Tag Archives: ACOs

Controlling rising medical costs

The 2017 Milliman Medical Index noted that medical expenditures (inpatient, outpatient, and professional) made up about 80% of the total cost of healthcare for a family of four, and that nationally the cost increases from 2016 to 2017 were about 4%. However, many employer plans have experienced much higher cost increases, especially in certain areas of the country. In 2016, for the first time, independent physicians made up less than half of the practicing physicians in the United States, according to an American Medical Association (AMA) study. Physicians who work with hospitals charge a facility price at their offices, which could result in increases in costs and significant discrepancies in prices for the same services. Additionally, hospitals have continued to merge with each other, and while these mergers offer the potential for lower costs by increasing efficiencies, a 2016 study by Northwestern University, Harvard University, and Columbia University found that prices at merging hospitals actually increased 7% to 10% if the hospitals that merged were within the same state. Given these factors, along with general price inflation and increased utilization, plan sponsors should consider ways to mitigate costs using any or all of the strategies below.

Price transparency and quality

Providing price transparency, coupled with information on quality of care, is a way to promote consumerism within a health plan so that both the plan sponsor and the members who are receiving benefits can save costs. There are various vendors that offer plan sponsors and members the ability to “shop” for surgical procedures and doctors based on price and quality metrics. Cost and quality advantages can result from steering members to specialized “Centers of Excellence” for a given procedure.. Members can be incentivized to choose the lower-cost facilities or physicians (without sacrificing quality) through a reduction or elimination of member cost–sharing, or even with rebates (that is, the plan will “pay” the member to choose a lower-cost alternative).

Narrow networks and carve-outs

Another way to steer members toward cost-effective facilities is through the use of a narrow network. Most health plans offer a narrow network option (for both insured and self-insured plans), which limits member access to a smaller pool of doctors and hospitals within their larger networks. The narrow (or preferred) network promises better discounts on claims than regular in-network claims, and the plan sponsor can encourage members to use these facilities by reducing member cost-sharing within the narrow network. The plan is designed to have an additional tier of cost-sharing, with the preferred network having the lowest member cost-share. Furthermore, plan sponsors with direct contracts can consider carving out a particular facility from in-network if the facility is not a cost-effective, high-quality option (and there are other options available to the members).

Alternative payment strategies

In addition to steering members through plan design and incentives, certain plan sponsors can look to alternative payment strategies to further control costs while ensuring that quality of service does not suffer. For example, a bundled payment can be used in place of fee-for-service for certain procedures with predictable episodes of care (e.g., total joint replacement). The plan sponsor pays the same amount regardless of days spent in the hospital or rehab visits, which can help to reduce unnecessary services. A plan sponsor can also enter into a shared savings arrangement with a group of providers, such as an accountable care organization (ACO). An ACO is a group of doctors and hospitals whose focus is on providing coordinated care to certain members within a plan. Ideally, the main goal of both the ACO and the plan is to keep costs low without sacrificing quality. If successful, both share in the savings achieved. Plans with a large enough membership can enter into these alternative payment strategies on their own; for smaller plans, they may be able to contract through their insurance carrier or third-party administrator.

This article first appeared on LaborPress.org.

Maximizing value-based care program performance

Over the past few years, there has been a proliferation of value-based care programs offered by health plans and government payers. These programs, including accountable care organizations, bundled payment programs, and quality incentive programs, often include a multitude of measures related to costs, quality, patient experience, and outcomes, along with various methodologies to determine success.

As the use of value-based reimbursement programs and the associated financial impact increases, it is important for providers to learn the program’s intricacies as well as the analytical, operational, and clinical requirements to ensure its success. In this paper, Milliman consultants Rod Martin and Laurie Lingefelt discuss how success with these programs is possible.

Medicare Shared Savings Program 2016 Track 3 financial results

Under the Medicare Access and CHIP Reauthorization Act of 2015, healthcare providers that participate in a Medicare Shared Savings Program (MSSP) as Track 3 accountable care organizations may qualify for the advanced Alternative Payment Model 5% bonus. Track 3 was first offered in 2016. This paper by Milliman consultants discusses first-year MSSP Track 3 performance and possible drivers of success.

Individual stop-loss is now optional for Next Generation ACOs

Next Generation Accountable Care Organizations (NGACOs) now need to choose between whether they want to have their annual financial reconciliations based upon capped claims or uncapped claims. Previously, they didn’t have a choice and reconciliations were based upon capped claims. For some NGACOs, the choice between an annual financial reconciliation based upon capped claims or uncapped claims could have significant impact. Milliman consultants provide more perspective in this paper.

Financial implications for Next Generation ACO Program

The Centers for Medicare and Medicaid Services has released the 2016 financial results for each of the Next Generation Accountable Care Organizations (NGACOs). The financial results may influence key decisions that each NGACO needs to make very soon regarding the magnitude of their risk parameters for 2018.  In this article, Milliman consultants explains those results and offer considerations for NGACOs to think about.

What predictive analytics can tell us about key drivers of MSSP results

We recently used machine learning techniques to understand key drivers of Medicare Shared Savings Program (MSSP) financial performance. Of the 190-plus objective accountable care organization (ACO) features reviewed, ACO baseline efficiency proved to be the most important financial performance driver we identified. Another way of putting it is that MSSP rewarded inefficient ACOs more than ACOs that have attained efficiency.

You may be asking, “How did you measure baseline efficiency?” The chart below tells an interesting story.

We analyzed ACO baseline efficiency by reviewing ACO baseline expenditures that were unadjusted, risk-adjusted, and geographic-risk-adjusted. Risk-adjusted per capita expenditures were adjusted to account for each ACO’s average risk score and mix of entitlement categories. Geographic risk-adjusted per capita expenditures were adjusted to account for Medicare reimbursement levels in each ACO’s area.

Below are a few interesting notes:

1. Despite adjusting for risk levels, mix of entitlement categories, and reimbursement levels, there is still significant variation in baseline per capita expenditures. See the third column above for this wide range of variation.
2. The Centers for Medicare and Medicaid Services (CMS) has already made MSSP rule changes that balance the rewards between ACOs at different levels of starting efficiencies. Past financial performance in MSSP agreement period 1 may not be a strong indicator of performance in agreement period 2. ACOs should understand how these rule changes affect them.

Beyond baseline efficiency, we found that several other features were strongly associated with gross savings:

1. National fee-for-service (FFS) trends higher than local market trends
2. Location in the Southeast and south central regions
3. Low performance year expenditures for short-term inpatient admissions
4. High baseline per capita expenditures, unadjusted
5. High CMS-hierarchical condition category (HCC) risk scores

However, we also found that these features still explained less than half of the variation in gross savings across ACOs. This may indicate that ACO care management efforts are accounting for some of the remaining variation.

The full report is posted at Milliman Insight and includes a deeper dive into research conducted by Jill Herbold, Cory Gusland, and myself.