Milliman’s new podcast, Critical Point, presents unique perspectives from the firm’s professionals. The podcast’s debut episode, “Healthcare waste and how to find it,” features Jackie Sehr, Marcos Dachary, and Dr. David Mirkin from Milliman MedInsight®, a data warehousing and healthcare analytics platform. In this episode, they discuss healthcare waste and approaches to minimize waste and reduce unnecessary costs across the American healthcare system.
To listen to this episode of Critical Point, click here.
With accountable care organizations (ACOs) soon to serve more than a million Medicare patients, it is clear that this model of care delivery is receiving an unprecedented test of its viability, and, if it works as intended, may reshape how healthcare is paid for on a larger scale. Cigna alone plans to have more than a million people enrolled in ACOs by 2014, and says it believes that ACOs are going to be important regardless of the Supreme Court’s ruling on the Patient Protection and Affordable Care Act (PPACA).
With so much focus on the topic, it’s worth taking a look back at some of the research and analysis on ACOs published by Milliman on the topic over the past couple of years.
First, for a good summary of ACOs—what they are and how they work—start with this overview video featuring a number of Milliman experts.
For many observers, the key question about ACOs is whether they represent a financially viable model compared to fee-for-service. Effective financial management will be key to success. Milliman has produced a number of relevant papers:
With all the attention on Medicare ACOs, it’s easy to forget that they exist in the private market, as well. For more on such entities, look at “ACOs Beyond Medicare,” which describes the potential advantages for providers who partner with a private insurer rather than with CMS. A 2011 Managed Healthcare Executive roundtable featuring Milliman consultant Rob Parke also discussed ACOs in the private market.
A number of other papers have also been published discussing various aspects of ACOs such as:
Modern Healthcare looks at the financial risks facing potential accountable care organizations (ACOs). Here is an excerpt:
The highest performers may not achieve the most savings, warned actuary firm Milliman in a separate report. Providers will need to conduct risk analyses before signing on to Medicare’s shared savings program, according to Milliman. For instance, high-performing systems may not be able to produce sufficient savings. “It will be easier for the inefficient systems to beat their targets,” according to the report.
For instance, “ACOs operating with low inpatient utilization and low cost will need to work hard on non-inpatient services to achieve significant savings,” according to Milliman. In conclusion, Milliman actuaries said the proposed rule offers “much less upside to ACO ‘A’ students who operate in very efficient systems than to ACO ‘C’ students who operate in systems with a lot of inefficiencies.”
Physicians and hospitals are facing unprecedented pressure from healthcare purchasers to deliver higher-quality, more cost-effective care. This paper discusses how it will be increasingly difficult for individual providers to continue without joining a larger integrated system. For many of these emerging systems, a partnership with a health plan will be much more attractive than becoming an accountable care organization (ACO) serving Medicare fee-for-service (FFS) beneficiaries.
Financial success or failure of an accountable care organization (ACO) will depend on meeting rules-based budgets set by the Centers for Medicare and Medicaid Services (CMS). The ACO will need to demonstrate quality as well as reduce spending below targets.
Will ACOs achieve these efficiency requirements? Improving quality will create some savings but probably not enough to generate shared savings payments to the ACO. Furthermore, the financial targets will be harder to accomplish for providers already operating efficient systems.
Actuarial models can help potential ACOs assess the financial risk and make the right decision as they contemplate whether to establish an ACO.
Read the full briefing paper here.
Accountable care organizations (ACOs) must manage toward actuarial targets, which is a key means to attain the end of more efficient care. This process requires both “supply-side” medical management and “demand-side” medical management. Here is an explanation of each:
Supply-side medical management services are what many consider the more challenging side of medical management but they are also what produce the savings. These services are intended to reduce utilization and payment for medically unnecessary services and also ensure that care is delivered in the most appropriate setting, which for an ACO should mean delivered by an ACO-associated provider. Clinical guidelines help evaluate the medical necessity of requested (or, retrospectively, rendered) services…
Demand-side medical management services optimize a population’s health so that demand for services will be lower. In particular, these services can impact ambulatory care sensitive admissions, preference sensitive admissions, readmissions, and ER visits.
For more on managing to actuarial targets, read the recent paper, “Nuts and bolts of ACO financial and operational success.” For more on medically unnecessary services, view this blog post or this paper.