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ACO, Bundled Payments Alignment Key to Success for Both Models

Industry experts suggested three models to align accountable care organizations (ACOs) and bundled payment models and resolve financial conflicts with the two models.

Accountable care organizations (ACOs) and bundled payments

Source: Thinkstock

By Jacqueline LaPointe

- CMS should align accountable care organizations (ACOs) and bundled payments by creating a blended accountability structure that allows organizations to participate in both alternative payment models without financial conflicts, industry experts recently suggested.

ACO and bundled payment conflicts are a major challenge for providers. When providers treat an attributed ACO patient under the bundled payment program, the bundled payment provider is responsible for any financial gains or losses during the episode. Potential savings or losses are not included in the ACO’s year-end financial reconciliation.

The financial conflict puts the alternative payment model at odds even though both ACOs and bundled payments aim to improve care quality and reduce costs.

“For the promise of shifting from volume-based to value-based payment to be realized, we need to look beyond choosing one model over the other but rather consider ways to incorporate the best of each model,” the experts from Greenville Health System’s Care Coordination Institute, Ascension Care Management, and the Brookings Institution stated in the Health Affairs blogpost.

“This will facilitate a team-based approach of both specialists and primary care providers geared toward achieving better health at lower cost.”

READ MORE: Key Strategies for Succeeding with Healthcare Bundled Payments

To align ACOs and bundled payments, Valinda Rutledge et al. offered three pathways, with the final suggestion offering blended accountability through mutual downside financial risk for both ACO and bundled payment providers.

Purchased service model

The first step to aligning ACO and bundled payment models is a purchased service model. The arrangement allows bundled payment or ACO providers to purchase services, or a service collection, from the other model. For example, bundlers can leverage ACO infrastructure, data, and care redesign structures by buying care management services from the ACO.

Model leaders should establish a base program fee in the form of either a per-member-per-month fee or a case rate. The fee should cover the costs of treating patients across care settings for an episode.

“Fundamentally, the base fee is a way to offset financial risk for the ACO; it may be dialed up or down depending on the level of risk,” the experts wrote. “A larger base fee could be coupled with smaller usage fees, moving toward a model in which the EPM [episode payment model] provider bears risk within the episode.”

“The higher the base per-member-per-month fee or case rate, the less upside ACOs are likely to be able to command from any at-risk portion of the financial arrangement.”

READ MORE: For Ongoing ACO Shared Savings, Look Outside Inpatient, Primary Care

Experts also warned that case rates may be more attractive, especially for providers in bundled payments, but accurate cost estimates are key to the case rate working.

Purchased service models should clearly identify who owns the financial risk. Current CMS rules disincentivize low-cost providers in ACOs from joining bundled payments because the ACO receives the bundle’s target price, not actual spending. Bundled payment models “cannibalize” shared savings, the blogpost explained.

Therefore, ACOs should offer an increased per-member-per-month fee or case rate when partnering with bundled payment providers to prevent shared savings cannibalization.

Providers should also put a portion of the revenue at risk to ensure ACOs and bundled payment models continue to align throughout the purchase service agreement, experts advised.

Gainsharing model

As purchasing service models mature, ACOs and bundled payment providers can take on additional downside financial risk while still aligning the models by entering a gainsharing agreement.

READ MORE: Accountable Care Organizations Grow, But Face New Challenges

Under a gainsharing model, ACO and bundled payment providers share in any savings and agree to assume financial risk when care quality and cost goals are not realized. The level of financial risk should be based on the owner of risk, engagement level in the model, projected episode volume or anticipated opportunity potential for ACOs, and the amount of savings needed to break even.

Provider organizations developing the model should establish incentives around performance on financial, utilization, and quality metrics in addition to year-over-year improvements.

ACO and bundled payments organizations engaging in gainsharing should also perform the following:

• Create communication channels between providers

• Develop aligned risk targets based on quality metrics

• Measure provider performance

• Communicate performance and financial results

• Establish mitigation and/or improvement strategies

• Ensure investments made through overlapping programs generate a return on initial investment

The advantages of joining a gainsharing model including providers not shouldering financial risk under ACO and bundled payment models alone. The model also promotes provider engagement in risk-based value-based care models.

However, industry experts warned providers that they should align the care continuum and share best practices for gainsharing to succeed. Providers can start by aligning clinical areas where specialized care engagement is limited.

ACO and bundled payment providers should also engage in population health and chronic disease management to ensure success.

In addition, experts stated that CMS should offer regulatory flexibility to allow providers to participate in models that start to align ACOs and bundled payments. For example, the federal agency should remove restrictions on partnerships other than those related to fair market value and eliminate restrictions on gainsharing payments if providers are in CMS bundled payment models.

Blended accountability model

CMS should continue to relax restrictions to promote a blended accountability model for providers assuming financial risk under both bundled payments and ACOs.  The blended accountability model offers a single target for providers in both models.

“Through the model, the ACO would agree that in ACO financial reconciliation, expenditures for EPM episodes would be based on the non-discounted target price (equal to the actual spending plus the reconciliation amount [payment to the participating providers] plus the discount [mandatory discount off of the baseline target price applied by CMS], which accrues to CMS) for all EPM beneficiaries prospectively assigned to an ACO,” the blogpost stated.

Since prospective attribution is key, only Medicare Shared Savings Program Tracks 1+ and 3, as well as the Next Generation ACO model, would be eligible for the blended accountability model.

The ACO would also take on responsibility for part of the financial risk of patients treated through the bundled payment model. If savings are realized during a bundled payment episode, bundled payment providers would earn a portion of the savings and the rest would go to ACO providers.

The experts recommended that CMS use a flat percentage distribution of savings, such as 70 percent to bundlers and 30 percent to ACO providers. Shared losses would follow the same rules.

CMS could also distribute savings or losses using an attribution method. The federal agency could create a tiered model based on the number of attributed lives for an ACO. The larger the number of bundled payment model lives attributed to the ACO, the greater the portion of savings or losses.

However, the experts noted that the blended accountability model only applies when bundled payment episodes occur within an ACO performance period. CMS should account for this challenge when developing ACO and bundled payment alignment models.

They added that CMS should also reconsider ACO minimum shared savings rate for the blended accountability model.

“Specifically, if savings are achieved during an EPM period, we propose that CMS allow ACOs to receive their full share regardless of whether or not the minimum savings rate is achieved,” they wrote. “Without this modification, there is a perverse incentive on the EPM side to minimize ACO savings so that the ACO does not achieve the minimum savings rate and the EPM therefore retains all savings.”

Blended accountability models promote ACO and bundled payment models by aligning incentives and activities, incentivizing providers to participate in both models without “double dipping” savings, driving efficiencies, and eliminating silos in value-based care models.

If CMS does not consider any of the ACO-bundled payment alignment models, providers may continue to choose between the two models, jeopardizing the success of both ACO and bundled payments.

“Unless we can find ways to reward high-quality, cost-efficient providers participating in multiple models, engagement is likely to decline over time as savings get harder to achieve and overlaps among value-based arrangements increase,” the experts stated.

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