Has Accountable Care’s Time Finally Come?

By Cyril Tuohy

InsuranceNewsNet

UnitedHealthcare Group’s decision to double the value of its contracts with accountable care organizations (ACOs) over the next five years is a big private-payer endorsement of the latest value-based health care delivery model.

By 2017, the insurer expects reimbursements to hospitals, doctors and other specialists belonging to accountable care networks to reach $50 billion, more than double the $20 billion in reimbursements paid today.

“Our unparalleled experience with accountable care models – and there are many – demonstrates that they can work better for everyone in health care, from patients to payers to care providers," Austin Pittman, president of UnitedHealthcare Networks, said earlier this month.

In short, UnitedHealthcare has decided to put its money where its mouth is. The health insurance giant isn’t alone. Many other health insurers – including Aetna, Cigna, Humana, Wellpoint and Blue Cross -- have embarked on pilot programs or are under contract to reimburse health care providers through the ACO model.

The accountable care trend received its most important stamp of approval when it was mentioned as a key strategy in the Patient Protection and Affordable Care Act, also known as Obamacare. Medicare, the largest health insurer in the U.S., has backed the model.

ACOs are designed to provide incentives for hospitals, doctors and long-term care facilities to work as one and to integrate the care given to the patient. The idea is for the specialties to reach consensus about what is best for the patient, achieving better outcomes at a similar or lower cost than the more-typical fee-for-service reimbursement scheme.

Dr. Jane Dillon, senior medical director of Advocate Physician Partners in Rolling Meadows, Ill., calls it “care across the continuum.” “No matter where the patient is—inpatient, outpatient, acute care -- we are actively involved in their health care,” she told InsuranceNewsNet.

On the payment side, ACOs, and by extension hospitals and doctors, are rewarded for stabilizing costs, and penalized for making mistakes. Under the fee-for-service model, a patient returning to the hospital to fix a botched surgery would be charged for both the original surgery and the care needed to repair the original mistake. Under the ACO model, the hospital would be paid once — for the surgery -- and would absorb the costs of its own mistake.

“The market is clear and unambiguous,” said Dr. Jeffrey Brenner, founder and executive director of the Camden (N.J.) Coalition of Healthcare Partners. “Medicare will not keep paying. Everyone will have to think a lot harder about care inside the hospital.”

Dr. Jim Frazier, vice president of medical affairs for Norton Healthcare, a Louisville, Ky.-based ACO serving Kentucky and southern Indiana, said the goal is to “stimulate the competition among health care system” and make health care accountable to the patient and the payer. “The ACO is a model and a philosophy,” he told InsuranceNewsNet.

Will it work? Proponents, including the Obama administration, say it’s worth trying. The U.S. already spends $8,233 per person on health care each year. This is more than two–and-a-half times what most other developed nations such as France and the United Kingdom spend on a per-person basis. In percentage terms, the nation spends 17.6 percent of gross domestic product on health care, higher than elsewhere. Critics of the health care system say costs are growing at a rate that is unsustainable. They also question the value Americans receive for the money they spend.

The system delivers care in shockingly uneven doses: the rich may remain on life support for years, if they so choose. In contrast, poor Americans often have trouble paying for simple immunizations, even when some of those immunizations are required by state law. U.S. life expectancy trails that of other high-income nations.

And still, more than 45 million Americans remain uninsured – at least until Jan. 1 when the crux of health reform kicks into gear in the form of the health care exchanges.

Prior health care delivery models are – literally and figuratively – bankrupt, say proponents of ACOs, who think the time to slam the hammer down on medical cost inflation and raise quality is now.

A report published in February by Leavitt Partners calls ACOs a “fundamental rethinking” of how care is delivered compared with managed care organizations (MCO) and health maintenance organizations (HMO) of previous eras.

”Whereas the MCO movement was characterized by cost containment, the ACO movement will be characterized by health management that generates better patient outcomes, which may result in cost containment,” wrote Leavitt consultants David Muhlestein, Andrew Croshaw, Tom Merrill, Christina Pena and Brent James in “The Accountable Care Paradigm: More than Just Managed Care 2.0.”

More than 400 organizations around the country that can loosely be labeled as ACOs are experimenting with multiple models to improve quality and lower costs.

Veteran doctors caution, however, that the accountable care model isn’t going to work if it just means a new generation of ambitious, profit-driven businessmen and corporate officers out to cut deals for themselves while shielded by a catchy slogan.

Real ACOs — those in the business of fundamental operational change and upending hierarchies — face a lot of hard work, said Brenner, the Camden, N.J., health executive.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].