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 Thought Leaders

Meeting the ACO challenge head on

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   By Matt Kuntz, July 2012

Matt Kuntz

Both payers and providers face complex technical and analytical challenges.

In response to the rapidly rising costs of U.S. healthcare, healthcare reform legislation has introduced a number of changes geared toward reducing costs and improving access to and quality of care. One of the first to take effect was a new model for delivering care: the accountable care organization (ACO). Introduced as a part of Medicare, the ACO model has been rapidly adopted by commercial payers around the country as a tool for improving patient outcomes and controlling runaway healthcare spending.

ACOs are made up of disparate providers (hospitals, PCPs, specialists, etc.) who band together to take end-to-end responsibility for a patient's care. In order to encourage positive outcomes, ACOs generally share risk for patient costs and are paid based on quality care and good outcomes, not just the volume of services delivered.

ACOs introduce a number of new challenges for payers and providers. To reward providers for quality care and good outcomes, payers will have to administer increasingly complex, risk-based payment mechanisms. At the same time, they will need to use complex analytics to measure outcomes so they can reward providers for keeping members healthy. Without these rewards, they will be providing incentives to reduce all services rather than providing incentives to keep the members healthier. We don't want to drive providers to skimp on preventive measures that keep members healthy at a reasonable cost.

Other aspects of reform also exacerbate the challenges. Because of the new medical loss ratio requirements (MLRs), payers that participate in ACOs will need to demonstrate high administrative efficiency. Further compounding the challenges is the move from employer-based insurance to health information exchanges (HIEs) with individual consumers. This shift will require health plans to now focus on providing better customer service in the face of the increased complexity of these new models.

Providers are facing their own technological challenges as well. As they begin to take on risk, they will need to build up much of the technological infrastructure that has traditionally been used by payers to pay claims, manage eligibility and operate care- and disease-management programs. In order to receive their rewards for quality, providers will also need to perform their own analytics, making sure that they are meeting their targets and doing the right things to achieve the required outcomes.

While it is not clear exactly how ACOs will work in the future or precisely how they will be paid, it is clear that they will be a major new business model over the coming years. To succeed in improving outcomes and lowering costs, payers will need to leverage technology to innovate across their business, including benefit designs, payment mechanisms, care and disease management, customer service, transparency and integration of data and business processes. They will need to use cutting-edge, flexible technology that supports:

  • Automated payment based on risk arrangements that cover multiple billing entities (hospital, PCP clinic, specialist clinic, etc.).
  • Automated payment based on outcomes and episodes of care.
  • Administration of complex provider networks to drive members to participating ACO providers.
  • Administration of innovative new incentive-based benefit designs to drive desired member behavior.
  • Transparency of benefits and claim adjudication so that payers can provide high-quality customer and provider service.
  • Transparency of quality and incentive programs so that members and providers understand what they are being incented to do and how they are performing.
  • Sophisticated analytics so that outcomes can be measured and incentives provided.
  • Sophisticated analytics to learn what benefit designs, payment methodologies and care- and disease-management interventions are most effective.
  • Advanced integration capabilities to support coordination between the payer and the providers and amongst the different providers in the ACO.

Payers and providers who can successfully produce better outcomes at a lower cost and maintain good relationships with their members will thrive.

About the author

Matt Kuntz is chief technology officer, HealthEdge. For more on HealthEdge, click here.


Tags:  Thought Leaders  Accountable Care Organizations