Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other healthcare providers, who come together voluntarily to give coordinated high quality care to their medicare patients. Now healthcare organizations and doctors are facing the most sweeping payment transformation in history as there has been an accelerating shift to different types of value-based and shared-risk models which impacts hospitals operations and bottom lines. The process of group of doctors trying to meet these new rules is known as ACO Health Solutions. Below are some steps they have to meet during the preparation for the transition.
Preparing for a Shift from Fee-for-Service to Fee-for-Value
Remaining financially viable—and excelling—under fee-for-value contracts requires a fundamentally different set of competencies. To succeed under fee-for-service contracts, health care leaders need to be skilled at driving growth of high margin—and, typically, acute care—services. To succeed under value-based payments, healthcare leaders must do the exact opposite. To reduce costs, preventative services are emphasized far more than high-cost, acute care services, which are used as sparingly as possible. To improve quality, leaders need to identify and minimize unnecessary variation from evidence-based practice.
Today’s healthcare leaders face the great challenge of developing the competency for this new world in a market that, paradoxically, rewards a different set of values. Despite the challenge, building these new competencies is absolutely critical. Straddling two fundamentally competing payment models is sustainable only while value-based payment contracts represent a small subset of overall agreements. As providers and payers identify effective value-based contracts, it’s likely that the market will hit a tipping point where there’s a rapid acceleration toward value-based payments. Organizations that are unprepared for this shift put themselves at serious risk.
Separating Near and Long-Term Priorities
While our destination is clear, the first step in a healthcare organization’s journey toward value-based payment is often not. Fundamentally transforming a health care delivery system requires a wide array of new competencies. For many organizations, the first step in this journey is signing on the dotted line to put one or two contracts and a small set of their population at risk. Lacking a map to the next town in a long journey, healthcare leaders are left to transform their business with little direction. In our experience, health care organizations are best served by separating near-term and long-term priorities. Near-term priorities are owned by a small group of leaders, typically the ACO team, which sets the guiding path for prioritizing the development of competencies that are central to managing at-risk contracts successfully. Concurrently, this team works closely with leaders across the care delivery system to prepare the organization for true care delivery system transformation, a journey that will take place across the next decade. By investing in near-term imperatives and prioritizing long-term transformation efforts, ACOs can make meaningful steps toward value-based payment without overwhelming their organization’s resources and capabilities.
Today’s fee-for-service contracts reward healthcare organizations that increase the volume of services that they provide. Broadly, value-based contracts attempt to use payment to incentivize other aims, such as cost reduction and quality improvement. Many of these payment models attempt to improve on the current fee-for-service system, while adjusting the model in a range of ways—small and large—in an attempt to more adequately compensate ‘value’ in health care. Other models, like capitation, represent a break altogether from the current fee-for-service system. Providers, payers, and employers across the country are experimenting with a wide variety of these payment models in an effort to find contract types that best improve care delivery.
A note about terminology: increasingly, accountable care, population health management, at-risk contracting, and value-based payment are used interchangeably. Of these terms, value-based payment is often used the most broadly to reflect even small iterations on the current fee-for-service model (like pay-for-performance initiatives). Health Catalyst separates accountable care efforts—which we also refer to at-risk contract initiatives—from population health management. True population health management requires care delivery system transformation. The efforts that healthcare organizations are undertaking in new payment models like ACOs are just one step in a much longer journey.