PATH TOWARD PAYMENTS THAT REWARD VALUE
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1 PATH TOWARD PAYMENTS THAT REWARD VALUE David Muhlestein, PhD JD Chief Research Officer Leavitt December 18,
2 PRESENTATION OVERVIEW 1. Current Trends 2. Are ACOs Delivering on their Promise? 3. Making the Business Case
3 CURRENT TRENDS
4 ACO GROWTH 32.4 Million Lives Number of ACOs Number of Lives Covered (Millions) 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q # of ACOs # of Covered Lives 4
5 ACO GROWTH BY PAYER ACO GROWTH BY PAYER Payment Arrangement Growth by Payer Type 1367 ACO Lives Per Payer (in Millions) Payment Arrangements Source: Leavitt Partners Center for Accountable Care Intelligence Total Medicare Commercial Medicaid 5
6 WHERE ARE THEY FORMING? Source: Leavitt Partners Center for Accountable Care Intelligence 6
7 ACO PREVALENCE IS INCREASING 2016 Source: Leavitt Partners Center for Accountable Care Intelligence 7
8 HOSPITALS IN ACOS OVER TIME Source: Leavitt Partners Center for Accountable Care Intelligence 8
9 ACO 2017 SURVEY: HEALTH SERVICES PROVIDED BY THE ACO Which of the following types of health services are offered by your ACO, either directly or through contracts? n=173 Primary Care Labs and Imaging Specialty Care Inpatient Care ED Behavioral Health Care Home Health Care Pharmacy Long-Term Care (e.g., SNF, assisted living) Dental Care
10 ACO SURVEY: FOCUS ON HIT PRODUCTS AND SERVICES Has your ACO or any providers within your ACO adopted and/or participated in any of these HIT products or services on behalf of any of your beneficiaries? Home Telemonitoring Electronic Medication Reconciliation HIE - Internal E-visits Decision Support Tools Patient/Provider Communication Automated Patient Reminders HIE - State/Regional Population Analytics E-prescribing Patient Portal or Personal Health Record n=165
11 ACO 2017 SURVEY: TOP FOCUS AREAS Many ACOs have identified one or a few focus areas for improving efficiency and reducing the total cost of care. Which of these focus areas are your top three priorities for 2017? Prevent. readmissions/transt. care improvement Management of chronic conditions Prevent. ED visits/inpatient admissions Post-acute care integration Mental health care integration End-of-life care assessment Pharmacy or medication adherence Patient engagement Palliative care Overuse of speclty./redund. imaging & diagnostics Surgical care standardization Supply chain efficiencies Long term care integration 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% n=168 Yes No
12 CHALLENGES TO SUCCESSFULLY PARTICIPATING IN ACO ARRANGEMENTS Difficulty finding willing provider partners Inadequate clinical integration Accounting or financial tracking Misaligned quality requirements Cultural compatibility with value Lack of technology to support value-based care Lack of interest of payers or purchasers to engage Difficulty securing reserves necessary for risk 12
13 ARE ACOS DELIVERING ON THEIR PROMISE?
14 MSSP 2016 ACO RESULTS BY START DATE Financial Impact of the Medicare Shared Savings Program by Start Date 2,000, % 1,800, % Beneficiaries 1,600,000 1,400,000 1,200,000 1,000, , , , , % 0.8% 0.6% 0.4% 0.2% 0.0% -0.2% -0.4% Percent Savings/Losses 0 April 2012 July 2012 January 2013 January 2014 January 2015 January % Assigned Beneficiaries % Savings/Losses
15 MSSP 2016 RESULTS BY BENCHMARK 60% Shared Savings Rate 50% 40% 30% 20% 10% 0% $6,000 $8,000 $10,000 $12,000 $14,000 $16,000+ Benchmark
16 QUALITY AND SAVINGS Cost Compared to Benchmark 20% Savings 15% 10% 5% Composite Quality Score 0% 70% 75% 80% 85% 90% 95% 100% -5% -10% -15% Losses -20%
17 ACO 2017 SAVINGS BY REGION Geographic Region Percent Achieving Savings Relative to Benchmark Net Per Beneficiary Savings Average Composite Quality Score Midwest 63% $47 95% Northeast 40% -$118 94% South 63% $68 95% West 46% -$113 94%
18 ACO PROGRAM RESULTS 2016 Program # Participants # Participants Who Earned Savings # Participants Who Owed Losses Total Aligned Beneficiaries Total Benchmark Expenditures Cost per Beneficiary MSSP ,884,058 $81,376,645,025 $10,322 Pioneer ,528 $3,381,183,973 $12,545 Next Gen ,734 $5,149,126,612 $10,915 CEC ,085 $1,415,517,283 $88,001 Total ,641,405 $91,322,472,893 $10,568 Program Total Benchmark Expenditures Minus Total Expenditures Gross Savings % Earned Shared Savings Payments/Owe Losses Net Savings (Losses) Net Program Savings % Net Savings per Beneficiary (Losses) MSSP $651,943, % $691,275,105 $(39,331,454) -0.05% $(5) Pioneer $68,032, % $37,128,920 $30,903, % $115 Next Gen $48,299, % $37,973,093 $10,326, % $22* CEC $75,120, % $51,151,304 $23,969, % $1,490 Total $843,396, % $817,528,422 $25,868, % $3 *Incorporating discounts, savings per beneficiary was ~$134
19 VALUE-BASED PAYMENT IMPACT AT THE MARKET LEVEL VBP Penetration 6% 5% 4% 3% 2% 1% 0% 1.7% $4,887 $4,969 $1, % 3.6% 4.3% 5.0% 5.6% $2, S1 S012S2 2013S1 2013S2 2014S1 2014S2 $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 Period National VBP Penetration National Medicare Costs National Commercial Costs Semi-Annual Costs Key Finding: Increased VBP penetration was not associated with a slow down of growth for either Medicare or commercial costs. Source: Growth of Population-Based Payments is Not Associated With a Decrease in Market-Level Cost Growth, Yet; Leavitt Partners, 2017 (Presented at AcademyHealth 2017 Annual Research Meeting)
20 ACO LONG TERM SUCCESS ACO Starts and Dropouts Over Time <= Start Dropout 20
21 WHY AREN T PAYMENT MODELS WORKING? 1. Payment models are wrong 2. Not enough time in the program 3. No business case
22 MAKING THE BUSINESS CASE
23 PERCENT OF MARKET POPULATION COVERED BY POPULATION-BASED PAYMENT MODELS 25th Percentile 1% Median 4% 75th Percentile 14% Source: Leavitt Partners ACO Database N=945 Markets
24 BARRIERS TO MAKING THE BUSINESS CASE Experimentation vs roll out CFO Dilemma Governance
25 CHALLENGES WITH TRANSFORMATION 1. Change is hard, change when times are good is nearly Impossible Fee-for-service has been very good for most providers 2. Current business models and systems are built around fee-for-service 3. Lack of organizational preparedness and leadership support to fully adopt new business models 4. There has not been a precipitating event to cause markets to tip 25
26 POLICY IMPLICATIONS 1. The goal is delivery reform, not payment reform, so policies should focus on delivery reform 2. Until a critical mass of payments come through these models, providers are not going to make substantive changes 3. Each market will have a different driver that can encourage greater adoption of these payment models
27 KEY TAKEAWAYS ACO growth has continued, but ACOs are not significantly reducing costs Providers are preparing for population-based payment models, but are content to focus on fee-for-service for now The business case for wholesale adoption of accountable care has not been made 27
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