A Statewide ACO Business Model: How Caravan Health is Testing New Limits

May 28, 2019
Gleaning from their years of ACO experience, Caravan Health leaders now believe that being part of a larger, collaborative ACO will lead to more sustainable success

As healthcare stakeholders continue to look for new ways to navigate the value-based care environment, could hospital associations partnering with statewide Medicare accountable care organizations (ACOs) be a business model that evolves into continued success?

According to Caravan Health, a company that helps community health systems build accountable care and population health programs, the answer is yes. The Kansas City-based organization launched the first-ever statewide collaborative ACO in Mississippi earlier this year, and since that first launch, Florida and Idaho have also joined the group of statewide ACOs supported by Caravan Health.

The business model, according to officials, involves the state hospital association acting as a convener to engage community hospitals with Caravan Health’s methodology of population health, governance and accountability. Ideally, these collaborative ACOs will allow hospitals to pool lives and achieve the scale necessary for success.

According to Caravan Health CEO Lynn Barr, the organization had come to learn through its experience in the federal Medicare Shared Savings Program (MSSP) that patients in ACOs can essentially go wherever they want for healthcare services, “and we have a very limited ability to control what happens to them. With a lot of hard work you can reduce the cost of care by 1 to 2 percent per year,” Barr says, adding that Caravan Health once had nearly 40 ACOs it was working with, only to see their results “bounce all over the place.”

So Barr and her colleagues started to think about what kind of scale was needed to create a reliable revenue stream. They concluded that Medicare ACOs should cover about 100,000 lives to just get to that 1 to 2 percent savings threshold, but in reality, most ACOs have nowhere near that many; about 80 percent of ACOs have 25,000 or fewer attributed lives.

Indeed, the problem with smaller ACOs, says Barr, is that their results are much more “random” than larger ACOs, which are more likely to deliver more predictable and sustainable results. Barr points out that in 2017, Caravan Health achieved total savings of over $54 million across all its ACOs, but they only got $15 million in shared savings “because the [ACOs] were all too small to get over the risk corridor,” she says.

So toward the end of 2017, Caravan Health told many of its smaller ACOs—some with 10,000 attributed lives or less—that they frankly had two options: they could continue trying to get lucky with the model they were in, or they could link up with a much larger ACO that would be willing to take them in.

That larger organization happened to be the Central Oregon ACO, which offered to take on all of Caravan Health’s ACOs, a proposal that nearly every single client agreed to. “The other way just didn’t make sense, and they realized that,” says Barr.

“We then figured out that we should be doing this [ACO work] in the states since the states are the payers. That’s where insurance is regulated; if we are going to be payers, we will need to do this across all payers, because CMS [the Centers for Medicare & Medicaid Services] is pushing us in that direction as well. So we really need to create these statewide networks for the independent hospitals and health systems that would allow them to have enough statistical power to be successful in these models,” Barr says.

Barr and her colleagues believe that now, being part of a collaborative ACO will help hospitals create, operate and manage successful population health programs, and achieve sustainable success. The Florida Hospital Association (FHA), which represents more than 300 hospitals in the state, was the second group of its kind to team up with Caravan Health. The new model will enable any of these FHA patient care organizations to participate in the statewide ACO, if they choose. FHA’s senior vice president, John Mines, notes in an email to Healthcare Innovation that initial success will be measured by the level of hospital participation, but “ultimate success will be measured by the ACO’s performance in achieving measurable improvements in a variety of cost and quality measures.”

Mines says that FHA aims to serve as a “convener to introduce and connect our members with Caravan’s collaborative model of ACO care delivery. Caravan will bring proven expertise and programs around practice transformation and improvement, data and analytics, network development and accountability/compliance,” he says.

Mines says that to date, ACO results “clearly indicate there is a strong correlation between scale and predictability of outcomes.” He adds, “ACOs do not have to be contiguous, and we think Caravan’s collaborative model improves the likelihood of achieving the necessary scale to be successful. Our current work with hospitals throughout the state participating in the Hospital Improvement and Innovation Network (HIIN) has proven geography isn’t important when it comes to working together to share best practices and developing structure and discipline around goals the group agrees to pursue.”

While Barr is hopeful that this model will generate tangible results, she does acknowledge a few core challenges that remain for ACOs, broadly. For one, she believes it’s still difficult for an organization to redesign its operational primary care processes to do population health. The system “has been built for fee-for-service and 15-minute doctor visits, with no [incentives] for helping patients figure out where to go next. That whole redesign is really hard, and it’s particularly hard for hospitals that have employed physicians or have told practices they bought that they will leave them alone. Getting everyone to agree on what to do is really hard.”

Comments on the MSSP Final Rule

In December, CMS published a final rule that made sweeping changes to the MSSP, with the overarching goal to push Medicare ACOs more quickly into two-sided risk models. One key element of the rule that discouraged certain stakeholders—such as the National Association of ACOs (NAACOS), an association comprised of more than 360 ACOs—was that most one-sided risk ACOs will now only be able to stay in those models for two years, compared to the previous allowance of six years.

But Barr attests that Caravan Health is a “big fan of the new program.” She says, “We have to make money with this program, which is designed [for you] to make money if you do the work.” She adds that in the last several months as folks started to realize that these significant changes to the MSSP would be finalized, Caravan Health has generated 8,000 more leads from interested participants. She thinks this increase is largely due to the fact that her company takes on 75 percent of the risk for the ACOs, which probably seems desirable for ACOs that aren’t ready to plunge deep into risk just yet.

“So I don’t think people will be [departing the MSSP],” says Barr, responding to the idea that the new program will discourage ACO participation. “The government said they are serious about this and then doubled down on it. There was uncertainty there for a while, but now people know this is the direction we are going in. The incentives are strong and will only get stronger,” she states, noting that the government made MIPS [the Merit-based Incentive Payment System as part of the MACRA law] “so bad that everyone wants to be an ACO [and qualify as an advanced alternative payment model] so they aren’t in MIPS.”

In the end, Barr says she is looking forward to “a fairly stable period for the next few years,” which she contends “would be a big relief to everyone so they can figure out how to make this work.” She adds, “But the driver is for providers to get more of the premium dollar. What we see happening is that this will become much more of a multi-payer, [single] system, and when you put together these large, clinically integrated networks in the states, you then have the ability to either work with the payers to develop value-based programs with them, or ultimately become a payer.”

Sidebar - 

Editor’s Note: Editor-in-Chief Mark Hagland comments on the nationwide implications of Caravan Health’s potential breakthroughs in bringing ACO organizations to scale.

The ACO leaders in this story seem already to be moving forward on a very promising path. And what are the implications of all of this?

One of the biggest, it seems to me, is this: by gathering participating organizations together in larger, composite groups, these leaders are dramatically increasing the chances of making significant advances in curbing costs while improving outcomes. What Lynn Barr told Rajiv Leventhal speaks to one of the core challenges of ACO development: the difficulty of achieving traction with such relatively small covered populations. It seems obvious that we’re going to need greater mass and greater scale in order not only to prove the long-term benefits of ACO development, but also, on a very basic level, to achieve those benefits.

What’s particularly interesting at this moment is the fact of these broader ACO collaboratives emerging at a time when Seema Verma and other senior officials at CMS are intensifying their pressure on provider organizations to take on downside risk in the MSSP program. In so many ways, this feels like an inflection point in ACO development: while no one believes that the phenomenon will simply collapse, not many are fully confident that the MSSP program, in any case, will continue to expand robustly in the near future, either.

And honestly, the concept of a statewide ACO collaborative only makes sense, and seems like the next step in the evolution of ACOs—whether Medicare or private-payer ACOs. And really, a thousand flowers should be allowed to blossom, in this arena.

Indeed, developments are taking place in a number of corners of the industry. Just take a look at the website of the Accountable Care Learning Collaborative (ACLC), a broad collaborative of leaders and organizations already participating in some form of accountable care. The ACLC itself cites a “Community” that encompasses a wide variety of different types of organizations operating in this area, including The Aspen Group, APG (America’s Physician Groups), the Health Care Payment Learning & Action Network, the Health Care Transformation Task Force, Premier Inc., Integrated Healthcare Associates, and several other large organizations, some of them themselves collaboratives.

So the energy is beginning to emerge to advance the widespread creation of bigger, broader ACO organizations, including statewide ones. And if some of these emerge within the MSSP program, why would they not emerge in private-sector contracts as well? The potential here is great for an acceleration of the entire ACO phenomenon—and it could happen within the next year or two. So this is a very fertile area in the evolving landscape of value-based care delivery and payment. Only time will tell how this all shakes out; but if Lynn Barr, John Mines, and their colleagues at Caravan Health and FHA are confident about their organizations’ near-term path forward, that says something important about where this train is headed. To paraphrase the old Irish adage, may the road rise up to meet all these leaders, and the wind be at their backs.

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