The landscape around accountable care organization (ACO) and alternative payment model (APM) development continues to evolve forward over time, sometimes in predictable ways, sometimes in less-predictable ones. What’s clear is that some of the fundamental insights that industry observers noted years ago, continue to be as meaningful as ever, including the challenges and complexity of capitated payment, the centrality of data and data analytics to success, and the need for the leaders of patient care organizations to think very carefully about how and why they might want to be participating in two-sided risk, capitation, and other alternative payment models.
Recently, Christina Hedge, the health practice payer lead at the McLean, Va.-based Booz Allen Hamilton consulting firm, spoke with Healthcare Innovation Editor-in-Chief Mark Hagland regarding the current complex landscape around all things APM. Below are excerpts from that interview.
What do you see right now in this moment, as you scan the private-payer ACO landscape? Private-payer ACOs are all developing in such incredibly diverse ways that it can be difficult to generalize about them, correct?
I continue to state that when you’ve met one ACO, you’ve met one ACO. Some are physician-owned, hospital-owned, payer-owned. So just as every payer is different, every ACO is different. There are 31-plus flavors. And that makes it hard for payers, providers, the industry, and patients, because there really is no standardization.
What are you seeing as the most innovation directions in ACO development right now?
Really, it’s about sharing the data; that’s what it all comes down to. A hospital system and payer recently worked together and agreed the payer could have access to their electronic health record. That is super-innovative. You always have providers and payers on either side of the table, and I’ve sat in on both sides. And payers in general have much more data than ACOs do. And value-based care means changing how we deliver care and improve outcomes. And the provider usually doesn’t have a complete view of the patient. So the most innovative thing is sharing data. Trusting one another.
The phrase that I’m constantly hearing, is that it’s about “opening the kimono”: providers need to trust payers. Trust is an important thing, right?
It is. And that’s why we’ve seen so much consolidation in the provider world, for leverage. And that’s often where some of our government payers are, the fear of not having the key providers in the network. So with providers and payers, it’s so often a leverage game. But how do we put that aside for the greater good of the patients? How do we come together and trust that we’re both going to be fair and equitable. On the flip side, payers think, if I give them too much information, will they gave that to my competitor? It’s amazing to me that everyone is saying that the Nirvana state is capitation—that you’re at the top when you achieve capitation in a “value-based agreement”. But that’s silly: capitation is a shifting of risk. But providers are wanting to take on more risk, because of COVID. In COVID, providers lost money because services were not provided.
Is there a downside to capitation?
There absolutely is, if providers don’t have enough patients to spread the risk. It’s a really big risk if you’re a small provider. But if you’re a very large medical practice, they can manage that risk because of their size. So are the providers set up for success?
Large multispecialty medical groups are ahead of the hospitals in this area; they’re the organizations moving into full risk. How do you frame that reality? Is it that hospitals are “behind,” or rather, that they have a different kind of reality to navigate?
Hospital care is inherently episodic; it is hard to oversee the total care of the patient. That is not their role in healthcare. And some hospital executives view DRGs as the closest thing to capitation , because you’re paid for an entire episode of care. But ACOs that are physician-based have the population.
Integrated health systems are growing bigger and bigger now, as many of them acquire entire medical groups, or build comprehensive contract with them. Such business consolidation is inevitable, correct?
Yes, what’s happening is that these mega-mergers are accelerating on both the provider and payer sides. And unfortunately, healthcare is a business; that’s a chassis on which the healthcare industry is built in this country.
And in some mature markets, there are just a few providers and a couple of payers. What happens then in contracting?
I used to be in a Blue Cross Blue Shield plan 20 years ago, and was in that situation. And we said, look, we’re here to finance healthcare; and we want to make sure patients stay as healthy as possible. And you need to get paid. So we have to work together for the health of the population. It doesn’t always happen, and there can be conflict, and situations that play out in the media. But you’ve got to come together and say, we both have an important role in this community. How can we meet the needs of our patients and plan members?
What is your perspective on the growing number of provider-sponsored health plans?
I think they’re interesting. I’m not sure where that phenomenon will land. But what I can say is that they don’t provide optimal choice; and in the United States of America, people want choice, right? It’s a very closed system. And I used to work at Kaiser Permanente, and it’s an amazing organization, but their model doesn’t work in every market. They were in Texas, and they didn’t do well there. Healthcare isn’t a one-size-fits-all proposition. So you’ll continue to see a lot of different models. And you’ll always have the market dynamic of, who’s the bigger bear?
Inevitably, then, different models will emerge in different markets, correct?
Yes, and with different people. And you might have one market with high Medicare Advantage, for example, and another not. So I think it’s the market dynamics that will drive this.
Given all this, what should c-suite leaders in integrated health systems be thinking about right now?
I would ask them, what do you want to be when they grow up? Do you want to be an insurance company? I mean, risk can be difficult. What does your population look like? Is it large enough to take on that kind of risk? Risk management is what payers do: they have actuaries and risk managers. And though it might sound sexy to own it all, it takes real expertise to make it work. And they still have to fill beds.
So, one phrase we’ve been hearing for several years now is the phrase “one foot in the boat, one foot on the shore,” meaning that a patient care organization has a mix of value-based and risk-based contracting and discounted fee-for-service reimbursement, all at the same time. How does one navigate that complexity, in your view?
I actually think that some of these hospital systems are taking on too much risk. And if you are going to take on risk, be prepared. Health plan models are probably much more sophisticated. So what do you want to achieve in your negotiations? And going into the negotiation understanding that payer models have more data and information than you!
And all this reminds me of what it was like many years ago, when you could buy a build-it-yourself house that you could order through the Sears catalog. We’re talking about the 1950s and 1960s now, to be clear.
Yes; the reality is that it’s not an easy thing to succeed in value-based and especially risk-based payment. And in that game, the payers are way ahead of the providers in gaming out the possibilities because they have more data. And as a hospital-based integrated health system, you still need to fill beds and make sure the physicians’ schedules are optimized. And all those things can be conflicted; you have to think about value instead of volume. So it will take a tremendous mindshift for those provider executives to succeed.
Can hospital-based health systems take on some level of downside risk, and survive?
It depends. The thing I worry about is, how much astray from their mission does that take you? If your mission is to take care of people and you’re now taking on risk management, well, there are others in the industry that do that really, really well already. I find everybody’s thinking, oh, my revenue will skyrocket with capitation, but if you don’t have the right risk mitigation protocols, you won’t do well. Payers understand risk, it is the foundation of insurance. And it’s mission versus money. Some people rush to capitation, because they see a much bigger payout. But if they’re going to start taking on the role of the payer, will they start to take on the individual providers who have the sickest patients? You need some of the healthy people to balance out that risk. So, figure out a way that you can still stay true to your mission, and leverage the payer for what you need them for, which is to handle risk. And yes, it takes superb data analytics to be successful.
