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Doctor ACO pay risk varies greatly on payer: public or private

As accountable care organizations develop, early patterns emerge on which arrangements are most likely to put physician payment in jeopardy for not meeting goals.

By Sue Ter Maat — Posted June 17, 2013

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Physicians in accountable care organizations with private payers are more likely to be part of a payment arrangement that is both carrot and stick regarding savings goals. But in ACOs with public plans, doctors are likely to get a deal that involves just the carrot.

The Premier health care alliance, a purchasing and research group owned by hospitals and others, released a paper in June saying that of 85 ACO arrangements involving 22 of its members and 1.8 million lives, a third of deals with payers are for upside-only shared savings arrangements. That means there are no penalties if the hospitals and physicians fail to meet savings goals, but there are bonuses if they meet or beat them. Of those upside-only deals, more than half are through the Medicare shared savings program or Medicare Advantage.

Meanwhile, commercial health plans represented just 21% of upside-only arrangements, and those tended to cover a relatively small number of lives — 5,000 or fewer. But three out of four downside-risk deals — meaning, hospitals and physicians stood to lose money if they did not meet savings goals — came from ACO arrangements with private payers or self-insured plans.

In 70% of private-payer ACOs, hospitals and physicians were either at financial risk or they received a flat care-management fee, which carried no upside if savings were achieved. The care management fees usually run about $3 to $5 per patient, per month.

ACO participants, experts and consultants noted at a February webinar hosted by the National Commission for Quality Assurance, which offers ACO accreditation, that physicians often were skeptical of the organizations, because it wasn't clear how their income and practice patterns might be affected by a turn to value-based pay over fee-for-service arrangements.

In a white paper accompanying its survey, Premier noted that upside-only deals initially could assuage some fears while doctors made the transition. “These agreements provide an opportunity for developing ACOs to test and participate in a value-based relationship with a payer, without fear of experiencing losses if cost and quality targets aren't met,” Premier wrote.

However, Premier also noted that private payers have their own motivation to avoid upside-only deals. “These payers have bottom-line obligations and are less tolerant than government payers of losses in early years of the program,” Premier wrote. The organization said it can cost from $1.7 million to $12 million to develop the infrastructure and resources to form an ACO, and that payers are critical to providing not just financing to help cover that cost but also the patient pool needed to sustain the organization.

More risk, more reward

Premier leaders did not endorse any type of ACO payer model during a conference call on June 5. A more critical issue at the moment for hospitals and physicians is understanding the financial resources that will be required, the access to data and good data analysis that will be needed, and the ability of all involved to work together to achieve goals before an ACO is formed.

However, Premier noted that although upside-only deals provide a more certain path financially, ACOs that include a downside risk could end up being more valuable to physicians.

In Medicare's upside-only shared savings plan, physicians generally are offered a maximum of 60% of any savings achieved. Premier said some commercial downside-risk plans aren't as generous, but many offer physicians up to 80% of shared savings, with some going as high as 100%.

Regardless of the contract arrangement, the number of ACOs is growing rapidly. Health care consultant Leavitt Partners counted 328 ACOs as of Nov. 1, 2012, the latest date it issued a formal count, up from 221 in May 2012 and 164 in September 2011. The organization estimates that there are at least 400 ACOs up and running. Another consultancy, Oliver Wyman, estimated that between 25 million and 31 million lives were represented under ACO arrangements as of the end of 2012.

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External links

“Payor Partnerships: Insights from Premier's PACT Population Health Collaborative,” Premier, June (link)

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