Top 5 Risks in Accountable Care Organization Models

As Medicare and other healthcare payers continue to explore new care models – particularly risk-sharing models – accountable care organizations (ACOs) continue to grow in number and popularity. A successful ACO – one that generates savings and provides excellent care to patients – understands and manages risk through sophisticated use of data and population health management strategies. This applies from the patient level through the management and organizational level.

At the patient level, ACOs must understand, manage and mitigate the risks of patients becoming sick (or sicker) and requiring more costly healthcare than their contract benchmarks call for. At the management and organizational level, ACOs face a different set of risks.

Through our work with ACOs, organizations such as private equity funds that have acquired ACOs, and organizations with Medicare Advantage risk contracts, we have identified some of the top management and organizational risks in ACO models. It’s a good idea to keep these risks in mind whether you own an ACO or are considering acquiring one. For providers considering an ACO contract, the points below can also provide valuable insights into ACO models.

Risk #1: Signing up providers that aren’t a good fit

In our experience, the number one factor in the success of an ACO is the right mix of providers who will work to coordinate each patient’s care to reduce costs and improve outcomes. Although an ACO will use its specific risk-sharing agreement to decide exactly what its mix of providers should look like, those that are a good fit for an ACO share several common characteristics.

Providers who are well-suited for an ACO model generally:

• Embrace preventative care
• Are open to using patient data dashboards
• Are interested in trying proven or new methods to get patients to change their behaviors
• Currently do, or are prepared to, proactively interact with patients and follow them throughout their “care journey”
• Develop a communications strategy to monitor patients and identify illness, injury and other health issues as early as possible
• Follow a plan about how often they should see, communicate with and otherwise interact with various types of patients
• Will follow plans to minimize hospital readmissions and have patients complete follow-up care
• Are willing to make care convenient for patients

Risk #2: Insufficient data infrastructure

In order to achieve the minimum savings rate (MSR) specified in its agreement and benefit from risk-sharing agreements, an ACO needs to access, analyze, understand and act on a wealth of data. This includes clinical and financial data related to both individual patients and its overall patient population.

In order to keep costs down and care quality high, an ACO must be able to track patients and their data at each stage of the healthcare process. Yet, patient data is often scattered across disparate sources, including specialists, hospitals, skilled nursing facilities, pharmacies, primary care facilities and providers outside the ACO network.

Successful ACOs need to have the infrastructure to pull this data together and use it to minimize redundant and unnecessary care or tests, direct patients to the most cost-effective treatments and providers, and keep track of follow-up care. This infrastructure includes health information exchange capabilities, full transparency of data across providers, strong data analytics and the ability to share data with providers so they can make good decisions for their patients.

A solid data infrastructure is also needed when you’re analyzing potential providers to add to an ACO, as well as potential ACO acquisitions. Without it, it’s a challenge to analyze underlying data to consider whether a provider’s patient population is the right match, whether the provider’s cost structure is compatible with an ACO model, and/or whether an ACO is set up for current profitability or can become profitable in the future. Without good data and analysis, it’s difficult to mitigate other risks as they cannot be properly measured.

Risk #3: Concentration of patients among providers

If one or two providers in the network have an overly large share of patients and revenue, this presents several risks for an ACO. For example, if a single large provider decides to leave the ACO network, that provider may take a large number of patients with them. Likewise, a provider may be able to use its patient share to gain leverage when negotiating its contract, which may reduce an ACO’s profitability.

Risk #4: Too few providers

A wide network of low-cost, high-quality providers, including a full range of specialists and primary care providers will help to keep patients in-network for more of their care. This makes it easier to track care, outcomes and costs, and overall to keep costs down.

Providers should also be well-distributed geographically. If patients cannot easily and conveniently visit in-network providers for preventative and follow-up visits, they are more likely to wait to receive care and end up requiring more expensive and extensive care.

Risk #5: Expensive and/or low-quality post-acute care

One of an ACO’s biggest potential cost areas, and one with some of the largest variations in cost and quality of care, is post-acute care, particularly skilled nursing facilities. Consider that Medicare’s top-performing skilled nursing facilities had an average length of stay of fewer than 24 days, versus an average of more than 34 days for low-performing facilities. Cost savings from directing patients to higher-quality, lower-cost post-acute care can quickly add up.

If you’re considering acquiring an ACO, are an ACO looking to acquire additional providers or improve operations, or are a provider considering joining an ACO, you need to understand how to mitigate the management and organizational risks in the risk-sharing model. Contact me or another member of Kaufman Rossin’s healthcare industry team to learn how we can assist you with ACOs or other risk-based arrangements.