How ACOs are Influencing the Provider-Payer Battle

Guest post by April Wortham Collins, manager of customer segment analysis, Decision Resources Group.

April Wortham Collins
April Wortham Collins

Under the traditional fee-for-service reimbursement model, providers and payers are natural adversaries. To maintain a steady source of revenue, providers are incentivized to render as many services as possible without running afoul of controls designed by payers to keep utilization in check. When healthcare costs inevitably creep up, providers demand higher reimbursements from payers. Payers, trying to keep claim in check and health insurance premiums competitive, respond by restricting members’ access to certain providers.

It’s this tension between payers and providers that forms the backbone of the U.S. healthcare system. At least, it has until recently. Policy and political leaders have come to realize that, absent of other factors such as quality, efficiency and patient satisfaction, healthcare costs will continue to rise, creating a weight under which the system will eventually collapse.

Enter the accountable care organization, a new model for healthcare delivery and reimbursement that exemplifies the key tenants of the Affordable Care Act and the healthcare Triple Aim: improving the patient experience of care, improving the health of populations and reducing per capita costs. Unlike the fee-for-service reimbursement model that rewards providers based on volume of services, the ACO model rewards providers for achieving specified quality objectives and constraining costs.

On their face, ACOs would seem to encourage cooperation between payers and providers. After all, to improve population health, providers need claims data and the type of technology solutions that payers have been investing in for decades. And to reduce healthcare costs, payers need to partner with quality providers with proven track records for keeping patients healthy. Ask any patient who has bounced back and forth between doctors’ offices and their health insurance company trying to sort out a medical bill, and the opportunity for improving the patient experience of care is tremendous.

So far, many ACOs are doing just that. Of the nearly 1,100 ACO contracts that Decision Resources Group is tracking today, more than half are commercial agreements involving 70 private payers. The largest private-payer ACO initiative in the country is led by Cigna, whose Collaborative Accountable Care program has 124 ACO agreements in 29 states encompassing more than 24,000 primary-care physicians and 27,000  specialists.

However, other aspects of healthcare reform are adding fuel to the payer-provider fire—and ACOs are a flashpoint. To keep health insurance premiums competitive, payers are excluding high-cost providers from their networks. Many of these narrow or exclusive provider networks also function as an ACO, with attached health plan products that are proving popular in public health insurance exchanges.

In addition, an increasing number of providers with ACOs are starting their own health plans, which compete against traditional payers. In some markets, the largest provider and payer are no longer contracting at all, creating siloed delivery systems that undermine the level of access that healthcare reform seeks to create. This trend isn’t surprising, considering the ACO model encourages providers to accept financial risk for quality and patient outcomes, potentially rendering the payer obsolete.

For industry partners, including health information technology companies, it’s a confusing time. Do I cast my lot with payers or providers? The answer, for now, is both. In the ACO model, providers and payers desperately need solutions that allow them to identify and classify the patient populations for which they are responsible. Both need to understand how patients’ lifestyles and behaviors impact their health status, how and when to intervene, with the most effective treatments.

No matter where ACOs go from here, or what happens next in the payer-provider saga, those are the kind of needs that are here to stay. The future of U.S. healthcare rests on it.

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