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ACO Shared Savings is Top Payer Partnership

 |  By Margaret@example.com  
   June 06, 2013

The most prevalent arrangement for Medicare ACO contracting is 'shared savings upside,' or what is known within the industry as a one-sided risk model, survey data shows.

Early adopters of Medicare accountable care organizations have a preference for a one-sided risk model while commercial ACO participants look for care management fees, according to a survey released Wednesday by Premier healthcare alliance.

The Premier survey looks at 85 payer arrangements covering 1.8 million covered lives for 22 participants of its PACT (Partnership for Care Transformation) population health collaborative program.

The results reflect "the journey to population health management," Joe Damore, vice president, Population Health Management Premier, stated during a Wednesday press conference. "The organizations we work with are in the process of redesigning care and also redesigning their payer arrangements to support the new care model."

For the survey respondents, the payer arrangements fall into five categories:

1. Medicare and Medicare Advantage (35%)

2. Commercial (33%)

3. Medicaid (12%)

4. Self-insured employers (9%)

5. Provider-owned plans (11%)

The most prevalent arrangement for Medicare ACO contracting is shared savings upside or what is known within the industry as a one-sided risk model. These contracts involve a per capita expenditure target. As Damore explained, "if you are below that target you share in the savings with the federal government."

The reason shared savings is popular is the costs involved in building the infrastructure necessary to transition to ACOs. The American Hospital Association places the cost at $1.7 million to $12 million to develop the infrastructure and resources needed, including information technology, care management programs, and patient-centered medical homes.

Damore noted that shared savings also allow time for ACO participants to gain experience in managing risk. "One-sided risk is a good way to gain experience for organizations that are new to managing risk."

On the commercial side, the most prevalent contracting vehicle is care management fees. These are generally lower risk because there are no shared savings or losses, Damore explained. Payers provide a set fee-per-member, per month (often $3 to $5) for more active care management and preventive services, such as disease management. However, payers are not obligated to share any savings that may accrue from those efforts.

"In early stages of accountable care, this may be preferable for commercial payers. It's a set and predictable amount of spending, versus shared savings, which would vary based on the success of the program," said Damore.

A Premier report [PDF] on its payer partnership program says risk aversion could be due to payers in the commercial market having bottom line obligations that may be less tolerant of losses than public payers such as Medicare.

Damore noted that "the government, which traditionally is more conservative than the private market, appears to be more progressive when it comes to shared savings, at least for now. We are starting to see things turn around, but to date, public payers have been the leaders when it comes to broad scale shared savings agreements."

Upside arrangements are unusual in commercial markets. Among the ACOs analyzed, only 21% of commercial arrangements offer upside shared savings. Those agreements tended to be smaller in scope, usually for 5,000 covered lives or less.

Almost 70% of commercial payment arrangements are either care management fees or shared savings downside models.

In exchange for the downside risk, however, commercial payers tend to be more generous than the Medicare program, offering savings splits that typically range between 50% and 80%. Medicare, in contrast, only offers a maximum of 60% of savings, although the assumed risk is comparable in the public and private market.

While there is very little capitation among either commercial or Medicare ACOs, that is expected to change said Damore. Capitated payments typically are paid on a periodic basis and are based on projected spending adjusted for risk. "Going forward," he said, "we'd expect that as payers and providers get more acclimated to accountable care, they will move more toward capitated arrangements."

Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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