Accountable Care Organizations An Important Model Influencing American Health System Reform April 26, 2016 Producer: Emilia Varrone Edited by: Alexander Perry Director: Afzal Bari

ACCOUNTABLE CARE ORGANIZATIONS 1 Accountable Care Organizations are Becoming an Increasingly Important Force in American Health Care Accountable Care Organizations (ACO) Definition and Trends April 26, 2016 | Emilia Varrone Sources: Mark McClellan et al., "A National Strategy to Put Accountable Care into Practice", Health Affairs, May 2010; David Muhlestein and Mark McClellan, "Accountable Care Organizations in 2016: Private and Public-Sector Growth and Dispersion," Health Affairs Blog, April 21, 2016; Sergey Demushkin, Wojclech Zasina, Gregor Cresnar, Ben Pixels, Noun Project, April 20, 2016; “Alternative Payment Systems,” American Academy of Pediatrics, April 20, ACO Definition ACOs consist of care providers who are accountable for achieving quality improvement and decrease in health care spending growth. ACO Growth – There are 94 new ACOs nationwide this past year, a 12.6% increase.

2 Accountable Care Organizations Take Responsibility for the Quality and Cost of Treatment and Take Various Forms ACO Principles and Structures April 26, 2016 | Emilia Varrone Sources: Mark McClellan et al., "A National Strategy to Put Accountable Care into Practice", Health Affairs, May 2010; Brian Dolan, "Mostashari's Aledade Raises $30 Million to Help Small Practices Launch ACOs", Mobi Health News, June 15, 2015; Zina Moukheiber, "Aledade, Which Helps Doctors Run Small Practices in the Age of Obamacare, Raises $30 Million," Forbes, June 15, 2015; ; NIck Abrams, Bybzee, Sherrinford, Sergey Demushkin, Ben Pixels, Andrew Vine, Noun Project, April 21, 2016 Payments Linked to Savings ACO payments to doctors are linked to quality improvements that reduce overall cost. Responsible for Quality and Cost ACOs are generally provider-led and primary-care driven. ACOs take on the responsibility for the quality and cost of care for a population of patients across the care continuum $ Emphasis on IT for Measurements Increasingly sophisticated systems to measure performance and how quality improvements are reducing cost. Hospital System In the early days of ACOs, hospital systems were primarily responsible for the majority of systems. Today, hospital systems are not the only kind of ACO, but they still represent a major portion of available ACOs nationwide, as they have readily accessible capital Principles:Types of ACOs: ACCOUNTABLE CARE ORGANIZATIONS Physician Groups Physician groups can often keep their autonomy through ACOs, however hospital systems have easier access to capital. Insurance Companies Insurance companies are becoming increasingly prevalent ACOs, as they are comfortable managing risk, and have a vested interest in lowering cost. Other Other types of ACOs include management companies, such as Aledade, which places a major emphasis on technology

3 Physician-Owned ACOs are Overtaking Hospital-Owned ACOs Number of ACOs, by Type April 26, 2016 | Emilia Varrone Source: David Mulestein, "Accountable Care Growth in 2014: A Look Ahead," Health Affairs Blog, January 29, ACCOUNTABLE CARE ORGANIZATIONS

Number of Independent Physicians is Trending Downward, However ACOs Allow Physicians to Maintain Autonomy April 26, 2016 | Emilia Varrone Source: "More U.S. Doctors Leaving Private Practice Due to Rising Costs and Technology Mandates, Accenture Report Finds", Accenture, October 31, The number of independent physicians are trending downwards, while the number of hospital- employed doctors are increasing. One reason ACOs are so popular may be because they provide a way for physicians to remain independent. Number of Physicians (thousands) & Percentage of Independent Physicians 57 % 49 % 43 % 39 % ACCOUNTABLE CARE ORGANIZATIONS 4

Shifts in Health Care Policy Has Helped Drive the Proliferation of ACOs April 26, 2016 | Emilia Varrone Sources: David Muhlestein and Mark McClellan, "Accountable Care Organizations in 2016: Private and Public-Sector Growth and Dispersion," Health Affairs Blog, April 21, 2016; "Summary of the June 2015 Final Rule Provisions for ACOs Under the MSSP", Department of Health and Human Services, March 2016; Marcia Frellick, "First-Year Data Mixed for Medicare Shared Savings ACO," Medscape, April 14, 2016; Photo: Assistant Secretary for Planning and Evaluation, "HHS", April 25, 2016; Cornelius Dorgan, Alex Auda Samora, Noun Project, April 25, Affordable Care Act (ACA) & the Medicare Shared Savings Program (MSSP) Established in Nov 2011 by the ACA, MSSP rewards ACOs that lower their growth in cost of care while maintaining performance standards. The program has shown early promise, with early adopters cutting spending by $238 million with unchanged or improved quality of care. The Department of Health and Human Services (HHS) HHS met its interim goal of paying 30% of Medicare compensations to services evaluated based on quality rather than quantity ahead of schedule. Now HHS aims to make 50% of payments involving shared risk by Health Affairs analysis indicates that Medicare ACO’s have been a major contributor towards achieving this goal so quickly. Medicare Access and CHIP Reauthorization Act (MACRA) Passed last fall, MACRA repealed the unpopular Sustainable Growth Rate (SGR) and replaced fee-for-service payments with the Merit-Based Incentive Payment System (MIPS). Physicians will be able to opt out of MIPS by using qualified Alternative Payment Systems (APMs) which include ACOs. Under MACRA, an organization can qualify for APM bonus payments by moving non-Medicare lives to APMs, which may further incentivize the adoption of APMs, especially ACOs. Health Care Policies that Contributed to the Rise of ACOs APMMIPS ACCOUNTABLE CARE ORGANIZATIONS 5

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