Accountable care organizations are frequently viewed as a test for the viability of value-based reimbursement models and as a mechanism for influencing market changes — from a fragmented fee-for-service model toward a population health system that rewards outcomes. The Centers for Medicare & Medicaid Services plans to shift 50 percent of Medicare payments to alternative payment models, notably ACOs, by 2018.

Seen through that lens, the 2014 performance results released by CMS in August for the Pioneer Model and Medicare Shared Savings Program ACOs could be viewed as disappointing, considering that a large majority of ACOs fell short of their savings targets. But a deeper review of the past three years illustrates that as ACOs gain more experience, their quality and cost-savings performance improves.

Asking whether the ACO push is succeeding or failing is premature. A more useful approach is to focus on lessons learned from providers selected for CMS' Next Generation ACO program. Our research suggests there are several key success factors, including organizational realignment, understanding the specific needs of local markets, focusing on continual improvement, and recognizing opportunities for partnership or collaboration.

Next Generation

CMS selected the providers participating in the 2016 Next Generation ACO program in part for their readiness to assume higher levels of risk and reward. If the MSSP and Pioneer ACO programs were the first steps in CMS’ move toward population health, Next Generation is the continuation of this evolution — but it is unlikely to be the final generation.

Of the 21 Next Generation participants, eight are Pioneer ACOs and nine are MSSP ACOs; cumulatively, they manage over 450,000 members and $4.5 billion in health care expenditures. There are also four participants that are new to the ACO program but that have managed commercial and Medicare Advantage risk.

The Next Generation program includes several design features aimed at increasing adoption and success. It offers higher risk and higher reward financial arrangements and four payment mechanisms: fee-for-service, fee-for-service with per-beneficiary per-month payments, population-based payments and capitation. Under the program, benchmarking shifts from a retrospective to a prospective focus, and savings are calculated based on attainment and improvement, not on past performance. Patient assignment remains the same but supports voluntary alignment to mitigate membership fluctuation. Waivers offer the opportunity to enhance benefits in telehealth, post-discharge home visits and three-day skilled nursing facility admissions — all with the goal of supporting population health programs.

Performance results

The contrast between high-performing and average ACOs is sharp from both a quality and savings perspective. Of the 333 MSSP ACOs in 2014, all improved in 27 of 33 quality metrics. While 53 percent met their spending targets, only 26 earned shared savings payments. The Pioneer ACOs did somewhat better, as most came to the program with more experience delivering coordinated care. Still, just over half — 11 of 21 ACOs — earned shared savings. The ACOs selected for the Next Generation program had varying degrees of success, with four of the Pioneer ACOs and two of the MSSP ACOs earning savings.

A discussion with leaders of five ACOs selected for the new program suggests that they are continually maturing and improving and that there are four key lessons learned: organize and operate differently, innovate to meet market needs, plan for an evolution (not a big bang), and focus on partnerships.

Organize and operate differently: Success in population health management is dependent on enterprisewide transformation — redefining organizational, clinical and network structures to create a highly integrated care delivery system.

The Henry Ford Physicians ACO provides care to more than 20,000 Medicare patients in southeast Michigan and is one of the four Next Generation ACOs that did not participate in the MSSP or Pioneer programs. Instead, Henry Ford focused on building a clinically integrated network beginning in 2010, with most contracts having pay-for-performance elements as an early gateway to taking on risk.

In 2014 and 2015, Henry Ford took on additional commercial risk. Today, 30 percent of its business is in value-based care, with 100,000 lives covered in the risk-bearing clinically integrated network, which has a large, employed medical group focused on population health.

Cornerstone Health Enablement Strategic Solutions in North Carolina, an MSSP ACO since 2012, manages care for more than 16,000 Medicare patients. Cornerstone reorganized its practices and now has a service-line focus to integrate care and implement protocols throughout the organization. The service-line approach delivers patient-centered, integrated care and includes regular meetings to review care protocols and guidelines.

Triad HealthCare Network in North Carolina has demonstrated significant success by making strategic organizational changes. Triad achieved $22 million in cost savings in the first two years of the MSSP, providing care for 35,000 beneficiaries. Triad also recognized the importance of organizing differently and shifted to a physician-led population health model: Administration provides support, but those providing care are the ones who lead the organization. Triad’s focus “is managing a population’s health across the continuum of care, not just providing fragmented point-of-care services,” said Thomas Wall, M.D., chief clinical officer.

Fundamental to the Next Generation ACOs interviewed is a clinical delivery model that uses an integrated care team to support care management and care transition. Triad and Cornerstone modified their organizational structure by adding outpatient care managers in the practices, while Henry Ford created an ACO support team to better coordinate care throughout the system.

In addition, Next Generation ACOs employ different clinical models to manage high-cost patients. Henry Ford implemented an ambulatory intensive care unit model using physicians who are the most experienced and best equipped to manage those patients. Strong communication between the ambulatory ICU and primary care physicians ensures the appropriate level of care.

“One of the biggest fundamentals for success,” said Charles Kelly, D.O., president and CEO of the Henry Ford Physician Network, “is building relationships with caregivers and patients so you’re in position to provide advice to help them stay healthy.”

Triad, using an extensivist model, is run by hospitalists and an in-hospital congestive heart failure clinic for high-risk patients, ensuring access within 48 hours of hospitalization or for a care need. Cornerstone has implemented heart failure, oncology and extensivist care models and is piloting a similar approach in nephrology. The models are managed by a team of physicians, advanced practice providers, executive administrative staff and clinical data analysts to optimize patient engagement, integrate care and use evidence as the basis for care. “The care models were developed to ‘cater’ to the specific medical, social and physiological needs of the patient and their diagnosis,” said Grace Terrell, M.D., president and CEO of Cornerstone Health Care.

Innovate to meet market needs: Health care is delivered on a local level, and success is dependent on understanding the specific needs of the local market, including the different needs of the Medicare, Medicaid and commercial populations. There are different outreach strategies, population health programs and clinical models that