The US healthcare system’s shift from volume- to value-based reimbursement for treatment in order to lower costs and improve patient care is disrupting healthcare business models. The high-profile government–led accountable care organizations (ACOs), which put financial pressure on payers and providers to share responsibility for meeting quality and cost goals, is no exception.
About 10% of the US population, or 34 million people, will be enrolled in either government-funded or commercial ACOs by 2015, according to consultants, up from 12 million in 2013. While the numbers are small some estimate that, for a variety of reasons, ACOs’ influence is much greater, with up to 170 million covered lives in the US affected either indirectly or directly.
The Centers for Medicare and Medicaid Services (CMS) established the ACO initiative, which essentially aim to improve coordination and management of patients while lowering the cost of care. Key to their effectiveness are financial rewards for meeting or exceeding pre-determined quality and cost metrics—or, in some models, penalties for falling short. The degree to which providers have a stake in the game and the kinds of goals they must meet vary depending on the model they follow and whether the organization is aligned with the CMS or a private insurer.
Whether ACOs survive in their current form and expand coverage to a vast majority of the population is uncertain, but, regardless, they are changing the way the US looks at health care. CMS announced first-year results of the program, started in 2012, earlier this year. The impact wasn’t major—the agency estimated that the initial crop of ACOs achieved a total savings of about $275 million out of a $1 trillion budget--but many experts believe the model is on the right path.
Much of the focus has been on implications for providers and patients, but these pilots affect suppliers as well. Not too many forums to date have focused on how ACOs can work with life sciences companies. That’s partly because ACOs have been preoccupied getting off the ground. Managing pharmacy costs hasn’t been a top priority. And because the field is evolving so rapidly and in such a fragmented fashion, efforts to look at it systematically are complicated. Regulatory and other barriers prevent ACOs and life sciences companies from working together and those are not easing. For more on this see The RPM Report May 2014.
That said, industry’s engagement with these new entities will test traditional commercial models and ultimately could have broader effects and access to medicine. Results released earlier this year of a Health Strategies Group study involving 110 ACOs provide some insights into their approach to pharmacy. The survey included online queries of top executives, followed by 30 “deep-dive” interviews in order to better understand life sciences companies’ opportunities for partnering with ACOS and the likely pain points involved in doing so. Respondents were senior executives at ACOs. Given ACOs’ expanding influence, it’s worth a look.
Among the survey’s findings, as presented at a recent ExL Pharma conference on the topic:
ACO are organized in many ways depending in part on whether they are operated by physician groups, health plans or health systems. Decision-making authority varies as well, with health system-run ACOs viewing themselves as being the dominant arbiter within their organizations in determining risk arrangement and services, but they recognized physician groups have an important role and health plans less so (40%). Health plan-led ACOs indicated more sharing of decision making authority among themselves, health systems and physician groups. These differences are important for pharma and other suppliers to understand as they figure out who to talk to within ACOs, said speaker Robert Shewbrooks, a principal at HSG and leader of its syndicated research practice.
Regardless of how they allocate financial risk, most ACOs do not have their own formulary teams or ability to drive formulary decisions within a larger health care system. More specifically, only about 5% of ACOs are developing their own formularies. Many ACOs, however, are taking roles indirectly in formulary decision making, for example by participating on the formulary committees of payers with which they have relationships.
Only 27% say cost is the primary reason for their interest in managing pharmacy, but the good news for pharma is that cost is not the only reason. Some 23% are most interested in improving quality and outcomes and 15% in patient compliance and these other factors are more important than cost reduction for the overall success of the ACO, Shewbrooks noted. Therapeutic areas on top of ACOs’ lists for cost management are, in order: Psoriasis (44% of respondents), likely due to the influx of expensive biologics into what had been a relatively inexpensive category, followed by gastrointestinal diseases (39%) and rheumatoid arthritis (38%)
ACOs are focusing on quality because their financial rewards depend on their ability to meet certain metrics. The top disease management priorities for ACOs, as determined by CMS and other quality metrics established by well-regarded professional organizations: diabetes, eye and heart disease. Diabetes and heart disease are predictable choices – diabetes is the focus of six CMS ACO measures and is emphasized in other widely used quality assessments. Eye care metrics are not part of the 33 Medicare ACO quality measures, but they are a major concern, the survey found, partly driven by their inclusion in other quality measures that ACOs often follow. This is an opportunity for industry, Shewbrooks pointed out.
As for pain points: The biggest challenge for executives is achieving continuity of care across different entities within an ACO, followed by getting providers on board with goals, and logistics, such as improving infrastructure, notably clinical integration and improving infrastructure, notably health IT platforms. Only 8% of respondents cited patient engagement as their biggest hurdle, although it should be top priority, argued Shewbrooks, noting that patients who are not engaged are tough to manage.
Successful implementation of teams that ensure quality across the care continuum will be increasingly important to ACOS. Survey respondents cite some improvements in care coordination, although not many have seen profits rise. Only 47% decreased their costs per patient and 22% said no changes resulting to date. That could be because the organizations are still young and in the construction and implementation phases of their programs, while results are more likely to be available by Year Three, said Shewbrooks.
For pharma and other suppliers to these organizations, addressing ACO demands is fraught with uncertainty as those organizations continue to evolve rapidly and in unpredictable ways. For now, companies are working on outcomes data and building value propositions for their brands that they hope payers and ACOs will accept. They are eager for partnerships, although they are not yet clear on how those would be structured. At some point, they will have to consider different commercial models, although in the short-term they are largely leveraging existing resources, with innovations contained to pilot phases.
