Why hasn’t the commercial ACO model accelerated more quickly?
Even as the market has matured, evolution of the commercial ACO model has been slow. All parties agree on the long-term vision to lower costs of care, yet the reality is that at the heart of it, the parties all have mis-aligned short-term incentives, which are often still in tension despite shared ACO objectives.
Commercial ACO parties' near-term objectives:
Employers are looking to:
- Reduce overall healthcare spending for the employer and out-of-pocket spending for employees. Part of our messaging for the past three years has been that many employers are looking to the delivery system (such as the supply side of healthcare) to save on costs for the employer and employees because they’ve gone to full replacement high deductible health plans and have mostly exhausted their ability to shift costs to employees without it hurting too much (for example, the demand side of healthcare.)
- Increasing access to high quality medical treatment is a driving force behind many of the leading employers (most will admit that cost savings will take a long time and/or won’t be huge.)
- Empower consumer choice
- Win talent wars through attraction and retention
- Improve productivity
Health plans are looking to:
- Grow commercial membership to increase profit and scale administration efforts
- Create innovative and attractive products for employers
- Secure high-value network relationships with providers
- Differentiate themselves in the increasingly commoditized insurance world
Providers are looking to:
- Grow their share of commercial care
- Increase share of wallet with existing members
- Protect against impending hits to financials as the general population ages in to (less-profitable) Medicare
- Build their population health management capabilities
- Respond to pressure from their boards to innovate in business design
Yet these parties – while looking for seemingly different things (perhaps different things more in the short-term compared to long-term) – continue to pursue ACO arrangements. There is a spectrum of interest and commitment among players: some ACO participants are using the opportunity to experiment with value-based care on a small scale; some are using it as a population heath engine to inject innovation into the rest of their business; and some are truly passionate this is the right direction for the industry to go to create quality, access, and affordability for consumers.
From the latter group, the National Business Group on Health (NBGH) – whose work includes helping employers make informed ACO strategy decisions, and intelligently implement these strategies – has brought together representatives – including Oliver Wyman – from health plans, providers, employers, enablement companies, and other industry players for quarterly meetings to discuss our shared goal of moving value-based care forward and open a dialogue on what we need from each other to make it happen. We kicked off a recent meeting by live-polling a series of questions, where participants were required to put themselves in the shoes of other parties and answer what they needed from each other. Results showed alignment on what would be impactful to helping the shift to value not happening today:
- Help telling the story to potential members, leadership, the general public, and other stakeholders
- Time to demonstrate and reap the long-term benefits of these arrangements, and commitments from all parties for the duration of time needed
- Specific data to empower parties involved to drive change, at the individual physician and member level
These concepts aren't new – so why do they continue to be sticking points?
Here are three reasons.
1. Difficulty understanding the complex interdependencies of these arrangements:
ACOs are complicated arrangements, with a lack of standardization exacerbating the challenge in communicating about them broadly. Because these arrangements are hard to understand – even from the inside – there is a need to help educate and "sell" the benefits of these arrangements externally:
- Benefits buyers within employers need help educating their leadership; plan design and contracting changes to support the ACO requires investment which needs to be justifiable to the C-suite
- Employers need help educating their employees on the value of staying in the ACO network
- Payers and providers need help educating potential customers
Furthermore, payers, providers, and employers – each running a different set of detailed operations – continue to struggle with streamlining their processes and procedures. There tends to be an intensive period of negotiation and set-up when arrangements are first implemented, then a sharp drop in interaction between parties during steady-state operations, making it difficult to collaborate and help each other improve.