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Transform Care February 12, 2015

Analysis: What Separates Successful ACOs From the Pack

Partner, Health & Life Sciences, Oliver Wyman

Oliver Wyman Partner Patrick Barlow centers his strategy work on helping organizations drive success in their value-based health initiatives. Below he offers his perspective on why some ACOs have failed to generate anticipated cost savings while others are moving forward:

CMS recently announced a bold pledge to drive 50% of provider payments into value-based models, such as ACOs, by 2018.  Likewise, a private sector consortium known as the Health Care Transformation Task Force, consisting of a number of large health plans and provider systems, further upped the ante by setting a target of moving 75% of their businesses into value-based arrangements by 2020. These highly visible commitments confirm that healthcare’s transformation to value is not only here to stay, but is accelerating.

However, the distribution of this transformational effort remains uneven. While there are some notable progressive leaders driving real change in the market, my team’s observations of the value-based healthcare landscape over the past few years suggest that many entrenched players have favored style over substance, making only token efforts towards value. In a rush to keep pace with market buzz, many traditionally-minded payers and providers scrambled to stand up nominal ACOs and issue press releases signaling that they too were in the value-based game. Several years (and millions of investment dollars) later, many of those same organizations struggle to highlight any real transformation.

There are wonderful examples where the reality of value-based health has actually held true to its promise of sustained quality, real cost savings, effective trend management, and improved patient experience. – Oliver Wyman Partner Patrick Barlow

Behind closed doors, many health plan and health system executives admit that their ACOs have failed to generate the anticipated cost savings, and in many cases ANY savings at all. However, there are wonderful examples where the reality of value-based health has actually held true to its promise of sustained quality, real cost savings, effective trend management, and improved patient experience. As we looked at these success stories, a few common themes emerged, separating them from the pack:

  • Providers agree to take downside risk, either as a form of capitation or two-tailed risk sharing
  • Risk-bearing entities have an active plan to expediently migrate their entire book of business into value-based arrangements
  • Providers have a robust financial understanding of how to successfully shift to value, and a willingness to tackle the disruption required to cannibalize existing profit centers (e.g., procedural specialties) before new ones are fully built
  • There is a visible and active clinical leader (or leaders) who can drive cultural change around care delivery and champion organization-wide transformation, rather than allowing population health to be a sideline “experiment”
  • Physician compensation models are focused on value creation, rather than traditional production, and line physicians share in value-based success
  • Value-based models are actively commercialized and productized to drive member volume, capture market share, and build brand and reputation
  • Benefit designs and network models that create strong motivation for members to stay within organized care systems

When these elements come together, value-based models have been shown to produce enhanced quality, a differentiated patient/member experience, and measurable financial savings. With leadership from CMS, consortiums like HCTTF, and progressive payers and providers, transformation success stories will continue to multiply. Will this latest push help catalyze the market towards a more complete transformation to value, or will the traditionalist organization continue to set the pace of change?

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