A recent post reviewed why some Accountable Care Organizations (ACOs) have failed to generate anticipated cost savings, while others are moving forward. Here, Oliver Wyman’s Tomas Mikuckis provides some specific examples of partnerships that demonstrate how to strategically navigate from a fee-for-service to a value-based market:
In recent weeks, a number of interesting success stories have been highlighted in various publications. Taken together, they show that delivering value can’t be achieved through a one-size-fits-all prescription. The examples highlight the importance of capitalizing on the often unique advantages of given local markets to create traction and momentum. Here’s a cross-country roundup of role models for success on value:
- Massachusetts: Blue Cross Blue Shield of Massachusetts (BCBSMA) has expressed a commitment to driving cost and quality improvement through value-based arrangements. The Blue Cross Alternative Quality Contract (AQC) rewards doctors and hospitals for higher quality and better outcomes. In 2014, independent researchers examined the first four years of the AQC and found that it has lowered costs and improved patient care for HMO Blue members. A recent Avalere Health report concluded that “models like the AQC could serve as potential building blocks for collaborations that align incentives across providers and several payers” and “as backbones for pilots that engage the Medicare program and other government payers, with the potential to transform healthcare delivery and spending.” Part of BCBSMA’s advantage has been a very highly organized physician market with lots of employment and infrastructure in place, enabling providers to take risk and be successful. While BCBSMA’s announced intentions to expand the program beyond its HMO business to more open-access PPO networks isn’t yet a guaranteed slam-dunk, as some observers have noted, the effort to do so will benefit from a strong foundation laid with a high degree of provider buy-in and engagement.
- Michigan: Blue Cross Blue Shield of Michigan faced a very different landscape, with a more fragmented and less developed physician landscape. BCBSM embarked on a multi-year investment to develop what is now among the nation’s largest Patient-Centered Medical Home programs. The program achieved certified savings of $155 million in prevented ER and hospital claims from the first three years of the PCMH designation program. Data from 2013-2014 shows adult patients in Blue-designated PCMH practices had a 27.5 percent lower rate of hospital stays for certain conditions than non-designated practices, and a 9.9 percent lower rate of ER visits over non-PCMH doctors. The investment in the PCMH model appears to be paying outsized dividends as well, evident in both the rapid introduction of hospital value-based contracts in that market over the past two years and a number of unique ACO-based product partnerships that have been launched in the state. More on the BCBSM PCMH and others can be found in the Patient-Centered Primary Care Collaborative’s annual review here.
The examples highlight the importance of capitalizing on the often unique advantages of given local markets to create traction and momentum. – Oliver Wyman’s Tomas Mikuckis
- Washington: Last year Providence Health & Services and Swedish Health Services launched the Providence-Swedish Health Alliance, one of the first ACOs in the country to work directly with employers on high quality, affordable healthcare benefits for employees, allowing providers to work directly with employers on employee benefits product development. Boeing was the first employer to sign with the new ACO. The willingness by Boeing to be innovative and game-changing in how it offers benefits to its employees has catalyzed competition among several well-organized delivery systems. Boeing’s leadership encouraged these systems to take risk, commercialize their ACO capabilities, and “productize” the opportunity to compete for market share of patients, rather than admissions, creating conditions for further investment in population health. The aerospace company’s forward thinking has since been cited as the start of a new trend in other similar markets.
- New Hampshire: Earlier this month, Tufts Health Plan and Granite Healthcare Network, representing five of New Hampshire’s largest health systems, signed an agreement to create a new and innovative insurance company. The new company, designed to coordinate care and promote evidence-based care practices, is an interesting example of identifying market opportunity and then creatively bringing together the necessary assets and capabilities in a lower-risk, faster-to-market way than going it alone.
While these approaches are highly diverse, with varying roles being played by payers, physicians, delivery systems, and employers—they do have one thing in common: Each involves partnership across multiple stakeholders in ways that would have been hard to imagine just a few years ago. While still novel, they represent the actions of early movers recognizing significant opportunity in turning formerly competitive relationships into potential win-win partnerships, given the right dose of sustained innovation and investment.