ACO Update: A Third Horse Enters the Race

A few months ago, we noted that the release of regulations for ACOs would trigger an ACO services race across the healthcare landscape, where market participants would be sprinting to create service offerings that would help hospitals and physician practices become compliant with the CMS ACO regulations for sharing financial risk and the rewards.  So where do things stand six months later?

Just like earlier this year, the “Big Two” – Optum and Aetna – seem to be squarely in the lead of creating a turnkey ACO solution.  And in the last few weeks, we’ve seen a couple items of note from these two.  The first was an interview with Charles Kennedy, CEO of Aetna’s ACO division on HISTalk.  In the interview, Kennedy talks about how Aetna is pursuing the ACO opportunity via three go-to-market offerings:

• Clinical integration (basically an HIE via Medicity)
• A population-based approach with chronic disease management tools that typically rolls out to hospital employees as a way of deploying a light version of an ACO
• A full, private-label health plan, where a delivery system has their own health plan “powered by Aetna”

Last week, Optum announced that it has brought together its own ACO division with more than 700 people (!) focused on enabling “Sustainable Health Communities,” which is Optum’s version of the ACO concept.  Optum’s press release calls out its own five-part strategy:

• Patient and population health management
• Informatics, analytics, and technology
• Clinical integration, network development, and physician change management
• Payment model, contracting, and actuarial expertise
• Operating expertise

Interestingly, the press release also mentions that Optum is also bringing solutions to market targeted at commercial health plans and government payers – the other side of the ACO/shared risk/bundled payment equation.

The big question we have been trying to figure out here at TripleTree is who is going to follow “the Big Two” and their industry-leading ACO partnership announcements (specifically: Optum with Tuscon Medical Center and Aetna with Carilion Clinic)?  Where are the other healthcare companies that are going to pursue this mammoth opportunity?  Wellpoint’s acquisition of CareMore, McKesson’s acquisition of Portico, and Harris Corporation’s acquisition of Carefx certainly point to their interest in this market, as does Premier’s burgeoning alliance with IBM – but we have yet to see any of these or other players signal their interest in developing a broader set of provider-focused bundled payment service offerings.

This past week we think have finally seen another company unequivocally throwing its hat in the ring:  The Advisory Board Company announced the creation of a new company called Evolent Health, in partnership with the UPMC Health Plan.  Evolent intends to provide a platform for population and health plan management to leading health systems as they develop their value-based care strategies.  This follows ABCO’s earlier acquisitions of Crimson, Concuity, and Cielo MedSolutions – all earlier signals that the company was pursuing the hospital analytics, contracting, and registry marketplaces in a big way.

It makes perfect sense for The Advisory Board to do this – with nearly unparalled access to hospital c-suites across the country, it was only a matter of time before they launched a solution to address the many, many requests they must be getting to help with hospitals’ new risk-sharing strategies.  We see this as a welcome development in this space, and hope to see other HCIT players, undoubtedly facing their own questions from their healthcare clients, enter the fray as well.  Where are you, Accenture, Microsoft, and Elsevier?

Let us know what you think.

Conor Green

Conor Green is a Vice President at TripleTree covering the healthcare industry, and specializing in revenue cycle management and tech-enabled business services. You can email Conor at cgreen@triple-tree.com.

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A Big Week for ACOs

Given that this Friday is the deadline for applying for CMS ACO “Pioneer” status and is also the assumed release date for the final ACO regulations, this is sure to be a busy week for ACO news.

And as if we needed more proof that still no one knows how ACO adoption is going to shake out, we took note of the following last week:  on August 19^th, Forbes published a blog post titled “How ObamaCare is Destroying Accountable Care Organizations.”   (This was based on a post by noted healthcare policy analyst John Goodman: “Health Care Schizophrenia” )

As a key argument, the post cites how an innovative medical group in Texas called IntegraNet wouldn’t qualify for CMS ACO status, despite all the good work they are doing around measuring practicing evidence-based medicine and driving down costs because they rely on a Fee-for-Service model.

One week later, on August 26th, guess what happens?  IntegraNet became one of the first groups in the country to formally apply for ACO designation.  (To be completely fair to Goodman and to Forbes, IntegraNet clearly states that they are applying early in order to have some influence on the “burdensome rules” imposed in the regulation).

However this drama plays out, we here at TripleTree have been thinking a bit about the broader picture.  While most of the drama and headline news (and criticism!) is happening at the federal level of the CMS ACO program, there are a number of hospitals and physician groups that have quietly undertaken their own shared savings and bundled payments experiments.

In fact, Modern Healthcare published its first survey of accountable care organizations this week, identifying 13 ACOs respondents around the country (this despite the fact that CMS ACO program does not launch until 2012). To us, these experiments are the real market opportunity for ACOs, and one that has finally gotten some deserved attention on the back of the government’s healthcare reform legislation.

In fact, a great example can be seen here in our backyard with Fairview Health System’s developing relationship with the payer Medica.  A case study can be found here, but in short:  Fairview, a seven-hospital system with 49 clinics and 450 employed physicians, and Medica, with 1.6m members in the upper Midwest, decided that they could seek a more mutually beneficial relationship.  In 2009, they entered into a contract that pays Fairview based on the achievement of defined outcomes for quality and total risk-adjusted cost of care based on Fairview’s performance on certain diabetes and vascular care measures.  Essentially, if Medica members have better outcomes and lower costs than the community at large, Fairview shares in those savings.  Preliminary data is encouraging, though the relationship is requiring a “total cultural transformation” on the hospital system’s part, including a total redesign of workflow, compensation, and responsibilities. (Just think of what kind of transformation will be required to measure and achieve CMS’s 65 proposed quality measurements!)

While these quiet moves will never get the attention that Highmark’s acquisition of West Penn Alleghany that we profiled recently, this the real story of the ACO debate going on right now.  These experimental relationships between providers and payers are the ones that will prove if shared savings and bundled payments can truly bend the proverbial cost curve.

Let us know what you think.

Conor Green

Conor Green is a Vice President at TripleTree covering the healthcare industry, and specializing in revenue cycle management and tech-enabled business services. You can email Conor at cgreen@triple-tree.com.

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