How will private ACOs impact your business?

June 16, 2014 at 10:43 AM Leave a comment

Last week, Anthem Blue Cross of California and Healthcare Partners reported that their joint venture, Anthem-HealthCare Partners ACO, saved $4.7 million in its first six months.1 The ACO covers 55,000 commercial beneficiaries in Southern California, and is one of the first to provide a comprehensive measure of coordinated care’s potential in the commercial PPO space.

According to Anthem – Healthcare Partners, the savings are the result of reducing utilization, as measured by the following HEDIS benchmarks*:

  • 18% reduction in hospital inpatient days (length of stay)
  • 4% reduction in hospital inpatient admissions
  • 4% reduction in outpatient visits, including emergency room visits
  • 4% reduction in radiology procedures
  • 4% reduction in lab tests

*HEDIS: Healthcare Effectiveness Data and Information Set. Measurements are compared to a control group; metrics are per 1,000 members and adjusted for risk.

In addition, the ACO increased preventive health screenings and prioritized the management of chronic diseases, such as monitoring diabetes LDL and cholesterol management for heart disease patients.2

These results provide some contrast to the mixed results of the Medicare ACO program interim report released in January of this year. CMS announced that the 114 provider groups participating in Medicare’s shared savings program (MSSP) generated a total of $126 million in savings in year one.3 While CMS officials touted this as a “strong start”, they did not disclose the  ACOs’ total expected spending to help gauge the program’s success.

Altogether, the MSSP ACOs cover approximately 1.6 million lives indicating average savings of $80 per Medicare beneficiary in the first year of the program.4, 5 In comparison, the Anthem-Healthcare Partners ACO saved on average $85 per member in the first six months. Assuming it sustains this level of saving through the second half of the year, the private ACO saved double the amount per member in comparison to its Medicare counterparts over the same span of time.

Although the vast difference in Anthem ACO’s population size versus that of all MSSP ACOs makes the above comparison purely anecdotal, the future looks promising for commercial ACOs.

Medical device manufacturers should take note. Reduced utilization could lead to a decline in medical device usage, and hospital purchasing decisions will be as focused as ever on getting the best deal or the lowest cost product. The exception to the rule are products that have a proven track record in helping hospitals reach their quality goals, such as improved patient outcomes. Medical device manufacturers have an opportunity to develop marketing messages that align their products’ functionality with their customers’ shifting priorities.

A key difference of private ACOs is that commercial insurers have the freedom to set quality goals and standards for themselves, whereas Medicare ACOs must comply with and meet strict quality standards set by CMS. Anthem ACO’s early success in the commercial space indicates that medical device manufacturers need to familiarize themselves with the quality goals of private ACOs as well as Medicare ACOs if they want to optimize the way they approach hospitals with their devices.

Provider organizations seem to have another feasible option with the commercial ACO model in a space dominated by Medicare and Medicaid. Other commercial arrangements are on the rise: the Healthcare Partners ACO is only one of fourteen Anthem ACOs in California, and other large insurers such as Aetna and Blue Cross are following suit across the country.6




Additional Resources

Modern Healthcare – Commercial insurers less likely to offer ACOs ‘upside-only’ shared-savings arrangements      


Entry filed under: Accountable care, Affordable Care Act, Hospital trends, Medical Device, Medicare. Tags: , , , , , .

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