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How health plans and employers are using episodes of care to maximize their contracts with ACOs

By Marc Rothman, MD and Tami Hutchison on 4/21/21 10:42 AM

Health plans and employers are increasingly contracting directly with Accountable Care Organizations (ACOs) in hopes of lowering the cost of care provided to plan members and improving health outcomes. Unfortunately, ACOs have a problem: Although they have proved to be a vital component in the movement toward value-based care, ACOs rely extensively on their primary care members to drive value improvement, and primary care physicians can only influence a portion of the health plan spend — estimated to be 40%. The challenge ACOs share across all their risk arrangements is how to create tighter incentive alignment between the ACO and its PCPs -- and the downstream medical/surgical sub-specialists they rely on — to achieve increasingly more value, and assume increasing amounts of risk on both an upside and downside basis.

By and large, the medical/surgical specialists PCPs refer to continue to be paid in a fee-for-service manner. This has significant implications for employers and health plans that have contracted directly with ACOs to provide care to their employees and plan members.

This disconnect has created gaps in care coordination with other providers and increased the total cost of care provided to the member. One solution is to restrict plan members’ choice of providers, however, there is no evidence that a single health system is capable of treating all conditions at the same high level of quality.

Using episodes of care to create accountability
Health plans, employers, and ACOs need a framework that extends an ACO’s reach without compromising any control on spending. Well-designed episodes of care programs can align and serve that function by tying specialists and facilities to specific illnesses, injuries, treatment paths, and even clusters of clinically-related conditions. While episodes of care began as a model to organize and pay for care around procedures, this approach is increasingly being applied for common chronic conditions that have a very high variability in both cost and quality in most communities that we have analyzed.

Using episodes of care payment strategies, employers and health plans could increase the reach of ACOs and the portion of care that is managed by accountable providers from 50% to more than 90% without limiting plan members’ choice of providers. Episodes of care provide a person/event-based structure to align incentives within the population-based approach typically seen within ACO arrangements. Episodes provide a standardized and measurable framework for assessing the qualitative and financial performance of specialists, building aligned incentives, and creating a meaningful transparency tool physicians can use to continuously improve, and in so doing, provide health plan sponsors and members with the value they increasingly expect. It’s a win-win.

Combining total cost of care incentives with episodes of care-based incentives can serve as a comprehensive and dependable framework for creating accountability outside the purview of PCPs.

Learn how: In our latest white paper, we explore how marrying ACO contracts with EOC contracts can drive value and expand accountability and chart a course of action for health plans and employers interested in reducing costs while incentivizing better care.

Marc Rothman, MD is the Chief Medical Officer at Signify Health
Tami Hutchison is Senior Director, Business Development at Signify Health