With at least 15 percent of Americans now covered through an accountable care organization of some sort, integration seems almost inexorable. But not all is well in the land of Medicare ACOs, and in the private sector, the evolution may hit a few dead ends.
In addition to joining accountable care partnerships with insurers, health systems are "sticking a toe" in the proverbial ACO waters with Medicare, their largest payer, as Anne McGeorge, managing partner at Grant Thornton's healthcare practice, put it in a recent online presentation.
As of January, there were 23 Pioneer Medicare ACOs and 351 Shared Savings ACOs -- so far saving a combined $380 million -- but many of participating providers do not think they can sustain their work.
About two thirds of the shared savings ACO participants are not likely to adopt a two-sided risk model in the next round of contracting, according to a survey by the National Association of ACOs, and hospital advocates are lobbying the Centers for Medicare & Medicaid Services for changes.
"The Pioneer ACO and MSSP programs place too much risk and burden on providers with too little opportunity for reward in the form of shared savings," wrote Linda Fishman, senior vice president of public policy at the American Hospital Association, in a letter to CMS, calling for a new minimum savings rate for ACOs of no more than 2 percent.
With 23 of the original 32 Pioneer ACO participants remaining, "very few -- if any -- additional healthcare organizations will apply to participate" as it is "currently constructed," Fishman wrote.
But if Medicare accountable care is proving to be too much, too quickly for many health systems, convergence with commercial insurance may be a bit more feasible.
Just as some insurers are experimenting with managing clinics and provider groups, a number of health systems are getting into the underwriting business, emulating the integrated care model of Kaiser Permanente and, more recently, the University of Pittsburgh Medical Center and its UPMC Health Plan.
According to an Advisory Board survey from last year, 34 percent of health systems already have a health plan and 30 percent hope to launch one within the next five years.
"There are advantages when providers either create or affiliate with a health plan," Grant Thornton's McGeorge said. "First of all, they get to capture the full premium dollar from subscribers. Providers can also manage utilization better, they'll have all of the data to do that, and will be able to steer patients to owned or affiliated facilities."
Providers with their own health plans, like Catholic Health Initiatives, which is acquiring an Arkansas HMO that could be a launchpad for national insurance products, "present credible contracting threats to health insurance companies," McGeorge added.
Despite some bullish plans, though, "most providers will admit that they are far from ready to manage risk and to incur the cost to move to this value-based curve," McGeorge said.
It's an open question whether the average insurer would be better positioned to operate a health system than the average health system would be to operate a health plan, given the problems with both delivery and payment systems. Indeed, as more health organizations try to innovate, the American healthcare market may end up with many hybrids.
"There are advantages to health plans when health plans either buy or affiliate with provider groups: increased market share, increased consumer satisfaction through expanded networks and improved coordination," McGeorge said.
Short of buying medical management companies, like Humana, or buying a health system, like Highmark, there is a lot of value to be had in payer-provider partnerships that either incentivize members to a certain delivery network or use some kind of bundled payment experiment, McGeorge said.
For instance, Tufts Health Plan's Steward Community Choice HMO has discounted premiums of 15 percent to 30 percent for members using Steward hospitals and physicians, and Aetna's Whole Health accountable care plan has premiums in a similar discounted range for members using certain networks with providers like the Carilion Clinic and Banner Health.
Another option is joint ventures, such as the health plan launched by Aetna and Inova Health System in Virginia and the chronic care management company created by Independence Blue Cross and DaVita HealthCare Partners, called Tandigm Health.
For payers there is the most disruptive and risky option: acquiring a health system and, slowly, redesigning it.
Highmark is now nurturing the newly-branded Allegheny Health Network, a five-hospital system created after the insurer formally acquired the financially-beleaguered Western Pennsylvania Hospital last summer.
Highmark purchased the health system in large part to compete with UPMC. "You couldn't let a provider with 23 percent market share go bankrupt," said Jay Godla, Highmark's chief strategy officer last fall.
Highmark also wanted to bring more clinical innovations to healthcare in a region that, adjusted for the cost of living, may actually be the most expensive healthcare market in the country, Godla said.
Highmark has granted $11 million to Carnegie Mellon University for a research lab focused on diagnostics, chronic disease management, endoscopy, infection prevention, data mining and behavior change. The Allegheny Health Network also recently inked a memorandum of understanding with Johns Hopkins' Kimmel Cancer Center for an affiliation that will be able to bring Hopkins' clinical trials to Allegheny Health Network cancer patients, along with consulting on rare cancers and novel therapies.
Part of Highmark's work with Allegheny Health Network is also remaking the image of insurance and healthcare, and establishing a brand of integrated care to rival UPMC, which remains opposed to renewing a contract with Highmark.
"The reputation and brand recognition of the payer and the product itself have become increasingly important," said Jack M. Stover, an attorney at Buchanan Ingersoll Rooney who worked on Highmark's Allegheny Health Network acquisition, during the Grant Thornton webinar.