CEO SUMMARY: A recent report by a consulting firm that tracks the ACO industry indicates that, as of the end of 2012, ACOs of all types involved—in some manner—between 25 and 31 million patients. Moreover, Medicare and private ACOs are located in regions where 45% of the population of the United States lives. These facts confirm that it would be timely for local clinical laboratories and pathology groups to develop appropriate strategies for serving the ACOs in their communities.
PREDICTING THE ROLE OF PATHOLOGISTS and clinical laboratory testing in the developing market for accountable care organizations (ACOs) is anyone’s guess right now.
Of equal importance is how ACOs will pay for clinical lab tests and anatomic pathology services. That’s because the number of ACOs continues to grow at a fast pace. For example, on January 11, officials at the federal Centers for Medicare & Medicaid Services (CMS) announced 106 new ACOs.
That brings the total number of Medicare ACOs to 259. With these new ACO organizations, Medicare officials estimate that ACOs now cover as many as 4 million Medicare beneficiaries.
Private Sector ACOs
In the private healthcare sector, ACO growth is equally swift. In its report titled “The ACO Surprise,” consulting firm Oliver Wyman of New York City estimates that, as of the end of 2012, between 25 million to 31 million patients were already affected in some manner by an ACO. This report was issued in November 2012. It did not include the lives covered by the 106 new Medicare ACOs announced last month. Oliver Wyman divided total national ACO enrollment into three groups as of November 2012:
- 8-14 million patients were part of non-Medicare ACOs.
- 15 million non-Medicare patients who get their healthcare services from a Medicare ACO.
- 2.4 million Medicare beneficiaries were covered by the 153 Medicare ACOs that existed in November 2012.
By Oliver Wyman’s calculations, about 10% of the American population are now getting healthcare from an ACO. This is a fast ramp-up for this new model of integrated healthcare. Pathologists and laboratory executives should acknowledge this rapid market adoption, particularly since it moves patients out of the traditional fee-for-service setting and into care delivery systems that reimburse based on value.
In fact, there is a surprising twist in provider acceptance of ACOs. Oliver Wyman explained that organizations were serving both non-Medicare patients and Medicare beneficiaries with their ACO.
This has come about because of the shift toward proactive and preventative care, accompanied by value-based reimbursement. The goal is for providers to achieve early diagnosis and active intervention with patients. To achieve this goal, it makes better sense to treat all patients—both commercial lives and Medicare beneficiaries—using the same clinical and operational workflows.
“We’ve seen a few organizations try to operate fee-for-service and value-based models side by side,” stated Richard Weil, Ph.D., Partner at Oliver Wyman. “It [side-by-side reimbursement] doesn’t work in the long term. The two [payment] models are simply incompatible.
“Besides, it takes an immense amount of work to set up an ACO,” added Weil. “Once you’ve made that commitment, you want to reap the benefits—and there are immense benefits to being a value-based organization.”
For laboratory executives and pathologists who remain skeptical about the growth and expansion of ACOs in the American healthcare system, Weil has some words of advice. “There’s going to be a big growth spurt in 2013 [for ACOs],” predicted Weil. “The folks who were hoping that the ACO would go away are not going to get what they want.”
Many Regions Have ACOs
Weil made another observation about the current state of ACO development. He notes that the locations of existing ACOs now coming into operation already give them access to about half the nation’s population.
This fact has profound strategic consequences for most community hospital laboratory outreach programs, as well as local pathology groups. It means that they will need to deal with nearby ACOs sooner rather than later.
Weil was specific in his observation. He stated, “We would argue that this is remarkably quick growth for a new and complex form of payment and care delivery. But it is really only a fraction of the potential impact these provider organizations can have.
“The Medicare ACO programs were deliberately designed as a way to create a multi-payer care delivery model that could compete in the open marketplace with fee-for-service,” he continued, “and it is reasonable to ask how many people live in markets where an ACO is one of their healthcare choices.
“The astonishing answer is nearly half of the US population,” declared Weil. “When we examine the landscape on the level of primary care service areas (PCSA), 45% of the population live in PCSAs served by at least one ACO, with 17% in a PCSA served by two or more.”
Watch ACO Success Stories
How will ACOs evolve? Weil says that the innovators and leaders will attract all the attention and will be the drivers of rapid change. “The averages [of ACO performance] won’t drive change, but the success stories—the ACOs that manage to gain an edge on fee-for-service providers will,” he predicted.
“Successful ACOs won’t just siphon patients away from traditional providers and attract the attention of payers, employers, and partner organizations,” predicted Weil. “They will change the rules of the game in the regions where they operate, leading purchasers to expect lower costs, higher quality, and greater patient satisfaction.
“As that happens, there will be a race to adopt the best models,” he added. “Providers that fail to do so—or that commit halfheartedly to real change, will stand no chance.”
With this analysis, THE DARK REPORT is the first in the laboratory testing industry to call the attention of pathologists and laboratory administrators to the rapid progress of ACO development in the United States today. In the story which follows on pages 10-13, THE DARK REPORT provides inside intelligence on the progress of ACO development by two well-known attorneys who are actively involved in ACO negotiations on behalf of their non-lab healthcare clients.
As you will read on those pages, ACO administrators are giving contract negotiations with hospitals, health systems, physicians, and health insurers priority. That gives pathologists and lab executives time to develop ways to sell the value of lab testing services to ACOs when it finally comes time to contract for lab testing services.
Growth in the Number of ACOs Nationwide, Demonstrates Momentum behind this Trend
IT HAS NOT BEEN EASY TO GET UP-TO-DATE DATA about the number of accountable care organizations (ACOs) that have been announced and are either in active organization or are already in the early stages of delivering clinical services to patients. Below is a map that was prepared by the New York city-based consulting firm Oliver Wyman. It shows the percentage of population in each state living in a community that is served by one or more ACOs. Further, Oliver Wyman estimates that between 25 million and 31 million patients are already affected by an ACO in their region.