Why ACOs and Other Risk-Bearing Providers Must Prioritize Contract Management
The following is a guest article by Deepti Sharma, Senior Vice President of Product Management at HSBlox
Healthcare providers are continuing to form and invest in Accountable Care Organizations (ACOs) as a means of improving care quality and reducing costs.
Some of the largest ACOs serve upwards of hundreds of thousands of patients, while, overall, 13.7 million Medicare beneficiaries are being cared for by ACOs this year, according to the Centers for Medicare & Medicaid Services (CMS).
A key component of the healthcare industry’s push towards value-based care, ACOs place a heavy emphasis on delivering preventive care to patients to reduce costs, which may be particularly impactful for those experiencing chronic conditions. Approximately 90% of the nation’s $4.5 trillion in annual healthcare expenditures goes toward people with chronic and mental health conditions, such as heart disease, cancer, and diabetes, according to the U.S. Centers for Disease Control and Prevention (CDC).
Providers that participate in ACOs are financially accountable for the quality and cost of care that they deliver to patients and can share in the savings they provide if they meet certain quality standards. In 2022, ACOs saved Medicare $4.2 billion, with 63% of ACOs earning shared savings. ACOs have generated more than $21 billion in gross savings for Medicare over the prior decade, according to the National Association of ACOs.
In addition to the possibility of shared savings when cost and quality targets are met, some Medicare ACOs face potential financial penalties from the federal government for cost overruns. Given that many providers are enduring narrow operating margins, any additional financial risk represents a potential threat to providers’ missions of delivering high-quality care to the communities they serve.
Accordingly, effective contract management in value-based arrangements is essential for ACOs and other risk-bearing providers. To succeed under value-based plans, it is critical that participants possess the ability to transmit and receive data within a scalable, multistakeholder network and facilitate payment capabilities across that network.
Effective contract management ensures transparency around ACO payments and savings, providing a shared understanding of what factors are being measured, exactly how they are measured, and what that means within the context of the value-based agreement. Often, however, providers face limitations associated with legacy information technology (IT) infrastructure that prevents adequate transparency around payments, data sharing, and collaborative care.
Sophisticated IT to Serve ACOs’ Needs
Many providers are saddled with IT systems that lack the digital tools required for success in value-based arrangements. Although most legacy infrastructure is capable of supporting relatively simple fee-for-service contracts, these systems generally do not possess the sophistication required to undergird the complex networks of ACOs and other risk-bearing entities.
However, that does not mean that providers need to engage in costly “rip-and-replace” initiatives to implement IT systems that are optimized for value-based care.
Instead, they can adopt modern platforms that integrate layers of data seamlessly, then extend that data layer either as a DaaS (Data as a Service) or as a PaaS (Platform as a Service) so that partners can use existing applications served up via microservices or create business applications for their own needs. These platforms enable ACOs and other risk-bearing organizations to gather and combine data from a wide variety of sources, including electronic health records, pharmacy records, demographic information, and data on social determinants of health, to build a 360-degree view of their patient populations and various cohorts.
With this type of actionable information, ACOs can develop targeted preventive strategies and coordinated care plans for the highest-risk patient groups, helping these patients to better manage chronic conditions. Additionally, to achieve shared savings and avoid penalties under VBC arrangements, ACOs and other risk-bearing organizations need a scalable, cloud-based digital infrastructure that enables a many-to-many network of participants.
Conclusion
ACOs and other risk-bearing entities need the right digital tools and infrastructure to support contracts with networks of multiple and varied stakeholders, such as hospitals, physician groups, payers, and social service agencies. To ensure providers’ success in shared-risk arrangements, these IT systems must facilitate contract management by delivering accurate, holistic patient data that serves as the foundational layer and establishes a single source of truth for value-based care arrangements.
About Deepti Sharma
Deepti Sharma is the Senior Vice President of Product Management at HSBlox, an Atlanta-based technology company empowering healthcare organizations with the tools and support to deliver value-based care (VBC), successfully and sustainably.
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