After promising results, Medicare will likely continue expanding risk-based contracting efforts

In our last blog post, we shared a few reasons why risk-based contracting in health care is here to stay. In this post, we’ll share some data points that point to current and future impacts on the industry, and a few suggestions to help you jump on the value-based train.

The value-based train has left the station. Medicare, the closest thing to a bellwether in the U.S. health care industry, recognizes more than 420 accountable care organizations in its Medicare Shared Savings Program (MSSP) and its Pioneer ACO model. In year one of the MSSP, 53 organizations saved the Medicare trust fund $345 million in its first year, while Pioneer ACOs saved the trust fund approximately $74 million (see year one results here, and year two results here). The Centers for Medicare & Medicaid Services (CMS) Innovation Center, as of July 2014, is piloting 13 new payment and service models, including the Pioneer ACO pilot. More than 7,981 health care organizations are participating in these pilot projects.

How will these developments impact the health care industry? First, the degree to which providers can successfully manage risk for patient care and outcomes will become a competitive advantage. Risk-based plans will be priced lower than standard PPO plans, and will become popular among health care purchasers and consumers. Providers who get ahead of the curve in risk bearing will be in a position to gain more managed care contracts and more patients.

Second, health care is local, therefore risk-based arrangements will vary based on the unique needs of each market. Organizations that are first in meeting the needs of their market will seize the upper hand.

Third, if ACOs and other risk-based provision methods continue to increase quality and lower costs, Medicare and large commercial insurers will invest even more in risk-based plans. Results continue to trend upward.

Fourth, physicians who want to practice fee-for-service medicine will have fewer options; concierge medicine may gain in popularity.

Trendwatch_coverFor more detail, plus takeaways for health insurers and providers, download Optum’s Trend Watch.

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