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Payment and Delivery System Reform in Medicare: a Primer on Medical Homes, Accountable Care Organizations, and Bundled Payments

In response to the Affordable Care Act, Medicare has been testing new payment models to improve patient care and control costs. A recent Kaiser Health Foundation report is a primer on three of these models — medical homes, accountable care organizations, and bundled payments:

  • Medical homes are team-based care models focused on primary care practices for delivery and coordination of patient care. The payment model typically provides a monthly management fee or other payment in addition to fee-for-service reimbursement.
  • ACOs are groups of physicians, hospitals, and other providers that collectively share accountability for the quality and cost of care delivered to patients in an ACO. Financial incentives involve shared savings or losses for ACO performance based on meeting quality and cost benchmarks.
  • Bundled payments focus on setting an episode of care budget for a particular clinical condition over a defined time period rather than paying separately for each delivered service. By better managing and coordinating care, providers can come in ‘under budget’.

Each payment model is discussed, including its goals, financial incentives, number of participants, potential implications for beneficiaries, and early results on quality and savings. Preliminary results from these models have been mixed and are summarized in the report.

Source: Basement S. and others. Payment and delivery system reform in Medicare: a primer on medical homes, accountable care organizations, and bundled payments. Kaiser Family Foundation, Feb. 2016. https://kaiserfamilyfoundation.files.wordpress.com/2016/02/8837-payment-and-delivery-system-reform-in-medicare1.pdf

Posted by AHA Resource Center (312) 422-2050, rc@aha.org

Accountable Care Organizations: Findings from an AHA Survey

How many hospitals are part of an accountable care organization? How are their ACOs structured, and what types of contracts and risk models are being used? What are the challenges? How are patient engagement, care management, and performance management being handled? Are the ACOs part of an information exchange?

To find answers to these and other questions, the American Hospital Association sent a survey in 2013 to all 4999 community hospitals in the US, and of the 1517 responses received [a representative sample], 309 hospitals [20%] reported they were part of an accountable care organization.

Here are some of the other findings:

  • ACO STRUCTURE:  Two-thirds reported a new legal entity was formed for the ACO, such as an LLC. Governance was most often characterized as either a physician/hospital-led joint venture or as a physician-led ACO. Most [72%] ACOs will centralize their purchasing function.
  • CONTRACTS/RISK MODELS: A commercial payer partnership or a Medicare Shared Savings Program were the most frequently cited shared savings programs pursued. Under Medicare, nearly two-thirds preferred the one-sided risk model, and 89% anticipated engaging in an upside or simple shared savings model.
  • CHALLENGES: The biggest ACO challenges were developing clinical and management information systems and aligning incentives to promote provider productivity.
  • PATIENT ENGAGEMENT/CARE MANAGEMENT: Nearly two-thirds will notify patients that they are attributed to an ACO, and about half of those will allow patients to opt out. Nearly all the ACOs had a systematic process for identifying eligible patients.
  • PERFORMANCE MANAGEMENT: Most ACOs will track multiple types of measures, including quality, utilization, financial, and patient satisfaction. Just over half can track and routinely share these measure with all ACO members.
  • INFORMATION EXCHANGE: Less than half of ACOs are participating in a health information exchange.

The AHA Survey of Care Systems is an ongoing survey to be updated regularly.


Accountable care organizations: findings from the Survey of Care Systems and Payment. American Hospital Association, Aug. 2014. http://www.aha.org/content/14/14aug-acocharts.pdf

AHA survey of care systems and payment [database for sale]. Health Forum, an American Hospital Association affiliate, 2014. Description at http://www.ahadataviewer.com/about/AHA-Survey-of-Care-Systems-and-Payment/; Download available for purchase at http://www.ahadataviewer.com/quickreport/

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

Making the Business Case for Payment and Delivery Reform

How do you build the business case to overcome the barriers and elicit support for changes in how health care is delivered and paid for? Three groups — the Network for Regional Healthcare Improvement, Center for Healthcare Quality and Payment Reform, and Robert Wood Johnson Foundation — have published a guide to help.

Ten steps for making the case are presented:

  1. Define the planned change and expected results
  2. Estimate how the type and volume of services will change
  3. Determine how payments/revenues will change
  4. Determine how service costs will change
  5. Calculate the changes in provider operating margins
  6. Identify the changes in payment needed to maintain positive financial margins for providers
  7. Determine if a business case exists for both providers and purchasers
  8. Refine the changes to improve the business case
  9. Analyze the potential impact of deviations from the planned care and outcomes
  10. Design a payment model that pays adequately, assures wanted outcomes, and controls risk and variation

Details and examples are provided for each step. Data on billing/claims, clinical health records/registries analysis, service costs, and patient-reported outcomes will be needed for the analysis.

Source: Miller HD. Making the business case for payment and delivery reform. Network for Regional Healthcare Improvement, Feb. 24, 2014. http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2014/rwjf411117

Posted by AHA Resource Center (312) 422-2050, rc@aha.org

Value-Based Contracting for Hospitals

A new guide on value-based contracting is available to assist hospitals and health systems with the evolution of the nation’s health delivery system from a fee-for-service to a value-based payment model. The guide discusses the following:

  • Foundational requirements, including the need for shared goals and incentives, strong leadership and governance, and unified persistence
  • Assessment and preparation, covering desired position, service area, system infrastructure, resources, contract scope, types of arrangements and risks, capacity to carry risk, and the time frame for the transition
  • Financial and operational requirements, such as capital needs, unit costing/tracking, financial and actuarial assessment/planning, contracting capabilties, and data infrastructure
  • Evaluating a contract from the perspectives of responsibilities and risk, financial impact, and credit risk
  • Implementation success factors, encompassing physician engagement, transparency and accountability, and performance measurement and improvement

Other helfpul resources are also listed in the guide.

Source: Pizzo JJ and others of Kaufman, Hall and Associates. Value-based contracting. Signature leadership series. Health Research and Educational Trust/American Hospital Association, July 2013. http://www.hpoe.org/Reports-HPOE/Value-Based_Contracting_KaufHall_2013.pdf

Posted by AHA Resource Center (312) 422-2050, rc@aha.org

Hospital Trends: Emerging Health Care Delivery, Payment Models and Care Coordination Practices

This trend overview looks at medical homes and accountable care organizations as new health care delivery models. Based on the first analysis of FY2011 data collected as part of the AHA Annual Survey conducted during 2012, just 6% of responding hospitals were participating in an ACO, while 15% indicated they had an established medical home.

The overview also looks at how many hospitals reported involvement with bundled payment models; the extent that hospitals are engaged in care coordination/transition across care settings; and hospitals’ meaningful use of electronic health records.

Health Forum is further surveying hospitals on ACO adoption, with the data planned for release later this year.

Kenward K and Bostick N. Trends 2013: Emerging health care delivery, payment models and care coordination. Health Forum, an American Hospital Association affiliate, 2013. Available for sale as pdf download at http://ams.aha.org/EWEB/DynamicPage.aspx?WebCode=ProdDetailAdd&ivd_prc_prd_key=92b0ce53-d80b-43ef-9c7b-ec1a8211806e

NOTE: Also published as introduction in 2013 AHA Hospital Statistics. Health Forum, 2013. Available for sale at http://ams.aha.org/EWEB/DynamicPage.aspx?WebCode=ProdDetailAdd&ivd_prc_prd_key=f15837e6-7d5b-4beb-ba50-0c6c381ae53b

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

Survey Results: Hospital Readiness for ACOs

The Health Research and Educational Trust, an affiliate of the American Hospital Association, conducted a survey of US hospitals in 2011 to determine their readiness for the development of accountable care organizations. A small percentage of hospitals was currently participating in an ACO [3%] or preparing to participate [10%]. Three-quarters of hospitals were not exploring the ACO model at the time.

The report also discusses the following, based on survey findings on hospital ACO activity:

  • ACO governance structure, including physician relationships
  • Legal structure of ACOs, including risk management ability and arrangements
  • ACO payment models, including capitation and pursuit of bundled payments
  • Partnerships and ability to provide primary, acute, and post-acute care
  • Care management, including patient population identification and assignment, population management, care coordination and transitions, and clinical information exchange
  • Performance reporting and quality improvement
  • Challenges and perceived barriers

Appended to the report is an ACO readiness assessment checklist to help organizations determine their progress on the ACO development journey.

Source: Hospital readiness for population-based accountable care. Health Research and Educational Trust, May 2012. http://www.hpoe.org/resources-and-tools/resources/Accountable_Care.pdf

Related source: Audet AJ and others. Hospitals on the path to accountable care: highlights from a 2011 national survey of hospital readiness to participate in an accountable care organization. Commonwealth Fund Issue Brief, vol. 22, Aug. 2012. http://www.commonwealthfund.org/Publications/Issue-Briefs/2012/Aug/Hospitals-on-the-Path-to-Accountable-Care.aspx

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org

Bundled Payments: Implementation & Operation

Bundled payments are an alternative model to the traditional fee-for-service model used in the U.S. for paying for health services. The bundled payment model pays a fixed amount that covers care services for a particular condition over a defined time period. The Health Care Incentives Improvement Institute identified and studied 19 non-federal bundled payment initiatives underway. The results are shared in an article that provides concise answers for the following questions:

  • Why are bundled payments being pursued?
  • What conditions are most commonly bundled?
  • How are bundles defined?
  • What services are included within a bundle?
  • When does the bundle start and stop?
  • What patients are included, and are there any factors that would exclude them from a bundle?
  • What is the process for reaching agreement on a bundle definition?
  • How do payers qualify providers for bundled payment arrangements?
  • How are rates set for the bundle?
  • What is the time period from bundle planning to implementation?
  • Does insurer claim data support implementation of bundled payment rates?
  • How are payments made?
  • How to plans track and report spending within the bundle?
  • Are the bundles adjusted for performance in any way?
  • What types of risk arrangements are in place?
  • How many patients are involved in bundled arrangements?
  • What results have been produced by the existing initiatives?
  • How do the payer and provider
  • How do the interviewees involved in the study see the future of bundling?

The participating bundled payment organizations identified and interviewed for the article are listed. Also included is a detailed list of inpatient and outpatient procedural conditions and chronic and acute conditions that are currently subject to or are planned for payment bundling .

Source: Painter MW. Bundled payment across the U.S. today: status of implementations and operational findings. Health Care Incentives Improvement Institute Issue Brief, June 1, 2012. http://www.hci3.org/sites/default/files/files/HCI-IssueBrief-4-2012.pdf

Related resources:

Committee on Research. Bundled payment: AHA research synthesis report. American Hospital Association, May 2010. http://www.aha.org/research/cor/content/BundledPayment.pdf

Hussey PS and others. The PROMETHEUS bundled payment experiment: slow start shows problems in implementing new payment models. Health Affairs, 30(11):2216-24, Nov. 2011. http://content.healthaffairs.org/content/30/11/2116.abstract

Berenson RA. Moving payment from volume to value: what role for performance measurement? Robert Wood Johnson Foundation, Dec. 14, 2010. http://www.rwjf.org/qualityequality/product.jsp?id=71568

Bundled payments for care improvement. Center for Medicare & Medicaid Innovation, accessed June 4, 2012 at http://www.innovations.cms.gov/initiatives/bundled-payments/index.html

Practice Management Center. Bundled payments. American Medical Association, accessed June 4, 2012 at http://www.ama-assn.org/ama/pub/physician-resources/practice-management-center/claims-revenue-cycle/managed-care-contracting/evaluating-payment-options/bundled-payments.page

Cutler DM and Ghosh K. The potential for cost savings through bundled episode payments. New England Journal of Medicine, 366:1075-1077, Mar. 22, 2012. http://www.nejm.org/doi/full/10.1056/NEJMp1113361

Sood N and others. Medicare’s bundled payment pilot for acute and postacute care: analysis and recommendations on where to begin. Health Affairs, 30(9): 1708-17, Sept. 2011. http://content.healthaffairs.org/content/30/9/1708.abstract

Posted by AHA Resource Center, (312) 422-2050, rc@aha.org