Measuring ACO Performance From the Health Plan and Provider Perspectives

David V. Axene, FSA, FCA, CERA, MAAA, outlined how more accurately measuring and evaluating the performance of accountable care organizations (ACOs) can help both health plans and providers succeed in their risk sharing contracts during a session at the National Association of Managed Care Physicians Fall Managed Care Forum 2017.

Axene, who is the president and managing partner of Axene Health Partners, explained that the ACO concept revolves around providing bonus payments as rewards for those who achieve budget targets and other goals that are often tied into the Triple Aim of population health, patient experience, and costs of care. In practice, however, not all organizations achieve these goals, which is where the importance of measurement comes in.

He mentioned a client of his that currently contracts with over 40 ACOs. While they are aware that some are performing better than others, they lack ways to measure this performance reliably, which would let them cut ties with the poor performers and identify the qualities that contribute to the success of the high performers.

Profiling and ranking the “desirable” ACOs can also help bring the lagging ACOs up to speed, which is increasingly valued in the new world of reimbursement that awards incentives for improving cost metrics, instead of the old fee-for-service world.

“I find that improvement follows measurement,” Axene said, as providing examples of what an ACO should be doing can help shape the behaviors of those that are struggling. He emphasized the importance of providing an actionable, brief report that communicates clearly what should be done to improve performance.

After explaining the importance of measuring ACO performance, Axene then turned to a challenging question: how best to conduct this measurement. He cited the Triple Aim as a helpful tool to choosing the “yardsticks” for measurement. For instance, the most common financial aspects measured include per member per month (PMPM) cost of care, medical loss ratio, or performance against a targeted trend rate.

No matter the metrics, Axene emphasized the importance of adjusting for differences in location, network, and services provided, as well as risk adjustment of attributed patients, in order to minimize bias and ensure “apples to apples” comparisons.

With these keys in mind, he then shared the best practices of ACO measurement, acknowledging that these were based on his experiences and that if he asked 5 people about their own practices, he would likely get 5 different answers.

First, it is important to begin with a consistent approach that can apply to the wide range of varying ACOs, so it can be standardized. Next, detailed claims and eligibility data must be captured, and actuarial cost models should be built at both the billed and allowed payment levels to understand utilization and unit costs. After attributing the population to primary care providers, he would then determine risk scores on a per member basis, and adjust the data back to a normalized baseline for comparison.

Axene also discussed 3 levels of “drill down” in performance analyses. Level 1, the macroeconomic view, looks at the risk-adjusted PMPM costs compared with the budget, while Level 2 is more of a “micro” view that includes details like utilization and unit costs, and Level 3 focuses on comparing clinical episodes of care.

With these comparisons, health plans conducting performance analyses can identify the high-performing ACOs with positive bottom lines and delve into what makes them so successful. ACOs can use the information to determine who within their organization is contributing to its overall success, understand patterns of referrals and costs, and refine their practices to become more attractive to payers.

Axene provided checklists of ACO-related questions from both the provider and payer perspectives that could be answered with information from performance measurements. For instance, providers should ask themselves if they are confident that their ACO can use data analytics to identify opportunities to lower costs. Payers should ask why they have an arrangement with each ACO: is it because they are actually a high performer, or just because they were willing to enter a contract?

Finally, he displayed a visual of a 3-legged stool used to define success, with the seat labeled “happy” being supported by legs representing reimbursement and provider incentives, appropriate benefit design, and care management.

“You define happy when you achieve your goals and objectives,” Axene concluded. “The measurement of an ACO’s performance is measuring how effective everything is and whether or not we hit happy.”