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Brace yourself – a long technical thread ahead! We are on track to have 50% of members served by providers in value-based agreements (e.g., accountable care organizations) in 2020. But what are ACOs?
An ACO is a group of clinicians that agrees to be mutually accountable for cost and quality outcomes of a defined population.
How do we identify a population for a given ACO? Like most payers, we are using a claims-based attribution logic — in 2019, this is retrospective in nature. We look at all of a member’s claims in 2019, and then…
based on where they received a plurality of primary care services, we link them to that ACO. In 2020, we’ll move to prospective attribution. To derive a target “benchmark,” we use a base period. Each ACO will have a base- and a performance-period attributed population.
First, we take the total cost of care of the attributed population in the base period. We trim off per member per year expenditures above $250k/year (high cost claim truncation). This establishes the base period total expenditure for the ACO.
Next, we apply a prospective trend derived from our actuarial estimates of expected cost between the base period and performance period. These estimates depend on the region of #NC where a member may reside. We have 5 distinct regions for the purposes of calculating the trend.
After we trend the baseline, we adjust for risk, efficiency and prior year performance. With risk adjustment, we adjust the benchmark to reflect whether the attributed population in the performance period is sicker or healthier than the attributed population in the base period.
With baseline efficiency adjustment, we measure the ACO’s attributed costs relative to the statewide average and then adjust the benchmark. This helps efficient ACOs and makes the target a little harder for ACOs with higher baseline spending.
Finally, we measure the prior year performance — did we pay shared savings or recoup losses? — and then add back this amount into the current year target. This helps to ensure a longer-term sustainable benchmark for ACOs, rather than diminishing the returns quickly.
And with that, we have our benchmark!
After the performance year is over, we measure gross savings against the target benchmark and quality. We calculate the total cost of care (includes high cost claim truncation again) for the ACO’s performance year attributed population and compare it to benchmark.
Each ACO has a sharing rate, depending on whether it is in one-sided or two-sided risk. In one-sided risk, the sharing rate is 50%, but in two-sided risk, higher sharing rates can be elected by the ACO.
Quality factors TWO ways: First, it gets multiplied against the sharing rate and second, the composite score determines how much of a pool of dollars solely dedicated to quality performance it shall earn.
We then tabulate the quality adjusted shared savings, the quality bonus dollars earned, and voila! You have a settlement. @scottheiser
