Experts develop financial modeling tool to assess economic impact linked with accountable care

Premier healthcare allianceMar 8 2011

Experts from 28 of the nation's leading health systems developed a comprehensive financial modeling tool to assess the economic impact associated with a system-wide transition to accountable care.

Premier healthcare alliance Accountable Care Implementation Collaborative members will leverage the model as a decision support tool to assess financial risks and opportunities for their physician networks and hospitals in the movement toward accountable care. Additionally, organizations can evaluate various scenarios to determine how quickly to transition to an accountable care organization (ACO), which populations should be targeted for ACO services and how to structure shared savings arrangements with payors.

The collaborative currently includes 28 health systems with more than 120 hospitals and 5,000 physicians across 23 states. Upon launch, these providers will provide health and wellness services for 1.5 million beneficiaries.

The ACO financial model can help organizations plan budgets, investments and other financial needs as they transition over time from today's fee-for-service reimbursement system to one based on shared savings and value-based payments.

"Before any organization moves toward accountable care, senior leadership and board members need reasonable projections that analyze how such a move could affect the bottom line," said John Benz, senior vice president and chief strategic officer of Memorial Healthcare System in Hollywood, Fla. "This tool should allow us to create a budget that evolves over time as more services are provided by the ACO. In fact, using this model, we should be able to time exactly when we need to shift the bulk of our business from fee-for-service to a shared savings model, and the number of covered lives we need in the ACO to ensure financial health."

Specifically, the model is composed of more than 150 different financial analysis "levers" that evaluate the impact of accountable care on health system financial performance. Users of the model can:

• Estimate the ACO's impact on future volume and revenue by assigning various combinations of beneficiaries to the ACO, by major payor category (i.e., Medicare, Medicaid, commercial, etc.).
• Model the financial impact of a variety of shared savings arrangements, ranging from fee-for-service plus potential shared savings incentives to full-risk capitation. Users also can examine different shared savings distribution models between providers and payors.
• Evaluate the impact of services provided in sites that are in-network versus out of network.
• Model total medical costs per member, per month by major service and payor.
• Assess changes to utilization patterns that may occur as systems transition to accountable care, such as increased primary care and decreased hospital inpatient services.
• Alter labor cost drivers and designate staff to specific ACO support functions during the transition to accountable care.

Using the accountable care financial model, users can project summary income statements for the healthcare delivery system, hospitals, the physician network and the ACO entity. Levers can be adjusted to model ACO growth, use rate changes, medical costs, staffing shifts, and population and other market changes over time.

"No one will be able to become an ACO overnight and understanding the financial viability is a key consideration," said Mark Hiller, Premier vice president of innovative data solutions. "This financial model helps organizations assess the financial implications of their accountable care journey during the crucial transition period where fee-for-service income is replaced over time by other payment methodologies such as shared savings."

The ACO financial model is just one of the deliverables provided to members of the Accountable Care Implementation Collaborative. Already released is an industry standard information management capability road map for enabling accountable care. Additional tools and offerings to help members transition to an ACO model will be released over time.