Top Health Industry Issues of 2011

2011 is a makeover year for health industry organizations reacting to and preparing for new rules and payment models. Continuing cost pressures and new customer demands require a fresh look at existing roles of industry players.

This issue is one of six health industry issues for 2011. For the full Top Health Industry Issues of 2011 report, please see www.PwC.com/us/TopIssues2011

Issue #3 Highlights:

ACOs: Is this the next big thing or not?

The health reform law will create a new type of care model, called the accountable care organization (ACO). It’s already created a large amount of buzz within the industry although less than a third (28%) of consumers surveyed by PwC were familiar with the term ACO. That will soon change. Will ACOs be the next big thing? Are they the 2010s’ version of HMOs? Under the health reform law, ACOs focus on managing a discrete Medicare population. However, ACO has already become a metaphor for the larger issue of population health management by disparate parties within the health system—parties that are looking for a new way to provide care while managing costs. Under this broader description, ACOs encompass a spectrum of models that include physicians, hospitals, payers, and vendors under a basic premise of shared risks and rewards based on patient outcomes.

One of the biggest risks for ACOs will be managing a patient population itself. That risk is twofold: keeping people in the ACO and engaging them to stay healthy. Under the Medicare model, beneficiaries may either be assigned to an ACO or have the ability to opt in or opt out. Regardless, the ACO would be accountable for all aspects of each beneficiary’s healthcare, whether they use more costly physicians and hospitals outside the ACO.

PwC asked consumers about how likely they would be to stay within an ACO. Half of consumers surveyed said they would always stay with a hospital or group of physicians if they knew that group was accountable for their care. Consumers in the Mountain states are far less likely to stay within an ACO-like organization as are consumers in other regions of the country (See Figure 3). While about half of individuals surveyed said they’d always stay with a provider for their care, slightly fewer Medicare beneficiaries (48%) said the same. Providing incentives for patients to be a part of this accountability model could be the difference between profits and losses for an ACO.

Most of the organizations that want to be ACOs under the Medicare Shared Savings program are already getting ready. Some organizations insist that they already fulfill the description of ACOs in which patient care is coordinated and savings are distributed among providers.

Look for more discussion in the full Top health industry issues of 2011 report www.PwC.com/us/TopIssues2011

Implications:

• Increased discussions around ACOs are fueled by mounting pressure to find new care models that cut costs and prepare for new outcomes-based payments. Organizations need to understand that if ACOs succeed, fee-for-service models may decline and capitation-like payment could increase.
• The right infrastructure, with the proper leadership to manage populations that aren’t tied to an ACO, will be the foundation for sustainability. ACO discussions are leading to increases in physician employment. Health plans, pharma and life sciences companies should consider moving from vendors to being partners with providers.
• Consumers may need to be convinced of the advantages of an ACO. With half of consumers’ surveyed saying they would always stay with an ACO-like group, organizations should segment patient populations to manage expectations, risks, and outcomes associated with their health and behaviors.
• Care pathways will be important, but providers need to close the gaps between pathways as well. This is where pharma companies and health insurers can connect all of the players to increase adherence and care management.