There are two discussion questions attached below. For the second question, please read the case and answer the four questions. Thank you!
Accountable Care Organizations (ACOs) were introduced under the ACA to provide coordinated
care and chronic disease management for Medicare beneficiaries while working to lower costs. Is
this a good policy initiative? Why/Why not? How has ACOs impacted health care delivery in the
US? Recent research shows that the growth of ACOs has plateaued during the pandemic; as a
health administrator of a large community hospital, would you recommend your health
institution form an ACO with other providers in your community? Which type of ACO would
you advocate for and why?
Advancing Community Health Improvement through a Hospital-Health Department
A seasoned healthcare executive recently joins a mid-size medical practice in a small town. The
chief executive officer (CEO) was hired to help the practice adapt to today’s new value-based
challenges. The multidisciplinary practice includes obstetrics and gynecology, internal medicine,
pediatrics, and psychology specialists. The clinicians are committed to effective preventive care
and the treatment and management of chronic and acute illnesses. As part of the practice, the
organization has developed a holistic approach to patient-centric care but is not fully integrated.
The CEO was initially tasked with evaluating current practice performance to see if the practice
is aligned with the state’s new value-based initiatives. Episodes of care (EOC), or bundled
payments, are part of the new initiatives. The CEO understands the nuances and complexities of
EOC programs, which have been defined as related service costs associated with a patient and a
particular acute medical problem or surgery procedure (Centers for Medicare & Medicaid
Services, 2018). Each EOC has a defined and specific time period across a continuum of care
(Division of TennCare, 2018). The CEO focuses on triple aim concepts and looks to drive the
practice by controlling cost, improving patient quality, and outcomes. However, the volume of
reporting is overwhelming, and there needs to be an evaluation on how many episodes will
directly impact the organization.
Episodes are a complex system comprising both incentives and risk sharing as part of the model.
The model involves different stakeholder agencies who will set thresholds. The state sets a
standard acceptable threshold for each EOC. However, the CEO understands each of the
managed care organizations (MCOs) set their own commendable thresholds, which can vary.
The CEO makes a mental note that EOC commendable thresholds are associated with gain
sharing. In addition, there are several important aspects that have a fundamental impact on the
payment model. Integral to the model are the exclusion criteria and risk adjustment methods used
to compare EOCs fairly. The state sets exclusion criteria (business and clinical) across all
episodes. Conversely, varying risk adjustment methodologies are set by each of the MCOs.
Reports are released quarterly from each of the three MCOs. XYZ, one of the MCOs, has sent
preview and interim performance summary reports. Each report comes with an EOC summary as
a PDF and an excel spreadsheet with encounter level cost center information (e.g., professional,
ancillary, etc.). The XYZ interim performance report contains data on six EOCs, including
cholecystectomy, esophagogastroduodenoscopy (EGD), oppositional defiant disorder (ODD),
perinatal, respiratory infection (RI), and urinary tract infection (UTI). In addition, XYZ preview
reports contain information for attention deficit hyperactivity disorder (ADHD), breast biopsy,
human immunodeficiency virus (HIV), otitis media, and skin and soft tissue infection (SSTI)
The CEO begins to analyze the perinatal episode interim performance summary. Analysis
reveals a gap to gain sharing at $490 per episode. Risk adjustment factor (RAF) scores were
average. The practice had a slightly higher RAF at 1.02 compared to provider base at 0.99 RAF.
The average nonadjusted cost for the practice was $7,082 with a commendable threshold of
$6,462. The distribution of the episodes was varied and revealed 40 patients are above the
average with approximately 20 patients with costs above $8,144. The CEO observes that over 50
claims were associated with the emergency department (ED) cost category. The ED/observation
costs were 5% higher compared to the providers average base. In addition, the CEO notes that
the outpatient radiology costs were 19% higher than the provider base. Inpatient facility costs
were slightly higher at $3,128 compared to the provider average of $2,792. On a positive note,
pharmacy spend was less than the provider average. The CEO concludes the perinatal analysis
by evaluating the quality metrics. He notes that not all quality metrics have been met. In
particular, HIV quality metrics (which are linked to gain sharing) were at 83% and did not meet
the 85% gain sharing standard threshold.
The CEO turns the evaluation process to respiratory infection (RI) episodes. RIs are a low-cost
EOC but will have an impact on multiple clinics across the organization. The RI interim
performance report from XYZ reveals the practice is neither in the red (risk) or green (gain).
There is only a $7 gap to gain sharing. The RI EOC has a total of 262 valid episodes with a
nonadjusted cost of $95 and a 1.01 RAF score. The cost distribution was skewed to the left.
However, 14% of patients had risk adjusted cost above $141. In addition, the top five drugs
prescribed by spend ranged from $316 to $1,177 with an average pharmacy spend of $40
compared to $34 provider base average. A few other items stood out to the CEO and were worth
noting—several patients went to the emergency department (ED) with an average cost of $535
compared to $240 provider base average. Finally, the average lab cost was higher than the
provider average—$40 compared to $19.
The CEO is scheduled to meet with the pediatric administrator who is concerned about the future
otitis media (OM) EOC and wanted to discuss strategies. The administrator thinks it would be a
good idea to review preview reports prior to the performance period. Based on the practice case
mix and OM volume (75), they feel OM analysis and strategies might help the clinic. The OM
EOC had an average episode cost of $117 and 0.98 RAF for the past year. The commendable
threshold was set at $147. If the practice maintained the current path with costs during the
performance period, the total upside generated would be $2,057 only if they met the two quality
metrics linked to gainsharing. However, non-OM episodes with amoxicillin filled was just shy of
meeting QM threshold.
1. Based on the new payment reform initiative aimed at value over volume, do episode of
care (EOC) reports contain actionable data?
2. Since EOC is a retrospective system, when is the best time to make valuable
improvements? What do preview reports offer the practice?
3. Under the value-based initiative, what challenges does this practice face in managing the
reports (data and information)?
4. Under the new policy initiative focused in value, does the practice have opportunities to
improve the perinatal episode