As Accountable Care Organizations take the country by storm, too little attention is being paid to how the new incentive structure of ACOs is sharply altering the landscape of health care innovation.
ACOs, even at this early stage, are changing the innovation paradigm, creating new opportunities for some sectors and new challenges for others. For payers and providers, ACOs have opened the door for innovative new payment and care delivery models. But at the same time, there are new pressures on the biopharmaceutical and medtech industries to demonstrate the value of their innovations in ways not required in the past.
Here are some of the emerging lessons and concerns about ACOs and innovation that were raised during a series of multi-stakeholder roundtables hosted by NEHI in Massachusetts and Washington, DC.
Transitioning From Broad-Based Innovations to Targeted Solutions
The use of global budgets has allowed providers to shift their focus from volume and intensity of service to a broader more comprehensive view of health. As a result, ACOs have begun to invest in innovations and services that were previously under-reimbursed or not reimbursed at all: prevention and wellness, chronic disease management, and behavioral and mental health. This shift towards patient-centered care is driving industry to develop solutions that help ACOs achieve these new population-health goals. They are doing this by developing tailored solutions that incorporate prevention strategies, behavioral changes, genomic factors, and home-based or community-based interventions that get to the underlying factors of a patient’s health.
Interestingly, in many cases it is clinicians who are driving these changes from the bottom up, rather than ACO leadership dictating practice reforms from the top down. Once physicians become part of an ACO model, they typically look for ways to redesign the way care is delivered in order to stay within their global budget. As a result, clinicians are now taking the lead in creating new clinical protocols, developing ways to track patient outcomes, measuring cost savings, and leveraging other practitioners as part of the care team.
Emerging Patient Engagement Technologies
With patient engagement a new focus of ACOs, industry innovators are actively investing in new ways to help ACOs achieve this goal. For instance, there has been a marked increase in the adoption of telehealth and mobile health technologies that can bridge the communication gap between patients and providers outside of the doctor’s office or the hospital room. There is now a real business case to invest in many of these technologies when considering their cost relative to the total medical expense for a patient, rather than relying on fee-for-service reimbursement. Home telemonitoring for heart disease patients, for example, can seem expensive to purchase — costing as much as $1,000 per device — but if it can help avoid a $10,000 hospital readmission, the investment may make financial sense for an ACO.
Similarly, the biopharmaceutical industry is striving to extend its reach and its value by offering consumer-based tools that help educate and engage patients across the continuum of care. For instance, Johnson & Johnson recently purchased the consumer-based business HealthMedia to create coaching tools to help patients navigate the health care system, better engage with their providers, and learn what symptoms they should be looking out for.
Payers are also exploring technologies that can help patients seek appropriate care for their symptoms. Aetna, a national health plan, recently invested in the mobile application iTriage that allows patients to query their symptoms, identify appropriate providers and care settings for their treatment, and determine what services are covered by their insurance plan. This mobile technology even allows patients to print out directions to see their provider of choice. Aetna has shown that when patients are empowered with this information, they are much more likely to seek appropriate care and choose an in-network provider.
Increasing Use Of Evidence Based Medicine And Clinical Guidelines
Because ACOs are taking on whole or partial financial risk for their patient populations, they are now looking more closely at which drugs, devices, technologies, procedures, and patients require the most resources and are reviewing the clinical evidence to determine appropriate care. In some cases, global payment models have already shown a change in the utilization of some therapies and technologies on the market today. For example, early results from Blue Cross Blue Shield of Massachusetts’ Alternative Quality Contract, a commercial ACO-like payment model, show that the use of high-tech radiology and imaging services has declined significantly while preventive care has improved overall, including some forms of cancer screening, when compared to fee-for-service payment models.
Steward Health Care System, a pioneer ACO in Massachusetts, streamlined the use of anesthetic agents across their chain of hospitals after recognizing that one of three anesthetic agents being used was four-times more expensive than the others. After reviewing the evidence, Steward decided to use the more costly drug only in instances where the evidence supported its use.
Paying closer attention to the evidence also applies to the adoption of new innovations. Many ACOs have created committees and review boards to assess the evidence and ultimately decide if and when new drugs or devices should be used. These review boards are evaluating new products and writing clinical guidelines based on safety, effectiveness, patient-centeredness, regulatory compliance and cost-effectiveness. Partners HealthCare System, another pioneer ACO in Massachusetts, has a “Center for Drug Policy” where physician leaders review newly FDA-approved therapies and write clinical guidelines for appropriate use.
Due to these changes in the marketplace, the biopharmaceutical and medtech industries are adjusting by generating evidence earlier in the product development process. Not only are they generating clinical and sometimes cost-effectiveness data earlier, they are also exploring partnerships with payers and providers to better understand the long term impact and outcomes of their products. These partnerships allow manufacturers to gain better feedback data on their products in real time rather than having to conduct additional clinical studies that can be costly and time consuming.
The Challenge for Innovators
Despite the new opportunities offered by ACOs, many questions remain about the impact of ACOs on innovation, including: .
Will ACOs disincentivize the use of new technologies in cases where the clinical or financial benefits accrue outside of the window in which an ACO would calculate savings? Innovators are understandably concerned that an ACO may favor a less expensive therapy over a more costly alternative despite its potential long-term benefits that may be unclear when a product first enters the market.
Will ACOs incentivize the use of Part D therapies that are excluded from the ACO’s global budget over Part B therapies that aren’t? What will this mean for patients and their access to innovative and appropriate therapies?
How will academic research be supported and subsidized in the new ACO environment? If academic medical centers are forced to compete with other providers on cost alone, the fear is that the funding stream for academic research may decrease significantly.
These questions deserve close attention by health care leaders, policymakers, patient groups and innovators so that all sectors can better work together to make ACOs a success. In the meantime, the continuing challenge for biopharmaceutical and medtech innovators is to develop products that help reduce the total medical expense for patients and/or improve quality as defined by ACO quality measures.
A simple formula for how innovators can best survive in the new ACO world comes from Health Economist David Cutler of Harvard University: “In any industry that works well, the firms that do extremely well are the one that create value. They’re not the ones that are the cheapest or the highest quality at all cost. They are the ones that focus on how do I create value. Do that and you win.”