How Accountable Care Is Transforming U.S. Healthcare

Health insurance companies are disclosing more information about just how big their bets are when it comes to converting payments to doctors and hospitals away from fee-for-service medicine to the new order of value-based medical care, which emphasizes transparency and quality

Jun 27, 2014 at 6:00PM

Health insurance companies are coaxing doctors and hospitals away from fee-for-service medicine at an unprecedented pace to new accountable care models they hope will tame health costs, improve quality and boost earnings.

Under the traditional fee-for-service model, doctors and hospitals are paid on a per treatment or procedure basis that generates volume and higher costs. The fee-for-service approach isn't always good for patients either if they are victims of excessive or unnecessary treatment.

By comparison, accountable arrangements pay doctors and hospitals to keep patients healthy and out of more expensive inpatient settings. Providers also have to achieve certain quality measures and outcomes for their patients in order to get extra money or bonuses. In health industry parlance, executives call it a push to "value-based" care.

But what supporters hope the value-based approach does for health plans and their bottom lines is wrench more expensive and potentially unneeded care from the U.S. health care system.

Health plans like Wellpoint (NYSE:ANTM), Aetna (NYSE:AET), Humana (NYSE:HUM) and UnitedHealth Group (NYSE:UNH) are setting aggressive goals and being more vocal to the financial community about the percentage of contracts they have in value-based or "accountable" arrangements.

Many insurers are expected to update Wall Street analysts and investors on their progress moving away from fee-for-service to accountable care in their second quarter earnings reports, which begin next month and should be watched closely.

Value-based arrangements come in many forms including "bundled payments" to a group of providers to treat a population of patients or via "patient-centered medical homes" and accountable care organizations (ACOs), which are umbrella entities that group providers together, rewarding doctors and hospitals for working together to improve quality and rein in costs.

"Our drive toward value-based arrangements has become our 'new normal', and today includes more than 110,000 contracted physicians and over 100 ACO-type organizations, compared to less than 50 ACOs a year ago," said Doug Wenners, senior vice president who handles provider contracts for Wellpoint, parent of several Blue Cross and Blue Shield plans that operate under the Anthem brand, in a statement to The Motley Fool.

Wellpoint said its ACO with Healthcare Partners physician group in California saved nearly $5 million in just six months.

Insurers say the value-based approaches are moving beyond the experimental stages.

"We're not just piloting this effort by investing in ACOs and patient-centered medical homes, we're applying the principles more broadly by investing in a new type of relationship with providers that rewards quality-driven, cost-effective care," Wenners said. "We hope to have 75 percent of primary care physicians in our networks participating in this population health model by 2016."

The biggest dollar figure disclosed thus far came last year when UnitedHealth Group said it would double to more than $50 billion the value of contracts it has with doctors and hospitals that are in accountable care arrangements of some kind.

UnitedHealth now says it expects its "accountable care" contracts to total $65 billion by the end of 2018 from $30 billion today. They will come in many forms.

"Most physicians are enthusiastic about accountable care payment models and would rather be paid for delivering value and better outcomes, and rewarded for spending more time with patients," UnitedHealth said in a statement. "Another reason for increased interest is the fact that we offer a variety of accountable care contracts. This enables us to customize payment models with care providers and meet them where they are in terms of readiness to move from fee-for-service to value-based contracts."

Aetna, too, is making in-roads with more than 1.7 million of the company's health plan enrollees getting medical care through value-based networks that include "36 accountable care organization collaborations, 114 patient-centered medical homes, 134 Medicare Advantage collaborations and 81 high-performance networks acquired in the Coventry transaction."

"Looking forward, we project that 20% to 25% of our medical costs will run through some form of value-based network contract in 2014 and are committed to increasing that participation percentage to 45% by 2017," Aetna said in a statement.

The federal government is already seeing results through the Medicare Shared Savings Program. Almost half of the ACOs that contracted with Medicare in 2012 had lower medical expenses than projected. They exceeded their quality benchmarks and therefore 29 ACOs generated shared savings of more than $125 million, according to the Centers for Medicare & Medicaid Services.

There are now more than 5 million Medicare beneficiaries receiving care through an ACO model, and insurance companies see that as only growing.

Humana spokesman Alex Kepnes said the insurer's "goal is to have 50 percent of our individual Medicare Advantage members taken care of by primary care physicians involved in full-risk accountable care arrangements by 2017."

Though U.S. health care is still largely a fee-for-service world, insurers see every contract as an opportunity to curb health spending, thereby hopefully boosting profits (and ultimately share price).

Leaked: This coming blockbuster will make every biotech jealous
The best biotech investors consistently reap gigantic profits by recognizing true potential earlier and more accurately than anyone else. Let me cut right to the chase. There is a product in development that will revolutionize not how we treat a common chronic illness, but potentially the entire health industry. Analysts are already licking their chops at the sales potential. In order to outsmart Wall Street and realize multi-bagger returns you will need The Motley Fool’s new free report on the dream-team responsible for this game-changing blockbuster. CLICK HERE NOW.

Bruce Japsen has no position in any stocks mentioned. The Motley Fool recommends UnitedHealth Group and WellPoint. The Motley Fool owns shares of WellPoint. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers