In September UnitedHealthcare and its collaborators announced plans to create what is planned to be one of the largest accountable care organizations in Wisconsin
As predicted, national health insurance companies are moving deliberately to be part of large accountable care organizations (ACOs). For example, in Wisconsin, three health systems and one of the nation’s largest health insurers are developing a multi-system accountable care organization designed to compete with the largest ACO in the state.
ACOs Expected to Use Medical Laboratory Testing in Different Ways
For pathologists and clinical laboratory executives, this development is a reminder that ACOs will play a significant role in healthcare’s transformation. Also, these super-sized ACOs will have their own influence on the transformation of medical laboratory testing in this country, since ACOs can be expected to use medical laboratory testing in different ways and are unlikely to use fee-for-service as the primary method of payment for laboratory testing.
In September when UnitedHealthcare (UHC) (NYSE: UNH) announced it was collaborating with two health systems to form an ACO in Wisconsin to cover 100,000 patients. A third health system (Ministry Health) joined the new ACO network a week later. UHC efforts are part of a nationwide strategy to double what it spends to provide care in ACOs.
Currently, Minneapolis, Minn.-based UHC spends more than $23 billion annually to pay physicians and hospitals in three types of care delivery: ACOs, centers of excellence, and other performance-based programs. A company spokesperson said the insurer expects to spend $50 billion on such payments by 2017.
Early Example of a Multi-Health System ACO
UHC’s collaborators will be Quality Health Solutions (QHS) and the Medical College of Wisconsin, both located in Milwaukee. This creates one of the nation’s first multiple-system ACOs, according to an article published in Becker’s Hospital Review.
The ACO will have 3,000 physicians and 18 hospitals, Becker’s reported. It will begin operating on January 1, 2014, the first day members will have health insurance coverage under the Affordable Care Act.
When the ACO was announced on September 11, Quality Health System (QHS) said its four hospitals in southeastern Wisconsin would join the organization. They are:
- Agnesian Healthcare, in Fond du Lac;
- Columbia St. Mary’s in Milwaukee;
- Froedtert Health, in Milwaukee; and,
- Wheaton Franciscan Healthcare, in Glendale.
Less than a week later, QHS added the second-largest health system in the state to its network by contracting with Ministry Health Care of Milwaukee.
Ministry Health Has $2.2 Billion in Annual Revenue
Ministry Health operates 15 hospitals and has more than 650 clinicians in 47 clinics, according to a story published in the Milwaukee Business Journal. Also, Ministry Health has a partnership with the Marshfield Clinic, one of the largest physician groups in the nation, and with other independent physicians. Ministry Health has $2.2 billion in annual revenue and operates hospitals and clinics in the Fox Valley and central and northern Wisconsin, the Milwaukee Business Journal reported.
While QHS will contract with UnitedHealthcare in this new ACO, it is also talking with its self-insured employer clients about having them join the ACO. Additionally, QHS is negotiating with other insurers about forming an ACO, the newspaper reported. It was unclear whether this ACO would be part of or separate from the UnitedHealth ACO.
In an interview, QHS CEO Peter Pruessing told the journal that adding Ministry Health to its network would significantly enhance the ability of QHS “to bring a broader population and a broader geography to our network.”
ACO Is One Way to Increase Bargaining Power
By serving more patients over a wider area, QHS would have more bargaining power with UnitedHealthcare and other health insurers and the ability to compete more effectively with the largest ACO in Wisconsin, Aurora Health Care, the Milwaukee Business Journal reported. For its patients, QHS would develop shared savings, pay-for-performance and other innovative payment programs with insurers, the journal wrote.
QHS’ physicians and hospitals would be eligible to receive bonus payments by making meaningful improvements in readmission rates, illness prevention, patient safety, and cost savings, UnitedHealthcare said in a press release.
Catherine Jacobson is the QHS Board Chair and President/CEO of Froedtert Health. She stated that QHS would create value by driving down costs for employers and increasing quality. However, it remains to be seen if large ACOs can, in fact, reduce costs and improve quality.
New Opportunities for Clinical Laboratories
In the meantime, clinical lab organizations and pathology group practices should take steps to develop appropriate strategies for meeting the needs of ACOs operating within their communities. As hospitals, office-based physicians, and other ancillary service providers affiliate with ACOs in their communities, they will require a different mix of medical laboratory testing services and clinical pathology consulting resources to improve patient outcomes.
—By Joseph Burns