Patient Engagement: The Do-or-Die of Growing Alternative Payment Models

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Avalere analyses show that more than 700 ACOs already operate in the U.S.
Please note: This is an archived post. Some of the information and data discussed in this article may be out of date. It is preserved here for historical reference but should not be used as the basis for business decisions. Please see our main Insights section for more recent posts.

According to estimates from the CMS actuary, one quarter of Medicare fee-for-service physician spending in 2015 was for beneficiaries served by an ACO, and one Health Affairs Blog analysis found that 23.5 million Americans receive their care from an ACO. 1,2

It’s unlikely the ACO trend will diminish soon, given Secretary Burwell’s goal to transition 50 percent of Medicare fee-for-service payments to alternative payment models (APMs) by 2018 and the APM incentives embedded in the Medicare Access and CHIP Reauthorization Act’s (MACRA, the “SGR Fix” statute).

Of course, two decades ago, there appeared to be an inexorable trend toward the dominance of managed care, which some viewed as a panacea for rising health care costs. Throughout the ACO’s evolution, healthcare stakeholders have understandably drawn comparisons between the ACO and managed care models of the 1990s.

Much like ACOs, managed care products were the primary mechanism by which healthcare policy makers aimed to control rising healthcare costs, leading to a surge in managed care in the late 1980s and early to mid-1990s. In 1988, 29 percent of Americans receiving health insurance through employers were enrolled in managed care; by 1993, this number reached 51 percent.3 In 1997, 95 percent of insured full-time employees were enrolled in managed care products and an estimated 5.6 million Medicare and 14.6 Medicaid patients were as well.4,5

Managed care faced a significant backlash from consumers in the mid to late 1990s, resulting in over 900 state laws passed to regulate managed care practices.6 According to a 1998 Health Affairs survey, 55 percent of Americans were at least “somewhat worried” that HMOs would be more concerned with saving money than caring for them if they fell ill, and 51 percent thought HMOs reduced the quality of care for people who were sick.7

Even at that time, plans denied only about one percent of recommended hospitalizations, slightly more than one percent of recommended surgeries, and just over 2.5 percent of specialist referrals. 6 Further, consumer concerns with managed care products were mostly not from personal experience, but instead from external influence, as 54 percent of Americans who said managed care did a bad job were largely influenced by family, friends and the media. 7

What then, was the root cause of the managed care backlash of the 1990s? Was it a lack of access to essential healthcare, or the opaqueness of the healthcare decision making process and the patient’s role in it?

If healthcare stakeholders learn one lesson from the 1990s managed care backlash, it is the central importance of engaging and communicating with patients. Ultimately, patients are skeptical of any model that does not directly solicit and value their input in critical healthcare decisions.

We’ve discussed at least four key differences between ACOs and managed care before: the growing electronic clinical information infrastructure; expectations around public reporting of performance measurement; value and accountability incentives; and of course a growing understanding of the centrality of patient engagement.8

The growth of ACOs must not outpace providers’ and policymakers’ growing embrace of the importance of actively engaging patients in their health and healthcare decisions. Otherwise, consumer opinion of ACOs will likely erode, potentially driven by personal experience, anecdotal evidence from their peers and families, or even negative media coverage. ACO regulations already place some limitations on providers’ communication and engagement with patients. Under current attribution methodologies, many patients are unaware they are even being treated by an ACO. Much of the conversation on ACOs revolve on only two parts of the Triple Aim, those being cost and quality of care. If ACOs and other APMs are to flourish long-term, health stakeholders need to redirect their attention to the third and perhaps most critical part of the Triple Aim: the patient experience.

1. “Estimated Financial Effects of the Medicare Access and CHIP Reauthorization Act of 2015.” Centers for Medicare and Medicaid Services, Office of the Actuary, 9 April 2015

2. Muhlestein, David. “Growth and Dispersion of Accountable Care Organizations in 2015.” Health Affairs Blog, 31 March 2015

3. Iglehart, John K. “Physicians and the Growth of Managed Care.” New England Journal of Medicine, 1994

4.Baker, Cathy A; Díaz, Iris S. “Managed Care Plans and Managed Care Features: Data from the EBS to the NCS.” Compensation and Working Conditions, 2001.

5.”Managed care; where do we go from here?.” The Free Library. 1999 National Conference of State Legislatures 15 May 2015

6.”A Brief History of Managed Care.” National Council on Disability,

7. Blendon, Robert J; Brodie, Mollyann; Benson, John M; Altman, Drew E; Levitt, Larry; Hoff, Tina; Hugick, Larry. “Understanding the Managed Care Backlash.” Health Affairs, 1998

8. Seidman, Josh. “Be Prepared: Beyond the Alphabet Soup of Value-Based Care.” The Health Care Blog, 19 June 2014

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