A new ACO agreement between Boeing and an IDN launches a new type of ACO
By Caroline Anschutz
Of the more than 600 ACOs in this country, including more than 300 commercial ACOs and almost 350 ACOs aligned with the Centers for Medicare and Medicaid Services, almost all of them have one thing in common — they include a provider and some kind of payer.
But what would happen if a company skirted the “middle man,” so to speak, and signed a contract directly with the provider? Can an ACO agreement exist without a payer?
This summer, one employer launched an agreement to attempt just that.
Boeing makes healthcare history
In June 2014, The Boeing Company became one of the first to reach an ACO agreement with a provider that does not include an insurer.
Boeing, which is headquartered in Chicago, is the world’s largest aerospace company and manufacturer of commercial jetliners and military aircraft. In 2013, it saw record revenue of $86.6 billion and boasted more than 168,000 employees. This year, it signed on as the first large group health insurance client of the Providence-Swedish Health Alliance, the ACO formed by Providence Health and Services in Renton, Wash., and Swedish Health Services in Seattle. The agreement also includes an ACO formed by UW Medicine, also located in Seattle.
Under the agreement, about 27,000 Boeing employees and 3,000 retirees in the Puget Sound region of Washington state will be eligible to select Providence-Swedish Health Alliance or the UW Medicine ACO as their health network. The open enrollment period begins in November, and coverage is effective Jan. 1, 2015. Eligible employees will have the option of keeping their current, traditional health plans; or selecting the Providence-Swedish Health Alliance, or UW Medicine’s ACO.
How three providers made the cut
Providence and Swedish Health Services are experienced ACO administrators. They teamed together in 2012 to form Providence-Swedish Health Alliance and have aligned their hospitals along with approximately 50 primary care clinics and independent medical group practices in order to coordinate care, share best practices, and follow the ACO’s reimbursement model. Quality metrics for participating providers include clinical outcomes, health status, preventative measures, and patient satisfaction. Providence-Swedish Health Alliance was also approved as a Medicare ACO in December 2013, and offers coordinated care to more than 25,000 Medicare beneficiaries across western Washington. The organization is one of only three Medicare ACOs in the state. On its website, the organization says, “The Providence-Swedish Health Alliance is an innovative new health care program providing easier access to physicians and care teams, more personal support, better coordinated care and an enhanced level of service – all at a lower cost to members and their employers.”
UW Medicine’s ACO includes 20 hospitals, over 500 clinics, more than 700 primary care providers, and 4,000 specialists. On its website, UW Medicine ACO states, “By creating an accountable care network with other leading healthcare organizations throughout the Puget Sound region, we provide you with increased access to outstanding care and enhance our ability to provide affordable, high-quality care.”
A new type of ACO
Billed as an “employer-driven ACO,” Boeing’s agreement with Providence-Swedish and UW medicine is believed to be one of the first of its kind. The potential benefit for Boeing is clear — by cutting out the insurer “middle man” between patients and providers, it may be able to reduce costs. The contract sets goals for the employees’ medical costs. If costs are higher than anticipated, the provider will foot the bill. If costs are lower, the provider sees the savings. Boeing employees who elect to participate in an ACO will pay higher deductibles and co-pays if they receive treatment from a provider that is not included in the ACO network.
The contract includes quality goals that are important to patients, including the ability to schedule appointments in a timely manner and the maintenance of patient safety and satisfaction. Cost benchmarks such as reducing readmissions to the hospital after treatment and the management of chronic conditions are also included in the contract.
According to Boeing, there are several enticing benefits to participating in an ACO, including lower paycheck deductions and larger company contributions to Health Savings Accounts. These employees will also not be responsible for a co-payment for many primary care doctor visits, and generic drug prescriptions are 100% covered. Not only are there financial incentives, but the providers will coordinate appointments and treatment across their network, relieving the patient of that responsibility.
Boeing did not disclose how much it hopes to save though the contracts or give a time frame for the agreement, but did say that these are “multiyear” contracts.
Industry reaction
Joe Gifford, M.D., CEO of Providence-Swedish Health Alliance, said that since the contract was announced in June, other employers have expressed interest in joining the ACO.
Joseph Tedino, Senior Managed, Employee Communications at Boeing, stated that Boeing might forge similar agreements in other markets. He said that the company hopes the contract with Providence-Swedish and UW Medicine will allow its employees to better engage in how they use their benefits.
As of publication, there was no indication as to how many Boeing employees are interested in the ACO option. Open enrollment began in November, and Boeing is banking on an “improved patient experience” attracting employees to the new ACO agreement.
Wendell Potter, a senior analyst at The Center for Public Integrity, said in an article published in September that he is certain that other large employers are watching. If Boeing’s venture is successful and demonstrates savings, Potter says to expect to see many more of these “employer-driven” ACOs to pop up in the near future. A report from consulting firm Leavitt Partners agrees, predicting a “marked increase” in the number of direct contracts with employers as businesses look for high-quality care at a lower price.
Potter’s predictions don’t stop at Boeing. Because ACOs can coordinate appointments and treatment across a provider network, relieving patients of responsibility, prior approvals for treatment from an insurance company become unnecessary. In anticipation that this will become a national trend and in response to the Affordable Care Act provisions that decrease profit margins, Potter says, large for-profit insurers are diversifying.
Health insurers are now required to spend at least 80 percent of premium revenue on patient care. As a result, they are seeking higher investment returns elsewhere, increasingly putting money into technology ventures. Potter predicts that “the big for-profits will eventually cede the health insurance marketplace to nonprofit insurers and provider-led organizations like ACOs — and even to hospitals that are looking to operate their own health plans.”
The future of “employer-driven” ACOs
Others may not be as willing as Potter to make such extensive predictions of the future of these new ACO agreements. Boeing’s agreements are almost unique in American healthcare. In 2013, Intel, which saw revenue of $52.7 billion last year, signed an agreement with Presbyterian Healthcare Services of Albuquerque, New Mexico. The agreement offers a narrow-network, ACO style benefits plan to its 5,400 Rio Rancho, New Mexico employees. Presbyterian operates a work-site clinic and earns bonuses for meeting quality goals and hitting cost targets.
Employer-driven ACOs may not yet be a trend, and their success is unclear. Unless Boeing’s venture fails, however, it’s safe to say more employers will likely follow in their footsteps.