The six guiding principles for shared savings distribution
Though application will vary widely because of differing circumstances and types of initiatives, chances for success will increase if every activity can be judged by whether it is consistent with a set of guiding principles viewed as fair by the ACO members. You may want to consider a savings distribution formula with the following principles:
• Eyes on the prize: Triple Aim. It offers incentives for the delivery of high-quality and cost-effective care to achieve the Triple Aim – better care for individuals, better health for populations, and lower per capita costs.
• Broad provider input. It is the result of input from a diverse spectrum of knowledgeable providers who understand what drives patient population value.
• Fairness. It is fair to all in that it links relative distribution to relative contribution to the organization’s total savings and quality performance, and adheres to measurable clinically valid metrics.
• Transparency. It is clear, transparent, practical to implement and replicable.
• Constant evolution. It adapts and improves as the capabilities and experience as the ACO grows.
• Maximized incentive to drive value by all participants. After prudently meeting overhead costs, it allows gradual transition as well as commercially reasonable return on capital investment or debt service. It makes the most of ongoing incentive programs for all to deliver value by distributing as much of the savings surplus as possible to those who generate them.
Weighting: How to assign relative percentage among providers
As mentioned, it is important that design of a fair distribution formula be the product of collaboration among informed and committed clinicians who understand patient population management. Like virtually all organization compensation formulas, the determination of relative contributions of the different providers in a given ACO, or care initiative within the ACO, will involve a certain amount of inherent subjectivity but will be guided by weighted criteria applied in good faith.
• Step 1: Break down each initiative into its value-adding elements and assign provider responsibility for each. The ACO will have a number of different care management initiatives. Some, like outpatient diabetes management, may be completely the responsibility of one provider specialty, (that is, primary care). Others may involve coordination across multiple settings for patients with multiple conditions involving multiple specialties. Each initiative was chosen for a reason – to drive value. In setting relative potential distribution percentages, envision the perfect implementation of each initiative. Next, look at what tasks or best practices are needed to drive success, and then who is assigned responsibility for each.
• Step 2: Assign relative percentages to each specialty relative to its potential to realize savings. For a pure primary care prevention initiative, they would get 100% in all categories. For multispecialty initiatives, the percentage is tied to the proportion of those savings predicted to flow from that provider class.
N.B.: Historically, cost centers are not necessarily the cost savers. A mature ACO will be able to allocate savings to each initiative and the relative savings distribution within each. But for a start-up ACO, because it is so apparently logical and fits the traditional fee-for-service mindset, it is tempting to look at claims differences in the various service categories, such as inpatient, outpatient, primary care, specialists, drugs, and ancillaries, and attribute savings to the provider historically billing for same (that is, hospitals get "credit" for reduced hospital costs). However, a successful wellness, prevention, or lifestyle counseling program in a medical home may be the reason those patients never go to the hospital. The radiologist embedded in the medical home diagnostic team may have helped make an informed image analysis confirming a negative result and avoided those admissions. But, do use those service categories to set cost targets.
• Step 3: Individual attribution. We now know every provider group’s potential savings, but how do we determine the actual distribution based on actual results? Select metrics that are accurately associated with the desired individual and collective conduct of that provider class. They should cover both quality and efficiency. In the value-based reimbursement world, even if the performance is superb, if it is not measured appropriately, it will not be rewarded.
Once the proper metrics are selected, each provider’s performance is measured.
Keep it simple and open
Pick a few of the very best quality and efficiency metrics and have them and the data collection process thoroughly vetted by the providers. Following the guiding principles, the distribution model will be a success if: (1) everyone understands that this is the best practical approach, (2) the process has been open, and (3) everyone is acting in good faith to have as fair a shared savings distribution process as the current sophistication level of the ACO’s infrastructure allows. It cannot be viewed as coming from a "black box." For a young ACO, it will be crude, at best, in the beginning.