How to Sell Your Agency’s Services to Medicare’s New Accountable Care Organizations (ACOs) – Phase I

Becoming a preferred provider with Medicare’s new Accountable Care Organizations (ACOs) is likely to be a very lucrative relationship for home health agencies. Is your agency well positioned as a preferred provider in the eyes of the ACOs? In this issue’s feature, we help you answer that question, plus give you tips on how to successfully sell your agency’s services to ACOs.

Why ACOs Want to Establish Preferred Provider Relationships with Home Health Agencies

Under the Patient Protection and Affordable Care Act (PPACA) recently passed by Congress, Medicare was authorized to create accountable care organizations (ACOs). Likely to be owned by a combination of hospitals and physicians, these organizations will be charged with the responsibility of managing a population of Medicare fee-for-service patients.

The ACOs were designed to generate savings that will be shared by the ACOs’ owners. While Medicare is currently evaluating the thousands of comments it has received in response to the initially proposed regulations, the basic concepts of the ACOs are unlikely to change. Since providers of service to these patients managed by ACOs will be paid their current Medicare rates, any savings will have to be generated by reducing utilization of services or substituting lower-cost services for more expensive ones.

We assume ACOs will want to establish preferred provider relationships with organizations, such as home health agencies, that can help them achieve these goals. Since hospitals try to minimize variations in care procedures, the chosen home health agencies will likely also receive referrals for more than those patients managed by the ACO. With so much at stake, home health agencies must understand how to position themselves in the eyes of the ACOs.

How Will ACOs Choose Home Health Agencies to Be Preferred Providers?

Many in the industry may assume that home health agencies will be chosen on the basis of relationships or quality indicators. We believe, however, the winners will be agencies that can achieve savings while providing an acceptable level of quality. As a result, Average Reimbursement per Discharge will be one of the key metrics in the decision-making process. Home health agencies have sought to maximize this number in the past. The ACO management will now seek to minimize it, however, thereby creating a source of tension for the agencies.

What You Need to Do to Become a Preferred Provider

The first thing you need to do to help position your agency as a preferred provider for ACOs is to compare your agency to your competitors to see how it stacks up. Healthcare Market Resources’ Financial Analysis Report provides you with this information.

Next, adequately assess your agency’s Average Reimbursement per Discharge by reviewing the key measurements that impact this metric, including:

  • Recert rate
  • Low utilization payment adjustment (LUPA) rate
  • Average case weight.

Home health management will want to compare itself to agency competitors to see how well it manages patients under these new criteria.

We know that different types of patients perform differently on these indicators. In order to have a fair comparison among agencies, therefore, normalizing the data for differences in patient clinical conditions is preferable. That means we need to take away the impact of the patient disease mix.

How do you take away the impact of patients’ clinical conditions? The performance of an agency on each metric is the weighted average of its level of each indicator for a group of clinical conditions. So to do this calculation, you need to multiply the metric for each clinical condition by the percentage of the clinical condition represented in the market – not the individual agency. Through this process, the differences in disease mix among agencies are normalized, providing a level playing field to compare agencies. Healthcare Market Resources’ Key Indicators by Diagnosis report provides all the information required to complete the calculation.

For a more detailed explanation of this calculation, as well as an example, refer to the following free resources:

Finally, keep your ear to the ground to monitor whether your local hospital and physician organization are looking to partner and form an ACO. Then be sure to start planting the seed that the ACO should select your agency as one of its preferred post-acute providers.

Do you need help in developing an effective strategy for creating growth opportunities for your organization? Click here or give us a call at 215-657-7373 today for information about how Healthcare Market Resources can help.