Provider Compensation

ALLOCATIng SHARED SAVINGS

Providers are the building blocks of any Accountable Care Organization (ACO).

They are how patients (beneficiaries, members) get attributed, and through attribution, they are the unit at which payers measure ACO performance. It is in everyone’s best interest (providers, ACO leadership, patients, and payers) that the mechanisms for achieving shared savings are understood, and that the mechanisms for allocating those shared savings across providers are transparent and merit-based.

Understanding How Shared Savings Are Achieved

The old standard “if you’ve seen one contract, you’ve seen one contract” certainly applies in the shared savings/value based contract arena. Each contract is its own creation, with wide variation between payers, from one product line to another (Medicaid vs Commercial vs Medicare vs Employer-sponsored), and even across different health system agreements. And the nuances that vary from contract to contract really make a difference! Understanding the specifics of a contract’s attribution methodology is key — does the contract include attribution through urgent care? Does it consider an NP who works at a specialist clinic to be a “primary care” provider by virtue of being an NP? These things can make a big difference in ACO strategy and success. Other influential components in any shared savings or pay-for-performance contract: risk scoring methodology, benchmarking methodology (does it use historical claims or regional/national benchmarks, for example), and even how expenditures are calculated (are there exclusions, is there truncation, etc.).

Allocating Shared Savings

A merit-based approach shows providers how they would perform if they were in an ACO by themselves — this should be the true standard for determining performance. This atomizes performance into discrete units, allowing individual practices to understand how they contribute to overall performance, and allowing ACO leadership to see what groups are driving their successes (or losses). To attain this level of clarity on performance, the contract terms must be applied at the practice/provider level. This means taking the contract’s exact attribution methodology, taking its exact benchmarking methodology, risk score methodology, and expenditures calculations methodology. These things matter! Time and again, ACO leaders (and providers themselves) have been surprised. Depending on the contract terms, your most efficient practice may not be the one generating the most shared savings — if it was efficient in its benchmark years as well, it may be competing against a very low historical benchmark.

Whether shared savings ultimately gets allocated based on the financial contributions of each provider, having this accurate, transparent view of performance aligns providers with ACO leadership and can help drive the ACO to higher savings rates.