Pediatric ACOs May Become a Bigger Deal; Providers Seek Shared Savings From Plans

By Patrick Connole
Health Plan Week

Commercial health plans are beginning to recognize the potential of pediatric accountable care organizations, following the lead of providers and state Medicaid programs that are creating ACO-like value-based payment arrangements. In one case, a Colorado provider achieved shared-savings reimbursement provisions in payer contracts to reflect quality improvements for children under its care, market consultants say. And Cigna Corp. points to the importance of pediatrics in its collaborative care efforts as it considers the area for stand=alone programs.

Bo Bobbitt, head of the health care law group at Raleigh, N.C.-based law firm Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, LLP, tells Health Plan Week (HPW) there is a business case for pediatric ACOs, especially in the Medicaid setting, which is usually comprised of 50% or more children. “Children are not simply small adults and their needs and the concomitant rich opportunities in value-based medicine are quite different,” he says. “There are many more healthy individuals in the patient population, but there are several unique areas of very high costs. Utilization of best practices and focused care protocols such as asthma present opportunities for both quality improvement and cost savings.”

One area of high potential is family-centered “pediatric medical/health homes” linked to specialty care for complex conditions, Bobbitt says. Other priority areas are neonatal hospital care protocols, home care/case management, follow-up clinics, asthma management, antibiotic utilization and standardization of evidence-based best practices and data-driven research.

When asked why there has not been as much effort to form pediatric ACOs, Bobbitt says there are four reasons:

  • “First, adults, especially the elderly through Medicare, were the first entrants to accountable care. There are no children in the nation’s leading patient population under ACOs, Medicare.
  • “Second, the high-value initiatives for children are quite different than for adults.
  • “Third, because of the high percent of healthy children, the minimum size of a pediatric ACO should have at least 20,000 individuals, whereas, for adult ACOs, it can be as little as 5,000.
  • “Fourth, the complexity of conditions of the high-risk child is so esoteric that often separate ones are addressed at separate academic medical centers, often hundreds of miles apart. This makes forming a collaborative network difficult.”

As for health insurers, the reaction to children and value-based care has been “comparatively slow,” Bobbitt says.

“The driver for commercial insurers is marketing, to provide complete family care under an ACO umbrella.” But health plans are likely to become more connected to pediatric ACOs as more states moves to Medicaid managed care and accountable care. “There ain’t much activity there yet. I expect many states to move Medicaid to accountable care in the next two years, which will create a sea change,” he says.

A value-based care expert, Tom Merrill, senior analyst at consulting firm Leavitt Partners LLC, tells HPWthere is definitely potential for future growth in the segment, with the impetus now on states that have expanded Medicaid under the reform law. “States where they have extended eligibility make more sense since there are more funds flowing, more effort to improve the care they are getting,” he says.

A policy shift is needed in order to get more activity since Medicaid programs usually are charged with tending to the chronically ill, which does not usually include youngsters. “Children generally are not the big spenders. They don’t cost a lot. Most of the money that is put up is for kids and preventive type care,” he says. “Most states in regard to Medicaid are in crisis mode and it is hard for them to allocate money into preventive things, besides vaccines. On the commercial side of things, it is a similar situation where the focus is on efforts for the sickest of the sickest, the older people, and there is not as much money to squeeze out of the system in regard to kids. Where it [ACOs] has happened, it has been for purely quality ambitions rather than financial incentives.”

Some Providers Push for Shared Savings

There are cases where this is changing in regard to financial incentives. A forthcoming collaborative report from Leavitt and the American Academy of Pediatrics, which was made available to HPW, presents case studies on pediatric ACOs and value-based payments related to children’s care. One such subject is the Colorado Pediatric Collaborative, which achieved so much success that the provider sought a new type of contract with its payer partners Aetna Inc. and Anthem, Inc., Merrill says.

“They had all this data [from years of working on pediatric care quality under the state’s Medicaid program] that showed they were able to actually move the needle a bit on kids,” he says. When it was time to negotiate with the payers, the provider was rewarded. “In a traditional world when the provider does less care in a quality manner, avoiding unnecessary services, all of those savings accrue to the payer and not the provider. So they said let’s see the shared savings and we can benefit from our hard work and continue to finance our quality initiatives,” Merrill says.

Using the Medicare program as a reference point, he says ACOs are generally thought to be succeeding if they can generate 2% to 10% of savings. Anything above 10%, according to Medicare, may be a sign of withholding care. But Merrill says since many people think up to 30% of health care spending is not needed, it is possible to get annual savings above 10% and not be doing anything wrong in terms of patient care. Still, “in my opinion, 2% to 10% is a reasonable number, and upward of 5% or beyond is impressive,” he adds.

For one major insurer, pediatricians “are definitely a part of our collaborative accountable care process” when they are on staff of a multi-specialty practice, Harriet Wallsh, R.N., national director for Cigna Corp.’s collaborative care operations, tells HPW. She says some of the insurer’s collaborative accountable care (CAC) arrangements, like Partners in Care in New Jersey, are heavily weighted with pediatricians, for example.

There are some differences with children’s care and how it relates to CACs. For instance, predictive modeling is usually best utilized for chronically ill members, which typically are not children, Wallsh says.

As for the future, she does not rule out a pediatric-centered CAC. “It is something we are thinking about,” Wallsh comments. But first the idea would have to progress through Cigna’s test-and-learn processes, and if it looks promising then it would head to pilot mode where the scalability of such an effort would be measured.

“We don’t see a tremendous amount of requests from the marketplace because when you think about it there are not too many practices that are exclusively pediatrics in a larger scale,” she says.

Contact Wallsh via Mark Slitt at, Merrill at and Bobbitt at‚Äč



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