Medicare Advantage and ACO REACH Driving the New Era of Healthcare Providers

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Sakshm Vashist
Wed 17 Aug 2022
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Since the COVID-19 pandemic began, there has been an increase in the financing and acquisitions of organizations that are focused on moving their members from the fee-for-service (FFS) to the value-based care (VBC) model. These organizations include physician groups, primary care practices, Medicare Advantage (MA) insurers, or management services organizations. Private equity and venture capital companies have shown an increasing interest in these organizations recently, as their valuations have risen by around $50B in just the last 18 months.

Demand and Growth Drivers of New-Age Care Providers

Direct contracting and ACO REACH have contributed to a rapid expansion of Medicare privatization. New-Age care providers, who are aiming to grow by 4x-5x in a span of two to three years, have also been able to move fee-for-service (FFS) member patients to a more cohesive VBC model due to advancements in technology.

ACO REACH is driving a new era of healthcare transformation by helping people move towards VBC affordably and seamlessly. According to NAACOS, the next-generation ACO model has generated $1.7 billion in gross savings and $836 million in net savings to CMS between 2016 and 2020, demonstrating its impact.

While the annual MA spending per person is approximately $12,000, it’s expected to double from $800 billion in 2019 to $1.6 trillion in 2028. This makes it a compelling proposition for new-age firms to plunge into Direct Contracting as they are on the cusp of transforming into technologically advanced ACOs.

How Are Medicare Advantage and ACO REACH Entities Disrupting Healthcare?

The ACO REACH model has given rise to several types of entities and each of them is transforming healthcare in its own way:

  • Standard ACOs: They have traditionally served Medicare FFS beneficiaries but have not catered to member patients of all age groups. They are moving towards the VBC model and are also trying to acquire firms catering to different segments in a VBC model. For example, One Medical’s acquisition of IORA health (catering to adults of 65+ years of age).
  • New Entrant ACOs: These organizations have never provided services to a Medicare FFS population in the past and are now acquiring patient members from multiple physician groups. After the acquisition, they are moving their member populations from FFS to a VBC model. For example, Rise Health has recently acquired members from various physician groups.
  • High Needs Population ACOs: These companies are not necessarily healthcare organizations. They could be technology companies that are looking to enter the ACO world. However, they are targeting a population with specific or complex needs. They are not directly managing the population but partnering with various physician groups to manage their at-risk patients.

For example, UpStream, a technology company, partners with physician groups to manage full-risk of certain medicare-based populations, battling chronic conditions, which were previously managed by ACOs, physician groups, and health systems.

Transforming and Reducing Healthcare Clinician Burden

The ACO REACH model offers a plethora of benefits to new-age providers. It’s easier for them to manage financial incentives, generate predictable revenue streams, and focus on the health of their populations as a whole. This model appeals to a wide range of physician groups and other healthcare organizations as it helps them alleviate physician burden, provide care to at-risk patients (chronic care management), and promote organizations that have never been part of Medicare FFS or Shared Savings program to participate in providing VBC.

MA and ACO REACH have created a win-win situation for new-age providers and patient populations. Direct Contracting entities can run their businesses in a far more refined manner and create more profits without compromising the quality of care provided to the member populations. This is leading to a new era in the U.S. healthcare system where technology-first organizations are accelerating the VBC transformation.

Interested in speaking with our team to learn how Innovaccer can help you scale as an ACO REACH entity? Feel free to email us at contact@innovaccer.com

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Sakshm Vashist
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