ACA or No ACA?


Incentive-based payment models continue to spread.

By Jerome Connolly, PT, CAE
October 10, 2014

Even though many of us are hoping the Affordable Care Act (ACA) will be repealed, it appears to be becoming more entrenched as time moves on. It has survived nearly every significant court challenge thus far. And 40 attempts by the U.S. House of Representatives to repeal Obamacare have had no effect. Moreover, the Republicans mantra of “repeal and replace” has not yet resulted in an agreed-upon alternative to the ACA.

So despite the president’s waivers and delays of various provisions, the ACA appears to be getting more established. Even if Republicans take control of the Senate in the November elections, a very realistic possibility, any legislation passed by both chambers that would repeal Obamacare will face the veto pen of the man whose name has become derogatorily associated with the law.

Meanwhile, a number of the macro concepts embraced by the ACA continue their forward march. One such policy is the growth being witnessed in value-based purchasing (VBP) also known as pay-for-performance (PFP).

To be sure, VBP and PFP preceded the Affordable Care Act by a few years, but a number of ACA provisions are predicated on the concept of shared savings that rewards providers for performance with patients and, in some cases, for even assuming more financial risk with respect to the patient’s care.

Shared savings was embedded in Section 3022 of the ACA and brought us Accountable Care Organizations (ACOs).1 Now in their third year of operation, at least 350 Medicare ACOs have been joined by nearly as many private sector (mostly insurance plan-driven) entities.2

In addition, private payors are recognizing the multiple benefits (especially economic) associated with shared risk. Consequently, a variety of innovative payor-provider models are emerging.

Across the United States, value-based arrangements have become the norm for payers and providers. WellPoint has more than 110,000 contracted physicians and more than 100 ACO-type organizations, compared to less than 50 ACOs a year ago. UnitedHealthcare’s accountable care contracts total $30 billion, and the insurer expects this number to top $65 billion by the end of 2018.3

Now, according to a study by McKesson Health Solutions, 90 percent of payors and 81 percent of hospitals already implement a mix of value-based reimbursement and fee-for-service, and payers expect FFS to decrease from 56 percent to 32 percent in five years, while hospitals anticipate a decrease from 57 percent to 34 percent.4

A recent report from the President’s Council of Advisors on Science and Technology encourages insurers to speed up the adoption of VBP by changing payment incentives, moving away from fee-for-service (which rewards volume) and linking reimbursement to quality and outcomes (value).5

The Blue Cross Blue Shield Association’s (BCBSA) member plans are spending more than $65 million a year on value-based payment programs that have a high return on investment. In 2012 alone, the plans report saving $500 million.6

Blue Cross plans administer more than 350 value-based programs ranging from accountable care organizations and patient-centered medical homes to pay-for-performance and episode-based payments in 49 states, according to a recent BCBSA report.7

According to the report this includes:

  • partnering with clinicians so they have the individualized support, data, and tools they need to be successful, and
  • engaging patients with wellness programs, transparency tools, and information on how to keep healthy and manage chronic conditions.

Blue Cross reports the result has been a widespread reduction in emergency room visits, hospital admissions, and readmissions. Moreover, BCBSA reports improvements in preventive care, including better diabetes control and an increase in screenings and immunizations.

Blue Cross Blue Shield (BCBS) Plans have initiated Patient-Centered Medical Homes (PCMHs) in Maryland, D.C., Virginia, Michigan, Minnesota, New Jersey, and North Dakota. Anthem developed a PCMH that now encompasses nearly 18,000 providers, including more than 9,900 primary care physicians who represent more than 1 million attributed members across California, Colorado, Connecticut, Indiana, Kentucky, Maine, Missouri, New Hampshire, New York, Ohio, Virginia, and Wisconsin. Additional growth is expected with the program being available in all 14 Anthem markets by mid-2014.

Blues have established ACOs in Illinois, Minnesota, Massachusetts, New Hampshire, and Colorado, some of which enhance the fee-for-service system, while others replace it with payment based on quality indicators, and still others factoring in the total cost of care (TCOC).7

The depth and breadth of the Blue Cross activity in the ACO and PCMH innovative payment models is depicted in the sidebar to this column. Combined with the substantial market share command enjoyed by Blue Cross plans, this movement provides incentive to private practice physical therapists to understand and develop strategies to effectively cope with these trends.

BCBSA is not alone in beefing up value-based payment programs. WellPoint has more than 100 ACO-type organizations, and UnitedHealth’s accountable care contracts total $30 billion.6

Perhaps another sign demonstrating that the move to value-based care is real is the formation of the National Association of ACOs. NAACOS held its Fall 2014 conference last month to educate more than 400 attendees on policy and operational issues for ACOs working with public and private payers. Such conferences represent an opportunity for private practice physical therapists to learn more about the emerging business trends and identify strategies for participating in ACOs that are developing in their service areas.

The aforementioned McKesson study found evidence that the transition from fee-for-service (FFS) to value-based purchasing (VBP) is well under way, but also found that 15 percent of payors and 22 percent of providers said the pay-for-performance model is extremely difficult to implement. Many cited technology impediments as a core problem, noting it’s hard to standardize and analyze data.4

Despite the difficulty of this transition to value-based health care, the end result of reduced costs and improved care and patient outcomes will be worth it, according to the president and Chief Executive Officer of the Cleveland Clinic.8

Toby Cosgrove, MD, in a blog post for the Harvard Business Review, described value-based health care as a “breakthrough that will change the face of medicine.” He said the pay-for-performance model will lower health care costs, improve quality and outcomes, and eventually affect every patient across the United States. However, the road ahead is difficult, he said, as many oppose the plan, which offers less money than the current fee-for-service model.

“Whether providers like it or not, health care is evolving from a proficiency-based art to a data-driven science, from freelance physicians to hospital-employed physicians, from one-size-fits-all community hospitals to vast hospital networks organized around centers of excellence,” Cosgrove wrote. “Each step in this process leads to another.”8

Because value-based care will necessarily involve making less money for better outcomes, Cosgrove says it is being delayed by “criticism, misunderstanding, and a reluctance to do things differently.” However, he said, providers should view it as an opportunity rather than a problem. “After all, the providers who make the transition early will be rewarded with more satisfied patients, lower expenses, and pride in a job well done.”8

In contrast on the financial piece, a recent Forbes article reports that as insurers and physicians speed up this shift to value-based care, both primary care and specialty care physicians have reported that their compensation increased slightly in 2013.3

But not everyone agrees with Cosgrove on the feasibility of value-based care. The uniqueness of each individual patient complicates the idea of “mak[ing] all of medicine measurable and quantifiable,” David A. Shaywitz, MD, PhD, director of strategic and commercial planning at a San Francisco-based pharmaceutical company, wrote in The Atlantic.9

Meanwhile, a 2012 study in the New England Journal of Medicine found incentivized hospital care had negligible effects on 30-day mortality rates. A four-year study of New York City hospitals similarly showed the model reduced costs but did little for patient outcomes.10

Despite these findings, payors, providers, and patients are making the shift toward different reimbursement models including risk sharing, Healthcare Finance News reports. Andrew Croshaw, a partner with the health care intelligence firm Leavitt Partners, predicts about one-third of Americans will have a shared-risk plan by 2020. He also predicts that Congress will take steps to make providers bear more risk, regardless of which party controls the Senate next year.11

So far, the most active experimenters in risk-bearing arrangements have been physician groups. But major payors also are embracing the shared risk approach, especially Cigna, Aetna, UnitedHealthcare, Anthem, and Blue Cross Blue Shield companies in Massachusetts, California, and Michigan.11


The study commissioned by McKesson also found that payers are implementing a combination of payment models and the majority continue to use fee-for-service models. Among value-based payment models, the most widely used models are pay for performance (used by 65 percent of payers) and capitation, global payment, or total cost of care payment (used by 64 percent of payers).4

Following close behind in popularity is episode of care/bundled payment, with 59 percent implementing these models. That is followed by shared savings with upside risk, with 46 percent implementing. Shared savings with upside and downside risk is the least popular model, implemented by only 29 percent. More than two-thirds of payors use pay-for-performance, capitation, global payment, or total cost of payment value-based models of reimbursement.4

Payors in collaborative regions are significantly more likely to implement capitation/global payment compared to those in payor- and provider-centric regions. Larger payors are more likely to implement pay-for-performance models and shared savings with upside only.4

The rapid growth of incentive-based payment models connotes an emphasis on value (cost and quality) and signals opportunities for physical therapy practices able to demonstrate effectiveness of their interventions. 

Blue Plans Innovative Partnerships with Clinicians

United States health care spending exceeds $2.8 trillion annually. Based on evidence that 30 cents of every health care dollar goes to care that is ineffective or redundant, the Blue Cross and Blue Shield Association (BCBSA) and BCBS Plans are implementing initiatives to help assure their 100 million insureds receive safe, high-quality, coordinated, and affordable care. Blue initiatives use an interconnected approach involving:
  • Changing payment incentives by moving away from fee-for-service—which rewards volume—and linking reimbursement to quality and outcomes.
  • Partnering with clinicians so they have the individualized support, data, and tools they need to be successful.
  • Engaging patients with wellness programs, transparency tools, and information on how to keep healthy and manage chronic conditions.
Blue Cross Plans are partnering with local clinicians throughout the nation on initiatives that employ this approach. These include Patient-Centered Medical Homes (PCMHs)—in market or in development in 48 states and the District of Columbia—and Accountable Care Organizations (ACOs)—in market or in development in 41 states and D.C. BCBSA reports these innovations are delivering quantifiable improvements in quality and affordability.

Patient-Centered Medical Homes
Blue Plans collectively support the nation’s largest network of PCMHs currently covering more than seven million Blue insureds under arrangements where the patient and primary care practice are at the center of care.

  • CareFirst BCBS’s PCMH initiative includes 3,600 primary care providers (PCPs) and nurse practitioners caring for one million CareFirst members in Maryland, D.C., and parts of northern Virginia. PCPs can practice in established groups or “virtual” panels that help enable accurate quality and financial measurement and provider “peer-review” of one another’s performance. The model includes an immediate double-digit increase in the primary care fee schedule and new payments for care plans for chronically ill members. Participating providers are eligible for additional fee increases based on performance. CareFirst local care coordinators partner with PCMH practices to help coordinate care, such as assuring post-discharge coordination, making physician office visits to discuss patients’ care plans, and providing regular web-based updates to a record available to the entire care team.
  • In its second year, CareFirst’s PCMH program has trimmed expected health care costs in 2012 for PCMH-covered members by 2.7 percent (representing $98 million in savings), an improvement over the 1.5 percent savings in the program’s first year. In 2012, 66 percent of participating primary care panels in the PCMH earned Outcome Incentive Awards (OIA) (up from 60 percent in 2011). Panels earning OIAs achieved an average 4.7 percent savings against expected 2012 care costs. Panels that did not earn OIAs registered costs that averaged 3.6 percent higher than expected in 2012, but this is an improvement over the 4 percent registered in 2011. Quality scores for panels that earned OIAs were 3.7 percent higher than for panels that did not earn OIAs in 2012. Overall, quality scores for PCMH panels rose by 9.3 percent from 2011 to 2012.

  • BCBS of Michigan’s PCMH program involves 1,243 physician practices containing more than 3,770 physicians, making it the country’s largest PCMH effort of its kind for the fifth consecutive year. The number of physicians earning PCMH designation from Blue Cross Blue Shield of Michigan has tripled since Blue Cross Blue Shield of Michigan first launched the program in 2009. These practices implement key capabilities like offering after-hours access to care, implementing processes for following up on test results, and using registries that flag care gaps. More than 1.1 million Blue Cross Blue Shield of Michigan members, and close to 2 million patients across the state, have access to a Blues’ PCMH-designated practice. The program has saved approximately $155 million over its first three years.

    According to 2013 data, compared with nondesignated practices, PCMHs experienced 19.1 percent lower adult hospital admission rate for ambulatory-care sensitive conditions, 8.8 and 17.7 percent lower Emergency Room (ER) visit rates (for adults and children respectively), 7.3 percent lower adult use of high-tech radiology services, and 11.2 and 23.9 percent lower adult and children (respectively) primary-care sensitive emergency department visit rates.

  • Horizon BCBS New Jersey’s statewide PCMH initiative—including 70,000 insured—provides upfront and ongoing support to help primary care practices transform, including an enhanced fee schedule; a monthly per-member (PMPM) fee supporting care coordination; financial support for a population care coordinator at the practice site who proactively manages patient care; and an opportunity to earn additional incentives based on quality, patient experience, and utilization metrics.
  • Results in 2012 include a 5 percent higher rate in improved diabetes control, a 3 percent higher rate in breast cancer screenings, an 11 percent higher rate in pneumonia vaccinations, a 23 percent lower rate in hospital inpatient admissions, a 12 percent lower rate in ER visits, and 9 percent lower cost of care for diabetic patients.

  • BCBS North Dakota’s MediQHome program—involving more than 50 percent of Plan members—provides IT-driven care coordination for chronically ill patients while benefiting all patients through enhanced preventive care outreach. Eighty percent of eligible providers statewide submit their patient data, including progress notes and lab results, to the Plan’s health information and care coordination technology platform, which creates actionable reports identifying gaps in care. BCBSND also rewards primary care providers through a targeted care management fee and outcomes-based incentives. In 2012, building on the MediQHome model, the Plan launched an Accountable Care Model that now includes more than 70 percent of MediQHome participants.

    To date, MediQHome has led to a 30 percent reduction in ER use among MediQHome patients with chronic illnesses compared with nonparticipating chronically ill BCBSND members. Inpatient hospital admission rates among patients in MediQHome are 18 percent lower than those in the general BCBSND patient population.

  • Anthem Blue Cross and Blue Shield has launched a Patient-Centered Primary Care program: a singular, consistent, and scalable framework designed to drive the migration from volume-based, episodic, and fragmented care to value-based, patient-centered care. All of Anthem’s primary care, value-based arrangements will operate under this framework. The program rewards participants for improvements in quality and affordability and gives PCPs the tools they need to successfully manage patients’ health. Participating PCPs receive a clinical care coordination PMPM payment for “non-visit” services—focusing initially on care planning for medically complex patients—and have the opportunity to share in any achieved savings if they meet threshold performance on nationally recognized quality and efficiency measures that are part of the program. Performance on these measures not only determines eligibility to share in savings, but also determines the level of shared savings earned. To date, the program encompasses nearly 18,000 providers, including more than 9,900 primary care physicians who represent more than 1 million attributed members across California, Colorado, Connecticut, Indiana, Kentucky, Maine, Missouri, New Hampshire, New York, Ohio, Virginia, and Wisconsin. Additional growth was expected with the program continuing to roll out in all Anthem markets through 2013. By early 2014, the program was available in all 14 Anthem markets.
  • Patient-Centered Primary Care incorporates best practices from Anthem’s PCMH pilots, such as an Empire BCBS initiative in the New York City area that yielded up to 14.5 percent savings in the total cost of care compared with those treated by non-PCMH practices. Adults in PCMH practices used 11 to 17 percent fewer ER services, had 12 to 23 percent fewer hospitalizations, and had better low-density lipoprotein cholesterol (LDL) control and diabetes testing rates. The Plan has achieved similar results in Colorado and New Hampshire, where efforts improved performance on all of the pilot’s diabetes measures.

Accountable Care Organizations
Under BCBSA Plans’ ACO-type arrangements, providers take overall responsibility for the quality and costs of care for a defined patient population—supported by data, analytics, and technical assistance from the Plan.

  • BCBS Illinois’s three-year agreement with the 10-hospital Advocate Health Care system covers 420,000 BCBSIL PPO and HMO members who receive care from Advocate and its 2,700 physicians, who predominantly are in small, independent practices. Under the arrangement, Advocate significantly limited annual rate increases in return for having the opportunity to share in savings resulting from care improvements. To help guide improvement, BCBSIL provides Advocate with actionable data, including daily communication of attributed members who have been hospitalized, enabling Advocate to proactively manage patients’ care.

    In the first three quarters of the agreement, the ACO has seen a 4.6 percent decrease in costs versus the market benchmark, with improved clinical outcomes such as lower admission rates.

  • Blue Cross Blue Shield of Minnesota’s Aligned Incentive Contracting (AIC) model is a three-year partnership with providers in which increases to the fee-for-service component decrease over time and are replaced by growing performance incentives tied to measurable improvements in quality outcomes and to managing total cost of care (TCOC). Health systems assume full responsibility for the total cost of care related to attributed members. BCBSMN provides a risk-adjusted per member per month (PMPM) payment along with an allowed trend for attributed members’ TCOC. If the provider’s actual PMPM for those attributed members is below the PMPM target, the provider is eligible to receive a share of those savings.

    BCBSMN’s AIC model demonstrated in 2011 that the trend for AIC care systems was approximately 34 percent lower than comparable care systems. Seventy-five percent of AIC providers were successful in earning incentives, and the Plan estimates $13 million in net savings against expected claims costs after paying incentives. Members reached optimal treatment goals for diabetes, blood pressure, cardiovascular disease, and hypertension.

  • BCBSMA’s Alternative Quality Contract (AQC) moves away from fee-for-service by using a population-based global budget that is adjusted annually for health status and inflation, combined with performance incentives tied to nationally accepted quality measures. Twice annually, the Plan provides AQC-participating physician groups with practice pattern variation analyses on more than a dozen conditions that allow clinicians to drill down to patient-level detail, understand underlying reasons for differences in practice patterns, and identify improvement opportunities. The Plan now covers 79 percent of its HMO members under AQC agreements, up from 39 percent in 2008.
  • According to the BCBSA report, an independent analysis by Harvard Medical School researchers, AQC groups had overall savings of 2.8 percent over two years compared to spending in nonparticipating groups. AQC groups also demonstrated a quality advantage, with their chronic care management, adult preventive care, and pediatric care performance improving more in year two than year one.

    Source: Blue Plans Improving Healthcare Quality and Affordability through Innovative Partnerships with Clinicians, Blue Perspective, February 13, 2014. Accessed August 2014.


    Jerome Connolly, PT, CAE, is a registered federal lobbyist whose firm Connolly Strategies & Initiatives has been retained by PPS. A physical therapist by training, he is a former private practitioner who throughout his career has served in leadership roles of PPS and APTA. Connolly also served as APTA’s Senior Vice President for Health Policy from 1995 – 2001.




    1. Centers for Medicare and Medicaid Services, Accessed August 2014.

    2.Shortell S, The State of Accountable Care Organizations, Agency for Healthcare Research and Quality (AHRQ) Health Care Innovation Exchange,, Accessed August 17, 2014.

    3. Japsen B, How Accountable Care Is Transforming U.S. Healthcare, The Motley Fool, June 27, 2014.

    4. The State of Value-Based Reimbursement and the Transition from Volume to Value in 2014, McKesson Health Solutions, June 2014. Accessed August 2014.

    5. August 2014.

    6. Overland D, Blue Cross: Value-based Care Delivers Huge ROI, Fierce Health Payer, July 10, 2014.

    7. Blue Plans Improving Healthcare Quality and Affordability through Innovative Partnerships with Clinicians, Blue Perspective, February 13, 2014. August 2014.

    8. Cosgrove T, Value-Based Health Care Is Inevitable and That’s Good, Harvard Business Review, September 24, 2013.

    9. Shaywitz D, Lowering Health Care Costs Is Hard Because Every Patient Is Unique, The Atlantic, September 25, 2013.

    10. Jha AK, Joynt KE, Orav EJ, Epstein AM, The Long-Term Effect of Premier Pay for Performance on Patient Outcomes, N Engl J Med 2012; 366:1606-1615,April 26, 2012.

    11. Croshaw A, Healthcare Moves Toward Shared Risk, Health Care Finance News, June 23, 2014.

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