By Sana Moosa As provider organizations mature toward implementation of accountable care organizations (ACOs), manufacturers of biopharmaceutical products will need to stay abreast of changes, set the stage for innovative partnership, and take advantage of emerging opportunities.
Federal initiatives to create shared-savings projects have been going on for some time and gave a start to shared-savings models, such as ACOs. ACO pilots originated between healthcare organizations and the Centers for Medicare & Medicaid Services; however, after showing success in improving outcomes and cost savings, they were quickly adopted by commercial payers. ACOs are collaborations of physicians, hospitals, and other providers, organized around the capacity to improve health and reduce overall costs for a population of patients. They are capable of measuring improvements in patient health and overall costs and receiving payments that increase when these improvements occur.
The drivers of ACO model adoption include rising healthcare costs and the push for greater patient accountability, shared savings incentives from reducing cost of care, and a genuine desire to improve the quality of care for patients. Providers are also being driven toward ACOs out of competitive necessity and see an opportunity for improved business strategies across the continuum of care. ACOs are viewed as a way to align payments and healthcare initiatives with measurable, meaningful progress in improving care while lowering costs. They promote accountability for a patient population, coordinate services, and redesign care processes for high quality and efficient delivery.
Impact on providers and patients
Providers and patients are the most affected by ACOs and represent the greatest opportunity for manufactures to re-engage, provide new value, and further the business. Primary care physicians will benefit from ACOs as they will have an opportunity to play a larger role in patient care; however, specialists may see a decrease in reimbursement depending on whether ACOs hire them as employees, establish contracting arrangements, or pay for their services on a fee-for-service basis.
Hospitals most likely will be negatively affected by new regulations and will have to find new ways to adapt to the system. Hospitals will be financially motivated to provide more coordinated care to patients, but they may need to make substantial investments in infrastructure to support health information technology (HIT) systems and networks with ACOs. In the short run, hospital revenue may decline with the drive towards fewer readmissions and procedures, as they shift from volume-based to quality-based care. However, shared savings from improved quality of care may offset this in the long-term. Patients, meanwhile, may need to share some accountability so that they become more cost-conscious and share risk with healthcare providers.
Impact on manufacturers
Overall, manufacturers will not be directly impacted by the adoption of payment reform. However, device manufacturers are expected to witness a larger impact than pharmaceutical manufacturers. Within acute episodes, pharmaceuticals make up a lower percentage to the overall cost of care than devices. Thus, devices may be more scrutinized due to price variability that is typically seen within the same device class.
Chronic conditions will be most impacted by the adoption of ACOs, but at the product level, the impact will be dependent on the type of payment model that is adopted. Even though common chronic conditions may face scrutiny under the ACO model, the emphasis is on improving quality across the non-therapeutic aspects of care. Overall drug utilization may be more or less restricted, depending on the nature of stakeholder partnerships within the ACO.
Manufacturers will have to evolve from traditional strategies and tactics, as they will have limited efficacy in a marketplace defined by accountable care. Value propositions will need to be holistic, encompassing all of a manufacturer's supporting programs, and they will need to be distinctly quality-and-outcomes-focused. The ACO concept may increase the need to develop comprehensive patient-level offerings. Quality-and-outcomes focused services offer an additional degree of differentiation. Manufacturers may also need to shift contracting resources away from plans and toward accountable care entities.
The current approach to calling on customers is siloed and focused on payers, with teams dedicated to individual customer types. But as stakeholders consolidate into ACOs, manufacturers will need to build customer-facing teams that realize the increased role of providers as well as coordinate a holistic, team-based approach in targeting customers.
Strategic options
A number of strategic options can be considered for manufacturers to implement in response to payment reform and the emergence of ACOs. These strategic options exist at the environmental, stakeholder, and therapy area/asset level.
Environment level Opportunities exist for manufacturers to influence the external environment as the ACO model evolves. Companies can help shape the standard methodology of bundling payments and other payment models through public policy advocacy, and they can reach out to "schools of thought" regarding payment reform to better understand focus areas. Companies can also communicate opinion and expertise in the context of payment reform.
Meanwhile, it is important for manufacturers to continue to monitor the environment around payment reform. This includes identifying triggers that need to be monitored as payment reform shapes the landscape and identifying new partnership opportunities with existing or emerging stakeholders.
Stakeholder level Traditionally, manufacturers have been accustomed to selling to the payer. However, the shift of risk from payers to providers requires a change in the stakeholder engagement strategy. As provider groups become more organized and sophisticated, they will be open to more contracts and partnership opportunities with manufacturers. In fact, partnership and contracting opportunities between providers and manufacturers may become the new norm as compared with payers.
Potential partnership opportunities include patient education/advocacy, initiation of pilots with MGs, IDNs, or ACOs, and outcomes monitoring to develop a product value story. Potential contracting opportunities include risk-sharing agreements, performance-based rebates, and fixed rebates.
Therapy area/asset level Although payment reform is not expected to impact specific products, common acute and chronic conditions are expected to be managed more tightly in order to improve quality and reduce cost. As a result, there are several strategic options manufacturers will want to consider at the therapy area level or product level in preparation for payment reform. For example, manufacturers may want to conduct market assessments to understand ACO impact on specific therapy areas (TAs), develop TA-level messaging strategy for ACOs, or partner with providers to build evidence for a future product's value story. At the product level, manufacturers may want to provide quality outcomes/value-based data on existing products, deliver patient education on behavioral modification, or solidify market positioning and value proposition.
Partnership opportunities
As ACOs develop, manufacturers can seek multiple partnership opportunities to support specific customer needs. At the lowest level of sophistication, the business priorities of an ACO include tracking data and improving quality metrics, patient education and disease awareness, claims and reimbursement analysis and support, and metrics performance monitoring/benchmarking. Manufacturers can help by supporting basic analysis and benchmarking, performance monitoring, and patient education.
For more sophisticated ACOs, their priorities include development of disease management processes, drug monitoring at the regional/national level, standardized patient tracking process, and optimization of patient outreach and improvement of adherence. By partnering, manufacturers can lend support with disease and drug monitoring, standardization of patient-tracking processes, and patient education.
The priorities of the most advanced ACOs include the development of clinical protocols for specific disease profiles and/or patient types, collaborations in clinical trials/research and publications, negotiation of best rates with drug manufacturers for specific products, and further improvements in patient experiences and care. Manufacturers can collaborate with these more advanced ACOs on clinical trials, protocol development, and contracting.
Sana Moosa is a senior consultant with Campbell Alliance.
