Despite being the highest spender on healthcare in the world and paying approximately 17% of its GDP on healthcare, the United States still has poor population health and worse outcomes than its international peers.1 As a result of this unsustainable spending in the U.S. healthcare sector, healthcare reform has prompted a number of alternative care and payment models, and prompted the revitalization of others. Among these new and resurrected approaches are accountable care organizations (ACOs) and integrated delivery networks (IDNs). The ACO movement was generated by the Patient Protection and Affordable Care Act (PPACA) of 2010 based on the need for cost containment within the Medicare sector, while IDNs first appeared in the 1990s to address the needs of a changing reimbursement environment and to combat the threats on bargaining power.2
What is an ACO?
An ACO is defined as a network of providers that assume responsibility for the care of a population with the intent of managing quality and cost of care.3 Although ACOs were initially encouraged in the Medicare program, private sector ACOs have emerged as well. ACO participation continues to rise despite news of departures and dissatisfaction with Medicare models. As of January 2016, there were a total of 838 active ACOs serving approximately 28.3 million people.4 Despite the success and continued interest in ACOs, there are still a number of challenges the model will face. Organizational buy-in will continue to be difficult in a market where fee-for-service practices have dominated the healthcare landscape for decades.4 Furthermore, difficulties with the integration of health information technology systems may continue to hinder effective population management practices.4
What is an IDN?
An IDN is a network of facilities and providers that aim to offer a continuum of care in a particular area or market.5 A number of IDNs already act as payers themselves by sponsoring their own health plans, actively participating in ACO demonstrations, or contracting with health plans on a capitated basis.6 As of 2013, there were over 400,000 healthcare professionals serving 626 IDNs.7 IDNs have been in existence for nearly 30 years, yet there isn’t much known about their performance.6 Much of the difficulty in evaluating performance leads back to ineffective electronic medical record (EMR) integration.6 Frequently, mergers preclude access to shared electronic databases and prevent optimal coordinated care practices. Other challenges within IDN systems stem from operational changes, which can lead to physician dissatisfaction, largely due to shifts in autonomy related to prescribing practices.
Overlap between ACOs and IDNs stems, in part, from a shared foundation in value-based care rather than traditional volume-incentivized, fee-for-service models.8 In addition, both ACOs and IDNs focus on population health management and are structured around the Triple Aim principles of improving health, reducing healthcare costs, and improving the patient experience of care.8,9
ACOs and IDNs both encourage coordinated patient care by linking healthcare providers who are willing to be held clinically and fiscally accountable, but the two models also differ in a few ways. ACOs can be formed more quickly and with fewer resources than an IDN.10 In addition, under the Medicare Shared Savings Program, ACOs are eligible to participate in shared earnings if they are able to reduce loss outcomes and adhere to performance and quality measures.11
Challenges to the Biopharmaceutical Industry
The evolution of market dynamics and care networks challenges the biopharmaceutical industry to adopt practices that meet the influence of these networks. Key considerations for change include sales-force structure, resource deployment, customer targeting and segmentation, and the identification of key decision-makers. Overall, a shift away from traditional sales and traditional models of reach and frequency will be required for successful interactions with these organized customers.13
Time and time again, it has been said that seeing one ACO or IDN means that you have only seen one ACO or IDN. Although each model will vary, there are overarching principles that must be considered for both ACOs and IDNs. As models focused on value and coordinated care, ACOs and IDNs will not determine a new product’s value based solely on randomized clinical trial data. Instead, studies with active comparators and those containing real-world evidence will be necessary to demonstrate value and command premium pricing.
This presents the opportunity for partnerships between ACOs or IDNs and manufacturers to share data and identify ways to leverage real-world research to support both parties. Furthermore, ACOs and IDNs encourage the use of algorithms and treatment protocols. This trend provides manufacturers with the opportunity to present strong data, including a demonstration of economic value, to solidify a place in therapy.
As ACOs and IDNs continue to take on increasing financial responsibility for their patients, the pharmaceutical industry can assist in this effort through the development of above-brand initiatives such as disease-state awareness campaigns.
ACO Medicare Part A Inclusion
Specific to ACOs, manufacturers will need to consider the inclusion of Medicare Part A and Part B services in benchmark ACO payments. This, in essence, leaves Part D drugs out of the calculation and incentivizes their use. This comes in contrast to provider incentives in the past for fee-for-service practices that encouraged the use of Part A and Part B services and medications. In order to support product acceptance, manufacturers of drugs that fall outside of Part D can look to present comparative effectiveness research that will highlight product attributes.13
Focusing on quality measures on which ACOs are evaluated, and that align with a manufacturer’s disease state of interest, will enable more successful interactions with ACOs in the future. Another key to a successful relationship with ACOs is to consider the structure of the individual ACO and to determine which levels of management should be targeted, whether it be C-suite, D-suite, participating physicians, or a combination thereof.
In much the same way, successful relationships with IDNs will be dependent on identifying the key decision-makers. Typically, formulary and P&T decision-makers who should be targeted are higher-level executives, such as C-suite members. Additionally, segmenting the market to target IDNs will be extremely important for manufacturers since the IDN trend indicates there are larger accounts with greater leverage during price negotiations.
Another consideration with IDN customers is the timing of decision-making, which can take anywhere from 6 to 12 months. As a result, it is important to recognize that efforts will not be immediately realized as they might have been with traditional sales rep models.14
Regardless of the customer—ACO or IDN—pharma needs to act now as consolidation does not look to be slowing down. Manufacturers aiming to forge lasting partnerships will need to critically assess this evolving segment and offer solutions to the organizations that create value by addressing the Triple Aim.
1. Squires D, Anderson C. “U.S. Healthcare from a Global Perspective: Spending, Use of Services, Prices, and Health in 13 Countries.” Washington DC: The Commonwealth Fund. 2015.
2. Integrated Healthcare: Literature Review. Essential Hospitals Institute. http://essentialhospitals.org/wp-content/uploads/2013/12/Integrated-Health-Care-Literature-Review-Webpost-8-22-13-CB.pdf. Published February 2012. Accessed June 10, 2016.
3. FAQ on Accountable Care Organizations — Physician Payment. http://www.aafp.org/practice-management/payment/acos/faq.html#aco. Published August 20, 2015. Accessed June 9, 2016.
4. Muhlestein D, McClellan M. “Accountable Care Organizations in 2016: Private and Public-sector Growth and Dispersion.” HealthAffairsBlog. http://healthaffairs.org/blog/2016/04/21/accountable-care-organizations-in-2016-private-and-public-sector-growth-and-dispersion. Published April 2016. Accessed June 10, 2016.
5. Jirele, L. “Understanding Data Behind the Complex New World of Healthcare Involving IDNs and ACOs” [webinar]. 2015. http://www.pmsa.net/_resources/webinars/UnderstandingData-Jirele.pdf.
6. Goldsmith J, Burns LR, Sen A, Goldsmith T. “Integrated Delivery Networks: In Search of Benefits and Market Effects.” National Academy of Social Insurance. https://www.nasi.org/research/2015/integrated-delivery-networks-search-benefits-market-effects. Published February 2015. Accessed June 9, 2016.
7. “Which Are the Top Integrated Delivery Networks (IDNs), and How Many Docs Do They Have?” Pharmaceutical Commerce iCal. http://pharmaceuticalcommerce.com/latest-news/which-are-the-top-integrated-delivery-networks-idns-and-how-many-docs-do-they-have. Published November 6, 2013. Accessed June 9, 2016.
8. Burns LR, Pauly MV. “Accountable Care Organizations May Have Difficulty Avoiding the Failures of Integrated Delivery Networks of the 1990s.” Health Affairs. 2012;31(11)2407-2416.
9. “The IHI Triple Aim.” Institute for Healthcare Improvement. http://www.ihi.org/engage/initiatives/tripleaim/pages/default.aspx. Published 2016. Accessed June 9, 2016.
10. Correia EW. “Accountable Care Organizations: The Proposed Regulations and the Prospects for Success.” AJMC. www.ajmc.com/journals/issue/2011/2011-8-vol17-n8/ajmc_11augcorreia_560to568. Published August 8, 2011. Accessed June 9, 2016.
11. Rini J. “Demystifying the ACO.” www.hira.org/articles-archives/211-demystifying-the-aco. Accessed June 8, 2016.
12. “The IHI Triple Aim.” Institute for Healthcare Improvement. www.ihi.org/engage/initiatives/tripleaim/pages/default.aspx. Published 2016. Accessed June 9, 2016.
13. Farraj R, Konschak C. “Remaining Relevant in ACOs and CINs: How Pharmacists and Pharmaceutical Companies Play a Major Role.” Divurgent. 2011.
14. Yeo A. “Pharmas Urged to Take Committed Steps Along the IDN Pathway.” In Vivo: The business and medical report. December 2015.