Safety-net accountable care organizations (ACOs) have the potential to deliver cost-effective, patient-centered care that engages patients and contributes to achieving the Triple Aim in Medicaid. Safety-net ACOs are playing increasingly important roles in delivering care for vulnerable populations. Active ACO formation is occurring in at least 18 state Medicaid programs with considerable variability across states, although they have been slower to develop than ACOs serving Medicare or commercial populations.

This post will outline five key observations regarding emerging safety-net ACOs and suggest broad policy implications. We are defining safety-net ACOs as collaborative entities of providers and sometimes payers that are 1) accountable for managing the health of their population, 2) assuming upside and/or downside financial risk, and 3) serving predominantly Medicaid (including dual eligibles) and uninsured patients.

Our observations are based on in-person site visits and telephone interviews with 66 safety-net ACO leaders and state officials conducted over the last two years in 14 states, including Alabama, California, Colorado, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Jersey, North Carolina, Oregon, Pennsylvania, Vermont, and Washington. Further, with funding from the Robert Wood Johnson Foundation, our team is in the process of conducting in-depth case studies of three emerging safety-net ACOs: Hennepin Health in Minneapolis, MN, AltaMed Health Services Corporation in Los Angeles, CA, and Baystate Health/Pioneer Valley Accountable Care in Springfield, MA.

1. State policy is a key factor in the formation of safety-net ACOs.

State policy and support is significantly hastening ACO formation in the safety net. Many states have explicitly promoted the development of safety-net ACOs through combinations of legislation and agency-initiated procurements. Four of the best known examples are:

  1. Massachusetts’ Chapter 224 cost-containment legislation, which mandates that 80 percent of the Medicaid population be enrolled in risk-based contracts by 2015;
  2. Minnesota’s Integrated Health Partnerships, which promotes the development of accountable care organizations;
  3. Alabama’s legislation (Act 2013-261) that authorizes the extension of its Medicaid high-risk case management program into four regional care organizations; and
  4. Oregon’s commitment through their 1115 Medicaid waiver to reduce spending through the Coordinated Care Organizations (CCOs) program.

In states without explicit policy guidance, safety-net ACOs are emerging more slowly. In these states, the formation of ACOs is rooted in the desire to pursue Triple-Aim-driven delivery system transformations that allow the ACO to retain and attract new patients as more safety-net patients become insured through Medicaid expansions, and to share in potential financial benefits of such transformations.

California is an example of a state where some safety-net providers are pursuing ACO activities, despite an absence of state policy guidance. For example, AltaMed, the largest independent Federally Qualified Health Center (FQHC) in the country, has spearheaded efforts in collaboration with safety-net hospitals to take advantage of care coordination activities under the ACA and to participate in the California duals demonstration.

2. Both health policy experts and those involved in forming ACOs consider health homes, high-cost case management, and integrated behavioral health to be priority delivery system transformations for ACOs in the safety-net.

Safety-net ACOs are adopting a common set of building blocks to address the unique constellation of physical, behavioral, and psychosocial needs of the safety-net population. First, in many cases, safety-net ACOs are using health homes as the core component of their care coordination strategy. Key activities of health homes include the use of multidisciplinary teams and care coordination between health system sectors.

Second, safety-net ACOs are prioritizing case management of high-cost patients to obtain the most immediate positive return on investment while achieving improvements in quality and patient experience. Third, integrating behavioral health with primary care is viewed as an especially important building block for safety-net ACOs given the high rates of mental health and substance abuse disorders in the Medicaid population and the need to address behavioral health as a strategy for achieving Triple Aim goals.

States supporting ACO formation are encouraging providers to develop health homes, case management programs, and integrated behavioral health building blocks by requiring them for participation in state-led payment reforms and state-supported ACO development. In Massachusetts, the state is requiring behavioral health integration and medical home certification in order to participate in the Patient-Centered Primary Care Reform Initiative, a key component of Massachusetts’ health reform legislation.

Similarly, Maine is encouraging health homes, behavioral health integration, and Community Care Teams as conditions for participation in their state-led ACO initiative.Oregon’s vanguard efforts have also seen health homes as a core building block of their transformation efforts in the safety-net, as described by OCHIN and the Oregon Health & Science University (OHSU) in their Health Affairs blog series.

3. It takes money to save money: upfront capital and financial flexibility are required for investment in delivery system transformations.

Safety-net ACOs need upfront capital to invest in high-cost case management strategies, IT infrastructure, and the workforce changes necessary for operating an ACO. According to the National ACO Survey conducted in 2013, organizations will need $4 million of capital on average to start an ACO. However, many safety-net providers have limited financial reserves or no ready access to capital to fund these investments. Even if ACOs promise long-term shared savings, they still require upfront capital to launch delivery system transformation.

Safety-net ACOs have overcome these barriers through various strategies. In select cases, a safety-net entity was large enough to fundraise or invest reserve capital on its own. In other instances, the state provided the upfront investment through various vehicles, such as grants or global capitation payments to a risk-bearing partner in an ACO. Finally, safety-net providers serving and assuming financial risk for populations with very high-cost individuals may have an easier time in justifying investments in delivery system transformations that will result in savings and improved quality outcomes.

Hennepin Health has a health plan partner that accepts global capitation for a high-risk early Medicaid expansion population, allowing Hennepin Health to make investments under the flexibility of global capitation. Similarly, AltaMed had experience serving very high-risk patient populations through a globally capitated PACE program, and wanted to serve other populations, such as dual eligibles, under similar financial arrangements. The potential for improved care coordination and quality outcomes for high-risk, high-cost populations that could also result in significant returns on initial investments provided motivation for the safety-net entities to make investments while assuming financial risk.

4. Safety-net ACOs are adopting payment and delivery system transformations incrementally.

Most safety-net ACOs are not emerging as full-fledged ACOs that could immediately meet CMS or other third-party requirements (e.g. NCQA ACO accreditation). As they evolve, many safety-net ACOs may not have a formal governance structure in place or even call themselves an ACO, unless required to do so by state policy. They may also be developing the delivery system transformations and financial risk contracts of an ACO in a stepwise fashion.

In the last several years, AltaMed has both expanded the number and scope of its risk-based contracts with health plans, implemented medical homes across its 46 sites, and sought to collaborate with hospitals in the development of an accountable care network. Baystate Health is moving incrementally by first developing ACO contracts and activities for its commercial and Medicare patients, while preparing to expand their ACO arrangements to their Medicaid population.

Given their incremental development, safety-net ACOs are often reluctant to take downside risk at the outset; rather, they start participating in ACO-like contracts with shared savings arrangements, some of which have the intent to move toward greater risk in future years. In Massachusetts’s Patient Centered Primary Care Reform Initiative that includes 21 health centers, participants have the potential for upside shared savings only in Year 1, while subsequent years will involve downside risk.

In some cases, evolving state policy promotes this incremental path. In Colorado, the state Medicaid ACO program began with patient-centered medical home transformation promoted through a PMPM and incentive payments based on achievement of performance targets. Starting in 2014, Colorado’s Medicaid ACO program plans to move toward full-risk, and began testing full-risk global capitation at one Medicaid ACO led by a Western Colorado health plan. This incremental strategy constitutes a step-wise path to transitioning to full-risk contracts with the duals population as well.

5. Building on a long-standing recognition of how non-medical factors impact health outcomes and utilization, safety-net ACOs are addressing social determinants of health through community partnerships.

Safety-net ACOs serve populations with complex and often unmet social and economic needs related to housing, food security and nutrition, legal assistance, employment support, and/or enrollment assistance. So far, safety-net ACOs are utilizing two principal strategies to address social determinants of health. The first involves screening for social determinants through risk assessments that incorporate a wide range of social and behavioral topics, including housing, food security, substance abuse, and mental health. The second strategy involves coordinating care with a diverse constellation of community-based service organizations that can address non-medical needs that influence health outcomes and health system utilization.

By coordinating with other sectors, such as social services, housing, and the justice system, some safety-net ACOs are convening community partners to ensure that a Medicaid individual is receiving comprehensive, coordinated public services. By pursuing these strategies, the ACO becomes acutely aware of the availability and constraints in the supply of social and community services.

Hennepin Health is a leading example of a safety-net ACO that is combining screening and coordination strategies in a comprehensive manner. Hennepin Health assigns its highest risk patients to a “call me first” individual who is responsible for the coordination of services to meet a patient’s social, behavioral, and economic needs extending beyond health care to behavioral health, housing, and other realms. Furthermore, when risk assessment data revealed social and economic needs in their patient population, such as a need for more supportive housing for medically complex members, Hennepin was able to secure designated housing units for their patients and advocate for increasing County-provided resources.

While Hennepin’s “social ACO model” is among the most advanced, others are also exploring this model. Many of Oregon’s CCOs regularly convene county health departments and social services agencies, and Health Share, Oregon’s largest CCO, is currently exploring coordinating the provision of housing services for select patients.

Furthermore, some safety-net ACOs are pursuing strategies to address upstream population health and are facilitated by state policies targeting prevention. Several states have promoted prevention and partnerships with public health agencies through a variety of funding mechanisms. For example, as part of its state ACO program, Oregon has promoted training of community health workers as a prevention strategy within CCOs. Maine’s ACO program is requiring its providers to develop informal or contractual partnerships with local public health entities in areas such as nutrition and women’s health.

Building on their Integrated Health Partnership (IHP) demonstration, Minnesota is using State Innovation Models (SIM) funding to support partnership development between local delivery systems, public health agencies, and community agencies to identify and create a plan for addressing population health needs. Building on its role as a community health center, AltaMed secured grant funding to pursue community-level BMI screening and obesity prevention activities. With or without state support, emerging safety-net ACOs are reflecting and building upon their roles as safety-net providers in improving the health of patient populations and the broader community.

Looking Ahead

In the changing health care environment, safety-net ACOs are well-positioned to become integrators of health and social services for Medicaid populations. Because of their commitment to addressing social determinants of health, they have the opportunity to extend this integration upstream to address population health. By serving both these roles, they hold promise to achieve Triple Aim goals and reduce health disparities in their communities.

Safety-net ACOs are a distinct innovation compared to their Medicare and commercial counterparts, as they differ in their origins, missions, functions, and challenges. Recognizing safety-net ACOs’ unique potential to improve care and reduce costs for their patients while also reducing health disparities and promoting health in the wider community, policymakers would be wise to consider specific policy initiatives to support and evaluate emerging safety-net ACOs.