ACOs offer new risks and rewards

Assuming there is no new legislation to the contrary in the next few months, Accountable Care Organizations will begin operating nationwide in January 2012.

The federal government's goal in creating the new ACO framework as part of the Medicare Shared Savings Program is to reduce healthcare costs, cut inefficient resource allocation and improve patient care. ACOs are expected to contract with Managed Care Organizations to coordinate care for commercially insured patients as well as Medicare recipients.

This shift to a patient-centric and value-based approach to healthcare presents opportunities and risks to the pharmaceutical and medical device industries, according to Tony Chen, associate director of government pricing, and Robert Fellman, senior healthcare consultant, at Alliance Life Sciences, a consulting firm. Chen and Fellman are co-authors of the white paper "Accountable Care Organization Clinical Integration: What the new framework means for drug and medical device manufacturers and the market."

Companies that successfully manage the change to ACOs will be rewarded with revenue growth opportunities and more ways to engage insurers and providers, according to Chen.

"The ACO structure will create new sales channels for drug and medical device manufacturers. Those who do it correctly will see increased profitability," he said.

However, Chen warns that these new sales networks come with new reporting responsibilities. "It's imperative that manufacturers demonstrate that their products and treatments are achieving the outcomes they are supposed to achieve. They now have to follow-up with metrics and quantify the results," he said.

With a new emphasis on value and results, manufacturers will need to show that their drugs and devices slow or cure diseases and reduce costs to patients and providers.

"It's a change in philosophy. The ACOs are not going to invest money when there's no evidence to show increased value," said Fellman. "Culturally, we are coming to the realization that we can no longer afford to throw money at a treatment that does not result in a positive outcome."

Chen and Fellman agree that one of the biggest risks for pharmaceutical and medical device manufactures is not to get on board.

"Manufacturers that adopt the new model and make sense of it will be in a favorable position to contract with ACOs," Chen said. "Those players who don't embrace the change will lose significant market share."

Although ACOs are part of a hotly debated healthcare paradigm shift, the changes they embody are apolitical, according to Fellman. "There is a need in this country to run a more efficient healthcare system. Regardless of politics, people want to see positive market reforms. Value-based contracting is the future," he said.

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