If its merger with Cigna goes through, Anthem will be an ACO powerhouse, as well as the largest health insurer by lives.

 

Among the many ways that Anthem will dominate the market if its merger with Cigna is approved will be in accountable care organizations. The combined entity will control a third of the ACOs currently run by health plans.

ACOs, the contracting model that incents physicians and hospitals to improve quality and lower costs, are considered the pilot for future reimbursement in the U.S. healthcare system.

No doubt Cigna’s aggressive movement into ACOs contributed to its appeal for Anthem, which, despite being a much bigger insurer, was slower out of the gate on the new contracting model. Cigna has at least 150 ACOs in place 32 states, according to data from DRG’s Organized Customer Group Network. That compares to Anthem’s 61 in just 14 states.

Cigna’s ACOs are called “Cigna Collaborative Care,” or CCCs, and its partners include large medical practices, multispecialty groups, physician/hospital organizations, and integrated health systems. The CCC contracts establish a risk-adjusted, projected medical cost for each provider group’s Cigna patient population, then reward the providers on how well they beat that cost and meet certain quality measures. Cigna advertises that its mature collaboratives result in 3 percent lower total medical costs, 50 percent fewer emergency-room visits, and significantly better compliance with diabetes measures. Along with the incentives, Cigna provides a paid care coordinator who works as an employee of the provider group to coordinate the care of high-risk members.

While Cigna began its first ACO in 2008, Anthem, which is almost three times its size in enrollment, did not operate ACOs until 2010. Among its contracting arrangements, Anthem has developed a combination ACO/HMO called Vivity, a joint venture with seven Southern California hospital systems. Vivity serves the state employee health program and other large employer groups. The combination is designed to compete against other integrated narrow-network plans in the same area, offering care through some of the biggest hospital names in the area, including Cedars-Sinai Health System and. UCLA Health. The initiative uses a common electronic medical record system, a shared care management system, and joint wellness resources.

The hybrid ACO/HMO promises cost savings of about 10 percent, and members in the plan are able to use the partner hospitals with no deductibles and a modest copay. Vivity’s provider partners and Anthem share the profits or losses. Anthem offers other ACO/HMO hybrids; depending on their success, an Anthem/Cigna merger opens up the possibility for many more narrow-network type arrangements.

Of course, the merger still has to pass muster with the Department of Justice and numerous state attorneys general, but assuming it is finalized, there are several ways the two insurers will create a stronger ACO strategy:

  • Provider practices: Anthem has said it would consider buying provider practices as a defensive move against provider market consolidation. Its merger with Cigna moves it closer to dozens of provider practices in CCCs that could be candidates for acquisition.
  • Risk-based contracting: Most of Anthem’s and Cigna’s contracts are shared savings and do not yet require providers to take on downside risk, but Anthem is further along, with 11 ACOs that operate under shared risk and savings, capitation or global payments. Cigna has just two. The goal of ACOs is for providers to have more skin in the game; Anthem could leverage its experience in risk-based contracting in the combined company.
  • Comparative data: All ACOs are using their data to determine what care management programs are working and where costs seem unnecessarily high. The combined Anthem-Cigna ACOs will provide a wealth of information for population health management.

For more on how all of the mergers underway are changing the MCO market, check out DRG’s executive briefings on the transformation of the healthcare value chain.

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