Using Alternative Payment Models to Address Health Care Disparities

In the U.S., a person’s health status is impacted by a variety of factors such as race/ethnicity, disability status, socioeconomic status, age, gender, sexual orientation, geography, and more. These differences in society are linked to inequalities in health status that are referred to as health care disparities.

The CDC defines health disparities as “preventable differences in the burden of disease, injury, violence, or opportunities to achieve optimal health that are experienced by socially disadvantaged populations.” Health care disparities are taxing on individuals, families, society, and the economy; they can shorten lives, decrease productivity, increase health care spending, and much more. A report, commissioned by the Joint Center for Political and Economic Studies, estimated that the direct and indirect costs of health inequities in the U.S. from 2003-2006 were approximately $1.24 trillion.

Often, health care disparities are reinforced by our payment system, which incentivizes providers to focus more on procedures and less on prevention. There is little financial reward in our health care system to address the underlying factors causing disparities. A study recently published in Health Affairs stated, “Our findings suggest a possible double jeopardy for minority patients: Long understood to be at risk of receiving less effective care, they also appear to be often at risk of receiving more ineffective care. Understanding racial and ethnic differences in the receipt of low-value care should inform policies aimed at addressing health care disparities, including the design of payer performance metrics.” Although there are many ways to address health care disparities, payment and delivery transformation is an imperative step to realigning incentives to promote health for everyone.

Accountable care organizations (ACOs) are one type of alternative payment models (APM) that can be utilized to decrease health care disparities. Ideally, ACOs can reduce disparities and help everyone receive necessary and effective care while reducing ineffective care through care coordination, implementation of evidence-based practices, and reduction of duplicate/fragmented care.

ACOs cover diverse communities and are responsible for the population’s health and health outcomes. ACOs and other APMs have the potential to create a culture where providers think about patients more holistically. Additionally, to improve the overall health and decrease the health care costs of their covered populations, ACOs can use data about patient demographics, socioeconomic status, and other factors to create targeted interventions. Betancourt et al. stated, “Progressive ACOs will create culturally competent interventions that address the social, environmental, and behavioral determinants of health—interventions that historically have not been fully embraced given a previous focus on revenue-generating procedures at the expense of a broader notion of public health.” ACO payment models move away from fee-for-service payments and incentivize controlling health care costs while improving quality for the entire covered population. By realigning incentives and focusing on the entire population, ACOs can partner with community organizations or launch their own initiatives to address the social determinants of health that lead to health care disparities.

Despite the potential impact ACOs could have on reducing health care disparities, racial/ethnic minority groups appear to be under-represented within ACOs. By analyzing Medicare beneficiary data by ethnicity and race, we found that although Black and Hispanic people make up 10.5 percent  and 8.4 percent of the Medicare population, respectively, they only account for 8.5 percent (Black) and 1.6 percent (Hispanic) of the MSSP ACO population. There is a statistically significant difference between the proportion of minority populations enrolled in Medicare and the proportion of minority populations enrolled in MSSP ACOs. Since Medicare ACO contracts only represent approximately 40 percent of the ACO contract market, further research will need to be completed to determine why fewer minorities are enrolled in ACOs, and if this is a general trend within commercial and Medicaid ACOs.

ACOs are not the only APM that can be used to address health disparities, and additional funding for decreasing health disparities through APMs has been increasing in recent years. Some examples of funding opportunities are included below:

  • In 2014, the Robert Wood Johnson Foundation launched “Finding Answers” to learn more about how payment reform can reduce health care disparities. Three projects in VirginiaNew York, and Oregon were selected to study payment reform and decreasing health care disparities.
  • In 2016, the CMS Innovation Center created the pilot project “Accountable Health Communities Model” to screen patients for unmet social needs that affect their health and to provide them with resources to meet those needs. This model hopes to decrease avoidable health care utilization, decrease the cost of health care, and improve the health care quality and the overall health of Medicaid and Medicare beneficiaries. Thirty-two organizations scattered throughout the U.S. were selected to participate in the Assistance and Alignment Tracks of the Accountable Health Communities model.

Leavitt Partners is dedicated to addressing the social determinants of health at both the national and local level through public-private partnerships, and to providing timely insights regarding the accountable care movement. The latest Leavitt Partners ACO tracking data and analysis can be found in the Health Affairs Blog “Growth Of ACOs And Alternative Payment Models In 2017” here.