Integrated Delivery Networks & The Future Of Drug Development
By Sarah Wilson, Decision Resources Group
Integrated delivery networks (IDNs) have become more powerful in recent years, as consolidation within the healthcare industry has resulted in fewer, but more dominant regional players. These organizations are not just powerful in terms of market share, but also in the ever-growing space of value-based contracting and accountable care organizations (ACOs). IDNs were among the earliest adopters of Medicare ACO programs, which include the Pioneer ACO program and the Medicare Shared Savings Program (MSSP) ACOs. The Centers for Medicare and Medicaid Services (CMS) releases results specific to these programs on an annual basis, creating opportunities for new drug development.
Analysis of historical data indicates IDNs have been strong performers in some quality measures specific to therapeutic areas based on historical data, including chronic obstructive pulmonary disorder (COPD) and asthma. Other quality measures specific to therapeutic areas have proven to be a struggle for IDNs, as they adjust to being rewarded or penalized for value and performance. Three therapeutic areas in which IDNs have struggled compared to other ACO participants are vaccinations and preventive screenings, heart failure, and diabetes. For the most part, however, IDNs have performed middle-of-the-pack compared to participants of other MSSPs and Pioneer ACOs.
The Rise Of Integrated Delivery Networks
Before getting into the analysis of performance results, it is necessary to understand what IDNs are and why they are so important. Decision Resources Group (DRG) defines an IDN as an organized system of tightly aligned healthcare providers and facilities that delivers a full range of coordinated clinical services across inpatient and outpatient settings in a distinct geographic region. IDN characteristics can include shared clinical guidelines, a common technology platform, and the ability to jointly negotiate with payers on contracts that may involve financial risk for quality and patient outcomes. Simply put, IDNs are healthcare ecosystems unto themselves.
Some of the larger and more influential IDNs often have their own drug formularies or utilize the formulary established by their insurance subsidiary. IDNs, which can also include academic medical systems, may be more inclined to prescribe biologics and biosimilars, among other newly developed drugs. The IDN’s level of involvement in value-based and alternative payment models will also influence which drugs may appear on its own formulary or may be prescribed by influential providers within the organization. These formularies are often adopted for the purposes of ACOs.
IDNs And Their Participation In Accountable Care Organizations
The U.S. healthcare sector, including IDNs, continues to pursue value-based payment models (in particular ACOs) in an effort to improve patient experience, reduce costs, and improve outcomes — the “triple aim” of the Affordable Care Act. According to DRG analysis of ACOs, IDNs participate in more than 300 ACO contracts for Medicare, commercial insurance, Medicare Advantage, and Medicaid beneficiaries. Among influential IDNs identified by DRG, more than half participate in a Medicare ACO, with the majority participating in MSSP ACOs. IDNs were also the majority of participants of the now-concluded Pioneer ACO program. Many IDNs that participated in the Pioneer ACO program have transitioned from this program to the Next Generation ACO program, which can require participants to adopt a greater share in risk and savings. Participation in ACO contracts continues to rise among IDNs, as their size allows them to spread cost and risk across the organization. Furthermore, many IDNs have indicated their support of value-based care, making IDNs prime candidates for ACO contracting.
Medicare ACO Quality Measures
For each performance year, CMS requires ACO participants to report data for specific quality measures. CMS has grouped measures in the following quality domains: patient/caregiver experience, care coordination/patient safety, preventive health, and at-risk populations. A closer look at individual quality measures reveal that they can be grouped into common therapeutic areas. CMS has identified asthma and chronic obstructive pulmonary disorder (COPD), preventive screenings and vaccinations, diabetes, hypertension, heart disease, and heart failure as key therapeutic areas where ACO participants should focus on reducing cost of care and improving health outcomes.
A better understanding of the impact these performance measures can have on IDNs is of importance. Though details of commercial ACO contracts are often kept under wraps, payers and providers have indicated that the Medicare quality measures have been adapted for commercial and Medicare Advantage ACO contracts. The therapeutic areas targeted by CMS quality measures signal key areas where healthcare outcomes and costs can be improved. Thus, they are prime opportunities to develop drugs with better efficacy or that are easier to use.
IDN Performance In Medicare ACOs
Medicare ACOs began in January 2012 with the launch of the Pioneer ACOs, and then MSSP ACOs launched in July 2012. Performance results for Pioneer ACOs date back to the 2012 performance year, while the first year of MSSP results were released in 2013. CMS should soon release the 2016 financial and performance results for MSSP ACOs. The agency will also release the final year of ACO results for Pioneer ACOs, which dissolved at the end of 2016, and the first year results for Next Generation ACOs. Viewing ACO results from historical lenses can show how far IDNs have come in their ACO performance, as well as how far they have to go to perform well in other quality measures.
Analysis of IDN performance in CMS quality measures has shown success in specific therapeutic areas. Compared with other MSSP and Pioneer ACOs, IDN-led Medicare ACOs have begun performing better in the quality measure ambulatory sensitive conditions (ASC) admissions: chronic obstructive pulmonary disease (COPD) or asthma in older adults. The continued improvement in scores appears to indicate that IDNs are refining their treatment policies to better manage patient health. IDNs performed poorly in this measure in the initial performance years but have since improved.
There are common therapeutic areas that have proven difficult for IDNs to show success in quality measures. Vaccinations and preventive screenings is one therapeutic area that has proven particularly challenging for IDNs. While IDNs have shown some improvement over time, they have performed worse in these measures compared to other MSSP and Pioneer ACOs. Breast cancer screening, tobacco use: screening and cessation intervention, and colorectal cancer screening are three quality measures in which IDNs have struggled to perform well as participants of MSSP and Pioneer ACOs.
The change in quality measures CMS established for 2015 for diabetes may have impacted IDN performance results. Prior to 2015, some IDNs had shown improvement in previously established quality measures, plus the composite score, which aggregates an ACO’s performance in specific diabetes measures. However, CMS removed most of the measures save for the diabetes composite score and hemoglobin A1c poor control. CMS added an eye exam quality measure to the mix, which is a measure where many IDNs struggled to perform well. As such, the overall diabetes composite score dropped.
Historically, another therapeutic area in which IDNs have performed poorly has been heart failure. ACO participants are judged based on the use of beta-blocker therapy for left ventricular systolic dysfunction and unplanned admissions for heart failure patients. However, IDNs have shown signs of improvement in this quality measure based on the 2015 results, released in August 2016. Results for the quality measure all-cause unplanned admissions for patients with heart failure, which was new for 2015 performance year, are a mixed bag for IDNs. It will be important to continue tracking whether IDNs improve their performance surrounding heart failure based on 2016 results, as this could indicate IDNs have found treatments that work for both provider and patient.
IDNs, ACOs, And Future Drug Development
IDNs rise to prominence may be just beginning, and may be paving the way for creation of a new healthcare paradigm. As the health system and hospital sectors continue to consolidate, IDNs will become even more influential in the U.S. healthcare sector. Systems that are in the early stages of IDN formation will likely progress to more advanced stages through acquisitions of not only hospitals, but of ancillary facilities as well. An increase in clout and influence within a particular region will likely accompany an increase in the size of their organizations.
As such, IDNs will likely be the leaders in the change to accountable care and other innovative initiatives to improve healthcare value. Monitoring IDN performance in Medicare ACO quality measures could indicate areas of need, where new drug development could assist with improvement. Therapeutic areas targeted by quality measures for Medicare ACOs could also indicate areas of potential growth for drug development. Vaccinations and preventive screenings, diabetes, and heart failure are specific therapeutic areas where IDNs have struggled to show success in improving care. These three therapeutic areas provide specific opportunities for development of new drugs to assist IDNs in their drive to improve patient experience, improve health outcomes, and reduce cost of care.
Medicare ACOs are one important component of a broader strategy to move towards higher quality care. IDN participation is also on the rise among commercial and Medicaid ACOs. Understanding the therapeutic areas targeted by these programs and IDN performance within these areas can also be used to determine opportunities for future drug development. A key factor in many of these initiatives is prescription drug use, whether it be lowering costs or improving adherence. IDN development of their own drug formularies may favor generics and low-cost alternatives in an effort to meet prescription drug-specific goals. However, developing new drugs that have improved efficacy and are easier to use than traditional prescription drugs could be viewed positively by IDN key decision makers as methods to meet quality measures and attain a share in savings.
About The Author:
Sarah Wilson is a principal analyst of customer segment data at Decision Resources Group (DRG). In this role, she manages the Organized Customer Group Navigator data and supports DRG’s new IDN Analyzer module, which is part of Market Overview product suite. She tracks U.S. healthcare industry mergers and acquisitions, with a focus on health systems and hospitals. Wilson holds an MBA from Belmont University and a bachelor's degree in marketing and finance from the University of South Carolina.