From 3M Health Information Systems
Are ACOs ready to take on more risk?
Ready or not, Accountable Care Organizations (ACOs) will be expected to assume downside risk after two years according to a proposal announced by the Centers for Medicare and Medicaid (CMS) on August 9, 2018. This change would impact 460 ACOs in the Medicare Shared Savings Program (MSSP), or 82 percent of the 561 MSSP ACOs that currently have non-risk based agreements.
Not only will ACOs be forced to move to downside risk sooner, but the amount of savings that ACOs share during the 2-year upside risk period would decrease from 50 percent to 25 percent. CMS estimates that 107 of these ACOs with leave the program. However, the results of a April 2018 survey from the National Association of ACOs (NAACOS) suggest the numbers leaving could be much higher. Among 35 MSSP ACOs surveyed, 71 percent indicated that they would leave the program if forced to accept downside risk.
ACOs have been hesitant to move to downside risk for many reasons. Not only does downside risk mean that an ACO would have to share in potential losses, much of which they see as currently beyond their control, but a recent analysis by the Center for Healthcare Quality and Payment Reform (CHQPR) found that MSSP ACOs that take on downside risk generate smaller savings than their upside risk counterparts.
ACOs must make a significant upfront and ongoing financial investment, including care management, electronic health records, and reporting and tracking systems. Large health systems with existing infrastructure or those with access to capital are in a better position that smaller systems, providers in rural areas or safety net organizations, but maintaining an ACO is not cheap. A survey of 144 ACOs in 2016 by the NAACOS reported the average operating cost of an ACO was $1.6 million. Furthermore, the cost of operating an ACO is not factored into financial performance calculations.
Quality improvement gains have been easier to achieve than financial savings. A March 2018 report by Avalere Health estimates that the $1.7 billion that was projected as savings from 2013 to 2016 was actually a $384 million increase in federal spending over the same period. If the federal government is serious about moving providers to Advanced Alternative Payment Models (AAPMs) as a primary goal of the Medicare Access and CHIP Reauthorization Act (MACRA), then there seems to be no room for allowing ongoing upside-only arrangements.
There may be room for compromise. The goal should be a solution that lies somewhere between indefinite participation in upside-only arrangements and a hardline stance of forcing all ACOs into downside risk before they are ready. In the past 6 years, 10.5 million of the 38 million Medicare fee-for-service beneficiaries have become part of a shared savings ACO. A requirement to move to downside risk for all ACOs would certainly result in program departures, particularly among smaller ACOs, without any clear plan to bring them back.
Some have suggested that CMS consider a formal waiver process for ACOs that are showing meaningful progress in achieving savings and allow them to defer moving to a downside risk arrangement. This option would be available to those ACOs that can demonstrate progress in both quality and cost improvements. This acknowledges that established ACOs a more likely to generate savings than newer counterparts. It also creates a long-term vision for success rather than a uniform program that will push some ACOs out without a plan to eventually make them successful.
All ACOs are not alike. Policies that impose a uniform solution that favor large healthcare systems will encourage further consolidation and higher prices. A solution that supports physician practices and smaller hospitals will offer the best chance for a successful transition from a volume-based to value-based healthcare system.
Steve Delaronde is director of consulting for populations and payment solutions at 3M Health Information Systems.