How to Avoid an ACO Exodus — or Having No Takers in the First Place

Authors of an article in Health Affairs about a program for smaller and rural ACOs say their finding show those kinds of ACOs can generate major savings for Medicare, but apprehension about downside risk prompted an exodus from the program.

The question of whether ACOs should be forced to accept “downside risk” — in effect pay a penalty if they exceed certain spending benchmarks — has bedeviled CMS’ ACO programs and ACO programs in general. Seema Verma, the Trump administration’s CMS director, pushed for more downside risk, and the administration’s Pathway to Success program shortened the period during which ACOs in Medicare’s main ACOS could earn bonuses— “upside risk” — without also assuming the possibility of downside risk. Verma and others have argued that without downside risk, there isn’t enough of an incentive for ACOs to drive down spending while maintaining the quality of care=.

But researchers who report findings in this month’s issue of Health Affairs about a special program for smaller ACOs in rural areas argue that forcing downside risk after several years of participation is counterproductive, leading to the exit of ACOs and a missed chance for large savings for Medicare for the program.

The “insistence” on downside risk after three years “may have left money on the table,” wrote Matthew J. Trombley of Abt Associates and his colleagues. They suggest that their findings should prompt CMS officials to make changes to the upcoming Community Health Access and Rural (CHART) Model, which includes an ACO track that also targets providers and patients in rural areas.

The program that Trombley and his co-authors analyzed in Health Affairs was called the ACO Investment Model (AIM). To be eligible to participate, ACOs had to be relatively small (fewer than 10,000 beneficiaries) or comprise provides in rural areas. One of the main features of the program was that participating ACOs were eligible for upfront payments for investment related to being an ACOs, and they if didn’t earn enough in shared savings — the money available in upside risk arrangements if the ACO beats the financial benchmark — they didn’t have to pay the money back so long as they stayed in the program through the end of the initial, three-year contract period. The terms were attractive enough to lure 41 ACOs into participating. The contract period started in 2016.

The Health Affairs article builds on an evaluation of the AIM that the Trombley and Abt did for CMS. According to their calculations, AIM ACOs reduced Medicare expenditures in 2018 by $38.70 per beneficiary per month, a 4% reduction from the expected spending of $968.70 per beneficiary per month. Their calculations also show the savings for the three years totaled $526.4 million. When they factored in the shared savings payments and the upfront payments that were not recouped, the net savings came to $381.5 million. There might be some question about that figure because, as Trombley explains, it is seven times larger than the figure of $52.7 million in net savings that would come calculations based on CMS benchmarks.

Regardless of how the savings are calculated, the fact is that when the three-year contract period was over, two-thirds (27 of 41) of the ACOs left the program. The exodus was not one of ACOs that weren’t doing well. Trombley and his co-investigators didn’t find any difference in Medicare spending reductions between the ACOs that decided to stay in the program and those that left.

Why did they leave?

Trombley and his colleagues said that the evaluation they did for CMS found that the exiting AIM ACOs “commonly cited the prospect of downside risk. Revision of the financial benchmarks that determine shared savings (or losses) was another motivation because those benchmarks might have worked against the ACOs and their chances of shared savings.

Their research is methodologically complex and an alphabet soup of acronyms and initialisms, but Trombley and his colleagues said their findings identified a fundamental trade-off: It may be shortsighted of CMS to push for downside risk or a larger slice of sharing savings if the result is ACOs leaving program or declining to participate in the first place.

As currently designed, the CHART program is stricter when it comes to downside risk, according to the description by Trombley and his colleagues in Health Affairs. The participating ACOs must accept downside risk after three years or payback advance payments if they the program before its five-year contract period is over. The researchers also say that the CHART program may attract large ACOs that can take on riskand disadvantage smaller ones that can’t.

“Slower transitions to two-sided risk may encourage wider and more prolonged participation of rural providers in global payment models (such as ACOs) while increasing efficiency in care,” they write in their conclusion.