Whither the ACO?

MHE Publication, MHE April 2021, Volume 31, Issue 4

The number of participants in the Medicare Shared Savings Program has tapered off, and the Direct Contracting Model may put accountable care organizations at a disadvantage. The National Association of ACOs wants the Biden CMS to make some changes.

Now that the Biden administration is putting a new team in charge of CMS, advocates for accountable care organizations (ACOs) are preparing to push for changes that they say will bolster CMS’ ACO programs and make risk sharing more palatable.

The National Association of ACOs (NAACOS) says that ACOs have worked as intended to slow the rate of spending growth for the Medicare program. In January, the group put out a statement saying that the new administration should increase what CMS pays hospitals, health systems and physician groups that participate in the Medicare Shared Savings Program (MSSP) and give them more time to take on downside risk. NAACOS noted that number of ACOs participating in MSSP, the largest CMS ACO program, has dropped from a high of 561 in 2018 to 477 this year. NAACOS says that MSSP deserves credit for being CMS’ largest, most successful value-based program. NAACO President and CEO Clif Gaus, Sc.D., says making the incentives to participate more attractive and the risks more manageable would lead more provider groups to participate. NAACOS has proposed that shared savings be split 50-50 between CMS and the ACOs instead of the current 60-40 ratio. The organization also wants an on-ramp of three years before shared savings starts. “Our healthcare payment and delivery system needs to desperately change, and ACOs offer the leading way to make that happen,” Gaus says. “A steady erosion of ACO participation damages our ability to get to where we need to be.”

Data that CMS released in September show that the MSSP ACOs had two years of record savings in 2019 and 2018. In 2019, Medicare spent $2.6 billion less than the CMS spending targets for ACOs. The net savings worked out to $1.2 billion after shared-saving payments — money ACOs receive if they spend less than financial benchmarks based on past spending — are factored. In 2018, MSSP ACOs spent $1.7 billion less collectively than CMS’ financial benchmarks. The net savings were
$740 million after accounting for shared-savings payments and collecting shared-loss payments.

Last June, CMS paused or adjusted many of its value-based programs because of the COVID-19 pandemic and the dramatic decline in the use of healthcare services not related to COVID-19. Among the most significant changes are those that affected Next Generation ACOs. The Next Generation ACO Model, which has 41 participants, gives ACOs a chance to take home higher levels of shared savings, but they are also on the hook for larger shared losses if their spending exceeds their financial benchmarks. ACOs that participate also get waivers from several CMS rules, such as the requirement that admission to a skilled nursing or rehabilitation facility be preceded by a three-day hospital stay. The Next Generation program was supposed to end last year, but the Trump administration CMS, citing the pandemic, granted it a one-year reprieve.

CMS was also gearing up to start the Direct Contracting Model at the beginning of this year but moved out the start to April 1 because of the pandemic. On March 5, the Biden administration said it would stick with that date. As designed during the Trump administration, any provider organization can apply to participate in the program. The model is designed to test two varieties of risk-sharing arrangements. The “professional” track of the program sets shared savings and losses at 50%; the participating provider organization would get half of the difference between a financial benchmark and actual spending if it came in under budget (the shared savings) but also risk paying half of the difference between the benchmark and the actual spend if it went over budget (shared losses). The other “global” track is the full-risk option, meaning providers would get 100% of the savings or pay 100% of the losses.

Have ACOs been aced out?

In a letter to CMS in December, Gaus said that his organization had hoped the direct-contracting initiative would cater to existing ACOs willing to take on more risk. Instead, in Gaus’ view, CMS has provided incentives for health plans to participate in the program and put existing ACOs at a disadvantage. As designed, the direct-contracting program could cut into the current enrollment in ACOs by allowing new direct-contracting entities to take away members (under Medicare’s patient attribution rules) from ACOs, which, Gaus wrote, have served the Medicare program well for the past decade and have reduced the cost of care.

“These ACOs embraced the transition to value early on and worked with CMS to grow and refine the models so they would be successful long term,” Gaus added. “These providers were on the forefront of the value transition and took great risk to blaze a trail for other providers to follow. Many did so without financial backing and by investing their own resources with uncertainty about a return on their investment. Their commitment to clinical transformation and value-based care has advanced the entire healthcare industry, and they should be rewarded, not penalized, for these efforts.”

America’s Physician Groups (APG) also is aware of these concerns, but APG President and CEO Don Crane, J.D., says his group remains confident about the future for both the Next Generation ACO and direct contracting. His organization, which represents 345 physician groups in 44 states, has long supported CMS’ efforts to promote value-based payment models that use risk sharing, he says.

APG wants CMS to cast a wide net. “We want CMS to move forward with the Direct Contracting Model and with the risk-sharing arrangements in Next Gen ACOs,” he says. “We’re interested in all of the models, frankly. That’s why we say to Medicare, ‘Let’s go forward with these models.’”

Under professional-risk arrangements, a physician assumes the financial risk for the care and services delivered to patients, Crane explains. That’s a lower level of risk than global risk, in which a physician or physician group is responsible for the cost and quality of all the care a patient receives from the health system, whether that care is delivered in a hospital or from a specialist physician.

“What distinguishes APG and its members is that we’re all generally committed to the movement toward value-based care and more specifically to risk-based contracting,” Crane says. “We view capitation as being the ultimate destination for payment. Capitation used to be a dirty word but no longer.”

Joseph Burns is an independent journalist in Brewster, Massachusetts, who covers healthcare.