ACOs Can Be Stepping Stone to Greater Risk and Reward




With much of the post-election coverage focused on the Republicans’ campaign promise to repeal the Affordable Care Act (ACA), or Obamacare, many questions have been raised about the future of Accountable Care Organizations (ACOs) and other value-based care initiatives under Republican control. While it is almost certain that parts of the ACA may be altered, many experts agree that the complete repeal and replace of the ACA would be very difficult and ill-advised, especially as it relates to value-based care and ACOs.

The more recent passage of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)1 seems to support the position that we are not likely going to see any vast deconstruction of current value-based care initiatives. MACRA was signed into law on April 16, 2015, and was a bipartisan legislation that passed with an overwhelming majority in both houses of Congress. Among other things, MACRA reinforces and/or implements many of the value-based programs championed in the ACA, including provisions relevant to the operations of ACOs. For example, MACRA creates a Merit-Based Incentive Payment System (MIPS) that ties Medicare reimbursements to quality and value, changing the way Medicare rewards clinicians. Thus, even if we see a formidable challenge to some of the ACA’s key provisions, the use and growth of ACOs and other value-based initiatives are not likely to fall victim to such challenges.

In fact, according to the Centers for Medicare & Medicaid Services (CMS)2, there will be an influx of an additional 99 new Medicare Shared Savings Program (MSSP) ACOs in 2017. And of the announced 2017 MSSP ACOs, 42 will participate in to the more downside MSSP risk models (Tracks 2 and 3). There are also the Next Generation ACOs, whose numbers have increased from 18 to 45 in 2017, and whose cohort mostly comprises former MSSP or Pioneer ACOs.

These newly announced ACOs represent a 14 percent increase in overall CMS ACO program participation from 2016, similar to the year-over-year trend CMS has seen in its ACO programs since 2014. Even more telling is the decided shift toward more downside risk ACO programs and the proliferation of other CMS value-based care initiatives such as bundled payments and comprehensive end-stage renal disease (ESRD), Comprehensive Primary Care Plus (CPC+) and the Oncology Care Model.

What’s All the Noise About?


With this growth and expansion, you would think early ACO adopters have had stellar financial results, convincing more and more organizations to enter the program to seek similar financial gains. But a deeper look shows that results have been mixed. The Pioneer ACO program has declined from 32 initial ACOs to nine. And while the MSSP program has continued to increase in participants, less than a third have achieved shared savings payouts in each of the past three years.3 Even the Next Generation ACO program — whose structure was intended to make significant improvements on issues providers raised with the Pioneer and MSSP programs — had 15 percent attrition in its first year, dropping from 21 to 18 ACOs.4

So why are ACOs and other value-based programs increasing in popularity? The reasons are ultimately as varied and individualized as each organization. While opinions differ on strategy and implementation, it’s safe to say the vast majority of the provider community is on board with the focus on quality these programs encourage and drive. Others, motivated by altruistic and/or entrepreneurial goals, realize that current trends in our healthcare system are unsustainable and are willing to embrace different business models that reward keeping patients healthy versus paying for volume of procedures and visits.

Ultimately, all providers are now either informed of or are beginning to realize the clear agenda CMS has laid out via MACRA. Of the two prospective MACRA tracks, CMS appears to be showing its preferred path by providing guaranteed reimbursement increases to those physicians who enter more downside risk payment arrangements, or Advanced Alternative Payment Models (APMs). While the program’s transition will still allow high-quality providers to earn incentives via the Merit-based Incentive Payment System (MIPS), this will be a very competitive arena as providers will be scored and ranked in comparison to other providers going forward. Think of it as the difference between taking a class where everyone can get an A versus a class where grades are awarded on a bell-curve.

Good News Ahead


Since the vast majority of current CMS ACOs are in the MSSP, let’s focus on the MSSP for a moment. While financial results have been mixed for MSSP ACOs, there are two very encouraging results thus far that should continue to promote ACO formation and/or affiliation.

The first is that quality scores are way up. The average quality score for MSSP ACOs increased from approximately 83 percent in 2014 to over 91 percent in 2015 (the first performance year from 2012/2013 was simply pay for reporting.5 This represents a 10-percent increase year-over-year for the MSSP. Some would argue that this is a result of providers learning the system, but most agree that the level of transparency, focus and clear objectives has resulted in overall quality improvements for participating ACOs.

Equally as promising: The results show the more tenured organizations in the MSSP have a higher shared savings success rate than those in their first or second year. These results suggest that the experience gained in the MSSP allows organizations to implement, test and refine population-based health initiatives in a mitigated sand-box environment — and that over time, organizations continue to improve in these efforts and achieve better results. With this message in mind, organizations can truly look at these initiatives as investments that will yield success over time versus strictly on a year-to-year basis.

What’s Next?


All providers must decide the best path forward for their particular market environments. Even the vast majority of CMS ACOs are currently in MSSP Track 1, which leaves their respective physicians competing in MIPS. How these ACOs have performed — and how long they have participated — should provide insight into logical next steps.

For instance, ACOs that have achieved shared savings in the MSSP, especially over multiple years, are likely contemplating how to best capitalize on their success going forward. These ACOs have proven that they can effectively manage a population from both a quality and financial perspective, and are now leaving money on the table for their member physicians because of lost savings opportunity (i.e., shared savings only netting 50 percent of financial incentive) and non-participation in an Advanced APM. Many of these organizations are now exploring converting all or part of their current MSSP agreements to a more downside risk arrangement, like MSSP Tracks 2 & 3 or Next Generation ACO. CMS has also announced that additional models will qualify as Advanced APMs in 2018, and these successful ACOs may consider waiting another year to join one of the developing models.6

Depending on their respective markets, these organizations are also likely already in, or currently exploring, more downside risk arrangements with Medicare Advantage and/or managed Medicaid payers as potential avenues to expand on their success. These populations are seeing significant growth, with Medicare Advantage membership representing well over 50 percent of Medicare-eligible members in many urban markets and Medicaid expansion greatly increasing Medicaid enrollment in many states.7

Also, over and above CMS’ ACO programs, these lines of business generally offer more captive populations for population health management, which should make a successful ACO’s population-health approaches even more effective. Finally, these arrangements lend themselves more toward prospective downside arrangements like percent of premium and medical-loss ratio (MLR), or capitation, which allows for ease of cash-flow concerns inherent in retrospective downside models.

CMS ACOs that have not achieved shared savings or are new to the CMS programs still have plenty of time to improve performance. As stated earlier, results from the MSSP program suggest that performance and success rates improve over time. So if your organization has not been successful in achieving shared savings, perhaps the best course of action is to stay in Track 1, continue to refine and improve your organization’s population health management approach, and mature your enterprise risk capabilities. But this also means your organization should put considerable effort into what it will take to compete in MIPS.

If your ACO did not achieve savings in MSSP Track 1, that doesn’t mean your organization can’t manage population health and/or risk. There are multiple examples of CMS ACOs that were effectively managing their patient population before entering the CMS ACO program, which unfortunately set a low historical medical cost benchmark that these ACOs would always struggle to beat. In other words, lack of success in CMS ACO programs should not forestall you from exploring other downside risk models like Medicare Advantage and managed Medicaid. Even successful CMS ACOs have faced challenges that may unfairly impact your organization’s ability to achieve shared savings.The ones I’ve heard most often referenced include:

  • Lack of insight and influence over medical cost benchmark setting (as noted)
  • Confusion and disagreement around member attribution methodologies
  • Inflexibility and lack of ability to negotiate program provisions and framework
  • Diminishing returns inherent in ACO models because of benchmark recalibration (i.e., ultimately competing against yourself versus other healthcare providers)
Exploring more downside risk agreements with Medicare Advantage, managed Medicaid, and even commercial payers allows for the ability to negotiate benchmarks — either retro or prospective models — to have clearly defined patient populations and to negotiate dozens of other provisions that could further increase your chances of success. These arrangements may also aid your organization in the years ahead to maintain Advanced APM status if your all-payer mix of contracts has a sufficient mix of non-CMS programs based downside risk agreements.

As non-CMS payers adopt CMS’ preference for downside risk, look for these types of arrangements to become increasingly the norm. Regardless of an organization’s MSSP or other CMS ACO program success, those provider organizations that can quickly mobilize lessons learned from these programs stand to gain significant financial and competitive advantages by being early movers in these additional lines of business.

Read additional Insights in this downside risk series: Downside Risk: The Endgame for ACOs; Negotiating Downside Risk with Your Payers.
References
1 U.S. Congress. H.R.2 – Medicare Access and CHIP Reauthorization Act of 2015. April 2015.
2 Centers for Medicare & Medicaid Services. New Participants Join Several CMS Alternative Payment Models. January 2017.
3, 5 National Association of ACOs. A Look at MSSP ACO Performance Years 1-3. September 2016.
4 Modern Healthcare. Three ACOs bail on Medicare’s Next Generation program. July 2016.
6 Centers for Medicare & Medicaid Services. CMS announces additional opportunities for clinicians to join innovative care approaches under the Quality Payment Program. October 2016.
7 Kaiser Family Foundation. Medicare Advantage 2016 Spotlight: Enrollment Market Update. May 2016.

Conifer Health offers a comprehensive portfolio of solutions to help clients make informed decisions that reduce cost and deliver quality outcomes as healthcare organizations, employers and unions adapt to new realities in the fee-for-value era.