ACOs are moving toward risk, but a broad shift might not occur for three more years, according to a new survey.

Oct. 10—Accountable care organizations (ACOs) are steadily taking on financial risk but remain unsure exactly how to manage costs, according to a recent survey.

Half of ACOs had at least one active contract that included downside risk—either shared savings/shared losses (38 percent) or capitation (12 percent)—according to a new survey of 240 such entities. That acceptance of risk appeared to be an improvement from last year, when the majority (61 percent) of all ACO contracts were shared savings or upside-only risk, according to a 2016 version of the survey by Leavitt Partners and the National Association of the ACOs (NAACOS).

“The trend to more risk is a reflection of some ACOs consistently performing well and being more secure with financial outcomes,” said Clif Gaus, CEO of NAACOS.

The move toward risk is in line with what officials at Premier, which advises hospitals on delivery improvements, is seeing in in the ACOs and other alternative payment models (APMs) with which they work. But they also noted results indicating some are more hesitant because they aren’t ready for risk.

“This is the challenge for providers as they determine the speed to assuming greater levels of risk,” said Brent Hardaway, vice president of population health management advisory services at Premier. “While it can lead to significant success when done right, increasingly taking on risk is extremely challenging for providers and requires very specific capabilities, as well as the alignment of strategies and incentives across the provider system.”

The survey, which included ACOs in Medicare, Medicaid, and the commercial sector, found that the level of risk in Medicare ACO contracts was the same as in commercial and Medicaid ACO contracts for more than half of ACOs (53 percent). However, 26 percent reported less risk in commercial and Medicaid ACOs, which suggested to the authors that commercial and Medicaid insurers are not pushing provider-born risk faster than is the Centers for Medicare & Medicaid Services (CMS).

“When programs are optional, and often subject to negotiation, risk levels may remain low,” the authors wrote.

The findings echoed anecdotal reports that commercial ACOs are consistently less risky than Medicare ACOs, Gaus said in emailed comments.

That risk could quickly grow since ACOs of all types either were considering participating or had “firm plans” to participate in at-risk arrangements, including 47 percent in shared savings/shared loss contracts and 38 percent in capitated agreements.

Taking on Risk

Physician-led ACOs were less likely to have a shared savings contract with downside risk than were hospital-led and integrated ACOs. That could change in the future since many physician-led ACOs indicated they are planning to adopt a two-sided shared savings contract.

Among all ACOs planning to participate in a risk-bearing arrangement, the average estimated time before entering into the arrangement was 10 months for shared savings/shared losses and 17 months for capitation.

However, only 17 percent of ACOs that do not currently share losses said it would be one year or less before they would be willing to do so, while 63 percent said two to three years and 16 percent said four to five years. Physician- and hospital-led ACOs both reported an average readiness time of at least three years.

Before providers can take on risk, they must have a successful APM already established so that the provider has experience and has implemented the foundational capabilities needed to assume accountability for a defined population, said Hardaway.

“Only then can they take on other capabilities, including ensuring they have an aligned compensation strategies, leadership and infrastructure; understand how to best optimize contracts with payers; establish a high-value care network; achieve clinical integration across providers and risk contracts; and have robust population health information management analytics,” Hardaway said.

Echoing earlier findings by CMS, the survey authors found that ACO respondents that had been in the Medicare Shared Savings Program (MSSP) longer were more likely to have an active shared savings/ shared loss contract and were more likely to be considering participation or planning to participate in a capitated contract. CMS requires ACOs to assume risk no later than the start of their third three-year agreement period. One-third of MSSP ACOs, or 114 ACOs, are in their final Track 1 (non-risk-bearing) agreement period, which ends in 2018.

Cost Control

The ability to reduce spending posed the greatest challenge, according to all types of ACOs, followed by participation in mandatory downside risk, payer collaboration/flexibility, government regulations, health IT requirements, and the ability to reach required quality benchmarks.

“While ACOs indicated that they are slowly but steadily preparing to adopt financial risk, they are still unsure exactly how to manage costs,” the survey authors wrote.

ACO approaches to controlling costs include strategies to manage the costs and clinical complications associated with medications. Two of the five most commonly implemented population health management activities identified by ACOs were focused on medication support and oversight.

A dominant tactic among ACOs in the effort to control costs is the use of care coordinators, to reduce readmissions and emergency department (ED) visits and to manage chronic conditions. Ninety-five percent of ACOs use such staff to educate and engage patients and providers. They perform a wide range of functions but increasingly serve as “connectors” who identify patients’ needs and ensure a “warm hand-off” to the appropriate resource within the ACO or in the community.

Efforts to reduce preventable readmissions and develop targeted chronic-disease management programs are often the first changes made by ACOs to care delivery.

The survey authors were pleasantly surprised that hospital-run ACOs were just as likely as physician-run ACOs—unlike in 2016—to prioritize readmission prevention initiatives.

Only one-third of ACOs have implemented a post-acute care integration strategy, although most respondents were moving toward that.

The authors concluded that ACOs need to move beyond the widely adopted cost-control approaches to reach their goals of improved savings and quality outcomes. More-aggressive care delivery changes, including integration of behavioral health and steps to optimize medication management, are needed.

“Policies and programs need to focus on facilitating the delivery transformation necessary to achieve the desired outcomes of payment reform,” the authors wrote.

Next Steps

The movement toward risk will take another leap as Medicare moves away from ACOs that do not include downside risk. Although 95 percent of MSSP ACOs have no downside risk, the new Medicare physician payment program that started this year requires ACOs to have downside risk if their participating physicians are to collect bonus payments for being part of an APM. A new ACO, called MSSP Track 1+, is expected to have broad appeal for providers that are leery of downside risk but want to qualify for the APM payment track.

Gaus said providers have approached the new ACO model cautiously because it shifts to a prospectively aligned population and uses different benchmarking rules, which may reset ACOs’ benchmarks and negate 50 percent of prior savings.

However, CMS has lightened the downside risk for Track 1+, and when that change is coupled with the potential 5 percent bonus for physicians in an APM, it will have a strong appeal for existing Track 1 ACOs to switch.

“We anticipate a large uptake in that model—75-100 ACOs—but are cautioning ACOs to understand the differences that prospective alignment brings to their financial model,” Gaus said.

And despite confusion and changes in some other parts of federal healthcare policy, Gaus said, “Every indication we have from the new administration and the Congress is ‘all-in’ support for the program and its potential to improve quality and lower cost trends.”

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Tuesday, October 10, 2017