One ACO operator said some small and rural participants were scared out of the program by the requirement to take on downside financial risk.

Feb. 19—By the end of 2018, 74 of Medicare’s accountable care organizations (ACOs) departed the program, according to new analyses.

The departures of 13 percent of Medicare ACOs left 487 remaining in the program in 2019, as identified in an analysis of recently released Medicare data by David Muhlestein, PhD, chief research officer at Leavitt Partners, and echoed by ACO advocates. In comparison, a total of 59 MSSP ACOs dropped out of the program in 2016 and 2017, according to research.

“We have observed that the number of terminations occurring during performance year 2018 is slightly higher than what we have observed in prior years,” said an official at the Centers for Medicare & Medicaid Services (CMS). “However, we note that 90 percent of eligible ACOs elected the six-month extension from January 1, 2019 to June 30, 2019.”

That renewal rate appeared to differ sharply from another Leavitt finding that 26 percent of ACOs that reached the end of their three-year agreement opted to not renew their agreement at the end of 2018.

The CMS official, speaking on condition of anonymity, said the agency’s calculation of the number that extended their agreements for six months defined eligible ACOs as those that completed the 2018 performance year.

“It does not reflect ACOs that terminated earlier in the year and were not able to renew,” the official said.

The departures from the Medicare Shared Savings Program (MSSP) heading into 2019 followed steady participation increases over previous years, including an 18 percent increase from 2017 to 2018, when 561 ACOs participated, according to a fact sheet from CMS.

“It will be interesting to see how many new ACOs join in July and if it offsets the loss,” Muhlestein wrote in a tweet.

The departures followed an overhaul of the program in late 2018. Some ACO advocates warned that the changes would drive away many providers.

About 60 percent of ACO respondents in a 2018 survey by the National Association of ACOs (NAACOS) opposed the rule changes, and more than one-third (36 percent) said they would leave the MSSP if CMS finalized the proposed changes, as it did in December. The program was renamed Pathways to Success for 2019.

Under the overhaul rules, ACOs with three-year agreements ending in 2018 had the option to sign a six-month renewal until the start of a new round of five-year agreements in July 2019.

ACOs looking to launch or renew contracts for a July start had a Feb. 19 application deadline. ACOs that have opted to continue under existing contracts will not be affected.

Who’s Leaving?

Among clients of Caravan Health, which helps providers build and operate ACOs, its client ACOs declined from 38 smaller entities to 17 in larger ACOs in 2019 during the “tumultuous” 2018-19 transition, said Lynn Barr, CEO and founder of the company. The total number of Medicare beneficiaries in its client ACOs increased from about 400,000 in 2018 to almost 525,000 in 2019.

“As expected, some small and rural participants were scared out of the program by the requirements to take risk, but far more are sticking around to test the waters of the new Pathways to Success rules,” Barr said in a written statement. “We expect to see over 100,000 lives join our program in July and hope for a similar surge in January of next year.”

Although Leavitt officials did not respond to requests for more details on their analysis, they posted on Twitter that 67 of the departing ACOs were participating in the MSSP in 2017 (ACOs can leave at any time). They also concluded that departing ACOs generally were smaller, had lower total savings, and had lower shared savings compared with the 370 ACOs from 2017 that remained in the program in 2019.

The departures of some smaller and financially struggling ACOs followed rule changes that specifically sought to encourage their participation, as described by CMS officials.

The December final rule revising the MSSP created a differentiation between "low-revenue" and "high-revenue" ACOs and required high-revenue ACOs to take on more risk more quickly.

Although the revenue distinction was intended to favor physician-led ACOs, a NAACOS analysis of the CMS rules found almost 20 percent of physician-led ACOs would be considered high-revenue. Some federally qualified health centers and rural health clinics also would be categorized as high-revenue ACOs.

Several ACOs that appeared to have left the program, according to a comparison of 2018 and 2019 CMS data, did not respond to requests for comment.

Expected Losses

CMS appeared to concur that the changes would lead to the departures of some ACOs, noting in the proposed rule that although new ACOs would join, 109 were projected to drop out in the coming years due to changes that would require more ACOs to take on downside financial risk. In 2018—the last known accounting—82 percent of MSSP ACOs were in bonus-only tracks, in which they faced no potential financial losses.

“Without real accountability, we’re just offering bonuses on top of payments that may be too high already. That’s why we have now proposed to simplify the ACO system into two tracks, requiring them to take on risk sooner,” Alex Azar, secretary of the U.S. Department of Health and Human Services, said at a September 2018 meeting of the Physician-Focused Payment Model Technical Advisory Committee. “If this means somewhat fewer ACOs, that’s OK with us.”

However, responding to specific concerns that the changes could lead to significant ACO departures. CMS officials countered with the example of a high-revenue, hospital-led ACO that incurred shared losses—under two-sided risk—but continued in the MSSP.

“This suggests that even ACOs that have incurred shared losses still can provide a catalyst for making health systems and provider networks more efficient and effective,” CMS wrote in the rule.

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

Publication Date: Wednesday, February 20, 2019