Value Based Payment

How Medicare ACOs May Respond to Spiking Risk

May 30, 2018 9:00 am

One ACO leader expects regulators to either move ACOs closer to MA plans in terms of structure or make it easier for patients to switch out of FFS Medicare in favor of MA coverage.

May 29—Accountable care organization (ACO) leaders are girding for changes to the Medicare ACO program that may require the vast majority in upside-only models to take on downside risk.

A growing number of former Medicare leaders and policy advisers have warned that the Centers for Medicare & Medicaid Services (CMS) may soon restrict or eliminate the option for ACOs to operate for up to six years without accepting downside risk. Upside-only Track 1 ACOs have slightly declined in recent years as a share of all Medicare ACOs but still constitute 82 percent.

A proposed rule with unknown ACO policy changes—it refers to “facilitating transition to performance-based risk”—is under review by the Office of Management and Budget, which is the last step before release to the public.

ACO advocates have warned that requiring Medicare ACOs to take on downside risk will cause many to leave the program. Specifically, 71 percent of ACO respondents in a recent survey said they are likely to exit if required to assume risk.

“If they are going to force us into taking downside risk, we will exit,” Tricia Nguyen, MD, chief medical officer for Inova, a Northern Virginia health system that operates a Track 1 ACO, said in an interview.

The challenges of downside risk include the lack of upfront payments in Medicare ACOs to cover the substantial costs of operating such models, Nguyen said. The average annual operating cost of a single ACO is almost $2 million, according to a 2016 survey of ACOs.

Another challenge is keeping assigned Medicare beneficiaries within the ACO’s provider network even though they are free to seek care from any provider.

“If I were to take risk, I would only take risk on [Medicare Advantage], where there is defined expectation between a physician and a member,” Nguyen said. “Whereas ACOs, in attribution [Medicare beneficiaries] can come and go.”

Nguyen noted that more than 30 percent of assigned beneficiaries each quarter “churn” out of her ACO network.

Possible Changes

Policy analysts have raised concerns that coming changes could include limiting upside-only ACOs to a single three-year period or barring hospital-led ACOs from taking upside-only risk. But CMS also could change the ACO program to cut regulatory risk and mirror the approach of Medicare Advantage (MA), said Farzad Mostashari, MD, CEO of Aledade and a former official at the U.S. Department of Health and Human Services.

He cited the opposition to moving to two-sided ACOs among physician practices with which he has spoken, even those that already accept fully capitated risk under MA.

They reject ACOs “because of the unpredictability of the benchmarks and how it is set up,” Mostashari said. “If we made risk-taking in the $400 billion Medicare fee-for-service side more like MA’s $200 billion [program], then that would massively open up the amount potential disruption.”

Improvements that could bolster ACOs, said Aric Sharp, vice president of accountable care for UnityPoint Health’s ACO, include better alignment of quality metrics and of risk coding between ACOs and MA plans.

“That would bring more clarity and focus to organizations as they both prepare to take risk and ultimately take risk—as well probably reduce some of the regulatory burden,” Sharp said.

ACO Risk vs. MA Risk

Risk-based ACOs such as the Next Generation ACO make financial sense in places like Texas, where post-acute care comprises a large share of total costs, Nguyen said. When she was president of the Population Health, Education & Innovation Center at Texas Health Resources, she obtained savings of 40 percent by curbing the health system’s overuse of long-term care hospitals and inpatient rehabilitation facilities. But even that approach is unlikely to sustain a Next Generation ACO—which Texas Health Resources launched in 2018—because eventually those savings will be exhausted, she said.

“I give them a three-year runway,” Nguyen said.

But others were more optimistic about risk-based ACOs.

Beth Honan, chief contracting officer for Atrius Health, said the organization’s Next Generation ACO has been successful and appears sustainable over the long run because “the opportunities are there” for ongoing savings. However, even successful risk-bearing ACOs are not always the preference of providers.

The MA “platform and product design, from a cost standpoint, is a much better option for patients [than the ACO] with what they are able to do—the supplemental benefits and the coordination of care,” Honan said in an interview.

Her organization originally launched a Pioneer ACO—an earlier version of a risk-based ACO—because many of its patients were in fee-for-service Medicare and outside the MA system. Once Pioneers were phased out, Honan’s organization transitioned to the Next Generation ACO program, where they are in their second year. In 2016, her organization’s ACO generated $6.8 million in shared savings—the fourth-highest of the Pioneer ACOs—but those savings were dwarfed by what they saved with their MA partner.    

“It’s not always easy to care for your patients when they are in ACOs,” Honan said in reference to restrictions such as barriers to using so-called hospital-at-home programs or telehealth. An example of a lost savings opportunities in the Atrius Health ACO program was the need to deny a surgeon’s recent request to perform a joint replacement procedure at an ambulatory surgery center instead of a hospital because the patient was covered by FFS Medicare, which would not pay for the lower-cost setting.

“You have the ability to do things with your MA partner, as opposed to the [Next Generation ACO],” Honan said, referring to the willingness of their MA plan partner to cover lower-cost sites of care.

Transition Option?

Sharp said there should be an easy way to migrate patients from Next Generation ACOs to MA. The ACO experience is teaching provider organizations how to identify and appropriately code risk, for example, which are needed skills for success in MA.

“And yet, they are still faced with those challenges of how to move patients into those models if they decide they could jump in and start a provider-sponsored plan like we have,” Sharp said. “Even a model like [a Next Generation ACO] that looks like MA is still far from it.”

Policymakers could choose either to continue to evolve Next Generation ACOs or Track 3 MSSP ACOs so that they mimic MA plans or to find vehicles to ease patients’ transitions from ACOs to MA plans, he said.

“It’s a challenge maybe we should explore,” Sharp said.

Honan said it is very difficult to get FFS Medicare patients to shift to MA plans, but Atrius Health has had success in getting pre-Medicare patients to opt for MA coverage when joining Medicare. The system uses “Medicare educators” to provide one-on-one counseling about MA options, and 70 percent of the patients they speak with choose their plan.

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


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