Value Based Payment

Next Gen ACO Savings Could Bolster Medicare ACO Changes

August 28, 2018 8:34 am

Industry observers think Medicare will lose ACO participants if it implements a proposed overhaul of the program but expect it to proceed anyway.

Aug. 27—The most advanced Medicare accountable care organizations (ACOs) saved $100 million in their first year, according to a new report. And such savings could bolster Medicare’s proposed transition to greater risk for other ACOs, some industry watchers said.

The 18 Next Generation ACOs that completed their first year—three dropped out—cut Medicare spending by 1.7 percent, or about $100 million, in 2016. That total was reduced by $37.97 million in shared savings payments, according to a fact sheet.

“The highlight here for providers is that the Next Gen program works,” said Douglas Ardoin Jr., MD, managing principal at Lumina Health Partners. “It actually does what Medicare was hoping it would do around the cost and quality of care—at least better utilization and lower cost without the suffering of quality.”

Source of Savings

Most of the spending decline was attributed reduced post-acute care spending, especially by skilled nursing facilities (SNFs), according to the independent evaluation by NORC at the University of Chicago.

Also cut in 2016 were the number of inpatient hospital days (9,566 fewer) and nonhospital evaluation and management (E&M) visits (85,619 fewer). There also was a nearly 12 percent increase, to 9,756, in the number of beneficiaries who received annual wellness visits.

Yulan Egan, practice manager for research at Advisory Board, said the results show a continuation of two trends that were first observed in the NGACO predecessor model, the Pioneer ACO: Providers that take downside risk tend to perform better than those in upside-only models, and savings tend to be concentrated among a relatively small number of organizations.

Four of the 18 Next Generation ACOs accounted for about 57 percent of the total estimated Medicare spending cuts. The nine remaining Pioneer ACOs in the last year of that program actually derived nearly twice as much shared savings—$68.7 million, according to a 2016 report by the Centers for Medicare & Medicaid Services (CMS).

The NORC authors noted that the NGACOs were continuing to develop their approaches to an evolving model in the program’s first year and may improve on their initial results. For instance, specific approaches allowed three NGACOs also to cut home health spending.

“Our findings suggest that there are multiple pathways across various care settings for ACOs to total lower Medicare spending,” the NORC authors wrote.

Future Implications

The findings will likely impact CMS’s proposed July 2019 rollout of a replacement for the Medicare Shared Savings Program (MSSP), called Pathways to Success, observers said. That proposal would require the 561 existing Medicare ACOs to switch into one of two tracks and take on downside risk within two years.

“The insight for the providers that have not been involved or have not been successful in the Track 1 [ACO, upside only] in that they are in trouble,” Ardoin said. “Because I don’t think Medicare is going to go backwards—especially when there is so much evidence of people in two-sided risk, like the Next Gen model, being successful.”

Egan believes “CMS clearly sees these results as reinforcing evidence for the need to accelerate the transition to downside risk.”

Despite resistance from the many provider organizations that want more time in upside-only models, “This gives policymakers more evidence to point to should they decide to finalize their proposals in the face of that pushback,” Egan said. 

But requiring ACOs to move to downside financial risk in 2019 would cause more than 70 percent of those that responded to a May 2018 poll to leave the program, according to the survey by the National Association of ACOs (NAACOS).

Daniel Marino, managing partner at Lumina Health Partners, expects upside-only ACOs that have not invested in the needed infrastructure or have not derived shared savings to leave the Medicare ACO program.

But ACO providers that drop out face likely impacts for their physicians, who in that scenario would have to work to meet complex quality-reporting requirements under the Medicare Access and CHIP Reauthorization Act of 2015, Ardoin warned.

“It’s not just as easy as saying, ‘We’ll just go back to regular Medicare patients and regular Medicare pay,’” Ardoin said.

John Hsu, MD, an associate professor in the Department of Medicine and the Department of Health Care Policy at Harvard Medical School, said requiring two-sided risk—while allowing one-sided risk only as a transient step—makes sense from incentive and payment design perspectives.

“The challenge for CMS is that there may be a limited number of provider organizations with the capabilities needed to accept two-sided risk contracts,” said Hsu, who has researched ACO results. “Forming this type of provider organization and developing these capabilities also will be a nontrivial effort for many physicians and smaller physician groups.”

One ACO proponent who asked not to be named said it was wrong to compare NGACOs with the much higher number of MSSP ACOs because many of the former had prior experience with taking on risk in the Medicare ACO program, unlike newer MSSP ACOs.

NAACOS’s reaction to the NGACO results was limited to calling for CMS to order the same type of independent analysis for MSSP ACOs.

Other Findings

Other key trends for NGACOs included the decision to take the lower-risk option—80 percent as opposed to 100 percent—and use of the fee-for-service (FFS) payment mechanism.

“ACO leaders reported choosing the more conservative risk-sharing option (rather than 100 percent risk) and payment arrangement, based on their previous experience with value-based purchasing and characterization of their organizational infrastructure as not yet adequate to support population-based payment,” the NORC authors reported.

Four of the 18 NGACOs selected a 15 percent cap on savings or risk, while 11 selected a 5 percent cap. Among the 15 NGACOs that responded, eight told the NORC authors that they passed financial risk along to at least one type of provider within the ACO: Six NGACOs passed financial risk to hospitals, six passed risk onto other participating providers, and two passed risk on to SNFs.

NGACOs typically employed staff to fill administrative, care management, and healthcare IT or data analytics roles. Additionally, almost half of directly employed care managers and administrative staff were hired specifically to support the NGACO model, according to the NORC report.

“You’ve got to build a team that really focuses on care management, case management, and disease management of these patients,” Ardoin said. “And that’s where the most successful organizations around the country have seen a return on investment.”

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


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