News | Accountable Care Organizations

74 Medicare ACOs Depart: Analysts

News | Accountable Care Organizations

74 Medicare ACOs Depart: Analysts

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

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

Feb. 19—At 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 in the program in 2019, was 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.

Additionally, 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 2019 departures followed steady participation increases over the years in the Medicare Shared Savings Program (MSSP), including an 18 percent increase in ACOs from 2017 to the reach 561 in 2018, according to a fact sheet from the Centers for Medicare & Medicaid Services (CMS). CMS officials did not respond by the deadline for this article.

“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 changes would drive many providers from the program.

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. 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 a new round of five-year ACO agreements launch in July 2019. An executive at CMS previously said 90 percent of eligible ACOs had signed extensions. It was unclear why that statement sharply differed from the much larger share of departures found by Leavitt. CMS did not respond to a request for comment on the discrepancy.

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

Who’s Leaving?

Caravan Health, which helps providers build and operate ACOs, had more ACO clients added than departed during the “tumultuous” 2018-2019 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 did post on Twitter that 67 of the departing ACOs were participating in the MSSP in 2017. They also concluded that departing ACOs generally were smaller, had lower total savings, and had lower shared savings compared to the 370 ACOs from 2017 that remained in the program in 2019.

The departures of such smaller and financially struggling ACOs followed rule changes that specifically sought to encourage their participation, according to CMS officials.

The CMS December final rule revising 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.

Other 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 when the proposed rule estimated that although new ACOs would join, 109 ACOs would drop out in the coming years due to pushing 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 (HHS), said at a September 2018 meeting of the Physician-Focused Payment Model Technical Advisory Committee. “If this means somewhat fewer ACOs, that’s okay with us.”

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

About the Authors

Rich Daly
HFMA senior writer/editor


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