It’s Been a Rough Four Years for ACOs

On January 14, 2021, the National Association of ACOs (accountable care organizations) announced the names of their 2021 board and committee members. It got us thinking about what has happened to ACOs under the former Trump administration and the move from fee-for-service to value payment models. We also wondered what ACOs will want from the Biden administration.

The Hot Potato Game

ACOs are groups of hospitals, physicians, and other providers who agree to coordinate care for patients and hopefully, avoid unnecessary utilization of services and medical errors. It shifts risk from payers to providers. Payers are willing to take on more risk in exchange for possible savings.

Think of it as a game of "hot potato" between actuaries of providers on one side and Medicare on the other.

Declining Participation

A week after announcing new leadership, the association published a press release referencing newly published data from the Centers for Medicare & Medicaid Services (CMS) that showed a drop in participation in the Medicare Shared Savings Program (MSSP) over the past year. The number of ACOs participating in the program this year shrank to 477, down from 561 in 2018. That was a record high, but participation then declined down to 518 in 2019 and 517 last year. ACOs in the voluntary program care for 10.7 million Medicare beneficiaries, more than one-in-six on Medicare and 30% not enrolled in Medicare Advantage.

The Biden administration inherits fewer ACOs than the Obama administration left at the start of 2017. The national association blames the Trump administration for the decline.

Rising Risk Equation

Specifically, said the association, the Trump administration’s “Pathways to Success” program pushed ACOs to take on financial risk faster than the original program. The administration argued that shared savings programs did not incentivize ACOs enough to move to value-based care.

In reality, “Pathways to Success” just accelerated the decline of ACOs.

Therefore, says the association, CMS should give providers more incentives to sign up, including fixing benchmarking and risk adjustment issues that affect the spending targets. The association also wants more time before ACOs have to take on financial risk and give more timely and complete data to participants.

In 2019 OTW reported that CMS was cutting the initial shared savings rate from 50% to 40% for one-sided ACO contracts. The agency said it planned to cut shared savings drastically, to 25%.

At the time, CMS Administrator Seema Verna said the cut in savings for benefits-only contracts was made “to strengthen the on-ramp to the program while rewarding ACOs that take on greater risk with higher shared savings rates."

Some caregiver organizations predicted a high dropout rate and a slow evaporation of Medicare savings with those cuts. The new rule was criticized by the American Hospital Association (AHA), the National Association of ACOs (NAACOS), the American Medical Association (AMA), the Medical Group Management Association, and Premier, Inc., of Charlotte, North Carolina.

“If they don’t go back to 50 percent, we will see a long-term significant shrinkage in the ACO movement and a significant emanation of accountable care,” warned ACO association President and CEO Clif Gaus.

The pandemic also hurt ACOs, as CMS decided last year to stop ACOs from entering shared savings programs in 2021.

“Desperate” Change Needed

Gaus said that the healthcare payment and delivery system "needs to desperately change, and ACOs offer the leading way to make that happen. A steady erosion of ACO participation damages our ability to get to where we need to be. Health Secretary Nominee Xavier Becerra and the incoming Biden administration need to re-examine the balance of incentives and risk to ensure ACO growth and continued savings to Medicare, which ACOs have a history of producing.”

ACO’s Wish List

On January 22, 2021, Allison Brennan, the association's top government affairs staffer told Healthcare Innovation that ACOs "need a clear indication from the incoming administration that we need to double down on value. [That] will help convince some providers who have been on the fence, to move forward into it. And we can make the program more attractive to entrants—for example, increasing the shared savings rates, which were slashed under the Trump administration; and allowing adequate time before providers had to assume risk. The shared savings rate went from 50 percent to 40 percent; and the time went from six years without risk to as little as two.”

Brennan added that another priority is to address the "confusion and complexity regarding the overlap of various payment models. That’s another important area we think the new administration should focus on, especially after we’ve had almost a decade of innovation in exploring various payment models."

In effect, ACOs are asking the Biden administration to change the risk equation in favor of providers and hope actuaries at Medicare end up holding the hot potato.