ACO Expansion: A Costly but Vital Sustainability Investment
By - The number of accountable care organizations (ACOs) is on the rise, albeit a tad slowly, confirms new research from Niyum Ghandi, Partner at Oliver Wyman.
There has been active ACO expansion activity with the healthcare indsutry. Ghandi’s findings specifically verify the establishment of an additional 159 ACOs, bringing the estimated total up to 585. This number is a 12 percent increase from the prior year, contradicting a vigorous withdrawal movement from the Medicare Pioneer ACO Program, says Ghandi. This updated number additionally refutes former disapproval with reimbursement policies established by the Centers for Medicaid & Medicare Services (CMS), according to Ghandi, whose analysis is based on an earlier announcement from the Department of Health and Human Services (HHS) regarding an initiative to advance approved Medicare ACO programs.
Can slow and steady win the healthcare race? A push for program reforms that allow top ACOs to invest in expanding is essential, albeit expensive, confirms Ghandi. The strongest ACOs are delivering care at 20 to 40 percent below the typical cost of care with high levels of quality and patient satisfaction. However, most ACOs fall somewhere below this standard, maintains Ghandi, confirming CMS’ rules impede healthcare organizations from being able to afford investing further in the earning of shared savings payments.
Most beneficiaries fall under a geographic ACO umbrella. Almost 70 percent of beneficiaries reside in localities served by ACOs, confirms Ghandi. Forty-four percent of beneficiaries reside in localities served by two or more. Such numbers echo previously reported expert testimony from RevCycleIntelligence.com that a decline in ACOs represents growth and stimulates a tangibly emerging trend of hospital systems actively sponsoring ACO development.
“ACOs have reached an important point in their evolution,” states Ghandi. “There are enough of them that they will be able to capture market share very quickly once they start demonstrating superior value.”
Flawed CMS payment initiatives promote quality care
Ghandi’s aforementioned findings indeed follow the CMS Innovation Center’s announcement earlier this year regarding a new payment initiative – the Next Generation ACO Model – focused on a unique accountable care opportunity designed to achieve the utmost quality care standards. This initiative, which called for three initial performance years and two optional one-year extensions, according to CMS, evolved via the Pioneer ACO Model and the Medicare Shared Savings Program (MSSP).
Although proposed changes to MSSP address some of the initiative’s primary criticisms, further actions are required to resolve posed challenges and needed corrections on behalf of CMS, Ghandi says in an earlier statement.
“MSSP is supposed to be a fairly accessible gateway to value-based care for provider organizations that participate in Medicare,” says Ghandi. “And we’ve heard consistent rumblings from provider organizations that would prefer to stay in ‘dabbling mode’ without downside risk, so this extension will help prevent flight of early-stage ACOs.”
What does this mean for the healthcare industry?
RevCycleIntelligence.com spoke with Ghandi to provide greater clarity and deeper insight regarding a comprehensive relevance of his findings about ACO expansion and the associated cost significance for the healthcare industry at large.
RevCycleIntelligence.com: You reported the number of ACOs rose by 16% but the number of patients only rose by 6 percent. What do such numbers imply?
Niyum Ghandi: As the number of ACOs continues to increase, we’re seeing more small organizations begin to enter the various programs. Some of the earlier entrants into the Pioneer ACO program and MSSP were very large – with a few having over 100,000 Medicare beneficiaries.
Of course, even in those early years, there were some smaller ACOs – as the minimum size for MSSP is 5,000 beneficiaries – but since most organizations with larger PCP bases entered in earlier years, those entering now are disproportionately smaller.
RevCycleIntelligence.com: Why are many ACOs failing to deliver care that is cost-effective while also maintaining high levels of patient satisfaction?
NG: I think it’s less about organizations failing to do this and more about them moving towards improved cost-effectiveness in a gradual manner. The average patient satisfaction scores and quality scores for the Medicare ACOs was generally high. The mean quality and patient satisfaction scores for Pioneer and MSSP ACOs went up in the first two years across most measures, and in total the ACOs are experiencing higher patient experience scores than Medicare FFS average. The cost-effectiveness is coming slower, as most ACOs have not made a meaningful impact on the total cost of care yet.
It’s also important to note that the Medicare programs reward improvement in cost-effectiveness, rather that overall performance. So when the results are shared that only a minority of ACOs are driving statistically significant reductions in total cost of care, that ignores the fact that some ACOs are already more cost-effective than Medicare FFS average.
Overall, however, the cost-effectiveness is coming more slowly because to get to very large impact (like we’ve seen some of the best ACOs and other risk-bearing providers achieve), it requires complete redesign of care, rather than just incremental changes.
We’re seeing more and more ACOs embrace this sort of clinical transformation to drive not 3-5% cost savings, but north of 10% cost savings, but that requires a full organizational and cultural commitment to transformation, along with corresponding investment both in terms of hard dollars and cultural disruption.
RevCycleIntelligence.com: What is the relationship between CMS proposed rulings and boosting ACOs?
NG: The newest program announced by CMS – the Next Generation ACO Model – is the first one that has a clearly articulated path to sustainability. After the initial three-year period, the benchmark shifts to a regional benchmark rather than a model in which an ACO needs to continuously beat its prior performance. So while improvement is still rewarded, the model eventually shifts to rewarding overall performance, much like Medicare Advantage does.
Additionally, there are a variety of other improvements that CMS has instituted in this new program and is likely to implement in the next round of MSSP as well.
RevCycleIntelligence.com: Where are ACOs headed next? What can the healthcare industry expect within the next year or so?
NG: I think in the next year or so we’ll begin to see more data and insight from those who have been most successful over the past few years. For example, one ACO that we’re aware of just finished their analysis of the first year of a number of new clinical models they deployed and the results are impressive. They were able to reduce total cost of care and avoidable utilization dramatically for several different high-risk populations through complete redesign of primary and specialty care.
As more successful organizations emerge and identify the keys to success within their models while refining and scaling their transformation, we’ll start to see those who have been slower to move or have been struggling learn from the successes of the leaders. The averages that we see are diluted and mask the fact that there are some truly impressive models out there. So our sense is that in the next year we’ll see more hard data and insight from the leaders, and then in the following year, hopefully the averages will start rising as well.
