Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Risk Management News

Are Accountable Care Organizations Worth Investment Risk?

By Jacqueline DiChiara

- Do Accountable Care Organizations (ACOs) have longevity in the healthcare industry or will they soon merely be gone with the wind?

Accountable care organization

As reported, the Centers for Medicare & Medicaid Services (CMS) said within its 2014 results on 353 ACOs – 333 Medicare Shared Savings Program ACOs and 20 ACOs in the Pioneer ACO Model – that ACOs are transforming the healthcare industry by helping deliver higher quality care to Medicare beneficiaries, improving care for the chronically ill, and promoting smarter healthcare spending. Despite CMS's perspective and findings, trepidation about whether or not ACOs are indeed financially advantageous loudly resonates within the healthcare industry.

As reported, the successful execution of ACOs is often too expensive to prove advantageous, with very few successful ACOs pulling through. Three-quarters of those spending substantial amounts of time, effort, and money into such alternative payment model ACO structures fail to profit financially. The most successful ACOs and risk-bearing healthcare providers see “really impressive” results via the redesign of primary and specialty care, including cost savings upwards of ten percent. As reported, Medicare Accountable Care Organizations reap over $400 million in savings.

The stakes of failure are high yet the financial rewards great. The questions remains: is it worth it to take an ACO chance? Paul Keckley, Managing Director of the Navigant Center for Healthcare Research and Policy Analysis, chatted with to offer insight into this question in connection with CMS’s ACO results. Where do ACOs stand in terms of their longevity and viability?

READ MORE: IRS: Commercial ACO Can’t Claim Charitable Tax Exemptions

Paul Keckley: Medicare has said ACO bundled payments and patients in medical homes are the platform of their future. When the biggest single payer in the US health system is saying 50 percent of what it pays out will be through these models over the next two years, I don't expect they're going to back away from that.

If so, they would have backed down after the first year when savings reports were pretty modest. And even after the second year, you would have thought maybe they'd step back and regroup. But instead they've modified the program and expanded on the first four models to allow some rural providers to participate in ACOs. This says CMS is committed to the ACO as a central feature of its payment model. Can you explain some of the greatest fiscal challenges that ACOs pose?

PK: It's hard to save money for Medicare in markets that were not wasteful to start with. They've got to figure that out because early results tend to be from organizations in markets where you had some wriggle room to achieve some savings. If you step back from an ACO, it's a little like a primary care gatekeeper, largely driven by how strong your primary care model is. From the past, we know that creates anxiety from specialists who begin to figure they're going to be capitated. 

Is the upside for participating in an ACO worth the investment? They used to say it would be less than $2 million to set up an ACO. They just said it's closer to $5 million – in some cases, $7 million if you've never been involved in risks.

READ MORE: CMS Proposes Changes to ACO Medicare Shared Savings Program Regarding earlier estimates, how are the much larger current estimates affecting the industry?

PK: It was a surprise to most people. Their platforms couldn't do what ACOs require. Most can turn the switch and be up and operating in less than a year. The professional services industry benefited from a lot of that expenditure. Every ACO I know has used outside actuaries, outside consultants and outside legal counsel.

They made a big deal about you couldn't comingle certain expenses and had to have an operating budget, a balance sheet, and an income statement. You couldn't subsidize this through the back door. What that did is it said, "We're going to make sure we're treating this like a standalone business." Most organizations that jumped into ACOs view this as part of their shared risk effort, not a standalone. 

It's part of migration from volume to value. They want to go directly to employers and plans with the ACO as a piece of that puzzle. But because it's a Medicare Program, in Section 3022, four pages literally describes the fact that you can't comingle expenses, you can't subsidize this thing, and it’s got to be standalone. That surprised people. Considering increasing Medicare health costs in terms of ACOs, what do you think is next for the greater healthcare industry?

READ MORE: Do Accountable Care Organizations Save Claims Reimbursement?

PK: Expansion of the bundled program. It's interesting that after they began the BPCI Program, the Bundled Payment Care Improvement Program, which is in the Affordable Care Act, they announced a latest addition, the oncology care model. This signals bundles are going to be the ying and ACO the yang. The ACO is the platform for getting primary care docs organized so they can manage population health. Bundled payments are a way to get the hospitals and the specialists in line on what they do and what it costs.

It was fascinating CMS not only added this fourth bundle, the OCM bundle, and then came back a month ago saying, "By the way, we're going to double down on these bundles so in 75 markets, we're going to require total joints be done in a bundled-payment program." That's the new CCJR, Coordinated Care Joint Replacement. CMS – rightly or wrongly – sent the signal, “ACOs are here to stay. Get your primary care folks organized. Bundled payments are the way to address unnecessary care and get inflated pricing out of the system." Are ACOs the most significant foundation in the transformation of healthcare?

PK: The only way to balance sick care and well care and reduce demand and utilization of the system is to have stronger, accessible, effective primary care. Every health system recognizes you can make it very comfortable for surgeons and specialists to practice in your hospital, but without primary care, you won’t have referrals to those specialists. ACOs were the mechanism CMS is using to strengthen primary care which along with telemedicine and the patient-centered medical home pushes more money toward primary care docs and probably a little less towards specialists. Are ACOs – the term first coined not long ago in 2006 – remaining true to their original intent?

PK: I’m amused at the shift in terminology. Section 3022 was the Medicare Shared Savings Program, which sounds innocent enough, like it would be intriguing. But it's interesting that within days, it was known as the Accountable Care Organizations. I ran the numbers when the proposed rule came out, sat down with Marilyn Tavenner [former CMS head] and Don Berwick [former CMS administrator] who were talking about it as Accountable Care Organizations, not Medicare Shared Savings Program.

The intent from day one was to use this as the launch of a different volume-to-value program. The first version had 65 different measures and a one and two-sided model. They knew they were going to have to trudge along and go ACO 1.0, 2.0, 3.0 and figure it out. Who would have thought 32 starting pioneers and you've got 19 left standing now? Do you think even more are going to fall away as time passes?

PK: The pioneers, yes. The ones left can mitigate their losses with other programs. All but one went into the other MSSP Program, the traditional program. They did not quit doing ACOs, they just said, "I don't want as much risk as you are expecting the pioneers to take." People are in it for the long haul. It’s part of our new vocabulary.

Continue to site...