Detailing ACO Challenges with Risk, MACRA Implementation

June 06, 2016 - While accountable care organizations (ACOs) are popular and effective ways to implement value-based care, many ACOs are still facing significant challenges with managing risk and healthcare costs as the industry prepares for MACRA implementation.

The National Association of ACOs (NAACOS) has released a paper that identifies significant obstacles to improving ACOs, including overwhelming risk models, high investment costs, exclusion from MACRA’s advanced payment models, and the overlap of other CMS programs.

“ACOs are extremely concerned about the direction the CMS is going not only in the proposed MACRA rules but also with the conflicts created by its other value-based payment programs such as bundled payment,” explained Clif Gaus, President and CEO of NAACOS. “And when you add that to how much it costs to run an ACO, there's a significant number of ACOs ready to leave the [Medicare Shared Savings Program, MSSP] program.”

In the paper, the NAACOS has urged CMS to reevaluate the risk models for Medicare ACOs, include all ACOs in the Advanced Alternative Payment Models under MACRA, and resolve conflicts between CMS payment programs.

The NAACOS has called on CMS to restructure two-sided Medicare ACO risk models because they are “not viable for most ACOs and set the bar much too high in terms of financial risk.” This applies to Medicare Shared Savings Program (MSSP) Tracks 2 and 3 as well as the Pioneer ACO and the Next Generation ACO programs.

Under the two-sided risk model, ACOs are expected to repay some of the losses to Medicare if the organization exceeds its minimum loss rate. While the model allows for greater savings if ACOs are successful, many healthcare providers cannot handle the equivalent potential loss.

“Having to potentially pay millions of dollars to Medicare is simply not practical nor feasible for these organizations,” wrote Gaus and Allison Brennan, Vice President of Policy at NAACOS in the paper. “This type of risk often necessitates that ACOs have considerable financial backing, which is why, for the most part, these models have attracted ACOs with hospitals, health systems or outside investors.”

Some ACOs could be liable to repay all of their Medicare income, which could create substantial financial burdens on small and rural physicians.

While only 10 percent of ACOs participate in a downside risk program, this small population had to repay CMS $30,219,738 from 2012 to 2016. The average repaid losses paid on an annual basis was $2,902,411.

CMS may also want to evaluate the success of two-sided ACO risk models because participation rates are drastically lower than one-side models, noted the NAACOS.

One-sided risk models have grown 261 percent from 2012 to 2016, while two-sided risk models have only grown 62 percent.

Many ACOs are also not ready to manage the risks associated with a two-sided model. In a recent NAACOS survey, 43 percent of Medicare ACOs in the survey reported that they would not continue in the MSSP if CMS requires downside risk.

The paper also asked CMS to change ACO models to account for substantial investments that improve value-based care, including those associated with clinical and care management, health IT, population analytics, and reporting.

Currently, CMS does not include investments as part of financial risk nor does the agency credit ACOs, reported the NAACOS.

“The majority of ACOs are reluctant to participate in two-sided risk models largely due to the financial risk required and the considerable investments in their ACO,” explained Gaus and Brennan. “Because these investments do not guarantee shared savings, ACOs view them as risk inherent in MSSP participation. These investments include start-up and operating costs.”

On average, researchers found that ACOs invested approximately $1,622,032 to participate in the organization and improve care delivery models. While CMS argued that it would be difficult to calculate an average investment amount, NACCOS explained that $1.6 million could be the magic number for including annual operating costs into risk calculations.

Additionally, NAACOS has urged CMS to add all ACOs under the Advanced Alternative Payment Models, which would allow these organizations to benefit from increased incentives under MACRA.

“Not doing so significantly undermines the efforts of these ACOs, which have been at the forefront of committing to alternative payment models and improving beneficiary care and health outcomes through better care coordination and quality,” added Gaus and Brennan.

Many ACOs could also remove themselves from MSSP if their organization does not qualify to receive the five percent Advanced APM bonus. According to the survey, over half of the ACOs reported that they would leave the Medicare program without Advanced APM status.

CMS should also resolve conflicts between ACOs and other CMS initiatives, such as bundled payments, and prioritize models, like ACOs, that promote population health management, stated NAACOS.

When ACO patients are treated under a bundled payment scheme, ACOs lose the financial responsibility for that individual. The episode of care is set at the bundled payment program’s target price.

NAACOS proposed that CMS develop formal shared savings agreements with bundlers and incentivize the two programs to coordinate care.

Successful ACOs have the potential to save valuable healthcare dollars and promote value-based care, but the journey to success may be a rocky one. As NAACOS illustrated, smaller and rural ACOs may not be able to benefit from the network of care like larger healthcare systems have done, especially since CMS has not prioritized the needs of smaller ACOs.

Dig Deeper:

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