Downside Financial Risk Adoption Still Low Among ACOs, Study Finds

July 03, 2019 - The number of accountable care organizations (ACOs) increased roughly fivefold since 2012, but the number of contracts with downside financial risk has remained relatively static, according to a new study conducted by a team of researchers at Dartmouth's Geisel School of Medicine.

Published in the July issue of Health Affairs, the study showed that the proportion of ACOs assuming downside financial risk increased modestly from 28 percent in 2012 to 33 percent in 2018.

“Overall, the increasing number of ACO payment contracts per ACO suggest an increase in the breadth of value-based financial incentives,” Carrie Colla, PhD, an associate professor at The Dartmouth Institute for Health Policy and Clinical Practice and senior author on the study, stated in a press release. “However, there has been relative stagnation in the proportion of ACOs with deeper financial incentives--with only a third (in 2018) choosing contracts with downside risk.”

The findings from the Geisel study, as well as other recent announcements and analyses, show that ACOs are hesitant to adopt contracts with downside financial risk. Even Medicare has experienced difficulties moving ACOs in its flagship program to downside risk.

Eighty-two percent of ACOs participated in Track 1 - the program’s only non-risk based track - during the Medicare Shared Savings Program’s (MSSP) last performance period before transitioning to Pathways to Success, CMS reported.

READ MORE: How Downside Risk Will Impact Participation in Pathways to Success

Pathways to Success encourages greater and faster downside financial risk adoption. But a recent Health Affairs study conducted by researchers at the Duke-Margolis Center for Health Policy found that bearing downside risk was the top indicator that an MSSP ACO would exit the program.

“Understanding the potential importance of downside risk contracts in increasing the impact of the ACO model, the hesitancy of ACOs to adopt them, and the levers that could be used to strengthen both the breadth and the depth of incentives will be key to moving the ACO model forward,” Colla stated.

To uncover what separates ACOs with downside risk contracts and those without, Colla and her team analyzed ACO structure and contracts over from 2012 to 2018 using data from the National Survey of Accountable Care Organizations.

The researchers found that ACO leadership significantly differed between organizations bearing downside risk and organizations in upside-only contracts.

Specifically, ACOs with downside risk contracts were likely to be physician led (43 percent versus 57  percent) and more likely to be jointly run by a hospital and physicians, by just a hospital, or some other arrangement (i.e., coalitions and regional, county, or state organizations).

READ MORE: Understanding the Fundamentals of Accountable Care Organizations

Risk-bearing ACOs were also more likely than other ACOs to be physician-owned (30 percent versus 39 percent) by the end of the period. The organization were also more likely to be owned by other organizations, such as public ownership, non-profit ownership, or another privately-owned for-profit entity.

In terms of services and size, compared to other ACOs, risk-bearing organizations also had a greater chance of being an integrated delivery system, including a hospital, and having a higher number of hospitals, as well as directly provide or contract to deliver inpatient rehabilitation, routine specialty care, palliative or hospice care, home health or visiting nurse services, and skilled nursing facility care. The organizations were also more likely to have more participating physicians (mean of 1,210 physicians versus 441) and report that ACO contracts cover 50 to 100 percent of their primary care patients.

Researchers also found significant differences between risk-bearing ACOs and other ACOs in terms of contracts and prior value-based reimbursement experience.

ACOs with downside risk were less likely to have just a Medicare contract and were more likely to adopt contracts with Medicare, Medicaid, and private payers, compared to other ACOs, they reported. In addition, 81 percent of the risk-bearing ACOs had multiple contracts versus 55 percent of upside-only ACOs.

By 2018, ACOs with risk-based contracts also reported having a greater number of providers participating in other value-based reimbursement arrangements with some level of risk, including bundled payment models, Medicare Advantage, and capitated commercial plans.

READ MORE: For Ongoing ACO Shared Savings, Look Outside Inpatient, Primary Care

Researchers pointed out that Medicare has pushed for greater downside financial risk adoption through Pathways to Success and other risk-based ACO models, like the Next Generation model. The agency argues that risk-bearing ACOs generate greater savings compared to upside-only ACOs.

While recent research supports Medicare’s argument, the Geisel team warned administrators that cutting the amount of time ACOs have to transition to downside risk may result in decreased participation considering risk-bearing ACOs have distinctly different characteristics compared to other ACOs.

“[T]he assumption that inducing more ACOs to bear downside risk would result in increased savings should be questioned, based on what is known to date,” they wrote in the study. “While there may be value in decreasing the period of time during which ACOs have upside-only risk, there is also a need to balance participation and readiness to take on downside risk. Many of the ACOs without downside risk have a contract only with Medicare and are ‘dipping their toes’ in the ACO waters.”

Pathways to Success launched on July 1, 2019. However, CMS has not yet released participation information.