Driven By Decline in Medicare Contracts, ACO Participation Dips

October 22, 2019 - The introduction of Pathways to Success may behind falling accountable care organization (ACO) participation numbers, according to researchers from Leavitt Partners and the Duke-Margolis Center for Health Policy at Duke University.

Using information pulled from Torch Insight, a healthcare database from Leavitt Partners Insight, the researchers reported in a new Health Affairs blogpost that there were 1,588 public and private ACO contracts covering nearly 44 million lives by the end of the third quarter of 2019. In comparison, there were 1,611 ACO contracts by that time the previous year.

The decline in number of ACO contracts is the first net decrease seen to-date, researchers emphasized.

The data showed that a decrease in the number of Medicare ACO contracts is to blame for the recent dip in ACO participation. The number of Medicare ACO contracts fell by eight percent during the period, and the decrease was concentrated among smaller ACOs.

“This could be partially explained by the Pathways to Success overhaul of the MSSP, which was finalized in December 2018 and requires providers to move more quickly toward downside risk models – something many providers are reluctant to do,” researchers wrote in the blogpost.

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

Pathways to Success requires new ACOs to assume downside financial risk within two to three years depending on the organization’s revenue. The timeline is truncated compared to the six years new ACOs had under original Medicare Shared Savings Program (MSSP) rules.

Industry stakeholders, including the National Association of ACOs (NAACOS), feared new rules under Pathways to Success, particularly new risk requirements, would dampen ACO participation since most ACOs are still in upside-only risk models and half of ACOs in a survey from earlier this year said they were considering exiting the MSSP because of Pathways to Success rules.

Their concerns may have been valid, according to new ACO participation data. Not only did researchers from the Health Affairs blogpost find a dip in Medicare ACO participation following the implementation of Pathways to Success, but analysts from CMS and NAACOS also recently reported a decrease in MSSP participation.

Participation particularly dipped for small ACOs, researchers from Leavitt Partners and the Duke-Margolis Center for Health Policy added.

“At the end of 2018, after the Pathways to Success rule was finalized, we observed low dropout rates for hospital-led ACOs and large ACOs, but relatively higher dropout rates for physician-led ACOs,” their blogpost stated. “This further supports our previous suspicion that large ACOs are remaining in the revised program, signaling their comfort with moving to downside risk, but that smaller ACOs may be struggling to survive under the new rules.”

READ MORE: Medicare Shared Savings Program ACOs Saved $739M in 2018

ACO participation may be falling, but researchers stressed that only a modest number of ACOs actually exited the MSSP and 41 ACOs actually joined the program in July 2019. Staggered participation timelines under the overhauled program may also be contributing to the recent decrease in ACO participation, they explained.

Overall, ACO participation growth is continuing, they emphasized.

The number of ACO contracts may be down slightly, but data from the third quarter of 2018 and the third quarter of 2019 showed that the number of lives covered by the contracts actually went up. Compared to the third quarter of 2018, almost three million more individuals were covered by an ACO towards the end of 2019.

That boost was primarily driven by an increase in commercial ACO contracts during the period, researchers added. While the number of Medicare ACO contracts dipped by 54 contracts by the third quarter of 2019, commercial contracts increased by 30 contracts.

Commercial contracts also made up over half (55 percent) of all ACO contracts by that time and the private ACOs covered 60 percent of ACO lives, the blogpost stated. This growth in commercial contracts is the highest first-quarter level, with 54 percent more commercial contracts than Medicare contracts, the blogpost stated.

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Researchers also reported growth in the number of ACOs taking on downside risk.

The proportion of ACOs assuming any downside financial risk generally increased across all ACO types and sizes. Although, a slightly higher percentage of physician-led ACOs took on downside risk toward the end of 2019 compared to hospital-led ACOs, the data showed. Nearly one-third of physician-led ACOs assumed some level of downside risk during the period versus 27 percent of hospital-led ACOs.

The difference was even greater among ACOs taking on significant downside risk that qualified them for Advanced Alternative Payment Model (APM) status under the Quality Payment Program, researchers added. Of the 146 MSSP contracts qualifying their participants for Advanced APM status as of July 1, 2019, 41 percent were physician-led ACO contracts and 53 percent were hospital-led or jointly-led ACO contracts.

“This is promising, as there have been concerns that physician groups would be reluctant to move toward downside risk due to smaller financial reserves,” the blogpost stated.

As evident from this blogpost, ACO participation growth is still up in the air as CMS rolls out Pathways to Success. However, participation in the alternative payment and care delivery model continues to evolve, with more ACOs taking on downside risk and physician-led ACOs catching up to their peers.