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Value-Based Care News

Large, Experienced ACOs Assume Downside Financial Risk Sooner

A new analysis shows size and experience are two indicators of an accountable care organization’s (ACO) transition into a downside financial risk track.

Accountable care organizations (ACOs) and downside financial risk

Source: Thinkstock

By Jacqueline LaPointe

- Larger, more experienced accountable care organizations (ACOs) are more likely to assume downside financial risk, according to a recent analysis by Leavitt Partners.

ACOs that took on downside financial risk after participating in an upside-only track, otherwise known as “track switchers,” also tended to be in high-population and metropolitan areas, the healthcare intelligence business found in its study of three Medicare ACO programs (Medicare Shared Savings Program, Pioneer, and Next Generation).

“The distinctions between track switchers and non-track switchers are particularly important in the current healthcare environment as the pressure to provide better quality care while cutting costs is mounting from federal, private, and consumer voices,” the authors of the report wrote. “Understanding the characteristics of ACOs that have already made the jump to more risk can provide valuable insights for policymakers and other ACOs.”

In determining the difference between track switchers and other ACOs, researchers found that only three ACO and contract metrics were statistically significant. Those metrics were time in Medicare ACO programs, number of covered lives, and total number of contracts.

Track switchers started participating in Medicare ACO programs significantly earlier than their non-switching peers. Approximately 84 percent of those assuming downside financial risk entered a Medicare ACO program in 2014 or earlier versus 62 percent of non-switchers.

In addition, track switchers had Medicare ACO patient populations that were nearly twice as large of those of non-switchers, and track switchers had more contracts with public and private payers compared to their non-switching peers.

Notably, ACOs assuming downside financial risk later in the Medicare ACO program were also half as likely to drop out, the analysis found.

Additionally, track switchers tended to save more compared to other ACOs. Despite having similar cost benchmarks than non-switchers, track switchers tended to have higher savings rates, gross savings per beneficiary, earned shared savings per beneficiary, and net savings to CMS per beneficiary.

However, quality performance was not different among the ACOs. Researchers found little correlation between quality scores and assuming downside financial risk.

Similarly, public health factors did not relate to track switching, researchers reported. While ACOs taking on downside financial risk were more likely to be in high-population and metropolitan areas, health behaviors and chronic conditions in track switching ACOs were not “consistently more favorable” compared to other ACOs.

The characteristics of track switchers indicates two barriers to downside financial risk adoption, researchers explained.

“There are at least two barriers that seem to prevent ACOs from assuming downside risk: smaller size, and less familiarity with risk,” the authors wrote. “Larger, more experienced ACOs are more likely to eventually assume higher levels of risk. These findings suggest that more focus should be placed on helping ACOs achieve scale and supporting small and/or rural ACOs.”

Helping small and rural ACOs may be the key to keeping organizations in Medicare programs.

Researchers pointed out that CMS wants to keep ACOs in their Medicare programs. But at the same time, the agency is pushing ACOs to take on downside financial risk.

CMS recently overhauled its largest Medicare ACO program, the Medicare Shared Savings Program (MSSP). The agency intends for the changes to encourage more organizations to transition to a downside risk track. The updated program known as “Pathways to Success” will shorten the amount of time ACOs have to assume downside risk.

But 460 out of 560 MSSP ACOs are still in the upside-only track and ACO leaders are not keen on assuming more financial risk. In fact, 36 percent of MSSP ACOs in a recent survey said they would likely quit the program rather than take on downside financial risk according to new program rules.

“Our analysis suggests that perhaps giving providers more opportunities to work together and achieve scale will help them to succeed and gain the ability to switch tracks,” Leavitt Partners suggested. “This kind of success, in turn, is associated with providers remaining in the program. Another option may be to provide more up-front investment to aid in the start-up of an ACO (as was done with the Advanced Payment Model), or to allow more time for smaller ACOs to develop, even if larger ones are pushed toward downside risk.”

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