Medicaid ACO Growth Still Lags Behind Medicare, Commercial Payers

May 07, 2019 - Medicaid accountable care organizations (ACOs) have not grown as quickly as industry experts anticipated, according to a new report from Leavitt Partners.

ACOs with at least one Medicaid contract accounted for just eight percent of all ACOs by the end of 2018, the healthcare intelligence business found using ACO data from their Torch Insight database.

In other words, only 86 of the 1,013 ACOs operating at the end of the period were Medicaid ACOs. In comparison, 647 ACOs had at least one Medicare contract and 477 ACOs had at least one commercial contract.

“Since our examination of the rise and future of Medicaid ACOs in 2015, Medicaid ACOs have not significantly expanded across the country as we may have expected,” the authors write in the report. “While we have seen a small increase in states with Medicaid ACOs over the last several years, the number of Medicaid ACOs and Medicaid ACO-covered lives continues to lag behind Medicare and commercial ACOs.”

By the end of 2018, 13 states had implemented Medicaid ACO programs, the report shows. The number of states with a Medicaid ACO program is up from nine in 2016, representing a 40 percent increase during the two-year period.

READ MORE: Understanding the Fundamentals of Accountable Care Organizations

Despite the significant uptick in state programs, the number of Medicaid ACO contracts and covered lives continues to be low.

The report finds that most Medicaid ACOs (60 percent) only have one contract, which is through Medicaid. Only about 22 percent had at least two contracts.

Medicaid ACOs also covered approximately 3.7 million lives by the end of 2018, or five percent of the Medicaid population, the report shows. By comparison, Medicare ACOs covered over 11.2 million lives, or 29 percent of the Medicare population, by the same time.

Since the establishment of the Medicare Shared Savings Program (MSSP), which currently oversees 561 Medicare ACOs, Medicaid ACOs have not grown to the same extent as ACOs contracting with other payers, the report states.

However, Medicaid ACO contracts had the highest number of lives per contract. On average, a Medicaid ACO contract covered 43,500 lives, while individual Medicare ACO contracts covered an average of 17,500 lives and commercial ACO contract covered 24,300 lives on average.

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

The number of lives covered by an ACO contract is significant because ACOs need to reach a critical mass for care delivery change, the report explains.

The report also finds that Medicaid ACOs are more likely to also have both Medicare and commercial contracts. The majority of Medicaid ACOs only have Medicaid contracts but of the ACOs with at least two contracts, about 44 percent also have at least one Medicare contract and at least one commercial contract.

The number of contracts is important because the number indicates an ACO’s maturity, the report states.

“A high number of active contracts signals an ACO’s desire and readiness to assume responsibility for a patient population. If Medicaid ACOs with more than one contract across several payers commit more of their revenue through value-based contracts than through fee-for-service, it may be an indication that those ACOs are more committed to value and are making the meaningful care delivery changes that are required to successfully improve outcomes and lower costs,” the authors write.

The report shows that Medicaid ACOs are generally more mature than ACOs through Medicare or commercial payers. ACOs with Medicaid earned an average maturity score of 0.35 points, while Medicare ACOs saw an average maturity score below 0.25 points and commercial ACOs had an average of 0.30 points.

READ MORE: 5 Care Coordination Strategies for Medicare ACO Success

The maturity scores suggest that Medicaid ACOs are well on their way to making care delivery changes that will meaningfully impact quality and costs, the report states.

That may explain why state ACO models are achieving positive outcomes. For example, Colorado’s ACO programs had net savings of $77 million and the ACOS decreased the rates of emergency department visits, high-cost imaging services, and hospital readmissions, the report finds.

The ACO program in Minnesota also realized net savings. The program netted $213 million in four year and reduced hospital readmissions and emergency department visits by 14 and 7 percent, respectively.

“These results are promising and provide an indication of the potential cost savings and quality improvements that ACOs are intended to make,” the report states.

Positive financial and quality results in early Medicaid ACO programs should push more states to develop similar programs, the authors say.

“Policymakers and state officials can learn from the maturity and other characteristics of successful ACOs as they decide whether and how to implement or improve Medicaid ACO programs in their states,” they advise in the report.

States that already have moderate to high levels of Medicare and commercial ACO activity are especially well-suited for a Medicaid ACO program, they add.

“Such a state may be well positioned to launch a Medicaid ACO program, which would support providers in reaching a critical mass of ACO patients needed to create system-level change,” they write.