Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Value-Based Care News

Why Did Experienced Accountable Care Organizations Fail?

Accountable care organizations represent a learning experience of sorts for the healthcare industry. When savings are generated but not returned, a variety of factors come into play.

By Jacqueline DiChiara

- The Medicare Pioneer Accountable Care Organization (ACO) has proven it is able to manage larger performance-based financial risk levels. But some Pioneer ACOs dropped out when quality benchmarks were too hard to reach.

Pioneer Accountable care organization Next Generation ACO chatted with Johnathan Niloff, MD, McKesson’s Chief Medical Officer, about the past, present, and future of ACOs.

“The Pioneer Program was sort of a big experiment in value-based or risk-based contracting. CMS and CMMI view this program as a success because of its effectiveness in improving quality metrics and in reducing total cost of care," Niloff begins.

After a number of the initial participants in the Pioneer Program left the program or suffered losses, confusion across the industry ensued, he says.

All the organizations participating in the Pioneer Program have experience in managing risk, he explains. But many still performed poorly due to benchmark methodology or CMS’s shared savings methodology.

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“This was a learning experience for everyone. A number of the parameters of the original Pioneer Program did not create the optimal environment for an organization to be able to manage an at-risk population from a perspective of coordination of care across the continuum.”

According to an independent evaluation report from the Department of Health and Human Services (HHS), Medicare beneficiaries in Pioneer ACOs reported better quality care and communication levels, received fewer tests and procedures, utilized fewer hospital services, and had more provider follow-up visits following hospital discharge.

In 2012, Pioneer ACOs generated nearly $280 million in Medicare savings, reported HHS. In 2013, this number reached $104 million.

Pioneers that left were not looking to abandon risk

Some Pioneers fell away in time. Last September, 6 of 19 Pioneer ACOs received no shared savings payment. Three Pioneer ACOs – Beacon Health, Dartmouth-Hitchcock ACO, and Heritage California ACO – owed millions of dollars in losses.

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“There are some unusual features of the Pioneer ACO model, which are built into the way that performance is measured,” said Emily Brower, Atrius Health’s Vice President of Population Health, to

“The Medicare fee schedule differs based on your geographical region. The difference between the prices in that region and the national average can help or hurt an ACO regardless of how it’s changing care. That does lead to some disappointing results for some participants.”

“An organization that's very risk-averse might choose a higher threshold because that will protect them on the downside, and so they could generate savings but not return those savings to the ACO.”

Almost all of the Pioneer ACOs that left the program either went into the Medicare Shared Savings Program or signed up for the Next Generation ACO program, the successor of the Pioneer Program, Niloff explains. But their reasons for doing so, he says, were merely about the need for more suitable benchmarks.

“It wasn't that they abandoned risk. They were just looking for programs that had more favorable parameters that would allow them to be successful.”

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“If you look at the Shared Savings Program and the data CMS announced for 2016, there were a large number of original participants that came to the end of their first three-year term and had to re-sign up. A large proportion of those, despite not having earned shared savings, still renewed their arrangements.”

Only 3 ACOs accepted downside risk in the previous Shared Savings Program, states Niloff. But this time around, 16 ACOs signed up for the Medicare Shared Savings Program’s Track 3 – nonetheless tied to significant downside risk. The Next Generation ACO Program includes much higher risk sharing, Niloff asserts.

“Twenty-one ACOs signed up to participate in that program, which exceeded CMS's goals and actually is more than they anticipated enrolling in that program in the first two program years, nevermind the first program year.”

“Much of that is attributable to the fact that the Next Generation Program facilitates ACOs to really manage a net-risk population between prospective attribution so they actually know who their risk members are.”

The bar may have been set too high

Niloff says establishing a reasonable benchmark methodology, the ability to have a narrow network, and the provision of incentives for patients to keep care within a network all foster net-risk program success.

Organizations operating within a fee-for-service realm are still making the transition to a world focused on total cost of care, he says. They are struggling to manage conflicting incentives. Investment and mitigation strategies, he adds, can help make a smooth transition possible.

“The organization needs to come to terms with internal conflicts and unify around a strategy to move forward and successfully transition. They have to align their objectives and incentives among all their constituents.”

“The challenge is at the beginning, you don't have a significant proportion of your patients in risk arrangements. Or those in risk arrangements may not have enough risk associated with them.”

Once an organization executes successful alignment measures, additional programs need to be put in place, Niloff explains. Greater focus on four areas is needed: quality metrics, coordinated care, high-cost patients, and analytics, he adds.

“You need a good quality program, specifically to manage your quality metrics and close your gaps in care. Virtually all of the value-based programs have a component of achieving quality metrics as a part of them."

“A number of them include achieving certain quality metrics. Managing quality and the appropriate systems and programs in place to meet your quality metrics are always a high priority.”

“You need really good programs around managing and coordinating care across the continuum. You have to implement a true coordinated care model that centers around a primary care medical home model as one of the organizing components of that cross-continuum coordination-of-care model.”

“You need a methodology to identify high-risk patients and then a care management program to manage the care of those high-risk patients. It's a well-known phenomenon that a small proportion of patients always account for a disproportionate share of costs, so one can get a lot of return from focusing on those high-cost patients.”

“You need analytics to understand the key drivers of your total cost of care and to be able to manage those drivers. It’s important to have good capabilities around understanding practice pattern variation and programs in place to manage the behavior change for those physicians who are significant outliers with respect to either the quality or cost of care.”

Consider a two-dimensional revenue cycle

Niloff says organizations must consider a dual revenue cycle approach to be successful. The understanding of revenue and operation needs to change contextually in an ACO-based world, he adds.

“In a value-based or ACO world, what historically a CFO might have thought of as a revenue center becomes a cost center in a total-cost-of-care model.”

Niloff anticipates several challenges with revenue cycle systems going forward, such as how to account for capitated payments or bundled payments or determining how shares are allocated to various parties, including physicians and skilled nursing facilities.

“There are a lot of complexity and different dollar flows that come into play for which there aren't necessarily good systems established neither for the auditing or accounting of them nor the distributing of them.”

As the healthcare industry shifts into the realm of alternative payment models, ACOs remain a focal point.

“The MACRA law that repealed the sustainable growth rate and the MIPS Program in 2018 are major drivers in moving providers into alternative payment models, specifically into different types of ACO or risk-based arrangements.”


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