Oct 19 2018 | Thought Leadership | By

Trying to Accelerate the Move to Value? The Limitations of Medicare ACOs.

Trying to Accelerate the Move to Value? The Limitations of Medicare ACOs

Ben Kline, Vice President Strategic Partnerships

This three-part blog series covers why Medicare accountable care organization (ACO) participants need to formulate a long-term Medicare Advantage strategy. In the first post, we covered the proposed “Pathways to Success” program from CMS. In this second post, we review the limitations of the current ACO program.

As the Centers for Medicare and Medicaid (CMS) continues its push toward value, more and more health systems are embracing opportunities to improve care and lower costs.

CMS has rolled out a number of programs to move the industry away from a fee-for-service approach to a system that rewards value over volume. Since 2012, many organizations have participated in Medicare’s largest payment reform effort, the Medicare Shared Savings Program (MSSP). Providers are also participating in other payment reform and care delivery transformation efforts, such as bundled payments, the Medicare Access and CHIP Reauthorization Act (MACRA), and Comprehensive Primary Care Plus (CPC+). (Note: This piece focuses only on ACOs participating in the MSSP, which is currently being redesigned into the proposed “Pathways to Success” program.)

Accountable care organizations (ACOs) have provided a good training ground for high-touch population health initiatives. They incentivize providers from across the care continuum to improve care quality and reduce costs for patient populations, while requiring providers to become more financially accountable for care delivery.

To-date, much of the participation in these value-based payment models has been in upside-only arrangements with no downside risk—and as a result, overall outcomes have been mixed (see our infographic on MSSP ACO performance). But with its proposed “Pathways to Success” program, CMS is forcing more accountability on ACOs with its recent announcement to remove Track 1 and Track 2 ACOs. CMS wants to move organizations into downside risk more quickly by eliminating these zero and low-risk tracks.

As health systems evaluate options for the next ACO contract period, they must determine whether to continue in the program or move in a new direction. For organizations ready to assume more risk and strengthen value-based care capabilities, the MSSP/proposed Pathways program presents a number of inherent challenges and limitations:

  • Financial opportunity: Financial opportunity is capped with shared savings methodology. For example, 119 ACOs have saved CMS more than $320 million, but missed the minimum savings threshold in 2017 to earn shared savings.[i] Moreover, the savings are often not sufficient to drive provider-level incentives and behavior change.
  • Benchmarks: ACO benchmarking methodology is complex and unpredictable. Some ACOs have generated savings against a benchmark that was not fully attributable to their actions. Others have struggled to generate any shared savings, even if they worked hard to improve outcomes and reduce utilization. And some ACOs still could not approach shared savings because their benchmark was already too well cost-managed to influence.
  • Risk adjustment: ACOs offer limited transparency into the annual risk adjustment and benchmarking process. Though CMS proposes to fix some of the program elements, it is challenging to manage a long-term ACO strategy when the program rules shift unexpectedly.
  • Care delivery: ACOs use a primary care-centric model to evolve to population health management, but there are limitations with coordinating care.
  • Benefit design and utilization management: ACOs present difficulties in managing the total cost of care due to potential leakage in an unmanaged network. Further, the program provides limited ability to coordinate care across the continuum.
  • Data: Quarterly reports are not timely enough and claims feed data lags too far from date of service to make timely interventions.

ACOs currently in the program must evaluate whether to continue participation in the proposed Pathways program in 2019, knowing that depending on their status, they will have to move to downside risk in a program that has limitations in yielding significant outcomes.

If your organization is at a crossroads, click here to download our paper to understand how to shape your long-term Medicare strategy.

Stayed tuned for our next blog post on graduating from an ACO to Medicare Advantage.


[i] https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/SSPACO/index.html


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