Why the Right Next Step for ACOs is Moving to Medicare Advantage

This three-part blog series covers why Medicare ACO participants need to formulate a long-term Medicare Advantage strategy. In this first post, we will discuss the proposed “Pathways to Success” program from CMS.

CMS recently announced a long-awaited proposed rule to redesign the Medicare Shared Savings Program (MSSP), Medicare’s cornerstone initiative to reform the payment system. The new “Pathways to Success” program overhauls how accountable care organizations (ACOs) share in risks and rewards, including a more aggressive transition to value.

Here’s the backstory. The MSSP was first launched in 2012 to drive better quality healthcare and lower costs for Medicare Fee for Service (FFS) beneficiaries. To achieve program goals and earn financial incentives, ACOs participating in the MSSP have had to create and manage high-touch population health initiatives. Across the care continuum, ACOs have developed provider incentive programs to improve care quality and reduce costs, while requiring providers to become more financially accountable for the delivery of care. ACOs have also built data analytics tools, beefed up information technology, developed new governance structures and hired care coordinators and other staff to oversee their efforts.

Despite these efforts, the overall MSSP results have been underwhelming. Net spending for CMS has actually increased, primarily because 460 of the 561 ACOs (82%) are not taking on risk for increases in costs. While some ACOs have generated savings and earned bonuses, CMS data indicates that upside-only ACOs continue to lose money—including almost $39 million in 2016.

Enter the proposed Pathways to Success, which would limit the duration of one-sided risk ACOs, is projected to save Medicare $2.2 billion over ten years. Some highlights of the proposed program include:

  • A reduction in the amount of time an ACO can remain in the program without taking on risk. Pathways would require an ACO to take on risk within two years, compared to up to 6 years with the current program. Existing ACOs that renew into the program must accept risk after one year.
  • More engagement with beneficiaries. Pathways would require ACOs to notify patients that they are in an ACO and explain what it means for their care. Certain ACOs could also extend incentive payments to patients who take steps to improve their health.
  • Additional flexibility to coordinate care across settings, such as allowing providers to bill for telehealth services, regardless of a patient’s location.  
  • Increased program integrity, such as the use of regional comparisons on spending in year one, rather than year two and beyond. In addition, the proposal authorizes termination of ACOs with multiple years of poor financial performance.

ACOs must now assess whether or not they’re willing and able to take on more downside risk. CMS acknowledges that many ACOs may reject the program’s more aggressive approach to risk. In fact, the proposed rule includes the projection that 109 ACOs will leave the program by 2026.

At a crossroads

With the pending changes in the MSSP, participants now find themselves at crossroads. Should they continue as an ACO and migrate to one of the new Pathways tracks, or, should they moved into Medicare Advantage (MA) and potentially reap the rewards of greater clinical and financial outcomes?

As organizations evaluate options for the next contract period and beyond, they must carefully reflect on the value proposition of an ACO. For health systems that want to generate sustainable savings for Medicare and are ready to assume more risk, a potentially more reliable long-term strategy is to graduate from an ACO and move to MA.

MA represents a tremendous opportunity for health systems to strengthen their value-based care delivery capabilities, control the premium dollar, improve outcomes and build a strong connection with patients. As with a Medicare ACO, MA providers can earn financial rewards for improving care quality and reducing costs for their patient population, such as through a value-based contract with an MA plan. For organizations seeking to achieve an even greater return on investment, they may want to consider establishing a provider-sponsored plan. In addition, CMS has offered new ways for providers to meet MACRA requirements with MA, such as through an Other Payer Advanced Payer Model (APM) or Medicare Advantage Qualifying Payment Arrangement Incentive (MAQI) Demonstration.

Now that CMS has announced its proposed changes to the MSSP, providers must evaluate their Medicare strategy and decide what pathway offers the best opportunity for long term success. For many organizations, a move into MA provides an excellent chance to take financial and clinical control of Medicare populations. With a clearly defined strategy, a health system operating an MA plan can successfully manage risk, improve the health of patients and build the expertise required for long-term success in a value-based world.

Stay tuned for the next posts around the challenges with Medicare ACOs and the opportunities in Medicare Advantage.

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