Upside-only ACOs increased Medicare spending
Accountable care organizations (ACOs) were supposed to result in savings for Medicare, but an analysis from Avalere said ACOs in the Medicare Shared Savings Program (MSSP) have instead increased federal spending—an evaluation a national group of ACOS called “rather simplistic," ignoring positive impacts ACOs have made on quality.
When MSSP was enacted in 2010, the Congressional Budget Office estimated the program would save the federal government $1.7 billion between 2013 and 2016. Avalere found the CBO was off by almost $2 billion, as spending increased by $384 million. The blame falls on the MSSP’s Track 1, where organizations can earn bonuses but suffer no financial consequences from CMS when they spend above their target. It also happens to be the track the majority of MSSP participants have selected, even for 2018.
“The Medicare ACO program has not achieved the savings that CBO predicted because most ACOs have chosen the bonus-only model,” Josh Seidman, senior vice president at Avalere, said in the report.
The CBO’s initial projections, Avalere said, didn’t factor in the time it would take ACOs to produce consistent savings. CMS’ own analysis had found the highest performers by 2016 were ACOs which had been participating in the program for at least three years. Avalere came to a similar conclusion, finding ACOs in the fourth performance year saved the federal government $152 million in 2016—the same year the number of ACOs taking on downside risk began to grow.
Tracks 2 and 3 of the MSSP, which involve downside risk for ACOs, have achieved savings which have only been limited by their smaller number of participants. Over five years, Avalere found upside-only ACOs increased federal spending by $444 million, while the downside Tracks 2 and 3 reduced federal spending by $60 million.
The National Association of ACOs (NAACOS) agreed that success has been elusive for some organizations and it would like to see more earning shared savings. But the group’s vice president of policy, Allison Brennan, took issue with other parts of Avalere’s analysis, saying “there are more sophisticated evaluations” which compare ACOs to other providers and show their impact on quality, noting MSSP ACOs subject to pay-for-performance measures in 2016 earned an average quality score of 95 percent.
“We really need to see CMS make program improvements to properly ensure a fair and accurate evaluation of ACOs,” Brennan told HealthExec. “For example, there are a number of flaws with how CMS sets ACO benchmarks, such as lowering future benchmarks when an ACO has savings and largely prohibiting risk scores from increasing. We need policy changes to address these flaws, which would in turn help to properly recognize and reward ACOs. We also can’t forget that it’s a steep learning curve for ACOs - clinical and operational transformations of this magnitude take time. It is essential to be patient when evaluating the progress and effect of ACOs.”
Overall, the program has achieved savings of $1.6 billion compared to benchmark projections.
“While data do suggest that more experienced ACOs and those accepting two-sided risk may help the program to turn the corner in the future, the long-term sustainability of savings in the MSSP is unclear. ACOs continue to be measured against their past performance, which makes it harder for successful ACOs to continue to achieve savings over time,” said John Feore, director at Avalere Health.
Avalere has noted in the past that ACOs would benefit from taking on downside risk thanks to the 5 percent bonus payment offered to those MSSP tracks which qualify as Advanced Alternative Payment Models (AAPMs) under the Quality Payment Program. Based on 2016 performance data, the cumulative financial benefit for ACOs would have been $966 million.
There’s some reason to believe the AAPM bonus is acting as an incentive for ACOs to move towards two-sided risk. 18 percent of MSSP ACOs will be taking on risk in 2018, the first year the program’s Track 1+ was open.
Yet there have been other signs that downside risk is still too hard to manage for some ACOs. Recently, seven ACOs dropped out of the higher-risk Next Generation ACO model, with the National Association of ACOs (NAACOS) saying CMS needed to avoid “unpredictable unilateral changes” to avoid a bigger exodus. NAACOS noted to HealthExec that the Avalere analysis didn’t account for savings from Next Generation model, which when combined with the MSSP results, had all Medicare ACOs generating $71.4 million in net savings in 2016.
John joined TriMed in 2016, focusing on healthcare policy and regulation. After graduating from Columbia College Chicago, he worked at FM News Chicago and Rivet News Radio, and worked on the state government and politics beat for the Illinois Radio Network. Outside of work, you may find him adding to his never-ending graphic novel collection.