More ACOs taking on downside risk: CMS

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Crystal Yednak Senior Manager, Health Research Institute, PwC US January 24, 2020

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Overall participation in accountable care organizations (ACOs) has taken a hit over the past two years, according to numbers released by CMS, suggesting that changes made to the Medicare Shared Savings Program for ACOs in 2018 may have modestly stagnated participation.

In a December 2018 final rule, CMS sped up the timeline for ACOs, requiring them to take on risk for cost increases after two years instead of the six years that some organizations could wait under the prior system. The first year that CMS rolled out a tightened timeline for organizations to take on risk, participation dropped to 487 ACOs for 2019 from 561 in 2018. In 2020, participation has bounced back to 517 ACOs.

As part of the effort to increase CMS' emphasis on value over paying for volume of services, ACOs assume responsibility for the cost and outcomes for the beneficiaries they serve. Depending on their track, ACOs can be rewarded with a portion of any savings they produce but can also be penalized for any spending that exceeds set benchmarks. CMS is trying to move more ACOs toward the model where they fully share the benefits and risks.

In a recent Health Affairs blog post, CMS Administrator Seema Verma touted that the number of organizations taking on risk has more than doubled under the rule changes, increasing from 93 in 2019 to 192 in 2020, which was a key aim.

In the 2018 rule, CMS also provided a new option for a “low revenue” track targeted at physician practices and rural hospitals that gives them an additional year before taking on the risk of cost increases. Participation in that track increased by 27 percent from 2019 to 2020, according to CMS.

HRI impact analysis

CMS’ change has shifted a higher percentage of ACOs to the higher-risk option, as 37 percent of ACOs are on tracks that require them to take on two-sided risk, compared with 17 percent in 2018. 

The National Association of Accountable Care Organizations has raised concerns that the program changes could dampen the overall shift to value-based care because of the change to the risk-reward equation for providers.

“If interest in ACOs dwindles, then doctors and hospitals will fall back into a fragmented, fee-for-service system, and any momentum to transform our health system will be lost,” said Clif Gaus, president and CEO of the National Association of Accountable Care Organizations (NAACOS), in a press release. “Harming participation in the Medicare Shared Savings Program hurts Medicare’s priority of changing how it pays for care. Congress should take a closer look at this program to ensure more damage isn’t done.” 

But the changes may have prompted those organizations that did not plan to take on full risk to depart the program earlier. In her blog, Verma pointed to an increase in independent physician practices forming ACOs. “In an era of rising prices for healthcare services, and increasing evidence of consolidation leading to higher prices, promoting physician-led ACOs is one of many steps CMS is taking to foster a competitive healthcare market to preserve beneficiary choice and improve value.” 

Previous HRI research has shown the trend of hospitals employing physicians to be a price inflator, and hospital-owned facilities are sometimes able to access higher government reimbursements.

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Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Crystal Yednak

Senior Manager, Health Research Institute, PwC US

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