COVID-19, Direct Contracting, & ACOs: Where Are We Headed?

Talk about down to the wire! On June 3, 2020, CMS finally decided to extend NextGen ACOs for another year. While the program was originally supposed to sunset at the end of 2020, CMS is providing some wiggle room to account for the impact of COVID-19. Given the recent significant increase in Coronavirus cases in Texas, California, and of course my home state of Florida…it looks like COVID-19 may be around longer than many people had originally hoped. Without a crystal ball, there are still a lot of unanswered questions as to the impact of the pandemic on ACOs, Next Gen ACOs, and Direct Contracting; however, we can make a few educated guesses as to what may happen.


The pandemic will have an effect on the originally predicted shared savings and losses for ACOS, however, it likely won’t be as negative an impact as expected back in April when NAACOS stated 56% of ACOs expressed that they would leave the MSSP due to fears of how COVID would impact them. On one hand, you have the reduction of elective procedures which should significantly reduce overall costs. On the other hand, you also have CMS’s decision to reduce losses by the percentage of months for which the COVID 19 public emergency is in effect. Combined, when I look at CMS’s rule modification, and current hospital and patient behavior, I believe that most ACOs (both MSSP and NexGen) will actually be in a good position to potentially achieve shared savings. For those that are not in line to achieve shared savings, at least they’re protected from having to pay back much in losses. That being said, because of this current environment, CMS is also capping NextGen ACOs at 5 percent gross savings, meaning they won’t lose money, but it won’t be a major windfall for them either. Essentially, it becomes a bit of a wash, but those who are practicing value-based care are finding it easier to stay afloat than those who are strictly fee for service. In my opinion, given the situation, not losing, or calling it a tie, is as close to a win as you can get in 2020. If you can make sure your patients are still receiving quality care, and those not affected by COVID 19 are able to stay out of the hospital, you’re in a better position for 2021.

Many of the NextGen ACOs will likely consider transitioning into Direct Contracting (the first performance period of Direct Contracting will now be delayed until April 1, 2021), but they have more time before they have to do so since NextGen ACOs will run, unchanged, through 2020 and 2021.  While the first deadline to apply for Direct Contracting ended on July 6th, there’s another opportunity coming up. You can apply for the January 1, 2022 start when CMS opens up a new registration period during the first quarter of 2021. Therefore, those who are considering it would be wise to begin preparations now. Since many NextGen ACOs have been successful at mitigating risk and achieving shared savings, they may be well-positioned for Direct Contracting. The key to success in Direct Contracting is managing your population and taking on full risk.


The future of ACOs is taking on full risk. We can see that CMS has been inching closer, and at this point even pushing everyone closer, to that reality. The real question is how does that manifest itself? During this 2020 slowdown, no new ACOs will be permitted to join the MSSP. At this stage, there still is no 2021 enrollment period set, either. There’s a good chance that once a new enrollment period is set, and people interested in starting ACOs (but may not be as skilled in mitigating risk) see that Coronavirus didn’t destroy the model, you’ll have some moderate, but tempered growth. Those confident in their risk mitigation capabilities will then look forward to Direct Contracting. However, there are still a lot of healthcare professionals out there that are still very wary of uncertainty. In fact, it is entirely possible that those wanting to start new ACOs wait until the data comes back both from 2019 and 2020 to make a decision. This means you won’t actually have a confident group of new ACOs until at least 2022. COVID-19 has certainly created a brief pause for readjustment, but I fully expect all ACOs to either take on full risk or move into Direct Contracting. The entire process may take a little longer now, but it’s important that if you work for an MSSP ACO that you watch what the Next Gen ACOs are doing with regard to risk contracting. That way, when the time comes to progress to the next level, there is a foundation of understanding for the next step in value-based payments.


Ryan Mackman

About the Author

Ryan Mackman, MBA, MHA - Business Consultant

Ryan Mackman has been an ACO business consultant team member with Salient since March 2018. In this role, he acts as a solution trainer, marketing and sales consultant, as well as Value Based Payment strategist. His skillset helps augment Salient’s efforts at the ACO and physician practice level.

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