Risk Aversion Won’t Cut it for ACOs | Part 1: Warm Ups Are Over

On August 9, 2018, via their “Pathways to Success” proposal, CMS announced that they plan to shorten the time Track 1 ACOs have available to take on risk, as 82% (460 out of 561) are balking at advancing past Track 1. Instead of three years, ACOs would only have two in what has been dubbed the “BASIC” track, with no option to extend beyond the 2 years. Many running ACOs immediately wanted to call a time out. How did we get to this point?

As it currently stands, the Centers for Medicare & Medicaid Services (CMS) allow Accountable Care Organizations (ACOs) to dip their proverbial toe in the waters of Value Based Payment by entering the world of the Medicare Shared Savings Program (MSSP) in Track 1. Those in Track 1 receive what amounts to a three-year trial (with an option to extend the trial another three years) in a one-sided risk model whereby they will receive some shared savings, should they achieve it, but they’re exempt from any shared losses.

When ACOs began signing contracts in 2012, it was expected that those starting in Track 1 would ultimately advance through the program such that, after the “get your feet wet” period, they would evolve through Tracks 2, 3, and Next Generation. As they matured, each advancement would require taking on more downside risk, but ACOs would also be rewarded with a greater portion of shared savings when they succeed. CMS was optimistic that one day all ACOs would all take on the responsibility of a NextGen ACO, allowing CMS to unburden itself with risk altogether.

Fast forward to 2018 and there are just 58 NextGen ACOs. In baseball terms, that means CMS is batting .103, which will get you cut from the team pretty quickly. CMS is finding out that many ACOs are either unprepared to take on downside risk, or they’re averse to it altogether. Compounding the issue is that the MSSP has actually shown some increases in net spending for a portion of ACOs that are not physician-led (which some speculate may be due to layers of bureaucracy muddying the waters). This comes as a surprise because the thought process, all along, was to get ACOs to lead the charge of narrow provider networks that would quarterback patient healthcare, creating an environment that emphasized a relationship-focused, team-based approach to health and wellness instead of the traditional transactional approach. This, in turn, would lower overall costs. It’s more than likely that CMS underestimated the learning curve on both the physician-led and administrator-led (hospital and non-hospital) ACOs with regards to converting from Fee For Service to Value Based Payment.

With 561 ACOs in the United States, the law of averages suggests not everyone would survive. However, “Pathways to Success” is certainly a warning that more ACOs, than not, need to get ready to play in the big leagues.


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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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