Skip to main content
Subscribe
  • Sign Up Free
  • Login
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Blogs
    • AI
    • Deals
    • Layoff Tracker
    • HIMSS 2023
  • Opinion
    • Breaking Bias
    • Commentaries
    • Letters
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Excellence in Governance
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top Innovators
    • Diversity in Healthcare
      • - Luminaries
      • - Top 25 Diversity Leaders
      • - Leaders to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Digital Health Transformation Summit
    • ESG: The Implementation Imperative Summit
    • Leadership Symposium
    • Social Determinants of Health Symposium
    • Women Leaders in Healthcare Conference
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Diversity Leaders Gala
    • Top 25 Women Leaders Gala
    • - Hospital of the Future
    • - Value Based Care
    • - Hospital at Home
    • - Workplace of the Future
    • - AI and Digital Health
    • - Future of Staffing
    • - Hospital of the Future (Fall)
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Sponsored Video Series - One on One
    • Sponsored Video Series - Checking In with Dan Peres
  • Data & Insights
    • Data & Insights Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Providers
January 13, 2016 11:00 PM

Medicare's new ACO model preps providers for insurance ventures

Bob Herman
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Hospitals and doctors have expressed a clear willingness to start their own Medicare Advantage plans. The latest iteration of Medicare's accountable care experiment paves the way for more of them to head in that direction.

    That's not to say all health systems interested in managing population health will start applying for insurance licenses. Some progressive systems such as Dartmouth-Hitchcock in Lebanon, N.H., are content to pursue value-based payment models with the help of other private insurers. However, the changes to the Medicare Shared Savings Program for accountable care organizations and the launch of the Next Generation ACO model make it clear the federal government wants providers to take more financial risk in Medicare now that they have some experience under their belts.

    “It's full risk and full capitation, and I think that's really where CMS wants to go,” said Dr. Bill Bithoney, a healthcare managing director at consulting firm BDO and a former hospital executive.

    ACOs are a staple of the delivery reforms embedded in the Affordable Care Act. Primary-care offices, specialists, acute-care hospitals, nursing homes and other post-acute facilities are expected to work together to manage care for a set group of patients. If groups are able to lower costs, such as by preventing expensive hospital admissions, as well as achieve high quality scores, they get to reap the rewards by sharing in some of Medicare's savings.

    Providers have embraced sharing savings based on good performance, known as upside risk. But they have been less sanguine about accepting downside risk, or paying penalties if certain performance thresholds aren't met. Only 1% of Shared Savings ACOs were in two-sided risk models last year. The percentage is higher for 2016, but only marginally, with about 5% of the participants accepting the risk of penalties.

    “Five percent is not a big number, but it does represent some progress,” said Josh Seidman, a senior vice president at consulting firm Avalere Health. “I think it will lay groundwork for some improvements.”

    The CMS built the Next Generation program in response to provider dissatisfaction with the more stringent Pioneer ACO model, but it also wanted to make accepting full risk just as palatable as the easier incentives of the Shared Savings program. The new model prospectively assigns Medicare beneficiaries to ACOs and allows waivers for things like limits on telehealth services and the rule requiring a three-day inpatient hospital stay before Medicare pays for skilled nursing.

    One of the biggest differences rests on the payment side. Starting in 2017, Next Generation participants can choose capitated payment, meaning Medicare would pay the ACOs a per-member, per-month lump sum, and providers would then be responsible for any and all care that patients need.

    ACOs that burn through those payments are on the hook for the additional costs. In essence, they would act like Medicare Advantage insurers—except for the important fact their Medicare beneficiaries still have traditional Medicare coverage. That means those patients have the freedom to seek care from hospitals and doctors outside the ACO.

    The process for filling the Next Generation slots was competitive since it gives hospitals and doctors more tools to coordinate care for their beneficiaries. But the CMS wanted to keep the trial group small.

    “This was like getting into Harvard,” said Richard Barasch, CEO of Universal American, an insurance company that has invested heavily in Medicare's ACO models. Universal American's Accountable Care Coalition of Southeast Texas was named one of the 21 Next Generation ACOs. The company “absolutely” will look at the capitation model in the second year since it already runs Medicare Advantage plans, Barasch said.

    Rob Lazerow, a practice manager at the Advisory Board Co., a consulting firm that works with hospitals and doctors, said some Next Generation ACOs may form their own Medicare Advantage plan as they gain more experience. These will be provider organizations that have stronger finances, are willing to devote large capital reserves to insurance payouts and have the drive to run health plan operations.

    Gaining experience with capitation as an ACO “absolutely” could push some providers to explore becoming insurers, said Seidman, who was a health technology director in the Obama administration before joining Avalere. “The question is, to what extent are ACOs destinations or stepping stones to something else?”

    Provider organizations that don't have an insurance infrastructure or want to avoid the increased regulatory oversight associated with insurance may prefer to stick with accountable care contracts.

    “The Next Generation model gives providers similar incentives as if they were in a Medicare Advantage plan if they choose the full-risk option,” Lazerow said. “But it lets providers focus on being population health managers rather than health plan executives.”

    What's clear, though, is that provider groups that decide to start their own Medicare plans, or at least choose the capitated approach, have the chance to make money. When BDO's Bithoney was a hospital CEO within the Sisters of Providence Health System in Springfield, Mass., his team worked with Tufts Health Plan on its Medicare Advantage product. His system “curated” the care for Tufts' Medicare patients while Tufts handled the administrative end.

    The end result? The system and insurer saved 12.8% of the Medicare Advantage budget for the 5,000-plus members, which would've been 4% in today's reimbursement environment, but it was still a well-received windfall.

    “It was much more profitable than a (Shared Savings) ACO could be,” Bithoney said. “In Medicare Advantage, you can make more money if you're confident you can save more money.”

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    diversity
    Health equity execs leveraging academic roles to drive long-term change
    Patrick Blair InnovAge
    PACE could expand amid possible nursing home closures: InnovAge CEO
    Most Popular
    1
    Centene to lay off 2,000 workers
    2
    How health systems are battling price-gouging allegations
    3
    Senate advances bill to temporarily aid hospitals, health centers
    4
    Elevance, Blue Cross Louisiana halt $2.5B proposed deal
    5
    Tower Health to sell urgent care centers, close others
    Sponsored Content
    Modern Healthcare A.M. Newsletter: Sign up to receive a comprehensive weekday morning newsletter designed for busy healthcare executives who need the latest and most important healthcare news and analysis.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Help Center
    • Advertise with Us
    • Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Blogs
      • AI
      • Deals
      • Layoff Tracker
      • HIMSS 2023
    • Opinion
      • Breaking Bias
      • Commentaries
      • Letters
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Excellence in Governance
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top Innovators
        • Diversity in Healthcare
          • - Luminaries
          • - Top 25 Diversity Leaders
          • - Leaders to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Conferences
        • Digital Health Transformation Summit
        • ESG: The Implementation Imperative Summit
        • Leadership Symposium
        • Social Determinants of Health Symposium
        • Women Leaders in Healthcare Conference
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Diversity Leaders Gala
        • Top 25 Women Leaders Gala
      • Virtual Briefings
        • - Hospital of the Future
        • - Value Based Care
        • - Hospital at Home
        • - Workplace of the Future
        • - AI and Digital Health
        • - Future of Staffing
        • - Hospital of the Future (Fall)
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Sponsored Video Series - One on One
      • Sponsored Video Series - Checking In with Dan Peres
    • Data & Insights
      • Data & Insights Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing