Medicare's newest program testing accountable care organizations is not even a year old, and three out of 21 participants have already exited.
The three organizations that have withdrawn from the CMS' Next Generation ACO program since January are Heritage California ACO in Northridge, Calif., River Health ACO in Harrisburg, Pa., and WakeMed Key Community Care in Raleigh, N.C. The program started out with 21 ACOs and is now down to 18. Organizations had until April 1 to bow out without incurring a financial penalty.
The remaining 18 are still within the range of 15-20 ACOs CMS officials thought would participate. But the exiting parties indicate Medicare's payment reforms, which center around quality and the ability to keep costs down, still have not completely won over many hospitals and doctors.
It's also a case of déjà vu. Many groups that were part of the Pioneer ACO program, a predecessor to the Next Generation cohort, have dropped out over the years citing financial uncertainty. Nine Pioneer ACOs remain from the original 32.
River Health ACO, a collaboration among PinnacleHealth, Susquehanna Health and other providers in central Pennsylvania, quit the program almost immediately in February. Executives expressed excitement after they initially were selected, but they later estimated the ACO would not be able to lower costs “to meet the current target set by CMS.”
WakeMed Key Community Care, organized by WakeMed Health & Hospitals and local physicians, was committed to the Next Generation program but decided to back out “after evaluating financial and operational metrics.”
“As an ACO with a very low benchmark, we are much more susceptible to any variability,” the ACO said in an emailed statement. The group, which is evaluating its Medicare ACO participation for 2017, also said it was unable to obtain reinsurance to protect itself from potential losses.
A spokeswoman for Heritage California ACO said the ACO “will be fully participating in calendar year 2017” but did not explain the departure for this year. The organization, operated by the Heritage Provider Network, lost money as a Pioneer ACO before jumping into the Next Generation program.
When asked about the Next Generation departures, a CMS spokesman sent a statement that said, “ACOs make their own business decisions regarding participation in ACO initiatives and may determine that a certain model is no longer the best fit for their organizational priorities.”
Like other ACOs, Next Generation participants share in savings or losses depending on whether they meet clinical quality targets and lower healthcare spending below a certain threshold. Next Generation ACOs can take on more payment risk than other ACOs and qualify as an “advanced alternative payment model” under Medicare's new physician payment law.
However, Medicare beneficiaries who are part of ACOs can continue to go to any doctor or hospital they want, which providers view as an obstacle to meeting their spending targets.
“The big challenge with all the Medicare models is the fact that there is no network,” said Greg Maddrey, a director at The Chartis Group, a consulting firm. “It takes away a fairly significant control point in managing care and risk.”
The CMS tried to account for that in the Next Generation model by allowing ACOs to pay beneficiaries $50 in cash per year as an incentive to stay within their network. Next Generation groups can also offer added benefits to their patients, such as post-discharge home visits and waivers for telehealth and skilled-nursing facilities.
The federal Medicare agency also has tinkered with ACO spending benchmarks in response to feedback from Pioneer ACOs and other providers, which may entice some groups to stick with or move to the less risky Shared Savings Program.
“ACOs with spending below the regional average will find the (Shared Savings Program) far more attractive than Next Gen,” said Dr. J. Michael McWilliams, a health policy professor at Harvard Medical School who has studied ACOs.
Maddrey added that because of the way ACO filing deadlines are structured, many organizations are applying and analyzing their chances of financial success after they are accepted.
“After you apply and start to look at the data that comes back and your cost targets, it's natural to say, 'Are we sure we want to take this leap?' ” he said. “ 'Do we think we have the organizational capability and time to be successful in this program?' ”
The remaining 18 ACOs are staying within the program for now but could drop out down the line. The next round of Next Generation ACOs will be announced in August.