CMS loses money as Medicare ACOs remain risk-averse

Story updated Nov. 3, 2017.

The CMS' Medicare shared savings program paid out more in bonuses to accountable care organizations than the savings those participants generated, as many were unprepared to take on downside risk, new federal data show.

About 56% of the 432 Medicare ACOs generated a total of $652 million in savings in 2016, according to the CMS dataset released last week. However, participant bonuses eclipsed those savings. The CMS paid $691 million in bonuses to ACOs, resulting in loss of $39 million from the program.

"Medicare isn't saving money," said David Muhlestein, chief research officer at Leavitt Partners.

That's because 95% of the Medicare ACOs—or 410—participated in Track 1 of the Medicare Shared Savings Program, which doesn't require ACOs to take on any downside risk, so they aren't on the hook for penalties if they miss their targets. Just 22 ACOs participated in advanced tracks—Track 2 or Track 3—with downside risk. In those tracks, the ACO must pay back any losses to the CMS.

"These investments that ACOs have made, they take a number of years in some cases to generate positive results in savings," Brennan said.

Advocate Health Care based in Downers Grove, Ill., plans to move its ACO to a downside risk track in 2018, said Dr. Lee Sacks, chief medical officer of the system. The ACO, called Advocate Physician Partners Accountable Care, was formed in 2012 and includes roughly 5,000 physicians and 140,000 beneficiaries.

The ACO generated $60.6 million in savings in 2016.

Sacks said the organization is prepared to move to downside risk. "Based on our track record over the last four years in MSSP, the likelihood of material downside is pretty low," he said.

Advocate plans to participate in Track 1+, a two-sided model with less downside risk than the other established tracks.

The new track, which will be implemented in 2018, is expected to be popular among ACOs because it is an appealing transitional option, Brennan said.

For 2017, the CMS saw more ACOs participate in downside risk than in 2016. Brennan said 36 ACOs are in Track 3 this year compared to 16 this year.

The implementation of Medicare Access and CHIP Reauthorization Act drives increased participation in the downside risk tracks, Muhlestein said. Track 1 ACOs are not considered an advanced alternative payment model so they don't qualify for 5% bonus payments. Tracks 2 or 3 ACOs do qualify as an advanced APM.

Correction: The CMS' $39 million loss represents 0.05% of its total costs. The story originally used an incorrect number.

An edited version of this story can also be found in Modern Healthcare's Nov. 6 print edition.