Heading for the exit: Rather than face risk, many ACOs could leave

Ann Morse Abdella was all in when the Medicare Shared Savings Program started in 2012. She helped launch a rural accountable care organization in western New York, serving roughly 7,000 Medicare beneficiaries.

Six turbulent years later, Chautauqua Region Associated Medical Partners is heading for the exit.

The constantly evolving program and its increasing pressure to take on financial risk are too much to swallow, especially since the region, which has a high penetration of managed care, is already fairly efficient in terms of healthcare spending. The prospect of being held responsible for missed savings goals is unsettling since it's unclear how much more can be done to control costs.

"We have been trimming and honing and looking at efficiencies and cost savings for a number of years," said Abdella, the ACO's executive director. "If we do anything more, we're going to be anorexic; we'll kill ourselves."

The organization will not renew with the CMS once its contract expires early next year. Chautauqua has been part of an upside-only model under the Medicare Shared Savings Program known as Track 1. It shares in savings only if certain goals are met. The attraction of Track 1, especially for smaller organizations, is there's no penalty for missing the targets. Chautauqua Region Associated Medical Partners has saved Medicare $6.7 million, $3 million of which went back to the ACO.

Under Obama-era regulations, ACOs that started in Track 1 in either 2012 or 2013 are supposed to move to a risk-based model by the third contract period, which begins next year. There are 561 Medicare ACOs this year, 82% of which are in Track 1.

Leaving the Medicare Shared Savings Program has consequences, especially for an ACO like Chautauqua whose doctors don't have enough Medicare patients on their own to take part in the Merit-based Incentive Payment System created under MACRA. That means they won't be part of any value-based care initiatives.

"I've got a bunch of solo practitioners that otherwise get written out of the script," Abdella said.

In the coming weeks, other early adopters will decide whether to stay in the program. Signs point to many following Chautauqua out the door. This month, the National Association of ACOs released a survey of 82 ACOs that began in 2012 or 2013, and 71% said they are likely to leave the MSSP if forced to take on more risk.

Some that are considering disbanding argue that the CMS doesn't give them enough information on patients to justify taking on risk. Even if they wanted to stay and move to the next track, it's unclear where they'd get the money to pay the CMS for missing savings goals.

A mass exodus would likely undermine progress to move Medicare from a fee-for-service to a value-based pay system. ACOs have been critical in providing clinicians a full picture of the care patients receive elsewhere, leading to more informed doctors developing better care plans.

The National Association of ACOs has been lobbying the CMS for a reprieve, but Administrator Seema Verma indicated she wasn't interested in allowing ACOs to continue without taking some risk.

"The presence of these upside-only tracks may be encouraging consolidation in the marketplace, reducing competition and choice for our beneficiaries," Verma said at the American Hospital Association's annual meeting last week in Washington, D.C. "While we understand that systems need time to adjust, our system cannot afford to continue with models that are not producing results."

Track 1 ACOs increased federal spending by $444 million from 2012 to 2016, while the downside risk ACOs actually reduced federal spending by $60 million, according to analysis released in March by Avalere Health and funded by the Pharmaceutical Research and Manufacturers of America. The CMS has not released its own data showing losses. HHS' Office of Inspector General last year found that ACOs in the program reduced spending by about $1 billion over three years.

Instead of focusing on Medicare Shared Savings Program goals, researchers should home in on ACO spending relative to fee-for-service spending for providers in the same region, suggested Allison Brennan, vice president of policy at the National Association of ACOs. If they did, they'd likely see savings.

A key reason ACOs hesitate to assume risk is the way they're notified of their patient populations. Providers have long complained about the current process, which primarily assigns patients retroactively.

That means the CMS tells a doctor at year-end which patients' care will be taken into account in determining whether quality of care improved while reducing costs.

The agency does this to ensure doctors don't cherry-pick the healthiest patients. However, the demographics for patients assigned to an ACO could change each year, making it harder to know if an organization is meeting its goals, according to Carole Romano, vice president of accountable care and regulatory compliance at ProHealth Medical Management, a New York-based ACO that launched in July 2012.

"Now they want us to think about taking on risks with an entity that can change the rules on us in the middle of the game," Romano said

Leaders at Romano's ACO are also leaning toward disbanding, but a decision is at least a week or so away.

Ownership structure can also play a part in whether or not an ACO continues under the Medicare Shared Savings Program.

Dr. Edward Gold, vice president and chief medical officer of the Hackensack (N.J.) Alliance ACO, thinks his organization could succeed under a risk mode. He estimated the ACO, which is part of the Hackensack Meridian Health system, has saved Medicare $50 million since launching in April 2012. However, the decision lies with his health system's leadership, who seem reticent about the prospect.

"I don't think hospital CFOs like any idea of risk," Gold said. "Risk is not something these organizations are used to dealing with. It's something new, which is a little bit scary."

Another practical barrier is that only Track 3, which requires ACOs to take on the most risk, has an out clause allowing an ACO to exit after six months if it feels it won't perform well.

Track 1+ has a lower shared-loss rate of 30%, compared with Tracks 2 and 3, which can reach 60% and 75%, according to John Feore, a director at Avalere.

Before an ACO can take on risk, it must document to the CMS that it has the means to pay the penalty for missing savings goals. For the Integrated Care Alliance, that meant securing a line of credit before moving up to Track 1+, even though the earliest it could potentially face a penalty is September 2019.

"That's one of the things that's scaring off the Track 1s from going to risk," said Dr. Daniel Duncanson, CEO of the Florida-based ACO. "It's how many hoops they have to jump through to get there. It came close to deterring us."

Integrated Care Alliance began in July 2012, and Duncanson said he would have attempted risk earlier, but few other payers were offering risk-based contracts and the ones available were unworkable.

"There were some payers coming to us and they wanted to do these big risk arrangements, but they only got a few hundred patients," Duncanson said. "The infrastructure costs are so high that even if we generated savings, it wouldn't pay for the cost of doing it and that's just not wise business."

That lack of parity with private payers can deter providers from moving to Track 1+ from Track 1, according to Chas Roades, CEO of consultancy Gist Healthcare.

"It hasn't been worth killing the fee-for-service golden goose on the commercial side in order to capture shared savings in the Medicare book of business—and it's not feasible to ask doctors to practice medicine two different ways depending on who's paying," Roades said.

Despite the challenges, some early adopter ACOs are staying in risk-based models. Turning back now could undermine the progress that's been made to better coordinate care for patients, according to Dr. Brian Jones, vice president of value-based care at Methodist Health System, Dallas.

Dr. Lee Sacks, chief medical officer at the newly merged Advocate Aurora Health, agreed. An ACO known as Advocate Physician Partners Accountable Care began in July 2012 and has helped lower readmissions in general and hospitalizations for congestive heart failure through improved post-discharge follow-up care. The ACO generated $60.6 million in savings in 2016.

The ACO transitioned to Track 1+ to continue its work.

"We've made a real difference for our patients not only in terms of costs but in terms of longevity of life," Sacks said.

The CMS' apparent stance on the need to take on risk could, according to some policy insiders, end up bolstering the program.

"ACOs within (the Track 1) category have entered into the program but have not made substantive changes in how they deliver care," said David Muhlestein, chief research officer at Leavitt Partners. "Simply getting the ACOs who are not really trying to change care delivery out of the program will improve the performance of the broader program."