What Will It Take to Fix ACOs?

Transitioning from fee-for-service to more integrated payment models such as accountable care organizations (ACOs) can make care providers more answerable for their patients’ well-being and help slow healthcare spending growth. But for ACOs to succeed, their financial models need improvement, as does patient engagement.

Those were the major conclusions in a recent white paper, Medicare Slowdown at Risk: The Imperative of Fixing ACOs, by Elliott Fisher, MD, MPH, director of the Dartmouth Institute for Health Policy & Clinical Practice; Judd Gregg, former U.S. senator from New Hampshire and now co-chair of the nonpartisan organization Campaign to Fix the Debt; and James Weinstein, DO, MS, president and CEO of Dartmouth-Hitchcock Health.

“Unfortunately we are still early in the days of ACOs, so there is not a lot of empirical evidence yet,” says Fisher, who coined the term ACOs several years ago. “Most of our findings are based on qualitative research, but ACOs have the potential to achieve very significant savings.”

Fisher and his co-authors call Medicare reform a national priority. “With proper modifications, these new payment models are the only way we can really improve care for our patients while slowing the growth of healthcare spending; otherwise our children will be paying off the federal debt we left them with,” he says.

Improving the Financial Model

Although early data from the Centers for Medicare & Medicaid Services (CMS) shows that the Medicare Shared Savings Program (MSSP) generated over $417 million in savings for 220 Shared Savings Program ACOs, and 23 ACOs in the Pioneer ACO Model qualified for shared savings payments of $460 million, the current financial model makes it difficult for ACOs to succeed, notes Fisher.

“About half achieved savings, but only half of those received a shared bonus payment,” Fisher says. “That means only 25% of all ACOs earned a bonus in the first two years of the program. That leaves 75% of the ACOs upset because they did all this work and did not get a share of the savings.”

The financial benchmarks for ACOs could be improved, he adds. He and his fellow authors suggest:

• Transitioning to a revised model based on regional per-beneficiary costs so providers know their financial targets up front. Currently, ACOs are unsure of the benchmarks until they are deep into the measuring period.
• Stronger participation incentives for low-cost provider organizations, to encourage providers from all geographic areas to form ACOs.
• Tools to incentivize providers to accept two-sided risk, which means ACOs would face potential loss as well as share in savings.

Increasing Patient Engagement

The co-authors also recommend CMS improve patient engagement in these ways:

• Reform how people are assigned to ACOs. This includes examining data on care patterns to reflect an ACO’s true patient population. “You have to know who all of your patients are so you can help their quality of care improve,” says Fisher.
• Give people the option to belong to an ACO while allowing ACOs taking two-sided risk to offer lower in-network cost sharing and shared savings with those beneficiaries who acknowledge their participation in that ACO.
• Restrict supplemental insurance (including employer-based plans) from covering first-dollar beneficiary costs in Medicare. This would remove barriers to patient engagement and discourage overutilization of care. It also could potentially save taxpayers $100 billion over 10 years, according to the Congressional Budget Office.

Looking to the Next Generation

Fisher, a strong proponent of ACOs, says physicians, healthcare leaders and policymakers must choose whether to step forward and remedy the issues limiting ACOs’ potential. “We’re at a tipping point, but we really can improve care,” he says. “It’s a tremendous opportunity for us to do the right thing for our patients. If not us, who?”

He is encouraged by CMS’ recently announced plans to introduce a new payment and care delivery model—the Next Generation ACO—that sets stronger measures and more opportunities for care.

The Next Gen ACO builds on CMS’ experience from the Pioneer ACO Model and MSSP. It establishes more predictable financial targets and encourages greater coordination and closer care relationships between ACO providers and patients. It would do this, in part, by:

• Offering rewards to patients for receiving care from ACO physicians;
• Covering skilled nursing care without prior hospitalization;
• Expanding coverage of telehealth and post-discharge home services.

To support increased risk sharing, ACOs would have a more stable, predictable benchmark and flexible payment options that support their investments in care-improvement infrastructure.

Although the new model has yet to be implemented, Fisher says it looks promising. “We’re starting to see real movement toward addressing the concerns that physicians and hospitals have had about the challenges to succeed under the model,” he says.

Download the white paper Medicare Slowdown at Risk: The Imperative of Fixing ACOs, released jointly by Campaign to Fix the Debt, Dartmouth-Hitchcock Health and Dartmouth College, at: https://crfb.org/blogs/medicare-slowdown-risk-imperativeof-fixing-acos.

Daniel Casciato is a freelance writer and copywriter from Pittsburgh, PA.

Take-Home Points

Report authors urge changes to help ACOs meet their potential.

Revise the financial model.

• Let providers know financial targets sooner.
• Create incentives for participating and taking on two-sided risk.

Improve patient engagement.

• Improve the way people are assigned to ACOs.
• Allow two-sided risk ACOs to share savings with beneficiaries.
• Restrict supplemental insurance from covering Medicare 
• first-dollar costs.