Financial risk, perseverance pays off for Medicare ACOs

Two-sided risk pays off for ACOs

However, ACOs that assume two-sided financial risk in the Shared Savings Program have been successful in reducing costs, according to HCTTF.

"ACOs in two-sided models are more incentivized to invest in analytics infrastructure, redesign care pathways, and engage clinicians in systematic efforts to reduce unnecessary utilization. These investments not only produce cost savings but also lay the foundation for long-term success," the nonprofit coalition of leading healthcare stakeholders stated in the brief.

These investments also lead to quality improvements. As ACOs seek to reduce costs, they are more likely to have fewer emergency department visits and inpatient admissions, as well as improved chronic disease management.

HCTTF asserted that two-sided risk serves as "both a motivator and a catalyst, accelerating the organizational maturity required to succeed in value-based care."

ACOs give it time

In addition to financial risk, HCTTF found that time spent in the Shared Savings Program also correlated with better performance. As ACOs went through agreement periods, their performance improved, and later periods were linked to higher average savings rates.

The brief also highlighted that performance volatility declined as ACOs continued in the Shared Savings Program. Notably, HCTTF noticed that outcomes were closer to the rising average among ACOs in their third or fourth agreement period. In contrast, newer Shared Savings Program ACOs exhibited extreme savings or losses.

Once again, HCTTF attributed the link between time and performance to infrastructure investments. Additionally, the brief explained that ACOs had time to implement organizational learning and apply "more repeatable, reliable approaches to bending the cost curve."

Overall, HCTTF stated, "The wide distribution and volatility of results is equally important to note. Success is not automatic or guaranteed, but instead requires disciplined investment, detailed financial planning and sustained execution."

The future of the Medicare ACOs

The issue brief underscored the importance of accountability in value-based care. When ACOs "lean into risk, invest in the infrastructure to support it, and remain committed over time to realize its rewards," HCTTF said.

These lessons should influence the next generation of ACO models, the coalition added.

Medicare ACO models are facing significant growth and policy refinement as the industry continues to shift to value-based care. Medicare itself intends for all Traditional beneficiaries to be in an accountable care relationship with a provider in the next five years.

The program is about halfway there, with about 53% of Traditional Medicare beneficiaries in one of these relationships, CMS reported earlier this year. This includes relationships with providers in the Shared Savings Program and in other ACO models.

CMS has continuously refined its ACO models, notably adjusting the popular ACO Realizing Equity, Access, and Community Health (ACO REACH) Model. However, the model is scheduled to end by the end of next year, leaving over 100 ACOs uncertain about their next steps.

Industry groups, such as Accountable for Health, have urged CMS to provide clear direction for the ACO REACH Model and other ACO models nearing their expiration dates.

CMS has not announced whether it will extend the ACO REACH Model despite its support from industry groups. Still, the federal agency has updated the model for its last performance year that would bolster sustainability and effectiveness for future iterations or successor models.

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.