This past holiday season, the Centers for Medicare & Medicaid Services (CMS) decided it was time to turn up the heat on Accountable Care Organizations (ACOs). On December 21st, CMS issued a final rule named “Pathways to Success” that drastically restructures the Medicare Shared Savings Program (MSSP) and expedites the time that ACOs have before they need to take on more risk.
CMS launched MSSP in 2012 to encourage healthcare providers to get more skin in the game by offering performance-based payment models in which ACOs could be eligible to share in savings that resulted from decreasing costs and increasing quality of care. The percentage of cost savings that ACOs could keep was dependent on whether the ACO was also willing to be accountable for downside risk, meaning they could need to cut a check if their Medicare beneficiary costs went up instead of down.
Over the past six years, many physicians have flocked to ACOs to reduce their administrative burden, build their IT infrastructure, and seek refuge from MACRA penalties, leading to 561 Shared Savings Program ACOs providing care to 10.5 million beneficiaries in 2018. While overall participation has exceeded expectations, 82% of ACOs are in Track 1 of MSSP and have not yet taken on any downside risk.
CMS now has the data to show that ACOs perform better when they take on downside risk, and Pathways to Success aims to expedite the transition of ACOs to two-sided risk models by reducing the amount of time that an ACO can remain in MSSP without downside risk from six years to two years for new ACOs and three years for certain low revenue or physician-led ACOs.
The doors are closing on ACOs that are in upside only shared savings arrangements - so what now?
CMS predicts that the revised timeline should be enough for ACOs to improve their performance and appropriately transition to greater levels of risk and reward, estimating that while ACO participation may drop in 2019, it will increase by ten in 2020. To facilitate this transition, CMS has made changes to increase transparency and flexibility, including realigning and localizing Medicare cost benchmarks, expanding access to telehealth services, and providing tools for ACOs to offer new incentive payments to beneficiaries that take steps to achieve good health.
While many ACOs will be able to make this transition successfully, the reality is there are many ACOs that have been coasting in no-risk shared savings arrangements, simply collecting administrative fees without any focused efforts to drive down costs. These ACOs have not built up the administrative, financial, or clinical capabilities needed to navigate shared risk contracts and, therefore, these ACOs will unlikely be able, or willing, to take on downside risk.
This will likely lead to two major shifts in the industry:
1. ACO Consolidation: While CMS has offered new flexibility and incentives to low-revenue ACOs which they hope will prevent consolidation, the expedited Pathways to Success timeline will present significant opportunity for high-performing, large ACOs that have the resources, infrastructure, and technical capability to acquire small ACOs that are nervous to transition to two-sided risk on their own.
2. Use of Managed Services Organizations (MSO): For small ACOs that stay the course, or for physicians that leave their ACOs for greener independent pastures, many will turn to the administrative expertise and risk-bearing capabilities of MSOs. MSOs have long been helping physician practices manage their financials and remain focused on clinical care. Now, with increasing pressure for advanced risk-taking models, MSO services will become even more in demand.
Whether you’re an ACO, MSO, or individual practice, one thing is for sure: the only way to succeed in two-sided risk model will be to have the knowledge and tools needed to change behavior at the point of care. That is where technology companies like Stellar Health come in. Stellar Health bridges the information and incentive gap between insurance companies and providers by offering a technology platform that provides actionable data and incremental incentives to primary care physicians at the point of care.
Risk is coming and the race to value-based care is on. Not just for ACOs, but for technology companies that aim to help healthcare providers take the plunge.