ACO vs. Value-Based
Earlier this year, the U.S. Department of Health & Human Services (HHS) set a goal of moving 30 percent of payment for traditional Medicare benefits to value-based payment models by the end of 2016 and 50 percent by the end of 2018. The Center for Medicare & Medicaid Innovation’s (CMMI’s) Accountable Care Organizations (ACOs) have been the largest movement toward that goal to date, yet the most recent financial results highlight some flaws, and organizations should carefully analyze whether an ACO or a Medicare Advantage (MA) structure is a better fit for them.
The results show these ACOs are important building blocks for many organizations and will continue to generate success coupled with tweaks made by the Centers for Medicare & Medicaid Services (CMS) to generate more positive numbers. Organizations having already proven their success in generating savings could easily graduate to MA and be successful. Plans not as successful, or plans not currently possessing the infrastructure needed to succeed in MA, should look to CMS’ Next Generation model to alleviate some of the concerns of the previous demonstrations.
CMS applauded the most recent financial and quality results, stating Medicare ACOs continue to improve quality of care while slowing down healthcare costs. Ninety-seven ACOs qualified to share in savings by meeting quality and cost benchmarks. CMS stated the ACOs generated net savings of $411 million in 2014 and improved in most quality measures. CMS also noted additional ACOs are inquiring about participating next year.
Yet these numbers represent one in four generating enough savings to qualify for bonuses. Only 11 Pioneer ACOs earned savings payments of $82 million. Five generated losses, with three owing CMS shared losses of $9 million. Despite CMS reporting Pioneer ACOs improving an average of 3.6 percent compared to 2013 on 28 of the 33 quality measures, most did not see any rewards. Only 27 percent of Medicare Shared Savings Program (MSSP) ACOs earned shared savings payments.
The results indicate ACOs need time to adjust to the model and show improvement over time. Thirty-seven percent of the MSSP ACOs launching in 2012 generated savings in the third performance year, compared to 27 percent of MSSPs beginning in 2013 and 19 percent beginning in 2014. However, these numbers do not account for the ACOs dropping out of the program, potentially skewing the earlier success rates. The results also highlight the complexity of participating in CMS’ alternative payment models. Many ACOs not as successful initially likely lacked or underestimated the investment needed for new infrastructure and systems. Plans and providers need to understand the need to set up more sophisticated information technology (IT) infrastructure and how to successfully utilize data. As potential ACOs evaluate whether to participate, they should consider how much of an investment is needed in order to succeed.
The major concern over CMS’ use of benchmarks is also still evident. In order for an ACO to qualify for shared savings, the ACO must beat a benchmark calculated by CMS. The year-to-year trend in this benchmark is a mix of the national percentage growth rate in Medicare and the absolute dollar value of the annual per member per month (PMPM) increase in the average Fee-for-Service (FFS) per capita costs. Because of this, ACOs in high-cost areas consistently achieving lower costs are not rewarded because their improvements in financial and quality performance are not accurately captured. The current program also lacks a full and up-to-date risk adjustment to accurately account for beneficiaries’ health status. Thus, ACOs that may generate savings for CMS still miss the benchmark.
Despite concerns with methodology, there are now approximately 7 million beneficiaries served by more than 400 ACOs. At the same time, CMS has shown it is focused on issues that develop and is working on options which will tweak the program to better fit future participants (the Next Generation ACO, for example). Despite the challenges, ACOs are currently the biggest initiative succeeding in enticing and exposing large numbers of providers and beneficiaries in its effort to coordinate services. The program is still receiving strong interest from both new applicants and existing ACOs seeking to continue the program, and CMS plans to announce new and retiring ACOs by the end of the year.
Resources
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