Size Does Matter for Medicare Shared Savings ACOs

A recent article in CMS’s journal, Medicare and Medicaid Research Review, reinforces our concerns about the prospects for small Accountable Care Organizations (ACOs) in the Medicare Shared Savings Program (MSSP).  It appears that size does matter for these provider systems, and that small ACOs are extremely vulnerable to flaws in CMS’s gainsharing methodology.

According to the article by Rutgers Unviersity researchers, an ACO with  5,000 assigned beneficiaries, and which makes no change in efficiency (neither loses nor gains money), faces a 50% chance that CMS will get it wrong and either reward them inappropriately or send them a bill for inefficiencies that were not real.  As real savings grow, the probability that small ACOs will get at least some recognition grows, but the risk of error remains high.

The law of large numbers is a crucial consideration, according to the article.  ACOs with 20,000, or better 50,000, beneficiaries, are much less likely to be graded inappropriately due to randomness. This analysis did not look at the impact of randomness in the quality measures, but it’s probably as great a factor in causing even more payment error for smaller ACOs.

All of which points to an exodus of small ACOs from the MSSP in 2-3 years when the first round of the demonstrations conclude.  Nobody wants to see “grand opening, grand closing” of these important experiments in evolving provider systems — especially CMS. The agency needs to consider methodological findings like this one to ensure it doesn’t cut small ACOs off at the knees, just as they’re beginning to walk.

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