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Five Thoughts on ACOs – Crossroads Ahead!

April 25, 2014
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While much of the recent focus in this industry is on yet another ICD-10 delay, it’s quietly been an eventful month for the Accountable Care Organization (ACO) concept. In my opinion, the ACO movement is spiraling towards an eventual crossroads that will foretell its future.

This month has just reinforced those feelings. Let me explain.

  1. A week ago, the American Hospital Association sent out a letter to the Centers for Medicare and Medicaid Services (CMS) on ACO initiatives. The tone of the letter was as clear as day: Make Medicare ACOs easier to join, right now there is too much risk and burden on providers with too little opportunity for reward in the form of shared savings. Truthfully, it’s not the first time I’ve heard this “not really worth it” attitude in regards to Medicare ACOs.  Last year, I interviewed David Muhlestein, the director of research at the Salt Lake City, Utah-based Leavitt Partners, about the reduction in the number of ACOs being formed. I asked about the nine organizations that dropped out after the first year of the Pioneer ACO initiative and why this happened. Here’s what he said:

CMS has it open to anyone, so anyone can be Shared Savings or apply for the Pioneer ACO. But they have a rigid framework that they are working with, where they say, ‘These are rules; this is the data we are going to provide.’  For many of those organizations, they were getting that data months later, so it’s useless to them. It was really an administrative hurdle, particularly for those that dropped out.

  1. Among their multiple requests for an improved ACO initiative, the AHA asked that CMS improve the timeliness and accuracy of performance data. There you go. That speaks to exactly what Muhlestein told me months ago. AHA also asked that CMS set a standard minimum savings rate of no more than 2 percent, create more “achievable thresholds” in the early years, allow Medicare patients to opt-in, implement technical adjustments to the benchmark to account for policy changes, allow to vary beneficiary cost sharing, and simplify and align quality measures. There’s a lot there and I wonder if CMS will alter its course, and oblige any of these requests in the near future. Had you asked me more than a month ago if I thought ICD-10 was going to be delayed again, I would have said, “No way!” So you won’t get any predictions in this space. I do like the idea of opt-in beneficiaries and believe it could be very important to the future growth of ACOs.
  1. Elsewhere, a recent study in the Journal of the American Medical Association (JAMA) showed how many existing ACOs are wildly fragmented. In looking at one ACO, the researchers reported many of the Medicare beneficiaries were not assigned to the same ACO in two years of care and most of the specialty care they were given was provided outside the ACO. Many of the beneficiaries who were not assigned included patients in high-cost categories, such as end-stage renal disease, disabilities, and Medicaid coverage. As the authors of the study, Harvard Medical School researchers, said: “Unrestricted choice of healthcare providers is maintained for Medicare beneficiaries and that could weaken incentives and undermine ACO efforts to manage care.” Indeed, this kind of fragmentation could definitely undermine those efforts.
  1. It’s not all bad. A report from Oliver Wyman, a consulting firm, this week reported that the total number of ACOs is increasing. With the latest round of Medicare ACOs being announced in January, the total number is now over 500. According to CMS, about 10 percent of all Medicare beneficiaries will now receive their healthcare from ACOs and ACOs now serve 33 million non-Medicare patients too. These numbers are nothing to scoff at. Imperfect as it may be, the ACO movement is making inroads.
  1. Getting back to my main point, I think it’s clear that we’re headed towards a “now or never” moment with ACOs. While ACOs are increasing, the Oliver Wyman report noted that non Medicare ACO growth has slowed considerably. There were 130 in July of last year and only 150 today. Before that, it felt like new ACOs were popping up every day. As Muhlestein told me last year, it appears many organizations – providers AND payers – are in a wait-and-see mode. How many people will take their cues from the Medicare ACOs? And if the AHA’s cynicism and prognostications about the current approach to those Medicare ACOs are accurate, will those same waiting providers hold off permanently? Remember, the ACO program is voluntary. Voluntary, but in this editor’s eyes, critical to the future of healthcare delivery. What will happen to them? Time will tell. Soon.

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