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EXCLUSIVE: Substantial ACO Reforms Could be Forthcoming

May 9, 2018
by Rajiv Leventhal
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Farzad Mostashari believes that an upcoming CMS rule will propose significant changes around how long providers can stay in upside-only ACO models

Earlier this week, CMS (the Centers for Medicare & Medicaid Services) Administrator Seema Verma remarked that “upside-only” ACOs (accountable care organizations) that do not take on downside risk have not generated enough results to date. Now, Healthcare Informatics has learned that a CMS rule is forthcoming that could shorten the duration ACOs can stay in one-sided risk models.

Verma’s remarks, made at the American Hospital Association (AHA) annual membership meeting in Washington, D.C. on May 7, aligned with what HHS (the Department of Health & Human Services) Secretary Alex Azar said at AHIP's (America’s Health Insurance Plans) National Health Policy Conference in March where he stated, “[Federal ACO] programs were intended to give providers three years to learn how to accept risk and share savings, but the results have been lackluster.”

But Verma went into more detail this week, noting that downside-risk ACOs have achieved significant savings to Medicare, “while upside-only ACOs are increasing Medicare spending, and the presence of these upside-only tracks may be encouraging consolidation in the market place, reducing competition and choice for our beneficiaries.  While we understand that systems need time to adjust, our system cannot afford to continue with models that are not producing results," she said.

When ACOs are in a one-sided risk model, they do not share losses with the government when they overspend past their benchmarks, but they do share in the gains. As such, in these one-sided risk models, CMS is on the hook for any losses all on its own.

ACO Changes Forthcoming

As Healthcare Informatics has learned, there is an ACO rule that was sent to the Office of Management and Budget (OMB) on May 1 and is currently pending review. The proposed rule, titled “Medicare Shared Savings Program; Accountable Care Organizations,” will likely call for changes to the duration of one-sided risk models and force people into two-sided risk, says Farzad Mostashari, M.D., CEO of Aledade, a Bethesda. Md.-based company that helps create and operate physician-led ACOs, and former National Coordinator for Health IT.

Mostashari, in an interview with Healthcare Informatics, says that from Verma and Azar’s perspectives, they expected ACOs to take three years to figure things out before moving into downside-risk programs. “But now people have been in the program for six years, are still doing one-sided risk, and are asking for more time. I think what [CMS] will propose is that if your contract period is over, and you are in a one-sided risk model, you cannot renew that contract. You would have to get out or get up,” Mostashari says.

He believes that the ACO reforms that are coming “will be substantial,” noting that “if they were going to make them modest, they probably would have put them in the physician fee schedule rule rather than make a standalone ACO rule.”

There has been recent analysis of Medicare ACOs—specifically the Medicare Shared Savings Program (MSSP)—that supports Verma’s and Azar’s remarks. A study from Washington, D.C.-based consulting firm Avalere, published in late March, found that downside-risk models in the MSSP model (Tracks 2 and 3) have experienced more positive financial results than upside-only ACOs in this model, indicating the potential for greater savings to CMS over time as the number of downside-risk ACOs increases. Specifically, ACOs in the upside-only model (MSSP Track 1) increased federal spending by $444 million compared to the downside-risk ACOs (MSSP Tracks 2 and 3) that reduced federal spending by $60 million over five years, according to that analysis.

As such, Mostashari asserts that folks should not be surprised that these changes are impending. In fact, he actually predicted that a policy change was coming in a recent piece he penned in NEJM, in which he wrote, “We predict that CMS will almost certainly not extend one-sided risk for the third MSSP contract and may even propose regulations that would limit ACOs to one three-year contract in Track 1, beginning in 2019, perhaps focused on hospital-based ACOs.”

Nonetheless, as it stands today, MSSP Track 1 remains by far the most popular option for ACOs, representing 82 percent of all MSSP ACOs in 2018. Recently, the National Association of ACOs (NAACOS), the American Medical Association (AMA) and others jointly signed a letter requesting that CMS allow certain ACOs to continue in MSSP Track 1 for a third agreement period before having to move to a two-sided risk model.

What’s more, NAACOS also released a survey last week which found that 71 percent of ACO respondents indicated they are likely to leave the MSSP as a result of having to assume risk. The ACOs that were surveyed were MSSP Track 1 participants entering their third agreement periods in 2019 and thus are required to move to a two-sided ACO model next year.

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