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Report Projects 105 Million Will be Covered by ACOs by 2020

December 29, 2015
by Heather Landi
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While accountable care organizations (ACOs) have grown rapidly as a healthcare delivery and payment model over the last several years, the future of the model remains uncertain. In a recent Leavitt Partners report, analysts present projections of how the ACO model is likely to grow under four possible future scenarios. The most likely scenario, according to the report, projects that the population covered by ACOs will reach 105 million by 2020.

The report, titled “Projected Growth of Accountable Care Organizations,” states that the number of ACOs has increased from 157 in March 2012 to 782 in December 2015. And, the number of lives covered by ACOs has grown from an estimated 7 million in March 2015 to 23 million in December.

The Leavitt Partners analysts highlight a number of factors that could affect the growth of the ACO movement, including federal and state support and incentives. The passage of the Medicare Access and Chip Reauthorization Act of 2015 (MACRA) has been particular impactful as it provides strong incentives for providers who participate in alternative payment models. And, the Center for Medicare and Medicaid Innovation has also announced several new programs such as the Next Generation ACO Model, the Comprehensive ESRD Care Model and the Oncology Care Model.

“In the immediate future, the growth of the ACO movement will depend most heavily on the success of current ACOs. Providers who are considering accountable care with hesitation will be most strongly influenced by the success or failure of organizations currently involved in accountable care. This also applies to current participants in the Medicare Shared Savings Program (MSSP) who must decide whether or not to continue their participation,” the analysts wrote.

 “Incentives and penalties imposed by federal and/or state governments will also shape the growth of the movement by shifting the financial risks and opportunities. Providers may be pushed toward accountable care by the belief that these arrangements will eventually be forced on them. The move toward accountable care will continue to differ by geography according to market variations in ACO success, government policies, and other factors,” the analysts state in the report.

Here are the four possible future scenarios:

  • In the baseline scenario, analysts project that the number of ACO-covered lives would quadruple, increasing from 23 million to 105 million in 2020, which represents approximately one-third of Americans The analysts based these projections on the assumption that the federal government will continue to demonstrate strong support of the ACO model, that positive financial results will become increasingly common and that commercial payers will  continue to move aggressively toward risk-based contracts.
  • In the second scenario, the analysts modeled projections based on the assumption that MACRA was not passed in order to determine the impact that MACRA had on the growth of ACOs. Under this scenario, the number of ACO-covered lives increases to 68 million in 2020, which is significantly lower than the baseline scenario. As part of this scenario, analysts assumed that the passage of MACRA would be responsible for an additional 37 million ACO-covered lives.
  • The third scenario, the financial failures scenario, examines what would happen if ACOs are unsuccessful. “Here we assume that an increasing percentage of ACOs will either fail to recoup their investment costs by earning shared savings, or worse, incur shared losses. This scenario also assumes that ACOs that experience financial failures will abandon accountable care either by terminating or failing to renew their contracts. Similarly, this scenario assumes that commercial payers will also find these contracts to be unfavorable – that the investment costs associated with additional technology and administrative burden do not yield a positive financial return,” the analysts wrote. Under this scenario, the number of ACO-covered lives is still projected to grow to 41 million by 2020, which illustrates, according to the analysts, that negative financial results will not stop the growth of the ACO movement.
  • The fourth scenario, the widespread support scenario, investigates what would happen if there was strong support from all stakeholders in the healthcare industry. Under this scenario, analysts project the ACO movement to increase by more than 600 percent, growing to 177 million ACO-covered lives.

“In this scenario, we assume that the robust support from the federal government and commercial payers will be sustained. Additionally, we assume that state governments will be attracted to the cost-saving potential of accountable care and will incorporate principles of accountable care into their Medicaid programs,” the analysts wrote. “Another assumption is that a large majority of providers will develop and demonstrate a commitment to accountable care as a result of positive financial results and/or the belief that this model results in better care.”

“A final assumption is that accountable care will lead to an enhanced patient experience and consumers will develop a significant preference for receiving care from an ACO. Patients will show support for accountable care both by patronizing ACOs and by supporting policies that proliferate accountable care,” the analysts stated.

The analysts conclude that while there is wide variation between the different scenarios, the number of ACO-covered lives continues to increase in each scenario.

“Negative results by existing ACOs pose the biggest threat to the movement, but even that wouldn’t lead to a decrease; it would only limit the extent of the growth. This provides confidence to stakeholders that accountable care will continue to play an expanding role in the health care industry,” the analysts state.


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