ACO Journey to Downside Risk
Accountable care organizations (ACOs) cannot, and should not, hide from downside risk. Despite the ongoing kerfuffle between CMS’s (Centers for Medicare and Medicaid Services) push for downside risk and the threat of mass exodus by early ACO adopters, downside risk is proving fruitful and gaining momentum.
Admittedly, ACOs have legitimate reasons for hesitating. In addition to recent mixed signals from CMS, success with downside risk takes time to realize. There are considerable upfront costs across technology, care coordination, education and infrastructure. Most notably, accountability requires data and the ability to share, interpret and put resulting insights into continuously evaluated and refined actions.
However, pressure to accept downside risk is mounting as risk-bearing organizations experience success across commercial and Medicare populations. Even the most risk-adverse organizations cannot escape much longer.
A recent survey from the National Association of ACOs (NAACOS) revealed the depth of risk aversion among the first wave of Track 1 ACO participants. Track 1 ACOs are upside-risk only and are required to move into downside-risk as they mature into their third contract. For the very first ACOs founded in 2012 or 2013, their third contract period begins in 2019. According to the survey, 71 percent of these early ACOs will “likely” leave the MSSP (Medicare Shared Savings Program) if forced to assume more risk.
This is a big deal. Track 1 represents 82 percent of all Medicare ACOs. Staying and accepting downside risk or exiting the program is a decision facing the vast majority of ACOs now and for each year to come. Industry groups and sympathetic lawmakers are lobbying hard to delay the downside risk requirement. All this noise might lead physicians and hospital leaders to the conclusion that value-based care isn’t working and delay tactics make sense.
They would be wrong.
Downside risk is everywhere. It percolates throughout Medicare and commercial populations in the form of bundled payments/episodes of care, pay for performance, capitation and through alternative payment models such as those under MACRA, ACO Track 1+, Next Generation and Tracks 2 and 3. Today, nearly two-thirds of all payments are based on value. Surprisingly, commercial investment in risk-bearing contracts currently outpaces CMS. This means a broad range of value-based contracts are on the horizon for health systems whether they remain on the ACO path or not.
Downside risk is everywhere because it works. It helps drive higher quality care and lower healthcare costs. According to a recent study by ORC International, value-based care strategies reduced unnecessary medical costs, improved patient engagement and payer-provider relations, and increased quality of care.
In stark contrast, upside-only risk encourages health systems to play it safe, to hang on to their volume-based practice methodologies and simply share in whatever cost savings they happen to generate. Without any proverbial skin in the game, there is no incentive to embrace improvement across quality and care outcomes. There is no genuine accountability.
The Bottom Line
Organizations taking on downside risk are outperforming those who don’t.
The ORC study revealed downside risk-models in the MSSP (Tracks 2 and 3) have more positive financial results than upside-only models (Track 1). Specifically, over a five-year period, Track 1 ACOs increased federal spending by $444 million while Tracks 2 and 3 reduced federal spending by $60 million.
Another recent study indicates around 91 percent of Track 1 ACOs would have financially benefited from accepting risk and participating in Track 1+ (based on 2016 performance data). The same study revealed downside-risk models have more positive savings overall than upside-only models.
As evidence mounts on the effectiveness of downside risk arrangements, government healthcare officials take an increasingly hard line on the necessity and timing of assuming risk. Specifically:
- Health and Human Services (HHS) Secretary Alex Azar (May 2, 2018), in a speech to the World Health Care Congress, stated that two of the agency’s top four priorities were to accelerate the shift to value-based reimbursement and address the cost and quality of healthcare. Specifically,
- “The final two areas of innovation we are focused on are engaging in new models of payment for Medicare and Medicaid, and removing obstacles to innovation.”
- CMS Administrator Seema Verma (May 7, 2018), “these [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.”
- Bruce Greenstein, HHS’s chief technology officer, at the HLTH conference (May 8, 2018), when asked about the 71 percent of ACOs who intend to leave the MSSP program rather than accept downside risk, “Well, maybe this program is not for you. Because if you only want a little bit of extra money but don’t want to take risk, maybe this isn’t the program for you. There’s no ‘A’ for effort here; you have to produce results.”
Without a doubt, downside risk is a primary lever CMS and commercial insurers want to use to slow and reverse unsustainable healthcare spending while improving patient outcomes. Innovative, technology-forward ACOs and healthcare delivery systems are leading the market by getting ahead of mandated downside risk and adopting the tools, infrastructure and culture needed to succeed. Regardless of risk-aversion, now is the right time for ACOs to evaluate their readiness to assume downside risk.