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Time to abandon the ACO concept

January 13, 2020

Topics: Quote of the Day

By Maria Castellucci
Modern Healthcare, January 10, 2020

The experimental Next Generation Accountable Care Organization model didn’t save Medicare money during the first two performance years, according to an analysis released Friday from the agency.

Rather than reducing Medicare spending, the Next Generation ACO model, which is now in its fifth and final year, added $93.9 million to net Medicare spending during 2016 and 2017, the first two years of the program, the analysis found. The study, which was conducted by researchers at the University of Chicago and commissioned by the CMS, said the increase wasn’t statistically significant although at first glance it appears to be a blow for supporters of the model who claimed its been saving Medicare money.

But the results from the study are more complicated, according to David Muhlestein, chief research officer at Leavitt Partners. Medicare can save at most about 1% on spending for beneficiaries in the program because that’s how much they take from the ACOs at the beginning of performance years. The fact that the program was a wash for the agency in the first two years doesn’t make a huge difference because the bar for saving is so low, he said.

“Is the program ever going to solve our cost issues in Medicare? No. It’s all pretty minor,” he said.

The Next Generation ACO model is an experimental project from the CMS Center for Medicare and Medicaid Innovation that forces organizations to take on substantial downside risk.

According to the study, Medicare was unable to achieve savings during the first two years of the program—2016 and 2017—because they had to pay out more in savings than they recouped. In fact, before accounting for the payouts CMS had to make, the model actually decreased Medicare spending by $123.18 million during the first two years.

The CMS hasn’t announced if it will make the project a permanent part of the Medicare program, although the changes made to the Medicare Shared Savings Program in late 2018 resemble somewhat the Next Generation model because ACOs are forced to take on higher levels of downside risk the longer they are in the program.


Next Generation Accountable Care Organization Model Evaluation

NORC at the University of Chicago, January 2020

After accounting for shared-savings payouts, the net impact of the NGACO model on Medicare spending cumulatively across PY1 and PY2 was a statistically insignificant $54.40 PBPY increase (+0.42 percent), totaling $92.99 million.

No impact on quality-of-care measures.


Participants continue to drop out of Medicare ACO program

By Maria Castellucci
Modern Healthcare, January 10, 2020

Just 53 new accountable care organizations joined the Medicare Shared Savings program for the Jan. 1 start date, which is significantly less new entrants compared to previous years.

There are now 517 ACOs in the Medicare program versus in 2018 when there were 561 ACOs. The drop in new participants follows a recent trend from six months ago when only 66 new ACOs joined.

The National Association of ACOs blames the changes to the Medicare ACO program for the recent drops in participation. In late 2018, the CMS finalized an overhaul of the program that requires ACOs to take on downside financial risk sooner after years where most organizations were risk averse.

The growth of ACOs in risk-sharing tracks this year likely shows that the participants who decided to stay in the program are serious about taking on down-side risk, which is ultimately a good thing for the program, said David Muhlestein, chief research officer at Leavitt Partners. There were likely ACOs in the program that didn’t belong there because they had no intention of moving to downside risk. By forcing ACOs to take on risk eventually, the CMS is likely getting a stronger pool of participants ready and willing to do so.



By Don McCanne, M.D.

For the past decade the public and private policy community has been insisting that the way to control our very high health care spending has been to make the actual providers of health care accountable for both the costs and quality of the care they provide. Thus the establishment of the accountable care organizations (ACOs).

CMS and its advisers have been insisting that the success of the ACO model is dependent on the ACOs taking a substantial downside risk; that is, a substantial proportion of the financial risks of caring for these patients must be transferred from the insurer (Medicare) to the providers of care (the ACOs). Although they talk about transferring substantial risk, in these Next Generation models it is still a relatively small amount, but it is quite visible since it represents primarily the profit margins of the providers. A modest increase in bearing the costs of risk can result in significant losses for the providers.

Although they are lauding these organizations that are taking downside risk, it is no surprise that the number of organizations participating is now declining. Since the original Medicare Shared Savings Program is being leveraged into downside risk it should not be a surprise if participation declines throughout the program. So far the policy community is insisting that we continue with this (failed) experiment. They are dismissive of the ACOs that are leaving the program but express the hope that “a stronger pool of participants” is ready and willing to take the dive into this (foolish) venture.

What is sad is that CMS and much of the policy community have remained opposed to a model that is vastly more effective in reducing wasteful spending – the single payer model of an improved Medicare for All – as they insist that we continue with this failed experiment with ACOs.

Enough. Whether it’s due to their ideology or something else, those in control are not changing. We need to replace them with legislative and administrative public stewards who do care about the people of our nation and will thus enact and implement a program that will ensure that we all will have our health care needs met – a single payer improved Medicare for All – not after a decade or two of playing around with adding the additional, wasteful administrative complexity of a public option version of Medicare for All, but right now!

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About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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