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COVID-19: The swan song of ACOs

April 13, 2020

Topics: Quote of the Day

By Maria Castellucci
Modern Healthcare, April 13, 2020

Most accountable care organizations taking on downside risk in the Medicare Shared Savings Program are considering dropping out due to concerns they will suffer financial losses in response to the COVID-19 pandemic, according to a new survey.

Fifty-six percent of risk-bearing ACOs said in a survey from the National Association of ACOs that they were very or somewhat likely to drop out of the Medicare program by May 31, which is the deadline the CMS offers to quit the program without being on the hook for losses. The survey had 81 participants, representing 42% of the program’s risk-bearing ACOs.

The COVID-19 pandemic is causing concern among ACOs that they’ll incur penalties this performance year because routine, preventive care has been put on hold while at the same time healthcare costs are rising through more hospitalizations.

“When ACOs made a commitment to assume risk, they didn’t expect they’d be handling the risk of a global pandemic,” said Clif Gaus, CEO of NAACOS, in a prepared statement.


Survey Shows ACOs’ Concerns About the Effect of COVID-19

National Association of ACOs

In addition to the significant toll the COVID-19 pandemic is having on our healthcare and economic systems, new survey results show the global pandemic could derail a decade-long effort to shift payment for healthcare services from a focus on volume to one on value. Value-based payment models, such as accountable care organizations (ACOs), incentivize physicians, hospitals, and all healthcare providers to work in a more coordinated manner, focusing on delivering high-quality care while avoiding unnecessary utilization and costs. An increasing number of providers have embraced the ACO model and its focus on accountability for cost and quality, but new survey results demonstrate that normal accountability is not appropriate in the face of a global pandemic.

In early April, the National Association of ACOs (NAACOS) emailed all Medicare Shared Savings Program (MSSP) and Next Generation ACO Model participants, including NAACOS members and nonmembers, with a request to complete an online survey focused on the effects of COVID-19 on ACOs. There were 304 responses from 226 ACOs across the country. The results of that survey send a clear and strong message that ACOs are very concerned about the effects of COVID-19 on their ACO. As shown in more detail below, those worries are illustrated by almost 60 percent of respondents in risk-based models reporting they are likely to quit the ACO program to avoid financial losses stemming from the pandemic, and 77 percent of ACOs reporting they are “very concerned” about the impact of COVID-19 on their ACO’s 2020 performance.

A vast majority of ACOs are very concerned about the effect of COVID-19 on their ACO

When asked how concerned ACOs are about the impact of COVID-19 on their ACO’s 2020 performance, 77 percent report being “very concerned” and 17 percent report being “somewhat concerned.” The remaining 6 percent of responses were split between being not concerned, neutral, or don’t know.

Further, 90 percent of ACOs report that the COVID-19 pandemic will have a significant or very significant effect on their ACO’s ability to earn shared savings.

While the concept of foregoing shared savings may seem like a small price to pay in an economy teetering on the brink of significant recession, shared savings payments for ACOs are often the only funding they have to keep the ACO functioning. Medicare does not pay ACOs a per-member, per-month or per-year payment, nor does it provide additional support to fund ACO operating costs that go towards additional clinical resources, data analytics, care coordinators, health IT, compliance, or administration.

A large portion of risk-based ACOs are likely to quit over concerns about COVID-19

In response to an emphasis in recent years for ACOs to assume increasing levels of financial risk, currently more than 40 percent of Medicare ACOs are in risk-based models. The MSSP has a May 31 deadline for risk-based ACOs to give notice of quitting to avoid losses, as well as potential savings opportunities, for this year. The survey found that 56 percent of risk-based MSSP ACOs report they are likely to leave the MSSP in response to concerns about having to potentially repay losses in 2020 because of COVID-19.

Uncertainty and difficulty predicting performance are notable concerns

A likely driver for ACOs to quit the program is the uncertainty about costs, quality, and utilization for 2020. COVID-19 has upended normal utilization and care patterns, disrupting ACOs’ ability to employ successful population-health strategies and causing tremendous uncertainty about costs. There is also notable uncertainty on how the pandemic will affect other aspects of the ACO program, such as changes to acuity or risk scores, diminished opportunities to meet quality requirements related to preventive care, and which patients the ACO will be accountable for this year. This uncertainty was strongly noted by survey respondents in comments, and 65 percent reported that the scope of the effects of COVID-19 will make it very difficult for them to accurately predict their ACO’s 2020 performance.

From the Conclusion

The survey results detailed above paint a potentially grim picture for ACOs and the move to value. Advancing value-based care has been a priority of Congress and the administration. If the Department of Health and Human Services’ goal remains moving all Medicare payments into alternative payment models by 2025, then it is imperative that the government appropriately adapt models to withstand the highly unusual circumstances brought on by COVID-19. Specifically, NAACOS and other leading healthcare organizations are calling on Congress and the administration to cancel all losses for ACOs for Performance Year 2020. More ACOs have assumed downside risk in recent years, which has been a priority for the administration. Simply put, ACOs’ acceptance of financial risk did not account for a global pandemic. ACO providers are risking their lives treating COVID-19 patients, they should not also be required to risk their businesses, many of which are not equipped to potentially pay millions to the government for increased costs from COVID-19.



By Don McCanne, M.D.

Accountable Care Organizations (ACOs) were established on the theory that by making providers accountable for the health care they were providing, you could improve quality while lowering costs. They were the policy community’s model of replacing volume with value. The enthusiasm amongst the bureaucrats has been so great that it has been the intent to move all Medicare payments into such alternative payment models (APMs) by 2025.

The experience to date has been very unimpressive. Significant cost savings have not been realized, and, in spite of the administrative excesses of quality determinations, they have failed to demonstrate significant improvements in quality that really counts. Further, it was never clear how they intended to reduce volume when most health care services are considered beneficial, even for those visits that merely provide reassurance. There is nothing like a pandemic to demonstrate that volume must always be a consideration in health care delivery and its financing system.

There is nothing good about the COVID-19 pandemic, but it is demonstrating what a ridiculous concept value-based purchasing is with its ACOs, APMs, MIPS (Merit-based incentive payment system), and specifics such as downside risk penalty systems. Though the policy community has been reluctant to back off of advocating for this screwy concept, we now see that the physicians and other providers out in the field living with this system are no longer able to tolerate it. Policy wonks are finally going to lose this one by fiat since their providers will walk away. In a month it could be that ACOs will have been dumped on the trash heap of terrible policy ideas (though that could be delayed if Congress were foolish enough to use bailout funds in an unsuccessful attempt to try to salvage the ACOs).

So are there any policy ideas out there that would work? Regular readers know that there certainly is one and that is a well-designed, single payer model of an improved Medicare for All. The design would include surge capacity. Although transitional queues for non-urgent problems might be necessitated during a pandemic, everyone would receive essential health care services without having to negotiate financial barriers, not to mention resolving inefficiencies and inequities in our financing system for all time. Wish those policy folks would finally get this into their heads. Maybe we could talk with them during their wake for the ACOs, hinting that single payer could be their policy reincarnation.

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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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