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ACO wonks stumbling through the pandemic

April 15, 2020

Topics: Quote of the Day

By William K. Bleser, Elizabeth Singletary, Hannah L. Crook, Jonathan Gonzalez-Smith, Robert S. Saunders, Mark B. McClellan
Health Affairs Blog, April 14, 2020

The purpose of this two-part Health Affairs Blog post is to summarize impacts, issues, and policy implications due to the coronavirus pandemic for the largest payment reform program in the country: accountable care organizations (ACOs). Clinician organizations participating in, and payers running, payment reform programs face significant uncertainty. ACOs, in particular, face substantial risk of financial loss related to their cost-performance requirements, and decisions to stay in the program or leave are rapidly approaching.

In Part 1 of this post, we estimate coronavirus-related changes in use and financial impact on ACOs based on existing data.

The Bottom Line

All in all, any given ACO’s shared savings and losses for performance year 2020 will depend on how much the utilization increase from COVID-19 is offset by the decrease in procedures and primary care visits. Our estimated ranges indicate a likely scenario of net increased costs, which will vary for any given ACO based on policies in local geographies, the prior health status and COVID-19 prevalence for the attributed population, and the ACO’s own surge policies. The main message is that COVID-19 can have potentially large financial impacts on ACOs and more strongly affect physician-led ACOs. The uncertainty for any given ACO will challenge them in their current pandemic response and, without action, may limit their willingness to remain in ACO programs.

ACOs across the country vary tremendously in size, structure, geography, and patient characteristics, and many ACOs are unlikely to have sufficient liquid cash reserves needed to weather the crisis and tremendous uncertainty without significant supports and flexibilities.


Maintaining Progress Toward Accountable Care And Payment Reform During A Pandemic, Part 2: Immediate Issues And Short-Term Actions

Health Affairs Blog, April 15, 2020

In Part 2, this post, we identify immediate issues and short-term actions that private payers, Medicare, and Medicaid can take immediately to adjust their ACO programs to adapt to this crisis in the coming weeks and months.

Conclusions And Summary Of Recommendations

The coronavirus pandemic is perhaps a once-in-a-lifetime health and economic crisis. In addition to broader health outcomes and care delivery impacts, it threatens the progress of payment reform writ-large. The spread of payment reform is quite large to date, with nearly 1,600 ACO contracts across all payers covering almost 44 million lives (about 13 percent of the US population). The MSSP ACO program covers more than 11 million beneficiaries alone. In addition, these payment reforms have provided health care organizations with infrastructure and competencies that they have been able to shift toward community-based population health surveillance and management to limit the impact of the epidemic.

Based on current data, we have found that the COVID-19 pandemic will have significant negative financial impacts on ACOs based on: increased use and expenditures from COVID-19 cases that can lead to smaller shared savings or new shared losses, non-reimbursable infrastructure costs, and reduced revenue in primary care and elective procedures that can cause cash flow problems for smaller and less resourced ACOs. Uncertainty is substantial in all of these cases and can vary tremendously depending on an ACO’s geography, structure, beneficiary health, and size, which can cause anxiety for ACOs considering their future in these payment reform programs. These anxieties could result in ACOs dropping out of the program entirely or consolidating together (which is associated with less competition and decreased value).

We offer suggestions for payers such as CMS and commercial insurers in the short term to help continue progress, including providing reassurance to ACOs and other health care delivery organizations participating in alternative payment models, clarifying telehealth flexibilities and fixes, and harmonizing 1135 waivers with payment reform specifications. In many cases, these reassurances and flexibilities will need to be paired with support for infrastructure development related to new telehealth technology and public health surveillance activities, at least.

We plan to follow this blog post with a subsequent one in the coming weeks on longer-term program considerations and potential solutions such as infrastructure support.



By Don McCanne, M.D.

Earlier this week the National Association of ACOs released the results of a survey indicating that “a large portion of risk-based ACOs are likely to quit over concerns about COVID-19.” Today Mark McClellan and his colleagues at Duke University, proponents of the ACO model of health care financing, explain the impact that the COVID-19 pandemic has had on ACOs, concluding, “The uncertainty for any given ACO will challenge them in their current pandemic response and, without action, may limit their willingness to remain in ACO programs.”

In the past they have released reports indicating that the results of ACOs in achieving higher quality at lower costs have been less than stellar, but they have continued to support the model suggesting that more experience with it may improve the results. If there was ever any doubt that the model is irreparably flawed, the experience under the stress of the pandemic should have laid that doubt to rest.

Yet they do not want to give up. They are suggesting modifications that will surely result in considerable infusion of public funds, but they are doing it to salvage the highly defective ACO model as opposed to improving the lot of patients and their health care professionals when compared with what would be happening under the traditional fee-for-serve Medicare model. Under traditional Medicare, absent the ACOs, essential health care services would be rendered, and Medicare would pay the bills. That’s as it should be.

We all know that Medicare is not perfect, but, instead of playing around with illogical constructs advanced by advocates of the “art” of policy rather than the science of policy (as if process is what is important and the product doesn’t matter), we should enact and implement those changes that will improve Medicare, and then, of course, expand it to cover everyone. Yes, it’s time for single payer Medicare for All. Let’s take care of the patients, not the wonks.

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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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