Challenges facing the accountable care organization (ACO) system

An interesting article in Modern Healthcare reviews some discussion at a recent Medicare Payment Advisory Commission (MedPAC) meeting. The first issue is that the pool of fee-for-service Medicare beneficiaries is shrinking, at least on a relative basis.

As Medicare Advantage grows each year, population-based alternative payment models like accountable care organizations are left with a shrinking pool of beneficiaries, he added.

Another issue is that generating “savings” year after year may be increasingly difficult over time.

Because ACO benchmarks are reset each performance period based on the ACO’s past performance, an ACO that improves the amount of savings it generates each year will have to deal with benchmarks that are increasingly harder to exceed, which puts long-term ACO participation at risk.

To address this issue, MedPAC considered using administratively set cost benchmarks. Getting health systems to participate in voluntary ACOs is also a challenge.

Getting providers to participate in such models in the first place is another hurdle MedPAC wants to clear. Incentives for providers to participate in APMs are already written into statute. By 2040, payment rates will be 8% higher for physicians in advanced APMs than those who choose not to participate,

Some have proposed mandating participating in ACO. Providers and payers also have different perceptions about whether providers should be taking on financial risk if costs do not fall.

Commissioner David Grabowski, a professor at Harvard Medical School, said downside risk shouldn’t be forced onto providers, while Commissioner Dana Gelb Safran, president and CEO of the National Quality Forum, said two-sided risk can make providers serious about generating savings.

MedPAC’s solution was to have small providers have no risk, mid-size or safety net providers have two-sided 75% shared savings, and have larger health system be fully capitated (i.e., 100% shared savings). While larger health systems will be able to better manage risk and be less sensitive to outliers, they also may be less nimble when it comes to cost reduction.

Leave a Reply

Your email address will not be published. Required fields are marked *