ACOs Failing to Deliver, Says CMS in Issuing Proposed Overhaul

Alicia Ault

August 10, 2018

Stopping just short of calling Medicare's accountable care organizations (ACOs) a complete failure, federal officials said that instead of generating savings, the alternative payment system has been costing taxpayers money and that it's time for doctors and hospitals to begin taking on more of the risk of caring for patients.

The Centers for Medicare & Medicaid Services (CMS) on August 9 proposed a new rule that would govern how ACOs, which serve some 10.4 million Medicare beneficiaries, will be paid.

ACOs are groups of local physicians, hospitals, and other providers that work together and take responsibility for the quality and cost of patient care. Under the new rule, ACOs — even those already in the program — will have just 2 years to participate in a risk-free, shared-savings-only payment model. Currently, they have up to 6 years to stay in that risk-free, upside-only program.

CMS Administrator Seema Verma said in a call with reporters in which the new proposal was announced that a "shocking" 82% of ACOs take zero risk for patient care, which has led to increased Medicare spending — not the savings that were envisioned when the Medicare Shared Savings Program was established under the Affordable Care Act. The losses caused federal officials to propose the overhaul, she said.

"We understand that there are those who say we haven't had enough time to live up to the commitment to achieve value," said Verma. "But after 6 years, we believe the time has come to put accountability into the accountable care organizations.

"We now have enough collective experience that no provider group, whether they are a current ACO or considering becoming a future ACO, has any excuse for not providing value to patients and taxpayers," Verma said.

CMS said it estimates that if the rule goes into effect as written, some 117 ACOs will drop out of the program. By eliminating the ACOs that are losing money and by keeping the ones that are creating savings, the overhaul is expected to result in $2.24 billion in savings over 10 years, Verma said.

Halt Higher Quality?

The federal agency may be underestimating how many ACOs would drop out, said the National Association of ACOs (NAACOS). In a survey it conducted earlier this year, more than 70% of those responding said they would leave the program if they were required to assume financial risk.

"The administration's proposed changes to the ACO program will halt transformation to a higher quality, more affordable, patient-centered health care industry, stunting efforts to improve and coordinate care for millions of Medicare beneficiaries," said NAACOS President and CEO Clif Gaus in a statement.

Under the proposed rule, CMS would retire the current Track 1 and 2 options and replace them with a "Basic" track. That track would allow ACOs to choose a shared-savings-only payment for 2 years, with a payment of up to 25% of shared savings (half of the current payment). The track also offers three other paths of shared risk and reward, with savings and loss payments going from 30% to 50%. With increasing risk, ACOs are granted exemptions from federal laws that prohibit anticompetitive practices and from the so-called Stark laws that govern self-referrals.

ACO agreements would be extended from the current 3 years to 5 years. The organizations would also be required to notify beneficiaries that they are being cared for as part of an ACO. They have the option to go elsewhere for care if they so desire, said Verma.

The rule proposes to retain Track 3 of the current program, which would be renamed the "Enhanced" track, and will allow a 75% maximum shared savings payment and equivalent ding if there are losses. The move is designed to encourage ACOs that can take on higher levels of risk and reward to stay in the program, said the NACCOS.

CMS data show that physician-led ACOs are having the most success. When asked by Medscape Medical News why that might be the case, Verma said it wasn't clear, and added, "we continue to look at that issue." She said, "We're trying to encourage their participation — that's why you'll see with our proposed rule we're allowing them to participate in what we call our Basic track, which allows for a more gradual transition to taking on risk."

The rule proposes to extend all current ACO contracts — which are due to end in January — to July to give ACOs more time to choose an appropriate track. New applications will be accepted starting in July, said Verma.

CMS is inviting comments on the proposal during the next 60 days.

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