Accountable Care Organizations Could Be Missing Out on Millions

Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

By Mike Stankiewicz

Accountable care organizations could get millions of dollars in additional payments if they take on greater risk, but health-care stakeholders caution such organizations often are not ready.Consulting firm Avalere Health‘s analysis showed ACOs in the Medicare Shared Savings Program ( MSSP) would have gained $886 million in additional payments in 2015 if they took on two-sided risk, under which they take some responsibility for any losses. This includes a 5 percent bonus payment under the Quality Payment Program ( QPP). However, over 92 percent of ACOs operate in a one-sided risk track where they bear no risk.

“This study really shows how much incentive there is to take on greater risk,” Allison Brennan, vice president of policy at the National Association of ACOs (NAACOS) in Washington, told Bloomberg BNA Aug. 3.

Simulated Aggregate Net Savings for Track 1 ACOs Shifting to Track 2 (2015)

ACOs are provider-based networks that aim to increase coordination between physicians and services, improve patient outcomes, and reduce spending growth. They are part of a larger value-based approach to make Medicare payments based on results and outcomes instead of the number of services rendered.

Some of the largest ACOs include Banner Health Network near Phoenix; Advocate Physician Partners Accountable Care Inc. in Rolling Meadows, Ill.; and UnityPoint Health in West Des Moines, Iowa.

In 2015, only 42 ACOs were in the two-sided risk Tracks Two and Three options, under which they may be responsible for repaying a portion of shared losses back to the Centers for Medicare & Medicaid Services. Organizations operating in the Track One option could have seen a $1.1 billion increase in payments from the 5 percent bonus payment and a $178 million payment from shared savings if they took on more risk, the study found. While 21 percent of Track One ACOs would have generated $437 million in net losses overall, one-third of them would have offset their losses by the bonus payment.

Why Low Risk?

While the financial incentives for ACOs look good, Brennan said the risk is still too high for many ACOs.

“When the ACOs are evaluating which track to take, they’re looking at the levels of risk and the maximum downsided risk they can incur,” she said. “Many of these ACOs are just starting out. There is currently way too much risk for many ACOs to go down these two-sided risk tracks. They’re not ready.”

Josh Seidman, senior vice president at Avalere and one of the authors of the study, said ACOs in more risky tracks have more experience with the program and are more comfortable taking on more risk.

“Organizations are gradually becoming more comfortable with the program and gaining more experience,” he told Bloomberg BNA Aug. 3. “They are still undergoing many long-term changes, including changes in culture and how care is delivered to patients.”

Charles Oppenheim, partner at the law firm Hooper, Lundy & Bookman in Los Angeles, said the health-care field is generally risk averse.

“Most health-care providers are cautious about risk when it involves caring for patients,” he told Bloomberg BNA Aug. 4. “It takes a lot to overcome this. This sector really looks at the upsides and downsides of taking on risk.”

Brennan and Seidman said that Track One can be a stepping stone for organizations to enter Tracks Two and Three, but they still face many challenges.

Continued Challenges

David Muhlestein, chief research officer at Leavitt Partners LLC, a consulting firm in Salt Lake City, said many ACOs are performing poorly and are struggling to make changes and updates to their systems and manner of providing care.

“Some ACOs have done very poorly where they’ve lost 10 percent over their benchmark,” Muhlestein told Bloomberg BNA Aug. 3. “It might be that their benchmark was inappropriate, or some haven’t integrated or changed properly or quickly enough. The biggest challenge ACOs are facing is being able to create these new service and payment systems. It’s difficult to change an industry’s culture. These are huge organizational changes that take time and the reality is it takes longer than we would like it to be. It’s a generational transformation.”

He also said instability in the individual insurance market isn’t affecting ACOs’ performance and growth.

The Department of Health and Human Services recently delayed the release of 2016 final risk scores, financial reconciliation results, and payments for earned shared savings from July until September. NAACOS, in an Aug. 2 letter to the CMS, said the delay stems from faulty risk data and the delays can make ACOs hesitant to take on more risk.

The delay will result in “the lack of critical performance information that ACOs need to make final decisions about their 2018 participation, including their ability to assume financial risk in a two-sided ACO model,” the letter said. “ACOs are in the process of planning for 2018, and understanding how they performed in 2016 is a very important piece of information needed to plan accordingly for the future.”

Desired Changes

Muhlestein and Oppenheim said changes to methodology and compliance could make the program smoother for organizations.

In June 2016, the CMS established a new methodology for the program by incorporating regional spending to determine benchmarks. Avalere’s research showed more ACOs would have financially benefited from the new benchmarks.

“I’d evaluate the methodology around the benchmarks,” Muhlestein said. “I would also question whether the methodology is appropriate for the size of the population of the ACOs.”

Oppenheim said ACOs sometimes struggle with complying with strict anti-fraud and abuse laws, including the Medicare and Medicaid anti-kickback statute.

“As a health-care fraud and abuse lawyer, I would like to see more latitude from the government on what kind of incentives can be created that won’t trip up these organizations when trying to comply with fraud and abuse laws,” he said.

To contact the reporter on this story: Mike Stankiewicz in Washington at

To contact the editor responsible for this story: Brian Broderick at

For More Information

The study is at

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Health Care on Bloomberg Law