Some Coordinated Medicare Networks Skittish About Financial Risk

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By Mike Stankiewicz

Doctors and hospitals that coordinate care for certain Medicare patients aren’t likely to see a reprieve from taking on financial risks next year, industry sources told Bloomberg Law.

Industry groups say that forcing some health-care providers to repay Medicare for certain losses starting in 2019 in the accountable care organization program will likely shrink the program’s participation and hurt the move from fee-for-service care to a value-based care system. Accountable care organizations (ACOs) are groups of doctors, hospitals, and other health-care providers who come together voluntarily to give coordinated high quality care to their Medicare patients. If they save Medicare money, these groups can reap financial rewards.

Right now, 82 percent of the Medicare ACOs are Track 1, meaning they share in savings generated but they don’t have to pay back money if they fail to meet program goals, according to the Medicare agency. That will change in 2019 as some of these ACOs will move out of Track 1, unless the Centers for Medicare & Medicaid Services agrees to revise program rules and let them stay in Track 1, which is what doctors and other health groups want. Overall, about 10.5 million Medicare beneficiaries are served by 561 ACOs, which is a jump from 9 million beneficiaries and 480 ACOs in 2017.

Paying Back `Millions’

Allison Brennan, vice president of policy at the National Association of Accountable Care Organizations (NAACOs), told Bloomberg Law Feb. 28 that while she supports transitioning ACOs to risked-based models, some organizations are not prepared yet, and could end up quitting the program if forced into them too early. “If ACOs quit the program, it will hurt the transition to value-based care, counter to the program’s intent,” she said.

NAACOS, along with five other groups including the American Medical Association and Association of American Medical Colleges, recently requested that the CMS give some ACOs more time before they face risk. The groups said many ACOs are still in Track 1 “because they are unprepared to assume risk requiring them to potentially pay millions of dollars to Medicare.” Brennan added that CMS needs to act early this year to give ACOs time to make strategic decisions.

Track 1 is the only nonrisk-bearing model for ACOs in the Medicare Shared Savings Program. The risk-bearing tracks are Track 1+, which involves limited risk of losses, known as downside risk, for health-care providers, as well as Tracks 2 and 3, with Track 3 having the greatest risk and savings potential. Other types of ACOs are the ACO Investment Model, which is aimed at rural and underserved areas, and Next Generation program, for organizations with more experience in coordinating care. Tracks 2 and 3 account for 1 percent and 7 percent, respectively, of all ACOs in Medicare.

The most recent cost savings data for ACOs operating in the Medicare Shared Savings Program showed overall gross savings for Medicare in 2016 of $652 million, a CMS spokesperson told Bloomberg Law Feb. 28.

Accountable Care Organization Models (2018)

The industry groups proposed that the CMS allow certain ACOs to continue in Track 1 if they generate net savings for four years or do well in quality improvements. Overall, quality scores for ACOs have been improving, according to the CMS.

Help Not Likely?

A health-care consultant and a former White House health-care policy adviser said the administration is unlikely to act.

“The CMS has signaled it’s moving away from nonrisk-based ACOs as the agency is still losing money from them,” Chris Dawe, a former policy advisory for health care at the National Economic Council under the Obama administration, told Bloomberg Law Feb. 27. Dawe currently serves as senior vice president of Medicare partnerships at Evolent Health, a population health services firm specializing in value-based care.

David Muhlestein, chief research officer at Leavitt Partners LLC, a consulting firm in Salt Lake City, said few ACOs will take on more risk without a push, due to the potential of losing money. He said that because only those ACOs that started in Track 1 in 2012 will be affected by this change next year, he doesn’t expect a large drop-off in participation in the program.

“We see a natural turnover every year,” he told Bloomberg Law Feb. 27. “Last year alone 50 organizations didn’t renew their contracts.”

He added that Alex Azar, secretary of the Department of Health and Human Services, has indicated financial risk needs to be taken by these organizations in order to bring down health-care spending.

Concerns From ACOs

Despite Azar’s stance on risk, industry is hopeful the White House’s position on providing flexibility and choice in the health market is a good sign.

“This administration has taken steps to alleviate regulatory burden and our request is in line with that,” Brennan said. “The government is taking a real step backwards by forcing ACOs to take on risk before they are ready.”

Seth Edwards, principal of population at Premier Inc., another health-care industry organization that signed the recent letter to the CMS, said that smaller ACOs, like those in rural areas, are more likely to struggle to improve their savings. “If these smaller ACOs have even one patient who becomes very costly to treat, it can be difficult to keep their overall costs down,” he told Bloomberg Law Feb. 27. “A lot of these organizations are doing the right thing and trying to improve quality of care and generate savings, and that’s being overlooked.”

While rural states feature fewer ACOs compared to urban centers, such areas are home to the largest organizations including Advocate Physician Partners Accountable Care Inc. in Rolling Meadows, Ill. which has 6,300 physicians and UnityPoint Health in West Des Moines, Iowa, with more than 900 physicians.

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

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

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