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By Monica E. Oss

Reading through our past coverage of the Medicare accountable care organization (ACO) program can produce a lot of confusion—like these two seemingly conflicting headlines:

The first headline is related to recently released data from the Centers for Medicare and Medicaid Services (CMS), which showed that in 2016, ACOs across all Medicare ACO programs generated $784 billion in savings—the highest amount we’d seen yet (see Medicare ACOs-The Enrollment & The Savings Are Increasing). There are 618 Medicare ACOs, covering 8.4 million beneficiaries (14.7% of the Medicare population), and the four-year savings reported were $1.2 billion (For more on specific ACO performance, be sure to check out our just-released market intelligence, The 2018 OPEN MINDS Medicare ACO Update: A Four-Year Trends Report.)

The second headline is about new research on CMS ACO data from 2012 through 2016. This research is focused only on the Medicare Shared Savings Program (MSSP) ACOs. The MSSP ACOs did not generate savings-rather they increased federal spending by $384 million in the first three years of operation (see ACOs Shared Savings Raised Federal Costs By $384 Million Between 2013 & 2016).

Why the different conclusions? It all comes down to which ACOs are included in the savings calculations. The first study looked at MSSP ACOs, Pioneer ACOs, and Next Generation ACOs, and found savings by looking at “expected expenditure” versus actual expenditures for attributed beneficiaries. The second study, which found no savings to CMS, looked only at the performance of MSSP ACOs by “upside” (for MSSP Track 1), and “downside” (for MSSP Tracks 2 and 3) risk—with ACO program savings subtracted from ACO participant earned savings to estimate the loss to CMS.

The takeaway—ACOs that have more downside financial risk produce more savings for CMS. This is similar to the findings a few years ago comparing various Medicare alternate payment models—with the conclusion that savings were produced by bundled rate models when the participating provider organizations had more downside financial risk for the cost of consumer care (see Medicare Demonstration Project Results Are In – Only Winner Was Bundled Payments and The Future Of ACOs Looks Bundled).

The findings are coincident with (and related to) a number of developments—the plan by CMS to move ahead with more Medicare bundled rate programs (see CMS Unveils New Voluntary Bundled Payments For Care Improvement Advanced Model); the increasing proportion of the U.S. population enrolled in ACOs; the increasing amount of downside financial risk in health plan contracts with provider organizations (see 73% Of Health System Executives Cite Transition To Risk-Based Care Models As A Top Priority).

How to factor these developments into your strategy? More downside financial risk favors larger, well capitalized organizations. The more financial risk, the larger the covered population and service array need to be for actuarial soundness, which means fewer but larger contracts are available with health plans. Significant downside financial risk requires a very different management model and management infrastructure. I think it is this last point that is going to create a new list of “winners” and “losers”—and may even cause some management teams to decide to pull out relationships with certain payers or health plans (see 71% of MSSP ACOs Likely to Quit Rather Than Assume Downside Risk). In this market turbulence, expect to see some organizations that fail to compete or fail to deliver, organizations that grow with the new opportunities, and a host of new “out of the box” competitors.

For more on the changing relationships between payers, health plans, and service provider organizations, don’t miss The 2018 OPEN MINDS Strategy & Innovation Institute coming the first week in June, in New Orleans. Two must-see sessions on this issue are the keynote by Charles Gross, Ph.D., the Vice President, Behavioral Health at Anthem, Inc., “Going Beyond Innovation-Developing Partnerships With Health Plans”; and the session, “How To Develop A Case Rate: A Guide To Bundled Payments,” facilitated by my colleague Ken Carr, Senior Associate at OPEN MINDS.

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