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The time for ACO to be ready for downside risk

Accountable care organizations (ACOs) are part of the foundation of the healthcare industry’s transition to value-based care and purchasing. The federal government says ACOs could do more to reduce costs and improve care quality. And the organizations can achieve the goals through downside financial risk. ACO programs with higher financial risk levels compared to the MSSP are generating greater savings.

CMS final rule aggressively moves ACOs into two-sided risk – Offers flexibilities in the beneficiary assignment, telemedicine, and beneficiary incentives.

Reasons to move from upside-only payment models:

  • In upside-only models, providers that ignore the program and achieve no savings face no consequences. Thus, there is a concern that providers in upside-only models will not strive meaningfully to achieve savings.
  • Due to natural variation in spending, some providers will have spending below the benchmark just by chance.
  • These providers will receive a bonus (depending on program parameters), and the payer will be unable to recoup those costs with penalties charged to those with spending above the benchmark.
  • Payers can try to protect against the financial consequences of upside-only risk and payment variation by requiring savings to exceed a certain threshold before bonuses are paid, some providers will still exceed the savings threshold by chance, and many providers that genuinely created savings will not get bonuses because the savings will not be large enough.

An ACO may only remain in a one-sided risk arrangement for a limited period of time. Most ACOs enrolling for January 1, 2020, period will have up to two years of one-sided risk. The permitted period of one-sided risk depends on whether the ACO is determined to be “experienced with performance-based risk Medicare ACO initiatives.”

Shared savings program:

Today, more than 600 ACOs are participating in the Medicare ACO Program, which includes the Medicare Shared Savings Program (MSSP) and the Next Generation ACO Model. The Shared Savings Program offers providers and suppliers (e.g., physicians, hospitals, and others involved in patient care) an opportunity to create an Accountable Care Organization (ACO). An ACO agrees to be held accountable for the quality, cost, and experience of care of an assigned Medicare fee-for-service (FFS) beneficiary population. The Shared Savings Program has different tracks that allow ACOs to select an arrangement that makes the most sense for their organization.

The Shared Savings Program is an important innovation for moving CMS’ payment system away from volume and toward value and outcomes. It is an alternative payment model that:

  • Promotes accountability for a patient population.
  • Coordinates items and services for Medicare FFS beneficiaries.
  • Encourages investment in high quality and efficient services.
  • After six years, these ACOs must move to a shared risk ACO model, such as MSSP Track 1+, 2, 3 or the Next Generation Model, where they are both eligible for shared savings and liable for a portion of increased spending, in addition to their direct financial investment.

Developing a culture for at-risk success:

While data analytics, care coordination, case management, and other capabilities are all critical to earning shared payments, establishing a culture that aligns with the model’s goals should be an ACO’s first step to assuming downside risk. Taking on downside financial risk does not directly introduce the need for new processes and controls, but it does magnify the importance of embedding certain steps into an ACO’s operations.

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