How to understand the new ACO results

Ben Umansky

Ben Umansky, Health Care Advisory Board

On Tuesday, CMS released performance data for accountable care organizations (ACOs) in its Pioneer and Medicare Shared Savings Programs.

Here are 7 early observations on what the results show about Medicare ACOs and what you should expect next.

1. It’s still not easy to earn money as an ACO.

Only about a quarter of MSSP ACOs actually earned a performance payment. Almost half of MSSP ACOs actually ended up costing Medicare more than expected, and another quarter—89 ACOs—generated savings for Medicare, but not enough to qualify for any shared savings in return.

That’s similar to the distribution of results we’ve seen in the earlier MSSP releases as well, and it should be a warning to anyone thinking an upside-only model like Track 1 of MSSP is easy money.

The news is a little more encouraging from the Pioneer ACOs. Eleven of the 20 Pioneers qualified for performance payments totaling $82 million. On the other hand, that means nine didn’t qualify, and in fact three Pioneers ended up so far over their expenditure targets that they owe Medicare a total of $9 million in shared losses. 

Overall, it seems that Pioneer ACOs are both more likely to earn performance payments and the payments earned are larger—about $7.5 million on average for each qualifying Pioneer versus just under $4 million on average for MSSP qualifiers. That could be due to the Pioneers’ slightly longer experience in the program or their more advanced care transformation capabilities at the outset, but it may also be evidence for the power of downside risk.

2. Success isn’t random.

The top performer in the MSSP this cycle is a familiar one. Memorial Hermann Accountable Care Organization earned the largest single performance payment—$22.7 million. Memorial Hermann was a top performer in the last round of results as well, and early Advisory Board analysis shows a clear correlation between 2013 and 2014 performance across all MSSP ACOs.

The fact that performance in one year is correlated with performance in the next is important and encouraging. It suggests that there are ACO-specific factors in play that can be observed, studied and, ideally, replicated. It is also encouraging that participants that have been in the MSSP longer are earning more performance payments than newer entrants, as it indicates that ACOs may be learning from their own experiences.

3. Size doesn’t matter.

Yes, Memorial Hermann is a large ACO centered around a large health system, and many of the ACOs with the biggest performance payments are in fact bigger themselves. But that’s mostly a natural consequence of the program’s design—payments are based on the total cost of care for a population, so a larger population will yield a larger payment in absolute terms. But on a per-beneficiary basis, the largest performance payment went to RGV ACO Health Providers, LLC, a Texas-based ACO with just under 8,000 attributed beneficiaries. RGV earned $957 per beneficiary—almost double what Memorial Hermann earned on the same measure ($555). In fact, there seems to be little correlation overall between performance and ACO size, though it is noteworthy that the top 11 per-beneficiary payments went to ACOs with fewer than 10,000 attributed lives.

4. Quality does matter.

In the MSSP, quality adjustments brought the average sharing rate for Track 1 ACOs that qualified for a performance payment down to 44.7% from a theoretical maximum of 50%. (The actual payments were reduced even further to account for the impact of sequestration). That means payments to ACOs were about one-sixth lower than they could have been with perfect quality performance—a difference of around $40 million. On top of that, six ACOs that qualified for a payment but didn’t properly report their quality saw their payments of as much as $14 million forfeited entirely.

To be fair, perfect quality performance may not be a realistic expectation. In the Pioneer program, improvement in overall quality slowed significantly. After a jump from an average quality score of 71.8% in year 1 to 85.2% in year 2, year 3 quality averaged 87.2%. The results may suggest that the Pioneers have successfully implemented and maintained early improvements but are finding it difficult to make deeper headway.

5. It’s not clear that the MSSP is saving Medicare money.

It does seem that the Pioneer program is indeed generating a net savings for Medicare. The 20 Pioneer ACOs combined for $120 million in total savings, earned $82 million in performance payments, and paid $9 million in shared losses.

But the MSSP picture is much more complicated—and more complicated than CMS’s fact sheet suggests. CMS emphasizes the $806 million in savings generated by the 92 MSSP ACOs that qualified for a shared savings payment. It also acknowledges that 89 other ACOs held expenditures below their benchmarks, but not by enough to qualify for a shared savings payment. It makes no mention of the 152 ACOs whose expenditures were above benchmark.

Fortunately, CMS has released ACO-level data that make it possible to reconstruct the full picture. As a complete group, the 333 MSSP ACOs kept spending only $291 million below benchmark—a cost savings to Medicare, yes, but one smaller than the $341 million in shared savings payments made to the 92 top performers.

There’s an open question whether the MSSP benchmarks are appropriate targets for ACO performance, and CMS has announced its intention to revise its methodology. Regardless, if the changes in expenditures relative to benchmark are to be the measure of MSSP’s success, it appears that the cost of performance payments currently outweighs those returns when all ACOs are taken into account.

6. The ACO programs are probably achieving what they need to.

Even if the aggregate savings to Medicare are negligible or negative, and even if most ACOs aren’t earning shared savings payments, it’s likely that the Pioneer and MSSP programs are benefitting both Medicare and the provider community insofar as they ease and enable a broader migration toward new payment and care models. Many ACOs are participating in order to gain experience with risk-based payment, to gain access to cross-continuum claims data and other important analytic resources, to learn to manage high-risk populations, and to strengthen alignment with stakeholders across their communities. For these participants, and for others who may follow, the continued operation and evolution of the ACO programs are of tremendous importance.

7. The path forward remains clear, even if it’s complicated.

CMS has shown a willingness to adjust and expand its ACO programs to encourage both greater participation and greater provider responsibility for the total cost of care. Yesterday’s results are not likely to change that approach. CMS remains committed to bringing 50% of its payments into alternative payment models like the ACO programs or bundled payments by 2018. MSSP and Pioneer will remain pillars of that migration, and CMS will continue to accept ACOs into MSSP while simultaneously nudging providers toward higher-risk, higher-reward environments like the newly established Track 3 of MSSP or the Next-Generation ACO Model. (If you’d like to learn more about the spectrum of Medicare risk options, check out this webconference that my colleague Eric Cragun and I shared with our members a few months ago.)

And it’s not just Medicare that’s holding the course. Nearly every ACO that’s spoken to the Advisory Board about its plans intends to reenroll in the program when the time comes, and many express interest in higher-risk models, including an eventual transition into a full-risk strategy in the Medicare Advantage market.

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