Life Science Compliance Update

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August 26, 2016

Rocky Start to CMS ACO Program

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Three of the 21 participants in CMS’ newest accountable care organizations program, the Next Generation ACOs, have withdrawn since the start of the year. Heritage California ACO in Northridge, Calif., River Health ACO in Harrisburg, Pa., and WakeMed Key Community Care in Raleigh, N.C. now leave the program with 18 ACOs. This model allows ACOs to assume higher risk for a promise of a higher reward than the Pioneer Model and Medicare Shared Savings Program.

Leaving New Model

The Next Generation ACO model uses a new benchmarking methodology that incorporates one year of historical costs as well as regional and national costs and an organization’s quality score. This is seen by many as an improved benchmarking methodology. As reported by Healthcare Finance, RiverHealth ACO released a statement: "While RiverHealth ACO managed the rate of increase in costs to below the national average, projections do not indicate that the ACO would be able to meet the current target set by CMS”.

Also reported, WakeMed Key Community Care also cited the difficult financial metrics. The ACO is a joint venture between WakeMed Health and Hospitals and Key IPA. WakeMed Key Community Care's Board of Managers made a business decision to withdraw from the Next Generation ACO program for 2016 after evaluating financial and operational metrics, according to the provider. "Though we were committed to the program, developments in Q1 led the board to reconsider the Next Generation participation decision," WakeMed Key Community Care said by statement according to the report.

State of other ACO Models

As reported by Leavitt Partners, the most popular of Medicare’s models, the MSSP, gained 100 new participants this year, increasing the total to 434 covering 7.7 million lives. Of those 434 MSSP ACOs, 22 have risk-bearing arrangements, including six in Track 2 and 16 in the new Track 3. Although CMS announced 100 new ACOs, the MSSP had 404 active ACOs in 2015, giving this new cohort a net increase of only 30. Eight MSSP ACOs moved to the Next Generation model and are accounted for, but further analysis will be needed in order to conclude how many ACOs merged with others vs actually leaving the program. CMS also announced that 147 MSSP ACOs chose to renew, continuing their participation in the program.

ACOs’ Future

A recent study indicates that ACOs may unintentionally create further disparities in healthcare. According to the report, physicians who participate in ACOs are more likely to practice in affluent areas. The study found an inverse relationship between ACO participation and the percentage of the population a physician served that was black, living in poverty, uninsured or disabled or had less than a high school education. This means patients who are already more vulnerable have less access to the benefits of ACOs.

Additionally, in 2015, 45% of Medicare ACOs costed more money than the government originally predicted based on historic patient costs. It was reported that 196 ACOs saved money last year, while 157 cost more than expected. Regardless, ACOs continue to be a major part of CMS’ policy agenda to move into value-based healthcare reimbursement. MACRA’s regulatory changes will encourage physicians to join ACOs, especially those with enough risk (and meeting other requirements) to be an Advanced APM. Other ACOs will attest to the new Merit-Based Incentive Payment Program (MIPS).

While until recently little has been known about the effect of Medicare ACOs on overall spending, and whether they have been able to reduce the use of high-cost care settings such as hospital stays and emergency department visits, new evidence suggests some modest gains. This is especially true when it comes to treating patients with multiple conditions who are responsible for the greatest proportion of spending.

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