Life Science Compliance Update

February 14, 2018

Should ACOs Be Revamped?


In an article authored by the American Enterprise Institute’s Resident Fellow and Milton Friedman Chair, James C. Capretta, he argues Medicare Accountable Care Organizations (ACOs) haven’t produced savings for the federal government. He believes ACOs would become more efficient and innovative if they were forced to compete with the other options beneficiaries have for getting their Medicare-covered benefits.

Creation of ACOs

Capretta describes the initial purpose of ACOs. They were created to address Medicare’s problematic fee-for-service program which has been found to foster waste and overuse of services. While Medicare Advantage provides a private alternative, they are typically led by insurance entities. Medicare ACOs, then, offer physicians and hospital systems the opportunity to form their own managed care arrangements separate from the MA program.

ACO Performance

Most ACOs participate in the ACA’s Medicare Shared Savings Program (MSSP). MSSP ACOs that meet quality standards and provide care at a sufficiently lower cost get to keep half of the savings they generate. According to recent performance data there were 432 ACOs participating in the shared savings option in 2016. All but 22 of the ACOs were “one-sided risk” ACOs, which means they could earn a bonus payment but were not at risk for a penalty if they exceeded their spending targets.

Only 31 percent of the ACOs produced enough savings to earn a bonus payment for 2016. 44 percent of the ACOs incurred expenses above the benchmarks that were set for them by CMS. The overall savings produced by ACOs for Medicare was $691 million in 2016. However, Capretta points out after taking into account bonus payments, the net effect of MSSP was an increase in Medicare costs of over $39 million for 2016.

Physicians and ACOs

Capretta describes a system where physicians are being pushed into joining ACOs to increase their fees, and when physicians join ACOs, their Medicare patients come with them. The hope among some ACO advocates is that Medicare fee-for-service will be transformed into a more efficient program without the Medicare beneficiaries even noticing that something had changed.

He argues this will not help the ACOs become more efficient over time. Because the beneficiaries are never asked whether they want to be assigned to an ACO, they are not obligated to stay in-network when they get their care. They can see any physician they want at no additional cost to themselves. Also, many physicians are not aware if individual patients are inside or outside of their ACO.

The current system will likely backfire over time, argues Capretta, due to the reliance on coercion of physicians. He believes physicians will join ACOs to avoid fee cuts and ultimately resent their circumstances. This will result in lobbying for regulatory changes that lessen the administrative impact of participating in an ACO. This, in turn, makes it more difficult for the ACOs the effectively operate, creating a program not unlike today’s fee-for-service option.

Revamping ACOs

In Capretta’s view, ACOs should be revamped so that they are presented to the beneficiaries as a clear and distinct enrollment option, alongside unmanaged fee-for-service and MA plans. Beneficiaries selecting ACOs should know they will be getting their care through an organized network of providers. This is similar to preferred provider organizations (PPOs) in the commercial market. He suggests beneficiaries retain the right to see any licensed provider, but would pay more in cost-sharing for services if they go outside of the ACO network.

High-performing ACOs would attract beneficiary enrollment because they would be able to share the savings they produce with the beneficiaries in the form of lower premiums and better coverage. ACOs providing premium discounts to their enrollees would be tagged with the aggregate cost of those reduced premiums when their financial performance was measured against their benchmark.

He further notes that beneficiaries currently have the option to purchase Medicare prescription drug coverage and supplemental insurance to partially cover their cost-sharing requirements. Capretta argues that CMS should build an online portal that allows beneficiaries to see clearly what the various combinations of coverage options will cost them in terms of the premiums they would pay as well as their cost-sharing requirements when they use services.

November 13, 2017

Accountable Care Organization Performance Results


2016 was the fifth performance year for the Medicare Shared Savings Program (MSSP). 2016 brought $652 million in savings to Medicare via Accountable Care Organizations, according to the Health Care Transformation Task Force.

The Shared Savings Program offers providers and suppliers (e.g., physicians, hospitals, and others involved in patient care) an opportunity to create a new type of health care entity, 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.

Roughly one-third of MSSP ACOs generated savings in 2016, according to CMS data. In terms of quality, 330 of the 428 ACOs subject to pay-for-performance measures earned an average quality score of 94 percent. Ninety-eight of the ACOs garnered a 100 percent quality score. Overall, the average performance score improved by more than 10 percent across five measures: screening for fall risk, depression screening and follow-up, high blood pressure screening and follow-up, hemoglobin checks for diabetic patients, and diabetes eye exams.

ACOs that have been in MSSP since 2012 and 2013 accounted for $503 million in gross savings. The newer the participants, the less money they saved: ACOs that entered in 2014 saved $94 million, 2015 entrants saved $50 million and the 100 ACOs that entered MSSP in 2016 saved only $6 million.

The 2012 and 2013 ACOs received $351 million in shared savings payments, leaving the remaining $151 million as savings for CMS. That’s in contrast to 2015, when CMS spent $217 million more in awarding bonuses to ACOs in both the MSSP and Pioneer ACO programs than what participants were projected to have saved.

“These results demonstrate the promise of new models of care delivery and financing for improving patient outcomes and reducing spending,” stated David Lansky, Health Care Transformation Task Force Chair. “This provides further evidence that we need more, not less, public and private sector investigation of alternatives to traditional fee-for-service medicine.”

MSSP ACOs in the program for at least three years also decreased costs by an average of $10.1 million per organization in 2015. In comparison, MSSP ACOs just starting the program only cut costs by an average of $5.4 million per organization.

The top ten ACOs with the highest shared savings in 2016 were:

  1. Palm Beach ACO (Palm Springs, Fla.): $30,540,508
    2. Advocate Physician Partners Accountable Care (Rolling Meadows, Ill.): $28,924,272
    3. Hackensack (N.J.) Alliance ACO: $22,835,022
    4. USMM Accountable Care Partners (Troy, Mich.): $21,195,787
    5. AMITA Health ACO (Arlington Heights, Ill.): $20,489,157
    6. Cleveland Clinic Medicare ACO: $19,914,592
    7. Millennium ACO (Fort Myers, Fla.): $18,530,680
    8. UT Southwestern Accountable Care Network (Dallas): $17,464,034
    9. Memorial Hermann ACO (Houston): $14,025,212
    10. Orange Accountable Care of South Florida (Miami Lakes, Fla.): $13,033,788

September 22, 2017

Accountable Care Organizations Under Magnifying Glass


Calling into question whether value-based care will ever truly work, a recent report casts dark news for ACOs. As reported, nearly half of physicians participating in the Medicare Shared Savings Program (MSSP) ACO in 2015 did not know if they could receive shared savings or faced downside risk, according to a study. Even as there are flaws with fee-for-service, there are legitimate questions being raised about the feasibility of implementing value-based health projects, as evident in this latest MSSP study.


The survey was conducted between September 2014 and April 2015 and asked more than 1,400 doctors participating in Pioneer, MSSP, and Advance Payment Model ACOs about their programs' incentive structure and effectiveness, among other topics.

The survey found many doctors participating in each model were not aware how their respective incentive structures worked. Specifically:

  • 5 percent of Advance Payment participants did not know if they or their practice faced downside risk and 16.1 percent said they did face downside risk;
  • 5 percent of MSSP participants did not know if they or their practice faced downside risk and 20.6 percent said they did face downside risk; and
  • 7 percent of Pioneer participants said they did not know if they or their practice faced downside risk and 19.8 percent inaccurately said they did not face downside risk.

Additionally, the survey found that similar proportions of physicians did not know whether they were eligible for shared savings in their respective programs. Specifically:

  • 9 percent of Advance Payment physicians said they were not sure whether they or their practice were eligible for shared savings;
  • 5 percent of MSSP participants said they were not sure whether they or their practice were eligible for shared savings; and
  • 2 percent of Pioneer participants said they were not sure whether they or their practice were eligible for shared savings.

The survey also found that many doctors were unsure of which of their patients were attributable to an ACO. Specifically, 42.7 percent of MSSP, 21.4 percent of Advance Payment, and 34 percent of Pioneer physicians did not know which of their patients were attributable to an ACO.

Will Value-based Payment Actually Work?

This question is raised in a recent MedPage Today article on the subject. During a panel discussion, one member raised concerns about the current push to pay for the value of services rather than the volume of services under MACRA. Under MACRA, for example, the push could have unintended consequences for the healthcare system, with the influx of APMs resulting in "a thousand flowers blooming," borrowing an expression from former Chinese leader Mao Zedong. Such an approach -- having one model for a single aspect of one specialty -- might only increase fragmentation in the healthcare system.

Additionally, some have been critical of recent changes to MACRA that slow the “on ramp” for physicians to participate. They argue it creates an incentive not to get on board with value-based programs in Medicare. However, with so many physicians unaware of MACRA, and the complexity of the law, it seems reasonable that CMS would take a slower approach in the implementation of the law.

The Point of Value-Based Pricing

Raised in a recent athenahealth article by Paul Levy, the former CEO of Beth Israel Deaconess Medical Center from 2002-2011 and author of “Goal Play! Leadership Lessons from the Soccer Field,” a key element of President Obama's healthcare policy was a push for "value-based pricing," using the authority of the Centers for Medicare and Medicaid Services to experiment with pricing incentives to reduce overuse in clinical care. Private insurers were likewise encouraged to pursue this direction.

The status quo in the U.S. for years has been “fee-for-service" pricing, in which doctors and hospitals were paid for piecework. Believing that the persistent rise in healthcare costs in the United States was driven by overuse resulting from this financial incentive, some policy analysts decided that doctors and hospitals should be given a countervailing financial incentive to reduce certain kinds of diagnostic tests and to avoid medically unnecessary procedures.

The predominant form of value-based pricing to emerge from this policy assumption was the so-called “global payment." Medicare or private insurers would give each health system (now called an accountable care organization or ACO) an annual number of dollars per year per patient, based on the risk profile of that system's population. If the health system could treat the patient for less money, it would keep the surplus. If its spending exceeded that budget, it would suffer a loss.

In essence, the plan consisted of CMS and private insurers trying to transfer the actuarial risk of patient care to providers, counting on the new financial incentive to change behavior.

Good Intentions but Rough Outcomes

Levy’s analysis continues by pointing out if the premise of global payments is that doctors are economically rational creatures who will respond to financial incentives, then the financial incentives have to be substantial, immediate, and transparent to be effective. Under a global payment regime, however, the incentives are minor, delayed, and fuzzy. Even those doctors who might want to be good corporate citizens will find themselves inexorably pushed to play “X," and thereby will undermine the hoped-for results.

Thus global payment regimes are hoisted on the petard of their own underlying assumption: The rationality of the participants. In the case of CMS, the global payment plan was doomed for other reasons. For one thing, early versions had no downside: While there was the potential to garner surpluses, health systems were protected against losses. Further, under federal law, Medicare patients are mobile: They have no obligation to stick with one health system if they feel they can get more of what they want from another.


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