With more than 400 accountable care organizations (ACOs) enrolled, the Medicare Shared Savings Program is one of the most visible health care delivery reform efforts of the Affordable Care Act. Through the program, physicians, hospitals, and other health care providers are given incentives to invest in infrastructure and redesigned care processes to foster higher-quality and more efficient care.
In an effort to attract new participants and to encourage current participants to continue with the program beyond their initial three-year commitment, the Centers for Medicare and Medicaid Services (CMS) has proposed several possible changes designed to make it easier for ACOs to take on financial risks as well as reap rewards.
So far, all but a handful of ACOs have chosen to participate under “one-sided risk,” in which they can share in generated Medicare savings relative to a spending target, but face no financial accountability if Medicare spending exceeds their target. In the first year, over $700 million in savings was achieved from the 58 ACOs that exceeded their savings targets, resulting in about $380 million in savings to Medicare with the rest going to the ACOs as a shared savings bonus. However, the net savings across all 220 ACOs that participated in the first year of the program was only $234 million (about 0.5% of their total spending). While these savings are modest (and almost half of ACOs did not save any money), participation continues to grow, with an additional 89 joining the program for 2015—meaning that more than 7 million Medicare beneficiaries are now receiving care through ACOs.
Currently, CMS requires that Medicare Shared Savings Program participants accept financial risk in order to stay in the program after their initial three-year agreement ends—and the concern is that many participants will not be willing or able to make the transition.
For many ACOs that began in 2012 and 2013, the decision to continue in the program is looming. A recent survey by the National Association of Accountable Care Organizations, conducted prior to the release of the proposed ACO rule, reported that 92 percent of respondents say they are either unlikely to accept two-sided risk or are undecided.
The major changes described by CMS in its proposed rule include (see Table 1):
CMS has released a request for comments on these changes and others such as new ACO financial benchmarks and designs that would encourage more organizations to take on greater financial risk.
Table 1. Current and Proposed Risk Models
Current One-Sided Risk Model
Proposed One-Sided Risk Model
Current Two-Sided Risk Model
Proposed Two-Sided Risk Model
Proposed Two-Sided Risk Model
|Transition to Two-Sided Model||First agreement period under one-sided model. Subsequent agreement periods under two-sided model.||Remove requirement to transition to two-sided model in a second agreement period.||ACOs may elect Track 2 without completing a prior agreement period under a one-sided model. Once elected, ACOs cannot go into Track 1 for subsequent agreement periods.||No change.||Same as Track 2.|
|Quality Sharing Rate||Up to 50% based on quality performance.||Up to 50% based on quality performance for first agreement period, reduced by 10 percentage points for each subsequent agreement period under the one-sided model.||Up to 60% based on quality performance.||No change.||Up to 75% based on quality performance.|
|Minimum Savings Rate||2.0% to 3.9% depending on number of assigned beneficiaries.||No change.||Fixed 2%.||2.0% to 3.9% depending on number of assigned beneficiaries.||Fixed 2%.|
|Minimum Loss Rate||n/a||No change.||Fixed 2%.||2.0% to 3.9% depending on number of assigned beneficiaries.||Fixed 2%.|
|Loss Sharing Limit
||n/a||No change.||Limit on the amount of losses to be shared in phases in over three years starting at 5% year 1; 7.5% in year 2; and 10% in year three and any subsequent year. Losses in excess of the annual limit would not be shared.||No change.||15%. Losses in excess of the annual limit would not be shared.|
Source: Fact Sheet, “Proposed Changes to the Medicare Shared Savings Program Regulations,” Centers for Medicare and Medicaid Services, Dec. 2, 2014.
The new rules should ease the transition for participating ACOs, many of which have said that three years is not enough time for them to accept two-sided risk, given the time needed to reengineer their care delivery processes. Commonly cited challenges included:
As CMS weighs comments on the proposed rules, it will need to find a balance between continuing to attract and spread participation throughout the country with achieving meaningful spending and quality gains for patients. With more time to focus on their care delivery processes and infrastructure, current and potential participants may be better positioned to take on two-sided risk and reap the benefits. However, it is clear that the one-sided risk model for ACOs is not the desired ending point for policymakers, and incentives need to be strong enough to motivate and support participation in two-sided risk models. This next round of participation under the new ACO regulation should go a long way in determining how quickly providers can take on financial risk and their appetite for doing so voluntarily.