Rumors of ACO Death Greatly Exaggerated

Gregg Masters, MPH, director of HealthInnovation Media and reimbursement gadfly, recently wrote in his blog about the current status of Accountable Care Organizations (ACO).

In all the sturm-und-drang of Obamacare vs. Trumpcare, ACO are like the kids in the middle of divorcing parents. How are they doing?

Masters tackled that question with a really interesting chart. Here it is.

He went on to say in his healthcare blog: “As of the end of the first quarter of 2017, our inventory included 923 active public and private ACOs across the United States, covering more than 32 million lives. The increase of 2.2 million covered lives in the past year means that more than 10 percent of the U.S. population is now covered by an accountable care contract.”

A Little ACO Background

The Affordable Care Act (ACA aka Obamacare) was passed seven years ago (March of 2010). It set up ACOs. ACOs tie reimbursement to quality metrics and the cost of care. They are actually a lot like the old HMO model. ACOs can adopt alternative payment models. They’re accountable to patients and third-party payers for quality, cost and overall care.

Part of the appeal of the ACO approach was that rewards for cost savings and improved care would accrue to the physicians.

The ACA provided ACOs a two-sided reimbursement model ACOs shared savings and losses. ACOs were given a maximum sharing rate of 60%, provided that the minimum threshold of 2% is reached.

Lots of “experts” predicted that ACOs would fail.

ACOs, they said, had high startup costs and large annual expenses; patients could vote with their feet and leave the ACO; ACOs bore too much liability for the “reward” they were hoping for. And on and on.

Inexorably Rising Enrollment Despite CMS Cuts

Masters also made the point that Medicare Advantage (MA) enrollment is continuing to grow despite CMS [Centers for Medicare and Medicaid Services] cuts. “With over 17 million Medicare beneficiaries voluntarily choosing MA thus far, and enrollment growing at more than 10 percent annually despite three years of CMS payment reductions in real dollars, it is increasingly clear the future of managed Medicare lies in the MA program.”

“Aetna, the Blues, United et al negotiated their version of ‘accountable care’ arrangements with participation IPAs, PHOs, IDNs, health systems, medical groups or physician networks. Five years later, we have some important data recently reported by Health Affairs that suggests ACOs are far from the neutered enterprises many suggested and while mixed in terms of results reported ACOs have found their place in the managed competition ecosystem and are not likely to disappear any time soon.”