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Successful Medicare ACOs Bring In Less Money than FFS Payment System

According to a recent report on the 2016 Medicare Shared Savings Program (MSSP) results, Track 1 ACOs that earned shared savings still incurred a $31 per member per month (PMPM) loss on average, equating to $5.2 million in losses for an average organization.


For Track 1 ACOs earning shared savings, the average $27 PMPM savings payment was vastly offset by a $58 PMPM reduction in Medicare fee-for-service revenue. (“Even Successful Medicare ACOs Lose Money: Analysis,” HFMA Compass, August 22, 2018)


While Track 2 and 3 ACOs earning shared savings fared better financially, they still lost an average of $14 PMPM or $2.9M per organization. Next Gen ACOs earning shared savings lost $3 PMPM or $1.2M per organization.


The authors of the report by Navigant wrote “Many health systems thoughtfully built accountable care organizations (ACOs) and physician networks and moved a portion of their managed care contracting intentionally toward risk. For many, entering the Medicare Shared Savings Program (MSSP) Track 1 represented a ‘toe in the water’ step to embrace the new economic and clinical realities of population health. However, new data now indicates many ACOs are still not generating savings and, considering their investments in IT and capabilities such as care management, losing money as an organization. These leaders now face the prospect of whether or not to embrace two-sided risk starting in January of 2019. (Analysis: Is Your Health System Ready for Two-Sided Risk? Navigant, August 2018)


The National Association of ACOs (NAACOS) conducted a survey of 144 Medicare ACOs in 2016 and found the average operational cost of a single ACO is almost $2 million. NAACOS wants the Shared Savings Program to value needed investments in individual ACOs in calculations of ACO risk.


The Navigant report noted increased investments (e.g., employing physicians, community-based sites of services such as ambulatory surgery centers and clinics) in an organization’s ACO decreases fee-for-service revenue. This has a direct impact on an organization’s top and bottom lines.


As noted in last week’s blog/newsletter, CMS plans to move from MSSP to Pathways to Success which requires accelerated movement to downside risk. A Navigant executive said that some Medicare ACOs facing a 2018 renewal decision have indicated to his organization that they will drop out, but a much larger “maybe half or more” could leave in 2019. “They don’t believe that continued downside risk participation in a CMS-based program is generally in their best interest.” (“Even Successful Medicare ACOs Lose Money: Analysis,” HFMA Compass, August 22, 2018)


Despite financial losses, Medicare ACOs are the only class of ACO models that have continued to grow recently. Health Affairs recently reported that the number of Medicare ACO contracts continued to grow in 2017, while commercial ACO contracts were flat. (“Recent Progress in The Value Journey: Growth of ACOs And Value-Based Payment Models In 2018,” Health Affairs Blog, August 14, 2018)



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