Verma: Overhaul Led to Significant Growth in ACOs Taking on Risk, But Verdict Out on Spending

A federal overhaul to the Medicare Shared Savings Program (MSSP), implemented late in 2018, has led to an increase in the number of accountable care organizations (ACOs) taking on downside risk.

The redesign of the program, dubbed “Pathways to Success,” generally required new ACOs to take accountability for spending increases after two years; previously ACOs did not have to take the risk for increases in costs for up to six years, Centers for Medicare and Medicaid Services (CMS) administrator Seema Verma noted in a blog post published Friday in the journal Health Affairs.

The number of ACOs taking on risk for increased spending has gone from 93 ACOs at the start of 2019 to 192 at the beginning of this year, she said.


“The number of ACOs with real accountability has more than doubled over the past year,” Verma wrote. “This will translate to lower costs and higher value for Medicare beneficiaries and taxpayers.”

But one trade association that represents ACOs — groups of health care providers who agree to be accountable for the cost and quality of care for a given population of Medicare beneficiaries — argued that this increase has come at the cost of new organizations entering contracts with CMS.

“[T]his year just 35 Shared Savings Program ACOs will enter into their first contract with CMS,” the National Association of ACOs (NAACOS) said in a press release issued the same day as Verma’s blog post. “Between 2012 and 2018, the program averaged 107 new ACOs annually. Last year was the first time the program saw a drop in overall participation when just 41 new ACOs joined.”


A survey from NAACOs, conducted in 2018, found that more than 70% of the organizations would leave the MSSP if they were forced to take on risk, and while the number of ACOs leaving was not quite that high, some did still exit. According to Verma’s blog post, 16% of ACOs chose to “voluntarily terminate” in 2019.

“While higher than the 11% average annual attrition rate the program has seen, not all health care providers that terminated actually left the program— over 40% of ACO participants that terminated from an ACO after January 1, 2019 will be participating as part of a different ACO in 2020,” she wrote. “The participation rates for January of this year put CMS on track to generate the $2.9 billion in savings over 10 years that was projected by CMS’s Office of the Actuary when the Pathways to Success policies were finalized.”

Next Generation model shows mixed results

CMS also released two sets of results for the Next Generation ACO model, which gained about $62 million in net savings during its first year of operations in 2016 — though cutting skilled nursing facility spending was a key factor. This model lets provider groups take on higher levels of financial risk and reward than can be taken in the MSSP.

For 2018, using a methodology that compares ACO performance to a “prospectively determined performance year benchmark” based on the ACO’s historical performance, 38 ACOs had estimated savings. Twelve organizations had estimated losses.

Medicare is expected to pay about $285 million in shared savings to ACOs while recouping $64 million as shared losses, according to Verma’s blog post.

The second evaluation for the Next Generation model used different methods to compare the cost of care for beneficiaries in Next Generation ACOs to a control group that was not part of the intervention. According to that report, there was a statistically significant decrease in spending in the Next Generation model, compared with typical models of care outside the model.

That said, the model did not lead to a statistically significant decrease in spending for the first two performance years, and when taken alone, the second performance year of 2017 saw a statistically significant increase in spending: $115.6 million across the 44 participating ACOs.

For Verma, there were three key lessons from the evaluation report:

  • The need to look at net spending when assessing a value-based payment model’s performance — that is, measuring how much spending changed after accounting for shared savings payouts to the model participants.
  • The importance of strong, targeted incentives for lower spending in value-based models, since even high-risk levels don’t guarantee overall savings
  • The need to use a variety of approaches to decrease spending while improving quality to make fee-for-service Medicare sustainable.

“[N]o single approach, ACOs or otherwise, will get us all the way there,” she wrote. “This is why CMS is strengthening its ACO initiatives while also creating other lanes on the road to value and applying lessons learned from prior models in future ones.”

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