50 things to know about ACOs

As the healthcare industry seeks more fee-for-value care initiatives, accountable care organizations have emerged as a model that emphasizes the value and quality of care over the quantity of care.

ACOs are designed to increase collaboration among providers and coordinate care, as well as reduce overall healthcare spending. So far, the model appears to be achieving those end goals. For example, one type of ACO — those in Medicare’s Pioneer Program — generated $385 million in savings for beneficiaries in its first two years.

The premise for accountable care arrangements was outlined in the Patient Protection and Affordable Care Act, and most of the first ACOs appeared in 2011. Today, nearly 70 percent of the U.S. population lives in an area served by an ACO, and between 15 and 17 percent of the population receives medical care from providers in an ACO.

This article details the various kinds of ACO initiatives operating today, their histories, rates of use, generated savings and challenges associated with accountable care.

Here are 50 things to know about ACOs.

The basics

1. ACOs were included in the healthcare law partly as a way to address the national deficit, according to Kaiser Health News.

2. Prior to its inclusion in the law, the term "accountable care organization" was first used by Elliott Fisher, MD, director of the Dartmouth Institute for Health Policy and Clinical Practice in Hanover, N.H.

3. However, the underlying idea of what current ACOs are trying to accomplish goes back to the 1970s, according to a Health Affairs health policy brief. During that time, some physician groups or joint ventures between physicians and hospitals experimented with aligning with payers under a capitation payment model, where payers would provide a fixed monthly payment for each enrollee, and providers would keep care costs within that amount.

4. There were problems with these types of arrangements, though. Many consumers were opposed to network arrangements restricting their choice of providers, and they feared the fixed payment model would backfire, pushing providers to deny care instead of providing too much care, according to the Health Affairs brief.

Medicare ACOs

5. Medicare ACOs are overseen by the Center for Medicare and Medicaid Innovation within CMS. This center was established by the PPACA to test new payment and delivery models.

6. Initially, the Congressional Budget Office projected Medicare ACO initiatives would save $5 billion during their first eight years.

7. As of September 2014, ACOs have reduced Medicare spending by $817 million.

8. From Jan. 1, 2015 to June 19, 2015, 56 ACOs and collaborative care agreements were formed.

9. In January, HHS announced a historic overhaul to shift away from fee-for-service and focus on value-based pay. Starting in 2016, 30 percent of Medicare payments will be based on outcomes, and by 2018 that number will rise to 50 percent. The change was initiated by the need to "drive the healthcare system towards greater value-based purchasing — rather than continuing to reward volume regardless of quality of care delivered," according to CMS. Investments in alternative payment models created under the PPACA, including ACOs, will help achieve HHS' overhaul goals.

10. Following HHS’ announcement, 28 major U.S. health systems, payers and stakeholders announced the formation of the Health Care Transformation Task Force, a private-sector organization aimed at accelerating the healthcare industry’s transformation to value-based care. The alliance includes organizations such as Boston-based Partners HealthCare and Livonia, Mich.-based Trinity Health, and payers such as Aetna, Blue Cross Blue Shield of Massachusetts and Blue Shield of California. It plans to improve the accountable care model, develop a system for bundled payments and improve high-cost care.

11. Different sources have presented different numbers of total ACOs in the U.S., accounting for different ACO models. As of January 2015, there are 585 total ACOs, both CMS and non-CMS, in the U.S., according to research from consulting firm Oliver Wyman. According to Leavitt Partners, there are 744 ACOs total in public and private programs.

12. There are now 426 Medicare ACOs, up from 368 in 2014, according to Oliver Wyman.

13. As of April 2015, nearly 70 percent of the U.S. population lived in an area served by an ACO, and between 15 and 17 percent of the total U.S. population was served by an ACO, totaling between 49 and 56 million patients. Roughly 11 percent of Medicare beneficiaries now receive care in an ACO, up from 10 percent in 2014, according to Oliver Wyman. Additionally, about 6 percent of non-Medicare patients are also served by ACOs in CMS programs.

Types of Medicare ACOs

14. Medicare currently offers four types of ACO models: the Medicare Shared Savings Program, which includes the ACO Investment Model and Advance Payment ACO Model, Comprehensive ESRD Care Initiative, Next Generation ACO Model and Pioneer ACO Model. Physicians, hospitals and other providers can only participate in one Medicare ACO.

15. The Medicare Shared Savings Program was the initial ACO model, established by the PPACA.

16. As of Jan. 1, 2015, there are 404 MSSP ACOs covering 7.3 million assigned beneficiaries in 49 states plus Washington D.C., and Puerto Rico, according to CMS data.

17. To launch an MSSP ACO, participating organizations must have at least 5,000 Medicare beneficiaries. This poses a unique challenge for independent physicians and rural providers. To qualify for participation, these providers often band together to create ACOs by combining their patient population numbers. CMS allotted $114 million in grant funds for 2016 to help rural hospitals and health systems become ACOs. The funds can cover the full cost of membership for 2016 applicants.

18. One kind of rural ACO, Nevada City, Calif.-based National Rural ACO, was formed in 2013 to combine knowledge, patients and resources to enable independent community health systems to participate in population health-based reimbursement models.

19. The Advance Payment ACO Model provides upfront, monthly payments to ACOs in the MSSP model. The goal is to help smaller ACOs with less access to capital participate in the shared savings program by giving them an advance on the shared savings they are expected to earn. There are 35 ACOs participating in the Advance Payment ACO Model within MSSP.

20. Born out of the Advance Payment ACO Model is the ACO Investment Model, which started accepting applications July 1, 2015.  

21. Participation in the ACO Investment Model will be broken into two groups with distinct goals. For new MSSP ACOs joining in 2015 and 2016, the ACO Investment Model aims to encourage new ACOs and coordinated care in rural areas through prepayment of shared savings. For ACOs that joined MSSP between 2012 and 2014, the goal is to help the ACOs progress to higher levels of financial risk.

22. On June 25, CMS announced two changes to its ACO Investment Model that could impact small group practices, especially those in rural areas. The two changes will allow ACOs that started in the MSSP in 2015 to apply to participate in the ACO Investment Model in the upcoming application round and remove the "10,000 or fewer assigned beneficiary" eligibility criteria for rural ACOs that started in the Medicare Shared Savings Program in 2015 (or will start in 2016). The application period for the Investment Model opened July 1.

23. The Pioneer ACO Program was developed for healthcare organizations that were already more experienced in coordinating care than those in MSSP. This model was designed to be more advanced and more flexible.

24. There are currently 19 ACOs participating in the Pioneer ACO Model. 26. More than 600,000 beneficiaries currently receive care in Pioneer ACOs, according to an independent evaluation from HHS.

25. In May 2015, CMS' Office of the Actuary certified the Pioneer ACO Model as the first of its ACO pilot programs to meet the necessary criteria for expansion. HHS is now planning to find ways to implement the model in other Medicare programs.

26. According to a study published in JAMA, total spending growth for beneficiaries aligned with Pioneer ACOs in the first two years of the program (2012 and 2013) was $385 million less than total spending growth for beneficiaries under traditional fee-for-service.

27. The Comprehensive End-Stage Renal Disease Care Initiative is the first disease-specific ACO model designed by CMS, focused on improving care and the payment and service delivery model for Medicare beneficiaries with ESRD.

28. ESRD patients comprise 1.3 percent of the Medicare population and account for approximately 7.5 percent of Medicare spending. The high costs — in 2010 Medicare spending on ESRD patients exceeded $20 billion — are due to underlying disease complications, co-morbidities and a higher-than-average mortality rate.

29. In this payment model, CMS will partner with ESRD Seamless Care Organizations that will be clinically and financially responsible for all care offered to matched beneficiaries.The ESRD Care initiative was scheduled to begin July 1, 2015.

30. In March 2015, CMS unveiled the Next Generation ACO Model, an initiative for ACOs already experienced in coordinating care in which the organizations will take on more performance risk but also have the chance to share in more savings.

31. CMS is holding two rounds of applications in 2015 and 2016 and expects between 15 and 20 ACOs to participate in the Next Generation Model.

MSSP ACO final rule

32. CMS released its final rule for ACOs under the MSSP in early June. The final rule outlines several new provisions that affects risk for providers, ACO eligibility for beneficiaries and finalizes policies related to ACO benchmarks, among other measures.

33. The rule creates a Track 3. This is a two-sided risk model that has a higher sharing rate of 75 percent in conjunction with accepting risk for up to 75 percent of all losses, prospective beneficiary assignments and the opportunity to apply for a waiver for the three-day SNF rule, which would allow payment for SNF services when a beneficiary is admitted to a SNF without a prior three-day inpatient stay. Once a beneficiary is prospectively assigned to a Track 3 ACO, the beneficiary will not be eligible for assignment to a different ACO, even if the beneficiary chooses to receive several primary care services from another ACO during the relevant benchmark year.

34. The rule finalizes policies related to ACO benchmarks. Under the rule, benchmarks will be reset in a second or subsequent agreement period by integrating financial performance and equally weighting benchmarks for subsequent periods. This is intended to make continued participation more attractive, as the longer the agreement period, the greater an ACO's chance of building on success, or, conversely, continuing its failure. "Therefore, we believe rebasing every three years, at the start of each agreement period, is important to protect both the Trust Funds and ACOs," CMS wrote.

35. The final rule eliminates the requirement that ACOs starting the MSSP under Track 1 must transition to Track 2 after one agreement period if they wish to continue as participants in the program. The revision will allow ACOs that have completed a three-year agreement under Track 1 to enter another three-year agreement under Track 1. ACOs may operate under the one-sided model for a maximum of two agreement periods.

Disappearing Medicare ACOs

36. According to a Leavitt Partners analysis, 27 ACOs have left the MSSP program this year. In January 2015, 89 ACOs joined MSSP bringing the total to 432, but the most recent Medicare data indicates there are just 405 current participants.

37. The Leavitt Partners analysis identified 19 of the 27 ACOs that left the program. Reasons for leaving include mergers between and within ACOs. ACOs merged because they couldn’t meet the 5,000 beneficiary benchmark or were unable to support necessary infrastructure on their own.

38. The analysis also found six ACOs dropped out entirely, either because partnerships were unsuccessful or they were unable to meet goals. Just one ACO dissolved entirely; the others are still pursuing value-based care.

39. In July 2013, nine ACOs announced they were leaving the Pioneer ACO program, likely due to financial results that fell short of expectations. According to CMS data, eight of the nine ACOs that left posted financial losses for the first performance year, and none of them earned shared savings. Seven of the nine ACOs that left the Pioneer program switched to the MSSP program, which allows organizations to share in savings but not be at risk for losses.

40. Additionally, 78 percent of post-acute providers are not participating in an ACO, according to a survey of 244 executives from senior housing and care facilities from healthcare consulting firm Lancaster Pollard. Of these, 47 percent of respondents said they are not participating because no ACOs exist in their service area, while 35 percent said it is because they had not been asked to join. Another 17 percent elected not to participate in an ACO, while 1 percent attempted to participate but did not qualify.

Commercial and Medicaid ACOs

41. Though the ACO model was formed as a Medicare initiative, more beneficiaries are covered by Medicaid and commercial ACOs as of March 31, according to a Health Affairs blog. Just 7.8 million of the 23.5 million lives covered by ACOs are in Medicare programs, according to the blog. CMS data indicate 7.3 million beneficiaries are covered in MSSP.

42. Each of the big five payers — Blue Cross Blue Shield, UnitedHealthcare, Aetna, Cigna and Humana — offer commercial ACO contracts. On July 6, Aetna announced plans to acquire Humana for $37 billion, so what happens with those ACOs remains to be seen.

43. BCBS has 450 ACOs in 32 states with more than 111,000 physicians. Additionally, the payer reports it generated $1 billion in savings in 2013 through accountable care organizations, patient-centered medical homes and other programs.

44. This year, UnitedHealthcare plans to add an additional 250 ACOs to its current list of arrangements, which will bring the payer's total agreements to more than 720 ACOs. Approximately 11 million plan participants receive value-based care through its ACOs.

45. Approximately 30 percent of Aetna's claims payments totaling $20 billion go to providers practicing value-based care, and 5.8 million Aetna members receive care through accountable care agreements and performance-based contracts. Aetna plans to increase the number of claims payments to 50 percent by 2018 and 75 percent by 2020. At the end of Q1 2015, the payer had 62 ACO agreements.

46. Cigna currently has 124 accountable care arrangements in 29 states with more than 24,000 primary care physicians and more than 27,000 specialists. The accountable care arrangements cover 1.3 million members.

47. As of March, 53 percent of Humana's members received care through accountable care arrangements. The payer plans to have 75 percent of members in such an arrangement by 2017. Humana reports having more than 900 accountable care relationships in 43 states and Puerto Rico. Those relationships include approximately 230,000 commercial members, 42,000 primary care physicians, more than 30 patient-centered medical homes, 200 integrated delivery systems and 1.3 million Humana Medicare members.

48. As of March 2015, 16 states have passed Medicaid ACO legislation or have enacted accountable care pilot programs, including Alabama, Vermont, Oregon and New Jersey, according to the Health Affairs report.

ACOs in the news

49. In June, two accountable care consulting powerhouses — Leavitt Partners and the Brookings Institution — announced a merger that will result in the largest accountable care collaborative in the world called the Accountable Care Learning Collaborative. Chaired by former HHS Secretary Gov. Mike Leavitt and former CMS Administrator and U.S. Food and Drug Administration Commissioner Mark McClellan, MD, PhD, the new nonprofit provides primary ACO research and intelligence.

50. Deerfield, Ill.-based Walgreens made news in December 2014 when it confirmed it ended partnerships with two of the three MSSP ACOs launched in January 2013, according to AIS Health. The two ACOs included Marlton, N.J.-based Advocare and Temple, Texas-based Scott & White Walgreens Well Network. Advocare saw beneficiaries' costs increase 4.2 percent against its first reporting year benchmark. Scott & White reported even costs for its first reporting year, but was ineligible to share in savings. Walgreens was the first pharmacy to partner with health providers on ACO initiatives. It helped manage the organizations and finance IT projects to share in initiatives.

Editor's note: This article was updated to reflect the most recent data for Cigna's accountable care agreements.

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