How will ACOs grow over time?

Accountable care organizations have grown rapidly as a healthcare delivery model over the last several years. While analysts expect the momentum to continue, the future of ACOs is uncertain.

In a new report from Leavitt Partners called "Projected Growth of Accountable Care Organizations," analysts present how the ACO model is likely to grow under four possible future scenarios. As of December, Leavitt Partners estimates there are 23.3 million lives covered by ACOs.

Here are seven key findings from the report.

1. In the immediate future, the growth of the accountable care movement will be most influenced by the success of current ACOs. Incentives and penalties imposed by the federal and/or state governments will also contribute to the momentum by altering financial risks and opportunities, according to the report.

2. In the baseline scenario — what Leavitt Partners analysts consider to be the most likely under current conditions — the number of ACO-coved lives is projected to increase to 105 million by 2020. A primary assumption in play under this scenario is that the federal government will continue to demonstrate strong support of the ACO model. This support will come through the ongoing implementation of new ACO programs such as the Next Generation ACO model, the Comprehensive ESRD Care program and the Oncology Care Model.

3. Another assumption underlying the baseline scenario is that positive financial results will become more prevalent. So far, only a minority of ACOs have earned bonuses, but Leavitt Partners expects this will increase for two reasons. First, ACOs will have had more time to refine processes and learn how to manage a population, and as early ACOs have proven successful, newer ones will have an established path to follow, according to the report. The third assumption is that commercial payers will continue to pursue risk-based contracts. Currently, commercial payers account for 54 percent of accountable care payment agreements.

4. The second scenario is similar to the first but it assumes the Medicare Access and Chip Reauthorization Act of 2015 was not passed. The reason for this projection was to determine the impact MACRA had on the growth of accountable care in the baseline scenario. While the assumptions related to positive financial performance and support from commercial payers remains the same, the degree of support from the federal government is substantially reduced in the baseline without MACRA scenario. According to the report, the number of ACO-covered lives in the baseline scenario without MACRA will rise to 68 million by 2020 compared with the 105 million projected covered lives with MACRA.

5. The third scenario, the financial failures scenario, investigates what would happen if ACOs are unsuccessful. Unlike the baseline scenario that assumes ACOs will see increasingly positive financial results, this scenario assumes an increasing percentage of ACOs will either fail to recover their investment costs by earning shared savings or incur shared losses, according to the report.

6. The financial failure scenario also assumes that ACOs with poor financial performances will leave accountable care by either terminating or failing to renew their contracts. It also assumes commercial payers will view these contracts as unfavorable. However, the number of ACO-covered lives is still projected to grow to 41 million by 2020 under this scenario. The increase would likely be due to the fact there is still strong support for ACOs by the federal government through incentives in MACRA alternative payment models track, according to the report.

7. Growth of the accountable care movement would increase significantly in the widespread support scenario. The key assumptions in this scenario include strong support from all stakeholders in the healthcare industry and sustained robust support from the federal government and commercial payers. The third working assumption is that state governments will incorporate cost-saving principles of accountable care into their Medicaid programs. In this scenario, the number of ACO-covered lives would increase from 23 million lives currently to 177 million lives in 2020 — a more than 600 percent increase.

Leavitt Partners forecasted the number of lives in accountable care arrangements based on the Diffusion of Innovations theory and the Bass Diffusion Model.

More articles on accountable care:
Saint Francis HealthCare Partners, UnitedHealthcare team up for accountable care: 3 things to know
Collaborative Health Partners, Humana team up in central Virginia
Delaware Valley ACO expands partnership with Humana

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