Earlier this month, Universal American announced that it would back away from financing unprofitable Medicare accountable care organizations. The publicly traded insurer contracts with local physicians to operate Medicare Shared Savings Program ACOs across 13 states, accounting for nearly 10% of all approved MSSP ACOs. And on some of these organizations, they’ve lost money: According to Modern Healthcare, despite investing over $60 million through the end of last year, the company's first-quarter ACO investment was "a drag" on its earnings.
Universal’s decision to pull back on some less-profitable ACOs highlights a potential risk of the model: It is universal. Organizations must certify that they meet determining criteria, and are subsequently limited in how they coordinate care and align incentives — raising a concern that dates back to the 2012 advent of the program.
“This is exposing a flaw on the Medicare side of the ACO discussion,” Jeff Hoffman, senior partner at Kurt Salmon, told Healthcare Dive. “You can create an ACO and have a group of Medicare recipients in your population, and you can try to manage them, but you have no control over where they get service, and you have no impact on plan design.”
The fear that Medicare ACOs are too “one-size-fits-all” to be a panacea is not new. Under the Medicare ACO model, the responsibility — and the risk burden — for creating programs to benefit overall population health lies wholly with the provider. According to Hoffman, that was the first problem that health systems identified when the program started.
“Some organizations who [had] more experience in population health said, ‘That’s just a strategy for failure,’” Hoffman said.
For example, Intermountain Healthcare, a dominant regional provider headquartered in Salt Lake City, chose to create its own coordinated care model rather than form a Medicare ACO. The key difference between a Medicare ACO and Intermountain’s “Shared Accountability” program is the participation of all players in the health care space — specifically payers. That, according to Hoffman, is the key to coordinated care success overall: A tailored approach to population health that makes payers a legitimate stakeholder in the improvement of outcomes.
“For those non-Medicare population health management organizations that are having success, it’s because they’re partnering with payers and employers and changing the dynamics of the plan to incent people to use different systems of care,” Hoffman said.
Of course, that doesn’t mean that some Medicare ACOs can’t be successful. Of the 32 Pioneer ACOs, nine had significantly reduced spending growth in 2012, generating $147 million in total savings while still maintaining high-quality care, according to California Healthline.
The secret to success, however, might be dependent on the health care market in which an ACO is launched, not the model itself. According to Hoffman, an ACO in a less-competitive environment might have a better chance of altering behaviors, creating savings, and improving outcomes because that ACO is the only available point of care. They don’t have to compete with other providers who are not part of the organization.
“As consumers, when there is no financial impact on our choice, we want everything and we want it when we want it. So how do I have an impact on that as an organization?” asks Hoffman. “If you’re an ACO in a one-health-system community, you might have better success because [your population] is coming there anyway. But if you’re in a more competitive environment, you can offer high-cost utilizers more efficient, better-outcome programs, but they don’t have to take it. And the cost when they go somewhere outside of your ACO still attributes to you.”
According to Hoffman, this is Medicare ACOs’ central question: Is the success of some ACOs attributable to the region in which the organization was launched, or to pathways and strategies created by the organization? And if it’s the latter, are those pathways and strategies reproducible in other ACOs?
As to whether more unprofitable ACOs might lose their funding, that remains to be seen:
"I don't know if it's a trend, but it's interesting," Hoffman said. "This is just part of the evolution of the ACO model."