ACOs that take on downside risk save Medicare money, but the majority would rather leave

Centers for Medicare and Medicaid Services Administrator Seema Verma told a group of hospital executives and administrators that taking on downside risk is the way to take cost out of the Medicare system.

But the majority of providers in accountable care organizations have said that if they were required to bear the financial burden of two-sided risk, they would  drop out of the Medicare Shared Savings Program ACO, a recent survey shows.

Some ACOs that have taken on downside risk have shown significant savings to the Medicare program while advancing quality, Verma said Monday during the American Hospital Association's annual membership meeting. This is in contrast to those ACOs that have not moved to downside risk and are increasing Medicare spending, she said. 

"And even more concerning, these ACOs are actually increasing Medicare spending, and the presence of these 'upside-only' tracks may be encouraging consolidation in the marketplace, reducing competition and choice for our beneficiaries," she said. "While we understand that systems need time to adjust, our system cannot afford to continue with models that are not producing results."

The Center for Medicare and Medicaid Innovation is developing new models, is looking at others launched under the previous administration, including ACOs, and will continue to move to a value-based system, Verma said.

Verma made her comments less than a week after a highly-reported National Association of ACOs survey that showed 71 percent of ACO respondents would leave the Medicare Shared Savings Program if they had to assume risk.

The National Association of ACOs April survey focused on 82 ACOs about to enter their third year of MSSP Track 1, requiring them to move to a two-sided model. Forty-three percent responded. The association said it was troubled by their response that illustrates long-standing concerns about forcing ACOs into risk-based contracts. 

This will become more of an annual issue as the more ACOs move beyond the second agreement period, the association said.

"It would be devastating to see ACOs quit the program year-over-year as a result of risk requirements, especially considering the progress we are starting to see from ACOs," the survey report said.

For instance, MSSP ACOs that earned shared savings in 2016 showed a significant decline in inpatient hospital expenditures and utilization.

Barriers to assuming risk include the risk being too great, concerns about unpredictable changes to the model and a desire for more reliable financial projections.

While CMS wants to move to reduce the cost to Medicare that Verma said has been achieved by ACOs assuming risk, CMS is trying to reduce provider regulatory burden and measures that negatively affect hospital finances and patient care.

"As we move to a more sustainable and value-based system, we must look closely at every area of spending – including spending on prescription drugs," Verma said. "In 2012, Medicare spent 17 percent of its total budget, or $109 billion, on prescription drugs. Four years later in 2016, spending had increased to 23 percent, or $174 billion. For Medicare, spending on prescription drugs is growing more quickly than spending on any other area."

Spending is also on the rise in Medicaid, she said. Drug spending by Medicare and Medicaid accounts for nearly 40 percent of all drug spending in the U.S.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com