Crawling to Success: The Next Generation ACOs

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Kathy Maddock
Vice President, Physician Enterprise Solutions and Interim GM, Operations
Sage Growth Partners

The departure of three ACOs is not a reason to worry – yet

The Next Generation Accountable Care Organization (ACO) demonstration pilot recently launched by the Center for Medicare and Medicaid Services (CMS) just received notice that three of the 22 ACO organizations that self -elected to participate this past January are already calling it quits. While this may seem like cause for concern, unless we start hearing about more of the 19 Next Generation ACOs pulling out, I would not worry yet.

The CMS innovation center designed this newer ACO model specifically to test how a higher-risk, higher-reward model can successfully drive health improvement and reduction of costs for Medicare fee-for-service (FFS) beneficiaries. Since most of the existing ACOs are not even taking downside risk at this point, it intended to qualify only a select a few of the better performing ACOs as participants.

What we are seeing now is not so different from what we saw when the Pioneer ACO program was initially rolled out. Some of the ACO organizations that applied to participate realized after the fact that the chances of being successful while taking on the required level of financial risk was untenable or just unreachable. I believe that some of these ACOs jumped too fast, then had second thoughts after reviewing financial numbers and cost targets.

Think of it this way: a professional poker player who has done well at the house poker tables and decides to take a higher risk by playing at the high stakes poker tables. Once in the high stakes room, the player realizes, after losing a few hands, that he really wasn’t ready to move up to the higher stakes yet, and needs to prepare more before he tries again.

David Muhlestein, PhD, JD, senior director of research and development at Leavitt Partners, was recently interviewed by Becker’s Review. During that interview, he said that, “most ACOs are not ready to take on more risk—most are not even taking downside risk at all—but a handful would like to take on more. If you’re able to successfully manage risk, you want as much as possible.” As he continued, since these ACOs are not closed networks, “it’s hard to take risk for patients who are going to other providers,”

So what happens to the three ACOs who decided to terminate from Next Generation program? I believe these ACOs are not leaving the ACO game altogether, but are clearly telling CMS that they are just not ready for the New Gen rules yet. Expect the savviest among them to emerge stronger after learning this lesson.