Are ACO operators eyeing Medicare Advantage instead?

Will participants in accountable care organizations (ACOs) soon look for an exit strategy?

The challenges of operating an ACO that cuts costs without losing money can be so daunting that some ACO operators may launch a Medicare Advantage health plan to replace it, according to Healthcare Finance News. Of the original 32 Pioneer ACOs, 10 have withdrawn from the project, including San Diego-based Sharp Healthcare earlier this year. That's despite the recent reports that the ACOs participating in both Pioneer and the Shared Savings models have saved nearly $400 million and earned another $445 million in bonuses.

One reason some providers may make such a switch is that payment benchmarks for Medicare Advantage plans are scheduled to grow at the same rate as fee-for-service Medicare. By contrast, payments are adjusted for ACOs only every three years, "confiscating most hope of shared savings," Healthcare Consultant John Gorman told Health Finance News.

Moreover, Gorman noted that Medicare Advantage plans could actually promote savings in healthcare delivery more effectively than ACOs, because they can design their benefits to promote in-network utilization, while ACO patients themselves are more of the "free range" variety and have more choice regarding the use of services.

Several prominent providers entered the Medicare Advantage arena. They include the University of North Carolina healthcare system and Catholic Health Initiatives, which will use the acquisition of two regional health plans as springboards to get into Medicare Advantage.

However, the leap from ACO to Medicare Advantage plan is not as simple as it appears. Capital requirements are significant, as well as the start-up costs and risks.

"Medicare Advantage is a different business than running a hospital or a physician practice," Gary Jacobs, managing director at PwCs' Health Advisory practice, told Healthcare Finance News. "It's quite a leap; some clients have done well at this and some are struggling; likewise with ACOs."

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