ACOs decide how to absorb losses

The Centers for Medicare & Medicaid Services' last week unveiled 27 new Medicare Shared Savings ACOs and five Advance Payment ACOs, who will join the 32 Pioneer ACOs in deciding how to cover financial losses they might incur.

The Medicare Shared Savings Program final rule gives ACOs several options, including setting aside cash reserves in escrow, establishing a line of credit and having the amount removed from future fee-for-service payments, reported American Medical News.

So providers need to step back and evaluate their finances, credit availability and how much each option will cost before making a decision, the article noted.

They also must take into account the track their ACO will take. Track 2 ACOs operate under two-sided Shared Savings and therefore should consider buying reinsurance to reimburse CMS if expenses rise beyond 2 percent. Track 1 ACOs, with one-sided Shared Savings, receive a smaller share of the savings but aren't penalized if costs rise and may not need a repayment system.

Smaller ACOs in particular, may find reinsurance to be their best choice as they don't have as much capital to implement the new coordinated care model as larger organizations, amednews noted.

Despite the various mechanisms to absorb potential losses, some industry experts still question whether the financial benefits will outweigh the initial start-up costs and investments of ACOs.

"The ACO actually looks like a terrible business deal for providers," Jeff Goldsmith, president of consulting firm Health Futures Inc., and an associate professor of public-health sciences at the University of Virginia in Charlottesville, said in a January Wall Street Journal article. "In order to get any shared savings, they will have to spend millions on consulting, systems, care managers and IT staff, give up a dollar in immediately reduced income, and maybe, if they check all the boxes right, get 50 or 60 cents back in 18 months," he said, FierceHealthcare previously reported.

For more information:
- read the amednews article
- here's the HeathLeaders article