Avalere: 37% of ACOs now take on financial risk

Medicare written on paper with a stethoscope
An analysis from Avalere found that 37% of ACOs are now on downside risk, a major increase over the past three years. (Getty/Designer491)

A new analysis found that 37% of accountable care organizations take on downside financial risk, as the Trump administration’s push for providers take on more risk makes an impact.

The consulting firm Avalere Health’s analysis released Tuesday found that the number of ACOs taking on downside risk has grown by 20 percentage points from 2018 when 17% of ACOs took on risk. Avalere pegs the increase on experience and a push by the Centers for Medicare & Medicaid Services to get the organizations to adopt risk earlier.

“As ACOs realize they have more experience in the [Medicare] Shared Savings Program, they are starting to feel more comfortable with the operations, processes and reporting requirements,” said Gabriel Sullivan, a consultant with Avalere. “What we see is those ACOs feel more comfortable with assuming risk.”

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From 2012 to 2017, fewer than 10% of ACOs in the MSSP took on downside risk where the ACO gets a share of savings but must pay back the federal government for not meeting spending targets. Most ACOs took on only upside risk, which gives ACOs a share of any savings they generate but they aren't on the hook for missing spending goals.

However, now 37% of ACOs are now taking some form of downside risk, according to the analysis that looks at CMS ACO performance data.

A major reason was the implementation of CMS’ Pathways to Success program, which replaced MSSP.

Pathways to Success required an ACO to take on downside risk after participating for three years in the program, as opposed to MSSP where an ACO could get only upside risk for six years before taking downside risk.

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In July 2019, when Pathways to Success started, the percentage of ACOs with downside risk increased from 19% to 29%.

The analysis comes as CMS Administrator Seema Verma recently announced that the number of ACOs taking on downside risk starting this year was 192, double the 93 ACOs taking on risk at the start of 2019.

Pathways to Success is part of a larger trend by CMS to get providers to shoulder more risk at a faster rate, Sullivan said.

“They have been modifying or creating new alternative payment models that require providers to accept downside risk either immediately or sooner,” Sullivan said of the agency.

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