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The American Journal of Accountable Care December 2015
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The Need to Level the Playing Field Between Accountable Care Organizations and Medicare Advantage
David Introcaso, PhD
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Anthony D. Slonim, MD, DrPH
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The Need to Level the Playing Field Between Accountable Care Organizations and Medicare Advantage

David Introcaso, PhD
For several reasons, including meeting the HHS Secretary’s Medicare quality and value payment goals, the ACO program needs to reformed to equate with Medicare Advantage.
CMS’s Medicare Shared Savings, or accountable care organization (ACO), program faces considerable challenges. Most immediately, the 2014 results released by CMS in September show the ACO program’s performance was actually worse than in 2013. Once again, approximately one-fourth of ACO providers (86 of 333) received earned shared savings, with the majority of savings concentrated among a small number of participants. The earned shared savings among these 86 was on average 33% less compared with that in 2013, in part, because quality performance scores reduced total shared savings by 12%. In 2014, successful ACOs spent only $29 (0.28% less) per beneficiary than the 67 worst-performing ACOs, proving that CMS has only managed to financially coerce some high-cost providers to decrease unwarranted utilization. Essentially, the ACO program’s savings at $1.5 billion represents only a fraction of the total 2-year spending by Medicare at over $1.15 trillion. The Medicare Shared Savings program has not made a difference in bending the cost curve.1 
 
ACOs need to be successful in their own right for primarily 2 inter-related reasons. First, the number of ACO participants needs to continue to grow rapidly since ACOs are the primary alternative payment model (APM) expected to meet HHS Secretary Burwell’s stated goal of having 50% of traditional fee-for-service Medicare payments tied to quality or value by the end of 20182—Medicare Advantage (MA) payments are not counted toward meeting this quality or value goal. Second, until the ACO program is redesigned to produce improved odds at achieving shared savings, provider participation will decline, and the decline could conceivably accelerate because, knowing Medicare fee-for-service is increasingly moving toward risk-based performance agreements, providers will choose instead to contract with MA plans. 
 
ACO performance implications aside, there is a larger, systemic challenge or question facing the Shared Savings program. How do ACO providers compete against MA plans? More specifically, how do they compete when their growth and success is effectively impeded by MA?
 
At least 3 factors explain why MA hinders the ACO program: first, MA plans—which currently serve 17 million Medicare recipients, or well over twice as many beneficiaries, as ACO providers—are expected to increase their enrollment from approximately 31% to 40% of all Medicare recipients (or 22 million beneficiaries) over the next 5 years. This growth represents an ever-increasing crowd-out problem for the ACO program since Medicare beneficiaries participate in either program or remain in fee-for-service. Second, MA markets are highly concentrated. In the 2850 counties that serve 84% of all Medicare beneficiaries, a single MA plan dominates. The absence of competition between and among MA plans undermines the potential to control Medicare program spending and promote quality.3 Market domination or prominence, and all its attendant advantages, also makes it difficult for ACOs to compete. These 2 factors are, in part, a function of a third factor: MA plans performing under decidedly more favorable program rules.
 
For CMS to be successful in establishing ACOs as APMs and, in turn, successfully reducing Medicare cost growth, the agency needs to level the Medicare playing field for ACO providers. Although there are currently many dissimilarities or inequities between the 2 programs’ regulations, there are at least 6 that need to be addressed: 1) in the MA program, beneficiaries choose to enroll, whereas ACO beneficiaries are assigned; 2) MA benchmarks are based on spending by the county in which the MA beneficiaries reside, but ACO benchmarks are based on their assigned beneficiaries’ historical utilization; 3) MA beneficiary risk adjustment scores can increase, but ACO risk scores cannot; 4) MA plans can earn extra payments for quality achievement, but ACOs cannot; 5) MA plans, unlike ACOs, can provide beneficiaries with additional or supplemental benefits; and 6) MA is administrative pricing and, therefore, considered cost neutral (why MA payments are, again, not included in the Secretary’s quality and value-payment goals), but ACOs are designed to score Medicare savings.4 Because CMS has a far freer hand to reform the ACO program, and since substantial changes to the MA program are politically difficult, instead of further pursing its current path to improve the ACO program in isolation, CMS should reform the program, such that the chances of success for ACO providers approximate that of MA. This can be accomplished only if ACO and MA program rules equate.     
 


 
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