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Growth in accountable care organizations slowed somewhat in 2015, both in terms of the overall number of ACO contracts nationwide and the number of patient lives attributed to those contracts. The initial wave of ACO early adopters that flooded the space starting in 2012 has subsided, and organizations that have been watching with trepidation before launching ACOs were discouraged by the departure of additional ACOs from the CMS Pioneer program as well as lackluster results from the Medicare Shared Savings Program released in August 2015. As stories of “lessons learned” filter throughout the marketplace, some organizations are taking more time to build out the infrastructure necessary for a successful ACO before launching their own. That infrastructure includes robust electronic health records systems, an area that is experiencing its own delays and setbacks, particularly when it comes to federal meaningful-use guidelines and the quest for interoperability.

The slower pace of ACO growth in 2015 does not signal a fading fad. In fact, we have already seen a spike in ACO activity. In early 2016, CMS announced that 121 new ACOs have joined the Medicare Shared Savings Program and that its new Next Generation ACO Model has launched with 21 provider groups in the first cohort. MSSP ACOs with a 2016 start date have a new option, called Track 3, that includes higher rates of shared savings, prospective assignment of beneficiaries and the opportunity to use new care coordination tools—none of which were available to ACOs that joined the program since its inception in 2012. However, the real test of the MSSP’s long-term sustainability hinges on what changes CMS makes to the benchmarking methodology it uses to establish the baseline for ACO performance and, by extension, the threshold at which an ACO is eligible to share in savings or risk. The ACO community argues that the current methodology is unfair and effectively punishes high-performing ACOs. CMS has proposed changes that would update the benchmarking methodology, with the aim of reflecting an ACO’s performance against providers in the same region rather than only evaluating an ACO against its own past performance. These changes would take effect with ACO agreements starting in 2017.

Meanwhile, CMS has signaled that it is ready to expand the ACO model into more discrete segments of the Medicare population, starting with beneficiaries with end-stage renal disease. In October 2015, CMS announced the Comprehensive ESRD Care Model, which encourages dialysis clinics, nephrologists and other providers to join together to coordinate care for assigned beneficiaries. Participants, known as ESRD Seamless Care Organizations, or ESCOs, are accountable for clinical quality outcomes and financial outcomes as measured by Medicare Part A and B spending, including all spending on dialysis services for their assigned beneficiaries. If successful, look for CMS to expand this model to other high-cost Medicare populations, particularly those with conditions that are associated with high rates of hospital admissions and readmissions.

While commercial ACOs will continue to take a cue from CMS-led initiatives and tread cautiously when it comes to accepting risk, we expect to see more commercial ACOs contracting directly with employers and take on some portion of the financial responsibility for coordinating healthcare for those employers’ workers. The trend has already begun. Of the 210 ACO contracts that launched in 2015, only five were risk-bearing agreements in which providers agreed to accept losses if cost and quality targets were not met. Perhaps even more notably, three of the five risk-bearing ACOs launched in 2015 involve ACOs contracting directly with employers: Lake Health’s ACO agreement with three employers in northeast Ohio involving some 2,500 patient lives; Connected Care, an ACO venture between Presbyterian Healthcare Services and Kaiser Permanente that provides care to about 17,000 employees of technology giant Intel; and Delaware Valley ACO’s ACO in Philadelphia, which serves employees of Jefferson Health System and Main Line Health. Look for these types of initiatives to grow in 2016, not only as existing arrangements expand to additional employer locations or to cover additional employees, but new employer ACOs come on line. This will be particularly true of ACOs with attached health plan products.

April Wortham Collins is Manager of Customer Segment Analysis for DRG and an ACO expert. Follow her on Twitter at @aprilworthamDRG

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View all of the 2016 Targeted Insights Series here.

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