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How ACOs are Winning (and Losing) at the Value-based Game

Below is the transcript for the above webinar:

Mike:Good Morning everybody, thank you for joining us on today's webinar, how ACOs are winning and losing at the based game. With our presenters April Collins, who is a manager of Customer Segment Analysis and market access insight, and Tyler Dinwhitty, who is an Associate Analysis from market access insights here at DRG.


One quick housekeeping item before we get started if you have any questions please put them into the Q&A feature in web-x and we will get to those at the end of today's presentation.


With that I will turn it over to April and Tyler for today's webinar.


April:Thanks Mike, Good Morning to everyone on the line. Being a resident ACO expert here at Decision Resources Group really puts me in [inaudible 00:00:44] seat when it comes to observing these incredible transformation that's taking place in US health care from a system that's dependent on volume to one that's built around value. No one expected this transformation to happen over night it takes time to re-engineer a vision team system that took more than 80 years of politics, policy and private sector forces to construct. I think it's fair to say that many of us expected or at least hoped to be further along at this point in the game.


The Affordable Care Act has been in effect for more than 6 years and the earliest Medicare ACOs have now entered their 3 year agreement period. Most of the performance results coming from the ACOs is mediocre at best with incremental improvements to quality but no real bending of the cost curve. Day after day I get the question why aren't ACOs working? The truth is ACOs are working and they are in some form or fashion here to stay. I think we all believe that otherwise why would we be here talking about them, but as with any major change there are winners and there are losers. We're at a point now where I think those are beginning to emerge.


Before we get started I just want to give you an idea of our perspective, who is DRG? We are Global Provider of Analysis and Data on significant issues facing the health care industry. We serve a wide range of clients in the pharmaceutical, bio tech, medical device, financial services and manage care sectors. For the purposes of today I'll carve out out US Manage Market [inaudible 00:02:28] Solutions, we help companies craft strategies and tactics for maximizing access of there products and services.


You may be familiar with 2 of our brands in market access help leaders inter study and fingertip formulary together they make us the industry leader in US formulary and live solution, allowing customers to answer critical business questions some of which I've listed here. At DRG we've actually been tracking ACOs since the summer of 2011, that's 6 months before the first pioneer ACOs launched and a full year before the first Medicare shared savings program ACOs launched. Before the pioneers you had the Louis and Clark types that embarked on those volumns of value expeditions without really knowing where it might lead. What started in 2011 as a list of names and locations has now grown into this robust queryable data base of more than 12,000 ACO contracts. We track a number of discreet elements like lives, participating providers, driver, the type of ACO, the payment type, clinical focus and whether or not a patient's in there medical home is involved. There are many others that just gives you and idea.


We also compare the ACO lives in these contracts to DRG Health Plan Enrollment Data and that helps us to penetration of the ACO model in a given market. Now together these elements paint a really detailed picture of just how deeply invested health care organizations or markets are in the ACO model as well as gauge their progress in moving from fee for service to fee for quality.


So that's where I sit as I watch and weight this value based game and I don't mean game in the trivial since of the word. I mean we've all heard the statistics the health care accounts for more than 17% of the nations TDP and of course medical bills are one of the biggest causes of personal bankruptcy so that's hardly something to play around with. But as with any game we have an objective to improve quality and reduce cost, we have rules and we need a strategy and I would argue that the stakes have never been higher. If you'll allow me this game metaphor lets take a look at the field focusing on ACOs, everyone has their own idea of what makes an ACO an ACO and at DRG we define an ACO as an entity formed by providers and payers or both to coordinate health care for defined population while achieving specified quality objectives and constraining costs.


As you all know the A in ACO stands for Accountability and our definition recognizes the level of financial accountability for providers involved in an ACO can vary widely from non to full risk contracts. By this definition again there are more than 12,000 active ACO contacts in the US today spanning all 50 states and there numbers are growing. When you consider the growth rate of ACOs over the last years as well as those that are in development we're actually on track for 24 million patient lives covered by ACOs in the next 3 years.


As I mentioned the financial accountability for providers in an ACO can vary widely, in a closer look at these ACO contracts reveal some telling characteristics when it comes to risk. More than 2/3 of ACO contracts in operation today provide care that's fewer than 20,000 [inaudible 00:06:21] and that's not involve financial risk on the part of providers. Also between October 2013 and 2015 we saw a real spike in ACO growth that was the total of ACO contracts more that doubled in that time period. The most amount of growth occurred again in ACOs that do not involve financial risk for providers. The most large [inaudible 00:06:45] baring ACO contracts that do involve risk are going to be your commercial agreements involving private payers and then followed by negate arrangements.


Among all types of ACOs by far the most common payment model is going to be shared savings and that's inherently a fee for service model in which providers share in any savings that result from reducing total health care spending for their patients below a benchmark level. None of this is to say that [inaudible 00:07:17] or any others wishing to engage with an ACO model should ignore non risk baring ACO, these ACOs are going to be moving to risk in the next 3 to 5 years and their looking for industry partners that can assist them in that transition.


That's the point and sale now let's look now at the objective. We've all heard of the health care triple aim the improving the patient experience of care, improving the [inaudible 00:07:42] population and reducing the per capita cost of health care. To that end HHS last year set some really explicit goals or value based payments and alternative payment models that include ACOs. HHS has already hit the first goal tying 30% of [inaudible 00:08:02] Medicare payments of quality or value by the end of 2016, so they did that back in March a little ahead of schedule.


So no HHS has it's eye set on increasing that number to half of all fee for service Medicare payments by 2018 and related it also want to run about 90% of payments through other valued based initiatives like the hospital value based purchasing and hospital readmission reductions program. Now commercial players they are following suit, they've also set some goals around transitioning to value based contracting.


United Health Care, that's the nations largest single private insurer has said it plans to move 65 billion to value based reimbursement models by the end of 2018 and it's actually already more than half way there with 36 billion of it's 2014 medical spending to providers in value based models.


For it's part Anthem says more than 38 billion of it's overall spending was tied to value based contracts last year and that represents about 30% of it's commercial claims.


Aetna says it's on track to have 3/4 of it's medical claims in a value based model by 2020 .


Cigna has already met it's goal of having 1 million member receiving care through collaborative care arrangements and those are ACO alike agreements that reward physicians for quality. Cigna has 150 collaborative care arrangements with physician groups in 29 states at this point.


While all of these players have their own objective they also have their own set of rules IE. quality metrics, bench marks and targets for reducing health care spending. HHS[inaudible 00:09:58] what's called a patch work system of Medicare reporting programs that make it frustrating at best and impossible at worst for providers to succeed at achieving these goals. Back in April HHS [inaudible 00:10:13] noticed a proposed rule making to implement some key provisions of the Medicare Access and Chip Re authorization Act, better known as MACRA.


Now we can divulge entire webinars to partitioning out MACRA and the implications for providers and the industry as a whole but the jest of it is this, the proposed rule would make changes to a single frame work called the Quality Payment Program. The Quality Payment Program does 3 things it repeals the SGR, it streamlines those quality reporting programs into a new merit based incentive payment system or MIP and it provides incentive payment for participation in alternative payment models like ACOs.


How well providers fair in these models can impact their reimbursement by plus or minus 4% beginning in 2019 and that's a whopping 9% in 2020. Now 2020 is still a few years away and goodness knows what form MACRA or MIP will take by them but we can take a look at where the scores stand today. For those ACOs that exist right now, how are they fairing when it comes to improving quality and containing costs.


So for that I'm going to turn it over to my colleague Tyler Dinwhitty and he's gonna talk to you about what we can learn from the performance results from the tinier [inaudible 00:11:41] savings from ACOs, Tyler.


Tyler:Thank you April, Good Morning everyone thank you again for joining us this morning and as April said I just want to spend a few minutes to go through some quality or some financial quality results that we have for the pioneer and Medicare shared savings programs and a little bit later to delve into come common characteristics of successful shared saving ACOs.


Overall the 2 programs have been pretty successful a large share of ACOs in both programs have actually been able to earn shared savings these results are for the 2014 performance here and several of those ACOs those ACOs that have actually earned shared savings have also improved quality. CMS tracks a little over 30 quality measure in those ACOs that have earned savings and have been able to improve on those quality measures from one year to the next.


While that's pretty good news you have to consider the fact that many ACOs for one reason or another haven't been able to earn shared savings. Some have been able to reduce expenditures below the CMS assigned bench mark but didn't do so to the extent necessary to actually earn shared savings. The rest especially in the case of the pioneer ACO program have actually spent more money than their CMS assigned bench mark and those pioneers have actually had to make payments back to CMS.


Let's take a closer look at the pioneer ACO program which as you can see from the chart has several successful ACOs that have been able to generate savings and consecutive years. The situation isn't all that rosy, out of the original 32 pioneer ACOs that entered the program in 2012 there are only 9 remaining. I think what's happened is you have this [inaudible 00:13:29] effect where ACOs enter the program in 2012 they weren't comfortable where they were, maybe they weren't ready to take on risk and they've actually dropped out of the program some of those actually transitioned to the Medicare shared savings program.


Which is quite a bit different for several reasons, one is that there are way more of them there are several hundred Medicare shared saving program ACOs compared to only 32 original pioneer ACOs. Also the vast majority of Medicare shared saving ACOs don't require their participating providers to take on financial risk. The video that you see here is for the 2014 performance year only and with the results divided up by the year ACO was launched. What you can see right away is that your older ACOs, your ACOs launched in 2012 or 2013 have performed better as a group in 2014 than ACOs launched that year. Add to that your older ACOs also earned higher average shared savings payments back from CMS in 2014 than your younger ACOs. The key take away is that ACOs that have been able to enter the program early and have gained experience in the program over the first 1 or 2 years have been able to realize success later on in the program.


We'll talk about that a little later but first I want to take a closer look at the list of ACO [inaudible 00:14:57] front runners. It's a pretty exclusive group so out of all Medicare shared savings ACOs that launched in 2012 or 2013 only 39 were actually able to earn 2 consecutive years of shared savings payments so it's a pretty short list. To put it in another way out of all the [inaudible 00:15:18] ACOs that have the opportunity to earn 2 consecutive years of shared savings only 18% actually did.


Here is a list of those ACOs with the name and the primary markets that they serve and I don't want to spend a whole lot of time on this list other than to point out a couple of things. One is that 8 of ACOs, 8 of the 39 have actually left the program since the results were published. The Medicare shared savings program, when an ACO enters the program it does so for an initial 3 year agreement period so your ACOs that entered from July 2012 to January 2013 their in the program for all of 2013, all of 2014 and all or 2015 and at the end of 2015 they have the option of either staying in the Medicare shared savings program, transitioning to a different program or leaving the program all together and there have been 8 that have decided to leave the program.


The second thing I want to mention is that the remaining 31 ACOs have actually elected to stay in the Medicare shared savings program for an additional 3 year contract period that began on January the 1st of this year. That leads me a bit into my next slide which is a look at some common characteristics of the 39 successful Medicare shared savings program ACOs. What we've done is take some information from our proprietary ACO data base that April mentioned earlier combined with a little bit of publicly provided information to look at some common threads or characteristics of the 39.


We've come up with 4 main characteristics, the first is caution. With the ACOs I mentioned before 31 out of the 39 have actually elected to stay in the Medicare shared savings program for another 3 year period and this indicates to us that they're not ready to take on risks despite they're early successes in the program. Instead they've chosen to stay in assured savings only track for an additional 3 years and give themselves a little more runway to gain some more experience, to build their infrastructure before actually making the jump to taking on risks to another ACO contract.


The other characteristic deals with the composition of the ACO or the make up of the ACO provider networks, on the list of ACOs on the previous 2 slides you probably recognized a few names probably those large enter grated delivery networks or health systems in certain markets. But for the most part while they are present many of the ACOs are actually driven by independent physicians from larger physician groups. So it's not necessarily a case of one type of provider or one type of entity being leaps and bounds more successful in the program than another.


The third characteristic is innovation, many of the ACOs on the list have [inaudible 00:18:15] providers that are involved in multiple population health focused initiatives. A good example are medical homes, most of the ACOs in fact have provider physician groups that are in NCQA recognized patient centered medical homes. Several others are involved in CMS [inaudible 00:18:35] payment programs several have electronic health records established, patient portals established, and a few very few are actually involved in multiple ACOs. There is this common link of commitments towards improving on delivering population health focus care and becoming more a dept at this transition from volume to value.


The last characteristic is experience, many of the ACOs have [inaudible 00:19:07] clinically integrated networks that have been around for over a decade others have prior experience in things like level payment programs or medical homes. Some began building their IT infrastructure and implementing patient portals or electronic health records as early as a decade ago. Other are very good at just provide high quality care and they've been recognized for that with awards and certain specialties. What's happened is I think these ACOs were able to leverage this experience when they entered the ACO program and have been able to achieve early successes in the first couple of years of the program.


That's just a quick look at some common threads and characteristics and somethings that might be able to start explaining why these ACOs in particular have been so successful. What will be really telling is we expect within the next 30 to 60 days when CMS releases the 2015 performance year data, because that will allow us not only to see how many ACOs are in 2 consecutive years of shared savings but how many actually earn 3 consecutive years how big that group is and what some common characteristics of those are.


So it's a pretty exciting time to study ACOs but they do still have their fair share of challenges and with that I'd like to turn it back over to April.


April:Thanks Tyler. So the Medicare shared savings program that Tyler just talked about is the countries largest coordinated effort to move US health care from volume to value. While it provides some great examples about ACOs are succeeding it also points to some areas where ACOs need help and where there's need there's opportunity.


My colleagues in DRG digital innovation team took a deeper dive into the performance of some Medicare shared savings program ACOs from 2013 and 2014. What they found reviled some really specific avenues for Pharma companies to assist ACO physicians in capturing those quality points that add up to intensive payments. Their research is actually targeted at Pharma but it applies to any industry partner that's looking to gauge in an ACO model.


First we need to understand exactly how the MSSP defines quality, MSSPs are measured on 33 quality measures and they're organized into 4 domain. There's care coordination, patient safety, preventive health at risk population and patient caregiver experience. Each of the 4 domains is weighted at 25% and then that feeds into the overall quality score which is used to determining the amount of savings that an ACO shares or the shared losses that is owes.


Now Pharma could arguably play a role in helping MSSP ACOs meet measures across all 4 of these domains but a good place for Pharma to start is gonna be that patient caregiver experience domain. There are 7 measures under the patient caregiver experience domain and 3 imp articular offer Pharma a prime opportunity to support ACO efforts because these measures really align with value absolution that Pharma can address. Measures in this domain earn scores based on consumer responses to the Consumer Assessment of Health Care Providers and System Survey.


Here's how they are calculated each score fits into a percentile and then each percentile earns the ACO a certain number of points for the measure, up to 2 points maximum for the 90th percentile. The point corresponding to each measured percentile are summed and divided by the total points available for that domain to produce an overall domain percentage. The percentage score for each domain is then averaged together to generate a final overall ACO quality score and it's this score that determines the amount of generated savings that the ACO can keep. Now that's a lot of detail and I realize that but it allows you to see exactly where these dollars are coming from and how they're calculated.


CMS[inaudible 00:23:43] that 341 million in shared savings earned by MSSP reporting in thus 2013 and 2014. It's highlighted these ACO improvements on 27 of the 33 quality measures but in that deeper scrutiny of these performance results shows that ACOs are actually leaving quality measure points on the table and could benefit from Pharma's help. DRGs analysis of this performance of 184 Medicare shared savings program ACOs on 3 measures in the patient caregiver experience domain indicated a considerable percentage of ACOs either regressed to a lower percentile or stayed at the same percentile for ACO measures 2, 5 and 6.


These ACOs failed to progress enough to earn more points and to possibly more dollars for these measures in 2014, again suggesting an opportunity for partnership with Pharma. Now providers don't just want these partnerships they really expect them and while many Pharma's are continuing for ways of potential of the so called beyond the pill offerings against the challenges of building such solutions and services. The survey from our digital innovation team showed that physicians have a clear and strong expectation that Pharma will find a role and supporting the new value based health care system. Comparatively high shares of ACO in the South and the Mid West shared this view with 71% in the South and 69% in the Mid West agreeing that Pharma companies will have to provide more resources and services along side drugs and treatment to stay relevant in the emerging health care system.


So Pharma must evolve value at it's services to cater to the needs of the ACO physicians in there quest for quality measure points and must prevent them from miss out on vile dollars. A substantial share of ACO physicians 2/5th in the Mid West and 1/3 elsewhere say that they do not know that source to find patients support. ACOs physicians are [inaudible 00:26:03] to need to improve outcome and as we showed on the previous slide they exhibit a strong interest in patient resources from Pharma that would help them do that across the nation but especially in the South and Mid West.


This result indicates again an opportunity for Pharma to provide patient support tools proven to move in the [inaudible 00:26:27] outcome. Now despite this demand ACO physicians are so far reporting low utilization of value added resources from Pharma, so there's a little bit of contradiction there. This is true for basic tools such as prescription reminders as well as more advance offering like behavioral modification programs. However interest in all value added resources is considerable and as you can see here varies by region.


ACO physician in the South, the West and Mid West rank behavioral modification programs first in terms of their interest. Those in the North East rank the program second. ACO physicians in the North East rank reminders to take or refill medications first, although such prescription reminders are also high in other regions. ACO physicians in the South and Mid West show comparatively high interest in apps to track or mange a condition. The next few slides here are going to look at specific questions found in that cap consumer survey that goes into these scores and that relate to the patient caregiver experience and provide some examples of how Pharma can provide value added support to increase consumer satisfaction with the health care experience.


These examples a lot of them are technology tools because that's the focus of the DRG team that conducted the survey but again the concepts behind them are applicable to other solutions that would be provided really by any industry partner. Examples on this slide illustrate how a brands existing value added support could actually be positioned to help ACO physicians or favorable owned ACO measure number 5, that's health promotion and education. The key is to inform ACO physician of what value added support can do for them in earning specific scores, again that's why I went through all of the details of how the scores are calculated so that at Pharma you can approach them and say this is how it can help you in this particular question that relates to this particular percentile point that earns you dollars.


[inaudible 00:28:43] question in the last 6 months did you and anyone on your health talk about specific things you could do to prevent illness? An example of value added support that could help ACO physicians earn measure points could be Cornerstones for Care, that's the Diabetes Support Program offered by Novo Nordisk. We also have some examples here of solutions provided by Acorda Therapeutics and Janssen whose website for diabetes drug Invokana allows users to set and track their personal health goal.


Similarly these examples illustrate how value added support could be positioned to help ACO physicians on ACO measure number 2 which is how well you doctors communicate. Have the opportunity to develop better solutions here or partner with solutions like Health Loop and that's a cloud based platform that automates follow up care. Or Care Sync which is a personal electronic health record that stores medical records from multiple providers in one secure location.


Finally we have some examples of how brands existing value added support or partnerships with head companies could be position to help ACO physicians on ACO measure number 6, shared decision making. Some key questions from the CAP survey that point to this measure are did you and this provider talk about the reasons you might want to take a medication? When you and this provider talked about starting or stopping a prescription medicine did this provider ask you what you thought was best for you? And in the last 6 months did you and this provider talk about how much of your personal health information you wanted shared with your family or friends?


Patient IQ by the way on this slide is a Texas based company that claims to be the first and only care coordination solution that can be integrated with pretty much any health care software system and that included EHR, population health management program you name it. The technology has several different features but at the end of the day all of them allow patients to adhere to care plans in between visits and also interestingly enough have their patient reported outcome typed into existing EHR.


I know we've covered a lot of ground this morning and time is running short but I wanted to leave you with a few key points that I hope will guide your strategy when it comes to ACOs and this value based game. The first is this ACOs are not a fading fad despite the slower pace of growth that we saw in 2015 and the lack luster results reported by the majority of Medicare ACOs we're still on pace to have more than 10% of the US population receiving care from a model in the next 3 years. On the commercial side ACO contracts are expanding and already cover more individual beneficiaries than all team programs combined.


At the same time HHS our countries largest payer of health care is targeting nearly half of Medicare fee for service spending through value based models by 2018 and the proposed changes under MACRA are gonna up the anti even further. All of these ACOs are chasing dollars that are tied to explicit quality measurement goals and while the majority of Medicare ACOs are moving money along patient quality only a few are reducing health care costs in a meaningful way. The results for commercial ACOs while there not widely reported and many Medicaid ACOs are just getting started but I would venture to say that the same is true of these types of ACOs as well.


Further more those Medicare ACOs that are saving money could earn larger shared savings payments by targeting key quality domain majors including that patient caregiver experience. Provider groups who are at the forefront of health care reforms they're participating in numerous value based care delivery and patient payment reform initiatives whether they'd be ACOs, bundle payment, patient center medical homes or some other form of coordinated care or population health management. As we've established many of these programs have multiple goals for quality and value and formulary decision makers of these health systems and hospitals that are participating in ACOs are struggling to understand them, much less meet and report them.


These key decision makers believe that Pharma and other industry partners can help them engage patients and provide solutions to meet these key measures. So all in all the game is just getting started and there's plenty of opportunity to change the score.


I want to thank you for your time and your attention today and before we move on to questions I just wanted to give credit where credit is due, as we alluded to you in this presentation we had help from DRG colleagues in the digital innovation team namely SanuCory and you'll see all of our bios here as well as our twitter handles so please do connect with us on twitter or Linkin because we would love to keep this conversation going. The same goes for the decision resources group if we can help you in any way please don't hesitate to reach out.


And so with that we'll turn it back over to Mike and take questions.


Mike:If you or anybody has any questions for us, for Tyler or for April please type them into the Q&A feature in web-x and they will take a few moments to look through them and then we'll start answering questions.


April:All right we've got some great questions here I'll tackle the first one and that is, Is there any evidence yet of ACOs evolving their own formularies, influences of prescribing and or clinical pathways?


To answer this question I have to go back to what we were saying earlier about risk, the majority of ACOs in operation today do not involve risk in the part of providers. Risk for patient out comes or quality, so for that reason they are not as motivated to factor in prescription drug formularies when they are establishing their ACO model. In fact for the Medicare shared savings program and pioneer ACO program prescription drugs are completely opt out of that, they're not allowed to make any changes to that.


Now commercial ACOs they do have that leeway. So that's a little bit of background to say that right now we do not have a lot of evidence of ACOs forming their own formularies it's just not there yet we definitely feel that as these ACOs begin to take on financial risk that this will be a key focus area. As we all know prescription drugs is a huge part of the total cost of care and ACOs are considering prescription drugs in that light at the moment because total cost care is something that they are judged on for their quality measures and their shared savings payment.


As we move more towards risk we're gonna see a lot more ACOs and health systems and IDNs create their own formularies. That was mainly talking about ACOs I will say that for health systems and IDNs that are really synonymous with ACO they either have a separate ACO entity that does there contracting on behave of employed or affiliated and or affiliated physicians now those health systems themselves have [inaudible 00:36:48] that take into account all of the shared goals that ACOs have with population health management and value based care in general.


At that point it becomes a little indistinguishable between what is an ACO formulary and what is an IDN that has a system wide formulary that is being constructed with value based contracting in mind. We spoke briefly on the [inaudible 00:37:18], definitely this is antidotal evidence we do have some of our colleagues in other parts of the DRG that have done some surveys around this type of question but we are seeing that physicians are changing their prescribing behavior based on the quality metrics for their ACOs.


Most of the evidence is for the Medicare ACOs because that's what publicly reported though we feel confident that that same is true of commercial ACOs and Medicaid ACOs.


I think Tyler has a question here he was going to tackle.


Tyler:Sure. So the question is, do you start to see a divide between larger organizations and smaller organizations where you have a larger group of providers that may end up being able to leverage their influence leverage their size and be more successful over the long run?


To answer that, well really not really. As I mentioned before on the slide mentioning certain characteristics while you do have large health systems, large organizations that serve a lot of patients that have tens of thousands of ACO beneficiaries served by the ACO you also have a good amount of ACOs with 5 thousand, 6 thousand, 7 thousand assigned beneficiaries. Being a larger size or being a smaller size ACO doesn't really predispose you to success one way or the other, it's more about identify and understanding your population, your organizational size and being able to more effectively identify issues and inefficiencies in your patient population and addressing those right away.


I've read some [inaudible 00:39:08] evidence of successful Medicare ACOs that have identified high cost areas in their communities and the patient based that they serve like high number of say diabetes cases and they've gotten together and they've focused on that and through that and getting that down and integrating their providers together, forming medical homes they've been able to cut those costs and as a result have been able to earn shared savings from that. So it make since that so many ACOs have NCQ recognized medical homes in there provider network because that is sort of your front line in an ACO program and it allows you to hit the ground running and to have an infrastructure available where you can start addressing those high costs populations right away.


April:All right, thanks Tyler.


Another question here, do next generation ACOs involve more or less risk than pioneer ACOs?


The short answer to that is less, as Tyler indicated that pioneer programs started out with 32 pioneer ACOs and it dwindled now to 9 and one of the main reasons that people have(people being ACOs) dropped out of the pioneer program or transitioned to the Medicare shared savings program is because the pioneer program requires these entities to take on risk in year one and that is such a tough thing to do. Even the most advanced, innovative, experienced ACOs out there have a difficult time jumping into risk especially right off the bat.


So CMS recognized that, it saw and listened to the ACO community about the problems with the pioneer program as well as problems with the Medicare shared savings program they're not perfect by a long stretch. CMS launched the next generation program, it launched in January with 21 participants and actually now it's already down to 18 even though it hasn't fully gotten off the ground yet but that's another conversation. CMS launched Next Generation with the idea that it wanted to take some of the best parts of the pioneer and some of the better parts of the Medicare shared savings program and put them together, so it's kind of like a Goldie Lock solution, that's what I like to call it, this CMS, ACO model.


Again Next Generation the answer is no they do not actually have to take on financial risk either in year 1, year 2 or year 3. The way that CMS is pushing these providers, these participants of the Next Generation program into risk is by making risk more attractive. As apposed to the pioneer the Medicare shared savings program if you do take on financial risk, if you decided to go that route then you can choose from several models and payment methods but up to 100%, you can reap back up to 100% of the amount of savings that you're able to produce. So CMS is making risk more attractive, it's still difficult for these providers to get there but if they are willing to go that route the reward is going to be greater.


Now again we have 21 next generation ACOs that were announced back in January if you go to the CMS website it's now down to 18. I think it was last month that these organizations had to submit there preferred provider list and which payment model they're going to use to CMS. We should be finding out in maybe the October time frame whether or not how many of these next generation ACOs are going to be risk barring versus non risk barring. Tyler alluded to that sometime within the next 30-60 days we'll also be hearing about the 3rd year performance results for the Medicare shared savings program ACOs. When you put those two together we're gonna get a lot more detailed picture of whether this ACO experiment is working as well as we think it is.


Tyler:I have one more question.


Have you found similar characteristics in next generation ACOs to those in the group of 39 successful MSSP ACOs?


I haven't honed in on the next generation ACOs just yet, I think that's mainly because the next generation ACOs will be very similar by default because the next generation program was actually designed to attract some of those high performing organizations that are already familiar with coordinating care and population health management. I think out of the active list of next generation ACOs there are several that actually transitioned from the Medicare shared savings program I don't have the exact number but I do know that some ACOs that actually earned shared savings only in 2014, those that either began in 2014 or that began earlier but only earned savings in 2014 have actually since then transitioned into the next generation program.


They would be similar but the thing about the shared savings program is that is was designed for ACO organizations that weren't really at the level of the pioneer ACOs where they are ready to take on risks. It's worth looking at how those that have entered that program that didn't have everything from the get go how they've been able to leverage what they already have or the things they've been able to build and achieve success in that program.


April:Okay I think we have time for just one more question.


Is it more difficult for ACOs to achieve shared and savings in year 2 or year 3?


This is referring to the Medicare ACO program all of which Tyler and I mentioned are 3 year agreements period and right now we have that data for years 1 and 2 and we're going to get that data on year 3 any moment now. I think this question is coming from the perspective that there actually has been quite an up roar among ACO community that the way that the programs are structured right now and this is risk aside this is even if you're in the shared savings tack 1. They way that it's structured at the moment it makes it difficult for these entities that are doing really well in year 1, they have to beat their best performance every year. They're basically having diminishing returns and that's all because the way their bench marks are set.


As I mentioned earlier the way that the shared savings or shared losses are calculated is looking at what the ACOs expenses are compared to a bench mark level. Until now the bench marks have been set at national level and they have not been adjusted year to year so again the ACO community made the argument that it's not fair to be judged if you're and ACO managing patients in Florida to be judged against one in Denver. It's got it's different set of patients that you're dealing with, with different types conditions and underlining conditions. A different set of social economic circumstances that all feed into their out comes really.


That's one aspect of the problem with the bench marking and that was set at a national average. Then secondly that it was not adjusted year to year so again if you're doing really well from the get go your gonna have to do so much better in year 2 to make shared savings which means in year 3 you're really gonna have to do well in order to get shared savings.


Back to that thing about the preform ace results for year 3 thing or least that's really going to be telling as to whether these entities that are doing really good work and they're very experienced and innovated and appear to be doing everything they can within that ACO frame work but that they're actually maybe punished in year 3 for doing well. The good new is that CMS has been listening to these complaints and they have made some modifications within the next generation ACO that they've made a lot of adjustments to how bench marking is done that solves these problems. CMS is also purposed some changes to the Medicare shared savings program that would also improve how bench marking is done.


Well I think that's all the time we have here Mike I'll hand it back to you.


Mike:Great thank you April and Tyler for today's presentation and thanks to everyone on the phone for attending. You will receive an email within the next few business days with links to today's recording and we hope you have a great afternoon. Thank you again.