Q&A: Avalere finds most ACOs would benefit from taking on downside risk with APM bonus

If the 5 percent bonus payment in the Advanced Alternative Payment Model (APMs) track was available in 2015, accountable care organizations (ACOs) would’ve earned additional net payments of $886 million if they had assumed downside risk under the Medicare Shared Savings Program (MSSP).

The study from Avalere Health simulated how ACOs in MSSP Track 1—which doesn’t include downside risk—would’ve fared under the risk-bearing Track 2 with the 5 percent bonus payment advanced APMs under the Quality Payment Program (QPP) will receive in the 2019 payment year. The risk would have paid off for most ACOs, with 79 percent (307) of Track 1 ACOs benefitting financially while 21 percent (82 ACOs) would have generated net losses overall.

HealthExec spoke to one of the authors of the report, Avalere director John Feore, to discuss the results and how it may dispel misconceptions about downside risk among ACOs.

HealthExec: What did your research find ACOs may miss out on if they avoid bearing risk?

John Feore: If you look at our conclusions, there would be ACOs that obviously lose money because every ACO would be subject to shared savings. But when you factor in the higher shared savings rate of Track 2, ACOs would’ve earned more shared savings payments and when you throw in the 5 percent bonus payment, ACOs stand to gain substantially if there are in a downside risk model.[[{"fid":"23128","view_mode":"1_col_no_crop","type":"media","attributes":{"height":184,"width":300,"alt":" - Figure 1-Avalere study","class":"media-element file-1-col-no-crop"}}]]

How do you simulate how Track 1 MSSP ACOs would do in Track 2?

We have their quality performance. If you’re familiar with the Shared Savings Program, if you exceed the minimum shared savings rate, then you can share in savings, but that amount is going to be reduced a little bit, assuming your quality score is below 100. Track 1 ACOs have a varying shared savings rate. It depends on the size of attributed population, so it can be as high as 5 percent before you share in savings. We essentially changed all of those Track 1 ACOs to the Track 2 model with a minimum shared savings or loss rate of +/- 2 percent.

There were far more ACOs choosing not to take on risk than going to the risk-bearing Tracks 2 or 3 in 2015. What misconceptions do those organizations have about downside risk?

I think the reason was it was a fairly new program and these organizations didn’t want to be on the hook right away for taking on downside risk. It’s completely understandable. I think the concerns from the ACOs were that if they combine initial startup costs and then ongoing expenditures with downside risk, they could lose a substantial amount of money as opposed to getting comfortable with the program. There were also new rules and regulations. I think it was caution in stepping into the ACO model.

We’re seeing a growth in the downside risk ACOs, so providers are more comfortable now. I think one of the big takeaways from our analysis is now that there is, outside of (MSSP), the Advanced APM bonus payment available to a downside risk ACO, even if it loses money and has to repay some of the losses to CMS. So this Advanced APM bonus can act as reinsurance, if you will, for taking on downside risk. You may lose some money in (MSSP), but if you get this 5 percent bonus, you still have a good chance of coming out in a net positive.

Were there negatives ACOs could take away from your research?

There were shared losses that ACOs would owe under downside risk that they wouldn’t owe under Track 1. So there were ACOs that would lose money. In the aggregate, that’s more than offset by the 5 percent bonus payment.

Do ACOs and providers which have avoided bearing downside risk think they can continue to avoid it?

I don’t think there’s many, if any, providers that think that downside risk will go away. The most likely scenario for ACOs in Track 1 is they wanted to get comfortable with a new program, ease their way into it with a stepwise approach. (MSSP) itself doesn’t allow them to stay in Track 1 forever, so even the program envisions ACOs eventually getting to downside risk. I think that’s the goal and the policy question is: How fast should they get there?