ACOs are slow to adopt downside risk

Accountable care organizations are a value-based alternative payment model that has leveraged both public and private healthcare payers to lower healthcare costs and improve care quality. However, as the ACO program continues to grow, questions have continued to arise over the need for these organizations to take on downside financial risk in the models.

Only 28% of ACOs formed in 2012 have taken on downside risk, while just 33% had at least one contract with downside risk in 2018, according to a new study published in Health Affairs.

The question of the efficacy of downside risk is also prevalent after CMS finalized changes to the ACO program in late 2018, drastically reducing the amount of runway time for ACOs to establish themselves before taking on downside financial risk. The overwhelming majority of ACOs don’t take on downside risk, which would require them to pay financial penalties for missing cost and quality benchmarks, while most have upside risk that rewards them financially for achieving benchmarks and outperforming peers.

Researchers from the Dartmouth Institute for Health Policy and Clinical Practice looked at data from the National Survey of Accountable Care Organizations to better understand the growth trends.

In 2018, there were 1,011 ACOs covering an estimated 32.7 million lives across 1,477 different public and commercial payment arrangements. From 2012 to 2018, the proportion of ACOs taking on downside risk has remained relatively stable, but those that do have downside risk tend to have a different structure and contractual relationships than other ACOs, researchers found.

For one, ACOs with downside risk were less likely to be physician led––43% compared to 57%­­––and more likely to be led jointly by a hospital and physicians, by a hospital or through some other arrangement. They were also less likely to be physician owned––30% versus 39%. However, they also likely more physicians, with a mean of 1,210 compared to 441, with between 50% and 100% of their physicians covered in an ACO contract.

In addition, downside risk ACOs were more likely to be integrated delivery systems––58% versus 42%––and to include a hospital and have a greater number of hospitals. They could directly provide or contract inpatient rehabilitation, routine specialty care, palliative or hospice care, home health or home care, and skilled nursing facility care more than ACOs without downside risk.

With respect to ACO contracts, those with and without downside risk had similar shares of arrangements of both Medicare and commercial contracts, though downside ACOs were less likely to have just Medicare contracts. In 2018, 84% of all ACOs had Medicare contracts, and 63% had contracts with two or more payers.

“Our results show that those bearing downside risk in ACO contracts also have more experience with other forms of risk-bearing contracts,” lead author Kristin Peck, research project director at the Dartmouth Institute for Health Policy and Clinical Practice Geisel School of Medicine, and colleagues wrote.

Because downside risk ACOs tend to have more experience, “the assumption that inducing more ACOs to bear downside risk would result in increased savings should be questioned, based on what is known to date,” Peck et al. wrote.

The findings could help inform policymakers as they continue to review changes to the ACO program.