ACOs—the leading model for care transformation

June 10, 2015

Health Care Alert

Author(s): Steven F. Banghart, April E. Schweitzer

Will the number of Accountable Care Organizations (“ACOs”) continue to grow? All signs point to “yes” given recent developments from the Centers for Medicare & Medicaid Services (“CMS”). ACO stakeholders should monitor several key developments and trends in the coming months.

The prevalence of ACOs has grown steadily since 2011 when the Centers for Medicare & Medicaid Services (“CMS”) finalized rules for the Medicare Shared Savings Program (“MSSP”). While there have been bumps along the road, there are numerous reasons to believe that the accountable care movement, both governmental and commercial, is likely to continue at a rapid pace into the near future. Continued growth in the accountable care movement aligns with the Department of Health and Human Services’ plan to move at least 50 percent of Medicare payments to alternative payment models, including ACO-based arrangements, by 2018.

There are several key developments that ACO stakeholders should monitor in the second half of 2015 as ACOs become a mainstream model for health care delivery:

  • First, on June 4, 2015, CMS issued a final rule after considering over 270 comments in response to their December 2014 proposed rule. By expanding the emphasis on primary care services in the assignment process, streamlining data sharing, modifying when ACOs must move toward two-sided risk and adding a new performance-based risk option, the final rule incentivizes current ACOs to renew their participation in the program. For more information, please read the CMS Fact Sheet regarding the MSSP Regulations.
  • Second, in March 2015, the CMS Innovation Center announced the Next Generation ACO Model, which allows providers to assume higher levels of financial risk for greater rewards than are available under the current Pioneer and MSSP models, with the possibility of eventually accepting capitated payments. The introduction of this additional ACO model demonstrates that CMS is dedicated to working with organizations that are prepared to accept increased financial risk as well as those organizations that are still learning to deliver accountable care efficiently and effectively under the lower-risk Pioneer and MSSP models.
  • Third, the expansion of Medicaid ACOs has been significant with 16 states having passed ACO legislation or enacted ACO-like pilot programs, ranging from MSSP look-alikes to capitated payments. Medicaid appears to be an effective vehicle for states to accelerate the regional growth of ACOs given the size of state Medicaid programs and the states’ control over payment models. Therefore, more states are likely to follow suit in the next few years.
  • Fourth, commercial insurers are developing state-of-the-art data integration strategies that provide real-time care coordination and data monitoring to avoid disconnected systems. Many providers have perceived interoperability issues as a barrier to success within commercial and governmental ACOs. A renewed focus on data integration at the commercial insurer level signals that payers are willing to devote resources to achieving technological integration within ACO networks.

These four ACO trends signal that the accountable care movement is likely to grow and help facilitate the government’s “triple aim” of improving health care quality, lowering costs, and increasing patient satisfaction.

The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.

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