Policy Evidence

  • Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, who come together voluntarily to ensure that patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. These entities can partake in shared savings or bear risk dependent on the contract. source
  • Bundled payments, also known as episode payment models (EPMs), are a type of alternative payment model where the total allowable acute and/or post-acute expenditures for an episode of care are predetermined. Participant providers share in any losses or savings that result from the difference between this target price and actual costs. source
  • The USC-Brookings Schaeffer Initiative for Health Policy found in 2018 that Medicare bundled payments could offer opportunities for improved performance and quality with adjustments for patient severity. source
  • HHS has endorsed the American College of Emergency Physicians’ (ACEP) Alternative Payment Model (APM) for emergency medicine, which bundles payments and allows emergency physicians to accept some risk and manage transition to value-based payment. source & source
  • In 2019, the Alliance for Addiction Payment Reform launched a comprehensive episode of care definition for implementation of the Addiction Recovery Medical Home - Alternative Payment Model. This APM establishes a broad continuum of care ranging from emergent and stabilizing acute-care settings linking with community-based services and recovery supports that are essential to supporting individuals’ needs in a chronic disease management approach. source
  • A 2018 release by CMS Administrator Seema Verma emphasized the agency’s clear goal to specifically encourage growth of two-sided risk ACOs. source
  • Boeing has a series of direct contracts with upside and downside risk elements with large integrated health systems in four markets: Seattle, St. Louis, Charleston, S.C., and Southern California. source
  • Employers are increasingly contracting with ACOs for comprehensive employee care, rising from 3% in 2018 to 11% in 2019. source
  • As of January 1, 2018, 82% of the ACOs participating in the Medicare Shared Savings Program (MSSP)(561 total) were only in Track 1, meaning they were assuming no risk. 10% were in Track 1+, 1% in Track 2, and 7% in Track 3. source

Outcome Evidence

  • While the number of accountable care organization (ACO) contracts with downside risk is growing, the majority of ACOs remain in upside-only risk contracts. Between 2012 and 2018, ACOs with downside risk contracts modestly increased from 28% to 33%. source
  • According to a 2018 marketplace survey conducted by NEJM, clinicians were very skeptical of value-based care relative to clinical leader and executives, stating they don’t believe value-based care contracts will lead to higher quality. source
  • The National Association of ACOs found that 71% (of 82) would drop out of the Medicare Shared Savings Program (MSSP) if forced to take on more risk. source
  • According to a 2019 Health Affairs study, 51 percent of ACOs are likely to exit Medicare Shared Savings Program due to downside risk requirements because of new rules that require them to take on more downside risk. source
  • The reason many ACOs are wary of joining in two-sided contracts stems from uncertainty of first-time or newly formed participants. source
  • In 2018 the Center for Healthcare Quality and Payment reform found that the Medicare Shared Savings Program (MSSP) ACOs that take on downside risk generate smaller savings than upside risk ACOs. source
  • In 2018, MSSP generated $739.4 million in total net savings across 548 ACOs. source
  • Hospitals may leave CMS’ bundled-payment model because participants were forced to take on downside risk. source
  • A 2016 study published in JAMA found that systems participating in Medicare’s Bundle Payment for Care Improvement achieved average per-episode savings of $1,166 (4%) over similar non-participating hospitals. The largest savings were in post-acute care, particularly skilled nursing facilities and inpatient rehabilitation facilities. source
  • A 2018 study published in JAMA found in the first year of the mandatory complete joint bundle the average percentage of hip and knee replacement patients discharged to a post-acute care facility was 30.8% for hospitals participating in the complete joint bundle compared to 33.7% for non-participating hospitals. The study also found that total Medicare spending was $453 lower at participating hospitals before accounting for shared savings distributions. source
  • A 2018 study published in JAMA found in the first year of the mandatory complete joint bundle 48% of participating hospitals produced savings which ranged from $14 to $3,591 on average per episode. The hospitals that generated savings were typically larger with higher volume, non-profits or teaching hospitals, and hospitals with integrated post-acute facilities. source
  • In 2018, Medicare Advantage plans had the highest percentage of total payments tied to alternative payment models (53.6%), followed by traditional Medicare (40.9%), commercial payers (30.1%) and Medicaid (23.3%) source

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