ACO Agreements: 61% Merely Involve Upside Financial Risk

Most ACO agreements just contain shared savings provisions, indicating that most ACOs aren’t willing to take on more financial risk, a recent research shows.

A latest Leavitt Partners study indicated that 61% of accountable care organization (ACO) agreements are upside risk-only, proving that ACOs might be risk-adverse or are still in the experimental stage with financial risk.

Even though ACOs are taking on more accountable care agreements, the research of 104 surveyed ACOs and 847 ACOs in the Leavitt Partners database disclosed that most ACOs preferred upside risk contracts with 50% claiming they would consider entering a shared saving arrangement in the future versus higher risk arrangements.

 “Although, despite a major number of ACOs assuming more than one accountable care agreement, there is yet a powerful preference by ACOs to pursue upside risk-only shared savings agreements in future agreements,” wrote Leavitt Partners.

Downside risk is vital to expanding several value-based reimbursement models. Under a downside risk arrangement, clinicians are economically responsible for the quality and cost of care they give.

Clinicians can share in a portion of savings if spending and quality performance exceeds benchmarks, but they could also confront repayment if spending and quality are below hopes and expectations. Those in upside risk-only models only share in the savings and don’t have to repay payers losses.

Although, the Leavitt Partner research discovered that the level of financial risk in ACO contracts relied on organizational type. ACOs were categorized into 6 organizational types: complete spectrum integrated, independent physician group, physician group alliance, expanded physician group, independent hospital, and hospital alliance.

Of the 6 types, just hospital alliance ACOs, which have a single owner and were significantly concentrated on inpatient, hospital-based advanced care, had more downside risk contracts (50% of all agreements) than upside risk-only contracts (43%).

In contrast, independent physician group ACOs, which have a single owner and concentrate on outpatient and ambulatory care, were overwhelmingly engaged in upside risk-only contracts. About 82% of their agreements involved shared savings and only 7% were downside risk arrangements.

The research also reported that more complex ACOs, like those with several owners and more integrated care, didn’t accept more financial risk even though they tended to have more accountable care agreements.

In regard to organization type, the level of financial risk accepted by ACOs was also related to the several lives the contract covered, the research determined. Agreements that included more financial risk normally had more lives attributed to them.

About 44% of capitated payment contracts, which need full financial risk on the provider side, covered more than 100,000 sufferers.

Similarly, 31% of shared savings and losses contracts involved over 100,000 sufferers.

On the other hand, more ACO agreements that covered less than 100,000 sufferers were upside risk-only shared savings arrangements (75%) versus shared savings and losses (70%) and capitation (55%).

Look forward, Leavitt Partners discovered that very few ACOs would consider growing their level of financial risk in accountable care contracts. While half of the ACOs claimed they would think about a shared savings contract in the future, another 40% said they would consider entering a shared savings and losses contract.

Just hospital alliance ACOs (31%) and physician group alliance ACOs (29%) stated that they would consider capitation in their next accountable care contract.

ACOs also tended to favor the Medicare Shared Savings Program as their next ACO program. Five out of the 6 organizational types would think about the Medicare program first before a commercial or Medicaid arrangement.

Leavitt Partners pointed out that the push for more Medicare ACO programs in the future might be because the Shared Savings Program gives an upside risk-only track and doesn’t need organizations to jump into downside risk.

In accordance to study results, Leavitt Partners recommended that healthcare agencies seeking ACO agreements should consider their organizational type to determine what level and type of financial risk best suits their facility.