Momentum toward private-payor ACOs

Becker’s Hospital Review looks at the reluctance by many providers to join the Medicare accountable care organization (ACO) fray (we’ve blogged before about the challenges) and the opportunity for private-payor approaches to ACOs. Here is an excerpt:

As hospitals and other providers begin to have second thoughts about accountable are organizations under Medicare, similar arrangements being organized by private payors are beginning to look like a better alternative, says Rob Parke, a principal and consulting actuary with the New York office of Milliman.

Mr. Parke is not convinced that CMS’ recent announcement of changes in the ACO program, such as introduction of the new Pioneer ACO model, will change the trend away from Medicare ACOs. Here he makes the following points about providers’ declining enthusiasm for Medicare ACOs and the future growth of private-payor arrangements.

Why hospitals are stepping back from Medicare ACOs

“After reading through the proposed regulations, hospitals have a number of concerns as to whether these entities will work and whether they will ultimately be beneficial,” Mr. Parke says. Moreover, he thinks hospitals’ enthusiasm for Medicare ACOs was somewhat artificial. “Many hospitals were looking at ACOs from a defensive point of view,” he says. “If a competitor started an ACO, what would they do?” But now that several prominent organizations that seemed perfect candidates for ACOs—like Mayo Clinic, Cleveland Clinic and Geisinger–have indicated they may not do so, everyone seems less interested.

Hospitals have several key concerns with Medicare ACOs, Mr. Parke says. For example, they are concerned that the Medicare ACO model would shift significant financial risk to the provider organization. “In the third year of either payment model you choose, the organization is put in financial risk,” he says. On the other hand, some providers want to go beyond shared savings and accept greater financial risk, which is what CMS’ new Pioneer ACO model is offering, he says.

The full Becker’s article is available here.