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The state of ACOs

Medical Economics JournalFebruary 25, 2019 edition
Volume 96
Issue 4

Physicians should weigh the pros and cons of participating in accountable care organizations.

accountable care organizations, healthcare, medical practice

©Andrey Popov

Transitioning the U.S. healthcare system from one driven by volume to one driven by value could take another 15 to 20 years, experts say. For the independent physician, there is ample opportunity to consider a leadership role in the evolution by joining an accountable care organization (ACO). 

Federally regulated, fee-for-service Medicare ACOs are setting the standards for value-based payment structures nationwide, and participation remains voluntary. In Medicaid programs, 12 states are actively pursuing ACOs, with another 10 states pursuing the option. In the commercial market, all the large payers have their own versions of accountable care with a variety of benchmarks and reimbursement details. About half of all ACO contracts cover commercial populations, according to consulting firm Leavitt Partners.

David Muhlestein, PhD, JD, chief research officer for the consulting firm Leavitt Partners, says there are approximately 1,000 ACOs in existence, with the majority organized around partnerships between hospitals and physician groups. 

Among Medicare ACOs, 30 percent are physician-led, according to the Centers for Medicare and Medicaid Services (CMS). Their collective results indicate quality improvements and notable savings, but value-based models are still evolving. “ACOs are neither super successful nor a disaster,” says Muhlestein.

He says a successful ACO needs three key ingredients:

1. Acceptance among staff and clinicians with an acknowledgement that the value-driven delivery model requires significant process changes

2. An understanding of the needs of the population served and the necessary interventions to improve outcomes; and

3. The ability to track, communicate, and share information across the organization-typically through technology interfaces.

Even though pockets of experimentation exist, by and large, providers are still functioning in a fee-for-service structure, Muhlestein says. It’s not so much an indicator of resistance to the ACO concept, but more a reflection of how they’re getting paid.

Here are pros and cons for primary care providers to consider regarding ACO participation.


ACO bonus payments can be significant.

In 2017, CMS distributed $780 million in performance payments to ACOs under the Medicare Shared Savings Program (MSSP).In 2016 providers earned $700 million, according to CMS. But ACO participation by itself doesn’t guarantee a bonus.

Muhlestein says about 20 percent of ACOs achieve enough savings to qualify for the extra payments in their first year. Among those in existence for five years or more, about half are sharing savings. 

Practices can earn bonus payments from commercial payers as well, but each payer has its own unique model, he says. The population served, care needs, and even geography can factor into how a commercial accountable care contract might be structured. 

Cigna, for example, reports that its accountable care program generated $424 million in savings from 2008 through 2016, and participating providers have seen a return on investment of 2-to-1.

Linda F. Delo, DO, owner of Delo Medical Associates in Port St. Lucie, Fla., says her practice is a patient-centered medical home and has earned $22,000 in bonus payments from a Blue Cross plan with a 50 percent shared savings model.

She’s also earning shared savings through participation in Palm Beach ACO (PBACO), which ranks as Medicare’s top performer, based on savings. In 2017, PBACO saved the  program $63 million and earned more than $28 million in performance payments. Physician-led, the ACO includes 275 primary care providers and 175 specialists. 

ACOs bring practices closer to patient-centered care delivery.

Performance data for the MSSP from 2012 through 2016 show that providers are achieving average quality scores of 91 percent, according to CMS. Virtually all ACOs have demonstrated continuous quality improvement, says Elias Matsakis, JD, senior partner of law firm Holland & Knight in Chicago. 

And there’s a spillover effect: Practices meeting Medicare’s ACO benchmarks will likely improve care for patients not covered by Medicare. According to Muhlestein, experienced ACOs have been able to change delivery practices, and as they do so, they’re taking on additional value-based contracts. 

“Yes, those bonus payments are great, but if you’re doing it just because you think you’re going to get paid, that’s probably not a reason to join an ACO,” Muhlestein says. “You should be doing it because you believe it will actually lead to better care and a better delivery system.”

While patients probably won’t know their care is coming from an ACO, they will notice when they begin receiving new services, such as medication management or nutrition classes for those with diabetes, he says. Because those types of services traditionally weren’t reimbursed, practices didn’t offer them prior to becoming part of an ACO. 

ACOs support independent practice.

“It’s tough for a primary care provider to sustain alone, be financially solvent, and practice the way he really wants to,” says Sharab Mohamed, MD, an internist in Greenacres, Fla., and a founding member of PBACO. He believes the ACO structure is one of the best ways a practice can remain independent today.

Access to benchmarking data is another benefit of joining an ACO,  Mohamed says. PBACO’s participating providers receive detailed performance data on a regular basis, and by understanding their relative progress on cost and quality measures, they can work toward improvement.

Thanks to its larger infrastructure, the organization also can monitor patients across a broader continuum than a single practice could. For example, PBACO can alert providers when an assigned patient presents in an emergency department or is admitted to a hospital. 

Delo notes an independent physician practicing as part of an ACO is better positioned for the future and will be able to meet the growing need for population health management, which payers of all types are asking for as a cost-containment strategy.


Accountable care models require fundamental retooling.

The biggest challenge for practices implementing value-based care via an ACO is engineering a new business model that achieves the intended goals in quality and cost savings, according to Muhlestein. 

Until the advent of value-based payment structures, physician practices and hospitals focused strictly  on building volume. It made sense because volume is what generates revenue in fee-for-service. However, providers today still largely focus on building volume, so many ACOs remain bogged down with fundamental retooling tasks.

“If you still get 90 percent of your revenue through traditional fee-for-service, it’s really hard to invest in a new delivery system that might hurt fee-for-service and take away some of that ongoing revenue,” Muhlestein says.

Transitioning to the value-based model will take years for a practice to achieve, not to mention significant capital investment in care programs and technology support. “It’s not just a little bit of marginal improvements around the edges,” he says. “It’s rethinking the delivery process.”

Matsakis says the biggest differentiator for ACO success comes down to experience. ACOs that have experience in improving outcomes with efficient interventions or pathways to more appropriate sites of care fare better. Those with care coordination and chronic disease management tools will meet more quality benchmarks than will groups of providers that are essentially just rebranding themselves under an ACO label.

“The challenge is to identify and engage the patients to comply with their health directives and ultimately to steer them to lower cost interventions or to quicker access to medical care before a condition becomes too acute,” Matsakis says.

ACOs are expected eventually to take on downside risk.

CMS designed a six-year ramp-up for the MSSP, in which Medicare ACOs could gain experience solely with shared savings (upside risk) before taking on both upside and downside risk (shared savings and losses). Recent rules shorten the transition period while reducing the proportion of savings ACOs would be entitled to keep.

In 2018, 82 percent of ACOs were in Track 1, which has no downside risk. Another 10 percent were in a new, transitional structure known as Track 1+. The Track 1+ option includes limited downside risk for participating practices while offering bonuses that previously were only available to Track 2 and Track 3 providers that assumed more risk. 

“Track 1+ would be daunting for first-time entrants who have no practical experience on how an ACO would operate,” Matsakis says. “But if they join an established ACO, they can do a historical analysis [to evaluate the costs and benefits of joining].”

Additionally, the experienced ACO is likely to build in a financial cushion before transitioning to a risk-bearing contract. Some ACOs looking to accept downside risk are also adding secondary investors as financial buffers, he says. 

Practices must consider unforeseen costs of participation.

Matsakis says the everyday administrative burden of ACO participation is usually manageable for physicians, although it requires additional processes for the office staff. Practices with EHRs that are accustomed to reporting data are most likely to find their compliance expectations to be reasonable, he says.

Delo recommends that primary care providers who are considering ACO contracts first ensure they have Certified EHR Technology, as required by CMS. Other details to consider are how the ACO allocates shared savings bonuses between primary care providers and specialists as well as the organization’s administrative costs. 

“If they’re taking 15 percent or 20 percent off the top of the shared savings to go toward the administration of the ACO, that’s pretty high,” Delo says. “They would need to make sure they’re providing a lot of service for that kind of cost.”

A fair administration fee might be 8 percent to 10 percent, she says.

She’s also concerned that CMS is going to raise savings expectations in the near future, and providers will reach a point of diminishing returns on their ACO investments. 


“You can only squeeze so much out of a dollar,” Delo says. You can only be so efficient. At some point, you reach a number where you’re doing the best you possibly can, and you can’t save more money beyond that.”

The benefits of physician-led ACOs

Not all ACOs are created equal, according to Linda F. Delo, DO, owner of Delo Medical Associates, a family practice in Port St. Lucie, Fla. She says that her initial ACO experience was disappointing because the organization offered little support and didn’t follow through with reporting, causing Delo to miss out on some bonus payments.

She ultimately abandoned that ACO but has since found one that is a better fit: Palm Beach ACO (PBACO), based in Florida. “They are a large ACO, physician-owned, and they are excellent,” Delo says.

Ranked as Medicare’s top performer in savings, PBACO delivers care to approximately 80,000 Medicare patients as well as another 80,000 commercial insurance beneficiaries who are covered under value-based programs. Some 275 primary care and 175 specialty physicians participate. PBACO is currently in Track 1, but officials say the organization is considering taking on risk in the near future.

“One of the most important things is to go with a physician-owned ACO,” Delo says. “Be sure you’ve got physicians running it with experience in the managed care model. I’m concerned that hospital ACOs have a different focus, which is to make the hospital profitable as opposed to placing emphasis on patient care and cost efficiency.” 

Internal medicine, general practice, family practice, and geriatric medicine providers billing with a taxpayer identification number can only participate in one Medicare fee-for-service ACO at a time, as per federal regulations, so making the right choice is imperative. 

In 2017, PBACO saved Medicare $63 million, for a total savings of $274 million over its five-year history. Intense engagement among the primary care practices is the most crucial factor contributing to its performance, the ACO’s leaders say. 

“We’re not outside investors,” says Sharab Mohamed, MD, a founding member of PBACO, who practices internal medicine in Greenacres, Fla. “We have a stake in the game, and we’re working for ourselves.”

Practices receive quality and cost data regularly, and quarterly performance meetings are mandatory, he says. The communication helps keep the group moving toward benchmark targets-and bonus dollars. 

“It took a lot to get the doctors in the field who were working in their own silos to come together and trust that we’re going to do the right thing,” says Lenny Sukienik, DO, an internist practicing in Loxahatchee, Fla., and a founding member of PBACO. “With primary care doctors, there’s a feeling out there that everybody’s out to get you, so getting that trust is the first step.”

Sukienik says there’s no secret as to how PBACO has been able to make the model work. Frequent communication and access to performance data helps the physicians identify opportunities for care improvement and cost savings.

For example, Sukienik has access to Medicare data through an online portal. He supplements his EHR system with real-time patient data to help inform decisions at the point of care, and he relies on the ACO’s app for updates on his patients’ status. 

Primary care physicians have long been considered the hubs for comprehensive patient care. For ACOs, primary care is a priority because it lowers costs. “What we’ve seen over the years is that spending more money does not equal better care,” says Sukienik.

Instead, he advises practices to make more informed decisions by paying attention to data. For example, imaging costs can be avoided if providers don’t repeat services such as MRIs. Quality can be maintained while costs are reduced.

Indeed, that’s the big-picture vision that the ACO model was built upon. “In 2011, no one knew an MRI is 30 percent more expensive at a hospital, but in 2018, no one doesn’t know that in our business,” says Sukienik.

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