Q&A: ACO Executive Expects Impacts from New Rules

The changed rules are likely to lead providers that operate ACOs to shift their efforts to Medicare Advantage, the executive said.

Jan. 7—HFMA recently talked with the leader of one of the largest accountable care organizations (ACOs) in the Medicare Shared Savings Program (MSSP) about impacts she and other ACO leaders expect from the recently issued 2019 final rules for the program. Early industry reaction to the changes was mixed.

Katherine Schneider, MD, is president and CEO of the Delaware Valley ACO, one of the largest MSSP ACOs. The ACO is owned by Berwyn, Pa.-based Main Line Health and Philadelphia-based Jefferson Health.

Schneider also serves as chair of the board of the National Association of ACOs (NAACOS).

HFMA: What effects do you expect for your organization and the industry from these recently finalized MSSP rules?

Schneider: From the big, national-picture perspective, there is no question that the rules make the program less attractive, especially for newer entrants coming in. They make it less attractive to come in and they make it less attractive stay in. There is a sort of glass half-full and glass half-empty; there’s clearly much more risk in staying in [than there was previously].

From my organization’s perspective—as of this week, we are in our sixth year in the program—we were expecting to have to move towards risk. So that’s nothing new for us. Even though we had mixed results over the years due to our own complexity—our networks changed a lot and we’ve grown tremendously over the years—we’re viewing this as one program in a portfolio. We have about 90,000 lives right now in the MSSP—about one-third of our business; another one-third is with private payers, and another one-third is with our own health system employees. That is a full-risk contract where we get 100 percent of savings straight to our bottom line.

Many of the more advanced and experienced ACOs are looking at this sort of portfolio, and one where Medicare Advantage is clearly an opportunity that has more potential, in terms of the levers you have to manage total cost.

We’re finishing our current contract, which will end at the end of 2019. Now that the rules are out, we’re going to put a lot of effort into modeling options for 2020. It’s highly likely we’ll stay in the program, at least short-term. There’s going to be a lot of learning for us in the first year under the new program because the benchmark methodology is going to change, and sometimes it is very difficult to predict how that will impact you—you don’t have complete information on regional data, for example. We don’t know how some of the attribution changes will play out. Network changes are a constant issue for us.

What will be interesting for us is seeing how things go in 2020 when we would have to move under a downside-risk model. To be clear, we would not have had to pay back a single penny in past years—even in our worst year, when we came in under the benchmark, we were still under the payback threshold.

The issue of putting reserves aside or some kind of financial guarantee—there are several different vehicles you can use for that, but for an ACO of our size it’s a huge amount of money. Even for two big health systems, [it’s] millions, tens of millions, potentially, that you have to have a worst-case scenario for. It’s especially important in a program where you don’t have complete predictability of how changes will impact you.

There are still a lot of unknowns as to how this will play out for us as DVACO, but I definitely know for the program as a whole it’s going to shrink the program. And it’s too bad, because it works. Not all ACOs have been successful and not every ACO has been successful every year. This is about changing the care model for how we take care of our country—for some of the highest-risk people and most costly people in the country. And that doesn’t happen overnight. So, it is too bad if the program shrinks.

HFMA: What is your time frame for a decision on continuing in the MSSP?

Schneider: Our current period ends at the end of 2019. So, we would be renewing for the five-year period beginning in 2020. It’s highly likely we will renew, but there’s a lot more to learn before I could say, ‘We will be staying in two, three, four, or five years.’  

HFMA: What have you heard from the leaders of other ACOs about the final rule?

Schneider: A lot of people were relieved that they moved away from the initial changes that were more draconian, like the 25 percent of savings [shared with the provider]. We never would have gone into the program under those circumstances.

Even keeping the two years that an ACO would have to move into risk, you don’t even have your first year of reconciled results by the time you would have to be committing to that third year under downside risk. So operationally, that’s going to be a real challenge; I don’t know how attractive the program is going to be for new entrants.

It’s pretty clear CMS is not trying to grow the program. They are doing a lot of other things in the Innovation Center. A lot of ACOs are looking to the portfolio approach, where fee-for-service Medicare is one thing they have. A lot of people are looking at growing their Medicare Advantage (MA) line of business. That doesn’t mean standing up a health plan, but through partnerships. But for some, maybe it is standing up a health plan.

HFMA: Is your ACO structured to provide an MA network?

Schneider: Yes, we already do that. Part of the private-payer segment of our portfolio is commercial plans and some of it is Medicare Advantage.

The interview was edited for readability.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare