Report: Stronger incentives needed to increase ACO risk-sharing and improve performance

Accountable care organizations (ACO) avoid downside risk contracts even though the number of ACO contracts and ACOs with multiple contracts have grown, according to a study published in the July issue of Health Affairs. The study authors suggest that stronger incentives to take on downside risk are necessary to ensure the success of the ACO model.

The study, conducted by researchers from Dartmouth College’s Geisel School of Medicine in Hanover, New Hampshire, analyzed ACO structure and contracts from 2012–2018 based on data from the National Survey of Accountable Care Organizations. During that period, the number of ACOs grew fivefold, according to a press release. However, the percent of ACOs taking on downside risk, meaning they share financial responsibility and may lose money if they fail to meet cost, quality and performance goals, saw only modest gains, increasing from 28% in 2012 to 33% in 2018. The majority of ACOs remained in upside-only risk contracts, or contracts that reward cost and quality goal but do not financially penalize ACOs, which industry experts say do not provide adequate incentives to boost ACO performance.

ACOs bearing downside risk were more likely to be part of larger, integrated care delivery systems that included hospitals, had more participating physicians, and were more likely to provide services such as inpatient rehabilitation, routine specialty care, and palliative or hospice care, the study found. They were less likely to be physician-led or -owned.

Only a third of ACOs chose contracts with downside risk in 2018, said Carrie Colla, PhD, associate professor at The Dartmouth Institute for Health Policy and Clinical Practice and senior author of the study. To move the ACO model forward, it will be necessary to address the hesitancy of ACOs to accept downside risk and understand the importance of downside risk in increasing the impact of the ACO model, Colla said.

The Geisel School of Medicine study is in line with the findings in a report on ACO risk-sharing released by Leavitt Partners in February. According to the February report, ACOs that have switched tracks to take on downside risk tend to be larger, located in urban areas, and more successful on financial metrics. However, the report did not find any significant relationship between switching to downside risk tracks and improvement on quality or public health metrics.

CMS has recently taken steps to accelerate ACO risk sharing. Effective February 14, ACOs are permitted only one year before they must share financial risk. New physician-led or low-revenue ACOs are allowed to remain in a one-sided risk model for three years.