What are five questions you need to ask before forming your own ACO?

by Michael Jones

Over the last several weeks, we’ve been in a series discussing Accountable Care Organizations, or ACOs. We began this month by reviewing “What is an ACO and what do you need to know about them?”, and we continued last week by giving some tips to answer the question “Is your practice ready to join an ACO?”. 

This week, we continue along the ACO discussion path with the first of two pivotal questions if you do decide to be a part of an ACO - do you form your own ACO or join an existing ACO?

Recall that there are some dates to be aware of - Phase 1 of the ACO application period going from May 18, 2023 through June 15, 2023 and Phase 2 July 11, 2023 through August 1, 2023. Especially if you’re going to be forming your own ACO, these dates are critical in submitting your application.

This week, we’ve prepared five questions to help you see if you are ready and able to form your own ACO. 

Question 1: Will your practice have enough Medicare beneficiaries to start an ACO?

Before you can even consider forming your own ACO, you should realize that the clinicians eligible for membership alignment must have a minimum of 5,000 Medicare fee-for-service (FFS) beneficiaries assigned to their ACO in each benchmark year to be eligible for participation in the Shared Savings Program (cms.gov).

First, understand that these are Medicare FFS beneficiaries only - and does not include patients in Medicare Advantage or group retiree programs. Many practices significantly overestimate the number of FFS Medicare beneficiaries attributed to them because of this.

Second, these beneficiaries must have what CMS deems “voluntary alignment”, which means that your practice must notify these patients about the ACO, and give them the opportunity to decline data sharing or choose another primary care provider. 

This flowchart from CMS is an often used tool to explain assignment of beneficiaries, and might be helpful as you ponder having 5,000 members or more.

Question 2: If you have more than 5,000 members, do you have enough to give yourself a chance at success?

The table shared below will show you the Minimum Savings Rate (MSR) to achieve shared savings if your savings rate is based on membership size and not selected (if you are on a further ACO track including risk). 

As you can see from the chart above, the smaller the ACO, the greater the Minimum Savings Rate, which means that, based solely on size, a smaller ACO will have to generate a higher positive performance to achieve shared savings than a larger one. Is this something that you will be prepared to achieve, year over year?

Question 3: Do you have the operational infrastructure to support an ACO?

The shared savings program is not set up to promote mediocrity and status quo. It encourages continual improvement and performance increases. To achieve these increases requires some degree of sophistication in choosing the most important focus areas for clinical improvement and data analysis and forecasting. To get to a true high performance level requires a dedication to improvement that takes a significant time and resource commitment.


Question 4: Do you have the compliance and governance infrastructure to support an ACO?

From the very beginning, with the submission to participate in an ACO, the establishment of a compliance and governance program is significant. Legal requirements, beneficiary notification programs, and provider training are all ongoing components of the ACO program, and must be met with consistency.

Question 5: Do you have the administrative and financial resources to meet the repayment mechanism obligations?

CMS has an entire 17 page document titled Repayment Mechanism Arrangements, which spells out the timeline, requirements, financial amounts, and options available to have a repayment guarantee prior to advancing to a two-sided risk ACO model. This can be an escrow agreement, a letter of credit, or a surety bond,

The amount is initially an estimate from CMS, using the following guidelines, and will be finalized in your ACO application.

• One-half (0.5) percent of the total per capita Medicare Parts A and B fee-for-service (FFS) expenditures for its assigned beneficiaries, based on expenditures and the number of assigned beneficiaries for the most recent calendar year for which 12 months of data are available; or
  

• One percent of the total Medicare Parts A and B FFS revenue of its ACO participants, based on revenue for the most recent calendar year for which 12 months of data are available, and based on the ACO’s number of assigned beneficiaries for the most recent calendar year for which 12 months of data are available.

Answering these more operational questions will give you an indication of whether or not your practice is ready and able to form an ACO on your own, which, as you can see, has many intricacies. If you are not ready to pursue an ACO on your own, you still have options to join an established ACO or form an ACO with other entities, which we will discuss next week.