Private ACO contracts: More downside risk & upfront payments

Half of accountable care organization (ACO) providers hold contracts with private insurers, according to a study published in the December edition of the American Journal of Managed Care. The analysis is one of the first to shed light on the nature of ACO contracts with commercial payers.

Medicare launched ACO pilots in 2005 and private payers began to test the waters five years later. Information on participants in ACOs under Medicare and Medicaid is publicly available but it is not for private contracts. To fill in that gap Valerie A. Lewis, PhD, of the Dartmouth Institute for Health Policy & Clinical Practice in Hanover, N.H., and colleagues surveyed organizations through the National Survey of ACOs to learn about the type and design of their contracts.

To be eligible, the ACOs needed to exist by August 2012 and meet their definition of an ACO contract: one that holds providers responsible for the total cost and quality of care of a defined population. A total of 173 organizations responded by May 2013.

Medicare accounted for the largest proportion of ACO contracts, at 66 percent, followed by private insurers at 51 percent and Medicaid at 25 percent. Most respondents (57 percent) had only one ACO contract.     

When asked about their largest ACO contract with a private payer, 69 percent responded that they used a shared savings plan and 56 percent included a downside risk component. In contrast, only 7 percent of Medicare Shared Savings Program contracts incorporated downside risk.

The proportion of shared savings that went to ACOs with private contracts totaled a mean 56 percent; those under Medicare Shared Savings Programs with only upside risk netted 50 percent of savings and those with downside risk received 60 percent of savings. Nearly 80 percent of private ACO contracts tied shared savings to quality performance and 39 percent included additional bonus payments for quality performance. Most private contracts included upfront payments through vehicles such as care coordination or care management plans.

Compared with ACOs with public contracts, providers with private contracts were more likely to be integrated; have a hospital; achieve higher levels of meaningful use with their primary care physicians; have more full-time equivalent primary care physicians and specialists; and have experience in pay-for-performance initiatives and other healthcare reform efforts. Lewis et al proposed that Medicare contracts may seem a safer and more feasible platform for less experienced ACOs.

The study offers a first glimpse of the types and characteristics of private ACO contracts and the providers pursuing them, they wrote. “The field of ACOs is rapidly developing, and continuing research on ACO contracts is necessary to understand how contracts are developing and changing.”