The ACO Evolution

By Monica E. Oss, Chief Executive Officer, OPEN MINDS

It has been over a decade since the Patient Protection & Affordable Care Act (PPACA)—also known as the Affordable Care Act (ACA) or Obamacare—introduced Accountable Care Organizations (ACOs), groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high-quality care to their patients. The initial focus of ACOs was on Medicare; now they span all payers. Of the 1,013 ACOs operating at the end of 2019, 86 were Medicaid ACOs. In comparison, 647 ACOs had at least one Medicare contract and 477 ACOs had at least one commercial contract.

This year, the big news in ACOs is in Medicare. The Centers for Medicare and Medicaid Services (CMS) launched the ACO REACH (Realizing Equity, Access, and Community Health) Model on January 1, 2023.

On the Medicaid front, the evolution has been slower but steady. As of 2020, fourteen states operated some form of Medicaid ACO model, compared to nine states in 2016. And there has been a 94% increase in consumers enrolled in Medicaid ACOs since 2016. Of the 14 states operating Medicaid ACOs in 2020, only two states saw a decline in enrollment since 2016. These were the findings of our recent analysis, summarized in our new report, The Medicaid Accountable Care Organization Update: The 2023 OPEN MINDS Market Intelligence Report.

ACOs present the opportunity for state Medicaid plans to move away from standard fee-for-service reimbursement, to some reimbursement based on performance. In 2020, eight states operated shared savings model Medicaid ACOs, five states operated risk-based models, and one state operated two ACO programs with elements of both models (Massachusetts).

The Medicaid ACO model incentivizes collaboration by making the health plans and provider organizations share performance bonuses and financial risk. But, the results have been mixed. Medicaid ACOs are associated with some improvements in use, quality, and expenditures; they have been shown to significantly reduce emergency department use; but, only Vermont’s ACO demonstrated slower growth in total Medicaid expenditures.

Medicaid ACOs operate under a wide range of performance measures. The Medicaid ACO quality measures we reviewed focus on three main areas:

1. Quality of care: readmission rates, patient satisfaction scores, and adherence to evidence-based guidelines.
2. Utilization: average length of stay, number of inpatient admissions, emergency department utilization, etc.
3. Population health: preventative service utilization, health screenings, chronic disease management, health promotion and education, etc.

Now, in 2023, for specialty and primary care organizations serving Medicaid beneficiaries in the now 13 states with Medicaid ACOs—Colorado, Delaware, Idaho, Iowa, Maine, Massachusetts, Minnesota, New Jersey, New York, Oregon, Rhode Island, Utah, and Vermont—the ACO structure and measures are critical to strategy.