PY 2023 Decisions for Competing with or Participating in Multi-ACO Enabler Entities

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The New Reality of Enablers

ACOs with independent participants have been struggling due to their highest performing practices being recruited by multi-ACO enabler entities.** From the other perspective, provider practices are challenged with selecting from an increasing assortment of enablers as alternatives to CMS’s BASIC, ENHANCED and REACH models. This article explores the ACO decisions for PY 2023 with the opportunities and threats from enablers added to the mix.

About half of future REACH participants are likely to be enablers

Monitoring the Moving Parts

ACOs threatened with losing their participants would benefit from proactively monitoring the growth of enabler entities in their geographies and the migration of patients to other organizations over time. They can design a more equitable and fair savings distribution methodology to retain their best performing participants long term. It is also possible to quantify the value from improved referral and keepage made possible by retaining independents and apply it to the long term retention strategy.

Enabler Contract as a Custom ACO Model

Practices negotiating with enablers can evaluate contracts from these companies side-by-side with the “bare” CMS models and tracks. Enabler contracts define the payout very differently from CMS’s original intent, with many removing downside loss exposure entirely, incurring an additional cut from savings, and introducing up front payments even outside of capitated models. As a result, an enabler contract can be modeled quantitatively as a reinsurance policy and debt financing on top of a bare track.

Enabler Contract as a Custom ACO Model
Payout under 102% and 104% attachment points

Probability of Earning Shared Savings

While most practices focus on the strategic and qualitative aspects of the decision, extending the analysis to include the quantitative financial, and actuarial, measures puts practices in a stronger negotiating position. That’s because they can objectively compare the shared savings payout probability, level of downside risk exposure, and timing of cash incentives. For each contract option, such analysis would identify the payout by probability band, based on the practice’s past performance and accommodate the MSR/MLR corridor. The comparison can be made across contracts from multiple enablers, opportunity for individual direct participation in a CMS or CMMI program, or joining forces with other independent practices.

Measuring upside vs downside with enabler's contract

Performance Variance and Pooling

Calculating the actual shared savings contribution by participant over time gives you insight into the performance variance across the participant cohort. Comparing that with your own savings history tells you whether it’s advantageous to be pooled into that enabler contract or whether you’ll be subsidizing other participants.

Enabler Core Competence

Another helpful analysis is to evaluate the enabler’s core competence. One method to do this is to temporally analyze individual providers in the years before joining an enabler versus after. It leverages performance metrics, such as HCC gap closure, avoidable ED, readmissions, and modifiable utilization. If providers are statistically more likely to improve on a metric after joining the enabler, then the enabler has a core competence in this area. Knowing this also helps to discern whether an enabler’s historical performance was due more to cherry picking of high performing practices or to realized improvements for their participants.

Risk of Termination

Some enabler contracts specify that a participant must be active in order to get a check for savings earned in prior performance years. For example, in August 2022, a participant might be waiting to hear whether their enabler ACO earned savings for PY 2021. But since the settlement results released mid-August are initially embargoed from public release, if a participant decides to exit the enabler, they risk losing their share of savings for 2021 and 2022, depending on the exact timing and contract terms.

Growth Projections vs Diminishing Returns

Since many enablers are often owned by private equity, recently IPO’d companies or payer-funded subsidiaries, investors expect them to maintain an aggressive growth trajectory. Recent merger and acquisition activity demonstrates that valuations for enabler companies incorporate such growth assumptions. However, the number of independent primary care practices is not expanding.

First, participants are being aggressively recruited and offered increasingly attractive contracts. Some use terminology like “financially struggling practice” in advertisements of upfront cash flows. (Enablers often make upfront payments available even outside of capitated models like REACH). Some of the enabler offers we evaluated do not make financial sense from the perspective of net present value of future earnings.

Second, enablers are forced to go “down market” to grow with progressively lower performing practices. Over the next couple years, it will become progressively more clear which enablers have sufficient core competence to improve performance of their participants.

Looking Forward

The presence of enablers in the ACO market for 2023 will be impossible to ignore – regardless whether you’re a competing ACO or an independent practice. ACOs under threat should aim for situational awareness of enablers in their geography. By default they should assume that all independent practices are actively being courted and formulate a plan to counter this fact with a long term retention strategy. Practices evaluating the enabler option gain both objective decision tools and negotiating leverage by quantitatively evaluating each enabler contract as a customized ACO model.

** “Enabler” refers to venture backed multi-ACO companies, as well as Payer-owned entities holding GPDC/REACH or MSSP contracts.