Reimbursing Accountable Care Organizations (ACOs) for value in a primarily fee-for-service payment environment is creating implementation challenges for Vermont’s innovative All-Payer ACO Model. Capitation rates paid to ACOs under the model are still rooted in fee-for-service spending despite risk adjustments.
- The model allows participating physician groups to retain fee-for-service payment to reduce financial risk and it does not change the incentive structure for specialists, who can impact spending on primary care bundles in the model.
- ACO reimbursement under the model is still based on fee-for-service claims it is not clear to providers across the state how the alternative payment model would be rewarding. And since participation in the Vermont All-Payer Model is voluntary for providers, this could spell trouble for the model’s implementation and eventual success.
- The financial risk methodology makes sense, according to participants, since hospitalizations and emergency department visits drive the cost of care. However, eight of the 14 total hospitals in Vermont are small critical access hospitals that have trouble assuming downside risk in the model.
- Maryland is the only other state employing an all-payer alternative payment model on a large scale. The model also sponsored by CMS requires all third-party payers in the state to pay the same rate to hospitals for services.
- A recent evaluation of the model found that Maryland’s total Medicare spending fell by $25.37 per beneficiary per month (PBPM) compared to a control group in the first three years of the program. Hospital expenditures also declined by $20.69 PBPM more than the control group. The evaluation estimated that the program saved Medicare approximately $679 million, indicating that the model’s potential success in other states.