Published 2/1/2014
Craig R. Mahoney, MD; Peggy L. Naas, MD, MBA; Marc E. Rankin, MD

Shared Risk and Orthopaedic Surgeons

New payment models can deliver—but have some downsides

Under a shared-risk payment model embodied in an Accountable Care Organization (ACO), the provider assumes some financial responsibility for the continuum of patient care services. This transfer of risk from payers to providers and patients is a core strategy, common in non–fee-for-service payment reform models—whether on the federal, state, or commercial insurance level. In these models, a portion of the provider’s compensation is based on managing the cost of care and health outcomes.

Orthopaedists who participate in shared-risk models may find themselves sharing achieved savings and losses with insurance companies, health systems, or other physicians. Today’s practicing orthopaedist will be charged with not only providing quality care, but managing the cost of care delivered and assuming risk for poor outcomes.

According to John Cherf, MD, MPH, MBA, chief operating officer of the Chicago Institute of Orthopaedics, “The most successful orthopaedic surgeon in a risk-sharing environment will need to consider all aspects of care. This will require a higher sensitivity to cost and value.”

Medicare Shared Savings ACOs
ACOs were formed under the Medicare Shared Savings Program (MSSP) mandated by the 2010 healthcare reform act. This law defined requirements for an ACO as follows:

  • The organization will be held accountable for the quality, cost, and care of the fee-for-service beneficiaries it treats.
  • The agreement with the MSSP will be for a minimum of 3 years.
  • The organization will receive and distribute payments for shared savings through a formal legal structure.
  • A minimum number of primary care physicians will be included and be responsible for the care of a minimum of 5,000 beneficiaries.
  • Information will need to be supplied regarding the professionals who participate in the ACO, the implementation of quality and other reporting requirements, and the determination of the allocation of shared savings.
  • Leadership and management structures will need to include clinical and administrative systems that define processes promoting evidenced-based medicine.
  • The organization will encourage patient engagement reporting on quality and cost measures and on care coordination and will need to be patient-centered.

The MSSP, which represents public sector ACOs, has two risk-sharing models. In the first, a one-sided risk model, providers and the Centers for Medicare & Medicaid Services (CMS) share a portion of the savings for the first 2 years, after which they share both savings and losses. The second, a two-sided model, provides for the sharing of savings and losses from the beginning.

Although the provider is eligible for a greater portion of savings in the two-sided model, many orthopaedic surgeons may prefer the one-sided model due to their lack of previous accountable care experience.

Early results
Although evidence on how ACOs have affected orthopaedists to date is lacking, early results of the MSSP ACOs provide some insight. On July 17, 2013, CMS announced first-year performance measures from the Pioneer ACO program. The 32 Pioneer ACOs recorded shared savings of $87.6 million in 2012. Costs for beneficiaries grew by 0.3 percent, which is less than half of the increase recorded in the private sector over the same period.

Although nine systems within the Pioneer ACO have announced that they are leaving the program, seven of the nine systems have applied to participate in another ACO model that carries a lower risk.

AAOS members have ample opportunity to be involved in an ACO, notably by providing input for quality metrics specific to musculoskeletal care. Currently, CMS quality of care metrics cover four broad areas:

  • care coordination and patient safety
  • patient–caregiver experience
  • preventive health
  • at-risk populations

To be eligible for shared savings, ACOs must meet 33 quality measures within these four domains. Most quality measures are broad and focus on primary care initiatives. Although a few measures have some application to musculoskeletal care—such as screening for future falls risk and measuring body mass index—no specific musculoskeletal quality measures exist. Orthopaedic surgeons participating in an MSSP ACO should actively work to define these quality measures. The alternative is that administrators, CMS, or other nonorthopaedists will establish musculoskeletal quality measures.

Commercial shared-savings ACOs
Many examples of shared-risk models can be found among private or commercial ACOs. Several national commercial insurance companies have engaged health systems, multispecialty physician groups, and primary care physicians in shared-savings, risk-sharing, and ACO models, some of which are similar to traditional capitated health maintenance organization models.

In the “bonus payment at risk” model, the provider’s bonus is based on quality and/or efficiency performance. The “risk of baseline revenue loss” model starts with a built-in fee-for-service model, but providers face a financial or payment loss if they fail to meet certain cost or quality thresholds and/or if actual costs exceed a set target.

One example of a commercial ACO is the agreement between Advocate Health Care and Blue Cross of Illinois. Quality metrics, the amount of savings to be shared, and the retrospective reconciliation process are negotiated between the parties involved.

Regardless of the model used, surgeons should understand the difference between “actuarial risk” and “performance risk.” An actuarial risk is not under the surgeon’s control and includes those outcomes and costs that are naturally observed in a given cohort of patients (an accepted risk factor). The performance risk is under the surgeon’s control and results when a procedure or episode of care does not meet its intended outcome. It should also be understood that the distinction between actuarial risk and performance risk is not always precise.

Advantages of ACO involvement
Participation in a shared-saving agreement offers some advantages to the orthopaedic surgeon. For example, all of the participating providers commit to become more closely aligned with each other. The organization will be rewarded or penalized based on the quality of care provided to patients and the financial performance of all the physicians participating. The most successful ACOs will be those that facilitate provider connections and keep patient members within the ACO.

Although ACOs will be required to follow payers’ quality metrics, orthopaedic providers will be able to help design metrics unique to the ACO and to define quality within the ACO. Without input from the orthopaedic community, quality will be defined by payers or providers who don’t have musculoskeletal expertise.

The ACO structure will allow and encourage health systems and their member physicians to decrease overall spending without decreasing the quality of care provided. The savings will then be shared between the payer and the ACO, which in turn will disseminate the savings to providers within the system.

Concerns for orthopaedic providers
ACO participation will require changes in orthopaedic practices. Reporting requirements will increase with the tracking and reporting of value-defining metrics. Data entry will likely be a shared responsibility among all members of the ACO, as will the costs associated with reporting. A positive side of this will be data “ownership.” If physicians are partially responsible for data acquisition, they will likely feel an enhanced sense of control of the data, which they can use to manage resources and care.

Unfortunately, providers’ perceptions of their connection to payers may change. The pathway to payment within an ACO could become one stop longer. Some arrangements require participants to cede their right to negotiate contracts to the ACO. This could create conflicts among medical specialties and potentially reward “over-represented” specialties.

Membership in an ACO will influence specialists’ ability to gain referrals from primary care colleagues. Existing referral sources may join different ACOs with their own risk-sharing specialist partners. Primary care physicians who participate in a Medicare ACO may refer patients only to those orthopaedists who have a risk-sharing or contracted relationship with that ACO. Specialists who demonstrate they can coordinate care with an ACO will be attractive to payers, other integrated care systems, and other ACOs.

The number of primary care physicians in ACOs will outnumber specialists. From a governance standpoint, this could create political challenges for orthopaedic surgeons and a sense of diminished influence within the healthcare community.

The possibility of aggravating healthcare disparities in a given geographic region is a potential unintended side-effect. Some orthopaedic surgeons whose practices are located in areas with high-risk patients with multiple comorbidities, such as a predominantly diabetic population, may feel compelled to relocate to avoid being penalized for negative outcomes. Appropriate risk stratification will be an important component to ensure continued patient access to quality care.

Looking forward
Shared risk is one of several models being pursued in both the public and the private sectors. The stated purpose is to provide quality care while containing cost. ACOs may hold promise for delivering quality care and holding down healthcare costs. Whether this model will prove an attractive option for practicing orthopaedic surgeons is uncertain.

Certainly the shared-savings ACO model has the potential to change the relationships between primary care referring physicians and specialists. Outcomes and their related cost profiles will become more transparent and these data may influence referral patterns. Primary care physicians participating in a shared-savings ACO may subcontract with specialist groups willing to share specific risks for bundles of services or build co-management agreements with metrics for determining outcomes.

Bundled payment programs in Medicare and with commercial payers may be more appealing to orthopaedic surgeons. (Look for the HCSC bundled payment article in next month’s AAOS Now.) Orthopaedists working directly with their hospitals to design bundled-payment programs for specific procedures may feel they have greater autonomy in decision making and may be able to exert more direct influence on quality metrics and outcomes than they might in a shared-risk program.

AAOS members must understand the opportunities and risks of these new payment models. As orthopaedic surgeons, we need to consider how to participate so that we can help design these models and learn from these experiences while minimizing unnecessary risk. And we must deliver high quality, high value orthopaedic care with documented outcomes, consistently and efficiently.

Craig R. Mahoney, MD; Peggy L. Naas, MD, MBA; and Marc E. Rankin, MD, are members of the AAOS Health Care Systems Committee.

Terms to know
Accountable Care Organization (ACO):
A payment and delivery model in which care providers meet quality metrics, redesign care for efficiency and quality, coordinate individuals’ care across care settings, and share in risk and financial savings resulting from the outcomes of such redesigned care.

Pioneer ACO: Ongoing Federal Medicare ACO shared-risk payment model for organizations experienced in coordinating care across the continuum and multiple care settings.

Medicare Shared Savings Program (MSSP): Ongoing Federal Medicare ACO payment model for fee-for-service Medicare patients with less risk than the Pioneer program.

Advance Payment ACO Model: Ongoing selected organizations that can receive Federal “upfront payments” and monthly payments to build care coordination infrastructure while participating in a Federal ACO.

Learn more…
The AAOS Health Care Systems Committee will host a free 1-hour webinar on “Shared Risk: What Orthopaedic Surgeons Need to Know about an Emerging Reimbursement Model” on Thursday, Feb. 13, beginning at 8:15 p.m. (ET). Register online at