There are now nearly 500 Medicare accountable care organizations (ACOs) participating in the Shared Savings Program and the Pioneer ACO Model combined. About one-third of Centers for Medicare and Medicaid Services (CMS), fee-for-service payments are tied to these alternative payment models saving over $411 million for Medicare in just one year. What’s more, patients are receiving better care according to multiple metrics: hospital-acquired infections are down, readmission rates are on the decline, and lives are being saved.

In short, ACOs are providing higher-quality and more person-centered care to an ever-growing number of Medicare beneficiaries while generating financial savings. And all because groups of doctors, hospitals and other healthcare providers are voluntarily (well, perhaps with a push from CMS) coming together to provide coordinated care, particularly to the chronically ill. So what happens when an entire state comes together to create an ACO?

New model in New England

Vermont is doing just that. The Vermont All-Payer ACO Model began with the start of the year and concludes on the last day of 2022. The Vermont ACO is a test, in cooperation with CMS, that joins the most significant payers throughout the state — Medicare, Medicaid and commercial healthcare payers — to incentivise healthcare value and quality, with a focus on health outcomes. The Vermont ACO is under the same payment structure for the majority of providers throughout the state’s care delivery system and aims to transform healthcare for the entire state and its population.

CMS and Vermont aim for broad ACO participation throughout the state to make redesigning the care-delivery system a rational business strategy for Vermont providers and payers. CMS and Vermont additionally aim for this model to drive meaningful improvements in population health by transforming the relationships between and among care delivery and public health systems. Here’s what the model looks like, and what smaller groups might be able to take away from the state’s efforts.

Set performance targets

The goal is to have 70% of all patients, including 90% percent of Vermont Medicare beneficiaries, attributed to an ACO. ACOs will continue to have payer-specific benchmarks and financial settlement calculations, but the ACO design (e.g., quality measures, risk arrangement, payment mechanisms, and beneficiary alignment methodology) will be closely aligned across payers to encourage seamless care that can be measured in an apples-to-apples way.

Vermont will seek to limit the annualized per capita healthcare expenditure growth for all major payers to 3.5%. Vermont will also limit Medicare per capita healthcare expenditure growth for Vermont Medicare beneficiaries to at least 0.1–0.2 percentage points below that of projected national Medicare growth, to promote cost-efficient care.

Vermont will also focus on achieving Health Outcomes and Quality of Care targets in four areas prioritized by Vermont: substance use disorder, suicides, chronic conditions, and access to care. Vermont will be held accountable for three categories of measures for each of the four priority areas in terms of population-level health outcomes, healthcare delivery system measures and process milestones. By establishing state and ACO-level accountability for these metrics, the model will incentivize collaboration between the care delivery and public health systems to achieve these outcomes.

Dedicate funding to care coordination

CMS will make available to Vermont start-up funding of $9.5 million in 2017 to support care coordination and bolster collaboration between practices and community-based providers. Vermont is expected to direct at least a portion of any such funding towards its existing Blueprint for Health and Supports and Services at Home programs that perform such activities.

Incorporate Medicaid in the mix

Medicaid is a critical healthcare payer in states, full-stop. And it’s not been forgotten in the Vermont All-Payer ACO Model. CMS has approved a five-year extension of Vermont’s section 1115(a) Medicaid demonstration, which enables Medicaid to be a full partner in the model, meaning Medicaid providers will be held to the same consistent standards, and will have access to the care-coordination efforts within Medicaid that they have with Medicare and other patients. The section 1115(a) Medicaid demonstration is backed by Vermont’s commitment to program flexibility, coordination of the managed care delivery system, removal of institutional bias, and delivery system reform. By allowing Vermont Medicaid to enter into ACO arrangements that align in design with that of other healthcare payers in support of the Vermont All-Payer ACO Mode, Vermont expects to demonstrate its ability to achieve universal access to health care, cost containment, and improved quality of care.

“This model is historic in terms of its scope, aiming to include almost all providers and people throughout the state in an all-payer ACO model to drive improved quality, better care coordination, healthier people, and smarter spending,” says Patrick Conway, MD, CMS principal deputy administrator and chief medical officer. “This model may also allow eligible physicians and other clinicians in Vermont to qualify for Advanced Alternative Payment Model bonus payments from the Quality Payment Program given their commitment to be accountable and improve care for patients.”