Understanding the ACO Opportunity For Hospices

Though the Medicare Advantage hospice carve-in is going away at the end of this year, those operators still have a role to play in value-based care.

The carve-in, formally known as the hospice component of the value-based insurance design model (VBID), will expire on Dec. 31. The program was designed to test hospice coverage through Medicare Advantage (MA). Though this does not mean that MA will never be involved in hospice, for now, organizations like Accountable Care Organizations (ACOs) may be providers’ best entry point into value-based systems.

Hospices can leverage their existing skill sets in end-of-life, palliative care and serious illness management to succeed in a value-based environment, Robin Stawasz, program development executive for Acclivity Health Solutions, said during a session at the National Hospice and Palliative Care Organization’s (NHPCO) virtual Interdisciplinary Conference.


“We all know that hospice creates savings. Hospice and palliative care, because of their savings and their higher outcomes, actually are the solution that value-based care is looking for,” Stawasz said. “Value-based care, incentivizes use of palliative care, incentivizes use of hospice.”

“Value-based care” could alternatively be called “outcomes-based care,” according to Stawasz. The fundamental theory is that by focusing on the outcome of care rather than the amount of services provided, quality and cost savings will improve.

Hospice and palliative care providers are adept at realizing such savings, largely because they operate in a lower-cost setting and can prevent hospitalizations and emergency department visits.


Hospice care saves Medicare roughly $3.5 billion for patients in their last year of life, according to a joint report from NHPCO, the National Association for Home Care & Hospice (NAHC) and NORC at the University of Chicago. Numbers like these should pique the interest of value-based entities like ACOs.

Providers also have incentives to explore value-based models. Many ACOs, for example, participate in the U.S Centers for Medicare & Medicaid Services’ (CMS) Medicare Shared Savings Program (MSSP), in which they can receive payments for a portion of the cost savings they generate.

Also, one must account for the sheer number of patients that are aligned with these entities. MSSP organizations are growing, according to Stawasz, currently covering more than 10 million patients. As of 2022, more than 500 of these organizations were in operation.

This will only expand, particularly because CMS has set a goal of ensuring that every Medicare beneficiary is covered through a value-based relationship by 2030.

One example that could be advantageous to hospices is the Accountable Care Organization Realizing Equity, Access and Community Health (ACO REACH) model that CMS is currently testing. To date, the program, established last year, has generated in excess of $70 million in cost savings. The model contains a high-needs track to serve the sickest, most complex patients whom hospice and palliative care providers are well-positioned to serve.

“There’s different flavors [of ACOs]. One that impacts hospice most are high-needs ACOs. So these are REACH ACOs that are focused on caring for the sickest of the sick, those really expensive patients, the ones that are probably going to need palliative care and hospice care the most,” Stawasz said. “Those high-needs REACH ACOs are things that hospices need to pay attention to, because those are the patients that you can really reach out and make an impact.”

The Center for Medicare & Medicaid Innovation announced the program in February 2022 to replace the Global and Professional Direct Contracting (GPDC) models. The agency said that ACO REACH reflects its redesigned strategy for payment system demonstrations, with advancing health equity as a key tenet.

One potential benefit is that ACOs have a great deal of flexibility when they contract with downstream providers, including hospices in shared savings arrangements.

The two parties can negotiate mutually beneficial terms that are customized to the needs and characteristics of their patient population. This practice began with the direct contracting models and will continue in the new program.

“Hospice and palliative care are solutions that value-based care really can embrace on both that savings and the outcome side …” Stawasz said. “You get to decide what works and can tailor the care around what you know works and what each patient wants. It’s not a cookie cutter where everybody gets the same thing. You can have a little bit more flexibility in deciding what’s appropriate.” 

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