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CMS’s Latest Move on ACOs: A Shift Towards Greater Realism Going Forward?

December 1, 2014
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Just hours after the news broke that CMS was issuing a new rule on ACO development, at least a few things are already clear

It’s still just hours after the news broke this afternoon—Monday, December 1—but as we and others across healthcare digest the latest developments out of the Centers for Medicare and Medicaid Services (CMS), some important points leap to mind. Indeed, two elements in particular hold major implications for the future of provider participation in Medicare’s accountable care organization (ACO) programs.

First of all, CMS is creating a new category of ACO, separate from the “regular” Medicare Shared Savings Program category and from the Pioneer ACO Program category. This new category has rules similar to those of the Pioneer ACO Program, but with a major set of differences. Known as “Track Three,” the new program, as a report in Kaiser Health News confirmed, “would allow ACOs to keep up to 75 percent of the money they save Medicare. But if they cost Medicare extra, they would be held responsible for 15 percent of the excess spending. Currently, ACOs cannot be held responsible for more than 10 percent.”

This new sub-program involves something akin to an extra carrot (a good share of “shared savings”) with an extra stick (a higher percentage of downside risk). In the coming weeks and months, it will be interesting to see how many current Pioneer ACO leaders shift into “Track Three.” And it will be even more interesting to see whether any regular-MSSP ACOs do so—or whether organizations or collaborative not currently participating in either the regular-MSSP or Pioneer-model programs join Track Three because of those incentives.

(Providers should also welcome CMS's change to its attribution procedure, with no new patients being attributed to ACOs in the middle of a calendar year, as currently occurs.)

Meanwhile, very importantly, as KHN report noted, “The new rule would give ACOs, both new and existing ones, an extra three years before they faced penalties, for a total of six years. Sean Cavanaugh, Medicare’s director,” the report noted, “said the change was one of many prompted by concerns raised by ACOs. ‘The notion that 36 months later you’re going to be at downside financial risk is pretty intimidating,’ he said in an interview,” the KHN report said.

“However,” the report continued, “the extra time would come at a price: ACOs that after their first three years decide to avoid penalties for the next three could keep no more than 40 percent of the money they save Medicare, rather than the 50 percent maximum they can keep during their first three years.”

Both of these new measures are gambles on the part of senior CMS officials: at this point in time, participation in both current programs, the Pioneer program and the MSSP program, is faltering. But the calculated risk being taken by CMS officials could potentially pay off. Provider leaders have repeatedly told us at Healthcare Informatics that the threat of downside risk remains too daunting a hurdle for many patient care organizations, as their senior executives and clinician leaders consider whether to participate in any of the Medicare ACO programs.

Indeed, even after praising CMS officials for the “proposal to waive certain fee-for-service payment rules that now inhibit clinicians from using their best medical judgment as to the best time and place for care,” as well as the fact that “CMS appears willing to revisit the instability of the financial benchmarks and the inequity of the risk adjustment methodologies,” the Charlotte-based Premier health alliance’s senior vice president Blair Childs said in a statement, “We believe, however, that CMS needs to do much more to improve the one-sided risk model In fact,” he said, “it proposes to reduce the already inadequate shared savings payments for ACOs extending their contract under Track 1 from 50 percent to 40 percent in year 4, stepping payment down an additional 10 percent each year to reach 20 percent in year 6. This will impede participation and inadequately recognizes the financial and transformational contributions made by participating providers.” The folks at Premier should know: some of their members are involved in both current ACO programs, and are leader organizations in the field.

Ultimately, only time will tell what comes of all this. But at least one thing is clear: CMS officials are apparently beginning to listen to provider concerns with regard to financial risk issues, and realize that the entire overall program could be in peril if changes aren’t made.

A next constructive step would be for senior CMS officials to consider taking another look at some of the core clinical outcomes measures in the ACO programs. But perhaps that will have to wait for another day.