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When It Comes to ACO Requirements, Yes: The Devil Really Always Is in the Details

January 29, 2016
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CMS’s announcement this week offers hope that the agency will consider reworking similar Pioneer ACO Program elements

The announcement this week by senior officials at the Centers for Medicare & Medicaid Services (CMS) of a new proposed rule around requirements for the Medicare Shared Savings Program (MSSP) for ACOs, should be greeted as very positive news for the leaders of accountable care organizations. What will be particularly interesting will be to see whether CMS officials rethink elements of the Pioneer ACO Program soon, as well.

First, let’s look at the details. As CMS revealed on Thursday, among the elements of the new proposed rule are the following, all taken directly from the announcement on its website:

  • Recognizing that health cost trends vary in communities across the country by using regional, rather than national, spending growth trends when establishing and updating an ACO’s rebased benchmark.
  • Adjusting an ACO’s rebased benchmark when it enters a second or subsequent agreement period by a percentage (increased over time) of the difference between fee-for-service 
  •  spending in the ACO’s regional service area and the ACO’s historical spending, which will provide a greater incentive for continued ACO participation and improvement.
  • Giving ACOs time to prepare for benchmarks that incorporate regional expenditures by using a phased-in approach to implementation.
  • Adding a participation option to facilitate an ACO’s transition to performance-based risk arrangements by allowing eligible ACOs to elect a fourth year under their existing first agreement and defer by one year entering a second agreement period under a performance-based risk track.
  • Streamlining the methodology for adjusting an ACO’s benchmark when its composition changes.
  • Clarifying the timeline and other criteria for reopening determinations of ACO shared savings and shared losses for good cause or fraud or similar fault.

As we noted in our news report on the announcement, industry observers have long noted some major problems with some of these areas. For example,

For example, in a July 2015 analysis, April Wortham Collins, manager, customer sentiment analysis at the Burlington, Mass.-based Decision Resources Group, wrote that, “ When setting an ACO's benchmark, CMS looks at the most recent available three years of beneficiary expenditures for parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO. If an ACO's beneficiary expenditures come in at a certain level below the benchmark, it gets a check from CMS for a portion of the difference. If the ACO is in Track 2 or Track 3 and its beneficiary expenditures come in at a certain level above the benchmark, it writes a check to CMS.” Importantly, Wortham Collins noted in her analysis last year, “Benchmarking is a sore spot for MSSP ACOs, which argue the current methodology is unfair and effectively punishes high-performing ACOs, forcing them to chase after diminishing returns in subsequent agreement periods when the benchmark is reset. In comments to the proposed rule released in December 2014, some ACO leaders argued they have to continually beat their own best performance in order to achieve share in savings, while higher-cost ACOs are rewarded for their historical inefficiency with higher benchmarks.”


Indeed, as I noted in reporting and blogs last year, in August 2014, Alison Fleury, CEO of Sharp’s ACO, told California Healthline that CMS’s rigidity in applying national cost metrics to diverse regional situations was a major factor in leaving the Pioneer ACO Program—obviously, a different program from the MSSP, but Sharp’s Pioneer departure illustrates the same kinds of frustrations. Fleury told California Healthline, and then later confirmed this for me and the audience at an iHT2 Health IT Summit last year, that  Sharp’s decision to drop out of Pioneer arose mostly because of the organization’s frustrations with the Pioneer Program’s financial measures, saying  that, “Because the Pioneer financial model is based on national financial trend factors that are not adjusted for specific conditions that an ACO is facing in a particular region (e.g., San Diego), the model was financially detrimental to Sharp ACO despite favorable underlying utilization and quality performance.”

Not surprisingly, Premier Inc.’s Blair Childs saluted CMS officials yesterday for taking these kinds of frustrations into consideration, saying in a statement that “Members of the Premier alliance believe the Centers for Medicare & Medicaid Services (CMS) is taking a step in the right direction by proposing important changes to the Medicare Shared Savings Program's benchmarking process. Although the details will be important,” he said, “the rule appears to make some encouraging recommendations, including a move away from accountable care organization (ACO) benchmarks based on historical spending in favor of a methodology that sets targets based on regional spending and trends.”

So this news regarding the MSSP Program is hopeful news indeed. What so many of us now would like to know is this: are the same senior CMS officials who had the wisdom to rethink some of the details of the MSSP, now consider doing so for Pioneer, before it loses any additional participating ACOs? Because while the MSSP continues to grow significantly, Pioneer has lost fully half of its original participants.