The Centers for Medicare & Medicaid Services (CMS) released a final rule on Monday June 6 that aims to improve how Medicare pays accountable care organizations (ACOs) in the Medicare Shared Savings Program (MSSP) for delivering better patient care.
Medicare bases ACOs’ payments on a variety of factors, including whether the organization can deliver high quality care at a reasonable cost. The final rule should help more ACOs successfully participate in the Medicare Shared Savings Program by improving the shared savings payment methodology and providing a new participation option for certain accountable care organizations to move to the more advanced tracks of the program, according to CMS officials in a press release announcement on Monday.
According to CMS, the final rule changes how Medicare pays ACOs by basing one of the payment factors on whether the organization is able to deliver high quality care at a lower cost compared to other providers in their region. This change recognizes that health cost trends vary in communities across the country and will give ACOs more opportunities to be successful. In addition, the rule provides a smoother and quicker transition to the more advanced tracks for certain ACOs by allowing an extra year under their first agreement before the organization takes on financial risk, CMS officials attest.
"Today’s changes will encourage more physicians to improve patient care by joining accountable care organizations, while also refining how the program measures success, so that current participants are better rewarded for quality,” CMS Acting Administrator Andy Slavitt said in a statement. “These new flexibilities are based on significant input from participants and will help physicians prepare for the new Quality Payment Program, part of bipartisan legislation Congress passed last year repealing the failed Sustainable Growth Rate.”
Specifically, in the final rule, CMS is revising the approach for resetting (or rebasing) an ACO’s benchmark for a second or subsequent agreement period beginning on or after January 1, 2017. The agency will apply the following changes, according to its fact sheet on the final rule:
- Replace the national trend factor with regional trend factors for establishing the ACO’s rebased historical benchmark and remove the adjustment to explicitly account for savings generated under the ACO’s prior agreement period.
- Make an adjustment when establishing the ACO’s rebased historical benchmark to reflect a percentage of the difference between the regional fee-for-service (FFS) expenditures in the ACO’s regional service area and the ACO’s historical expenditures. Here, CMS will use a phased-in approach to transition to a higher weight in calculating the regional adjustment. In response to commenters’ suggestions, for those ACOs determined to have spending higher than their region, CMS is finalizing an approach that will apply a lower weight in calculating the regional adjustment the first and second time that their benchmark is rebased under the revised rebasing methodology:
- For higher spending ACOs, the weight placed on the regional adjustment will be reduced to 25 percent (compared to 35 percent for other ACOs) in the first agreement period in which the regional adjustment is applied, and 50 percent (compared to 70 percent for other ACOs) in the second agreement period in which the adjustment is applied.
Ultimately, a weight of 70 percent will be applied in calculating the regional adjustment for all ACOs beginning no later than the third agreement period in which the ACO’s benchmark is rebased using the revised methodology.
Annually update the rebased benchmark to account for changes in regional FFS spending, replacing the current update, which is based solely on the absolute amount of projected growth in national FFS spending.
- Adjust an ACO’s rebased historical benchmark prior to the start of the performance year, including re-determining the regional adjustment, to account for changes in the ACO’s certified ACO Participant List during the agreement period. During the first and second agreement periods under the revised rebasing methodology, CMS will also re-determine whether the ACO has higher spending compared to its region, and therefore whether the applicable lower weight should be used in calculating the regional adjustment.
- As a result of these changes, the methodology for determining the ACO’s rebased historical benchmark will reflect an ACO’s performance in relation to other providers in the same regional market, rather than just evaluating the ACO against its own past performance. “We believe this approach will improve the program’s incentives for ACOs by recognizing an ACO’s efficiency relative to its region and limiting the link between an ACO’s performance and its future benchmarks,” CMS said in its fact sheet.
What’s more, currently, an ACO enters a three-year agreement period for a particular participation track, either under the one-sided shared savings model (Track One) or a two-sided shared savings/ shared losses model (Track Two or Track Three) and remains under that track for the duration of the agreement period. ACOs may enter either the one-sided or a two-sided model for their first agreement period. Eligible ACOs that participated under the one-sided model for their first agreement period may apply to continue in Track One for a second agreement period, or apply to a two-sided model.
CMS is finalizing an additional option for ACOs participating under Track One to apply to renew for a second agreement period under a two-sided model (Track Two or Track Three). If the ACO’s renewal request is approved, the ACO may request that its initial participation agreement under Track One be extended for an additional year (that is, the ACO would enter a fourth performance year under Track One). This option will become available beginning with the 2017 application cycle.
In a statement from the Charlotte, N.C.-based Premier Inc., Blair Childs, senior vice president of public affairs, commends CMS for finalizing policies to regionally adjust and trend ACO benchmarks following a transition that will minimize disruption. “Furthermore, we appreciate that CMS did not finalize its proposal to remove shared savings payments from ACO spending in calculating the rebased benchmarks, which would have unfairly penalized ACOs for performing well in the past,” Childs said.
However, Childs expressed disappointment that CMS will not apply this methodology for ACOs that renewed their participation in the program in 2016 until 2019. “These participants should be able to qualify for these positive changes, and should not be penalized by having to wait three years until their benchmarks gain parity with all other program participants. This decision puts the inaugural class of ACOs at a distinct disadvantage to those that applied later.”
Childs said he is further concerned that this final rule “ignores the reality of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and does not address the ability of ACOs to move into tracks that will qualify as advanced APMs once the rules are finalized but before their three-year contract is up. This will lock out many early adopter ACOs from the bonus on eligible clinician payments.”
Indeed, the early results of the Medicare Shared Savings Program and the Pioneer accountable care organization model show that in 2014, ACOs had a combined total net program savings of $411 million while also achieving quality improvements and enhancements in patient and caregiver satisfaction. The MSSP model includes over 430 accountable care organizations in 49 states and the District of Columbia serving over 7.7 million Medicare beneficiaries.
And, according to research from market research firm RNCOS, as ACO enrollees continues to grow significantly in the U.S., it is expected that number of lives covered by these such models is projected to reach around 76 million by the end of 2020.
The report notes that the United States spends more on healthcare than the next-highest 10 countries combined, and the cost pressures associated with ageing populations and an increase in the numbers of people with chronic illness in the U.S. creates a need for more accountable and integrated forms of delivering health services. As such, with the growing popularity of ACO programs, it is expected that number of lives covered by ACO would grow at a compound annual growth rate (CAGR) of around 20 percent during 2016-2020.
According to the CMS data from 2014, 92 of the 333 MSSP ACOs held spending $806 million below their targets and earned performance payments of more than $341 million as their share of program savings. In the Pioneer ACO program, which began with 32 ACOs in 2012, but has now lost about a third of participants after several organizations dropped out, 11 organizations generated savings outside a minimum savings rate and earned shared savings payments of $82 million. In total, 103 Medicare ACOs, or 29 percent, received bonuses in 2014.
But, the data also revealed that bonuses aside, 15 out of the 20 Pioneer ACOs (75 percent) and 181 of the 333 (55 percent) MSSP ACOs generated some savings in 2014, meaning that 25 percent of those in the Pioneer program and 45 percent of MSSP ACOs generated no savings in 2014. As a whole, Medicare ACOs generated over $417 million in savings in 2013, a number slightly higher than what 2014 savings delivered.