The Centers for Medicare & Medicaid Services (CMS) is proposing a new direction for ACOs (accountable care organizations) in the Medicare Shared Savings Program (MSSP), with the goal to push these organizations into two-sided risk models.
Referred to as “Pathways to Success,” CMS’ proposal, which has been expected for a few months, looks to redesign the program’s participation options by removing the traditional three tracks in the MSSP model and replacing them with two tracks that eligible ACOs would enter into for an agreement period of no less than five years: the BASIC track, which would allow eligible ACOs to begin under a one-sided model and incrementally phase-in higher levels of risk; and the ENHANCED track, which is based on the program’s existing Track 3, providing additional tools and flexibility for ACOs that take on the highest level of risk and potential rewards. At the highest level, BASIC ACOs would qualify as an Advanced Alternative Payment Model (APM) under the Quality Payment Program.
Currently, the MSSP model includes three tracks and is structured to allow ACOs to gain experience with the program before transitioning to performance-based risk. The vast majority of Shared Savings Program ACOs have chosen to enter and maximize the allowed time under Track 1, which is an “upside-only” risk model. MSSP Tracks 2 and 3 involve downside risk, but participation in these tracks has been limited thus far.
When ACOs are in a one-sided risk model, they do not share losses with the government when they overspend past their benchmarks, but they do share in the gains. As such, in these one-sided risk models, CMS is on the hook for any losses all on its own.
Broadly, CMS is now essentially proposing that the contract agreements of upside-only ACOs be two years, rather than allowing six years (two, three-year agreements) like the government has previously permitted. Overall, there are 561 MSSP ACOs out of 649 total Medicare ACOs, with 82 percent of those 561 MSSP ACOs taking on upside risk only.
While ACO contracts normally renew at the start of the year in January, CMS is giving ACOs whose contracts expire this December a one-time-only six-month extension, until July 2019, so they can apply for a new agreement beginning on July 1, 2019, if they so choose. Moving forward, CMS would resume the usual annual application cycle for the performance year starting on January 1, 2020 and subsequent years.
As the federal agency continues to steer ACOs away from upside-only models, CMS noted that some Track 1 ACOs are generating losses (and therefore increasing Medicare spending) while having access to waivers of certain federal requirements in connection with their participation in the program. These ACOs may be encouraging consolidation in the market place, reducing competition and choice for Medicare FFS beneficiaries, according to agency officials.
CMS Administrator Seema Verma previously has criticized upside-only ACOs, remarking that they have not generated enough results to date. And today, she hammered this point home on a press call. “[Upside-only] ACOs have no incentive, at all, to reduce healthcare costs while improving outcomes, as they were intended. Thus, the program has not lived up to the accountability part of their name,” Verma asserted.
Meanwhile, the ACOs in two‑sided risk models “have shown significant savings to the Medicare program and are improving quality,” CMS said in today’s announcement. As such, Verma said today that requiring ACOs to take on downside risk more quickly, matched with increased risk and flexibility, would reframe the Medicare Shared Savings Program to deliver value to the 10 million patients currently in ACOs, and taxpayers. “We project these changes will result in $2.24 billion in savings to Medicare program over next 10 years,” she stated.
How will Upside-Only ACOs Respond?
Indeed, as it stands today, MSSP Track 1 remains by far the most popular option for ACOs. Recently, the National Association of ACOs (NAACOS) surveyed Track 1 ACOs that were entering their third agreement period and found that 71 percent of ACO respondents indicated they are likely to leave the MSSP as a result of having to assume risk.
In CMS’ proposed rule, the agency internally estimates that more than 100 ACOs will drop out of the program over the next 10 years. CMS said in the rule that “The overall drop in expected participation is mainly due to the expectation that the program will be less likely to attract new ACO formation in future years as the number of risk-free years available to new ACOs would be reduced from six years (two, three-year agreement periods in current Track 1) to two years in the BASIC track, which also has reduced attractiveness with a lower 25 percent maximum sharing rate during the two risk-free years.”
Verma was asked on the press call about the expected drop in ACOs, to which she noted that since the two-sided risk ACOs are the ones who are generating savings, having organizations who are losing the government money eventually leave the program is not a bad thing. “We know that they are losing money when they are only taking on upside-only risk. So, we’re only allowing them to do that for the first two years of the program.”
Verma continued, “The other change we’re making is that for six years we’ve been allowing [ACOs] to only take upside risk while also take in 50 percent of the savings. Now, we’re saying you can only do this for two years and only get 25 percent of the savings. So, that’s why we’re mitigating the losses that we’re having in the program.”
It remains to be seen how stakeholders will respond to CMS’ proposal today, but with the survey NAACOS administered in May, the organization stated that it encourages ACOs to prepare to move to risk and strongly supports ACOs that are ready to do so, but that it does not support forcing ACOs to assume risk if they are not ready.
Verma, when asked on the press call about the new proposals, said that it’s simply time for the program to evolve. “When we developed this program, we wanted to move the entire program towards providers taking more risk because we know that works. We want to work with ACOs that are serious about participating in the program and investing in the type of changes that are going to deliver value to patients,” she stated.
The CMS chief acknowledged on the press call that, “For some, change is always difficult, and we understand that there are those who say they haven’t had enough time to live up to their commitment to achieve value."
In its proposal, CMS said that the BASIC track’s glide path would offer an incremental approach to transitioning eligible ACOs to higher levels of risk and potential reward. The glide path includes 5 levels:
- A one-sided model available only for the first two years to eligible ACOs (ACOs identified as having previously participated in the program under Track 1 would be restricted to a single year under a one-sided model);
- And three levels of progressively higher risk and potential reward in years three through five of the agreement period. Under the one-sided model years of the glide path, an ACO’s maximum shared savings rate would be 25 percent based on quality performance, applicable to first dollar shared savings after the ACO meets the minimum savings rate. The glide path concludes with a maximum 50 percent sharing rate, based on quality performance, and a maximum level of risk which qualifies as an Advanced APM for purposes of the Quality Payment Program.
ACOs in the BASIC track glide path would be automatically advanced at the start of each performance year along the progression of risk/reward levels, or could elect to move more quickly to a higher level of risk/reward, over the course of their agreement period.
In the end, ACOs entering the BASIC track’s glide path for an agreement period beginning on July 1, 2019, would have at most 2 ½ years under a one-sided model (with ACOs identified as having previously participated in the program under Track 1 restricted to 1 ½ years) and their first automatic advancement would occur at the start of performance year 2021, CMS explained.
What’s more, ACOs identified as “low revenue”—typically composed of physician practices and rural ACOs—could participate in the BASIC track for up to two agreement periods. For instance, a low revenue ACO that participates in the BASIC track’s glide path could renew under the BASIC track, at the highest level of risk and reward, for a second agreement period. ACOs identified as “high revenue”—typically ACOs that include hospitals—would be required to transition to the ENHANCED track more quickly, after no more than a single agreement period under the BASIC track.
CMS has observed that low-revenue ACOs have outperformed high-revenue ACOs, but that some low-revenue ACOs lack a pathway to transition from a one-sided model to more modest levels of performance-based risk. Agency officials noted its Medicare Track 1+ ACO Model, a time-limited Center for Medicare and Medicaid Innovation (Innovation Center) model which began this past January, demonstrates that a lower-risk, two-sided model is an effective way to rapidly progress to performance-based risk.