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State Medicaid Leaders Parse the Challenges of Healthcare Payment Reform

December 1, 2017
by Heather Landi
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The state Medicaid leaders agreed that new payment models are necessary, but not sufficient, to transform the healthcare delivery system
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The U.S. healthcare industry is in the process of major transformation, and during a health innovation conference at the Massachusetts Institute of Technology (MIT) on Nov. 29, faculty, researchers, clinicians and practitioners addressed the challenges confronting the industry and the tools being brought to bear to address those challenges.

MIT’s Sloan School of Management’s Initiative for Health Systems Innovation (HSI) sponsored the “Innovating Health Systems: Digital Health Transformations” conference at the Cambridge, Mass.-based campus. The conference addressed issues such as how states are rethinking health delivery to their populations and where emerging digital innovations may transform health care delivery.

During a panel discussion focused on state models and population health, Retsef Levi, J. Spencer Standish Professor of Management at the MIT Sloan School of Management, the panel’s moderator, noted that, across the U.S., state Medicaid programs are responsible for 75 million patients, with most of those patients among the older, poorer and sicker in the population. “It’s fair to say that state governments have a major role in driving innovation in value-based payment schemes and health care system reform.”

During that panel discussion, three senior leaders representing state Medicaid programs for New York, California and Massachusetts provided overviews of their states’ progress to transition from fee-for-service to value-based payment models to transform population health, as well as the challenges that still exist in their work to reform healthcare payment and healthcare delivery.

Michael Wilkening, undersecretary, California Health and Human Services Agency, detailed the state’s work to transition more of the 14 million MediCal beneficiaries, who represent about a third of the state’s population, into a managed care environment (MediCal refers to the state’ Medicaid program) and shifting the program into a more patient-centered approach. With a MediCal 2020 waiver, the state developed a Whole Person Care pilot program that helps to drive incentive payments toward designated public hospitals to focus on better coordinating care management to improve the health and wellbeing of high-risk individuals, avoiding duplication of services and reducing inappropriate utilization of hospital emergency rooms and inpatient services. (A Healthcare Informatics profile of the Whole Person Care pilot in L.A. county, which is part of the statewide pilot, provides more details about the program).

“We’re looking to shift from hospital-based care and inpatient care to more preventative and outpatient care. And, we’re focused on the integrating other services, such as behavioral health and social services, that provide other types of services to keep people from coming into the hospital, and to provide the service in the least restrictive, least cumbersome method for people,” he said.

Jason Helgerson, Medicaid director, State of New York Department of Health, said that the state is about halfway into its five-year initiative to restructure the healthcare delivery system through its Delivery System Reform Incentive Payment (DSRIP) Program, which received $6.42 billion in funding. New York’s Medicaid program serves 6.6 million people with an annual budget of $68 billion, the second largest program in the country,

“We’ve seen some positive results as far as reductions in avoidable hospital use in the ER and admissions and readmissions, but there is still quite a bit of work to get this large and complex sector of our economy to work together in a collaborative way,” he said. He noted, “The challenge with healthcare is it’s the least customer-friendly sector in our economy. Much of the onus is on the patient to go and get care, regardless of how complex sick or disabled they may be, and the services are offered at the convenience of the provider not at the convenience of patients or members. At the end of day, if we’re going to be successful in making this thing we call healthcare affordable, effective and meeting the needs of an aging population, we have to make it more responsive and centered around the individual than it is around the provider.”

Helgerson said New York’s Medicaid program is on a path to have 80 percent of payments to providers be value-based payments by the end of the decade. “That is not pay-for-performance, that is providers taking on risk. We’re at 40 percent of those reimbursements right now,” he said, adding, “We believe, at the end of the day, you need a combination of payment reform and delivery system reform in order to get to a point where we’re talking about radically improved outcomes at very affordable prices.”

The state of Massachusetts was an early adopter of managed care, however, Daniel Tsai, assistant secretary, MassHealth, and the Medicaid director for the commonwealth of Massachusetts, says one of the challenges facing the state is that the fundamental structure to the Medicaid program hasn’t changed in 25 years. “We have health plans working with us, but underneath those contracts, you still have providers being paid on a volume-based, fee-for-service context,” he said.

The state’s Medicaid program covers just shy of 30 percent of lives in the state, but accounts for 40 percent of the state budget. MassHealth is in the process of moving toward full accountable care, at-risk adoption, and starting March 1, 80 percent of lives in the Medicaid program will be in fully capitated models with 17 accountable care organizations (ACOs) across the state.

Tsai cited examples of some of the highest-cost MassHealth beneficiaries who are homeless individuals and are often admitted to the ED just to get a hot meal. “It’s terrible from a cost standpoint, terrible from a quality of care standpoint and it’s terrible from a health outcomes standpoint. There must be a better way we can think about structuring the care delivery system and payments to get at that; that’s part of what we’re trying to do by moving to new value-based payment structures,” Tsai said.

All three panelists acknowledged that moving new payment models is necessary, but not sufficient, to transform the healthcare delivery system. Healthcare reform requires a concerted focus on integrating care between hospitals and primary care practices, Tsai said.

“How do we get care to be integrated? Just changing to an at-risk payment model doesn’t solve that. In Massachusetts, the ACO model we rolled out had a bunch of carrots and sticks with it. We defined three at-risk models; almost of all the ACOs are going into a fully capitated model that we pay on a per-member, per-month risk-adjusted number. And, with all the new dollars, as we negotiated with the federal government for $1.8 billion in funding over five years, the way we rebalance the hospital and primary care calculus is that we said the new funding follows lives in primary care practice,” Tsai said. “We have a lot of requirements in the contracts to get funding; you have to have different parts of the health system coming together. The point there is, you can design the perfect risk-adjusted payment model and change the way cash flow moves across the system, but still have nothing that actually helps to improve the way folks experience care.”

Levi questioned the senior healthcare leaders about whether the strategies employed by their respective states were sufficient to drive transformational change. “There are some who say that this is just another attempt to impose capitation on the market. Will this new pressure lead to the change that we need, or are we just tweaking around the edges?” Levi asked.

All three acknowledged that they have learned lessons from previous attempts at value-based care and payment models at the state level. MassHealth’s Tsai noted an earlier value-based payment pilot initiative that involved a patient-centered medical home model within primary care practices and shared savings incentives. “What we found when we evaluated it is that we had primary care doctors had no leverage in figuring out how to work with specialist and hospitals in rejiggering workflows. So, the doctors ended up focusing on stuff that they could control, but then you’re not getting at the things that require providers to fundamentally change their workflows and have different folks start to integrate," he said.

“We will not have success with all 17 ACOs,” Tsai said. “In my mind, I think there is significant risk, but no other choice before us but to move in this direction. From a practical standpoint, if we don’t start to do some of these things, which we’ve built into our pricing and put savings there, we’d be looking immediately at cutting rates, cutting benefits and cutting eligibility to manage the Medicaid program.”

Tsai added, “I expect we’re going to have some folks who are not going to be able to financially sustain and make the improvements necessary all five years of the program. I think that is the right bar to set things at. If we set it so that we know every single ACO will succeed, without a doubt, we’ve probably set it far too low.”

One challenge, Tsai noted, is that at a granular level, there is significant variation among the different ACOs when it comes to understanding cost drivers and the appropriate quality performance measures. “But, I think we are taking a hands-on approach where we’re not just putting in a payment model and handing the keys over,” he said. “The only way you can manage a Medicaid program is you have got to get the contract and the payment model right, you need to have a vision and desire for where you want the delivery system to be and you have to articulate that with providers.”

Helgerson agreed that he does not expect all 25 “ACO-like entities” participating in the New York DSRIP to achieve equal success. “The difference between what we’re trying to do now and what we tried to do when managed care came before is we’re saying that, at the end of the day, the incentive alignment that needs to occur has to go down to the frontline provider.”

He said the goal was to move to a healthcare delivery model where health systems focus their efforts, resources and money towards better managing the needs of high-risk individuals rather than maximizing fee-for-service reimbursement. “And I think the only way you get there is with value-based payment, but I think it’s not enough for CEOs to understand the incentives; if they don’t change the way they reimburse their employees and people on the front line of the system, then we’re not going to get the change.”

Wilkening also sees promise in the current value-based payment and care initiatives in California. “I think if we’re setting up the right infrastructures, getting the right people together, and focused on providing patient care to people in the least restrictive environments and building up the support around them, then that’s going to lead to better outcomes for people and should do so at a lower cost. But, it requires a lot of players coming together to figure out how to set up the incentive infrastructure so everybody is moving in the same direction.”

 


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When It Comes to The Big Debate on ACOs, What Is “Big Enough” Savings?

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The back-and-forth interaction between CMS Administrator Seema Verma and the ACO community is unfolding at a key inflection point in the evolution of the MSSP program

Intense debates on every subject are constantly swirling in the healthcare policy sphere; that has always been the case. But one debate that is both impactful and being closely watched is the intensifying argument between the Centers for Medicare and Medicaid Services, particularly CMS Administrator Seema Verma, and some leader organizations in the accountable care organization (ACO) area.

At its base, the proposal on the part of CMS, as outlined in a proposed rule published in August, to push more ACOs into two-sided risk, is being pushed back against by many ACO leaders, particularly by their nationwide association, NAACOS (the Washington, D.C.-based National Association of ACOs). As Managing Editor Rajiv Leventhal noted in his report Dec. 5, CMS’s “core aim” is “to push these organizations into two-sided risk models—so that Medicare isn’t on the hook when ACOs overspend past their financial benchmarks—suggested 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.”

As Leventhal noted, “One option, per CMS’ proposal, would be the BASIC track, which would allow eligible ACOs to begin under a one-sided model and incrementally phase-in higher levels of risk. The second option would be 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. But where CMS, in its proposals, truly clamped down was through two core recommendations that stakeholders took issue with: shortening the glide path for new ACOs to assume financial risk, reducing time in a one-sided risk model from the current six years to two years; and cutting potential shared savings in half, from 50 percent to 25 percent for one-sided risk ACOs. These proposals, if finalized, will certainly deter new entrants to the MSSP ACO program. So far, the proposed rule has been met with varying degrees of scrutiny.”

Clifton Gaus, Sc.D., NAACOS’s president and CEO, recently gave Leventhal an interview, and in that interview, he confirmed his association’s stance that the reduction of shared savings and the shortened time allowed in one-sided models are two of the biggest problems the group has with the proposal. Indeed, Gaus said in that interview that the reduction in potential shared savings “would be very devastating to the growth of new ACOs.”

In fact, Gaus said, in polling their members, NAACOS’s leaders asked them whether they would in theory join a federal ACO program knowing that, at least at first, they would be limited to 25 percent of shared savings at most; and, in fact, “the near universal response was no, they wouldn’t have joined the program,” Gaus said, adding that “The potential of 25 percent savings just isn’t enough to offset our investment costs of starting and operating the ACOs,” noting that ACOs have to obviously put up money to get going, and sometimes it’s very hard for medical group practice-dominant ACOs to buy IT systems, not to mention the whole clinical transformational aspect of ACOs where they are typically hiring nurse coordinators, and in some cases opening 24/7 call centers. “There is a real start-up and operational cost that’s involved, and [getting] 25 percent of the shared savings doesn’t return enough income to offset those,” he said.

Meanwhile, this morning, NAACOS issued a new press release focused on the value that the MSSP program has created for CMS. “In the latest data proving the financial benefits of accountable care organizations (ACOs), Medicare’s largest value-based care initiative – the Medicare Shared Savings Program – saved $859 million in 2016, an independent analysis published today shows,” the press release began. “Since 2013, the first full year of the program, ACOs have saved Medicare $2.66 billion, well above the $1.6 billion calculated by the Centers for Medicare and Medicaid Services (CMS).” What’s more, the press release reported, “After accounting for bonuses paid to ACOs for hitting spending and quality targets, the program, which accounts for 561 ACOs and 10.5 million patients nationwide, netted more than $660 million to the Medicare Trust Fund between 2013 and 2016, contrasting the net loss of $384 million CMS estimates.”

And the press release quoted NAACOS’s Gaus as stating that “These results are the latest data point in a growing body of evidence unequivocally proving ACOs’ value. ACOs are saving American taxpayers hundreds of millions of dollars at a time when it’s most needed.” Indeed,  he added, “Given the natural lag time in collecting and analyzing data and the well-established trend that ACOs need a few years to start demonstrating results, we are only seeing the beginning of the nation’s return on investment in accountable care. This data doesn’t even mention the quality benefits ACOs have generated, which have also been substantial.”

Further, the press release noted, “A sizable amount of recent data show ACOs are saving money: 472 Shared Savings ACOs generated gross savings of $1.1 billion and netted $314 million in savings to the Medicare Trust Fund last year; CMS’s August 17 proposed rule estimates the overall impact of ACOs, including ‘spillover effects’ on Medicare spending outside of the ACO program, lowered spending by $1.8–$4.2 billion in 2016 alone.”

So now we reach the rubber-meets-the-road place. Here’s the fundamental question: Do Seema Verma and her fellow CMS and HHS (Health and Human Services) senior officials truly understand the complexities involved in what they’re asking of provider leaders? Verma and her fellow federal healthcare officials are facing a kind of Scylla and Charybdis situation right now. On the one hand, as everyone knows, the Medicare actuaries have predicted that total U.S. healthcare spending will explode from $3.1 trillion annually (in 2014) to $5.4 trillion annually (by 2024), in the next several years, amounting to a 70-percent increase in less than a decade, and bringing the percentage of GDP spent on healthcare in this country from 17.4 percent in 2013 to 19.6 percent in 2024.

On the other hand, as Clifton Gaus and the NAACOS folks have pointed out, based on surveying their membership, patient care leaders are going to recoil at the over-intensification of change mandates coming out of CMS. That feeling is quite widespread. As one ACO CEO told me just two weeks ago, Seema Verma is deluded if she thinks that ramping up the downside-risk requirements in the Medicare Shared Savings Program is going to inspire more patient care leaders to join the MSSP program or renew their participation in it. And, as this morning’s press release notes, ACO community leaders are documenting real progress in capturing savings.

The million-dollar (or maybe, $1.1 trillion-dollar?) question is, is the broad level of savings that ACOs are netting for CMS, progress enough? Indeed, what is “enough”? And what is “fast enough”? Because Administrator Verma and her fellow senior federal healthcare officials seriously risk cratering the MSSP program, the core federal ACO program, if they push too hard on the downside-risk issue. On the other hand, if they don’t push hard enough, the progress made so far could simply be dwarfed, in the broader scheme of things, by the current acceleration of overall U.S. healthcare spending inflation.

So right now really does feel like an inflection point—but one without an obvious resolution. Only time—and the interactions of federal healthcare officials and providers—will tell.

 

 

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At UPMC, Turbo-Charging Quality Improvement Efforts through Data Analytics

December 11, 2018
by Mark Hagland, Editor-in-Chief
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At UPMC, Dr. Oscar Marroquin is leading a team of data analysts whose work is facilitating intensive efforts around readmissions

At a time when the leaders of patient care organizations are facing intensifying pressure to shift away from a dependence on volume-based payment and to plunge into value-based care delivery, some U.S. hospitals, medical groups, and health systems are helping to lead the way into a future of continuous clinical improvement and of clinical transformation. That topic—of organized continuous quality improvement—was the subject of the fourth-quarter 2018 Healthcare Informatics cover story. Numerous leaders of pioneering organizations were interviewed for their insights into the health system change focused-quality improvement movement that has been emerging across the U.S. healthcare system.

Among the leaders interviewed for that cover story was Oscar Marroquin, M.D., a practicing cardiologist and epidemiologist, who is helping to lead a team of clinical data experts at the vast, 40-hospital UPMC health system in Pittsburgh. Dr. Marroquin and his colleagues have been busy harnessing the power of creating and nurturing purpose-specific teams focused intensively on the management of data to power performance improvement, particularly in the clinical area. Marroquin’s team, of about 25 data specialists, was first created five years ago. Of those, half are IT- and infrastructure-focused, and, says Dr. Marroquin, “The rest are a team of folks dedicated to data consumption issues. So we have clinical analysts, data visualization specialists, and a team of data scientists who are applying the right tools and methods, spanning from traditional analytical techniques to advanced computational deep learning and everything in between. Our task is to use the clinical data, and derive insights”—and all 12 clinically focused data specialists report to him.

And that work—“allowing people to ask questions to generate opportunities”—has paid off handsomely. Among the advances has been the creation of a data model that predicts the chances of patients who are being discharged, being readmitted. The model, based on the retrospective analysis of one million discharges, is also helping case managers to more effectively prepare patients for discharge, specifically by ensuring that patients being discharged are promptly scheduled for follow-up visits with their primary care physicians. “If those patients are seen within 30 days of discharge,” he notes, “there’s a 50-percent reduction in their 30-day rate of readmission.” The program is now active in six UPMC hospitals.


Oscar Marroquin, M.D.

Below are excerpts from the interview for that cover story that Healthcare Informatics Editor-in-Chief Mark Hagland conducted with Dr. Marroquin this summer.

From your perspective, what does it really mean to be data-driven, in the pursuit of continuous quality improvement and clinical transformation?

From my perspective, I’m very passionate in that I feel that you really can’t do any of the things that doing in terms of moving towards value, without having a robust data infrastructure, a robust strategy on how to use data and analyze it, and without then deriving evidence for how you’re going to transform your organization. There are a lot of buzzwords involved in all of this, but the only way to get from a buzzword to a true action of transformation, is if it’s data-driven.

I’m a cardiologist by training and an epidemiologist; I still practice. Over the past five or so years, I’ve been asked to oversee how we’ll derive insights from clinical data in our system; in other words, this work is around anything related to big-data analytics, with those analytics being used to help our clinicians. In order to do that, we’ve had to do many different things, including more intelligently aggregating our data, and focusing on specific analytical purposes. They’ve been structured as databases for transactional systems, but not with the intent of improvement.

So we’ve spent a lot of time creating a purpose-built environment for analytics. That’s involved a lot of technical work, to create tables, what we call our consumable layers, for analytical purposes. And we’ve created a team whose only job is to do analytics. We’ve had folks in the past managing back-end databases, who have generated reports, but that doesn’t lead to a sustainable way of using data. And so we have a team that is dedicated to maintaining the warehouse and consuming the data.

With regard to the team of 25 data analysts, do all of them report to you?

The 12 who do data consumption report directly to me; the others have a dotted-line report to me. They sit on our infrastructure team within our IT Information Services Division. Both teams are part of the Clinical Analytics Team. Data analytics—Health Services Division. Integrated team. Two sides of the same coin.

When did these teams come together?

There have been different phases. The analytics program development started in 2012, and we learned a lot of lessons. A lot of the work early on had to be dedicated to technical issues—identifying data sources, etc. That was a pretty labor-intensive process. We really got enough aggregated data to use it consistently in 2015, so from 2015 on, we’ve had this structure of teams dedicated to doing this as I’ve described.

Can you share a few examples of key advances that your team has made so far?

When asked what our team does, I tell folks we do work at the higher level in three different buckets. The first bucket is the entry point for the majority of projects. Not everybody in the system necessarily knows which questions to ask.

We allow people to ask questions to generate opportunities. Off of that, two things will happen. One, hypotheses can be generated, and so we can do hypothesis testing, we can do comparative effectiveness studies, we can formal testing of hypotheses. Also, when insights get generated, one can say, oh boy, there’s a lot of heterogeneity in this population, why is one group more at risk? So we can identify who is at high risk of a condition, and who within the high-risk category is at high risk of developing specific conditions? And the third level or bucket, we apply machine learning and AI tools to develop models that allow us to do a variety of things, from more precise phenotyping of our populations; we can build predictive models to identify patients at various levels of risk. And we also use these models to do unsupervised learning, where we can start to generate hypotheses. So most people in this space love to talk about the latter part, the predictive modeling, and we have done a fair amount of work there, with things like identifying patients at highest risk of rehospitalization after 7 or 30 days of discharge, and we’re using that in our hospitals to guide clinicians. There are resources everywhere.

So we developed a model derived out of retrospective analysis of one million discharges, and we’ve prospectively verified that the model allows us to identify patients at the highest risk of readmission, so our case managers can help us identify plans to help those patients transition from hospitalization to post-acute care in a more effective way. And we see that if they’re seen within 30 days of discharge, there’s a 50-percent reduction in their 30-day hospitalization if they get in to see a clinician. So we make sure that the patient has an appointment made and is ready to see their doctor once they’re discharged, to address any issues.

When was that program put into place?

We spent a lot of last year validating the data. And then this year, we started rolling this out to our hospitals in a phased approach, so throughout 2018, we’ve been deploying this to our hospitals, and we’ve trained and educated different hospitals to use the model, and we’re actively following patients to measure the impact of the tool. And as an epidemiologist, I’m always cautious about declaring victory too soon. We’re seeing good trends, our smaller hospitals are seeing decreases in patients coming back early.

So you don’t have any metrics to share yet?

We have three hospitals, smaller ones we started the program with first, that different units, have shown that this program has had an impact. The numbers are still small enough that I have reservations about absolute certainty. But already, we’re using the program in 20 of our hospitals.

What would your advice be for CIOs, CMIOs, and other healthcare IT leaders, as they consider these kinds of initiatives?

If we all are serious about transforming the way we care for patients, we need to do it in a data-driven way. There has to be a philosophical belief and commitment to do that. Number two, as a result of the institutional commitment and philosophy, then there has to be a team that’s dedicated to this work. I don’t think this is achievable in an ad hoc way, when people just have time. And three, it’s not for the faint of heart; it takes time and effort, but if you have the philosophical belief and institutional commitment, it’s doable. If I say to myself, I don’t ever want to leave my house and get drenched because I wasn’t prepared for a storm, then I need to check the weather app before I leave my house. In medicine, we haven’t yet taken that approach, but the data and analytics are there to guide us in helping us to make decisions, and making it a part of the everyday decision-making process. And in the same way I use examples of rehospitalization prediction, we also do condition-specific predictive analytics, around patients with asthma, kidney disease, etc., so there’s a lot of work going on there. And the message I give clinicians is, there will be companies that say they don’t’ sell you the predictive models they’ve developed; but in our experience, the models have to be a part of an organic process that leads to the building of the models. Clinicians won’t feel alienated, disenfranchised, or threatened, if you bring them in and engage them from the beginning.

 


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EXCLUSIVE: NAACOS President Foresees “Shrinkage in Accountable Care Movement” Pending MSSP Final Rule

December 5, 2018
by Rajiv Leventhal, Managing Editor
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If CMS doesn’t scale back some of its proposed changes to the MSSP, the government’s largest value-based payment program will be significantly affected, says one ACO leader

When the Centers for Medicare & Medicaid Services (CMS) released its proposals to overhaul the federal Medicare Shared Savings Program (MSSP), it was expected that industry associations, along with the ACOs (accountable care organizations) themselves, would push back strongly.

After all, in the August proposed rule, CMS, which has the core aim to push these organizations into two-sided risk models—so that Medicare isn’t on the hook when ACOs overspend past their financial benchmarks—suggested 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.

One option, per CMS’ proposal, would be the BASIC track, which would allow eligible ACOs to begin under a one-sided model and incrementally phase-in higher levels of risk. The second option would be 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.

But where CMS, in its proposals, truly clamped down was through two core recommendations that stakeholders took issue with: shortening the glide path for new ACOs to assume financial risk, reducing time in a one-sided risk model from the current six years to two years; and cutting potential shared savings in half, from 50 percent to 25 percent for one-sided risk ACOs. These proposals, if finalized, will certainly deter new entrants to the MSSP ACO program. So far, the proposed rule has been met with varying degrees of scrutiny.

One of the trade groups that has done much of the heavy lifting when it comes to pushing back on the government’s proposals, and offering evidence as to why ACOs need more time in one-sided risk models while being able to reap more of the shared savings, is NAACOS (the National Association of ACOs,) an association comprised of more than 360 ACOs across the U.S.

In a recent interview with Healthcare Informatics, Clif Gaus, president and CEO of NAACOS, confirmed that the reduction of shared savings and the shortened time allowed in one-sided models are two of the biggest problems the group has with the proposal. Specifically, Gaus says that the reduction in potential shared savings “would be very devastating to the growth of new ACOs.”

He explains that after polling NAACOS’ members, asking them if they would hypothetically apply to be an ACO knowing that at first, they would be limited to 25 percent of shared savings at most, “the near universal response was no, they wouldn’t have joined the program.” Gaus adds, “The potential of 25 percent savings just isn’t enough to offset our investment costs of starting and operating the ACOs,” noting that ACOs have to obviously put up money to get going, and sometimes it’s very hard for medical group practice-dominant ACOs to buy IT systems, not to mention the whole clinical transformational aspect of ACOs where they are typically hiring nurse coordinators, and in some cases opening 24/7 call centers.

“There is a real start-up and operational cost that’s involved, and [getting] 25 percent of the shared savings doesn’t return enough income to offset those,” he says.

Regarding the proposal to shorten the time in a one-sided risk model from the current six years to two years, Gaus points to CMS’ own data which shows that more experience in a federal ACO model drives more savings, but typically the first few years are not profitable for the ACO.

“We have many examples where an ACO has been in the program and was able to turn the corner by the fifth or sixth year,” he says. “Medicare has to have a long-term view of this. We are investing in a totally new redesign of the healthcare system, so give us time to learn how to transform that care into more efficient and higher-quality care. We are troubled by two years,” Gaus frankly admits. He believes that capping the time in a one-sided risk model at three to four years “is reasonable,” and is what many other associations have proposed.

Indeed, while NAACOS and other industry groups have made their arguments to CMS clear, the federal agency has so far taken a firm stance that upside risk-only ACOs have not been effective. A such, CMS seems to be fine with these ACOs leaving the MSSP— by far the largest federal ACO model, with 561 participants—if they are unwilling to take on more risk.

But Gaus believes that even though CMS did come out of the box with an “aggressive negative message” about one-sided ACOs, the agency has now moderated its views. To this end, a recent study from NAACOS and Dobson Davanzo & Associates, based on a different way of measuring financial success—by comparing actual costs over time in the ACO’s market as opposed to CMS’ method of calculating an initial risk-adjusted spending benchmark for each ACO based on its historical spending, without considering underlying market factors—revealed that MSSP ACOs generated gross savings of $1.84 billion for Medicare from 2013 to 2015, nearly double the $954 million estimated by CMS.

“The whole dialogue has changed,” says Gaus. “We have met with Seema and a number of her staff over the last two months, and the driving factor to this change in dialogue is that the 2017 data, from CMS’ benchmarks, turned the corner and showed that net-net the ACO program was saving Medicare money. You don’t see CMS coming out anymore arguing that the program is losing money,” he says.

What a Final Rule Might Look Like

Gaus acknowledges that a core challenge for CMS is being in the precarious position of pushing down too lightly in its regulations, which could result in the pace of change being too slow, or pushing down too hard, which could result in provider organizations fleeing value-based care initiatives.

“We know the government is wrestling with this issue, and so are we,” Gaus says. “In the crafting of our comments to CMS, as well as the comments from the AHA [American Hospital Association], AMA [American Medical Association], and others, we felt that the balance is the issue here, and there needs to be some movement toward the direction that CMS is pushing. We do respect their concerns, to a degree, but we just thought they were too aggressive in their speed to risk, or speed to remove an ACO from the program,” he says.

Gaus is hopeful that the final rule on the future of the MSSP—which he believes could come by the end of the year, but no later than the end of January—will reflect the industry’s concerns. “History says that this administration, like many others, does listen to input from stakeholders that the rule affects. I believe that they really do understand our positions,” he adds.

At the same time, NAACOS’ position is that the reduction in potential shared savings, as currently proposed, is a “total deal breaker,” and that there is no wiggle room for a number between 25 and 50 percent, Gaus asserts. He adds, “If they don’t go back to 50 percent, we will see a long-term significant shrinkage in the ACO movement and a significant emanation of accountable care.”

Importantly, Gaus also notes that ACO programs are voluntary in nature, a key consideration that he believes CMS often forgets. “Nobody has to be an ACO. [Providers] are making a bet of their capital, that they can invest that capital in cost containment, in care transformation, and [in return], they will get back in the shared savings more than they invested. It’s almost like buying stock—you made the investment and you hope the return is worth it,” he says.

Gaus says that he has told Verma in their many conversations that in many ways “we are at a crossroads, and we have to get the balance right, or we are going to see a denigration of what still remains the largest government value-based payment program.”


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