Something really quite extraordinary happened this week: NAACOS, the Washington, D.C.-based National Association of Accountable Care Organizations, published, in the august journal Health Affairs, a study based on research that NAACOS leaders had commissioned from Dobson DaVanzo & Associates, a healthcare economics consulting firm. And, as Healthcare Informatics Managing Editor Rajiv Leventhal noted in his report, “Medicare’s largest ACO (accountable care organization) initiative—the Medicare Shared Savings Program (MSSP)—generated gross savings of $1.84 billion for Medicare from 2013 to 2015, nearly double the $954 million estimated by the Centers for Medicare and Medicaid Services (CMS),” according to the NAACOS/Dobson DaVanzo & Associates study.
And here’s what’s extraordinary about that: this is the first time in my memory that I’ve seen a national association of provider organizations commission independent research that directly contradicted federal government findings and statistics. Could this be the start of a major conflict over the direction of the MSSP program? The potential for actual conflict here is quite real. But first, let’s look at what NAACOS and Dobson DaVanzo found. As Leventhal noted, “The study, which used similar scientific methods as a 2018 peer-reviewed paper by Harvard researchers published in The New England Journal of Medicine, found that MSSP ACOs reduced Medicare spending by $541.7 million during the 2013 to 2015 timeframe, after accounting for shared-savings payments earned by ACOs.”
The MSSP is the largest value-based payment model in the U.S., growing to 561 ACOs with more than 350,000 providers caring for 10.5 million Medicare beneficiaries in 2018. Under current MSSP rules, new ACOs are eligible to share savings with Medicare for up to six years if they meet quality and spending goals but are not at financial risk for any losses. As such, CMS has been reiterating in recent months that these “upside risk-only” ACOs are costing the government money.
What’s more, as Leventhal noted, “To this point, in a recent proposed rule that has so far been met with varying degrees of scrutiny, CMS is proposing to shorten that 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. This proposal, coupled with CMS’ recommendations to cut potential shared savings in half—from 50 percent to 25 percent for one-sided risk ACOs—will certainly deter new entrants to the MSSP ACO program. Importantly, CMS has essentially said they don’t mind if upside-only ACOs that are costing the government money leave the program if they aren’t willing to take on more financial risk. CMS Administration Seema Verma said in a press call following the proposed rule’s release that ‘[Upside-only] ACOs have no incentive, at all, to reduce healthcare costs while improving outcomes, as they were intended.’ Nonetheless, MSSP ACO participants seemingly performed quite well in 2017, despite CMS’ claims that they have been largely ineffective. In sum, the 472 ACOs that were in this model last year achieved $314 million in net savings to Medicare in 2017 after accounting for bonuses paid from the government, and $1.1 billion overall.”
For the NAACOS leaders, the key element here is that, as the authors of the Health Affairs article pointed out, “Despite the positive 2017 results, gauging MSSP performance based on calculations using administratively derived spending targets (benchmarks) is simply not an accurate way to measure overall program savings. In fact, the published academic research on MSSP performance points to much higher savings than are suggested by the benchmarks.”
Explained further by the researchers, for its analysis of Medicare ACOs, “CMS calculates an initial risk-adjusted spending benchmark for each ACO based on its historical spending for a group of attributed Medicare beneficiaries; it then trends this benchmark forward to the current program year based on the national average growth in Medicare spending per beneficiary.” The article’s authors further point out that if an ACO’s spending is less than the benchmark, and has a savings rate of at least 2 percent—and the ACO meets MSSP quality thresholds—it earns a shared savings payment that is typically 50 percent of the calculated savings. CMS then calculates total MSSP savings as the sum of total savings for ACOs with spending below the benchmark, plus the sum of spending above the benchmark for ACOs that exceeded it. Using this method, CMS estimated MSSP savings of $954 million between 2013 and 2015. During this period, ACOs that saved money earned $1.3 billion in shared savings payments. CMS concluded that on a net basis, the program increased Medicare spending by $344 million between 2013 and 2015, according to the NAACOS analysis and Health Affairs commentary.
At this juncture, there is an obvious issue here, because CMS’s calculation method implicitly makes it difficult for ACOs to show progress, since savings are benchmarked against administratively derived targets, rather than actual savings. Who came up with that method, anyway???
And the implications of using such a method are clear. As the press release that NAACOS issued upon the publication of the Health Affairs article noted, “Despite the growing ACO track record of improving quality and saving Medicare money, CMS, in an August 17 proposed rule, moved to shorten the time new ACOs can remain in the shared-savings-only model from the current six years to two years. Data show ACOs need more than two years to begin showing the benefits of forming an ACO. That proposal, coupled with CMS’s move to cut shared savings in half — from 50 percent to 25 percent for shared-savings-only ACOs — would deter new Medicare ACOs from forming.”
What’s more, the press release quoted Stephen Nuckolls, CEO of Coastal Carolina Quality Care in New Bern, N.C., which includes 63 providers caring for 11,000 Medicare beneficiaries, as stating that “It takes time and money to transform entrenched care delivery practices in local communities and build the critical mass to successfully integrate care, manage risk, and improve quality while reducing spending growth. Unfortunately, the proposed changes will hold up the move to value-based care by significantly undermining the business case to voluntarily form new Medicare ACOs.”
I take Mr. Nuckolls’s charge very seriously. I interviewed him recently, and as he noted in our interview, when asked the secret of his ACO’s success so far in the six-plus years in which Coastal Carolina Quality Care has participated in the MSSP program, “[I]t takes time for some of these strategies, such as population health, to pay off. Another thing that’s going on is that our care management program, I give credit for keeping our costs low and getting things in place. And in addition,” he told me, “we really made a lot of strides in our first contract cycle, specific to our market. All of our annual wellness visits and preventive care, we made our marks there and that positioned us well in our second contract cycle. And it just takes time, when you focus on the quality of care, for… when a greater percentage of your patients have their blood pressure under control, you’ll have fewer adverse events. And when you work to lower a1cs, that will avert events over time. And annual wellness visits, vaccinations, screening services—it costs money for screenings; and once you get things set up, that’s then in place. And care management services—when you go into your second contract cycle, you have some of those costs worked into your contract cycle the second time; so it takes time to achieve shared savings, and to get the staff to focus on the sickest population.”
What’s more, what Nuckolls told me in our interview reflects what virtually every ACO leader I and my colleagues at Healthcare Informatics have heard from ACO senior executives—that it takes several years to lay the foundations for ACO success.
What’s more, Nuckolls told me, the results revealed in this data review-based study and article are important, as they speak to “the policy point—organizations are truly saving the government money, even if it doesn’t immediately show on paper. The evidence doesn’t support the idea that ACOs should be kicked out because they have a bad benchmark. The true savings to the Medicare Trust Fund will then be less. And that’s what they need to focus on, achieving true savings to the government.”
So, the obvious question now is, what will happen next? Will CMS Administrator Seema Verma lash out against NAACOS, denouncing this “rival” analysis of MSSP ACO savings? Will she ignore it? Or will she reach out to NAACOS’s leaders, and attempt to find common ground, as the “Pathways For Success” program potentially threatens the expansion of the voluntary MSSP program? It feels as though a lot is hanging in the balance right now, because if the national association representing ACOs has just come out with what is implicitly a denunciation of CMS’s method for calculating ACO progress and success, that is a fairly major “j’accuse” that Administrator Verma and her fellow senior CMS and HHS officials would do well to consider carefully. So the next move on this chessboard is Ms. Verma’s. And who knows what that move might look like?