Medicare vies to keep ACOs on board with more flexible rules

08 Jun 2015 1:33 PM | Deleted user

Retrieved from
Bob Herman with Virgil Dickson   |   June 4, 2015

More flexibility is coming for Medicare accountable care organizations under a final rule the CMS published Thursday (PDF). The revisions are intended to strike a balance between maintaining the program's rigor and making sure providers continue to participate. 

The Medicare Shared Savings Program will offer a new track to take on more financial risk of patient care, and it will allow Medicare ACOs to avoid penalties beyond the initial three-year term. The CMS will also issue future guidance on benchmarking and rebasing issues that have been sources of contention for many providers.

The Affordable Care Act catalyzed the creation of Medicare ACOs, which are networks of hospitals and physicians that aim to improve the quality and lower the cost of care for Medicare beneficiaries in a defined area. More than 400 ACOs participate in Medicare accountable care contracts, and they care for more than 7 million beneficiaries.

The CMS received 275 comments from concerned stakeholders, and the agency expects 90% of Medicare Shared Savings ACOs will stay with the program because of the rule changes. 

Hospitals and physicians have been able to choose between two tracks for shared savings for ACOs, and the CMS is finalizing the third option it proposed in December. The third track is “very much modeled” after the Pioneer ACO, CMS Deputy Administrator Sean Cavanaugh said. And it also shares many similarities with the Next Generation ACO model that the CMS proposed in March.

Providers opting into track three will take on more financial risk, but could also share in potentially higher savings. The CMS said upside and downside risk for this model will be 75%—meaning an ACO's bonus or penalty would be 75% of its savings or loss— just as it proposed in December. ACOs in track three are also given a fixed population of beneficiaries to care for.

Cavanaugh said a number of healthcare organizations around the country “will find this attractive.” But it's more important for the agency to offer a variety of options that meet a provider's tolerance for taking on financial risk and maintaining high quality, he said.

The first track of Shared Savings ACOs, considered the safest, originally called for providers to receive rewards for hitting cost and quality targets for three years. Thereafter, they would be responsible for both rewards and penalties, called two-sided risk. However, the CMS finalized its earlier proposal, allowing ACOs to enter another three-year period in which they can avoid financial penalties. 

Allowing no risk, “is a very strong message from CMS and the administration that they are committed to the long-term viability of the program,” said Jeffrey Spight, president of Collaborative Health Systems (CHS), a division of health insurer Universal American that operates about two dozen ACOs with Medicare shared savings contracts. Universal American previously had an even bigger presence in the program but dropped out of them in several markets. 

The ACOs must be “in good standing with the program” and have high quality scores for beneficiaries. The CMS emphasized that two-sided risk is the future of the program despite this extension.

“There's a reality that shifting from fee-for-service to accountable-care models takes time,” said Dr. Patrick Conway, the CMS' chief medical officer. “That is a long-term transition and can certainly take more than three years. We're really trying to meet providers where they are.”

Later this year in a separate rule, the CMS also will readjust its methodology for what it calls benchmarking and rebasing. Several ACOs, particularly Pioneers, have said they faced significant penalties even though they had high quality scores and saved Medicare money. Regional payment differences and historically low Medicare per-beneficiary costs have not given them much room to share in savings.

A newer methodology would account for regional trends and future savings “rather than solely ACOs' own recent spending,” the CMS said.

The CMS made it clear in the rule that the ACO program is a separate, distinct option from traditional fee-for-service Medicare and the capitated Medicare Advantage program even though ACOs incorporate elements of both. Unlike Medicare Advantage, people enrolled in a Medicare ACO still have their full traditional Medicare benefits and can see any Medicare provider, not just those within the ACO.

“While we frequently relied on our experience in other Medicare programs, including Medicare Advantage, to help develop program requirements and design elements for the Shared Savings Program … the intent of this program is not to recreate or replace Medicare Advantage,” the CMS said.

HHS Secretary Sylvia Mathews Burwell set a goal in January to tie 30% of all traditional Medicare payments to alternative payment models such as ACOs and bundled payments by the end of 2016. That goal increases to 50% by the end of 2018. Adjusting ACO rules to be more accommodating to providers was viewed as necessary to the government's plan.

“ACOs are a critical part of meeting those alternative payment model goals, and we think this rule further lays the groundwork so that we'll be able to reach those goals,” Conway said.

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