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New Proposed ACO Rule Delays Risk, Seeks to Provide Clarity

By Marisa Workman

Friday, December 19, 2014

On December 1, the Centers for Medicare and Medicaid Services (CMS) issued a Notice of Proposed Rulemaking (NPRM) to improve and clarify existing regulations in the Medicare Shared Savings Program (MSSP). CMS is seeking public comments by February 6, 2015. The final rule following this NPRM, presumably to be issued in 2015, will be in effect 60 days after promulgation. However, since many of the policies impact new beneficiary assignment and changes to financial performance requirements for Medicare Accountable Care Organizations (ACOs), much of the final rule will be not be implemented until January 1, 2016.

This long-awaited rule follows the mixed results of the first two years of Medicare’s ACO programs, which have shown modest successes but significant challenges. The Bipartisan Policy Center highlighted these challenges in our August report, Transitioning from Volume to Value: Opportunities and Challenges for Health Care Delivery System Reform, and we look forward to submitting our comments to CMS with additional recommendations.

The Proposed Changes

This rule proposes changes to existing MSSP Track 1 (upside-risk only) and Track 2 (two-sided risk) options and proposes a new Track 3 option. It covers a broad range of issues, from smaller programmatic policy definitions to more substantive proposals that will have greater financial implications for participating ACOs. Most significantly, the proposal gives both new and existing ACOs an extra three years (the duration of one full contract period) before moving to two-sided risk (sharing in savings but also sharing in losses), thus allowing a full six years before penalties would apply for spending above the target benchmark. The removal of the requirement to participate in two-sided risk after one contract period of three years reflects significant concern voiced by ACOs that more time is needed for them to build and sustain the necessary infrastructure to assume more risk. However, those ACOs that elect to stay in the upside-risk only model would do so at a price: the ability to share in savings would be reduced by 10 percentage points for each subsequent agreement period that an ACO stays in Track 1.

For ACOs ready to take on greater risk and reward, CMS proposed a new two-sided risk option, called Track 3. This approach takes on some of the characteristics of the Pioneer ACO model, CMS’ more ambitious two-sided risk model operated by the Center for Medicare and Medicaid Innovation (CMMI), with higher rates of shared savings (up to 75% based on quality performance) and prospective attribution. It also proposes waiving certain Medicare regulations – which may be less relevant in these payment models than in traditional Medicare fee-for-service – as a greater incentive to move into Track 3. Examples of proposed waived requirements include the three-day hospital stay before receiving covered care at a skilled nursing facility, the homebound requirement under the home health benefit, some telemedicine payment restrictions, and certain prohibitions on post-acute care referrals. CMS seeks comment on including these waivers for Track 2 as well. Additionally, savings bonuses in Track 3 are capped at 20% of the benchmark (compared to 15 percent in the other tracks). If Track 3 participants spend more than Medicare benchmarks, they will be held responsible for up to 15% of the losses (current regulations hold ACOs responsible for 10% of excess spending). Track 3 proposes a method for identifying ACO patients at the beginning of the year (“prospective attribution”), as opposed to retrospective assignment based on claims data during the year. With today’s retrospective methodology, ACOs do not know who or what they will be held accountable for, making it very difficult for them to implement focused care improvement initiatives. CMS is also seeking comment on whether allowing Medicare beneficiaries to actively opt-in to an ACO would be a better way to improve patient assignment for ACOs in two-sided risk models.

The proposed rule also considers how to improve current benchmark spending target methodology. Though not offering a singular strategy, CMS seeks comment on a variety of ideas intended to change the existing method for setting, updating and adjusting financial benchmarks for ACOs. Some of the proposed methodologies include equally weighting the three performance years of each contract period, accounting for shared savings payments in the benchmark calculation, and various methodologies designed to transition towards regionally-based benchmarking.

Impact & Next Steps

Many providers have chosen not to participate in the current MSSP program because they view the potential rewards as insufficient given the expense and risk. The alternatives in this proposed rule demonstrate CMS’ desire to address the concerns that MSSP participants need more time in the program at one-sided risk. While this is a step in the right direction, in order to offer a more viable pathway to risk, a more aggressive approach to prospective attribution and benchmark reform is necessary.

As part of its Delivery System Reform Initiative, BPC will be releasing Transitioning to Organized Systems of Care: Near-Term Recommendations to Improve Accountable Care Organizations in Medicare in January 2015. Additionally, BPC looks forward to submitting our comments on the proposed rule. While the proposed changes to ACO regulations are a significant step to improving the pathway to risk, the final rule and future regulations would be greatly improved by setting clearer expectations for ACOs, providing more opportunities and tools for ACOs to engage beneficiaries and providers, and establishing a pathway to risk that is financially viable for more providers.