In an August 9, 2018 proposed rule, the Centers for Medicare & Medicaid Services (CMS) seeks to redirect the Medicare Shared Savings Program (MSSP) on so-called “Pathways to Success.”1 These proposed changes would move all MSSP Accountable Care Organizations (ACOs) to a two-sided or risk-assumption model within the next couple of years, and thereby (at least in theory) encourage the transition from volume to value-based care in the ACO space.2
What are ACOs, and how have they operated historically?
The Patient Protection and Affordable Care Act (PPACA) created the MSSP to “promote accountability for a patient population … coordinate items and services under [Medicare] parts A and B, and encourage investment in infrastructure and redesigned care processes for high quality and efficient service delivery.”3 Through implementing regulations in 2012, CMS launched the MSSP as the first “Medicare ACO” program.4 In this regard, MSSP participation occurs through ACOs, or groups of healthcare providers that are accountable for the quality of care and total healthcare spending of their assigned beneficiaries, in relation to a historical benchmark. In theory, an ACO participating in the MSSP or certain other CMS Innovation Center initiatives5 shares in savings if it meets quality performance criteria and keeps total healthcare spending below a given target, but must repay CMS if patient spending exceeds that target.6
Historically, most Medicare ACOs have not operated this way, as they have not actually lowered healthcare costs or assumed risk.7 As of January 1, 2018, there were 561 MSSP ACOs out of 649 total Medicare ACOs, serving over 10.5 million Medicare fee-for-service (FFS) beneficiaries. The vast majority of MSSP ACOs – 82 percent in 2018 – participate in a one-sided model, Track 1, whereby they are eligible to share in any generated savings but do not assume any downside risk. According to CMS, some of these Track 1 ACOs generate losses, and therefore increase Medicare spending relative to their benchmark, while having access to fraud and abuse waivers by virtue of their MSSP participation.8
At the same time, many of these ACOs point to other factors, including financial backing and market-specific challenges (e.g., providers in rural areas and safety net providers needing to tackle social determinants of health, continued predominance of FFS reimbursement, etc.), as undermining their efforts to generate savings and ultimately, lower healthcare costs.9 According to the National Association of Accountable Care Organizations (NAACOS), some MSSP ACOs have remained in Track 1 because they feel unprepared to assume risk, and possibly be on the hook for millions of dollars to Medicare, which is “simply not practical or feasible for most of these organizations.”10
What does CMS propose in its August 9, 2018 rule, and what are its goals?
Entitled Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations -- Pathways to Success, the Proposed Rule would redesign MSSP participation options in a number of ways, and thereby incentivize the transition to two-sided models. These two-sided models require MSSP ACOs to share in savings as well as losses, and thus assume a certain degree of risk.11
In particular, CMS proposes the following major changes to the MSSP:
- Reduce the amount of time an MSSP ACO can remain in a one-sided or shared savings-only model to two years, with previous ACOs restricted to a single year under a one-sided model.12
- Streamline the MSSP by retiring Tracks 1 and 2 and the deferred renewal option, and discontinuing Track 1+ in future application cycles.13 For agreement periods beginning on July 1, 2019 and thereafter, eligible ACOs could enter into one of two new tracks: a new BASIC track that starts as a one-sided model and incrementally phases in higher levels of risk through a “glide path”; and an ENHANCED track based on the current Track 3, offering more tools and flexibility for ACOs that take on the highest level of risk and possible reward.14
- Increase the MSSP agreement period from three to five years.15
- Allow ACOs to accelerate to a higher level of risk/reward within an agreement period; these ACOs could qualify as Advanced Alternative Payment Models (Advanced APMs) under the Quality Payment Program (QPP) if they assume enough risk.16 (By default, ACOs in the BASIC track would automatically advance at the start of each performance year along the glide path to increased risk/reward.)17
- Modify benchmarking methodology in an effort to provide more accurate and predictable benchmarks -- including incorporating factors based on regional FFS expenditures to set an ACO’s historical benchmark in its first agreement period, and adjustments to reflect changes in health status of up to -/+ three percent over an agreement period.
- Implement measures to deter gaming, including limiting more experienced ACOs to higher-risk participation options (e.g., by using past participation in performance-based risk Medicare ACO initiatives by an ACO entity and/or ACO participants to assess available participation options).18
- Modify application review criteria to more rigorously screen for good standing among ACOs seeking to renew or re-enter the MSSP after termination or expiration of their previous agreement. Relatedly, terminated ACOs in two-sided models would be held accountable for partial-year losses if either the ACO or CMS terminates their agreement during a performance year.19
- Implement provisions of the Bipartisan Budget Act of 2018 (BBA), which would allow eligible ACOs in performance-based risk arrangements to take advantage of certain telehealth waivers, establish a new beneficiary incentive program, and enjoy broadened access of the current Skilled Nursing Facility (SNF) three-day waiver.20
- Modify beneficiary assignment methodology through: an expanded definition of primary care services (adding new codes); a new “opt-in” methodology under which a beneficiary is assigned to an ACO if he/she has opted into the ACO (as an assigned ACO beneficiary); and continued use of a beneficiary’s designated primary care physician (which can be a physician of any specialty, or a nurse practitioner, physician assistant or clinical nurse specialist), even if the beneficiary no longer receives primary care services from an ACO professional in that ACO.21
- Seek comment on initiatives to promote electronic health record (EHR) interoperability, combat opioid addiction, and improve quality of care and coordination of pharmacy care for ACO beneficiaries.22
According to CMS, ACOs should be a component of the move to value-based care, “but after six years of ACO experience, the program must evolve to deliver value.”23 In this regard, the Proposed Rule would incentivize MSSP risk assumption, and thereby increase Medicare Trust Fund savings while mitigating losses. If implemented, the proposal is projected to generate $2.24 billion in federal savings over 10 years from 2019 to 2028, based on decreased claims costs and shared savings payments.24 Additionally, CMS believes that these changes would increase program integrity by eliminating certain gaming opportunities, promote regulatory flexibility and free-market principles, bolster beneficiary engagement, ensure stringent benchmarking and ultimately, enhance care for Medicare beneficiaries.25 In short, Administrator Verma feels that “[t]he time has come to put real ‘accountability’ in Accountable Care organizations.”26
How does the proposed rule impact the 2018 application cycle?
CMS no longer intends to offer an application cycle during 2018 for a January 1, 2019 start date, and instead proposes an application cycle for a one-time agreement period starting July 1, 2019. ACOs with a participation agreement ending on December 31, 2018 would have the option to extend their current agreement for six months through June 30, 2019 to prevent an interruption in participation, and could apply for a new agreement beginning July 1, 2019. CMS would then resume its annual application cycle beginning with the January 1, 2020 performance year.27
Historically, how have providers responded to performance-based requirements in the ACO context? And how have they (and others) responded to the Proposed Rule so far?
As alluded to above, many MSSP ACOs have expressed concern about being forced into risk prematurely. In a February 22, 2018 letter to CMS Administrator Verma, NAACOS urged CMS to grant certain Track 1 ACOs a third agreement period in Track 1.28 And in a May 2018 survey conducted by NAACOS, 71 percent of respondents indicated they are likely to leave the MSSP if required to assume risk next year.29 The proposed shortening of one-sided model participation will be a key issue for NAACOS in its comments to the Proposed Rule.30
So far, providers and other stakeholders have not responded well to the Proposed Rule. On September 20, 2018, nine stakeholder groups, including NAACOS and the American Medical Association (AMA),31 wrote CMS Administrator Verma a letter regarding the Proposed Rule. While acknowledging that the proposed “Pathways to Success” program would implement a number of positive changes, including some previously recommended by the value-based community, the groups also expressed concerns about CMS’ proposals to reduce the time new ACOs have in shared savings-only models from six to two years, and to decrease the shared savings rate from 50 percent to 25 percent. In this regard, the letter recommends that CMS give ACOs more time in an upside-only model, and apply a shared savings rate of at least the current 50 percent to ensure a sustainable business model.
According to the groups, their recommendations reflect a “unified desire to see the MSSP achieve the long-term sustainability necessary” to achieve the program’s goals. In this regard, “[p]rogram changes that deter new entrants would shut off a pipeline of beginner ACOs that should be encouraged to embark on the journey to value, which is a long-standing bipartisan goal of the Administration and Congress and important aspect of the Quality Payment Program.”32
The ABA Health Law Section will continue to monitor the Proposed Rule and keep readers apprised of material developments.
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Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations – Pathways to Success, 83 Fed. Reg. 41786 et seq. (proposed Aug. 17, 2018) (Proposed Rule).
For a further discussion of ACOs as a pathway to value-based care, see Seema Verma, Pathways To Success: A New Start For Medicare’s Accountable Care Organizations, Health Affairs Blog (Aug. 9, 2018), https://www. healthaffairs.org/do/10.1377/hblog20180809.12285/full/ (Verma Article). According to Verma, policymakers on both sides of the aisle agree on the need to transition the U.S. healthcare system from volume to value-based care; this need stems from the rapid growth of U.S. healthcare spending over time. American spending on healthcare represented 17.9 percent of gross domestic product (GDP) in 2016, the latest year for which official data is available, and under current law, is projected to reach nearly 20 percent by 2026. Nat’l Health Expenditure (NHE) Fact Sheet, Ctrs. for Medicare & Medicaid Servs. (Apr. 17, 2018), https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealth expenddata/nhe-fact-sheet.html. CMS estimates that national health spending grew by 4.6 percent in 2017 to nearly $3.5 trillion, and will rise to 5.3 percent in 2018, driven by rising prices for medical goods and services and higher Medicare and Medicaid costs. NHE Expenditure Projections 2017-2026: Forecast Summary, Ctrs. for Medicare & Medicaid Servs. (Aug. 1, 2018), available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpend Data/NationalHealthAccountsProjected.html. For most Americans, this means higher copayments, deductibles and premiums over time. From 2005 to 2013, medical bills were the single largest cause of consumer bankruptcy in the United States, and according to a December 2017 Gallup poll, 72 percent of Americans believe the U.S. healthcare system “has major problems” or is “in a state of crisis.” Barney Jopson, Why are so many Americans crowdfunding their healthcare?, Fin. Times (Jan. 10, 2018), https://www.ft.com/content/b900d04a-face-11e7-a492-2c9be7f3120a (citing Gallup Poll Social Series: Health and Healthcare, Americans Still Hold Dim View of U.S. Healthcare System, Gallup News Servs. (Dec. 11, 2017), https://news.gallup.com/poll/223403/americans-hold-dim-view-healthcare-system.aspx.
Pub. L. No. 111-148, § 3022 and § 10307, 124 Stat. 119, 395-99 and 940-41 (March 23, 2010), codified at 42 U.S.C. § 18001 et seq. (2010). In addition to the MSSP and ACOs, PPACA also established the CMS Innovation Center to test “innovative payment and service delivery models to reduce expenditures…while preserving or enhancing the quality of care” for Medicare, Medicaid and Children’s Health Insurance Program beneficiaries. Id. at § 3021. Since creation of the MSSP and ACOs, CMS has tweaked ACO participation options and parameters.
While the MSSP was the first “Medicare ACO” program, CMS has established a handful of other ACO models through its Innovation Center. All of these models are geared towards traditional, fee-for-service Medicare; thus, ACO rules technically only apply to traditional Medicare providers choosing to participate in an ACO model (MSSP or otherwise) and in particular, to their assigned Medicare beneficiaries under that model. All other reimbursement arrangements (managed care Medicare, other governmental payors, or commercial payors) do not fall within the ambit of an ACO. See Innovation Models, Ctrs. for Medicare & Medicaid Servs. (2018), https://innovation.cms.gov/initiatives/index.html#views=models&cat=accountable%20care (Innovation Models).
In particular, ACOs participating in the following models are eligible for shared savings: the Advance Payment ACO Model and the Next Generation ACO Model (which built off of the now-inactive Pioneer ACO Model). More generally Alternative Payment Models (APMs) have some shared savings/loss features but not all such models involve ACOs. See Innovation Models, supra n. 4.
Accountable Care Organizations (ACOs), Ctrs. for Medicare & Medicaid Servs. (May 3, 2018), https:// www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ACO/.
Verma Article, supra n. 2.
Press Release, Ctrs. for Medicare & Medicaid Servs., CMS Proposes “Pathways to Success,” an Overhaul of Medicare’s ACO Program (Aug. 9, 2018), available at https://www.cms.gov/newsroom/press-releases/cms-proposes-pathways-success-overhaul-medicares-aco-program (CMS Press Release). See also Fact Sheet, Ctrs. for Medicare & Medicaid Servs., Proposed Pathways to Success for the Medicare Shared Savings Program (Aug. 9, 2018), available at https://www.cms.gov/newsroom/fact-sheets/proposed-pathways-success-medicare-shared-savings-program (CMS Fact Sheet).
Nat’l Ass’n of ACOs (NAACOS), CMS Proposes Rule with Changes to Medicare ACO Program (Aug. 9, 2018), available at https://www.naacos.com/cms-proposes-rule-with-changes-to-medicare-aco-program (NAACOS Article).
Final Coalition Letter Re: Request for a third agreement period for certain ACOs in MSSP Track 1, from Nat’l Ass’n of ACOs (NAACOS) to Seema Verma, Administrator, Ctrs. for Medicare & Medicaid Servs. (Feb. 22, 2018), available at https://www.naacos.com/final-coalition-letter-to-cms-requesting-extended-t1-participation (NAACOS Letter).
CMS Fact Sheet, supra n. 8.
In particular, ACOs identified as having previously participated in the MSSP under Track 1 would be eligible to enter a five-year agreement period under the BASIC track’s glide path; however, these ACOs could only participate in the BASIC track’s one-sided model for one year (or 1.5 years if applying for a July 1, 2019 start date). They would be transitioned to incrementally higher levels of risk in years two through five of the agreement period. Id. See also Proposed Rule, supra n. 1, 83 Fed. Reg. at 41800, 41938 (proposing to amend 42 C.F.R. § 425.600).
Track 1 is the current one-sided or shared savings-only MSSP track. Track 1 ACOs may apply to extend their first agreement period under Track 1 for a fourth performance year, and thus defer by one year their entrance into a second agreement period under a performance-based (Track 2 or Track 3) model. Under Track 2, ACOs may share in savings or repay Medicare losses depending on performance, and have the potential to share in a greater portion of savings than their Track 1 counterparts. Track 3, like Track 2, is a two-sided or shared savings and shared loss arrangement; these ACOs assume the greatest amount of risk, but may share in the greatest portion of savings if successful. Track 1+ is a time-limited CMS Innovation Center Model whereby participants assume limited downside risk (less than Track 2 or Track 3 ACOs). See Shared Savings Program, Ctrs. for Medicare & Medicaid Servs. (Apr. 27, 2018), https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/about.html.
Proposed Rule, supra n. 1, 83 Fed. Reg. at 41800.
CMS Fact Sheet, supra n. 8. See also Proposed Rule, supra n. 1, 83 Fed. Reg. at 41830.
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) ended the Sustainable Growth Rate (SGR) formula for increasing Medicare reimbursement rates, and required CMS to implement the QPP. The QPP took effect on January 1, 2017. Clinicians have two ways to participate in the QPP, based on practice size, specialty, location, or patient population: the Merit-based Incentive Payment System (MIPS), or Advanced APM. Clinicians participating in an Advanced APM may earn an incentive payment for participating in an innovative payment model. Alternatively, MIPS participants earn a performance-based payment adjustment. Currently, MSSP ACOs participating in Tracks 1+, 2 and 3 qualify as Advanced APMs. Quality Payment Program, Ctrs. for Medicare & Medicaid Servs. (July 30, 2018), https://www.cms.gov/Medicare/Quality-Payment-Program/Quality-Payment-Program.html. See also Quality Payment Program: Overview, Department of Health & Human Servs. (2018), https://qpp.cms.gov/apms/overview.
Proposed Rule, supra n. 1, 83 Fed. Reg. at 41788. In general, under current rules Track 1 ACOs may only move to Track 2 or Track 3 at the start of a three-year agreement period. However, in 2018 Track 1 ACOs were permitted to transition to Track 1+, and MSSP ACOs were allowed to move to the Next Generation Model during the agreement period. NAACOS, NAACOS Overview of the 2018 Medicare ACO Class, available at https://www.naacos.com/overview-of-2018-medicare-aco.
Id. at 41786.
Id. at 41788.
Id. at 41914.
Id. at 41811-13; 41895.
Id. at 41907. For a general overview of MSSP changes in this proposed rule, see CMS Fact Sheet and CMS Press Release, supra n. 8.
Verma Article, supra n. 2.
Proposed Rule, supra n. 1, 83 Fed. Reg. at 41792; 41922-23.
CMS Fact Sheet, supra n. 8.
Verma Article, supra n. 2.
See Proposed Rule, supra n. 1, 83 Fed. Reg. at 41789. See also CMS Fact Sheet, supra n. 8.
NAACOS Letter, supra n. 10.
Press Release, Nat’l Ass’n of ACOs (NAACOS), May 2, 2018, available at https://www.naacos.com/press-release-may-2-2018.
NAACOS Article, supra n. 9.
Other organizations submitting the joint letter include the Association of American Medical Colleges; American College of Physicians; America's Essential Hospitals; America’s Health Insurance Plans; Health Care Transformation Task Force; Medical Group Management Association; and Premier.
NAACOS, 9 Stakeholder Groups Urge CMS to Ensure Continued Success of ACO Program (Sep. 20, 2018), available at https://www.naacos.com/press-release--coalition-letter-september-20-2018.
CMS Fact Sheet and CMS Press Release, supra n. 8.