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Creating Sustainability in Accountable Care

It looks like 2016 is shaping up to be the most pivotal year in healthcare policy in a long time.
Regulators have struggled to strike a balance between maintaining incentives for private organizations to continue to seek profit in reducing cost, while also seeking to ensure that there continues to be value created for society and the taxpayer. In keeping with comments submitted by us and others, CMS is now proposing to gradually move away from a purely historical benchmark (beat your own past performance) to a regional benchmark (beat your neighbor’s performance). In this way, value created by ACOs is defined commonsensically as “did people in the ACO get better care than they would have if the ACO had not existed.”
 
We acknowledge that getting the transition right—from rewarding improvement to rewarding attainment—is devilishly difficult. Transition to a regional benchmark too fast, and ACOs that still have high costs will leave the program. Transition to a regional benchmark too slow, and ACOs with low costs will lose their financial viability. We support the proposed transition of 35% regional comparison in an ACO’s second contract (years 4, 5, and 6) and 70% regional in its third contract (years 7, 8, and 9).
 
But this is only part of the solution. With healthcare costs rising every year, the benchmark must also be projected forward. CMS currently uses national inflation for annual updates of the benchmark within a contract period, but this creates an imperfect view of the counterfactual (what would have occurred had the ACO not existed). Regional updates using county weighted, risk-adjusted costs (as is done in Medicare Advantage) create more accurate benchmarks and therefore more accurate measure of ACO value. CMS is indeed proposing to switch to such regional inflation in future contracts but is adding complexity and reducing predictability by proposing to continue to use national inflation in the first contract (first 3 years). An ACO should be rewarded because a person in Dover, Delaware, got better care in the ACO than a like population outside of the ACO. Regional updates do that, while national inflation updates dilute that difference.
 
The benchmark must also account for differences between people’s health in order to accurately compare one person’s costs to another. To be sure, this adjustment creates opportunities to shift money around in the healthcare system without creating value, a practice CMS calls “coding intensity” in the proposed rule. Currently, CMS is using a blunt instrument to combat this practice. Simply put, it does not let risk scores to go up for the same population year over year. This is done without consideration of whether that population had a bad run of cancer or an unusually high number of unavoidable accidents. This prevents accurate comparison and therefore prevents accurate measurement of value. This transfer of insurance risk to ACOs is one of the biggest barriers to ACO sustainability over the long run, and increases the risk of providers dumping patients whose true risks are rising. People do in fact tend to get sicker over time, and pretending otherwise can only last so long.
 
It looks like 2016 is shaping up to be the most pivotal year in healthcare policy in a long time—possibly the most pivotal year since 1965. CMS is actively listening and working with private-sector partners to iterate and improve the alignment between what’s good for society, what’s good for patients, and what’s good for doctors entering these new payment models. All of us in healthcare, and particularly those of us who are in population health, must make the most of every opportunity to inform the changes that will be happening this year, and will illuminate the path forward.

 
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