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Proposed Rule for Medicare ACOs Includes Notable Changes for Rural Providers
September 24, 2018

Proposed Rule for Medicare ACOs Includes Notable Changes for Rural Providers

Caravan Health was started by a forward-looking group of community hospital CEOs and physicians who recognized early on the many challenges they would face transforming to a value-based payment model. The company is now the national leader of successful accountable care and population health programs for community health systems. Caravan Health works with more than 250 health systems, 14,000 providers, and more than 1,000,000 patient lives to drive quality, financial benefits, and strong physician relationships in Accountable Care Organizations. 
This article was written by Lynn Barr, CEO and founder of Caravan Health.

The future of the Medicare Shared Savings Program (MSSP) accountable care organization (ACO) program is coming into focus with the recent publication of a proposed rule by CMS. It is encouraging to see CMS include analysis and policy development on the needs of rural health providers, many of which have limited financial means and provide life-saving care in underserved communities. Data published by CMS shortly after the release of the rule showed that ACOs in rural communities and participating in a program intended to support small, rural ACOs—including many ACOs that include hospitals—are outperforming risk-bearing ACOs. But the CMS proposal to require rural ACOs to take downside risk will slow these initiatives and potentially jeopardize their continued existence.

In the August 2018 proposed rule, CMS reminds us that the program’s original rules encouraged the participation of rural providers in ACOs, saying the agency had “acknowledged that ACOs new to the accountable care model—and particularly small, rural, safety net, and physician-only ACOs—would benefit from additional time under the one-sided model before being required to accept risk.”

CMS’ proposed rule described strong financial results from low-revenue ACOs, as well as ACOs in risk-bearing tracks, but it mostly ignored the success of small, rural providers in ACOs. Still, several of the proposed program changes acknowledge the importance of nurturing these rural providers so they have a better chance of implementing real delivery and payment system reform. 

Fundamental to the creation of a voluntary program is the creation of a business proposition attractive both to potential participants and to CMS. One of the most talked-about policy changes is the move from Tracks 1, 1+, 2, and 3 to the glidepath from the Basic to the Enhanced track in the proposed rule. The proposed rule reduces the shared savings rate in the early years of the program from 50% to 25%. This rate may be simply too low for rural providers considering participation—and virtually all rural providers will be unable to accept a transition to risk in the near future, no matter how limited.

This change in pace of taking on risk, while significant, is not the only policy lever at CMS’ disposal. Another notable policy change for rural providers is the proposed approach to benchmarking. Among other changes, CMS recognized that ACOs in rural areas, as well as other ACOs with dominant market position, account for a large share of their regional benchmark. CMS has proposed to reduce the weight of regional spending in updating an ACO’s benchmark. This means that an ACO’s own costs will contribute less to the regional benchmark. Although well-intentioned, by restricting the change to the update factor, CMS does not address the issue baked into the starting point for rural providers and, so, fails to fix the problem.

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