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Regional Benchmarking or Regional Bonus? Sustainability in the Medicare Shared Savings Program

Travis Broome is vice president of policy at Aledade, a new company helping doctors stay independent and thrive in the transition to value-based care. Joining Aledade early on, Travis helped Aledade grow from 2 accountable care organizations (ACOs) to 20 ACOs. From business development with both practices and payers, to early population health analytics, to serving as executive director for the Aledade Louisiana ACO, he has touched every part of Aledade as it has grown. Today, he is a thought leader on accountable care and is responsible for strategy development, policy analysis and economic modeling. Prior to Aledade, Travis was a regional director at CMS. He earned his MPH and MBA from the University of Alabama at Birmingham.
ACO Risk Score Cap
The second policy that distorts regional benchmarking is capping the risk score for the ACO, but not for the comparison group. The math here is even more challenging for a blog post, but conceptually this is how it would work. A population with a risk score of 1.1 and a per capita cost of $10,000 is considered 10% more efficient than a population with a risk score of 1.0 and a per capita cost of $10,000. In the below example, we assume that costs and non­-ACO risk scores stay constant for the region and the ACO:

Example: If the ACO’s risk score increases, then the region’s risk score increases in proportion to the ACO’s market share. This creates a negative regional trend lowering the ACO’s benchmark. In an equitable situation, the ACO’s benchmark would increase due to ACO’s risk adjustment, more than offsetting the negative regional trend. But CMS will not allow the risk score to increase for the ACO’s continuously enrolled population, creating a no-win situation for the ACO.

If the ACO’s risk score decreases, then its benchmark decreases proportionally due to risk adjustment. If the ACO’s risk score increases, then its benchmark decreases due to regional trends. Heads CMS wins, tails the ACO loses.

To fix the effects this has on the regional trend, CMS should apply the same risk methodology to both the ACO and its regional comparison group.

There is also more at stake when it comes to risk than shifting savings from the ACO to CMS using the regional trend. By capping the risk score for the ACOs, CMS is saying it does not trust that the increases in an ACO’s risk score reflect an increase in the real risk of the population. However, CMS then uses the increase when it benefits the agency to do so. If CMS is truly concerned that some ACO risk growth is due to coding and not underlying morbidity, it could again follow MA’s lead and do an industry-wide, across-the-board offset to coding increases, but still recognize relative differences in risk scores among ACOs. This would not only fix the regional trend issue but also make better use of risk scoring in the entire Medicare Shared Savings Program.

In conclusion, CMS creates a proxy of regional benchmarking. CMS said it created the regional benchmark to improve the incentives for ACOs to generate savings, but these 2 policies clearly undercut that purpose. This is particularly concerning giving the all-or-nothing approach of the MSR and the much greater harm imposed on rural areas through this policy. Thankfully these are 2 policy decisions that are straightforward to correct within the existing framework.

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