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CMS Proposal Is a Start for Making Risk More Appealing to ACOs

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.
Cowritten by Britainy Barnes of Aledade; Sean Cavanaugh, chief administrative officer of Aledade; and Farzad Mostashari, MD, cofounder and CEO of Aledade.

On August 9, CMS issued the first update to the Medicare Shared Savings Program (MSSP) of the current administration. This is the first of a series of posts that will explore the proposed regulation. Here, we will identify CMS’ goals in updating the MSSP and introduce the concepts that we will explore in more depth later in the series.

The theme of the proposal was no surprise: performance-based risk. CMS Administrator Seema Verma has been quite clear for some time that she believes accountable care organizations (ACOs) that take on risk perform better than those that do not. The 609 pages of the proposed regulation, named the Pathways to Success, document CMS’ thoughts on how to move more ACOs into risk faster.

Before we dive into the details of the proposed regulations, we should review why CMS is so focused on performance-based risk. First and foremost, ACOs that take risk perform better against their benchmarks than those that do not. There are several reasons for this, but the reason CMS focuses on is motivation. CMS believes, as do we, that risk-taking ACOs are more likely to make greater investments in reducing costs. CMS is also concerned that some ACOs that do not take on risk may not be focused on reducing costs at all. These “ACO squatters,” as we have referred to them in the past, use the waivers and data available in MSSP not to provide better care at lower cost but to consolidate a healthcare market.

Most ACOs are not squatters. Most ACOs attempt to deliver better care at lower cost. These ACOs make significant investments in administration and care delivery. CMS acknowledges this investment risk but deems it insufficient. Since no ACO is required to make these investments, guaranteed accountability comes from performance-based risk. Therefore, CMS proposes to reduce the maximum time allowed in 1-sided risk from 6 years to 2 years for new ACOs. CMS also proposes policies that it believes will make taking on risk more appealing. These policies fall into 3 buckets, which we discuss below and will explore in greater depth later in our blog series:
1) Providing a glide path of increased risk taking over time that recognizes differences between ACOs in their experience, finances, and composition
2) Providing new flexibilities to ACOs
3) Refining the benchmarking methodology

Creating a Glide Path to Risk
CMS proposes to replace the current Track 1, Track 2, Track 3, and Track 1+ model with 2 tracks: Basic and Enhanced. Basic is a 5-year glide path from Track 1 to Track 1+. Enhanced is essentially Track 3. Every ACO will move from current tracks to this Basic/Enhanced framework over time. The soonest is July 1, 2019, for new ACOs and any ACO that chooses to transition. The latest will be January 1, 2021, for ACOs that started their 3-year agreement period in 2018. As part of the glide path, CMS proposes to embrace revenue-based risk with the risk cap based on revenue instead of total cost of care. CMS also tailors the glide path to the characteristics of the ACOs based on experience with risk and their financial capacity, as measured through revenue.

Generally speaking, a low-revenue ACO is a physician-led ACO without a hospital and a high-revenue ACO is an ACO with a hospital. CMS points out that physician-led ACOs have generated 2.9% gross savings compared with only 0.5% gross savings for hospital-based ACOs. This significant underperformance by hospital-based ACOs is why CMS singles them out for moving to risk faster. CMS believes high-revenue ACOs can do better. If the rule is finalized, we will find out if those hospital-based ACOs share that belief: either they will double down and take risk or, as projected, leave the MSSP.

ACOs are characterized as 1 of 4 groups:

Where an ACO falls on this chart determines its slowest possible glide path. An experienced/high ACO would have to go straight into Enhanced. While an inexperienced ACO could spend 10 years in Basic, with its revenue-based risk track, before moving to Enhanced.

The table below shows the 10 years in Basic available to Inexperienced ACOs.

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