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The American Journal of Managed Care September 2016
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The Opportunities and Challenges of the MSSP ACO Program: A Report From the Field
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The Opportunities and Challenges of the MSSP ACO Program: A Report From the Field

Farzad Mostashari, MD, ScM, and Travis Broome, MPH
This article provides a detailed description of a Medicare Shared Savings Program accountable care organization (ACO)'s actions and results, to increase understanding of the challenges and opportunities facing ACOs-particularly those comprised of independent practices.
The benchmark. The MSSP program contains a compromise that creates an inaccurate estimate of the “counterfactual”—what costs would have been in the absence of the ACO. Our commercial gain-share/risk-share contracts typically use regional trends to estimate expected costs, whereas the MSSP program uses national trends. This may have helped national uptake of the program in areas with lower cost and cost trends, but it provides an inaccurate assessment of true savings. Delaware, for example, experienced 5% annual Medicare cost growth from 2012 to 2014, while Medicare as a whole experienced essentially no cost growth at all. What in 2012 had been a low-cost area, by 2014 had higher-than-average annual per-capita Medicare expenditures of $9787.
If these regional trends were projected forward, our benchmark (absent risk adjustment) would have been $10,213; if national inflation in 2015 was applied, the benchmark would have been $10,022. However, the MSSP program approach (weighted 3-year average with national inflation) produced a 2015 benchmark of only $9627—or 1.7% below 2014 levels (Figure). In total, the benchmark “headwind” for Delaware created a huge swing of 4.5% for the 2015 performance period to overcome. This misalignment of regional versus national benchmarks eventually goes away as an ACO transitions to the more accurate regional benchmarking in its second and third contract periods (years 4-9), but it lengthens the time horizon for some ACOs to see financial success.
Hospital coding. Another consequence of using national inflation versus regional trends to update ACO benchmarks is the inability to adjust for local trends in hospital coding practices. Unlike Medicare Advantage or commercial health plans, Medicare does not conduct prospective utilization management of hospital coding, and hospital billing staff and consultants can use specialized software to adjust billing codes toward higher-reimbursed diagnosis-related groups to maintain and increase revenue. The uptake of these tools takes place in different hospitals at different times. The Delaware ACO reduced hospitalizations by 2%, but hospital costs actually increased by 4%—largely due to a shift in coding (eg, pneumonia increasingly coded as “sepsis” with no bloodstream organism identified10). During this same period, hospitalizations went up 3.6% nationally, while costs only went up 1.4%. If hospital coding intensity had remained constant, total costs would have been 2.8% and 3.7% lower in APC and Delaware ACOs, respectively.
Risk adjustment. Risk adjustment is necessary to account for differences in how sick an insured pool of patients is compared with other populations and over time. However, the MSSP contains a peculiar policy that is unlike other Medicare Advantage, Next Generation ACO, or commercial ACO contracts: risk adjustment in the MSSP can decrease the benchmark, but never increase it. The current CMS public use file does not permit examination of the impact of risk adjustment on projected benchmarks, but this policy is likely to cause a systematic bias toward lower benchmarks in the MSSP. Newly enrolled and newly attributed patients are likely to have low risk scores (which are counted), but any trends toward higher risk in the continuously enrolled population (that would, naturally, tend to get sicker and more expensive over time) are not counted. The downside of our aggressive strategy of “putting your arms around your patients” is the high proportion of newly enrolled patients in our ACOs, which magnified this effect. In the APC ACO, a weighted relative risk score of 0.986 translated into 1.4% ($1.5 million) of savings removed from the ACO ledgers.
Information flows and information blocking. Much of what we accomplished was based on a foundation of information from multiple sources: clinical data extracted from EHRs, claims data from CMS, and hospital admission-discharge-transfer (ADT) event notifications empowered physicians to prioritize high-risk patients implement workflows for better care transitions. Unfortunately, our ability to do so was delayed in many practices due to the inability or unwillingness of EHR vendors to provide practices with their own clinical data in standardized formats, and by hospitals’ refusal to share ADT data with local health information exchanges—or with the PCPs of the patients they are discharging.

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