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Health care value continues to gain traction, so providers should determine which model will allow their organizations to take on more two-sided risk.

Innovation and disruption

New Pathways ACO Not For You? Find a Model That Works

  • Jennifer Boese
  • 11/1/2018

Earlier this year, Alex Azar, head of the federal Department of Health and Human Services (HHS), told a crowd of hospital leaders, “There is no turning back to an unsustainable system that pays for procedures rather than value ... We are unafraid of disrupting existing arrangements …”

The shift towards paying for health care value — lower costs with expected levels of quality and patient satisfaction — isn’t losing steam. With health care costs already too steep, individuals, government programs like Medicare, and employers will not continue to sustain rapid increases.

Disruption. Innovation. Risk. Value. These are what the current administration and those in the private market are driving toward. But one size will not fit all. Some providers may opt to pursue Accountable Care Organizations (ACOs), bundles, medical homes, or other models being tested in Medicare, Medicaid, or in the commercial market. Others may bypass these models and test the value-based waters via direct provider contracting or new opportunities emerging under Medicare Advantage, including Special Needs Plans.

Regardless of the model, HHS continues to press providers to take on more financial risk for outcomes. HHS via the Centers for Medicare and Medicaid Services (CMS) and the Center for Medicaid and Medicare Innovation (CMMI) continues to evaluate previous payment models and then release newer versions, many of which are moving from upside-only risk options to both upside and downside (two-sided) risk. The most recent example from CMS is called the Pathways to Success Accountable Care Organization (ACO) which builds on previous Medicare ACO results.

Providers across the health care continuum should take note of HHS’s key ACO value-based moves along with similar moves in other models like the Bundled Payment for Care Improvement Advanced (BPCI-A), to see what those could mean for the future.

Accountable care organizations

A Medicare ACO is an entity that takes on the responsibility of care – financial and/or health outcomes – for a certain population of Medicare patients. HHS believes the most promising ACO model is when the entity bears two-sided risk for financial and quality outcomes.

Not many ACOs currently have two-sided risk. The most aggressive model right now is the Next Generation ACOs (Next Gen ACO). In the only report released to date by CMS on the original cohort of 18 Next Gen ACOs, Medicare realized a savings of over $100 million. When shared savings were paid out, Medicare still netted $62 million from Next Gen ACOs.

Compare the Next Gen result to the Medicare Shared Savings Program (MSSP) ACOs. There are multiple MSSP models (Track I, I+, II, and III). Of the 561 total MSSP ACOs, 460 are upside risk only (Track I). That’s 82 percent of all MSSP ACOs where they share in savings, but face no downside financial penalties. These Track 1 ACOs actually cost Medicare $49 million in 2016. No wonder Azar called the MSSP results to date “underwhelming.” While some will counter that more recent MSSP results show improvement, that improvement is not happening at the pace HHS wants.

Pathways to success ACO model

CMS proposes these key changes under its revised Pathways ACO model:

  • An expedited on-ramp to risk over five years. CMS proposes two tracks:
    • Basic Track — Begins with Level A (year one) and runs through Level E (year five). Levels A – B are upside-only risk, but by year three (Level C), ACOs must begin two-sided risk, which then increases each successive year (Levels C – E). Basic Track ACOs are similar to current MSSP Track I, Track II, and Track 1+ ACOs.
    • Enhanced Track — Designed for those familiar with and willing to assume the higher levels of risk and reward right away. It is based on current MSSP Track III ACOs.
  • A longer agreement period to provide more stability to ACOs for their future, especially since risk assumption increases each year. However, in general, ACOs are required to progressively move towards increased risk.
  • More flexibility in beneficiary assignment. CMS allows all ACOs to select a beneficiary assignment methodology (prospective or preliminary prospective with retrospective reconciliation) approach each year. ACOs may switch their assignment methodology on an annual basis. Prospective assignment was cited as a helpful factor to those in the Next Gen ACO (two-sided risk) model.
  • Lower savings rates for upside-only ACOs, going from 50 percent to 25 percent.
  • Differing options depending on underlying organizational entity type. For example, new terms such as “low revenue” or “high revenue” and “experienced” or “inexperienced” ACOs. These terms are designed to assist physician-led and smaller ACOs, while pushing larger (most likely hospital or health system-led) ACOs towards higher value and better results quicker.

Overall, HHS took past ACO outcomes from the original MSSP program and Pioneer and Next Gen ACO models, both of which are two-sided risk, to craft this Pathways model. (The Pathways model has yet to be finalized by CMS, so it is unknown if there will be any significant adjustments to the proposal.) When pressed by providers as to whether some of the Pathways changes could cause ACOs to leave the program, Adam Boehler, the current head of CMMI who runs MSSP and other models, said, “Our job isn’t to have a lot of ACOs; our job is to improve performance.” And at a recent national ACO conference, Boehler stated that not every provider needs to be in an ACO, so part of his role at CMMI is to tell providers, “If you’re not cutting it, get out of the way.”

Keep in mind Boehler is talking about voluntary models and is urging a higher level of commitment from those providers who elect to participate. Boehler is reiterating what we already know: HHS’s ongoing goal is to transform how it pays for health care, and it believes paying for outcomes (two-sided risk) is a key a part of Medicare’s future.

CMS Administrator Seema Verma summed it up clearly when announcing the proposed new MSSP Pathways to Success ACO rule:

“After six years of experience, the time has come to put real ‘accountability’ in Accountable Care Organizations. Medicare cannot afford to support programs with weak incentives that do not deliver value. ACOs can be an important component of a system that increases the quality of care while decreasing costs; however, most Medicare ACOs do not currently face any financial consequences when costs go up, and this has to change.”

Other models pushing two-sided risk

HHS leadership is serious about driving transformation and shaping a more accountable Medicare program. These models are additional examples of how the agency is building upon previous experience to create new models that drive towards lower costs with higher quality and patient satisfaction.

BPCI-A model

HHS has taken lessons learned from its first BPCI models to create its newest iteration. Like the Pathways proposal, BPCI-A drives at high quality care at a lower cost. CMS Administrator Verma states, “BPCI Advanced builds upon earlier success of bundled payment models and is an important step in the move away from fee-for-service and towards paying for value ...” BPCI-A holds providers accountable for the cost of care during an episode, which can include any of the 29 inpatient and three outpatient episodes from which providers can choose. It qualifies as an Advanced Alternative Payment Model (A-APM) and came online October 1, 2018.

In announcing BPCI-A participants, CMS states 1,299 entities had signed agreements to participate, including 832 acute care hospitals and 715 physician group practices, for a total of 1,547 Medicare providers and suppliers across 49 states, plus Washington, DC, and Puerto Rico.

“Today we are proud to announce robust participation,” said Verma. “We look forward to launching additional models that will provide an off-ramp to the inefficient fee-for-service system and improve quality and reduce costs for our beneficiaries.”

Comprehensive End Stage Renal Disease Care model

There are other two-sided risk models driving transformation. For example, the Comprehensive End Stage Renal Disease (ESRD) Care Model (CEC) builds on previous ACO models to target better quality and cost specifically for those with ESRD. The CEC is an A-APM. The model began in 2015 and currently includes 37 ESRD Seamless Care Organizations (ESCOs), which are entities that have come together to participate in the CEC model. In the only report issued to date on the CEC model, the first year of CEC included 13 ESCOs comprised of 216 dialysis facilities in 12 states, which resulted in decreased spending, decreased utilization, and high quality of life metrics.

Comprehensive Primary Care Plus model

The Comprehensive Primary Care Plus (CPC+) model builds off the original CPC model. Again, this model takes lessons learned and moves towards higher levels of risk. The model is an A-APM and has 2,900 primary care practices participating in 18 regions across the country.

Mandatory models

Azar has indicated that there may be a need to pursue mandatory models in the future, due to their proven record for producing rapid results. For example, the Comprehensive Care for Joint Replacement (CJR) model is a bundled payment model initially mandatory in 67 Metropolitan Statistical Areas (MSAs). It was scaled back in 2017 and is now mandatory in 34 MSAs. In the only report issued on the CJR, total costs were decreased while quality was maintained. Perhaps the most telling statement in the report on the success of this model states:

“Possibly the most notable outcome during the first CJR model performance year was that statistically significant changes in utilization and payments occurred so quickly. With approximately nine months of implementation, the CJR model resulted in outcomes that are consistent with what has been achieved in other bundled payment initiatives.”

How we can help

HHS, CMS, and CMMI will continue to emphasize accountability in their Medicare models. Whether through an ACO, a bundle, CPC+, or other model type, health care organizations and providers can expect this focus to continue. Mandatory models may also be deployed as a way to propel Medicare’s transformation.

In the end, the ACO or BPCI-A models may not be for you. However, it will be important to evaluate other approaches that suit your organization better and align with the heightened focus on accountability. You can start by charting a course forward in the evolving payment landscape.