Accountable Care Organizations

New rule aims to sustain Medicare ACOs in wake of COVID-19

May 26, 2020 6:20 pm
  • Medicare ACOs will not have COVID-19 costs counted against them when payment cuts and bonuses are calculated.
  • The new rule does not allow a 2021 enrollment period for new ACOs.
  • The adjustments may be enough to change the minds of ACO leaders who had considered dropping out after anticipating costly inpatient care needs related to the pandemic.

After nearly three-fifths of Medicare accountable care organizations (ACOs) indicated they would drop out without more help pertaining to COVID-19, CMS offered some financial shelter.

An interim final rule on April 30 modified requirements during the public health emergency for participants in the Medicare Shared Savings Program (MSSP), in which 517 organizations treat more than 11 million beneficiaries. Among the changes:

  • Removing spending associated with COVID-19 patients from ACO performance calculations
  • Allowing ACOs with agreements that expire Dec. 31, 2020, to extend their agreement period by one year
  • Giving ACOs in the MSSP’s BASIC track  the option to maintain their current level of participation for 2021
  • Adjusting program calculations to mitigate the impact of COVID-19 on ACOs
  • Expanding the definition of primary care services — used to determine beneficiary assignment — to include telehealth codes

The changes especially may affect the 160 ACOs that have agreements ending Dec. 31.

An April survey by the National Association of ACOs (NAACOS) found 56% were at least somewhat likely to leave the program if CMS did not take additional steps to insulate them from the adverse financial effects of the pandemic.

“Today’s rule will help ease the concerns of many ACOs, who earlier this month said they might leave the program in droves because of the catastrophic effects of the COVID-19 pandemic,” Clif Gaus, ScD, president and CEO of NAACOS, said in a written statement.

Some disappointment in the rule

Although Gaus described the new rule as an ACO “win”, some industry advocates were disappointed that it lacked an application period in 2021 for new ACOs.

“As this public health emergency has variable impacts across the country, some entities are ready and willing to enter the program,” said Blair Childs, senior vice president of public affairs for Premier. They should have that opportunity.”

Additionally, amid the continued uncertainty over the length of the public health emergency, NAACOS urged CMS to remove COVID-related costs from calculations for the entire performance year.

NAACOS also seeks other changes, including:

  • Adjusting standard quality assessments to account for the impact of COVID-19
  • Extending the end-of-May MSSP dropout deadline to much later in the year
  • Implementing similar adjustments to the Next Generation ACO Model and extending it for at least another year

Other changes urged by Premier included:

  • Providing a one-time incentive to two-sided-risk ACO entities and MACRA bonuses to all clinicians in those ACOs
  • Accounting for regional variability in testing and changes in coding and documentation guidance that may result in undercounting COVID-19 expenses

COVID-19 financial costs

The pandemic could cost Medicare between $38.5 billion and $115.4 billion in 2020, and COVID-related spending on Medicare ACO beneficiaries could range from $7.7 billion to $23.1 billion, according to a March NAACOS analysis. The average cost of a 90-day pneumonia episode including hospitalization and post-discharge care was used as a proxy for new Medicare spending.

The financial risk from COVID-19 participants was concerning particularly because the ACO program holds providers accountable for healthcare spending on patients. And the Trump administration has led a concerted effort to increase ACOs’ financial risk for spending that rises above preset targets. Medicare Advantage plans could face similar challenges.

In the April survey, ACOs echoed the expectation of increased financial challenges caused by the pandemic:

  • 25% expected spending on beneficiaries to increase by more than 10%
  • 23% expected spending to increase 5% to 10%
  • 5% expected spending to increase 1% to 5%
  • 10% expected spending to remain the same or fall
  • 37% selected “don’t know”



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