Value Based Payment

Medicare Chief Targets Upside-Only ACOs

May 7, 2018 4:49 pm

Other coming policy changes that could concern providers include Part B drug payment cuts, EHR portability penalties, and transparency requirements to participate in Medicare.

May 7—Medicare accountable care organizations (ACOs) that don’t accept downside risk are not producing results, says Seema Verma, administrator of the Centers for Medicare & Medicaid Services (CMS).

Verma’s new criticism of Track 1 ACOs, which constitute 82 percent of Medicare ACOs, came as her agency prepares to release a proposed rule that is expected to include big changes for the program.

“In addition to developing new models that align with our principles, we’ve been reviewing models launched under the prior administration,” Verma said about ACOs during a May 7 address at the American Hospital Association’s annual meeting.

She praised ACOs that have “taken on significant downside risk” and noted they achieved “significant savings to the Medicare program while advancing quality.”

Verma then criticized the majority of ACOs that remain in the upside-only track while they receive waivers of federal rules and requirements.

She also took the side of critics who have concluded such ACOs are increasing Medicare spending and may be encouraging provider consolidation. ACO advocates have countered that the entities have bent the cost curve relative to benchmark projections for spending by $1.6 billion, and they continue to improve their savings as they spend more time in the program.   

“While we understand that systems need time to adjust, [the nation’s healthcare] system cannot afford to continue with models that are not producing results,” Verma said.

Verma’s comments drew concerns from the leading ACO group.

Allison Brennan, vice president of policy for the National Association of ACOs (NAACOS) said in emailed comments: “[W]e are disappointed in the tone of the conversation around one-sided ACOs in the Medicare Shared Savings Program (MSSP). While certain policy makers emphasize the role of two-sided ACOs, it’s important to note that the vast majority started out as one-sided ACOs and only after their initial learning curve and successful development in Track 1 were they ready to move to risk-based models.”

Verma’s comments came one week after the Office of Management and Budget (OMB) reported the start of its review of a proposed rule that includes changes to Medicare ACO regulations, which involve “facilitating transition to performance-based risk and other program flexibilities, additional waivers for patients and doctors, and policies for ensuring program integrity and sustainability.” The OMB review is the last stage in rule creation before the regulations are publicly released.

Existing MSSP ACO rules require another 82 upside-only ACOs to take on downside financial risk in 2019.

However, 71 percent of ACO respondents in a survey released last week said they are likely to leave the program if required to assume risk.

“These results paint a bleak future of what will happen if the government keeps its mandate to push ACOs into risk,” Clif Gaus, president and CEO of NAACOS, said in a release. “It’s naïve to think ACOs that aren’t ready will be forced into risk in what is ultimately a voluntary program. The more likely outcome will be that many ACOs quit the program, divest their care coordination resources and return to payment models that emphasize volume over value.”

It is unclear what changes CMS will include in the coming proposed rule.

But Farzad Mostashari, a former Obama administration official and physician practice adviser, said in a recent tweet, “I strongly suspect that they will propose a shortening of the period of one-sided risk to reduce what they see as freeloading/ACO squatting.”

He noted that in the last group of upside-only ACOs to reach the end of their no-risk contracts, only eight out of 65 moved into models with downside risk.

The NAACOS survey found that 76 percent of ACOs would continue in Track 1 for a third agreement period if CMS were to create that option.

In a February letter, NAACOS urges CMS to extend upside-only models into a third three-year agreement period if they meet certain criteria related to lowering costs or improving quality. The organization also urges benchmarking changes, more realistic levels of risk, and greater predictability of rules.

ACO advocates also note that growing shares of Medicare ACOs are taking on risk. The Track 1+ ACO model launched this year had 55 ACOs, which is more than those in any other two-sided ACOs—MSSP Track 2, MSSP Track 3, or the Next Generation Model.

Other Value-Based Changes

Verma’s criticism of ACOs comes as the Trump administration prepares to release details about new value-based payment models, which she noted include new drug payment models, primary care models, models focused on those with serious medical conditions, and innovation in Medicare Advantage. Verma said the models also will encourage provider competition for patients based on price and quality and “move the government out of the business of setting prices.”

Another planned value-based payment change that Verma noted is an overhaul of rules implementing the Stark anti-referral law.

“Our agency is conducting a holistic review of our implementation of this law and the consequences,” Verma said. “We intend to leave in place the law’s important protections for our beneficiaries—and for the trust fund—while not penalizing providers who are taking brave steps away from fee-for-service.”

A related CMS initiative also aims to “remove [quality] measures that are no longer relevant,” Verma said. As part of that effort, the recently issued inpatient prospective payment system (IPPS) proposed rule proposes removing 18 measures and ending duplication of another 21 measures for acute care hospitals.

Potentially Concerning

Other changes may raise concerns among providers.

Among these changes, CMS proposes payment consequences for hospitals that don’t give patients access to their health records, and is seeking comments on creating a requirement that all providers share health records with patients as a condition of participating in Medicare. CMS also proposes requiring hospitals to post their charges online, even as some hospitals have warned that is not the price information that patients want or need.

“We know that that won’t fully address patient needs, but we are just getting started and have asked the public for ideas about what additional information patients need to make informed decisions about their care,” Verma said.

Verma also hinted changes may be coming in Medicare Part B’s drug payments, which total the average sales price plus 6 percent.

“This payment structure creates a perverse incentive for manufacturers to set higher prices, and for providers to pick drugs that are more expensive,” Verma said. “While this system may have made sense when it was designed, in today’s world, with some therapies costing over a half a million dollars, adding 6 percent to the sales price doesn’t make sense.”

Verma also backed site-neutral payments for administered drugs.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare


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