New models are expected to include approaches focused on rural providers, which have struggled to gain traction in value-based payment.
May 11—Medicare accountable care organizations (ACOs) are likely to face an imminent overhaul, according to former leaders of the program.
Nancy-Ann DeParle, partner with Consonance Capital and formerly acting administrator of the predecessor agency to the Centers for Medicare & Medicaid Services (CMS) before serving as an Obama White House senior healthcare adviser, said CMS is likely to move away from upside-only ACOs.
“For ACOs to really achieve their full potential, groups need to go to risk,” DeParle said in an interview. “Six years is a long time” for upside-only models.
Leslie V. Norwalk, strategic counsel with Epstein Becker Green and formerly acting administrator of CMS for President George W. Bush, said ACOs have helped improved quality, “but the outlays are higher.”
“I suspect CMS will say, ‘If you’re going to take upside [risk], you’re going to downside,” Norwalk said in an interview.
New limitations on Medicare Shared Savings Program (MSSP) Track 1 ACOs, which are eligible for bonus payments but not penalties, would mark a major shift for that dominant class of payment models. Track 1 ACOs constitute 82 percent of all Medicare ACOs. Seema Verma, administrator of CMS, recently delivered critical remarks about Track 1 ACOs in an address to hospital leaders, and CMS is preparing to release a proposed rule that may include big changes for the program.
Among likely changes are rules that allow larger upside and downside risk, more data sharing, and changes to the quality metrics, Norwalk said.
The appointment in April of Adam Boehler, a former CEO of home healthcare service provider Landmark Health, as director of the Center for Medicare and Medicaid Innovation (CMMI), was important as a sign of the administration’s priorities, Norwalk said.
“You’re looking at a much more open approach to innovation and sharing risk,” Norwalk said.
CMS payment models have moved past the stage of broad experimentation, DeParle said.
“Now is the time to focus in on some that can really show some promise for Medicare and Medicaid beneficiaries,” DeParle said.
Marilyn Tavenner, president and CEO of American’s Health Insurance Plans and also a CMS administrator in the Obama administration, agreed that Medicare should narrow the focus of its value-based efforts to “three or four approaches.”
She also urged that more value-based models be implemented in Medicare Advantage (MA) and that more hospitals consider launching their own MA plans, since Congress and the Trump administration are expected to increasingly push Medicare beneficiaries into Part C.
“Congress has figured out that that’s the closest they’re going to get to per-capita payment” in Medicare, Tavenner said.
Norwalk said MA plans are much more likely to have success with value-based payments because enrollees in those plans tend to remain enrolled over the long term. In contrast, half of Medicare fee-for-service (FFS) beneficiaries change their primary care physician every two years, she said.
“How is it you can be successful as a hospital or a physician group when your patients are constantly leaving you?” Norwalk said in reference to ACO enrollees, who are all in the Medicare FFS system.
The Provider View
Melinda Reid Hatton, general counsel for the American Hospital Association (AHA), said in an interview that she also expects changes to Medicare ACOs, including possibly addressing the fact that many Medicare beneficiaries do not know they are part of an ACO. That disconnect may fuel the commonly reported problem of beneficiaries obtaining health care outside the ACO without the knowledge of participating providers, potentially undermining their efforts at care management.
Blair Childs, senior vice president of public affairs for Premier, which helps hospitals in value-based models, agreed that ACO changes are coming.
Premier joined other ACO advocates in asking CMS to allow Track 1 ACOs to continue for a third three-year contract period as long as they meet certain performance metrics. However, Childs said in an interview that CMS actually may reduce the maximum time that ACOs can operate in Track 1 to just one three-year term.
Another possible ACO rule change that causes concern for Childs is the creation of separate rules for hospital-led and physician-led ACOs, such as allowing the latter to remain in Track 1 longer.
CMS officials told Childs the rationale for such a change would be that “hospital-led ACOs are not as successful as physician-led ACOs.” But he questioned research that has found better performance by physician-led ACOs, among other reasons because about 20 percent of Premier-affiliated ACOs that have been identified under CMS rules as physician-led actually are headed by hospitals.
“The premise in which the assertion is based, if they go in this direction, is in question,” Childs said.
However, Reid Hatton said AHA also is pleased that the Trump administration appears to have “recommitted themselves to” value-based models and to CMMI, which spawned ACOs and other Medicare alternative payment models.
“We’d like to see the administration keep going in the same direction,” Reid Hatton said in an interview.
Medicare’s continued leadership in the transition to value-based models is especially important because commercial insurers are making little progress on value-based payment.
“It’s a lot of the legacy Blue Cross and Blue Shield plans that aren’t interested in changing their models and negotiating value-based [payment] with the private sector,” Reid Hatton said. “We’ve got members who’ve knocked their heads against the wall [seeking value-based payment contracts], but when [insurers] have got 50, 60, 70 percent of the market and you’re making money, why would you change?”
Tavenner agreed that the slower-than-expected movement to value-based payment “is particularly hard on hospitals and physicians.”
Gail Wilensky, PhD, senior fellow with Project HOPE and formerly administrator for the precursor agency to CMS, said the evidence shows that hospitals will change their care delivery under value-based models that offer only a couple percent in additional payments, but physician practices often require much greater incentives.
Wilensky said Verma needs to quickly push CMMI to test more alternative payment models.
Emphasis on Rural Models
Some observers say comments by administration leaders indicate that new payment models focused on rural providers also are increasingly likely.
“We know rural hospitals in particular are a lifeline for the nearly one in five Americans who live in rural areas, and we’re committed to maximizing the promise of technology and building new partnerships to improve care across our country,” Alex Azar II, secretary of Health and Human Services, said at this week’s AHA membership meeting. “This will require novel approaches to care delivery and coordination, and we must ensure we are not standing in the way of needed innovation.”
Childs said in his discussions with CMMI, rural areas “were at the top of the list” of payment models that those officials hoped to implement.
“There really are no alternative payment models for the rural community right now,” Childs said.
Premier and the National Rural Health Association have proposed a value-based purchasing program specifically for rural providers, with participating physicians qualifying for the 5 percent annual Medicare payment bonus under the new Medicare physician payment system.
Reid Hatton of AHA agreed that CMMI needs a rural focus but warned that such models would require careful design to make them sustainable.
“That’s an area where a lot of progress could be made, but it takes more innovation” because the smaller patient populations in rural areas limit providers’ ability to spread risk, Reid Hatton said. “One or two expensive patients could be catastrophic financially.”
Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare