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CMS overhauls Medicare ACO program by limiting upside risk to only two years

Administrator Seema Verma says it's time for ACOs to take on downside risk, in a proposal that would save Medicare $2.2 billion over 10 years.

Susan Morse, Managing Editor

The Centers for Medicare and Medicaid Services has proposed overhauling the Accountable Care Organization program by limiting the amount of time an ACO can remain in upside-only risk from six years to two years.

Under the current program, ACOs can remain in an upside risk arrangement for six years, getting 50 percent of the savings. This has created a perverse incentive not to take on downside risk, said CMS Administrator Seema Verma.

The majority of the 649 Medicare ACOs, 561, are in a Medicare Shared Savings Program. The majority of these – 460 of the 561, or 82 percent – are not taking on risk for increases in costs.

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"It's not lived up to the accountability part of name," Verma said during a call late Thursday.

MSSP has shown increases in net spending for CMS and taxpayers.

The projected financial impact of the proposal would be savings to Medicare of $2.2 billion over ten years.

Under Thursday's proposal, ACOs in the two years of an upside risk arrangement would get 25 percent, rather than 50 percent, of the savings.

An estimated 107 ACOs are expected to drop out of the program, according to CMS.

The new proposed Pathways to Success would give ACOs spending targets to reap the rewards of savings and share in the ramifications, Verma said.

CMS intends to ensure that ACO spending targets accurately reflect spending levels and growth rates in their local market.  Therefore, Pathways to Success proposes incorporating regional spending into ACO targets earlier, starting during an ACO's first agreement period.

In addition, the proposal would authorize termination of ACOs with multiple years of poor financial performance.

An estimated 10.5 million beneficiaries in fee-for-service Medicare, out of 38 million beneficiaries, are in a shared savings ACO.

CMS is also proposing ACOs that take risk give incentive payments to patients.

To bolster beneficiary engagement, CMS proposed allowing certain ACOs under performance-based risk to provide incentive payments to patients for taking steps to achieve good health.

Also, CMS proposed to require that beneficiaries receive a notification at their first primary care visit of a performance year informing them that they are in an ACO and explaining what that means for their care.  

As providers take on increasing accountability, CMS intends to reward them by increasing flexibility.  Pathways to Success includes proposed changes which would leverage new CMS authorities under the Bipartisan Budget Act of 2018, such as allowing physicians in ACOs that take on risk to receive payment for telehealth services provided to patients regardless of the patient's location – including at their place of residence.

ACOs are groups of healthcare providers that agree to take responsibility for the total cost and quality of care for their patients. In return, ACOs receive a portion of the savings they achieve, and CMS provides them with waivers to provide the regulatory relief needed to innovate.

CMS recognizes the timing issues associated with the implementation of any final policies and the need for organizations to make decisions about participation in an ACO track.

To that end, CMS proposed a 6-month extension for current ACOs whose agreements expire at the end of 2018, along with a special one-time July 1, 2019 start date that will have a spring 2019 application period for the new participation options.

CMS said the opportunity for bonus payments if spending is low without any risk of losses if spending goes up – along with the provision of waivers – may be encouraging market consolidation. 

As part of the Administration's broader MyHealthEData initiative, this proposed rule promotes interoperability and patient control of their medical data by proposing a new requirement around ACO adoption of the 2015 edition of Certified EHR Technology.  

And as part of the Administration's broader Meaningful Measures initiative to reduce burden, the proposal aims to streamline the measures that ACOs are required to report.

"Medicare cannot afford to support programs with weak incentives that do not deliver value," Verma said by statement. "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."

Twitter: @SusanJMorse
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