Understand how we got here — and how to move forward.

Blog Post

Are physicians the future of risk-based payment? CMS thinks so.

May 22, 2019

    In 2017, Medicare spending totaled $702 billion, or 15% of total federal spending, a number that is expected only to increase as more baby boomers age into Medicare. Unsatisfied with provider performance in existing risk-based models, CMS is rolling out changes for 2020 that promote downside risk and prioritize partners who prove they can generate savings—and one of the most reliable partners may be physician groups.

    Just updated: How the Medicare ACO models stack up

    Physician-led ACOs outperform hospital-led counterparts

    Physician groups have emerged as a more reliable partner for CMS when it comes to reducing Medicare spending. Last year, CMS released the results of the 2016 performance year for the Medicare Shared Savings Program (MSSP). Overall, most ACOs failed to cut costs enough to generate savings for CMS. On closer examination, however, one cohort was significantly better at generating savings than the others: physician-led ACOs. In 2016, a full two-thirds of physician-led ACOs were able to keep spending at or below their benchmark. In contrast, over half of hospital-based ACOs exceeded their spending targets.

    2016 MSSP results, by entity type

    1. Federally qualified health center
    2. Post-acute care

    These results suggest that size and scale are not the best predictor of ACO success. Instead, physician independence may be more important. This trend makes sense, as independent physicians don't have the same conflicting incentives about reducing expensive acute and post-acute utilization as hospital- employed physicians.   

    This realization led to a change in CMS' approach to risk-based payment reform. CMS is now actively designing models to appeal to physician groups, not just health systems. To show its commitment to physician partners, CMS' rulemaking in 2019 has tried to address some of the evergreen barriers that deter physicians from taking on downside risk.

    Changes to risk-based payment models

    Recent changes to MSSP (MSSP) and the release of five new primary care payment models aim to make it easier for physician groups to take on risk. In fact, during a speech in April, Seema Verma said that one of the primary ambitions of the recent payment model changes was to support the development of physician-led models and create a pathway for physicians to remain independent while taking on risk.

    However, while CMS is beginning to recognize the important role physician groups play in cutting costs for Medicare, physician groups continue to face a number of barriers to taking on downside risk including:

    • Accessing capital to fund care management investments;
    • Achieving sufficient scale to build strong partnerships with high-cost sites and providers; and
    • Convincing physician shareholders to build out the capabilities necessary to take on risk before the market fully transitions to risk.

    It remains to be seen how many physician groups will enter into one of CMS' new arrangements. That said, early reforms may signal more of what is to come: greater flexibility for physician groups to take on risk, better financial benchmarks and options for payment reconciliation, and increased data sharing.


    Subscribe to Practice Notes

    To get more of our top insights, make sure you're subscribed to the "Practice Notes" blog.

    Subscribe to Practice Notes

    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.