CMMI still has to work out most of the details for how they will calculate performance-based payment eligibility and amounts. So even if you were able to predict your practice’s future quality performance and billings with 100% accuracy, you still wouldn’t be able to determine if you qualify.
But the decision to participate in the OCM should not be based on your confidence in earning the performance-based payment. Rather, as I argued in a previous post, the real financial risk of participating in the OCM is that you will overspend when working to meet the practice requirements for participation.
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If your practice does participate in the OCM, you will obviously want to try to qualify for the performance-based payment. It’s not just a matter of maximizing revenues. Earning the bonus is a requirement for continuing to participate in the OCM beyond its third year.
That said, the threat of being dropped from the program is not sufficient reason not to apply. If you’re confident about your ability to meet the practice requirements without overspending, the worst-case scenario is that your practice will earn additional per-beneficiary-per-month payments (PBPMs) for three years and gain access to performance benchmarks.
Overview of the OCM’s Performance Based Payments
At a high level, the OCM’s performance-based payments are determined as follows:
1. Patient Attribution
CMMI attributes Medicare FFS beneficiaries to the participating practice.
2. Cost Benchmarking
CMMI compares attributed beneficiaries’ total Medicare billings to the practice’s “target price.” The target price is calculated by analyzing the practice’s Medicare beneficiaries’ historical billings and applying a discount of 4% (for the one-sided risk model) or 2.75% (for the two-sided risk model).
3. Quality Benchmarking
CMMI measures the practice’s performance on a pre-determined set of quality measures, and based on the practice’s performance relative to others, calculates a “performance multiplier.” This performance multiplier is used to calculate the performance-based payments, if any.
4. Calculation of Performance-Based Payment
If the practice reduces beneficiaries’ total Medicare billings below the target price, then it is eligible to receive a performance-based payment based on the savings generated relative to the target price, multiplied by the performance multiplier (determined in step 3).
Each of the steps outlined above encompasses multiple additional steps. Below I’ve provided more details about what we know—and what is still to be determined. You can find more details in the OCM RFA.
Remember that all participants will operate under the one-sided risk model during the first two years of the program. Participants will have the option to switch to two-sided risk starting in the third year.
Patient attribution: Methodology still unclear for beneficiaries who receive chemotherapy in HOPDs
The OCM is designed to attribute chemotherapy patients to the “physician practice that is actively managing each beneficiary’s cancer treatment.”
If the practice administers chemotherapy in its own infusion center, and bills the administration under its own tax identification number (TIN), then the attribution of Medicare beneficiaries is straightforward. The episode of care—and attribution—is initiated by the first claim for chemotherapy administration and extends for six months.
However, if the chemotherapy is administered in a hospital outpatient department (HOPD) and billed under a hospital’s TIN, then it’s unclear how CMMI will attribute the patient to the appropriate practice. Remember that performance-based payments are distributed to the physician practice, not the site of chemotherapy administration.
Practices are accountable for beneficiaries’ total Medicare billings, not just cancer care
Similar to the Medicare Shared Saving Program (MSSP), the OCM holds participants responsible for attributed patients’ total Medicare billings. Consequently OCM participants have an incentive to improve care management in order to reduce avoidable health care utilization, such as ED visits or hospitalizations resulting from complications.
Importantly, practices will also be held accountable for non-cancer related care that attributed patients receive during the performance period. Given that two-thirds of Medicare beneficiaries have two or more chronic conditions, those Medicare billings could be significant. In addition, practices will be responsible for the cost of less predictable health care needs, such as bone fractures and AMI.
Practices must compete against their own historical cost performance
Instead of comparing each practice’s cost performance against other practices nationally, the OCM compares each practice’s cost performance to the practice’s own historical cost performance. (Here “cost” refers to the cost to Medicare.)
CMMI will calculate individual practice’s benchmark expenditures by analyzing past Medicare billings, adjusting for regional variation, risk-adjusting the data, and extrapolating the expenditures into the future based on changes in Medicare billings for non-participating practices nationally. CMMI has not indicated how many years of data they will use in the calculation, i.e. billings from the past one year, three years, etc.
Consequently, practices that make the biggest reductions in Medicare billings while also improving quality stand to earn the largest bonuses. Conversely, practices that have already made significant investments in practice transformation may be at a disadvantage, if they have less room for improvement.
For practices providing chemotherapy in the HOPD setting, the benchmarking to the practice’s own historical performance (versus against other practices nationally) is preferable as it ensures that they won’t be penalized for the reimbursement differential across sites of care. That said, the OCM does create an economic incentive to shift patients to lower cost care settings, when appropriate.
Critics of the model worry that benchmarking against historic spending will discourage the use of newer, more expensive cancer therapies. The performance-based payment does, in fact, create a financial incentive to reduce total Medicare billings (and therefore for oncologists to select lower cost drugs), but it is offset by the fact that participating practices will continue to be reimbursed for drugs at ASP plus a fixed mark up (which encourages the selection of more expensive drugs).
In any case, the results of United Healthcare’s episode based payment pilot showed that oncologists’ choice of drugs is not dictated by economic principles.
Risk adjustment methodology TBD—will not account for staging in first year
CMMI has not yet determined the specific risk-adjustment factors that they will take into account when calculating practices’ cost benchmarks and target price, although the RFA includes a list of factors that are under consideration.
During the first year of the program, risk adjustment will be based solely on information available in administrative claims data. So it will not take into account factors such as patients’ stage at diagnosis, which can have a significant impact on costs of care.
Critics speculate that, without a rigorous approach to risk-adjustment, year-to-year changes in patient mix could make the difference between practices that qualify for a performance-based payment and those that don’t.
Collective benchmarking option potentially helps mitigate risk
CMMI will allow participating practices to elect to be benchmarked collectively with other practices. Presumably, by allowing practices to band together, and increase the total number of attributed Medicare beneficiaries used to calculate cost benchmarks, practices can lower their exposure to risk due to outlier cases or variation in patient mix over time.
Practices that opt into collective benchmarking, and that also qualify for a performance-based payment, will receive a lump-sum bonus for all of the practices included in the benchmarking. The practices will then have to determine how to distribute the payment amongst themselves.
Quality measures TBD—performance will be judged relative to others
Unlike the cost benchmarks, OCM participants’ performance on quality measures will be compared either to other participating practices or to other practices nationally. Similar to the Medicare Shared Saving Program (MSSP), practices will have to achieve a minimum quality threshold in order to be eligible for the performance-based payment.
CMMI has not yet finalized the quality measures that will be used to calculate performance multipliers, but they do provide a list of potential measures in the RFA. They may change the quality measures during the course of the program. Participating practices will be notified of any changes in advance.
Are you considering participation in the OCM? Would you like to talk with others who plan to apply? I’d love to hear from you. Please contact me directly.