Health Policy Vitals

6 factors providers need to consider when choosing an ACO model

by Adam Lustig

Last month, CMS released the most recent results for organizations participating in the Medicare Shared Savings Program (MSSP) and the Pioneer ACO Model. While this information tells us a great deal about how MSSP is working today, the fact that only 25% of participants earned a bonus begs the question of where the program is headed. There’s little debate about the program’s importance in the transition to value, and CMS’s stance is clear: it’s expecting to pay out half its payments through alternative models by 2018, and recently expanded the MSSP program to give providers more options.

Prospective and current ACOs now have three distinct two-sided risk models to consider (Track 2 and 3 of MSSP and the Next Generation ACO Model), as well as an upside-only option (Track 1). So which will providers choose? And how will they choose? We’ve explained some of the key factors that may influence their choice.

Population size

In MSSP, ACOs must provide the plurality of primary care for a minimum of 5,000 Medicare beneficiaries. By contrast, CMMI’s Pioneer and Next Generation ACO models (both high-risk/high-reward options) require 15,000 and 10,000 beneficiaries respectively. The introduction of MSSP Track 3—modeled after the Pioneer program—opens up an option with greater risk/reward to ACOs that previously would have been too small to participate.

Beneficiary assignment

ACOs are assigned their beneficiaries retrospectively in Tracks 1 and 2, which means that they don’t know with certainty which beneficiaries they are accountable for until after the performance period.

Track 3 addresses this concern by assigning beneficiaries upfront (“prospectively”), similar to the Pioneer and Next Generation ACO models. In these models, ACOs know their patient responsibilities (and thus their clinical and financial responsibilities) from the outset. It’s an attractive option, given the financial risk inherent in all four models.

While beneficiary attribution is conducted primarily through claims data, the Next Generation ACO Model also allows ACOs to boost attributed numbers by beneficiary confirmation that the beneficiary’s PCP is a provider within the ACO. This is an attractive feature to many ACOs, as it increases the rewards to investing in patient engagement.

The balance of risk and reward

Each of the four models with downside risk offers ACOs the opportunity to share in a high percentage of reduced Medicare spending. In MSSP, Track 2 ACOs can earn up to 60% of any savings, while Track 3 ACOs see maximum shared savings rates of 75%. The introduction of MSSP Track 3 creates an opportunity for providers who did not participate in the Pioneer Model to participate in a model with a similar sharing rate, though the Pioneer program offered ACOs the option of taking on full risk.

The Next Generation ACO Model provides two options for shared savings rates, both higher than the rates in Track 3. Next Generation participants can choose to share in either 80% or 100% of savings earned. These rates are designed to attract more advanced ACOs that have experience with providing managed care for beneficiaries in Medicare Advantage or similar shared-savings agreements with private insurers.

Four lessons for distributing shared savings

In MSSP and Next Generation models, the total shared savings and losses are capped at a percentage of total expenditures. For MSSP Track 2 and Next Generation, the cap is 15% of total expenditures, while MSSP Track 3 participants are limited to 20% of benchmarked expenditures. Pioneer Model participants chose from a variety of participation options, some of which capped total savings/losses at up to 15% of the benchmark expenditure.

Confidence in savings potential

Another difference between the MSSP Tracks 2 and 3, Pioneer, and the Next Generation ACO models are the minimum savings and loss rates (MSR/MLR). These rates are the minimum amount that an ACO must save or lose in order to qualify for a portion of the savings or losses. Uniquely, MSSP Tracks 2 and 3 allow ACOs to choose one of three MSR/MLR options, enabling ACOs to adjust their participation to match their comfort and experience in risk-based contracting. This is in lieu of the Pioneer Model’s flat 1% MSR/MLR.

In contrast to MSSP and the Pioneer Model, the Next Generation ACO Model does not utilize a MSR/MLS. Instead, the model subtracts a discount percentage that incorporates quality (ranging from 2% to 3%), regional efficiency (ranging from -1% to 1%), and national efficiency (ranging from -0.5% to 0.5%) from the prospective expenditure benchmark. This discount score can range from 0.5% to 4.5% of the benchmark expenditures for the ACO.

The lack of a MSR/MLS, coupled with ACOs’ choice to share in 80% or 100% of savings, encourages participants to deliver high-quality care in a manner that is efficient compared to both regional and national benchmarks.

Example of 2% discount score for Next Generation ACOs

Prospective benchmark* $10,000
Discount 2%
Final benchmark $9,800

*Prospective benchmark includes baseline benchmark, trend, and risk adjustment calculations

Available investment assistance

Providers often highlight the significant investments required to effectively deliver population health. In response to stakeholder input, CMS instituted an ACO Investment Model (AIM) for physician-based and rural providers participating in MSSP. Under AIM, qualifying ACOs in the 2015 and 2016 MSSP cohorts will be able to choose from the following infrastructure payments: a $250,000 up-front payment, a $36 up-front payment for each beneficiary assigned to the ACO, or an $8 monthly payment for each assigned beneficiary. Both of the per-beneficiary per-month (PMPM) payment options are capped at 10,000 beneficiaries.

CMS is also offering a PMPM infrastructure payment for participants in the Next Generation ACO Model. CMS will recover these payments via ACOs’ earned shared savings. Providing support for necessary investments allows providers to invest in the workforce and resources necessary to succeed, and may enable some prospective ACOs to join the programs that otherwise could not.

Regulatory waivers

To further encourage coordination across the care continuum, CMS has granted some ACOs the ability to apply for waivers that will assist providers in managing patient care. Since these models include two-sided risk, providers should be incentivized to effectively use certain services that are currently regulated by CMS to discourage overutilization in the fee-for-service program. These waivers will be critical to ACOs’ success in managing patient care in the primary care, inpatient, post-acute, and home settings.

Even though Track 2 participants will be at risk for shared losses (like participants in the other models), CMS did not grant them the ability to apply for regulatory waivers. The MSSP Track 3, Next Generation ACO, and Pioneer models grant participants the ability to request that CMS waive the requirement for patients to have a three-day inpatient stay to qualify for skilled nursing. The Next Generation ACO Model also allows waivers to remove restrictions on the delivery of telehealth services and post-discharge home visits. Lifting these restrictions makes it easier for the ACO to provide seamless care throughout a care episode. Once CMS has experience with the waivers in the Next Generation ACO Model, the agency may expand these waivers to Track 3 participants in the future.

So what’s next?

These are just some of the factors that providers will need to consider when determining which, if any, CMS ACO model is best-suited for their organization. With numerous options now available, providers must decide how quickly, and at what level of risk, they want to jump into models that hold them accountable for total quality and cost of patient care. Some advanced providers may move even further along the spectrum of risk and launch their own health plan, and we expect to see more and more successful ACOs matriculating into Medicare Advantage in the future.

Keep an eye on the Health Policy Vitals blog as we continue to monitor the shift toward value-based payments and ACO participation.