Decision Time is Here as Medicare Finalizes Pathways to Success

by Josh Neal, Vice President, Strategic Partnerships and Philip Ikoku, Director, Strategic Partnerships

The New Year is shaping up to be one of new beginnings for many of the nation’s accountable care organizations (ACOs). In case you missed it, CMS issued a final rule on December 21, 2018, that, once enacted, will redefine the current Medicare Shared Savings Program (MSSP), Medicare’s most utilized payment reform initiative. The regulation, referred to as “Pathways to Success”, will introduce new participation options for ACOs as well as significantly accelerate the “glide path” by which ACOs transition to downside risk. Additionally, the Rule allows greater flexibility for ACOs in the areas of new beneficiary incentives, telehealth services, and choice of beneficiary assignment methodology, all as established in the Bipartisan Budget Act (BBA) of 2018.

The Rule, which represents the most substantive programmatic changes since MSSP’s inception in 2012, follows a series of tough public statements by CMS officials that highlight MSSP’s underlying problem – that the MSSP, as currently constructed, isn’t moving the accountable care needle swiftly enough. To date, few ACOs have been willing to commit to downside risk models under the existing MSSP structure. For example, in 2018, only 18% (101) of MSSP ACOs participated in a risk-based program option (Track 1+, Track 2, or Track 3), and, more generally, history has shown that most ACOs elect to maximize their full 6-year participation window under Track 1 (upside only). Thus, Pathways to Success demonstrates CMS’s commitment to ensuring that MSSP participants eventually shoulder meaningful performance risk.

A strong Medicare strategy is essential

With the terms of the final regulation in clear view and notice date quickly approaching, providers must evaluate their Medicare strategy and decide what approach, potentially including alternative vehicles such as Medicare Advantage (MA), offers the best path forward for long term success in the transition to value-based care. The impending MSSP changes create some much-needed flexibility for ACOs; however, for provider organizations that are interested in assuming greater levels of risk and looking for more sustainable savings opportunities, MA may well provide a more compelling value proposition.

Compared to the MSSP, a value-based MA model can enable greater value creation. Advantages include greater opportunity to manage medical costs to help better engage providers, a well-defined risk adjustment mechanism to appropriately impact premium based on patient complexity, and an established cost benchmarking and quality rating methodology that offers rebates to be used in driving membership through improved enrollee benefits. In addition, MA is often the fastest growing payer segment for providers due to increasing consumer preferences for the program and overall demographic trends. However, the sizeable surpluses created in MA, which can be multiple times larger than those in MSSP, are often captured by the traditional payer organizations despite much of the value creation being provider enabled. Providers must determine how to participate in their fair share of the value potential in MA, in addition to opportunities in FFS Medicare like MSSP.

What’s changing?

For ACOs, several of the more significant programmatic changes set forth in the Rule are summarized below:

  • Introduction of new participation tracks: Under the Rule, CMS will discontinue the existing participation options and ACOs will instead be eligible for participation in one of two new tracks, BASIC and ENHANCED, for an agreement period of not less than five years.
    • The BASIC track will enable eligible ACOs to begin under a one-sided model and incrementally phase-in higher levels of risk that, at the highest level, would qualify as an Advanced Alternative Payment Model (APM) under the Quality Payment Program. ACOs would be able to remain in a one-sided model (Levels A & B) for only two years before transitioning to downside risk (Levels C-E). In the upside only levels of the BASIC track, ACOs could receive 40% of shared savings based on meeting quality targets, after achieving a minimum savings rate. With downside risk in the higher levels, ACOs could share up to 50% of the shared savings. The transition to higher risk levels would be automatic, but ACOs could elect to move up to higher levels of risk more quickly.
    • The ENHANCED track is based on the program’s existing Track 3, which provides additional tools and flexibility for ACOs that take on higher levels of risk. ACOs could share up to 75% of savings and between 40-75% of losses, subject to quality performance and minimum savings/loss rates.
  • Benchmarking Methodology Changes: CMS will incorporate the use of regional Medicare FFS expenditures in the calculation of an ACO’s historical benchmark beginning with an ACO’s first agreement period rather than simply for renewal agreement periods. In addition, the Rule also calls for the use of blended regional and national growth rates based on Medicare FFS expenditures in setting cost benchmark trends and updates, with increasing weight placed on the national component of the blend as the ACO’s regional service area penetration increases. CMS has indicated that this change will help to mitigate the impact of excessive positive or negative regional adjustments and ensure that the program continues to remain attractive to ACOs as they advance through the various program levels.
  • Choice of Beneficiary Assignment: In conjunction with the BBA of 2018, ACOs participating in either the BASIC or ENHANCED tracks will be able to select prospective or preliminary prospective assignment with retrospective reconciliation of beneficiaries attributed to the ACO. This election will be available prior to the start of a performance year for either an initial or subsequent agreement period.
  • Expanded Use of Telehealth Services: The Rule finalizes regulations required as a result of the BBA of 2018 related to the use of telehealth services for ACOs participating in either the ENHANCED track or downside risk levels under the BASIC track. Effective January 1, 2020, physicians/practitioners in eligible ACOs will receive payments for telehealth services provided on behalf of prospectively assigned beneficiaries, regardless of whether prevailing geographic limitations are met.
  • Expanded Use of SNF 3-Day Waiver: ACOs in either the downside level of the BASIC track’s glide path or the ENHANCED track will be eligible to apply for a SNF 3-day rule waiver, regardless of the beneficiary assignment methodology that is selected. In addition, critical access hospitals and other small rural hospitals operating under a swing-bed agreement will be eligible to partner with eligible ACOs as SNF affiliates for purposes of the SNF 3-day rule waiver.
  • Beneficiary Incentives and Notification: ACOs that participate in certain two-sided risk models under Pathways will have the opportunity to apply to operate a beneficiary incentive program. If approved, ACOs may provide up to a $20 incentive payment (or in-kind vouchers for specific goods/services) to an assigned beneficiary for each qualifying primary care service the beneficiary receives from the ACO’s physicians/practitioners.

In addition, the Rule significantly enhances beneficiary notification requirements. Specifically, it requires an ACO to communicate the following: providers’/suppliers’ participation in the Shared Savings Program, (2) beneficiary opportunity to decline claims data sharing, (3) beneficiary’s ability to identify/change identification of the beneficiary’s primary care professional for purposes of voluntary alignment, and (4) availability of a beneficiary incentive program in the event the ACO operates such a program.

So, what’s next?

For many organizations, MSSP has created a foundation for risk acceptance by conditioning providers to develop competencies for value-based care. However, with the changes in the Pathways to Success rule, CMS has hastened the pace that participating providers must accept downside risk through the program while not significantly increasing potential financial rewards. CMS is committed to pushing providers down the path to risk, so organizations should evaluate how to participate in various programs to most effectively create an ROI during the transition to value.

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