CMS finalizes ACO overhaul, shortening pathway for financial risk

Hospitals cost
CMS finalized a shorter risk glide path for ACOs, but maintained a 50% shared savings rate for most participants. (Getty/ronstik)

The Centers for Medicare & Medicaid Services (CMS) finalized substantial changes to the Medicare Shared Savings Program (MSSP), an overhaul that will truncate the time that Accountable Care Organizations can remain in one-sided risk models.

CMS said the highly-anticipated 957-page final rule (PDF) issued Friday morning "dramatically redesigns" the program to ensure more ACOs in the program take on real risk. When the proposed rule was issued over the summer, CMS Administrator Seema Verma emphasized the need to shift ACOs to take on more financial risk, adding that the agency wants to "start working with ACOs that are serious about delivering value."

Under the overhauled program, called "Pathways to Success," new "low-revenue" or physician-led ACOs will have three years to remain in a one-sided risk model, reduced from six. All other new ACOs will have two years, and existing one-sided ACOs will have on year to take on additional financial risk.

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RELATED: NAACOS: Proposed rule changes to ACO program are 'deal breakers'

Additionally, CMS reduced the shared savings rate to 40% for ACOs not assuming risk for healthcare costs, but kept the 50% share for ACOs at all levels of financial risk. 

“Pathways to Success is a bold step towards quality healthcare at a lower cost through competition and beneficiary engagement,” Verma said in a statement. “The rule strikes a balance between encouraging participation in the ACO program and advancing the transition to value, ultimately protecting taxpayers and patients. Medicare can no longer afford to support programs with weak incentives that do not deliver value. As we structure new payment arrangements, the impact on the overall market will be top of mind.”  

In a blog post published Friday, Verma said the rule focuses providing opportunities for small, physician-led ACOs in rural areas that have shown greater success at reducing costs than their hospital-led counterparts. The rule also opens up new flexibilities to allow ACOs to use telehealth to treat patients in their own home. 

"We have heard that establishing a physician-led ACO can provide practices with a means of remaining independent from consolidated hospital systems," Verma wrote. "Today’s rule bolsters the option for physicians to form ACOs while ensuring that all ACOs are generating savings for patients and taxpayers."

CMS projects the changes will save Medicare $2.9 billion over the next 10 years. New data released by the agency on Friday also shows 44 Next-Generation ACOs, which take on the highest financial risk, saved Medicare $164 million in 2017. 

“While we are still digging into the details of the final rule, we are happy that the uncertainty facing Medicare Accountable Care Organizations (ACOs) has been resolved, and we can now move ahead confidently," Farzad Mostashari, M.D, co-founder and CEO of Aledade said in a statement. "As the new ACO program year begins, we look forward to helping independent physicians across the country successfully deliver high-quality, value-based care to their patients.”

RELATED: AMA, AHIP join NAACOS in effort to limit changes to ACO program

The National Association of ACOs (NAACOS) ardently opposed shortening the glide path, arguing that ACOs need time to adjust to a two-sided risk model. The organization was joined by several others, including the American Medical Association (AMA) and America's Health Insurance Plans (AHIP) opposing CMS' proposal to reduce the shared savings rate from 50% to 25%. 

NAACOS has also highlighted discrepancies in CMS calculations around ACO costs savings. The agency relies on benchmarks to calculate savings, but independent analyses have shown ACOs saved Medicare $2.7 billion between 2013 and 2016, including $859 million in 2016, significantly more than the $1.7 billion calculated by CMS.

In a statement, NAACOS CEO Clif Gaus said the organization is "very pleased" to see CMS keep the 50% shared savings rate for most ACOs, and drop the rate to 40% for others, rather than the initially proposed 25% rate. But he said the group remains concerned about the two-year limit.

“We will continue to advocate on certain provisions that CMS opted not to change in the final rule, such as the retention of a two-year period in the no-risk model for many ACOs and the distinction between high and low revenue ACOs," Gaus said in a statement. "These polices may present challenges to providers who want to participate in this important, yet voluntary, Medicare program. NAACOS believes there needs to be movement toward greater risk, and that movement requires an appropriate and reasonable glide path to encourage participation and success.”

The Healthcare Transformation Task Force (HTTF), which opposed the shared savings cuts, was pleased to see the rate for basic track participants bumped up to 40%. 

"The Task Force sees the higher shared savings rate as critical to creating a feasible business case for new entrants to transition away from fee-for-service; it also serves as a better incentive for providers to invest in the delivery reforms needed to succeed in ACOs," said Clare Pierce-Wrobel, senior director of HTTF. "And it’s a win-win for CMS: the final rule now predicts greater ACO participation leading to greater long-term savings because of these changes."

Others were similarly supportive of the change, and glad to see the rule come down before the end of the year. 

"CMS has made an important change from the proposed rule in the shared savings rate,"  added Tim Gronniger, former deputy chief of staff at CMS and current president at Caravan Health. "A sharing rate of 40% in the earliest years and 50% for the rest of the BASIC track under two-sided risk will help ease physicians into risk-bearing models with Medicare. We expect that this final rule will allow health systems to move forward in delivering on the promise of Medicare’s ACO program – namely, improving quality while managing total costs.”

In a statement, American Hospital Association executive vice president said the rule "will not be helpful in the move toward value-based care" and said the shortened length of time in upside-only models would be detrimental.

"As a whole, the policies in the rule will likely result in a significant decrease in program participation. That would be unfortunate, as we seek to transform care to better serve our patients and communities," he said. 

As part of the rule, CMS is offering an application cycle for new ACO agreements to begin on July 1, 2019. According to the agency, 90% of ACOs with agreements expiring at the end of the year have signed six-month extensions so they have the option to renew their agreement under the new policies.  

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