CMS Issues Proposed Rule To Delay ACO Penalties by Three Years

On Monday, CMS released a proposed rule that would give Medicare Shared Savings Program participants an additional three years before imposing penalties, Kaiser Health News reports (Rau, Kaiser Health News, 12/1).

According to Modern Healthcare, the proposed changes aim to discourage participants from dropping out of MSSP (Evans, Modern Healthcare, 12/1). CMS Administrator Marilyn Tavenner in a release said the rule "is part of our continued commitment to rewarding value and care coordination -- rather than volume and care duplication" (Adams, CQ HealthBeat, 12/1).

Background

Under existing MSSP rules -- which were adopted in 2011 -- accountable care organizations face penalties after the first three years in the program unless they volunteer to take on downside financial risk earlier in exchange for larger potential bonuses for meeting the program's goals.

Since the program's inception, just five of more than 300 Medicare ACOs have chosen to risk the early penalties. Modern Healthcare reports that the majority's choice "may have been wise" given uneven financial performance so far in the program. According to CMS, just 25% of MSSP ACOs launched in 2012 and 2013 have generated sufficient savings to earn bonuses.

Lawmakers have argued that more comprehensive penalties and rewards are needed to speed up changes to the health care delivery system. However, hospital officials and providers have supported less risk so they can adequately build a foundation for accountable care at their hospitals.

CMS Proposes Delaying Penalties

According to Modern Healthcare, CMS' proposed rule represents a "victory" for the health care industry and an acknowledgement that some organizations need more time before the penalties take effect.

Specifically, the proposed rule would allow MSSP ACOs to avoid penalties after the third year, instead delaying their onset for another three years (Modern Healthcare, 12/1). However, ACOs that opt to forgo the penalties for another three years will only be eligible to recoup 40% of the money they save the government, down from the 50% they were able to recoup in their first three years (Kaiser Health News, 12/1).

CMS said the switch after three years "may be too steep" for ACOs that do not have the proper infrastructure or experience to meet quality and cost-saving targets. Moreover, the department acknowledged that organizations that have performed adequately but are "not yet ready" to take on the financial risk could leave the program if not given more time (Modern Healthcare, 12/1).

However, not all ACOs would be eligible to delay the penalties. Under the proposal, only ACOs that met quality benchmarks in one of the first two years and ACOs that did not exceed the negative minimum savings rate in the first two years will be eligible to remain in the one-sided risk model.

CMS Proposes Creating 'Third Track' for ACOs

In addition, the department proposed a third track for ACOs that would allow them to retain up to 75% of what they save but also be responsible for up to 75% of their losses (Pradhan, Politico Pro, 12/1).The potential penalties in this track would vary based on quality performance.  In this track, bonuses would be capped at 20% of the participant's benchmarks, while losses would be capped at 15%.

Organizations participating in this third track would be given a list of patients whose costs they must manage at the beginning of the year. Under the current MSSP rules, Medicare only identifies the individuals covered by an ACO at the end of the year based on how much care they received from network providers.

According to Modern Healthcare, the change reflects ACOs' desire to know the identities of their network's patients in order to better improve quality (Modern Healthcare, 12/1).

Reaction

Clif Gaus, CEO of the National Association of ACOs, said he is "pleased and disappointed" by the proposed rule. He praised the department's decision to give organizations more time before they face financial penalties but called the proposal to reduce programs' potential bonuses "counterproductive" (Modern Healthcare, 12/1).

Premier Healthcare Alliance's Blair Childs applauded the "vital changes" made by the agency but echoed Gaus' concerns about reduced bonuses, saying it would "impede participation and inadequately recognize the financial and transformational contributions made by participating providers."

However, Loren Adler, research director for the Committee for a Responsible Federal Budget, argued that the move represents a "tradeoff" between increasing participation in the program and incenting ACOs to accept more risk. "Given how much learning is going on right now among all the players, I think CMS doesn't want to push too many ACOs out of the program altogether," he said.

CMS is accepting comments on the rule until Feb. 6 (Politico Pro, 12/1).