CMS’s low expectations for ACOs, though not admitting it

Medicare's Vision for Delivery-System Reform — The Role of ACOs

By Hoangmai H. Pham, M.D., M.P.H., John Pilotte, M.H.S., Rahul Rajkumar, M.D., J.D., Elizabeth Richter, M.A., Sean Cavanaugh, M.P.H., and Patrick H. Conway, M.D. (all from the Centers for Medicare and Medicaid Services)
The New England Journal of Medicine, September 10, 2015

Earlier this year, the Department of Health and Human Services announced the goals of tying 30% of Medicare payments to alternative payment models by the end of 2016 and 50% by the end of 2018. That move was reinforced by the Medicare Access and CHIP Reauthorization Act of 2015, which replaced the sustainable growth rate formula for calculating physician payments with a Merit-based Incentive Payment System (MIPS) that consolidates and incorporates key components of the Physician Quality Reporting System, the Physician Value-Based Payment Modifier, and the Medicare Electronic Health Records Incentive program for eligible professionals. The MIPS will adjust payment rates on the basis of physicians' performance on quality measures, resource use, clinical practice improvement activities, and meaningful use of electronic health records. Eligible professionals participating in eligible alternative payment models could receive a 5% lump-sum incentive payment each year from 2019 through 2024. If they meet program criteria, accountable care organizations (ACOs) could thus be central to Medicare's strategy for delivery-system reform

Three principles guide CMS as we seek to further improve ACO policies and programs.

First is the importance of maintaining an ongoing test bed of ACO models through the Center for Medicare and Medicaid Innovation.

The second principle is that a concrete strategy for expanding successful models should be based on our testing experience.

The third principle is that ACO initiatives require multiple, distinct “tracks” to engage different types of beneficiaries and providers. Understanding the market's diversity led to the conclusion that experienced ACOs willing to take financial-performance risks could be allowed to handle more flexible payment structures such as capitation or specific payment waivers but that less-experienced ACOs may take longer than anticipated to establish core capabilities in coordinating care for a population. Those organizations need protection from financial-performance risk during the development phase and, sometimes, direct capital support such as through the ACO Investment Model.

It's also important to understand what factors do not drive the CMS approach to ACO policies. Our programs are not premised on the expectation that ACOs should evolve into Medicare Advantage health plans. Medicare beneficiaries are the ones who decide to enroll in Medicare Advantage or remain in traditional Medicare. Some now also proactively select an ACO as part of traditional Medicare. We believe that all beneficiaries deserve access to high-quality, coordinated care regardless of which program they choose and that provider organizations should decide which lines of business are most appropriate for them. Some may choose to serve patients as both an ACO and a health plan; others may choose one path or the other or take advantage of other alternative payment models such as bundled payments. We are therefore striving to maintain comparable business cases for ACO initiatives and Medicare Advantage, but some disparities in program requirements will persist because of statutory provisions and other factors inherent in the programs (for example, actuarial approaches must acknowledge that a health plan can choose the counties where it offers a Medicare Advantage product, but an ACO is constrained by the bricks and mortar of its available providers and facilities and cannot easily change location).

CMS policies are also not premised on the expectation that for an ACO program to be successful, all ACOs in it must succeed financially. Design elements certainly shape the potential for ACOs to earn shared savings, but ACOs also vary widely in their capabilities and decisions regarding staffing, infrastructure, and specific interventions. We judge the performance of initiatives on the basis of whether our policies appropriately reward good quality of care and savings to Medicare — results that might be achieved only by the most prepared subset of ACOs. We believe it's important that with experience, ACOs be able to settle into the payment arrangements that best match their readiness and appetite for risk.

Finally, although CMS has implemented policies to promote improvement in ACO performance, we don't believe that all ACOs can consistently improve on their spending performance over the long run or that it would be ideal for beneficiaries if spending continually declined. There are challenges, however, in setting national policies given large geographic disparities in practice patterns, Medicare spending, and beneficiary needs. We're therefore emphasizing rewarding improvement in spending performance in these early years of ACO initiatives and aim to exercise sound judgment regarding the appropriate pace and approach to setting spending benchmarks over the long term. Ideally, our strategy would gradually shift from rewarding only spending reductions to also rewarding absolute spending levels, as in the Next Generation ACO Model, while considering the level of ACO penetration in Medicare and the degree of spending improvement — and do so without imparting sudden shocks to health care markets or exacerbating inequities.

We look forward to finding more strategies to help ACOs succeed faster, spur participation in more communities, combine multiple payment approaches for providers, and strengthen the business case for ACOs. Providers should compare ACO earnings not with what they could earn in today's fee-for-service payment environment but with what they could expect to earn in the future if they didn't participate in such alternative payment models. Although the challenges are protean, so are the opportunities, and we look forward to continued partnership with patients and providers.



By Don McCanne, MD

We are moving full steam ahead with delivery reform through alternative payment models in which accountable care organizations (ACOs) are anticipated to play a major role. That is why it is important to read and understand the vision that our CMS bureaucrats have for the future of Medicare.

A quick read indicates that we are well on our way to pretending that we are paying for value rather than volume through ACOs. But a careful read of the full, unedited article suggests that CMS has really low expectations for ACOs, even though their rhetoric does not suggest that.

We are headed in the wrong direction. We need a single payer national health program if we expect to increase efficiency and value in our delivery of heath care.

The way our CMS bureaucrats are clogging up our Medicare program should make us consider using all caps for “improved,” as in “IMPROVED Medicare for All.” Or just simply call it "single payer" - that's a more precise label anyway.