Health Care

MedPAC looks for ways to give ACOs better savings

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Medicare payment advisors agreed in a Monday meeting that it’s worth exploring whether administratively setting a factor to forecast cost trends for accountable care organizations could make it easier for high-performing organizations to share in savings each year. But the panel questioned whether a viable benchmark system for ACOs is even possible in a voluntary program.

This could set the stage for future Medicare Payment Advisory Commission sessions on mandatory ACO participation, and shows that MedPAC commissioners are moving in the same direction as the Centers for Medicare and Medicaid Services, which said in an October white paper that it aims to have all Medicare beneficiaries in a value-based care arrangement by 2030.

ACOs are composed of doctors, hospitals and other providers who work to coordinate care for Medicare beneficiaries. Provider participation in an ACO is voluntary, and those who do participate can earn bonuses based on how much they’ve helped save the Medicare program and their quality performance.

ACOs can share in Medicare savings if their beneficiaries’ expenditures come in below an assigned benchmark level. The benchmark is determined based on spending for beneficiaries who would’ve been eligible for the ACO in the baseline years, along with the growth in an ACO’s spending between the baseline and performance years.

Because ACO benchmarks are reset each performance period based on the ACO’s past performance, an ACO that improves the amount of savings it generates each year will have to deal with benchmarks that are increasingly harder to exceed.

This effect is known as ratcheting, and it puts long-term participation in ACOs at risk by reducing incentives for ACOs to create savings, MedPAC staff warned during Monday’s session.

In order to directly tackle ratcheting, MedPAC staff suggested using an administratively set trend factor, which could be based on a number of metrics including a discounted projection of Medicare fee-for-service spending growth or projected gross domestic product growth.

This would get rid of the ratcheting effect, but it comes with its own challenges, including the fact that spending projections may not always be correct. ACOs, and especially smaller ones, could be positively or negatively impacted by one-time changes in spending, practice patterns and more, which could lead ACOs with undesirable benchmarks to leave the program.

Still, commissioners overwhelmingly agreed that MedPAC should look into how to get rid of the ratcheting effect and said they want to explore administratively setting the trend factor as a way to eliminate the phenomenon.

But many commissioners questioned whether it’s possible to create a better benchmark system if the ACO program remains voluntary.

Part of what makes the goals of rewarding providers’ efficiencies, generating Medicare program savings and not disincentivizing participation in ACOs difficult to balance is voluntary participation in the program, MedPAC Commissioner Dr. Jonathan Jaffery said.

Jaffery said in his perfect world, every Medicare beneficiary is encompassed in a value-based payment model, be it Medicare Advantage or an ACO.

Commissioners including Betty Rambor and Bruce Pyenson said there should be some urgency behind the move to making ACO participation the standard of Medicare payment.

“Like others, I don’t see the solution in a voluntary system. [I think] that some form of mandatory or quasi-mandatory system is essential,” Pyenson said.

MedPAC Vice Chair Paul Ginsburg said he envisions a set up where ACO participation would be mandatory for certain types of providers, with strong incentives in the form of higher fee-for-service rates for other providers to participate as well. This would help achieve more equitable and efficient benchmarks, he said.

Data analytics from MedPAC staff could help figure out whether it’s possible to design a benchmark rebasing and trend-based system in a voluntary program that isn’t swayed by the selection effects, Commissioner Dr. Amol Navathe said, though he speculated that designing this system would be challenging.

Some commissioners expressed hesitation with jumping to a mandatory ACO model. Commissioner Dr. Lawrence Casalino cautioned that the more mandatory a Medicare program becomes and the more financial pressure put on organizations participating in the program, the higher the risk that those organizations will pay less attention to quality.

“We’re talking only about controlling spending today. But I think there’s a lot more room and really a need for more attention to, in some way – better than we have now – of measuring and rewarding quality of care in organizations,” he said.

MedPAC Chair Michael Chernew indicated he doesn’t like the idea of mandatory ACOs and said it should be more about incentives to join the program. However, he acknowledged that while a voluntary program and a high level of selection among program participants make setting the benchmarks more complex.

“But we certainly aren’t going to be able to force all groups into strong two sided risk models,” Chernew maintained.

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