Health Policy Researchers’ Analysis: CMS Needs to Rethink ACO Incentives Under MSSP
How can federal healthcare officials effectively stimulate forward the Medicare Shared Savings Program (MSSP) for accountable care organizations (ACOs)? A team of healthcare policy researchers believes that senior officials at the Centers for Medicare and Medicaid Services (CMS) will need to rethink the financial incentives for ACO leaders—and will need to face up to a number of hurdles.
In an article published in the June 6 issue of The New England Journal of Medicine entitled “Getting More Savings from ACOs—Can the Pace Be Pushed?” J. Michael McWilliams, M.D., Ph.D., Bruce E. Landon, M.D., Vinay K. Rathi, M.D., and Michael E. Chernew, Ph.D., write that “Strengthening incentives for ACOs to reduce spending is challenging because the program is voluntary. Some approaches — such as requiring ACOs to bear downside risk for excess spending — may make the program unattractive to some providers, potentially lowering program wide savings by reducing participation. Participation by providers with high spending that isn’t explained by patient risk factors is particularly critical to MSSP success, because the care their patients receive (including care from other providers) presents the greatest opportunities for savings. So far, ACOs with high risk-adjusted spending have lowered spending more than ACOs that began with low spending.”
What’s more, the authors write, “Pushing the pace is additionally challenging because CMS must specify rules in advance for setting realistic spending targets (benchmarks) for hundreds of organizations, whereas commercial insurers can individualize and revise spending targets through negotiation. Even if CMS sets a benchmark-growth pace that’s achievable on average, many organizations will fail to meet it and may be discouraged from participating further because, ultimately, ACOs must earn shared-savings bonuses to recoup their costs. Lagging ACOs that face downside risk for spending above benchmark levels are more likely to exit the program. These considerations would argue for permitting slow growth in savings.”
Clearly, the authors argue, the current framework of incentives isn’t working very well. As they write, “Although the MSSP has grown with new entrants, dropout rates have been substantial, suggesting that the alternative may be insufficiently unattractive and CMS’s pace already too fast. Besides pegging annual benchmark updates to national Medicare spending growth, CMS has “rebased” benchmarks every 3 years to ACOs’ most recent spending levels, requiring ACOs to achieve progressively slower spending growth to increase their bonuses. By 2018, more than 44 percent of the ACOs that entered the MSSP in 2012–2014 had exited. Of these dropouts, only 15.2% had received shared-savings bonuses more than once (vs. 46.3 percent of continuing participants).
What’s more, as the authors note, “The departures have been costly to Medicare. For example, we compared estimates of savings achieved in 20151 by ACOs that dropped out by 2018 with savings among continuing participants. Although the first group’s spending reductions were 20 percent smaller, they were substantial, were not offset by shared-savings bonuses, and consequently accounted for much of the MSSP’s net savings in 2015.3 This result stems from the fact that ACO benchmarks do not represent spending that would be expected absent MSSP participation. In fact, benchmarks needn’t reflect expected spending in order to establish incentives for saving.”
In order to turn the Pathways to Success program into a success, the researchers urge that three things happen. They recommend that ACOs assume downside risk much sooner; that the Pathways for Success Program must adjust benchmarks for regional spending, and give increasing weight to it over time; and CMS will need to terminate contracts with ACOs that have demonstrated multiple years of poor financial performance.
