Health Affairs Blog: Health Policy Researchers See Far More Complexity in MSSP Than Meets the Eye

A team of health policy researchers is arguing that, in order to optimize the Medicare Shared Savings Program (MSSP), policy leaders need to think in more complex, nuanced ways about the framework and goals of the program for accountable care organizations (ACOs).

Writing in the Health Affairs Blog, Michael McWilliams, M.D., Ph.D., and Alice Chen, Ph.D. published an analytical article on November 13 entitled “Understanding The Latest ACO ‘Savings’: Curb Your Enthusiasm And Sharpen Your Pencils—Part 2.” In that article, the researchers state that, “To achieve the MSSP’s long-term goals as the centerpiece of payment reform in the traditional Medicare program, significant design changes are needed. Below, we discuss those we believe will be most decisive in achieving success. We assume that the program will remain voluntary but note that the distinction between voluntary and mandatory is not as dichotomous as the debate over alternative payment models might suggest,” they note. “Short of a mandate, participation in the MSSP becomes de facto mandatory when the fee-for-service alternative becomes sufficiently less attractive. Accordingly, our recommendations consider effects on participation among the factors CMS must weigh as it walks the regulatory tightrope strung by the MSSP; we also assume that striking the right balance in tradeoffs between savings and participation incentives should get easier with each step, as fee-for-service becomes increasingly less appealing.”

Michael McWilliams, M.D., Ph.D., is the Warren Alpert Foundation Professor of Health Care Policy and a professor of medicine at Harvard Medical School. He is also a general internist at Brigham and Women’s Hospital. Dr. McWilliams’s research spans questions related to health care spending, quality, and access, with an overarching goal of informing policies that support efficiency and equity in health care. Alice Chen, Ph.D., is an associate professor of public policy at the USC Sol Price School of Public Policy. Her academic research focuses on improving the efficiency of health care markets. She examines how providers respond to changes in financial incentives and considers how health spending jointly affects health and labor indicators.

McWilliams and Chen insist that four steps need to be taken to optimize the MSSP program: “Eliminate rebasing based on historical spending”; “increase shared-savings rates”; “limit downside-risk requirements for now”; and “establish a long-term vision and plan.”

With regarding to eliminating rebasing, they write that, “To create meaningful incentives for accountable care organizations (ACOs) to save, the link between an ACO’s benchmark and its prior savings must be severed. One concern about such a policy when initial benchmarks are based on ACOs’ historical spending is that it could permit successive windfalls for ACOs with initially high spending by perpetuating wide differences in benchmarks, thereby advantaging providers with initially wasteful practices over their more efficient competitors. This concern, however, can be addressed without undermining incentives to save and participate.” They believe that “Benchmarks based on historical spending can be slowly blended with regional or national spending averages, or benchmark growth can be set administratively at a slower rate for initially high-spending ACOs than low-spending ACOs (for example, gross domestic product growth -1 percent versus +1 percent), thereby gradually converging benchmarks toward a common target.”

With regard to increasing shared-savings rates, the authors write that, “Although lower shared-savings rates allow Medicare to capture more of the amount saved, total savings are likely larger when the shared-savings rate is higher. Even if the shared-savings rate is 100 percent, Medicare benefits indirectly through spillovers, including savings from more efficient treatment of non-ACO patients and reductions in Medicare Advantage (MA) payment rates (which are based on fee-for-service spending). Also, if benchmark updates are based on regional or national fee-for-service spending growth, benchmark growth slows as ACOs achieve savings, thus producing eventual returns to Medicare as the actual (real) savings become larger than the benchmark-based savings given back to ACOs. We advocate for higher shared-savings rates in general and particularly high savings rates for ACOs with initially lower spending to account for the higher costs of reducing wasteful spending when there is less waste.”

Meanwhile, they strongly urge policymakers to limit downside-risk requirements for now, writing that, “Although the independent effects of downside risk on participation and selective exit are unclear, at this juncture we believe that limiting downside risk, and perhaps eliminating it for certain types of ACOs, would be prudent. With higher shared-savings rates and a plan for benchmarking without historical rebasing, downside risk can be gradually and progressively introduced without costly consequences for participation, particularly as fee growth is slowed. Downside risk may be important to elicit savings from large health-system ACOs, as they have particularly weak incentives in one-sided contracts due to fewer opportunities to lower wasteful spending without providing less care or less expensive care (and thus reducing fee-for-service profits).”

And, they insist, federal healthcare policy leaders need to develop a long-term vision and plan for the program, writing that “Conceiving an initial phase for the MSSP is relatively straightforward: base benchmarks on historical spending, update them at a preset or concurrent regional or national growth rate, do not rebase them based on performance, and allow ACOs to keep a substantial share of savings. We advocate for such an initial phase to last at least five years,” they write. “This encourages participation by providers with relatively high spending and gives them strong incentives to lower spending, thereby fostering convergence in spending that in turn facilitates eventual implementation of a steady-state model that permanently replaces the traditional fee-for-service payment system for all providers. The design of a steady-state model, however, has not been specified. One vision for the MSSP is that there is no steady-state model. Rather, the initial model (which is inherently an improvement model) could be made permanently available. As this model is most attractive to providers with high spending, this approach would focus only on tamping down fee-for-service spending when and where it gets high—a type of whack-a-mole model. Another, more ambitious, vision for the MSSP is a direct contracting version of MA, with benchmarks that are risk-adjusted functions of a regional or national payment rate. This is the vision that most stakeholders have in mind for the MSSP.”