• Carrots and Sticks

    Well, color me impressed.  It’s not as bad as I feared.

    As we’ve written before, my biggest complaint about ACOs was that it might be all carrot and no stick. Looks like the rule-makers heard me.  From page 231-233:

    We considered several options for structuring the Shared Savings Program. One option we considered was to offer a pure one-sided shared savings approach using the calculation and payment methodology under 1899(d) of the Act. This option would have the potential to attract a large number of participants to the program and introduce value-based purchasing broadly to providers and suppliers, many of whom may never have participated in a value-based purchasing initiative. Another reason we considered this option was that a one-sided model with no downside risk might be more accessible and attract smaller group participation. However, as some commenters suggest, while such a model may provide incentive for participants to improve quality, it may not be enough of an incentive for participants to improve the efficiency of health care delivery and cost. Therefore, we considered whether we should instead focus on our authority under section 1899(i) of the Act to create a risk-based option in the Shared Savings Program. Such a model would have the advantage of providing an opportunity for more experienced ACOs that are ready to share in losses to enter a sharing arrangement that provides greater reward for greater responsibility.

    Another option would be to offer a hybrid approach. A hybrid approach would combine many of the elements of the one-sided model under section 1899(d) of the Act with a risk-based approach under section 1899(i) of the Act. The hybrid approach would have the advantage of providing an entry point for organizations with less experience with risk models, such as some physician-driven organizations or smaller ACOs, to gain experience with population management before transitioning to a risk-based model while also providing an opportunity for more experienced ACOs that are ready to share in losses to enter a sharing arrangement that provides greater reward for greater responsibility.

    Based on the input of commenters on the November 17, 2010 RFI, other stakeholders and policy experts we are proposing to implement a hybrid approach. Specifically, we are proposing that ACOs participating in the Shared Savings Program will have an option between two tracks:

    Track 1: Under Track 1, shared savings would be reconciled annually for the first 2 years of the 3-year agreement using a one-sided shared savings approach, with ACOs not being responsible for any portion of the losses above the expenditure target. However, for the third year of the 3-year agreement, we will use our authority under section 1899(i) of the Act to establish an alternative two-sided payment model. Under this model, an ACO would be required to agree to share any losses that may be generated as well as savings. The portion of shared losses that the ACO would be at risk for in the third year of the agreement is further described in section II.G. of this proposed rule. ACOs that enter the Shared Savings Program under Track 1 would be automatically transitioned to the two-sided model in the third year of their agreement period. In that year, the ACO’s payments would be reconciled as if it was in the first year of the two-sided model. However quality scoring would still be based on the methods for the third year (that is, it would not revert back to the first year standard of full and accurate reporting). Thereafter, those ACOs that wish to continue participating in the Shared Savings Program would only have the option of participating in Track 2, that is, under the two-sided model.CMS-1345-P 233

    Track 2: More experienced ACOs that are ready to share in losses with greater opportunity for reward may elect to immediately enter the two-sided model (as discussed in section II.G. of this proposed rule). An ACO participating in Track 2 would be under the two-sided model for all three years of its agreement period. Under this model, the ACO would be eligible for higher sharing rates than would be available under the one-sided model.

    I’m going to wade through section II.G. next in order to understand better the two-sided model, but at least they are recognizing the issue.


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    • Fron KHN, asterisks mine:

      ACOs with more appetite for risk could opt for potential bonuses of up to **60 percent** of savings. But they would have to agree to repay Medicare for cost overruns. At most, a badly performing ACO would have to repay the government 10 percent of what Medicare would have spent on those patients if they weren’t in the ACO.

      ACOs that are less experienced or more risk adverse could choose an alternative path to avoid any financial risk for the first two years. They would be eligible for smaller bonuses, up to **50 percent** of savings they achieved for Medicare. Even these ACOs would still face potential penalties in the third year of up to 7.5 percent of what CMS estimated their patients should have cost.


      50 vs 60% for major risk bearing leap. Struck me as odd,. but I am sure there is a thought out rationale. However, if I was the risk, two-way bearing entity, my thinking would be, “I/we” have taken the time to develop our model, even if the newbies need a nudge for 2 years, we still want a greater differential in bonus payment….because its appropriate.”

      Also, I have not had time to scour the proposed rules fully, and if there was one thing I wanted to know (would appreciate collective wisdom), it was this:

      Payment structures for generalists and specialists…or not. I dont ask the question specifically because my focus is money, but rather because the nature of this item and how its constructed will give us an idea of locus of control, and whether HHS/CMS if finally walking it like they are talking it.

      Bottom line: prescriptive or descriptive insofar as provider reimbursement–and presumably impacts in track 2 model as track 1 seems more like FFS biz as usual, that eventually evolves away from convention.