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ACOs should worry about their overall Medicare strategy, not just Pathways to Success shared savings

Prior to the Pathways to Success final rule, some people worried that proposed changes would begin to steer providers away from the Medicare Shared Savings Program. Instead, we believe the final rule—which the US Centers for Medicare and Medicaid announced December 21—actually strengthens the program by accelerating the transition to risk and promoting the shift to Medicare Advantage (MA).

Upside only is no longer an option

The final rule for Pathways to Success includes a clear objective of pushing more ACOs toward risk. Medicare Shared Savings Program (MSSP) three-year agreement periods in Tracks 1, 2, and 3 (in addition to the time-limited offering of Medicare Track 1+) are being replaced by Pathways to Success five-year agreement periods in BASIC and ENHANCED tracks. The BASIC track is essentially a gradual year-by-year ramp-up to the old MSSP Track 1+. The ENHANCED track is similar to the current Track 3. Additionally, ACOs can no longer participate in upside-only arrangements for an entire agreement period.

The vast majority of ACOs, which represented more than 80 percent of beneficiaries as of 20181, are in Track 1 ACOs (upside only). ACOs that transition to Pathways to Success during their next agreement period will gradually be forced to take on risk. In the coming months, ACOs that are two or three years into their current agreement period should start evaluating their go-forward strategy. As a result, some ACOs that have not committed to building the necessary capabilities to succeed in risk arrangements might decide to exit the program.

How will ACOs decide which pathway to take?

Scenario modeling of potential shared savings and shared losses is commonly a basic first step to understanding risk exposure. However, it is not the only consideration, and on its own it may not be a solid basis for determining whether to participate. For example, it can be difficult for ACOs to achieve savings if they are already operating efficiently. So why participate? Let’s recognize that if the program succeeds, all ACOs/markets should be operating efficiently in the long run. Realizing shared savings from the program is nice while you can get it, and it can certainly boost participation in less efficient markets. But savings might not be sustainable over the long term, and ultimately savings should not be the end goal for ACOs.

Pathways to Success is a feeder for Medicare

In our view, the reason for ACOs to invest in Pathways to Success (as part of a broader value-based care strategy) is to help them prepare to participate in MA. MA is a high-priority growth area for many health plans, and we expect they will to continue to engage ACOs in MA partnerships in all markets. We expect markets that have not yet seen much MA activity soon will. ACOs will not want to lose attributed members either to competing ACOs or to MA plans. Anticipating this competition, ACOs in some markets might consider Pathways to Success as a strategic defensive play.

ACOs might also use Pathways to Success to eventually become MA plans themselves. The program could be used as a stepping stone in that direction, helping ACOs gain capabilities. In Pathways to Success, ACOs can have both the incentive and opportunity to build capabilities with less potential downside risk than being at full risk in MA. This can allow ACOs necessary time to identify and prioritize capabilities to build up, develop a build/buy/partner strategy, and ramp up.

Look beyond shared savings and losses

Some ACOs, including efficient ones, face increased likelihood of shared losses. This is a common concern among ACOs—especially because benchmark trend rates, mostly outside the ACOs’ control, are so difficult to estimate. Instead of focusing solely on shared savings or losses, ACOs should measure in-network spending, including any impact of steerage or “keepage,” and should plan to fund shared loss payments out of any related increase in in-network spending. For this purpose, organizational alignment regarding what is being measured, and how success is defined, is key. Many ACOs can reasonably define success as building capabilities, funding shared losses out of increased in-network spending, and executing on a roadmap toward MA.

Another opportunity to partially offset shared losses is through the MACRA Quality Payment Program (QPP). This could come from increases in payments under the Merit-based Incentive Payment System (MIPS) payment adjustment, or from the Advanced Alternative Payment Model (APMs) incentive payment. Keep in mind, the qualifying payment (QP) thresholds for the APM incentive payment get increasingly harder to hit over time, especially beginning in 2021. ACOs should consider the likelihood of hitting these thresholds when revising their ACO clinician-participant lists, especially primary care providers versus specialists. For ACOs that do not hit the QP thresholds, hitting the partial qualification thresholds could still be worthwhile as a way to be excluded from MIPS. Earning this MIPS reporting exemption might partially offset the risk of shared losses.

The Pathways to Success program will provide ACOs in many markets with a choice to accelerate the transition to downside risk, and ultimately MA, or to cede that ground to competitors. In making that choice, ACOs should consider their risk exposure in terms of organizational readiness to execute on a roadmap to MA. Without a clear Medicare strategy, ACOs and providers may risk being left behind.

And a huge thank you to my colleagues Brian Rush and Rick Lassow for their thinking in this area and support in developing this series.

1 https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/SSP-2018-Fast-Facts.pdf

Author bio

Mr. Mark J. Bethke has been a health care consultant for Deloitte Consulting LLP since June 1999. He is a Fellow of the Society of Actuaries (FSA) and a Member of the American Academy of Actuaries (MAAA). Mark is the health actuarial and financial modeling leader for Deloitte’s Value-Based Care and MACRA market offerings. Mark helps his hospital, physician, and health plan clients bridge their financial business needs through strategic collaboration in value-based accountable care models. Mark’s core competencies include value-based aligned incentive models and health information analytics by developing data models to help assess risk and model potential business scenarios. He works on issues such as provider contracting, risk/gain sharing, product development, financial analysis and management, data structure design, and health status-based risk adjustment. He has extensive experience in healthcare data analysis and modeling, benefits pricing, and healthcare provider payment systems.