MedPAC Alternative Payment Model Strategy Improves ACO Incentives

Medicare payment advisors said Friday they are focusing on a strategy to streamline alternative Medicare payment models, which includes removing the ratchet effect that makes it difficult for accountable healthcare organizations to generate total savings.

The Medicare Payments Advisory Panel has proposed reducing the number of risk tracks in population models. Providers currently have seven options to choose from: five in the Medicare Shared Savings program and two in the ACO REACH model.

Instead, the Centers for Medicare and Medicaid Services could only run a few referrals with simpler features. For example, models might have a 50 percent overall savings lane for small organizations, a 75 percent combined savings and loss for medium practices and hospitals, and a third 100 percent savings and loss lane for large healthcare systems.

The strategy builds on MedPAC’s previous recommendation to CMS to reduce the number of alternative payment models in Medicare and make the rest more consistent. Over the past few months, the group has been discussing the best way to do this. The Center for Medicare and Medicaid Innovation also said in October that model alignment is a priority for the agency.

MedPAC also suggested that the periodic “rebase” of the ACO’s spending benchmark be eliminated. ACOs can participate in Medicare savings if their beneficiaries’ spending falls below a set benchmark. As benchmarks are reset each performance period based on past ACO performance, an ACO that generates more each year will be dealing with benchmarks that are increasingly difficult to beat, jeopardizing long-term engagement.

The Commissioners propose to replace this system with benchmarks established using historical spending at the start of ACO participation in the model and then trending using an external growth factor unrelated to actual ACO spending. Growth Factor may be discounted for Medicare savings.

MedPAC’s strategy also encourages Medicare to implement a national bundled payment model for certain types of care episodes. CMMI already has comprehensive payment models for procedures, including hip and knee replacements.

All fee-for-service beneficiaries who receive a particular treatment will be assigned to the Medicare model, and those already in ACO will be assigned to both models during the episode period. ACOs may develop their own comprehensive payment plans for services not covered by the Medicare model.

MedPAC invites CMS to consider whether including an episode in the model will increase episode volume, discourage ACO participation, reduce health disparities, create savings beyond what an ACO can achieve, and more when deciding which type of treatment deserves bundle payments.

“We don’t really necessarily take a position on whether there should be many or few episodes… CMS advice is to think about how it all works together with episodes and with ACO,” MedPAC Chairman Michael Cernu. , professor of health policy at Harvard, said during meeting on Friday.

The Medicare Payments Advisory Panel will not be making any official recommendations on the strategy this year, but will include it in its June report.

The final strategy included in the June chapter could include stronger language on how health equity affects and more specific proposals to incentivize service providers, among other wording changes based on recommendations from commissioners on Friday.

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