October 11, 2016

October 11, 2016 | Commentary on

By Spinning Early Results, CMS May Be Undermining Payment Reform

A recent press release by the Centers for Medicare and Medicaid Services (CMS) summarizes the 2015 Results for the Medicare Shared Savings Program (MSSP) and the Pioneer Accountable Care Organization Model by stating that “physicians, hospitals, and health care providers participating in Accountable Care Organizations continue to make significant improvements in the quality of care for Medicare beneficiaries, while achieving cost savings.” It goes on to say that in 2015, Medicare Accountable Care Organizations (ACOs) had combined total program savings of $466 million, which includes all Accountable Care Organizations’ experiences, for 392 Medicare Shared Savings Program participants and 12 Pioneer Accountable Care Organization Model participants. Sounds great.

Clearly, the MSSP and Pioneer ACOs have generated a considerable number of valuable ideas and initiatives toward meaningful health care payment reform. However, a more detailed analysis shows that maybe the results are not as good as the report would have you believe. A full accounting that includes not only the savings achieved by a small number of organizations, but also the money that Medicare paid in bonuses to ACOs and the cost of running the program, shows that the overall impact to the Medicare program in 2015 was actually a net loss of at least $216 million. Furthermore, net per capita savings, a more meaningful number than total savings, show a loss to taxpayers from every new cohort of ACOs enrolling since 2013.

A Closer Look

This spin on the ACO results is only the latest in a pattern of efforts to celebrate the successes of the Medicare Shared Savings Program and Pioneer ACOs, even when a closer look at the data show a different picture. A 2015 study by the Center for Medicare and Medicaid Innovation (CMMI) that looked at per-beneficiary-per-month (PBPM) spending for Pioneer ACOs in the first two years of the program, showed savings compared to traditional Medicare of $35.62 in 2012 (first year) and $11.18 in 2013 (second year). Although these data were reasonably offered as evidence of the ability of ACOs to save money, the substantial savings drop off in the second year underscores a rarely discussed potential conceptual flaw not only in ACOs, but in shared savings models in general. Although savings may be realized early on by reducing inefficiencies, this may not be sustainable over time. To their credit, the authors did include this possibility as one of several explanations for the results.

There is also the more troubling May 2016 report by the HHS Office of the Inspector General revealing that after the close of the Pioneer ACO Program’s Performance Year (PY) 1, CMS allowed five ACOs that would have had shared losses exceeding $6.8 million to retroactively transfer from a two-sided risk model to a one-sided model with no risk of shared losses. While CMS published information about the results of Pioneer Model PY1’s total shared savings and shared losses, it did not include the information about the five ACOs that had been permitted retroactively to select a one-sided payment arrangement. The $6.8 million in losses that they would have incurred were not included in the results.

What’s At Stake?

The importance of a full discussion of the early results of alternative payment models (APMs) cannot be overstated. In addition to the MSSP and Pioneer ACO programs, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), that will determine how physicians in Medicare will be paid in the future is pinning its hopes to a large extent on the success of ACOs, according to the proposed rule published in May of this year. With few exceptions, the only way for physicians to opt out of the burdensome Merit-Based Incentive Payment System (MIPS) will be to participate in one of the advanced ACO models.

It is understandable that the Administration would want to highlight the positive aspects of the MSSP and Pioneer ACOs. A considerable amount of effort and expense has gone into these programs. In addition, the Secretary of the Department of Health and Human Services has set an aggressive goal of tying 50 percent of Medicare payments to APMs like ACOs by 2018, and so far the administration seems determined to meet that deadline whether or not these models are achieving their stated goal. However, it appears that even the data have become politicized to a level that prevents an accurate discussion of what is going well and not so well in payment reform. This is counterproductive.

Nobody expected that reforming the health care payment and delivery system and transitioning away from the decades-old and well-entrenched fee-for-service payment infrastructure would be easy or quick or that there wouldn’t be winners and losers. Although there may be merit to the idea of building momentum toward that transition, putting a positive spin on the data in order to meet arbitrary deadlines will only inhibit the process. It is not only okay, but essential to acknowledge where good ideas and initiatives are going wrong; otherwise the deficiencies can never be corrected.

Time For A Candid Discussion

Although there is a wealth of innovative ideas and a number of initiatives; many showing early promise, there is currently very little discussion about the overall direction or long-term goal of payment reform. A full discussion should include possible outcomes and consequences for the current trajectory of payment reform and at least the possibility that the current APMs, even if successful, may have limited long-term viability and may need to evolve to something very different over time.

MACRA, the MSSP, and Pioneer ACO programs, along with other public and private sector initiatives, make it clear that payment reform is here to stay; and, given the troubled history of the Sustainable Growth Rate (SGR) system, it is too important to squander this opportunity to get it right. What we need now is a candid discussion that includes not only the good work that has already been done, but also the substantial challenges that still remain.

About the Author

John S. O'Shea, M.D. Senior Fellow
Center for Health Policy Studies

First appeared on Health Affairs Blog. Copyright ©2016 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.