MedPAC hash out new alternative payment model strategy

The Medicare Payment Advisory Commission believes that a new model with different risk tracks and administratively set savings benchmarks could be the way forward for population-based alternative payment models, although Commissioners noted at a Friday meeting that there are still many details to figure out.

MedPAC should recommend that Congress keep timeliness and simplicity in mind, said Commissioner Brian DeBusk, CEO of medical device maker DeRoyal Industries, during Friday’s meeting. As Medicare Advantage is growing each year, population-based alternative payment models such as responsible care organizations is left with a shrinking pool of beneficiaries, he added.

In October, MedPAC commissioners discussed developing a single, multi-track, population-based payment model to guide CMS’s alternative payment model strategy. CMS set a goal the same month to have all Medicare recipients in a value-based payment arrangement by 2030.

MedPAC came with one November discussion on developing administratively set benchmarks for ACOs, which can share Medicare’s savings if their beneficiaries’ expenditure falls below an assigned benchmark level. The benchmark is determined based on expenses for beneficiaries that would have been eligible for the ACO during the base years, together with the growth in an ACO’s expenses between the baseline and profit years.

Because ACO benchmarks are restored each performance period based on the ACO’s past performance, an ACO that improves the amount of savings it generates each year will have to deal with benchmarks that are increasingly difficult to exceed, risking long-term ACO participation.

On Friday, MedPAC staff gave commissioners a plan for a hypothetical new three-track alternative payment model. The model would divide suppliers into three separate categories. Independent doctors, small providers of safety nets or providers in rural areas may be on a trail that does not involve financial risk. Suppliers can keep up to 50% of the savings generated in relation to their benchmark after a minimum level of savings has been achieved.

Medium-sized organizations such as multi-specialty medical clinics or small municipal hospitals can keep up to 75% of the savings generated or pay back 75% of the losses. Large health systems would use a 100% shared savings or loss ratio.

Commissioner Dr. Jonathan Jaffery, who heads the University of Wisconsin Health ACO, questioned whether the size of an organization would determine its risk appetite. Large organizations may have trouble earning shared savings when the cost of the care they provide is low and smaller organizations are sometimes more flexible than larger ones, he said.

Also up for debate is how quickly suppliers should be pressured to accept financial risks. Small suppliers may be allowed to remain in the risk track indefinitely, or eventually be encouraged to move to another track.

Commissioner David Grabowski, a professor at Harvard Medical School, said downside risks should not be forced on suppliers, while Commissioner Dana Gelb Safran, chairwoman and CEO of the National Quality Forum, said that bilateral risk can make suppliers serious about generating savings.

Getting suppliers to participate in such models in the first place is another obstacle MedPAC wants to remove. Incentives for suppliers to participate in APM are already enrolled statute. By 2040, payment levels will be 8% higher for physicians in advanced APMs than those who choose not to participate, MedPAC staff said.

But to encourage even more participation, officials could simply make the model mandatory for some providers to receive Medicare funds. Other options include paying lower prices to physicians who are not enrolled in the model, waiving certain Medicare requirements for participants, and offering participants more technical assistance.

Setting future mandatory participation dates for at least medium-sized and larger organizations can help generate short-term participation, says Commissioner Dr. Lawrence Casalino, a professor at the Weill Cornell Graduate School of Medical Sciences.

“One of the things I heard a lot when the payment reform was my job was how important it was that there was a clear signal of where it was going,” Safran said in agreement. “That would really be a very clear signal.”

The hypothetical model would also administratively set ACO benchmarks using external factors to circumvent the ratcheting effect. Most commissioners applauded this idea.

“Eliminating the ratchet effect is absolutely crucial. The ACO program can not work as long as the ratchet is a problem,” Casalino said.

But Commissioner Lynn Barr, leader of Caravan Health, which guides providers through value-based care, expressed concern about changing the system in a way that would cause providers to generate less savings and ultimately have to pay back to the government.

MedPAC should assume that legislation will be needed to make the alternative payment model reforms that the Commission is looking at, according to Vice President Paul Ginsburg, senior fellow at USC-Brookings Schaeffer Initiative for Health Policy.

“We do not want to get stuck in the 2010 statutes, where there was much less experience of these payment methods,” he said.

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