Premier’s Blair Childs on the Need for CMS to Adjust Its ACO Payment Methodology

Oct. 31, 2019
Blair Childs, the senior vice president of public affairs at Premier Inc., shares insights on the challenge facing CMS of potentially reworking its benchmarking methodology in order to improve fairness in ACO reimbursement

Leading healthcare associations are calling on the federal Centers for Medicare & Medicaid Services (CMS) to rework core benchmark elements in the agency’s methodology for paying accountable care organizations (ACOs) participating in its Medicare Shared Savings Program (MSSP).

In that regard, on October 22, the Charlotte-based Premier Inc. released a statement supporting the Rural ACO Improvement Act, Senate bill 2648, whose Section 2 addresses the issue.

In that statement, Blair Childs, Premier’s senior vice president of public affairs, said, “The Premier healthcare alliance congratulates Senators Cortez Masto (D-NV) and Pat Roberts (R-KS) for the introduction of legislation rewarding providers, particularly in rural areas, for their contributions to improving quality and reducing costs in the Medicare Shared Savings Program (MSSP). Medicare’s current benchmarking methodology undermines accountable care organizations (ACOs), particularly in rural areas, despite their success in reaping significant savings for Medicare. The Rural ACO Improvement Act (S. 2648) corrects this flaw and helps prevent a ‘race to the bottom’ by removing ACO beneficiaries from the benchmark calculation. This flaw discourages providers from investing time, technology, and resources into these care innovation efforts, which achieved nearly $740 million in savings in 2018 alone. We urge Congress to act this year to pass S. 2648.”

Section 2 of Senate Bill 2648 reads thus:

“Exclusion of Medicare fee-for-service beneficiaries assigned to an ACO from aspects of other payment models in certain circumstances including determination of regional adjustments

Section 1899(i)(3) of the Social Security Act (42 U.S.C. 1395jjj(i)(3)) is amended—

(1)in subparagraph (A), by striking subparagraph (B) and inserting subparagraphs (B) and (C); and

(2)by adding at the end the following new subparagraph:

(C)Exclusion of assigned beneficiaries in certain circumstances including determination of regional adjustments

For performance periods beginning on or after July 1, 2019, in determining any shared savings for any ACO under a model described in this paragraph, the Secretary shall—

(i)remove Medicare fee-for-service beneficiaries who are assigned to that ACO from the methodology for calculating regional expenditures used to establish, update, and adjust the benchmark expenditures; and

(ii)otherwise ensure that no such ACO is in a less favorable financial position due to differences between the share of Medicare fee-for-service beneficiaries assigned to the ACO of all such beneficiaries in the counties an ACO operates in compared to the share of such beneficiaries assigned to other ACOs.”

Premier’s statement amplified the support of S. 2648 by NAACOS, the National Association of Accountable Care Organizations. In a press release on its website, NAACOS offered this support:

“The National Association of Accountable Care Organizations (NAACOS) today declared its strong support for S. 2648, the Rural ACO Improvement Act, by joining 14 other leading healthcare organizations in urging Congress to pass the newly introduced legislation. The bill corrects a Medicare policy that unfairly penalizes ACOs when they reduce costs. The Rural ACO Improvement Act changes how ACO benchmarks, or CMS-set spending targets, are calculated and more accurately compares an ACO’s spending to its surrounding area. Specifically, it removes an ACO’s assigned patients when calculating the costs of patients in the ACO’s region, which partially determines that ACO’s benchmark. The bill is sponsored by Sens. Catherine Cortez Masto (D-Nev.) and Pat Roberts (R-Kan.). In 2017, CMS began incorporating spending from other providers in the ACO’s region when calculating an ACO’s benchmark. This regional adjustment rewards ACOs with costs lower than others in their surrounding area. But for ACOs who make up the bulk of their region those lower-cost ACO patients are included in the regional comparison, creating an unfair adjustment. Today’s bill will require CMS to remove an ACO’s assigned patients from the regional comparison group. The change is dubbed the ‘rural glitch’ because it largely affects rural ACOs, although most ACOs would benefit.”

In that press release, NAACOS included a statement by Clif Gaus, Sc.D., the association’s president and CEO. “When ACOs lower their spending, Medicare spending for the entire region also falls. The Rural ACO Improvement Act corrects an unintended flaw in CMS’s work that unfairly penalizes rural providers and ACOs who make up the bulk of their market,” Gaus said. “Our health system needs to find ways to incentivize the adoption of alternative payment models like ACOs, and this bill would certainly help realize that goal.”

The NAACOS press release went on to note that “NAACOS was joined on the bill by Aledade, American Association of Family Physicians, American College of Physician, American Hospital Association, American Medical Association, American Medical Group Association, America's Essential Hospitals, America’s Physician Groups, Association of American Medical Colleges, Federation of American Hospitals, the Health Care Transformation Task Force, the Medical Group Management Association, National Rural Health Association and Premier. “No ACO should be placed in a less favorable financial position due to their geography alone, and design flaws that discourage ACOs from operating in rural areas should be eliminated,” the letter states.” And it added this statement by CEO Gaus: “CMS’s current policy undermines efforts to further alternative payment models in rural America. We thank Senators Cortez Masto and Roberts for their leadership on this issue.”

Participation in the Health Care Payment Learning & Action Network

Premier’s support for S. 2648 is further connected to its support for, and participation in, the Health Care Payment Learning & Action Network that CMS has been sponsoring. In an October 24 statement, Susan DeVore, Premier’s CEO, who is participating in the LAN as a member, stated that:

“Premier and its more than 4,000 health system members and 175,000 other providers and organizations are ardent supporters of the movement toward value-based payment models as a core strategy for enhancing population health and bending the cost curve. With the right payment incentives in place, we know we can accomplish the new goals for the future of payment reform released by the Health Care Payment Learning & Action Network (LAN) today. This includes reducing waste, regulatory burdens and ineffective care. Moreover, the right incentives will reward a focus on wellness and addressing the social influencers of health. Premier believes that to reach the goals of the LAN, all providers of care need to be incented to participate, from primary through to post-acute care. However, this can only happen if all the providers along the value chain are given equitable treatment across the various payment models to create a level playing field.”

Further, DeVore said in that Oct. 24 statement, “Premier also strongly supports the LAN’s goals to increase transparency, interoperability and timely access to data. A recent Premier survey revealed that lack of healthcare provider access to timely electronic medical record and claims data is a major impediment in the movement to value and risk-based contracts. Access to data and the analytics to understand total cost of care and specific performance is a cornerstone for success in value-based payment models. We look forward to the release of the Office of the National Coordinator’s interoperability rule. We are hopeful that the rule will further support the development of a vibrant marketplace for apps that can easily and affordably integrate with EHR platforms, as well as enable app developers to read data and then embed it into the clinician workflow. We are confident that these steps will help accelerate the movement toward new partnerships and collaboration in healthcare delivery, higher-quality care and the improved health of our nation.”

Earlier this week, Premier’s Childs spoke with Healthcare Innovation Editor-in-Chief Mark Hagland about all of this work. Below are excerpts from that interview.

Tell me about Premier’s participation in the LAN?

Yes, that is a public/private entity that was created to support the movement to value, and to advance it more rapidly. Under this administration, they’ve restructured it, and created this forum that’s an advisory group for the Payment and Action Network, and also an advisory group to CMS.

So Susan is serving on that, and I also attend the meetings. I attended the first meeting back in August, and it was all about, really, what is it that needs to be done to speed the movement to value? And what we discussed is all the recommendations in the report they put out.

One is around the movement to two-sided risk. Again, I think everybody felt like that was an important direction to go in, overall, though there was concern that the incentives needed to be adjusted further, given that the models are voluntary. So we had a lot of discussion at the meeting about the benchmark and risk, and trying to make the benchmark, the way it’s set, the way risk adjustment is done, make all that as close to how it’s done in Medicare Advantage as possible.

Did CMS agree with those recommendations?

These were the recommendations that we were giving them. The challenge that CMS has is that the most powerful voice in CMS is the Actuary, plus the OMB [Office of Management and Budget] budgeteers—the people who would argue that you’ve got to cut costs more and do different things to reduce the spend. Sometimes those voices, the actuary and the OMB budget people, win out in a discussion.

I wrote recently about the benchmark issue. Healthcare researchers, writing recently in the Health Affairs Blog, found it to be a significant issue.

Yes, that’s something we’ve been observing for years. The reality is, if you live in the Miami area, the per capita payment for Medicare is close to $20,000 per Medicare beneficiary, whereas in upstate New York, it’s closer to $8,000. So obviously, it’s much easier for an ACO to succeed in a high-cost area than in a low-cost area. So how you set the benchmark is critical. They need to make sure that they include regional costs in the benchmark, that’s one point—so that you’re bringing in other FFS payments, so it will presumably raise payments to low-cost areas. And you need to exclude ACO beneficiaries; you want to take the Medicare beneficiaries out of the pool around which you calculate your benchmark. Your incentive is to get your costs down. The ACOs are reducing the per capita payment. The point is, take the beneficiaries in an ACO out of the benchmark for the region, thereby making the benchmark higher, so you’re not competing against yourself. And that’s what Senate Bill 2648 does, actually.

What will happen in the next several months, around all of this?

CMS is going to be coming out with these new models, and I expect this new direct contracting model to come out very soon—and we’ll see what they do around risk adjustment and the benchmarks. And the proof will be in the pudding.

Sponsored Recommendations

A Cyber Shield for Healthcare: Exploring HHS's $1.3 Billion Security Initiative

Unlock the Future of Healthcare Cybersecurity with Erik Decker, Co-Chair of the HHS 405(d) workgroup! Don't miss this opportunity to gain invaluable knowledge from a seasoned ...

Enhancing Remote Radiology: How Zero Trust Access Revolutionizes Healthcare Connectivity

This content details how a cloud-enabled zero trust architecture ensures high performance, compliance, and scalability, overcoming the limitations of traditional VPN solutions...

Spotlight on Artificial Intelligence

Unlock the potential of AI in our latest series. Discover how AI is revolutionizing clinical decision support, improving workflow efficiency, and transforming medical documentation...

Beyond the VPN: Zero Trust Access for a Healthcare Hybrid Work Environment

This whitepaper explores how a cloud-enabled zero trust architecture ensures secure, least privileged access to applications, meeting regulatory requirements and enhancing user...