CMS Wants to Sweeten ACO Pot

The Center for Medicare and Medicaid Services (CMS) wants to change the risk/reward equation for Accountable Care Organizations (ACOs) and is offering to sweeten the pot.

The agency is proposing to give ACOs an additional three years to get their act together before punishing them for not meeting financial goals.

There are now more than 330 ACO’s serving about 5 million patients through the Medicare Shared Savings Program. ACOs earn bonuses if they meet Medicare benchmarks. The benchmarks are based on an ACO’s previous year’s performance. They pay a penalty if they miss the benchmark. Most ACOs currently have a three-year grace period from the penalties. Medicare wants to extend that grace period for three more years to entice more providers to participate in the program.

According to Kaiser Health News (KHN), in the first year of the program, 180 ACOs saved Medicare $705 million. Half of those ACOs earned bonuses. Another 102 ACOs spent more than the Medicare benchmark, but didn’t have to repay Medicare because of the grace period.

The proposed change is one of dozens proposed by Medicare. KHN reported on December 1, 2014 that Sean Cavanaugh, Medicare’s director, said the change was one of many prompted by concerns raised by ACOs. “The notion that 36 months later you’re going to be at downside financial risk is pretty intimidating.”

If an ACO chooses to avoid the penalties after three years, they would be allowed to keep no more than 40% of the money saved by Medicare, rather than the 50% they can keep the first three years.

The agency is also proposing a “Track Three” model that allows ACOs to keep up to 75% of the money they save Medicare. But the risk for that extra reward is that if an ACO costs Medicare extra, then their pay-back responsibility rises from 10% to 15%.

Some providers have complained that it’s unfair for efficient ACO’s to be held accountable for their previous years’ performance when less efficient providers get rewarded for beating their own inefficient performances. So CMS is also soliciting views on alternative ways of deciding whether an ACO has saved Medicare money.

KHN reports that under one option, ACO spending would be compared to the average spent by other doctors and hospitals in the region that are not part of an ACO.

The public has until February 6, 2015 to comment on the proposed rule.