We recently used machine learning techniques to understand key drivers of Medicare Shared Savings Program (MSSP) financial performance. Of the 190 plus objective accountable care organization (ACO) features reviewed, ACO baseline efficiency proved to be the most important financial performance driver we identified. Another way of putting it is that MSSP rewarded inefficient ACOs more than ACOs that have attained efficiency.
You may be asking, “How did you measure baseline efficiency?” The chart below tells an interesting story.
We analyzed ACO baseline efficiency by reviewing ACO baseline expenditures that were unadjusted, risk-adjusted, and geographic-risk-adjusted. Risk-adjusted per capita expenditures were adjusted to account for each ACO’s average risk score and mix of entitlement categories. Geographic risk-adjusted per capita expenditures were adjusted to account for Medicare reimbursement levels in each ACO’s area.
Below are a few interesting notes:
1. Despite adjusting for risk levels, mix of entitlement categories, and reimbursement levels, there is still significant variation in baseline per capita expenditures. See the third column above for this wide range of variation.
2. Centers for Medicare and Medicaid Services (CMS) has already made MSSP rule changes that balance the rewards between ACOs at different levels of starting efficiencies. Past financial performance in MSSP agreement period 1 may not be a strong indicator of performance in agreement period 2. ACOs should understand how these rule changes affect them.
Beyond baseline efficiency, we found that several other features were strongly associated with gross savings:
1. National fee-for-service (FFS) trends higher than local market trends
2. Location in the Southeast and south central regions
3. Low performance year expenditures for short-term inpatient admissions
4. High baseline per capita expenditures, unadjusted
5. High CMS-hierarchical condition category (HCC) risk scores
However, we also found that these features still explained less than half of the variation in gross savings across ACOs. This may indicate that ACO care management efforts may be accounting for some of the remaining variation.
The full report is posted at Milliman Insight and includes a deeper dive into research conducted by Jill Herbold, Cory Gusland, and myself.
Healthcare providers and health plans continue to integrate vertically through consolidation and virtually through accountable care organization (ACO) risk-sharing arrangements. In this article, Milliman’s Dave Liner discusses how providers and health plans can improve their financial performance by considering strategies that optimize regulatory capital.
The Medicare Access and CHIP Reauthorization Act (MACRA) makes significant changes to the Medicare payment system by introducing a quality-based payment model. While MACRA primarily affects Part B clinicians, there are numerous implications that Medicare Advantage (MA) plans should consider. A strategic approach can help MA plans understand and respond to the legislation.
In the article “MACRA and Medicare Advantage plans: Synergies and potential opportunities,” Milliman actuaries explore the answers to the following questions:
• How will MACRA affect MA plans’ provider payments?
• What synergies exist between MACRA’s quality scoring and the MA Stars quality program?
• How can MA plans help providers achieve Qualifying Participant (QP) status?
• What incentives exist under MACRA for providers to improve risk score coding?
• How are MA plans in the market responding to MACRA?
Read Milliman’s “MACRA: The series” to learn how the legislation will affect providers, alternative payment models, and health plans
The skilled nursing facility (SNF) industry is an important area for Medicare accountable care organizations (ACOs), Medicare Advantage health plans, and other Medicare programs. How can these organizations appropriately benchmark performance to provide efficient healthcare and reduce spending for SNF services?
Milliman’s Jill Herbold and Anders Larson offer some perspective in their report “Performance of skilled nursing facilities for the Medicare population.” The report highlights several utilization and expenditure metrics for measuring SNF performance. It also explores SNF performance levels across the United States and provides a quantitative assessment of the opportunities to reduce spending for SNF services.
The Department of Health and Human Services (HHS) is striving to link 50% of Medicare payments to alternative payment models by 2018. One of the primary alternative payment models offered to Medicare providers is the Next Generation Accountable Care Organization (NGACO). Due to the potential large risk exposure for organizations considering this model, they should work with an actuary to understand the critical elements driving financial success (or failure). In this article, Milliman’s Charlie Mills, Cory Gusland, and Noah Champagne identify five key financial considerations that all ACOs should review before committing to the program. The considerations are ranked by the authors’ perceived importance, with one being the most important.
5. ACO’s CY2014 experience is the baseline for the first three performance years
4. Risk score changes are capped at 3% from the baseline year to each performance year
3. First dollar savings and losses
2. The 2016 benchmark trends are likely understated
1. In order to achieve savings, participants must outperform trended baseline less discount
On December 18, 2015, the Senate Finance Committee released alternative policy options meant to improve the care of chronic conditions for Medicare beneficiaries. In this article, Milliman’s Michael Polakowski and Nicholas Johnson outline 24 proposals that may have a wide-ranging impact on traditional Medicare, Medicare Advantage, and Medicare accountable care organizations. These policies are still under consideration; the Finance Committee’s bipartisan chronic care working group is requesting feedback and comments by today.