Last year, the U.S. Department of Health and Human Services announced a new payment model called Direct Contracting for entities that want to take on risk for fee-for-service (FFS) Medicare beneficiary expenditures. This program built upon existing Centers for Medicare and Medicaid Services (CMS) efforts to reduce healthcare expenditures while attempting to improve the quality of care for FFS Medicare beneficiaries. Although Direct Contracting is designed to appeal to a wide range of entities (including those that have not previously participated in risk programs with CMS) many current Medicare Shared Savings Program (MSSP) and Next Generation accountable care organizations (ACOs) are naturally going to want to understand the potential pros and cons of this program, and how it compares to their current ACO risk-sharing structures.
In this paper, Milliman’s Colleen Norris, Brent Jensen, and Dustin Grzeskowiak provide an in-depth technical evaluation of Direct Contracting, based on the CMS request for applications, along with comparisons to its sister programs MSSP and Next Generation ACO.
Shared-risk contracts between health plans and healthcare
providers are becoming increasingly common and sophisticated. As these
arrangements become more prevalent, there is an increasing amount of money at
stake between health plans and providers. Transparency and verification are
best practices in any relationship between parties that involves money, and
this includes provider risk-sharing agreements. A settlement audit prepared by
an independent third party is a recommended best practice for any organization
considering entering into or already participating in one of these
The underlying principle in these agreements is
straightforward: healthcare providers are in the best position to identify and
reduce unnecessary, duplicative, or inefficient care, and shared-risk
arrangements provide a financial incentive for providers to do just that. While
shared-risk contracts may be conceptually simple, the actual real-world
financial adjudication of them is usually complex.
This paper by Milliman consultants Colleen Norris and Tom Snook explores some proposed best practices for an independent audit of provider risk-sharing settlements, and discusses the value of this review for all parties involved.
In August, the Centers for Medicare and Medicaid Services (CMS) released a sweeping proposed rule that, if enacted, will significantly change the Medicare Shared Savings Program (MSSP).
In the current program, the track (1, 1+, 2, or 3) chosen by an accountable care organization (ACO) determines the methodology used to assign beneficiaries to that ACO. Under the proposed rule, an ACO will be allowed to select between two beneficiary assignment methods, prospective or retrospective, regardless of track or risk level, and to change its choice annually.
Under the proposed rule, CMS will offer the choice of retrospective or prospective beneficiary assignment to ACOs in the BASIC and ENHANCED tracks for agreement periods beginning July 1, 2019, or later. An ACO will be able to choose a beneficiary assignment methodology at the time of entry and can alter this selection prior to the start of each performance year. Under retrospective assignment, an ACO’s assigned population is based on services incurred during the performance year. Under prospective assignment, an ACO’s assigned population is based on services incurred during the 12-month period ending three months prior to the start of the performance year. If an ACO changes its assignment methodology election, its historical benchmark will be updated (consistent with current practice).
Under current rules, the beneficiary assignment methodology is determined by the track in which an ACO participates. Under the proposed rule, ACOs will be able to select an assignment methodology independent of their track.
There are distinct trade-offs between the two assignment methodologies, and the optimal choice will vary by ACO. In this paper, the third in a series of Milliman white papers about the proposed rule, Milliman’s Colleen Norris, Jason McEwen, and Jonah Broulette explore the differences between the two proposed assignment methodologies and considerations for ACOs as they evaluate their options.
On August 8, 2018, the Centers for Medicare and Medicaid Services (CMS) released a sweeping proposed regulation that, if enacted, will significantly change the Medicare Shared Savings Program (MSSP). The proposed regulation, titled “Pathways to Success,” accelerates the path for accountable care organizations (ACOs) to participate in shared risk arrangements while simultaneously softening key provisions, allowing lower revenue ACOs to participate with reduced total financial risk. In addition, CMS has proposed numerous methodological and operational changes.
In this paper, Milliman consultants provide a summary of the proposed regulation’s key provisions and briefly discuss how they might impact the MSSP.
Healthcare providers can improve their financial performance under value-based contracts by implementing an effective contracting strategy. Milliman consultants David Williams, David Liner, and Colleen Norris discuss how providers can accomplish that by prioritizing and measuring operational and contractual elements against three core pillars: transparency, stability, and control. Here is an excerpt from their article “Building a successful value-based payer contracting strategy.”
Providers prioritize each pillar and attribute to create weights for each cell. Contractual elements are then evaluated against those pillars to produce a score for each cell. This can be either a subjective evaluation or a more rigorous analytic evaluation depending on the nature of the element. The weighted scores can be used to prioritize areas of administrative concentration and to compare payer contracts on a similar basis. This prioritization is a critical step to a successful contracting evaluation process….
…The exercise of scoring the grid identifies high-risk elements and compares contract structures from different payers that require revisions. When performed rigorously, this process brings focus that allows management to spend more time on contracts with the greatest risk and potential for improvement. Applying each pillar to specific payer contract elements identifies specific risks and creates areas of focus for providers during negotiation. However, this analysis alone does not enable providers to easily compare value-based contracts in their entirety.
The complex evaluation process is illustrated below in a simplified form. The intent of this illustration is to highlight important aspects of the decision-making process required to effectively manage complex payer relationships.
First, the contract is scored for each pillar and element cell in the scoring grid. Each contract is evaluated separately and may contain different elements. The provider may require independent help.
Second, the provider weights each cell in the grid based on priorities. These weights would likely be consistent across contracts. The provider may counsel with outside help to prioritize, but ultimately will be responsible for the focus of their efforts.
Finally, the total score is calculated by applying weights in each cell based on prioritization of the contracting elements. Figure 2 illustrates this contract-scoring approach.
On September 8, Andrew Slavitt, Acting Administrator of the Centers for Medicare and Medicaid Services (CMS), made a significant announcement on the CMS blog regarding the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) implementation timeline.
According to CMS, providers will be allowed to “pick their pace” with respect to the Quality Payment Program (QPP) in the first year of MACRA implementation. Mr. Slavitt has outlined four proposed “pace” levels in which providers can enter the QPP.
The blog post is light on specifics; however, the way options 1 through 3 are described indicates that the financial penalties in the QPP may be substantially lessened in the first year of program implementation.
CMS is scheduled to release the final rule by November 1. We will provide more details on this change, and what it means for the market at that time.