Tag Archives: shared savings agreement

CMS seeks to strengthen MSSP integrity with “Pathways to Success”

The initial structure of the Medicare Shared Savings Program (MSSP) allowed accountable care organizations (ACOs) to avoid sharing any losses for a limited time, so that ACOs could experiment with the MSSP without facing potentially serious financial outcomes if they were not able to achieve savings. The Centers for Medicare and Medicaid Services (CMS) has since detected several ways it believes ACOs are acting within the letter of the rules of the MSSP but not necessarily within the spirit. As a result, several facets of its proposed “Pathways to Success” rule aims to bolster the integrity of the program.

In this article, Milliman’s Jason Karcher and Brian Sweatman discuss ways in which ACOs have been identified by CMS as weakening the MSSP’s integrity and how it is proposing to address these concerns.

Which ACOs will have a pathway to success under CMS proposed rule?

If enacted, the proposed rule from the Centers for Medicare and Medicaid Services (CMS) known as “Pathways to Success” will change the Medicare Shared Savings Program (MSSP) and affect all accountable care organizations (ACOs). The effect of the rule change will vary by ACO depending on each one’s current situation and unique characteristics—some ACOs will benefit from the change and others will not.

It is important for individual ACOs to consider their unique situations when assessing the impact this proposed rule will have on their organizations. In this article, Milliman’s Anders Larson and Cory Gusland highlight several key characteristics and considerations that affect most ACOs to identify potential winners and losers.

Financial benchmark considerations for “Pathways to Success” MSSP proposed rule

The Centers for Medicare and Medicaid Services (CMS) proposed rule on the Medicare Shared Savings Program (MSSP) will significantly change the program if enacted. The proposal, titled “Pathways to Success,” includes changes to the financial benchmark methodology that measures gross savings or losses under the MSSP for an accountable care organization (ACO). There are four key elements where changes have been proposed: agreement period length, regional fee-for-service (FFS) adjustment, risk adjustment, and trend.

In this paper, consultants Jill HerboldCory Gusland, and Charlie Mills discuss the proposed changes and important implications for Medicare ACOs. This paper is the second in a series of Milliman papers on the proposed rule.

Eight essentials to ACO contracting

Accountable care organizations (ACOs) must analyze the risks associated with each aspect of a shared risk and population-based payment contract to be successful. Attention to detail and data-driven decisions can help ensure that ACOs enter into a sustainable and cost-effective agreement. In this article, Milliman consultant Kim Hiemenz identifies the following eight elements critical to analyzing and understanding these payment contracts.

1. Understanding the attribution model.
2. Projecting population size and contract volume.
3. Modeling the impact of random variation.
4. Analyzing data.
5. Quantifying risk through specific modeling.
6. Setting utilization or financial targets.
7. Forward-thinking contracts.
8. Building trust.

Shared savings arrangements and ACOs provide cost savings opportunity

Sponsors of self-funded group health benefits may be able to reduce their healthcare expenditures by entering into a shared savings arrangement with an accountable care organization (ACO). In the latest issue of Milliman’s Benefits Perspectives, actuaries Anders Larson and Paul Houchens highlight some items that plan sponsors should consider regarding such an arrangement. The following is an excerpt from the article.

For plan sponsors determining whether a shared savings arrangement is appropriate, the following are some of the key factors to consider:

Number of plan participants: For plan sponsors with fewer than 2,000 plan employee participants, independently developing a shared savings arrangement with an ACO may be problematic as the plan may experience significant claims volatility from year to year. Additionally, the plan sponsor may not have the necessary leverage in terms of healthcare service volume to garner favorable terms with the ACO. For plan sponsors with limited size, exploring a shared savings arrangement as part of a purchasing coalition or through an insurer may be beneficial; however, the outcome of the shared savings calculation might not be shared directly with individual plan sponsors.

Geographic dispersion: ACOs generally have a localized geographic focus. Therefore, for employers with employees dispersed across the country, having an ACO manage the majority of the employee population may be an impossible task. For such employers, they should evaluate how their third-party administrators are building networks on a regional basis. A benchmarking exercise (discussed in the next section) will allow the plan sponsor to determine if its plan is well managed at a regional level. If the network is built with a focus on high-quality, cost-efficient care, the employer may capture the same financial benefits of a shared savings arrangement. Additionally, to the extent a private exchange could contract with ACOs on a regional or local level, the private exchange may offer purchasing power that could not be created independently by a plan sponsor.

Current healthcare utilization and cost: A plan sponsor that already enjoys partnering with a high-performing provider delivery system may have little financial incentive to deviate from its current arrangement. Employers with predominantly young adult employees also are unlikely to have the same financial savings opportunity from better utilization management as employers with a significant portion of employees with high-risk chronic conditions. Employees with high-risk chronic conditions create a larger variance in potential costs for a plan sponsor, as well as management opportunities for an ACO. As one of the first steps in evaluating whether a shared savings arrangement may be beneficial, plan sponsors should have their healthcare utilization and costs benchmarked relative to expected costs for their participants’ demographics (including population health), plan designs, geographic location, and provider discount level. Such an analysis will identify utilization management opportunities for a shared savings arrangement.