MedPAC hashes out new alternative payment model strategy

The Medicare Payments Advisory Committee believes a new model with different risk pathways and administratively defined savings criteria could be the way forward for alternative population-based payment models, although committee members noted during Friday’s meeting that there are still many details to work with.

Commissioner Brian Debuske, CEO of medical equipment maker DeRoyal Industries, said during Friday’s meeting that MedPAC should recommend time and simplicity to Congress. He added that as Medicare Advantage grows each year, alternative population-based payment models such as Accountable Care Organizations are left with a shrinking pool of beneficiaries.

In October, MedPAC delegates discussed the development of a single, multi-path, population-based payment model to guide CMS’s alternative payment model strategy. CMS set a goal in the same month to have all Medicare beneficiaries in a value-based payment arrangement by 2030.

MedPAC followed this up with a November discussion about developing administratively defined standards for ACOs, which could participate in Medicare savings if their recipients’ expenditures come in below the specified standard level. The benchmark is determined based on the spending on recipients who were eligible for an ACO in the base years, along with the growth in ACO spending between the base years and performance years.

Since the ACO standards are reset in each performance period based on the previous performance of the ACO, an ACO that improves the amount of savings it generates each year will have to deal with standards that are increasingly difficult to exceed, jeopardizing the long-term participation of the ACO.

On Friday, MedPAC staff presented the delegates with a blueprint for a new virtual three-track alternative payment model. The model will divide service providers into three separate categories. Independent physician practices, small safety net providers or rural service providers, can be on a financially risk-free course. Providers can retain up to 50% of the savings generated compared to their standard after meeting the minimum savings rate.

Medium-sized organizations such as multidisciplinary physician practices or small community hospitals can keep up to 75% of savings realized or repay 75% of losses. Large health systems may use a 100% combined savings or loss rate.

Commissioner Dr. Jonathan Jaffrey, who leads the ACO at the University of Wisconsin Health, questioned whether the size of the organization should determine its risk appetite. Large organizations may have trouble earning combined savings when the cost of the care they provide is low, and sometimes smaller organizations are smarter than large organizations.

Also up for debate is how quickly service providers should be paid to accept financial risk. Small providers can be allowed to remain on the no-risk path indefinitely, or eventually be encouraged to move to another path.

Commissioner David Grabowsky, a professor at Harvard Medical School, said downside risks should not be imposed on providers, while Commissioner Dana Gelb Safran, president and CEO of the National Quality Forum, said double-sided risks could make providers serious about savings.

Getting providers to participate in such models in the first place is another hurdle that MedPAC wants to remove. Incentives for service providers to participate in APMs are already written into law. MedPAC staff said that by 2040, reimbursement rates will be 8% higher for physicians with advanced APMs than for those who choose not to participate.

But to encourage more participation, officials can simply make the form mandatory for certain providers to receive Medicare money. Other options include paying lower rates to physicians not registered on the form, waiving some Medicare requirements for participants and providing more technical assistance to participants.

Commissioner Dr. Lawrence Casalino, a professor at Weill Cornell Graduate School of Medical Sciences, said setting future dates for mandatory participation for at least medium and large organizations may help generate participation in the short term.

“One of the things I heard a lot when payment system reform was practical is how important it is to have a clear indication of where things are going,” Safran said in an agreement. That would definitely be a very clear signal.”

The default model will also set ACO criteria administratively using external factors to overcome the effect of escalation. Most of the commissioners applauded this idea.

“Elimination of the ratchet effect is critical. The ACO program cannot work as long as the ratchet is a problem,” Casalino said.

But Commissioner Lynn Barr, leader of Caravan Health, which guides providers through value-based care, has expressed concern about changing the system in a way that would cause providers to generate less savings and end up paying compensation to the government.

MedPAC should assume that legislation is needed to make the alternative payment model reforms that the Commission is looking forward to, according to Vice President Paul Ginsberg, a senior fellow at the USC-Brookings Schaeffer Initiative for Health Policy.

“We don’t want to limit ourselves to the 2010 laws, as there was much less experience with these methods of payments,” he said.

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