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Medicare ACO UpdateTom Nolan

Centers for Medicare & Medicaid Services / Office of the ActuaryFall 2015 MAAC Presentation

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Overview

• Describe Medicare programs/models promoting Accountable Care Organizations (ACOs)

• Brief history from the actuarial perspective– Design phase (initial): Analysis of policy options for

implementing statute (ACA)– Monitoring: Making sense of emerging results (Pioneer

certification)– Back to design phase: New rulemaking

• Outline of June 2015 final rule and announced goals for pending Fall 2015 proposed rulemaking

• Related thoughts, observations, and Q&A

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During January 2015, HHS announced goals for value-based payments within the Medicare FFS system

CMS ACO InitiativesCMS ACO Initiatives

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Medicare Shared Savings Program

• Track 1 waives risk (for now)

– Advance Payment Model

– ACO Investment Model

Alt Models Test Higher Risk/Reward

• Pioneer ACO Model

• Next Generation ACO Model

• ESRD ACO Initiative

Current Medicare ACOs (as of April 2015)Current Medicare ACOs (as of April 2015)

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All ACOs have PCPs…but Overall Structure Varies

All ACOs have PCPs…but Overall Structure Varies

• Incentives can differ for ACOs depending on inclusion of hospital• Physician-only ACO involves leveraged risk• Motivation for forming ACO likely varies

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ACO ParticipationACO Participation

ACO-Assigned Beneficiaries by County

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Top 10 ACO-Saturated HRRsTop 10 ACO-Saturated HRRs

Hospital Referral Region

Beneficiaries with Part A and Part B

Standardized Risk-Adjusted

FFS Per Capita Costs (2013)

ShareEnrolled

MA (2013)

ShareAssigned to ACO (2015)

IA - Mason City 29,132 $9,259 3% 70%IL - Bloomington 27,726 $9,117 15% 58%IN - Lafayette 33,328 $9,734 16% 57%IL - Hinsdale 61,216 $9,908 9% 56%VT - Burlington 116,975 $8,242 13% 55%MA - Boston 794,102 $9,309 19% 50%IL - Elgin 97,149 $10,305 8% 47%NH - Lebanon 85,266 $8,612 7% 47%IA - Cedar Rapids 50,577 $8,850 25% 46%KS - Topeka 74,573 $9,674 7% 46%

Note: About 10% of FFS beneficiaries are unassignable in any given year due to lack of consumption of evaluation and management services necessary for assignment 8

ObservationsObservations

• ACOs are engaging in a variety of innovative care coordination and practice redesign activities with local providers in their communities

• ACOs are receiving Medicare claims data that can assist them in redesigning care and monitor their performance.

– Many integrate claims data with clinical data systems.

– Only the most advanced ACOs appear to be employing robust predictive modeling to target care management proactively

• ACOs identified physician engagement, patient engagement, care transitions, and post-acute care as key issues and are working on strategies to improve in these areas

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Examples of ACO InitiativesExamples of ACO Initiatives

From the Performance Year 2 Evaluation Report:• “Pioneers continue to rely largely on internal sources of learning: trial and error,

the experiences and vision of executive and medical leaders, and parent organizations’ experiences with managed care products.”

• “Pioneers have invested in their data analytics to identify areas for organizational improvement […including purchased claims management programs, clinical data analytic packages from vendors or developed homegrown systems].”

• “Pioneers mentioned commercial payers and self-insured employers as good sources of strategic support for their experience with population management… [but] at least one ACO noted that commercial payers in its area are reluctant to share ideas because of the competitive nature of the market.”

• “Several Pioneers discussed informal networking with other ACOs as an effective way to generate and share ideas.”

Accessible at https://innovation.cms.gov/Files/reports/PioneerACOEvalRpt2.pdf10

Specific Examples of ACO InitiativesSpecific Examples of ACO InitiativesBeth Israel Deaconess Banner Health

Network Partners HealthCare Montefiore

Area served Eastern Massachusetts Phoenix, Arizona Metropolitan Area

Eastern Massachusetts New York City (the Bronx) and lower Westchester County, NY

PY3 beneficiaries 34,631 52,772 69,751 24,230

Description of ACO (from: https://innovation.cms.gov/Files/x/Pioneer-ACO-Model-Selectee-Descriptions-document.pdf)

provider network /IPA model physician organization of over 1600 physicians including 400 primary care physicians

Comprises Banner Health-affiliated physicians, 13 acute-care Banner hospitals, more than 2,600 private and employed physicians

integrated health system consisting of two academic medical centers, community and specialty hospitals, a physician network, home health and long-term care services, and other health-related entities

independent practice association with an integrated delivery system of nearly 2,400 employed and community-based primary and specialist physicians plus allied health professionals; Montefiore Medical Center’s four hospitals; 21 primary care sites; and home care agency

PY3 Shared Savings

$9,847,873 $18,698,005 $13,218,122 $8,428,113

Description of “use a sophisticated computer algorithm and see who's at risk for hospitalization… Then we run that data past the primary-care doctors and develop care-management resources as appropriate.’ … Nurse practitioners make monthly house calls to sick, homebound patients who had emergency department visits. Less acutely ill patients receive phone calls or visits from registered nurses, he said.” 1

“‘Beneficiaries are able to remain at home and connect via a tablet with a centralized care team, to a physician, pharmacist, nurse,’ [CEO Lisa Stevens Anderson] said. ‘In Year 2, overall we've had a 27 percent reduction in total cost of care for beneficiaries that have extremely complex conditions.’" 2

“has an integrated care management program called iCMP that focuses on medically complex patients in the home. Nurse care managers oversee complicated and chronically ill patients with multiple medical conditions, such as diabetes or heart disease. The iCMP program helps keep these high-risk individuals healthier and lowers the overall cost for them by preventing avoidable hospital visits” 2

“’Early in Montefiore's ACO development, we created a predictive analytics model that assists in the identification of patients who will benefit from advanced interventions,’ said Andrew D. Racine, senior vice president ‘... By focusing on the right care for the right patient at the right time, we were able to substantially reduce admissions and all-cause 30-day readmissions.’” 3

1. http://www.modernhealthcare.com/article/20130720/MAGAZINE/307209990 2. http://www.healthcarefinancenews.com/news/dartmouth-hitchcock-may-exit-pioneer-aco-program-officials-say3. http://www.montefiore.org/body.cfm?id=1738&action=detail&ref=1112

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Actuarial PerspectivePart I: Design Phase

Actuarial PerspectivePart I: Design Phase

• Statute outlined the MSSP program at high level:– Panel virtually assigned (not enrolled) based on primary care utilization– No network restrictions – all providers continue to be paid under FFS system– Retrospective shared savings calculation:

• Broad authority to trend, adjust, and blend three most recent historical base years to form historical PBPY cost benchmark (remains static for three year agreement period)

• Historical benchmark adjusted for risk and updated to performance year basis according to national average absolute dollar change in $PBPY

• Discretion for sharing portion of savings measured for an ACO, subject to quality score results

• Key questions: – How can benchmark calculations be constructed to maximize accuracy?– What factors could lead to gaming and/or selection– What confidence can we have that shared savings reflect real improvement in

efficiency of care delivery?– What portion of measured savings can be shared with individual ACOs while still

retaining portion of overall savings for Federal Trust Funds?

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Square One: What’s the Baseline?Cohort or Cross Section?

Square One: What’s the Baseline?Cohort or Cross Section?

• MSSP emphasizes symmetry in tabulating baseline assignment and expenditures as cross-sections comparable to perf. Years (contrast to complexity & asymmetry of cohort methodology)

Source of slide graphic: Milliman Briefing Paper (March 2015)http://us.milliman.com/uploadedFiles/insight/2015/challenges-measured-savings.pdf

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Design Phase AnalyticsDesign Phase Analytics

• Financial modeling – an iterative process:– Key issue: ACOs are assigned beneficiaries based on primary care utilization (no

enrollment, no network lock in, annual churn…)– Sampling groups of beneficiaries greatly understates variation if clustering

ignored (geographically and clinically)– Expedited first pass - utilized existing county level FFS time series data (MA

ratebook data) to observe variation in risk adjusted per capita trend for counties of 5,000+ beneficiaries

– As specific policy proposals became more concrete, constructed (with contractor RTI) a comprehensive beneficiary-to-provider assignment simulation over 8 historical years; breaking out per capita claims reflecting various potential adjustments:• Segmentation by eligibility type• Truncation of large claims• Adjustment by prospective HCC model

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Updating Baseline to Benchmark TargetUpdating Baseline to Benchmark Target

• Fortunate to have robust empirical basis for simulation• Some policy proposals relatively straightforward to analyze:

– Greater weight on most recent base year (60%)– Truncating large claims (99th percentile)– Segmenting by eligibility type (incl. dual status)– HCC Risk adjustment within eligibility types

• Other policy options more complex and benefit from stochastic modeling, for example– ACO ability to bear risk over medium/long run or transition to risk if

mandated (NPRM proposed transition in year 3)– How should minimum savings rates be structured?– How should historical benchmark be rebased?

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Example: Minimum Savings Rates (MSRs)

Example: Minimum Savings Rates (MSRs)

• Minimum Savings Rate– Initial directive: vary the MSR percentage according to group

size to ensure 99% confidence that ACO did not receive bonus because of random chance• Produces reasonably sized MSR only if one assumes ACO assignment is

purely random on the national FFS population

– County modeling and refined provider-level modeling both pointed to far greater variation at baseline in assigned beneficiary adjusted per capita cost trend• MSR for smallest ACOs would have to exceed 10%• Although variation declines with group size, even at enormous

assignment total variation does not dip below approximately a 2% standard error

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Flashback to Flashback to Large State FFS Trend VarationLarge State FFS Trend Varation

2005 2006 2007 2008 AvgFastest Growing State in Given Year 7% 8% 5% 8% Average Growth 6% 5% 4% 5% Slowest Growing State in Given Year 2% 2% 2% 4% Standard Error 1.6% 2.2% 0.8% 1.1% 1.4%

Risk-Adjusted Per Capita Claims Growth for 10 Largest States (States with > 1M FFS Beneficiaries)

• But does a slower or faster growth rate tend to revert to the average over multiple years? (See next slide…)

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• …No, empirical variation continues to widen as base year and projection year grow further apart

• And although ACOs tend to spread assignment over multiple counties or even states, variation at ACO level is also accentuated by practice patterns and other clustered provider characteristics

Variation in FFS Growth over Extended Period

Variation in FFS Growth over Extended Period

Risk-Adjusted Per Capita Claims Growth for 10 Largest States (States with > 1M FFS Beneficiaries)

Growth from 2005 Base Year2 Years

(to 2006)3 Years

(to 2007)4 Years

(to 2008)Fastest Growing State 16% 18% 27%Average Growth 11% 15% 21%Slowest Growing State 6% 8% 14%Standard Error 2.6% 2.7% 3.3%

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FFS County Level Trend VariationFFS County Level Trend Variation

5,000 7,000 9,000 11,000 13,000 15,000 17,000 19,000 21,000 23,000 25,000-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

County FFS Population Count vs. Deviation from National Average TrendFFS A&B HCC-Adjusted Per Capita 2007->2008

PBPY

Cos

t Tre

nd %

Diff

eren

ce fr

om N

at’l

Avg

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Empirical 99th Percentile ConfidenceEmpirical 99th Percentile Confidence

5,000 7,000 9,000 11,000 13,000 15,000 17,000 19,000 21,000 23,000 25,000-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

County FFS Population Count vs. Deviation from National Average TrendFFS A&B HCC-Adjusted Per Capita 2007->2008

Red line signifies empirical 99th percentile; green line approximates Track 1 MSR policy

PBPY

Cos

t Tre

nd %

Diff

eren

ce fr

om N

at’l

Avg

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MSSP Track 1 Min. Savings RatesMSSP Track 1 Min. Savings Rates

Note: for risk (Track 2), Min Loss Rate = Min Savings Rate of 2.0%

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Example: Estimating “Flat Dollar” EffectExample: Estimating “Flat Dollar” Effect

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Example: Estimating “Flat Dollar” EffectExample: Estimating “Flat Dollar” Effect

Billings, MT 2006 2007 2008 2009 Actual Per Capita $6,401 $6,667 $6,953 $7,123 (A)Actual Growth (%) 4.2% 4.3% 2.4% Actual Growth ($) $266 $286 $170 National Growth ($) $382 $472 $536 (B)Simulated Target $6,783 $7,255 $7,791 (C)Actual v Simulated Target (% Diff) 1.7% 4.3% 9.4% (C) / (A) – 1

• Empirical example: by the final year of a hypothetical three-year agreement period an ACO in Billings would expect ~10% savings measured against national dollar update

• Hospital referral region exhibiting baseline per-capita costs 20% below national average, with four-year growth pattern as follows:

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Monitoring and EvaluationMonitoring and Evaluation

• Payment finalized for first 2 MSSP performance years and three Pioneer performance years (2012-2014)

• Combined savings within range originally projected• Gross savings/loss percentages vary by ACO size, as

baseline data predicted24

ACO savings percent by assigned beneficiaries 2014

ACO savings percent by assigned beneficiaries 2014

- Advanced pay ACOs are marked in red plus signs, other ACOs are marked by blue x - ACO data including measured savings available at the CMS.gov ACO PUF web page

- 20,000 40,000 60,000 80,000 100,000 120,000 140,000

-18%

-13%

-8%

-2%

2%

7%

13%

18%

Number of Assigned beneficiaries

Perc

ent (

Savi

ngs)

/ L

oss

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Monitoring and EvaluationMonitoring and Evaluation

• Validated our projection that ACOs would likely drop out following a shared loss:– Pioneer down to 18 of 32 initial ACOs– No new ACOs selected Track 2 in last enroll cycle

• But where’s the flat dollar effect?• And what can we say about net program savings?– By combining all ACO benchmark and savings dollars together

we can one rough mean estimate of program gross and net savings

– Note: formulaic savings would not necessarily account for the full effect on Federal spending (as noted in Pioneer certification) 26

MSSP Year 1 Combined FinancialsMSSP Year 1 Combined Financials

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Pioneer Year 1&2 Combined FinancialsPioneer Year 1&2 Combined Financials

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Pioneer CertificationPioneer Certification

• Three key ways of estimating overall impact:(1) Combined benchmark gross/net savings (minimal net impact)(2) Formal Pioneer evaluation (est gross savings ~3% y1 and ~1% y2)(3) OACT market trend comparison (material net savings)

• First two perspectives ignore spillover effects– ACO physicians are assigned only a portion of the beneficiaries they

actually serve each year– Feedback affect on national comparison trend– Evidence from private ACO model (AQC)– Internal analysis of Medicaid cost trends for PGP ACO assigned benes

• Pioneer certification relied in part on corroborating modest net savings for Pioneer ACOs under #1 and #2 with larger total market savings implied by broader analysis from #3

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Comparing Hospital Referral Region Adjusted Cost Trends by ACO ActivityComparing Hospital Referral Region Adjusted Cost Trends by ACO Activity

• Markets active in either/both ACO programs demonstrated lower adjusted cost trend than markets with very low ACO assignment

• Implied aggregate savings exceed net bonus payments by several multiples or more30

Boston “Supermarket”Boston “Supermarket”

• Most ACO-saturated large FFS market• Five Pioneers began risk contracts in 2012

Source: Medicare public use data on geographic variation

2011 2012 2013$9,300

$9,350

$9,400

$9,450

$9,500

$9,550

$9,600

$9,650

$9,700

$9,561

$9,517

$9,457

$9,673

$9,514

$9,346

FFS A&B Standardized & Adjusted PBPY Cost Trend

National Boston HRR31

33 ACO Quality Measures33 ACO Quality Measures

• Stands in for physician PQRS reporting requirement

• More information how scores are calculated 32

ACO Performance on QualityACO Performance on Quality

• Pioneer– Improvements in 28 of 33 quality measures– Average improvements of 3.6% across all quality measures

• Medicare Shared Savings Program– Improvements in 27 of 33 quality measures for ACOs that

reported in 2013 and 2014– Achieved higher performance than other FFS providers on

18 of the 22 Group Practice Reporting Option Web Interface measures

• Note: Improvement on quality measures will not by itself necessarily generate significant savings

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Revised RulemakingRevised Rulemaking

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External ForcesExternal Forces

• CMMI Models and other market initiatives (e.g. Partnership for Patients, advanced primary care / medical home initiatives, etc.)

• Alternative Payment Model bonus created by MACRA– 5% of physician fee schedule revenue– Would represent <5% of ACO’s total A+B benchmark

• New Medicare benefit for chronic care management– Potential to help more ACOs perform like the advance payment subset?

• Stakeholders requesting restructuring of ACO benchmarks to support long-run incentive for efficiency– Example: Medpac called for regional cost component for benchmarks

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MSSP Changes – June 2015 Final RuleRelated to Pioneer Certification…

MSSP Changes – June 2015 Final RuleRelated to Pioneer Certification…

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• Addressing participation agreement renewals including allowing eligible ACOs to continue participation under the one-sided model (Track 1) for a second agreement period

• Adding a new performance-based risk option (Track 3) that includes prospective beneficiary assignment (retaining symmetry!) and a higher sharing rate

• Providing ACOs choice of symmetric threshold for savings and losses under performance-based risk tracks

• Establishing a waiver of the 3-day stay SNF rule for beneficiaries who are prospectively assigned to ACOs under Track 3 (on or after January 1, 2015)

Other ModificationsOther Modifications

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• Refining the methodology for resetting benchmarks to add portion of savings back into rebased baseline

• Conducting further development and testing of other selected waivers through CMMI, including a waiver of the billing and payment requirements for telehealth services;

• Increasing the emphasis on primary care services in the beneficiary assignment methodology;

• Streamlining data sharing to provide improved access to data necessary for ACO health care operations such as quality improvement and care coordination, while maintaining beneficiary protections;

Opportunities for Future RulemakingOpportunities for Future Rulemaking

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• Announced intention to address other modifications to program rules in future rulemaking in the near term to improve ACO willingness to take on performance-based risk including:

– Modifying the assignment methodology to hold ACOs accountable for beneficiaries that have designated ACO practitioners as being responsible for their care;

– Waiving the geographic requirement for use of telehealth services

– Additional notice and comment rulemaking in 2015 for a methodology that would reset ACO benchmarks in part based on trends in regional fee-for-service costs rather than solely ACOs’ own recent spending

Notes on Regional Trend …CMS Previously Indicated regional trend would be part of new rulemaking

Notes on Regional Trend …CMS Previously Indicated regional trend would be part of new rulemaking

• Regional trends more accurately represent local price changes and other trend factors

• Regional trends only slightly correlated to ACO savings in PY1 and PY2

• Can mitigate cost of national flat-dollar update…Assuming it reemerges… i.e. Medicare FFS per capita trend reflates as currently projected

• Potential feedback effects– ACOs tend to be clumped in urban markets– Some evidence of spillover on non-assigned population

• Proposed rule forthcoming!39

Advancing Testing of other ACO ModelsAdvancing Testing of other ACO Models

• Comprehensive ESRD Care – significant opportunity for dialysis facilities to deliver care management to unique at risk population

• Nex Gen ACO beginning in 2016– Prospective trend target– Adjustment to benchmark based on regional cost

level– Leveraged sharing of savings/losses relative to

adjusted/discounted benchmark40

Other ObservationsOther Observations

• Savings from evaluation can be difficult to reconcile with savings from benchmark formula (signal vs noise)

• CMS may have opportunity to leverage economy of scale– Analysis of emerging claims data– Helping ACOs build efficient referral networks

• Hospital compare, physician resource use reports, etc.

• Savings potential remains mostly untapped– Unclear if ACOs will overcome structural limitations (or

program policies can sufficiently evolve) to unlock higher savings potential

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Notes / Resources / ReferencesNotes / Resources / References

• Thanks to CMS colleagues Dr. Terri Postma and Zach Tirrell for significant contributions to slides

• References:– Pioneer ACO Certification

• https://www.cms.gov/Research-Statistics-Data-and-Systems/Research/ActuarialStudies/Downloads/Pioneer-Certification-2015-04-10.pdf

– Medicare Shared Saving Program Final Rule:• https://

www.federalregister.gov/articles/2015/06/09/2015-14005/medicare-program-medicare-shared-savings-program-accountable-care-organizations

– Pioneer Y1&Y2 Evaluation Report:• https://innovation.cms.gov/Files/reports/PioneerACOEvalRpt2.pdf

– Summary of ACO-related public use data:• https://

www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/MSSP-ACO-data.pdf

– Other related evidence for savings potential:• http://content.healthaffairs.org/content/31/8/1885.full.html• http://jama.jamanetwork.com/article.aspx?articleid=1357260

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