Thursday, March 31, 2011

Up and Down Side Risk Proposed In the CMS Notice of Proposed Rulemaking on Accountable Care Organizations (ACOs)

The Allure of Risk!
The Disease Management Care Blog has been culling through a variety of documents that were released today by CMS on the Accountable Care Organization "Notice of Proposed Rulemaking."  What follows is an initial reaction and "first-read" summary that focuses on the proposed payment methodologies.  The DMCB will use the wisdom of crowds in sister blogs to update and correct as necessary.   

CMS proposes to forgo the upside-only "gainshare" and offer ACOs two tracks that have upside as well as downside insurance risk on a prospectively attributed population.

Track 1: Upside gainsharing for two years with two-sided risk on the third year. ACOs that opt for this track will get 50% of the upside savings that is capped at 10% of the benchmark.

Track 2: Upside and downside risk sharing  for all three years. ACOs in this track get 60% of the upside savings, while the downside is capped at 5%, 7.5% and 10% for years 1, 2 and 3, respectively.  Payment is capped at 7.5% of the benchmark.

CMS proposes that the upside risk payment only occur when two things happen:

1) a savings threshold ("minimum savings rate") is exceeded.  ACOs in Track 2 will need to get above a 2% savings versus a calculated benchmark.  Track 1 ACOs, especially those that are smaller or in rural or underserved areas, have both good and bad news.  The good news is that their benchmark can be as low as 0% (especially if they are in underserved or rural areas) but the bad news is that may need to achieve a higher level of savings over that benchmark.  The DMCB read that level may go, depending on size, as high as 3.9%   The smaller population, the greater the statistical variation that can plague the measurement of savings; 3.9% over the benchmarks increases the statistical likelihood that the observed savings are real.

 2) a composite measure of more than 60 clinical quality performance measures is met or exceeed.  Exceeding them can earn extra shared savings: up to 2.5% for Track 1 above (adding up to a max of 52.5%) and 5% for Track 2 (adding up to a max of 65%).  Achieving these measures can also blunt the downside losses.

It appears that CMS also proposes to hedge against future downside adverse risk development by holding back 25% of any bonus.

Next stop: figure out how the benchmarks are determined and what will go into the risk adjustment.

If the DMCB has any of this wrong, please comment!

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