Keeping the 2014 Medicare ACO Results in Perspective

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

Ken Perez
Ken Perez

“We have to take the long view, and be focused on iterating, evolving, and improving the concept, rather than seeking summary judgment.” – Farzad Mostashari, former national coordinator for health information technology, commenting on accountable care organizations

On Aug. 25, 2015, the Centers for Medicare and Medicaid Services (CMS) released 2014 financial and quality performance results for 353 accountable care organizations, 333 in the Medicare Shared Savings Program (MSSP) and 20 in the Pioneer ACO Model (although as of this writing, the CMS website only lists 19 Pioneer ACOs). As is customary, proponents (such as CMS) and critics of ACOs interpreted the results quite differently, as a glass half-full or half-empty.

Pioneer ACO Performance

During the third performance year, the Pioneer ACOs generated total model savings of $120 million. That figure constitutes a 24 percent increase versus the $96 million of savings produced during the previous year. A total of 15 ACOs (75 percent of all Pioneers) were able to generate savings during performance year three, compared with 14 ACOs (61 percent of all Pioneers) for the prior year. Of those generating savings in the most recent performance year, 11 Pioneers produced savings that exceeded the minimum savings rate, garnering shared savings payments totaling $82 million. One quarter of the 20 Pioneers generated losses, with three generating losses beyond a minimum loss rate, requiring them to make $9 million in shared-loss payments to CMS.

The Pioneers improved the quality of care delivered during performance year three, as their mean quality score rose from 85.2 percent to 87.2 percent year-to-year. The Pioneers improved in 28 of 33 quality measures and generated average improvements of 3.6 percent across all quality measures compared to Performance year two. CMS highlighted significant improvement in medication reconciliation (up from 70 percent to 84 percent), screening for clinical depression and follow-up plan (up from 50 percent to 60 percent), and qualification for an electronic health record incentive payment (up from 77 percent to 86 percent).

Moreover, Pioneer ACOs improved the average performance score for patient and caregiver experience in five out of seven measures compared to performance year two.

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The Treatment of Good News about the U.S. Healthcare System

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

Ken Perez
Ken Perez

Tracy Morgan, the “30 Rock” and “Saturday Night Live” star, once said, “Bad news travels at the speed of light; good news travels like molasses.” Such is the case with respect to the cost and clinical performance of the U.S. healthcare system.

Steven Brill, founder of Court TV and the American Lawyer, famously pilloried America’s healthcare system in “Bitter Pill: How outrageous pricing and egregious profits are destroying our healthcare,” the cover article in the March 4, 2013 issue of Time and the longest in the history of the magazine. Brill wrote, “In the U.S. people spend almost 20 percent of the gross domestic product on health care, compared with about half that in most developed countries. Yet in every measurable way, the results our health care system produces are no better and often worse than the outcomes in those countries.” In a subsequent article in the Jan. 19, 2015 issue of Time, Brill went on to describe the U.S. as having “a broken-down jalopy of a health care system.”

Brill’s “Bitter Pill” article received generous coverage by CBS, the Commonwealth Club, the Huffington Post, the Los Angeles Times, National Public Radio, the New Yorker, the New York Times, and even Jon Stewart’s “The Daily Show.”

The July 28, 2015 issue of the Journal of the American Medical Association (JAMA) included an article, “Mortality, Hospitalizations, and Expenditures for the Medicare Population Aged 65 Years or Older, 1999-2013,” that shared the findings of a study of over 68 million Medicare fee-for-service and Medicare Advantage beneficiaries by H.M. Krumholz, et al.

This lengthy, detailed, heavily footnoted, and carefully written study reported the following encouraging findings:

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Continual Rise of Medicaid: Two Paths to Reforming Healthcare Delivery

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

When one thinks of the areas targeted for healthcare delivery reform by the Patient Protection and Affordable Care Act (PPACA), Medicare, the largest area for healthcare spending by the federal government, obviously comes to mind. Notably, there are more than 400 Medicare accountable care organizations, and that figure is projected to rise in the coming years.

However, Medicaid is another significant and growing area of healthcare spending that could benefit from reform.

According to the Centers for Medicare and Medicaid Services (CMS), as of February 2015, 70.5 million people—more than one in every five Americans and 25 percent more than the number of Medicare beneficiaries—were enrolled in Medicaid or the Children’s Health Insurance Program, which represents an increase of almost 40 percent from the number enrolled at the end of 2009.

In 2013, the federal government and states together spent $438 billion on Medicaid, with $250 billion (57 percent) covered by the federal government. With 28 states and the District of Columbia expanding Medicaid coverage, in 2015 the federal government will spend $343 billion on Medicaid, an amount equal to 9 percent of total federal outlays and two-thirds of Medicare expenditures. Taking into account funding by the states, well over half a trillion dollars will be spent in total on Medicaid in 2015.

Moreover, spending on Medicaid is projected to eclipse the growth of the U.S. economy over the course of the next decade. The Congressional Budget Office projects the federal government’s spending on Medicaid will reach $576 billion in 2025, a compound annual growth rate (CAGR) of 5.3 percent over 2015 to 2025. That compares with projected a 4.3 percent CAGR for U.S. gross domestic product for the same period.

Although the coverage or access-to-care issue has been partially addressed via Medicaid expansion—with much more work to be done—how to provide high-quality care in a cost-effective manner through Medicaid constitutes the next challenge.

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CMS Moves to “Modernize” Medicaid Plans

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

Since the passage of the Patient Protection and Affordable Care Act, most of the health reform activity in the Medicaid arena has primarily been about expansion of coverage. According to the Centers for Medicare and Medicaid Services (CMS), as of February 2015, 70.5 million people—more than one in every five Americans—were enrolled in Medicaid or the Children’s Health Insurance Program (CHIP), which represents an increase of almost 40 percent from the number enrolled at the end of 2009.

However, on May 26, CMS aimed its sights on improving the quality of care delivered by Medicaid, issuing a 653-page proposed rule to “modernize the Medicaid managed care regulations,” which have not been revised in a decade. The proposed rule faces a public comment period that will continue thru July 27.

The changes presented in the proposed rule would align the regulations governing Medicaid managed care with those of other major sources of coverage, including Medicare Advantage (MA) plans and Qualified Health Plans (QHPs), which are offered thru health insurance exchanges (marketplaces). CMS has said that the proposed Medicaid measures will emphasize evaluating health outcomes and the patient experience enrollees have with private plans. In addition, the proposed rule mandates public reporting of information on quality of care, as well as the use of financial incentives to reward Medicaid managed care plans that meet quality measures, a la Medicare Advantage Star Ratings.

CMS’s announcement has been met with mostly favorable responses. “It was about time for the changes” has been a common refrain, with the revisions viewed as a natural, logical progression.

How big is the market that will be impacted by the changes? Per CMS, Medicaid managed care organizations (MCOs) have grown from handling 8 percent of Medicaid beneficiaries in 1992 to about 70 percent of the 70 million Medicaid enrollees today—almost 50 million people. That figure compares with 17.3 million MA enrollees as of January 2015.

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The Inexorable March toward Accountable Care: CMS Adds 89 New MSSP ACOs

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

Ken Perez
Ken Perez

During much of 2014, there seemed to be a rising tide of negativism about the Centers for Medicare & Medicaid Services’ accountable care organization (ACO) programs. After losing nine of its participating organizations after its first year of operation, the Pioneer ACO model suffered some more high-profile departures in 2014.

In August, Sharp HealthCare, a five-hospital system in San Diego, Calif., exited the program, and the following month, three other ACOs—Franciscan Alliance in central Indiana, Genesys PHO in Flint, Mich., and Renaissance Health Network in Pennsylvania—also dropped out. Since the Pioneer program’s inception in January 2012, the total number of Pioneers has dropped by 41 percent, from 32 participants to 19.

The bad news wasn’t confined to the Pioneer program. An October 2014 survey by the National Association of ACOs (NAACOS) indicated that two-thirds of Medicare Shared Savings Program (MSSP) participants are “highly” or “somewhat” unlikely to remain in the ACO program as it currently stands. Clearly, the Medicare ACO ship certainly seemed to be sinking.

In an attempt to right the ship, on Dec. 1, 2014, CMS released a long-awaited 429-page proposed rule to modify the MSSP, seeking to retain as many of the current MSSP ACOs as possible and attract new participants to the program. The words “encourage” or “encouraging” appear almost 100 times in the document—with an eye, ultimately, toward greater ACO participation in risk-based models. However, in spite of CMS’s intention, NAACOS and the American Hospital Association’s initial responses to the proposed rule were generally critical. CMS is accepting public comments until Feb. 6, 2015, after which it will compose the final rule, a process which should take, if history is a guide, three to six months.

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The Unlikelihood of Permanent SGR Reform During the Lame-Duck Session

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

“Hope springs eternal” is a phrase from Alexander Pope’s An Essay on Man: Epistle I, written in 1733. For some reason, right now hope is in full bloom in Washington, D.C. for physician groups, such as the American Medical Association and the Medical Group Management Association, which are pushing for passage of a permanent repeal of the sustainable growth rate (SGR), also known as a “doc fix,” prior to the congressional recess that will start in mid-December.

The points that are being made by physician groups are not new. There is the spectre of a 21.2 percent reduction in Medicare physician fees effective April 1, 2015, when the current doc fix expires, and nobody wants such a drastic reimbursement rate cut to occur. Also, because of moderating healthcare costs, the most recent Congressional Budget Office estimate of the cost of holding payment rates through 2024 at current levels is “only” $131 billion, near the low end of the CBO’s historical range. And last, earlier this year, a number of permanent SGR reform bills enjoyed bipartisan and bicameral support.

In spite of all these valid points, the case for fixing the SGR this calendar year, as opposed the first quarter of 2015, does not seem compelling or possible, due to both political and fiscal realities.

Politically, as the name implies, lame-duck congressional sessions are not known for legislative productivity. Chip Kahn, CEO of the Federation of American Hospitals, commented, “I believe that the lame-duck session is going to be limited to measures that are either emergencies like Ebola or must do’s to keep the government open.” Similarly, Tom Scully, former CMS administrator under President George W. Bush, opined in Modern Healthcare that there is “1 in 10 million” chance of a permanent SGR repeal passing during the lame-duck session.

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The Prospect of Permanent SGR Reform in 2015

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

In the wake of the U.S. 2014 midterm election, it’s natural to turn our eyes toward the future and begin to speculate about possible legislative developments, such as a permanent repeal of the sustainable growth rate (SGR), often referred to as a “doc fix.”

The SGR is a formulaic approach intended to restrain the growth of Medicare spending on physician services. The SGR requires Medicare each year to set a total budget for spending on physician services for the following year. If actual spending exceeds that budget, the Medicare conversion factor that is applied to more than 7,400 unique covered physician and therapy services in subsequent years is to be reduced so that over time, cumulative actual spending will not exceed cumulative budgeted (targeted) spending, with April 1, 1996, as the starting point for both.

In part because of the effective lobbying efforts of physicians, Congress has temporarily suspended application of the SGR by passing legislative overrides or doc fixes 17 times from 2003 to 2014. As a result, actual spending has exceeded budget every year during these years. Because the annual fee update must be adjusted not only for the prior year’s variance between budgeted and actual spending but also for the cumulative variance since 1996, the next proposed update, effective April 1, 2015, is a reduction in Medicare physician fees of 21.2 percent.

There are three reasons to be optimistic that a permanent doc fix will be passed in 2015.

Reason for optimism #1: It’s much cheaper than before.

Since 2012, the Congressional Budget Office (CBO) has released some 15 estimates of the 10-year cost of SGR fixes, usually assuming a freeze in rates (i.e., 0 percent annual updates to the physician fee schedule). These cost estimates have ranged from a low of $116.5 billion to a high of $376.6 billion. In August 2014, the CBO estimated that holding payment rates through 2024 at current levels would raise outlays by $131 billion, a figure near the low end of the range and relatively more affordable.

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CMS’ Pioneer ACO Program: Results to Date and Changes Ahead

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

The recent flurry of upsets in college football has caused pundits and fans of the sport to do a mid-season recalibration of their projections for their respective teams. Many of the pre-season favorites — selected just seven or eight weeks ago — are no longer in the running for the national championship, others are plugging along pretty much in line with expectations, and a number of “Cinderella” teams have emerged. All teams, no matter how well they have done thus far, will need to make adjustments in the second half of the season.

In like manner, with recent developments and disclosures about CMS’ Pioneer ACO Model, it’s time to do a kind of mid-season recalibration and speculate a bit about needed adjustments to the program.

In August and September, four hospital systems — Sharp HealthCare, a five-hospital system in San Diego, Calif.; Franciscan Alliance in central Indiana; Genesys PHO in Flint, Mich.; and Renaissance Health Network in Pennsylvania — dropped out of the Pioneer ACO Program. With those departures and nine that were previously announced, the number of Pioneers has dropped by 41 percent, from 32 original participants to 19. It should be noted, however, that the majority of the ACOs that have left the program have transferred to the less challenging Medicare Shared Savings Program (MSSP).

On August 6, CMS posted 879 pages of public comments received in response to the CMS Innovation Center’s December 2013 request for information that solicited input on the Pioneer ACO Model as well as new ACO models.

On October 8, CMS released detailed quality and financial data by ACO for the first two years of the Pioneer Program. With regard to quality performance, average quality scores for the Pioneers improved by 19 percent year-to-year, with improved performance on 28 of 33 measures (85 percent) between the first and second year.

Financially, in year one of the program, 13 of the Pioneers (41 percent) met or beat their expenditure benchmarks, qualifying for shared savings and garnering an average of $5.9 million, with the amounts received ranging widely. One Pioneer had to pay CMS a shared loss of $2.6 million, and the remaining 18 ACOs either did not earn shared savings or did not owe CMS money because of  losses.

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The History of the Sustainable Growth Rate, and How Its Repeal and ACOs are Linked

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

Section 4503 of the Balanced Budget Act of 1997, enacted on Aug. 5, 1997, replaced the Medicare Volume Performance Standard (MVPS) with the sustainable growth rate (SGR) provision, a formulaic approach intended to restrain the growth of Medicare spending on physician services. The SGR formula incorporates medical inflation, the projected growth of per capita gross domestic product (GDP), projected growth in the number of Medicare beneficiaries, and changes in law or regulation.

The SGR requires Medicare each year to set a total budget for spending on physician services for the following year. If actual spending exceeds that budget, the Medicare conversion factor that is applied to more than 7,400 unique covered physician and therapy services in subsequent years is to be reduced so that over time, cumulative actual spending will not exceed cumulative budgeted (targeted) spending, with April 1, 1996, as the starting point for both.

In part because of the effective lobbying efforts of physicians, Congress has temporarily suspended application of the SGR by passing legislative overrides or “doc fixes” 17 times from 2003 to 2014. (It utilized five different pieces of legislation in 2010 alone to avoid cuts exceeding 20 percent.) As a result, actual spending has exceeded budget every year during these years. Because the annual fee update must be adjusted not only for the prior year’s variance between budgeted and actual spending but also for the cumulative variance since 1996, the next proposed update, effective April 1, 2015, is a reduction in Medicare physician fees of 20.9 percent.

Those hoping for a permanent repeal of the SGR—which is pretty much everybody, given the almost universal disdain for it—entered 2014 with a sense of optimism that this would be the year. These hopes were fueled by bipartisan and bicameral support of SGR reform proposals that emerged at the end of 2013 and significantly lower estimates by the Congressional Budget Office (CBO) of the cost of a long-term doc fix.

Ultimately, the inability to figure out how to pay for the SGR repeal blocked the passage of the permanent reform bills, and Congress settled for yet another short-term patch. On March 27, 2014, the House of Representatives, under a suspension of normal rules, approved via a voice vote H.R. 4302, the Protecting Access to Medicare Act of 2014. The bill provides a patch to the SGR that would avoid a 24.4 percent reduction to Medicare’s Physician Fee Schedule (PFS), effective April 1, 2014, replacing the scheduled reduction with a 0.5 percent increase to the PFS through Dec. 31, 2014, and a 0 percent increase for Jan. 1, 2015, through March 31, 2015. Four days later, the Senate approved H.R. 4302 on a bipartisan 64-35 vote, and President Barack Obama signed the bill into law.

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CMS Proposes Changes to the Medicare Shared Savings Program Quality Measures

Ken Perez
Ken Perez

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

In the wake of mixed initial results for the Pioneer ACO Model and Medicare Shared Savings Program (MSSP), this is the year for the Centers for Medicare & Medicaid Services (CMS) to take the feedback it has received and revamp its ACO programs.

The proposed rule for the 2015 Physician Fee Schedule (PFS), a 609-page document released on June 19, 2014, interestingly included the first installment of modifications to the ACO programs. The proposed rule devoted 52 pages to changes to the quality measures for the MSSP. Throughout the document, CMS emphasized its intent to align the numerous physician quality reporting programs, such as the Medicare EHR Incentive Program for Eligible Professionals and the MSSP, as much as possible, to reduce the administrative burden on the eligible professionals and group practices participating in these programs.

The final rule for the MSSP, issued in November 2011, presented 33 quality measures against which ACOs would be measured. These quality measures also apply to Pioneer ACOs. The measures pertain to four domains: patient/care giver experience, care coordination/patient safety, preventive health, and at-risk populations.

The proposed rule recommends the addition of the following 12 new measures:

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