The future of the Medicare shared savings program: Pathways guides ACOs into risk

The first participants in the revamped Medicare Shared Savings program – now called Pathways to Success – will start in a few short weeks in July 2019. Centers for Medicare and Medicaid Services (CMS) officials are eager to get more ACOs into two-sided risk and Pathways to Success takes some big steps towards that goal – allowing Medicare providers to maintain their incomes by taking responsibility for the cost of care. There is a lot to like about the new program and health systems and physician groups should strongly consider joining.

Transitioning from fee-for-service

Medicare reimbursement for physicians will fall dramatically in the next few years for providers that don’t take on some of the risk of patient costs. It’s part of the MACRA law from 2015 that changed how doctors are paid by Medicare. Joining an ACO with a clear path to two-sided risk is one way to avoid the steep decline in reimbursement.

Through Pathways, Medicare Shared Savings Program ACOs will soon be on a faster path to risk. ACOs used to have up to six years in an ACO before there was any chance of having to pay back higher-than-expected costs. Pathways to Success allows a maximum of 2 to 3 years in an upside-only arrangement. After the first upside-only years in Pathways, the ACO gradually progresses to more downside risk each year.

ACOs that started in 2018 and earlier will be watching the Pathways rollout closely – they still could switch to the new program for a January 2020 start. There are a few things to think about as the new program gets underway.

First, a quick review of the benefits of Pathways:

1. The Basic and Enhanced tracks of the new program replace the old Tracks 1, 1+, 2, and 3, and will have five-year, rather than three-year, agreement periods. This gives ACOs an additional two years under their benchmark to earn shared savings before it resets to a new, presumably lower, level. This change offers more stability and predictability, especially considering the higher stakes of downside risk.

2. The benchmark calculation for Pathways takes regional factors into account in the very first agreement period. ACOs and advocates had been pushing for this change for years. The new formula can help ACOs that are efficient relative to their region.

3. Pathways includes a new methodology for factoring in risk scores that allows for 3 percent growth over the length of the agreement period. In short, ACOs will get more credit for serving beneficiaries with more complex or intense health needs. This change underscores the importance of every ACO using proper HCC coding to accurately reflect the health status of their beneficiary population.

4.  Pathways’ upside-only years have a shared savings rate of 40 percent, rather than 50 percent in the current program. This could be a bit intimidating for those who had grown used to the 50:50 shared savings split. Fortunately, CMS didn’t bring the sharing percentage down all the way to 25 percent, as originally proposed. On reflection, 40 percent isn’t the bad news some had feared. The change in risk calculation and benchmarking can more than make up the difference for ACOs earning a reachable level of savings: 1 percent accumulating annually.  

5. The new program offers specific help to smaller, rural, and physician-only ACOs by designating them as low-revenue ACOs and allowing more time in a lower risk arrangement. ACOs will qualify if the ACOs providers control less than 35 percent of claims for their attributed Medicare beneficiaries. The low-revenue ACOs will be able to spend an extra year in an upside only arrangement (immediately jumping two risk levels thereafter) and can spend a second five-year agreement period in the Basic Track (all at the highest level of risk) while high-revenue ACOs all must move to the Enhanced track after one agreement period in Basic.

Looming deadlines

Current ACOs can either finish their three-year agreement period or transition to Pathways to Success early. Some ACOs are making that switch in July 2019, after meeting some very tight deadlines to get there. Since the final program rules came out later than expected, CMS offered a six-month agreement period extension for ACOs that would have finished at the end of 2018. CMS also established a special six-month first Pathways agreement period from July 1 through December 31, 2019. ACOs that wanted to start or switch over to Pathways in July 2019 had only a few weeks to submit a letter of intent to apply, quickly followed by a full application.

For ACOs that want to start or switch in January 2020, there is still time to take action. CMS is asking for a notice of intent to apply between June 11 and June 28, 2019 and applications will be accepted from July 1 through July 29, 2019. Once an application is submitted there will be three rounds of requests for information – opportunities for applications to make modifications and correct deficiencies.

ACOs appear satisfied 

ACOs seem to be enthusiastic about the new Pathways to Success program. According to CMS, 90 percent of ACOs that would have ended in 2018 extended for six months and 85 percent of those applied for Pathways to Success. We see these new program rules as a vote of confidence in the future of the Shared Savings Program.

Since these new program rules came out, CMS has been busy announcing new models that push providers even more quickly into risk. The new Primary Care First and Direct Contracting models, announced just last month, are some of the highest profile new initiatives. The unmistakable message is that CMS will pay for health care value and is moving away from fee-for-service at every opportunity.

Value-based payment is here to stay and there are many options for providers ready to make the switch. In recent weeks, the CMS administrator has even started to talk about implementing mandatory alternative payment models, which would leave much less choice for providers about when to jump into value-based payment. For providers thinking about making the transition now, Pathways is worth a look.