Policy Brief: Applying Risk Adjustment Caps in an Equitable Manner
By The Aledade Policy Team
Accountable care organizations have demonstrated success in improving quality of care for patients, including underserved and vulnerable individuals, while saving $13.3 billion in gross savings and $4.7 billion in net savings to Medicare in the past decade. The Centers for Medicare and Medicaid has set a goal of having all beneficiaries in accountable care models by 2030. Furthering this goal aligns with another strategic aim for CMS–advancing health equity.
The 2024 rule-making cycle provides a critical opportunity to improve the Medicare Shared Savings Program, the nation’s largest value-based care program. CMS needs to make changes in the program to jump start growth and meet the agency’s goals for accountable care. Meeting these goals will also require making the program compelling to current participants so they don’t drop out. Growth in the MSSP has stagnated over the past four years while Medicare Advantage continues to grow.
The 2024 rule-making cycle provides a critical opportunity to improve the Medicare Shared Savings Program (MSSP), the nation’s largest value-based care program. CMS needs to make changes in the program to jump start growth and meet the agency’s goals for accountable care.
The fix for a well-meaning policy with unintended consequences.
One area where CMS can make immediate improvements is in fixing an anomaly in the MSSP risk adjustment methodology. To prevent large increases in risk scores seen in other programs, CMS caps the growth of an ACO’s aggregate risk score at 3 percent over a five-year contract. However, CMS does not apply the same cap to the population that an ACO is compared to, creating inequities and undermining the purpose of the program. For example, if an ACO’s risk score goes up 6 percent and the region’s risk score also increases 6 percent, CMS will calculate risk-adjusted cost growth as if the ACO’s risk score went up by only 3 percent but CMS also assumes the risk score of the comparison population went up by 6 percent. This imbalance reduces an ACO’s “performance” by a devastating 3 percent even though the ACO simply matched its region’s risk growth.
This policy is also driving inequity. Disabled and dually eligible beneficiaries are more than twice as likely to have risk growth that exceeds the cap as those who are in the aged non-dual category. CMS’ move to exclude demographic risk score increases and cap the ACO’s risk as a whole, rather than by individual eligibility categories, is a step in the right direction but it is not enough.
CMS has documented that the percentage of ACOs already feeling pain from this policy jumped from 4 percent to 11 percent in 2021 and an analysis by Milliman forecasts that 25 percent of ACOs will have their savings reduced by this policy by 2024. This policy is inadvertently sending a message to ACOs to not grow in places where people are getting sicker and have higher needs, working against CMS’ equity and accountable care goals.
Hearing from the front lines–what independent physicians in Florida had to say.
Aledade works with three physicians who participate in ACOs where this problem has particularly negative repercussions.
According to Dr. Shazia Nasir, “We were early pioneers of the ACO model. Setting up the infrastructure required tens of thousands of hours to learn all the rules and reorganize our practice and hire more staff. The result is that over the years our ACO has been successful in saving money for Medicare….but with uncapped risk for the region and capped for the ACO, it really takes the incentive away. Many new physicians (starting out in practice) are opting out of Medicare and insurance and going into direct primary care models because of all this.”
"This cap is like a brick wall in front of the progress of our primary care transformation. It is detrimental to the program as a whole if physicians do not realize the reward for their value-based care work."
The physicians also spoke about the importance of keeping independent primary care practices viable. Says Dr. Nibha Mediratta, “As an independent primary care physician it has been hard to survive in this health care landscape. We have increased staffing to meet patient demand, and wages have risen significantly. We depend on shared savings and have worked hard to make the savings, so that we can stay independent and not have to merge with large hospital systems. We do an obsessive review of hospital feeds and see every single discharged patient to prevent readmission. We offer same-day appointments and after-hours access to decrease ER visits. We see patients for chronic care management. It seems unfair that our chance to make savings is reduced so much because we are compared to our region's benchmark, when we are capped at 3 percent. I don't think it was CMS's intention to give a negative reinforcement to physicians who are providing quality care and saving health care dollars. This policy should be changed to make a fair comparison between providers and the region's risk.”
The physicians in Florida also mentioned their concerns about the worsening primary care physician shortage. Dr. Aashiv Hari noted, “Primary care physicians are looking for exit strategies and simultaneously there are not enough new entrants. CMS programs should ensure the viability of primary care and financially encourage physicians to remain independent.” He went on to note, “A 3 percent risk cap places a ceiling on our savings when compared to the higher regional potential. This cap is like a brick wall in front of the progress of our primary care transformation. It is detrimental to the program as a whole if physicians do not realize the reward for their value-based care work. CMS is asking the least paid physician in the system to be accountable for all the expenses of Medicare beneficiaries and limiting their earning potential for this work.” In 2021, this loss cost the ACO Dr. Hari's practice participates in $3.5 million, which is a figure that is nearly double the amount of savings CMS paid them.
CMS needs impactful change–not nuanced tweaks.
Recent policies CMS has enacted have been aimed at preventing practices from dropping out of the program, for example, through giving them more time to transition to two-sided risk. Those policies are a good start to ensuring the 11 million MSSP beneficiaries served are not impacted by the innovators and early adopters exiting the program. But, to truly grow at this point, CMS needs to enact policy that attracts the early and late majorities and even the laggards. This requires examining the ten-year history of the program and putting in place policies that will help it evolve and make it a viable program for all.