Task Force Letter to CMS Regarding Next Generation ACO Model

Dr. Patrick Conway
Deputy Administrator for Innovation & Quality, CMS Chief Medical Officer
Centers for Medicare and Medicaid Services
U.S. Department of Health and Human Services
Hubert H. Humphrey Building, Room 445-G
200 Independence Avenue, SW
Washington, DC 20201

Megan Cox
Director, Division of Financial Risk
Seamless Care Models Group
Centers for Medicare and Medicaid Services
7500 Security Blvd
Baltimore, MD 21244

Re: CMS – Next Generation ACO Model

Dear Dr. Conway and Ms. Cox:

The Health Care Transformation Task Force (Task Force) is pleased to provide input to the Centers for Medicare & Medicaid Services (CMS) regarding the March 10th 2015 announcement of the Next Generation ACO Model Request for Applications (RFA) set forth by the Centers for Medicare & Medicaid Services Center for Medicare and Medicaid Innovation.

As we described in previous communications, the Task Force is an emerging group of private sector stakeholders that came together to accelerate the pace of delivery system transformation. Representing a diverse set of organizations from various segments of the industry – currently including providers, health plans, employers, consumers and academic institutions – we share a common commitment to transform our respective business and clinical models to deliver the triple aim of better health, better care and reduced costs. Our organizations aspire to put 75 percent of their business into value-based arrangements that focus on the Triple Aim of better health, better care and lower costs by 2020. We hope to provide a critical mass of policy, operational and technical support from the private sector that, when combined with the work being done by CMS and other public and private stakeholders, can increase the momentum of delivery system transformation.

The Task Force applauds many components of the program, including the beneficiary attestation provisions, waiver of the Skilled Nursing Facility 3-day rule, enhanced opportunities for using telehealth, and lifting the homebound requirement for post-discharge nursing visit. These provisions should enhance an ACO’s ability to provide quality care and improve patient outcomes, as well as achieve cost efficiencies.

We have also identified three categories of change to improve this model. In order of importance:

Changes to the Financial Model are Critical

Based on information in the RFA, we understand the financial model in the Next Generation ACO program to contain several improvements including a refined benchmarking methodology and a selection of alternative payment mechanisms. However, prior to the release of the detailed financial methodology paper CMS will make available to all potential participants, we offer our recommendations on how the financial model could be further improved, namely changes to the adjustment to the benchmark, population-based payments, and other payment mechanisms requiring additional explanation.

A. We propose continuing with a blended year baseline so that one calendar year does not unfairly hurt or help an ACO.

As detailed in our letter on changes to the MSSP, we recommend a variety of options for ACOs to move to a regionally-based benchmark over time to facilitate the appropriate pace of transition for each ACO. We provide the relevant excerpt of our February 6, 2015 communication as an Attachment to this communication.

B. Framing the adjustor to the benchmark as a “discount” creates confusion, and lack of detail leaves too much open to interpretation.

Unlike the MSSP and Pioneer programs, Next Generation will not utilize a minimum savings rate (MSR), but instead will apply a downward adjustment to the benchmark taking into account an ACO’s quality score as well as regional and national efficiency ratios. The description of the discount is confusing and some ACOs interpret the new methodology to be an MSR without first dollar savings and so, on its face, less financially attractive than an MSR. We recommend that CMS use the MSR/MLR approach for Risk Arrangement A programs (80% risk share) and use the “discount” approach only for Risk Arrangement B programs (100% risk share). In addition, CMS should provide more detailed examples that show how the regional and national efficiency ratios will be calculated. CMS should also consider the quality differential. The financial effects of quality – where in the worst case quality increases the discount by 1% – appear to be of only limited consequence, which may be interpreted by some as decreasing the importance of quality. We recommend that CMS increase the financial effects of quality to more clearly emphasize and reward this essential component of accountable care.

C. We ask CMS to closely monitor the alignment of beneficiaries to ensure there is no unintended interaction between the hierarchical condition category (HCC) risk adjustment cap and the Next Generation ACO population.

As part of the prospective benchmarking methodology of the Next Generation ACO Model, CMS will apply prospective HCC risk scores to both the baseline and the PY populations using a cross-sectional methodology. An ACO’s full HCC risk score (both demographic and diagnostic components of the score) will be allowed to grow or contract with only a 3 percent maximum cap on the combined demographic and health status factors, compared to baseline. If early experiences suggest selective alignment and/or voluntary enrollment of high risk beneficiaries due to inadequate risk adjustment payments, we will ask CMS to revisit this issue urgently for possible adjustment to the cap.

D. Population-Based Payments are a potentially powerful tool to reach the triple aim and should have a farther reach.

We strongly recommend that Population-Based Payments be expanded beyond the direct provider/supplier list to Preferred Providers and SNF Affiliates. Expanding the reach of population-based payments would support a core principle of the model to “smooth ACO cash flow and improve investment capabilities.”

E. We ask CMS to provide additional resources for providers to more easily compare the risk-reward of the Next Generation ACO Model.

When a new program is released, potential participants immediately want to calculate the potential financial implications of the program. While components of the Next Generation ACO Model, such as a regional efficiency index and a more predictable benchmark are encouraging, in its current format, it is still very difficult for providers to see how they will translate into actual practice. We ask that CMS provide documents that translate the complexities of the program into clear and practical terms, including a modeling worksheet that specifies the details of the financial components.

For example, the following areas would benefit from additional information:

a) ACOs would benefit from more detail regarding the financial model generally. The information provided, to date, is insufficient to support robust analysis of the opportunities and risks presented in the program. The lack of transparency regarding the financial structure of participation may chill the submission of carefully reasoned applications. In addition, we recommend that, consistent with the MSSP program and the recently-released formal evaluation of the Pioneer program, add-ons such as Graduate Medical Education and Disproportionate Share Hospital payments be excluded when determining the national and regional efficiency measures.

b) ACOs would benefit from more detail about the capitation model. The capitation option is the carrot for some ACOs; more details would be helpful to organizations currently evaluating the model, and may attract applications from those organizations already ready for a full capitation model.

c) In explaining the regional trending component of the benchmarking methodology, the inclusion of MA language is confusing. ACOs need more detail on the trending methodology. In markets where larger ACOs can have a measurable effect on the regional growth trend, organizations could end up competing with themselves when a growth trend they helped to slow now serves to adjust their benchmark downward through the update and discount mechanisms. With more detail, we could suggest alternatives, such as creating an option to recalculate the regional efficiency factor.

Addressing each of these areas in a modeling worksheet would be very helpful. Providing documentation outside of the application interface will illustrate shared aspects and call out differences so that ACOs can have a clear picture of where the programs differ.

Additional Changes are Important

In addition to the above changes regarding the financial components of the model, we ask that CMS also consider the following requests as next in priority:

A. We believe that the $50 per year beneficiary coordinated care reward, as presented in the RFA, is not the optimal incentive to encourage beneficiary engagement with ACO providers.

Research has shown that difficulty paying medical bills is an important predictor of the likelihood that a person will forego medical and prescription drug care.1 As CMS considers beneficiary incentives, we would prefer to see cost structures that promote access to care or enhance beneficiary engagement such as removing copays or coinsurance that may act as barriers to care. Such cost structures would do more than simply reward beneficiaries for remaining in-ACO for their care, but would also encourage beneficiaries to make and keep annual visits, as well as build relationships between the patients and providers. Furthermore, such cost structures (e.g., waived/lower fees on premiums, preventive care, chronic care management, and generic drugs) have been shown to be effective in other ACO programs.2 However, if CMS elects not to follow the above recommendation, we ask that CMS consider making monthly or quarterly rewards payments, rather than the currently proposed semi-annual payments. Monthly or quarterly payments would allow for increased communication closer to the time of the reward, rather than simply receiving a check in the mail months after care is accessed.

Finally, we recommend that CMMI solicit input on how ACOs and CMS can jointly communicate around the beneficiary incentive, including cobranded communication, as education will be important to help promote the benefit. This recommendation is consistent with our recommendations to the MSSP program for collaborative communication for patient attribution.

B. The Next Generation model presents an opportunity to strengthen patient engagement in alternative payment systems.

In addition to communications from the ACO regarding voluntary alignment and the potential benefit enhancements associated with alignment, CMS could partner with the ACOs to provide educational materials to help ensure beneficiaries understand who has access to the benefit enhancements in the Next Generation ACO Model.

C. We ask CMS to provide process guidance to those organizations that are likely to apply to both the Next Generation ACO program and the Medicare Shared Savings Program (MSSP) Track 3.

There are many similarities between the proposed MSSP Track 3 program and the Next Generation ACO, as both programs are designed for ACOs ready to take on increased performance-based risk. Unfortunately, the timing for these two alternatives does not align. Specifically, groups applying to the Next Generation Model are expected to submit a letter of intent by May 1st and an application by June 1st, with the expectation of contracts beginning January 2016. That same level of clarity does not yet exist for the MSSP Track 3 program. To navigate this situation, we recommend that CMS offer those ACOs that are not successful in entering the Next Generation program the option to select MSSP Track 3 as a default alternative at that time. This will allow organizations to focus their efforts on the Next Generation model now, knowing that MSSP Track 3 will be an option later if determined to be a better fit, but without having to spend equal time evaluating and applying for both models in parallel.

Alternatively, we recommend that organizations who submit a Letter of Intent for the Next Generation ACO Model be given the option to select MSSP Track 3 as a default alternative; and by selecting, their information would then be automatically considered for Track 3 where it applies. If there is additional information that applies to Track 3 and not Next Generation, that information would be called out and included toward the end of the Next Generation application interface. Not only will this streamline the application process for ACOs, but it will also allow CMS to gauge the interest in Track 3 prior to the release of the final rule.

Finally, we raise the following issues as areas where additional information would be helpful, or where changes will be helpful to advancing the model but are unlikely to have an immediate influence.

  • We ask that CMS explain how a beneficiary’s opt-out preference will be carried through from another Medicare ACO initiative to the Next Generation Model if the beneficiary’s data has been de-identified.
  • The Next Generation model is still fundamentally an historical-cost-based model and so still will not be attractive to ACOs who are historically low cost or who have used Pioneer to drive down costs, or who simply may have had an unusually low cost trend in the 2014 baseline year. We recommend that the model move more quickly and explicitly – with details on the transition – to a geographically-based benchmark.
  • We request CMS to explain why, in initial performance years, voluntary alignment is limited to currently and previously-aligned beneficiaries.
  • We recommend that beneficiaries be able to view and compare the quality performance of Preferred Providers, SNF Affiliates and other participating providers. In addition, beyond the application stage, Next Generation ACOs should be monitored for compliance with the rule that SNF Affiliates must have a quality rating of three or more stars under the CMS 5-Star Quality Rating System.
  • We believe that the Next Generation ACO model could be advanced enough to pilot an authorization process within traditional Medicare regarding LTCH and IRF admissions. The Task Force would be pleased to take the first steps to develop a model authorization process for your consideration, such as a physician reviewer role for LTCH and IRF admissions, building from MedPAC deliberations.3 This work may be appropriate, then, for consideration by the Health Care Payment Learning and Action Network.

Thank you for the opportunity to provide this input. The Task Force sees the suite of
Medicare ACO programs—including the Next Generation ACO—as a pillar in advancing the adoption of value-based payment. We welcome the opportunity to further discuss these recommendations with you.

In addition to members of the Task Force (noted in the signature block below), the
American Medical Association contributed to and supports the content of this

Please contact Susan C. Winckler at susan@leavittpartners.com with any questions about this communication.


Lee Sacks
EVP Chief Medical Officer
Advocate Health Care

Francis Soistman
Executive Vice President & Head of Government Services

Farzad Mostashari
Founder & CEO
Aledade, Inc.

Peter Leibold
Chief Advocacy Officer

Emily Brower
Executive Director, Accountable Care Programs
Atrius Health

Christina Severin
President and CEO
Beth Israel Deaconess Care Organization

Dana Gelb Safran
SVP Performance Measurement & Improvement
Blue Cross Blue Shield Massachusetts

Joe Hohner
Executive Vice President, Health Care Value
Blue Cross Blue Shield Michigan

Kristen Miranda
VP Strategic Partnerships & Innovation
Blue Shield of California

Mark McClellan
Director, Health Care Innovation and Value Initiative
Brookings Institute

Tony Clapsis
VP and EA to Chairman, President, and CEO of Caesars
Caesar’s Entertainment Corporation

Carlton Purvis
Director, Care Transformation
Centra Health

Lynn Guillette
Director of Revenue
Dartmouth – Hitchcock

Elliot Fisher
Director for Health Policy & Clinical Practice
Dartmouth Institute for Health Policy and Clinical Practice

Lloyd Dean
President & CEO
Dignity Health

Chris Dawe
Managing Director
Evolent Health

Ronald Kuerbitz
Chief Executive Officer
Fresenius Medical Care

Steve Ondra
SVP and Enterprise Chief Medical Officer
Health Care Service Corporation – Illinois Blues

Dr. Richard Merkin
President and CEO
Heritage Development Organization

Lynn Richmond
Executive Vice President

Debra Ness
National Partnership for Women & Families

Jay Cohen
Senior Vice President

Kevin Schoeplein
President & CEO
OSF HealthCare System

David Lansky
President & CEO
Pacific Business Group on Health

Timothy Ferris
SVP, Population Health Management
Partners HealthCare

Jay Desai
Founder and CEO

Blair Childs
Senior Vice President

Joel Gilbertson
Senior Vice President
Providence Health & Services

Steve Wiggins
Remedy Partners

Michael Slubowski
President & CEO
SCL Health

Gaurov Dayal
President, Health Care Delivery, Finance and Integration
SSM Health Care

Judy Rich
President & CEO
TMC Healthcare

Paul Neumann
EVP & General Counsel
Trinity Health

1. Baughman Kristin R., Burke Ryan C., Hewit Michael S., Sudano Joseph J., Meeker James, and Hull Sharon K. Population Health Management. Associations between Difficulty Payment Medical Bills and Forgone Medical and Prescription Drug Care, ahead of print. doi:10.1089/pop.2014.0128
2. Boeing’s Preferred Partnership – no office visit copayments for seeing a primary care provider, increased contribution to HSA
Intel’s Connected Care – 100 percent coverage of preventive services, specific medications for diabetes, hypertension and other targeted conditions.
3. http://www.medpac.gov/documents/reports/mar14_ch11.pdf?sfvrsn=0

Attachment/Excerpt from February 6, 2015 Task Force
Communication on MSSP Proposed Rule

Benchmarking and Rebasing

While a transition to regional benchmark is the best option presented by CMS in the rule and we discuss it at length, the Task Force believes there is an even better option that takes into account the variability between ACOs. Because CMS cannot predict the best pace of the transition for each ACO, it should provide a set of options for moving to a regionally-based benchmark. These options would be more influenced at the beginning of the transformation process by historical spending, but blend in regional spending over time. Providing such a menu of options (including maintaining a historically-based benchmark methodology for another contract period, one or two transition glide paths, and a complete conversion to a regional benchmark) would allow more advanced ACOs to move more quickly to beating a regional target, while at the same time providing a pathway to success for less experienced ACOs.

Although CMS lays out several options, which we discuss in great detail below, we are concerned about a lack of data and detail regarding those options. We urge CMS to consider issuing a proposed rule to propose one or a combination of options. At a minimum, CMS should issue a final rule with comment to allow stakeholders to weigh in on the details of the finalized option.

Task Force Support for Option 5 MSSP Transition to Regional Benchmarks

We support option 5 as most aligned with the principles of the Task Force. There are core elements to making this option successful: defining the region, managing changes in patient acuity and adjusting the pace of the transition. CMS should flesh out these proposals and model them to receive the best input from the stakeholder community. We offer these preliminary thoughts on the three domains.

  1. Defining the Region: Every county where at least 10% of the self-attested patients or the preliminarily or prospectively assigned beneficiaries to the ACO have their primary residence is in the region.
  2. Defining the Comparison Group: All Medicare FFS beneficiaries (including those  assigned to other ACOs) not preliminarily or prospectively assigned to the ACO in the region’s counties that make up the comparison group.
  3. Dealing with small numbers: For a few ACOs, the region might not contain enough beneficiaries in the comparator group for a valid comparison. While the inclusion of beneficiaries assigned to other ACOs should go a long way to preventing small number problems, CMS should expand the included counties to any county with a preliminarily assigned beneficiary. If a valid minimum of beneficiaries in the comparison group is still not attainable, then the group can be expanded to contiguous counties.
  4. Risk adjustment: Use HCC coding comparison between the ACO assigned beneficiaries [DL1] and the comparison group to create a risk adjustment factor. This factor should be adjusted in both directions when health status changes. CMS should study whether the MA adjustment is valid or whether an ACO specific adjustment is needed. CMS should also explore the feasibility of concurrent risk adjustment which could be superior to the current prospective model.
  5. Transitioning from ACO historical costs to regional benchmark: Offer at least three paths for those organizations that choose to transition –
    1. Below regional benchmark at the end of the first contract

      1. 2nd contract: 50% (Historical Benchmark) / 50% (Regional Benchmark)
      2. 3rd contract: 20% (Historical Benchmark) / 80% (Regional Benchmark)
      3. 4th contract: 100% (Region)
    2. Above the regional benchmark at the end of the first contract

      1. 2nd contract: 80% (Historical Benchmark) / 20% (Regional Benchmark)
      2. 3rd contract: 50% (Historical Benchmark) / 50% (Regional Benchmark)
      3. 4th contract: 20% (Historical Benchmark) / 80% (Regional Benchmark)
      4. 5th contract: 100% (Regional Benchmark)
    3. Move straight to regional benchmark.

  6. Achieving Budget Neutrality: We believe this benchmark is a sustainable model that will attract more ACOs to the program, generating a greater denominator from which to generate savings to offset the shift to regional benchmarks for those in transition path (a). Furthermore, we believe that those in transition path (b) will almost certainly continue with the program in the 2nd contract and likely will continue in the 3rd contract. The reduced paid out savings (but unchanged program savings) due to the inclusion of the region in the 2nd and 3rd contract will also offset the transition costs for those in path (a). We urge CMS to consider this stakeholder feedback when examining the budget neutrality of this option.

Comments on Option 4: A 6-Year ACO Specific Benchmark

We agree with CMS that this change will encourage more ACOs to remain in the program than resetting the benchmark for each contract based on ACO specific historical costs. However, we believe that the transition to a regional benchmark is an excellent option due to its greater equity, greater incentives for continual improvement by high and low cost ACOs alike and established stakeholder support. We are concerned that the existing ACOs at the end of their first agreement period will not have sufficient time to understand the implications of the final program regulations prior to having to commit for the 2016 performance year. In addition, with only one year of fully reconciled data, it will be challenging for the ACOs to make a truly informed decision as to whether they are ready to move to a two-sided risk Track.

By extending the contract period, CMS would provide the ACOs more time to determine which Track would be the best next move. CMS would then have more data to determine which ACOs should not be allowed to continue in the program. These benefits are true even outside of rebasing. Therefore, CMS should extend the agreement period from three years to five years under all models for this and all subsequent agreement periods.

Task Force Support for Option 3: Regional Updates to Benchmarks in All Contract Years

While unnecessary in a transition to regional benchmarking, if that approach is not chosen, CMS should consider replacing the national update factor with a regional update factor. Using regional updates increases the likelihood that savings are the result of ACO-specific improvements furthering the goals of the MSSP. If CMS moves toward regional updates, it should revisit its statistical analysis of the minimum shared savings rate for Track 1 to see if the power would be increased if it were to move to regional benchmarks and therefore a lower MSR is possible.

To define the region for the regional update factor described in the previous paragraph, we refer CMS to the definition of region described previously in our discussion under Option 5.

Comments on Option 1 and 2: Even Weight of Prior Years and Returning Earned Shared Savings to the Benchmark

We support the transition to regional benchmarks as an excellent solution to increasing the equity of and sustaining the MSSP. However, we recognize that some ACOs would prefer to reset the benchmark at the end of each contract on ACO specific costs (either as part of a blend of historical benchmark and regional benchmark or solely on a historical benchmark). Both the proposal to evenly weight the historic baseline years and add back the savings in resetting the benchmarks would increase the sustainability of the MSSP; however, we stress our commitment to more wholesale reform in the near term.

Should Option 2 be adopted, we recommend one refinement. We encourage CMS to return to the benchmark all program savings. If CMS does not do so, then with each new contract the shared savings rate for the ACOs will effectively be cut in half. This will not provide sufficient incentive for providers to remain in the program.