CMS’ new payment models aim to ease the transition to risk

Providers and analysts are calling new value-based physician payment models announced last week by the CMS game-changers, potentially signaling a new era in which many providers are taking on downside risk and responsibility for total cost of care. 

The five new voluntary payment models, which are available under the Primary Care First heading through the CMS Center for Medicare and Medicaid Innovation, vary in levels of risk, but all involve providers receiving fixed payments based on their population of Medicare beneficiaries. They’re also designed to encourage improvement on quality metrics and lower costs through bonuses and penalties. 

Two of the models are essentially riskier versions of existing primary-care experiments, while the remaining three are Direct Contracting models that are new to Medicare, with two requiring providers to take on full risk.
Providers and analysts alike are touting the models as a significant moment in the movement to value-based payment, which has been talked about for years with little actual adoption. 

“The shift won’t happen by tomorrow, but over the next two to four years you are going to see a drastically different marketplace, and I think looking back at what actually caused it to change, we are going to look back at this moment—I think it’s potentially that significant. We will have to see how providers respond and take advantage of the opportunity,” said Dennis Butts, managing director at consultancy Navigant. 

Although the models are voluntary, the agency expects more than 25% of all Medicare fee-for-service beneficiaries will be involved, or nearly 11 million people. 

Providers expressed support for the models, praising the flexibility the experimental approaches allow for physicians to address the needs of their patient population.

They also said the models’ fixed payments reduce administrative burden by eliminating much of the work involved with revenue cycle contracts, and also maintain or reduce quality-reporting demands. 

“We know that physicians spend an awful lot of time on administrative work and some of that administrative work is related to revenue cycle—getting rid of the revenue cycle is going to free up physician time with patients,” said Dr. James Madara, CEO of the American Medical Association. 

The CMS also plans to encourage other payers, including Medicare Advantage plans and purely commercial insurers, to align their contract designs with the primary-care models, which will likely help ease reporting requirements. 

In terms of the downside risk required, specifically with regard to the two primary-care models, provider stakeholders said it’s likely manageable, especially considering the administrative benefits involved in the models. Participation in the Primary Care First models lets practices receive a bonus of up to 50% of Medicare revenue with a downside risk of 10%. 

“Can practices manage 10% downstream? Yes, they can manage it. The question is are they willing to accept it,” said Shawn Martin, senior vice president for advocacy and practice advancement at the American Academy of Family Physicians. 

Martin said willingness to participate will likely come down to how much revenue a practice has tied to Medicare fee-for-service. If a practice has a significant percentage of Medicare beneficiaries, the potential for a big bonus compared to a relatively small loss will probably be appealing. 

“If I had $100,000 in Medicare billing annually on my books, I don’t know that $10,000 of risk would keep me from receiving potentially $50,000 in bonuses,” he said. 

The possible bonuses are much higher than what accountable care organizations can currently receive in the Medicare Shared Savings Program, with some straying away from the program as a result of the lower rewards, Butts said. 

In that program, ACOs must share savings with Medicare, and depending on their contract, ACOs can receive at most 75% in shared savings with the agency. The benchmark design also causes some ACOs that perform better than their peers to miss out on savings because they need to keep improving. 

“Many health systems felt this is no longer good business, and that the economic model doesn’t support them,” Butts said. 

Issues with benchmarks, data and unpredictable changes bog down many of the CMS’ current value-based purchasing programs and cause providers to leave. The agency recently saw participants in the Next Generation ACO program drop to 43 from 51.

Madara said it’s critical that the CMS be willing to change these new models as they progress in order to maintain buy-in over the long term. “In government programs and trials, many of them were really well conceived and thought out in a theoretical way, but I think when you get the early returns and feedback, are you willing to iterate or are you stuck in a concrete mode? We have seen a fair amount of the latter; this a chance to see some of the former,” he said. 

The CMS for now will only take applicants with experience in value-based payment, but CMS Administrator Seema Verma said some of the models will eventually be mandatory during a speech at the National Association of ACOs conference. She also encouraged ACOs to join the models. 

Privia Quality Network, which has more than 100,000 beneficiaries in Washington, D.C., Maryland and Virginia, is leaning toward signing up for  the enhanced track in the Medicare Shared Savings Program, which has the most downside risk, said Dr. Fred Taweel, a primary-care physician based in Reston, Va., who is part of the ACO. 

These new models present another option for Privia. 

It’s unclear if a provider can be part of the shared-savings program as well as one of the new models. The CMS didn’t respond by deadline.

The three Direct Contracting models take approaches similar to Medicare Advantage, which might attract physicians, said Chet Speed, chief policy officer of AMGA. 

About 30% of AMGA members’ revenue is tied to Medicare Advantage, while 15% is tied to ACOs. “There is significant support for Medicare Advantage,” Speed said. 

Providers like the predictability of the arrangements, which have stable contractual agreements that allow practices to plan in advance. “When the details come out (about the models), and if it’s an attractive regulatory framework, then it could possibly attract people in Medicare Advantage,” he said. 

One of the Direct Contracting options is a geographic-based demonstration in which a health system, insurance plan or even a health technology company would bear full risk for at least 75,000 fee-for-service Medicare patients within a targeted region. The details of this model are the least flushed out, and the CMS is asking for input on its design through a request for information. 

The Direct Contracting process will start in January 2020 with an initial alignment year for organizations, while performance periods will begin a year later and will be for five years, according to the CMS.

Butts said the ability for technology companies to be involved in the market is “completely game-changing.” 

With tech companies leading the effort they can test new products and care designs with large patient populations and not face opposition from providers to take on more risk. 

Decisions are “no longer going to be in the provider boardroom,” Butts said. “Now it’s the hands of doctors, consumers and tech companies to drive innovation in the marketplace. The game is open for new and transformed healthcare delivery to emerge.”

Dr. Jason Mitchell, chief medical and clinical transformation officer of Albuquerque-based Presbyterian Healthcare Services, said involving technology companies in these models can work, but he doesn’t want the progress that’s already been made to be forgotten. The integrated delivery system has a long history of working on risk-based payment models with about 70% of its patients tied to those contracts. 

“They don’t have to reinvent the wheel,” he said. “We continue to innovate on a monthly basis, we have amazing things we have been doing, so I’m hoping they will leverage some of that experience.”