The Future of Physician Payment Reform
October 11, 2018
As part of the ACA, the Center for Medicare and Medicaid Services (CMS) was responsible for creating the Medicare Shared Savings Program (MSSP), the largest ACO administered by CMS. Despite continued calls to repeal the ACA, the larger effort to fundamentally shift physician payment and incentives from rewarding volume to promoting value is with no doubt here to stay. Successfully passed with solid bipartisan support, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) makes clear that the intention of Congress is to accelerate the transition from traditional fee-for-service (FFS) payment to value-based alternative payment models (APMs), of which ACOs are a major part.
MACRA repealed the sustainable growth rate system, which was formerly used by CMS to pay physicians under Medicare. In its place, the law set provisions for how APM participation would affect provider payment and statutory updates to clinician billing. Physicians can choose to join the Merit-based Incentive Payment System (MIPS), a modified FFS model, or participate in a qualified Advanced APM such as an ACO. Although most physicians are currently in MIPS, providers are rapidly joining ACOs.
Implementing ACO models are at the forefront of efforts to tie physician payment to quality and value. Currently, ACOs can either choose to operate under (1) a one-sided risk model (so-called Track 1), where they receive shared savings from reducing health care costs but are not liable for exceeding their unique Medicare Parts A and B FFS target cost, or (2) a two-sided risk model (Track 2 or Track 3), where they share losses for overspending but may receive a greater portion of shared savings at a rate up to 60% for Track 2 and 75% for Track 3 based on their quality performance. Evidence suggests that this realignment of incentives improves the quality of care and reduces costs although they have not been uniform across the health care system. RAND estimates that under MACRA, Medicare will decrease spending on physician services by $35 billion depending on the success of the APM designs. Affiliation with an ACO has been associated with reduced readmission, emergency department visits, and avoidable hospital admissions; CMS reports that they improved on 84% of the quality measures.
Despite demonstrating reductions in spending and improvements in quality, ACOs continue to face challenges. ACOs were created to enhance care coordination, eliminate repetitive or unnecessary services, and reduce overhead expenses by incentivizing vertical integration and physician consolidation. In forming an ACO, providers are forced to integrate clinically, structurally, and at times, financially. This can lead to undesirable vertical integration, which has been associated with higher health care prices, increased spending, and reduced patient satisfaction. Although consolidation was underway prior to the establishment of ACOs, their incentive structures and subsequent requirements nonetheless favor integration. These requirements include patient volume cutoffs and the need to overhaul their electronic medical records (EMRs). To address growing market concentration, policymakers should consider facilitating the transition to EMRs, restricting anti-competitive behaviors, and practicing stricter enforcement of antitrust laws. The benefits of coordinated care through integration must be weighed against the potential harms of reduced market competition. Targeting vertical mergers between hospitals and physician practices could prove fruitful as these mergers impede competition and do little to improve quality. Moreover, financial integration may not be needed to reap the benefits of clinical coordination. Coordination without consolidation could enable significant savings and reduce utilization by facilitating quality measure reporting, standardizing payments, and decreasing administrative burdens on physicians.
The formation and benefits of ACOs have also been uneven. ACOs currently tend to form in urban and affluent areas. Small and rural practices lack resources and face technical barriers in adopting EMRs and reporting quality measures. ACOs might also exacerbate existing health care disparities. Not only do vulnerable patients have less access to providers participating in ACOs, but they also receive worse care as indicated by provider performance on quality measures. Physicians serving vulnerable populations may deem it too difficult to achieve quality and spending targets. So in response, CMS has employed the ACO Investment Model to encourage the formation of new ACOs in rural and underserved areas. Yet, additional incentives or start-up assistance may be necessary to address these disparities.
Policymakers must confront additional challenges such as gauging the necessary degree of risk that ought to be undertaken in order to stimulate physician behavioral change and overcome incentives for providers to engage in rationing and denial of care. Additional risk adjustments that account for the socioeconomic characteristics of the underlying patient panel would encourage providers to join ACOs. These reforms to the ACO model would further the Triple Aim of improving patient care, bettering the health of populations, and reducing the per capita costs of health care.
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