The Accountable Care Act permits the Secretary of HHS to implement partial capitation models or any other payment model the Secretary determines will improve quality and efficiency. The Proposed Rule states that the Secretary will test partial capitation models in the Innovation Center. Pursuant to the “other payment model” authority, however, the Proposed Rule would require all ACOs to participate in a Risk-Based Payment Model by their third year of participation, at the latest. The Secretary believes that this type of “Two-Sided” shared risk model would cause ACOs to achieve greater efficiencies than the “One-Sided” shared savings model.
The Proposed Rule would permit a “Two Track” method of initial participation. An ACO may elect (i) to participate in the Two-Sided Model beginning the first year or (ii) to participate in the One-Sided Model for the first two years and then automatically transition to the Two-Sided Model in the third year (and thereafter).
To encourage and reward participation, the Two-Sided Model would enhance the Shared Savings otherwise available in the One-Sided Model as follows:
- The maximum upside sharing rate would increase from 52.5% to 65% (a maximum of 60% if there is no FQHC/RHC Participation)
- The maximum shared savings cap would be increased from 7.5% to 10% of the ACO’s benchmark
The Two-Sided Model would consist of the following Shared Loss terms:
- A “Minimum Loss Rate” of 2% above the ACO’s benchmark before the ACO must pay a portion of the loss
- Loss sharing on the excess above the Minimum Loss Rate at the rate of one minus the ACO’s achieved shared savings rate (e.g., a loss sharing rate of 40% if the ACO’s shared savings rate is 60%)
- A phased loss-sharing cap of 5 percent of the ACO’s benchmark in the first year of Two-Sided Model participation, 7.5% in year 2, and 10% in year 3
One result of the proposed Shared Loss provisions is that if an ACO must share losses in a particular year, then the proportion of that loss for which the ACO will be responsible will increase if and as the ACO fails to achieve the maximum quality points. Therefore, an ACO that is both inefficient and lacks high quality will bear an increased amount of the loss.
The Proposed Rule identifies several mechanisms that CMS might implement to attempt to assure that an ACO will be able to pay its portion of the Shared Loss, if any. The primary proposed means is to withhold 25% of an ACO’s earned performance payment (the “25% Retention”) until that amount is reconciled after the third year. The Proposed Rule would also require each ACO to establish self-executing methods such as reinsurance, escrowed funds, surety bonds, a line of credit, or another appropriate repayment mechanism to ensure repayment of any Shared Loss obligation.
An ACO that experiences a net loss against its baseline during its first 3-year agreement period must publicly report its loss and may not reapply to participate in the Shared Savings Program.
Monitoring and Termination of ACOs
The Two-Sided Model raises the stakes for an ACO by creating the risk of increased cost (through lower net reimbursement). For this reason, and to seek to ensure compliance generally, the Proposed Rule would require an ACO to certify its reported data and to permit CMS to monitor its behaviors to ensure compliance with program requirements. The Proposed Rule states that sanctions could include termination from the Shared Savings program and other “appropriate sanctions,” which the Proposed Rule does not describe. An ACO will forfeit the 25% Retention if the ACO or CMS terminates the 3-year agreement. A provider or supplier that engages in conduct that would cause its ACO to violate a Shared Savings program requirement – for example, withholding care from a beneficiary – would remain subject to existing sanctions (e.g., CMPs).