Editor’s note: This perspective was originally published on the Health Affairs Blog on Aug. 11, 2020.
The prognosis of COVID-19 on the US health care system may include yet another devastating outcome: delaying its transition to value-based care. The Centers for Medicare and Medicaid Services (CMS) has stopped accepting applications for new accountable care organizations (ACOs) in 2021. Furthermore, it has amended quality reporting requirements for ACOs, reduced their downside risk, and excluded costs attributed to COVID-19 from shared savings calculations. These actions justifiably alleviate some pressure from hospitals dealing with COVID-19. But if these changes continue indefinitely alongside this pandemic, the consequences may be dire.
Let’s be clear: CMS’s actions are rooted in good intentions and seek to protect existing ACOs. According to the National Association of ACOs’ April survey of 226 ACOs nationwide, nearly 60 percent are likely to leave the Medicare Shared Savings Program (MSSP) over concerns about repaying losses in 2020 because of COVID-19. But these numbers do not mean value-based care is unworkable. Many of these ACOs are still paid mainly through fee-for-service, meaning that most of their revenue come from high-margin elective procedures. Specialists at these practices have seen large reductions in relative value units. Conversely, value-based practices paid under capitation are poised to maintain steady revenues during the pandemic despite reduced patient volumes. To help the US health care system complete its transition to value-based care, we believe CMS should take the following actions.
Support The Adoption And Retention Of ACO Status
First, CMS must support the adoption and retention of ACOs. CMS recently announced that it would make favorable adjustments for Medicare Track 1+ and Next Generation ACO Models. Alongside these changes, CMS should encourage hospitals to remain in the MSSP by increasing shared savings percentages for Level A-E Basic and Enhanced ACOs. For example, if the ACO remains in the MSSP for at least three years, CMS could increase the rate of first dollar savings, or the percentage of savings accrued by ACOs, by 20 percent. Another option is to decrease the minimum savings rate, or the amount that needs to be saved before ACOs begin to receive bonuses. By using either or both of these options, CMS would not only reduce downside risk but increase upside reward—further incentivizing providers to retain ACO status.
Beyond supporting ACOs, CMS should encourage primary care doctors and hospitals that are not participating in MSSP to transition to value-based care. Rather than pausing ACO applications, it should offer applications in exchange for potential sustainability payments. Specifically, CMS could provide $100 per Medicare and Medicaid patient per month for the rest of 2020 to help offset losses from COVID-19 if the provider receives ACO status and agrees to remain in the MSSP for at least three years. Others have suggested similar sustainability payments in exchange for shifting to fee per patient over the next three years for primary care and bundled payments for specialists.
Adapt New Value-Based Models To COVID-19
Second, payers must adapt new value-based models to COVID-19. Many hospitals that are considering ending their ACO contracts believe that pure fee-for-service payments will help recoup financial losses from 2020. This, of course, assumes that hospitals perform high-margin elective procedures in the near future. The irony is that the exact payment mechanism that positioned these hospitals to struggle during the pandemic is what they hope will save them once the pandemic ends.
There’s a better path forward: Payers should ensure that hospitals move ahead toward value-based care instead of retrenching with fee-for-service. CMS could offer upfront per-member-per-month payments to ACOs at a rate that compensates for losses under fee-for-service. Transitioning to capitation would help ensure that hospitals are financially resilient during pandemics, now and in the future. Furthermore, private payers could partner with primary care physicians and hospitals to research and develop prospective bundled payments for COVID-19 using cost data from cases earlier this year. Assuming the payments are fine-tuned and risk-adjusted, bundled payments could help prevent the harms of overutilization on patients, while controlling unnecessary expenditures.
Prevent Acquisition Of Practices By Private Equity Or Hospitals
Third, state and federal officials must prevent the acquisition of practices and ACOs by private equity or other hospitals. Throughout the United States, hundreds of hospitals could close within a year due to financial losses from COVID-19. Furthermore, a recent survey conducted by the Primary Care Collaborative found that thousands of independent primary care practices are unsure if they will have enough cash to remain open. These hospitals and independent practices are at risk of acquisition by private equity giants or large hospital systems. In the short term, private equity and wealthier hospitals can bankroll failed practices and hospitals until COVID-19 restrictions loosen. However, once these restrictions are lifted, the acquiring party can profit by ensuring that the hospital or physician group remains in fee-for-service and provides high-margin elective procedures, rather than transitioning to value-based care. These acquisitions will also lead to higher prices and rates of out-of-network billing for patients—a trend that has been documented previously with physician staffing companies that were acquired by private equity.
Congress therefore should be wary about acquisitions of failed practices during COVID-19. The only party that can bankroll a failing practice should be private payers that enter value-based contracts tying payments to quality (that is, LAN Category 2b–4 arrangements). Inevitably, such restrictions will garner legal challenges from private equity, which may necessitate state-level reforms to Corporate Practice of Medicine Doctrine. In the meantime, Congress, through its COVID-19 Accelerated Payment Program, could offer grants instead of loans to practices and ACOs to help them maintain independence.
COVID-19 threatens our health care system in the present but also risks its future by delaying the adoption of value-based care. The longer we proceed under pure fee-for-service models, the longer health care costs will spiral with limited improvements in quality. To prevent this trend, we suggest supporting the adoption and existence of ACOs; creating opportunities for new value-based payments; and preventing the loss of value-based opportunities via private equity or large hospital network acquisitions. These recommendations will help ensure our hospitals focus aggressively on what matters the most: value for their patients.