Entries in Provider Payments (49)


Two New Milliman White Papers On MSSP Pathways to Success: 

Final Rule Revisions and Data Mining Tactics to Reduce Population Costs

By  Clive Riddle, January 11, 2019

Milliman's Noah Champagne, Charlie Mills, and Jason Karcher published a white paper on January 7th: “Pathways to Success” MSSP final rule: Key revisions to the proposed rule, which was preceded with a paper on January 4th by Kathryn V. Fitch, Adam Laurin, and Michele M. Berrios: “Pathways to Success” MSSP final rule: Faster movement to downside risk increases focus on reducing population costs.

The final rule isn’t a radical departure from the proposed rule, but as Champagne, Mills and Karcher summarize, these are the key changes from the proposed rule:

  • Levels A and B maximum shared savings percentage increased from 25% to 40% while Levels C and D increased from 30% and 40%, respectively, to 50%.
  • Less strict definition of low-revenue ACO: Now ACOs are considered “low revenue" if their historical Medicare Part A and B fee-for-service (FFS) revenues are less than 35% of the total historical expenditures for their assigned Medicare beneficiaries. 
  • High-revenue ACOs currently participating in MSSP Track 1+ will be allowed an exception to renew for one agreement period in Level E of the BASIC track.
  • New, low-revenue ACOs, not experienced with performance-based Medicare ACO initiatives, will be allowed to remain in Level B (one-sided risk) for an additional performance year. 
  • The final rule retains the proposed 3% cap on benchmark increases for risk scores. However, ACOs’ benchmarks will be fully adjusted for changes in the relative risk score when there is a decrease from the baseline year to the performance year instead of applying a 3% reduction cap as originally proposed.
  • The final rule still uses a maximum regional cost blending percentage of 50%, but finalizes a more gradual phase-in of the maximum blending percentage from the proposed rule for ACOs with historical expenditures above their regional service areas.
  • ACOs participating in the July to December 2019 performance period and selecting prospective assignment will be assigned beneficiaries based on October 2017 to September 2018 experience data.

Champagne, Mills and Karcher conclude that “CMS introduced the MSSP with the goal of transitioning ACOs to becoming risk-bearing entities and improving the quality of care provided to Medicare FFS beneficiaries. With the MSSP final rule, CMS has reaffirmed its commitment to these goals while offering greater shared savings potential to ACOs participating in the BASIC track and making the BASIC track available to a broader set of ACOs. The effect of these rule changes on specific ACOs will vary significantly depending on an ACO’s size, region, cost and quality performance, and structure.”


Fitch, Laurin and Berrios remind us that “one of the hallmarks of the new MSSP rule is faster movement to downside risk. Under the current regulations, accountable care organizations (ACOs) can stay in an upside-only track for up to six years. The new rule requires some ACOs in the Basic Track to begin assuming some downside risk in year 3.”  They stat that “under the new rule, there will be a more urgent need for ACOs to reduce population costs,” and that “two major tactics are typically implemented by health plans and ACOs to reduce population costs” are demand management and supply management.


Their report “focuses on supply management and, in particular, data mining tactics that identify medically unnecessary services.” They advocate "several data mining tactics we have seen successful ACOs adopt to effectively guide strategies to reduce medically unnecessary services and in turn reduce the ACO’s total population costs." including:

  • "For MSSP participants, the monthly Claim and Claim Line Feed (CCLF) data files provided by CMS should be routinely grouped and summarized into an actuarial cost model in order to evaluate cost drivers, identify potential targets for utilization reduction initiatives, track outcomes expected from key initiatives, and track overall costs compared to the ACO’s PMPY expenditure benchmark set by CMS."
  • "After identifying potential services to target from the actuarial cost model, organizations need to evaluate whether the utilization and spend in a service category represents efficient or inefficient care with very little or very large opportunity for improvement."
  • "ACOs must be able to target inefficient physician performance, which requires credible provider profiling. As with the benchmarking exercise described previously, physician profiling requires credible risk adjustment."
  • "ACO should also consider data mining to identify leakage of services to providers outside of the ACO." 

EHR and Patient Self-Pay: A Tale of Two Provider Woes

By Clive Riddle, November 30, 2018

In the provider administrative world, two continuing challenges causing large audible sighs are dealing with EHRs and ever-increasing levels of patient cost-sharing. An 11-page report just released on the annual HFMA/Navigant survey tackles these topics, providing findings from responses of 107 hospital and health system CFOs and revenue cycle management executives.

On the EHR front, we are told that 56% of executives “said their organizations can’t keep up with EHR upgrades or underuse available EHR functions, up from 51% last year. Moreover, 56% of executives suggested EHR adoption challenges have been equal to or outweighed benefits specific to their organization’s revenue cycle performance.”

Timothy Kinney, managing director at Navigant, says “hospitals and health systems have invested a significant amount of time and money into their EHRs, but the technology’s complexity is preventing them from realizing an immediate return on their investments.”

The survey found that 44% quickly adapt to EHR functional release, and the above cited 56% includes 39% that underutilize available EHR functions, and 17% can’t keep up with EHR functions. Regarding adoption challenges and benefits, the also above cited 56% includes 34% stating benefits and challenges are equal, and 22% who feel challenges outweigh benefits.

Regarding patient self-pay, the report tells us that 81% of executives “believe the increase in consumer responsibility for costs will continue to affect their organizations, down from 92% last year. Among them, 22% think that impact will be significant, compared to 40% last year. Executives from health systems and larger hospitals believe their organizations will be more heavily impacted by consumer self-pay.”

Navigant Managing Director James McHugh comments that “the impact of consumer self-pay on providers will only increase with the popularity of high-deductible health plans and negative changes to the economy. Providers must take advantage of opportunities to more holistically educate patients on out-of-pocket costs, predict their propensity to pay as early as possible, and secure alternative payers or financing when needed.”

The survey results seem to indicate self-pay continues to be a big issue, yet is more manageable now than a year ago. Time will tell if that trend continues.



The State of BPCI

by Clive Riddle, October 12, 2018

CMS announced that “1,299 entities have signed agreements with the agency to participate in the Administration’s Bundled Payments for Care Improvement – Advanced (BPCI Advanced) Model.  The participating entities will receive bundled payments for certain episodes of care as an alternative to fee-for-service payments that reward only the volume of care delivered. The Model participants include 832 Acute Care Hospitals and 715 Physician Group Practices – a total of 1,547 Medicare providers and suppliers, located in 49 states plus Washington, D.C. and Puerto Rico.”

CMS also reminds us that “BPCI Advanced qualifies as an Advanced Alternative Payment Model (Advanced APM) under MACRA, so participating providers can be exempted from the reporting requirements associated with the Merit-Based Incentive Payment System (MIPS).”

CMS further explains these three differences between the new BPCI Advanced Model and the original BPCI Initiative that ended September 30, 2018:

  1. BPCI Advanced offers bundled payments for additional clinical episodes beyond those that were included in BPCI, including – for the first time – outpatient episodes.
  2. BPCI Advanced provides participants with preliminary target prices before the start of each model year to allow for more effective planning. The target prices are the amount CMS will pay for episodes of care under the model.
  3. BPCI Advanced qualifies as an Advanced APM.  Participating clinicians assume risk for patients’ healthcare costs and also meet other requirements including meeting quality thresholds, potentially qualifying them for incentive payments and exempting them from the MIPS program.

CMS has released results of its evaluation of the original BPCI Initiative, Models 2-4 for Years 1 -3 (through 12/31/2016.) CMS notes that “Model 2 episodes begin with a hospital admission and extend for up to 90 days; Model 3 episodes begin with the initiation of post acute care following a hospital admission and extend for up to 90 days; and Model 4 episodes begin with a hospital admission and continue for 30 days. The BPCI initiative rewards participants in Models 2 and 3 financially through reconciliation payments for reducing Medicare payments for an episode of care relative to a target price. Alternatively, when episode payments are higher than the target price, Awardees may have to pay amounts to CMS. Under Model 4, Medicare makes a prospective payment for the episode, so Awardees keep the difference if their costs are below the prospective payment.”

Of all participants, 22% of Model 2, 33% of Model 3, and 78% of Model 4 participants withdrew from the initiative.

CMS evaluation is based on the 169-page study just released by the Lewin Group: CMS Bundled Payments for Care Improvement Initiative Models 2­4: Year 5 Evaluation &  Monitoring Annual Report. Their findings included:

  • While BPCI was associated with a decline in episode payments, after considering the reconciliation payments made to participants, BPCI did not result in savings to the Medicare program.
  • Across the 67 Model- participant- and clinical episode-combinations analyzed in this report, payments declined for 50 and the change was statistically significant for 27.
  • The average Model 2 episode initiator (EI) participated in eight clinical episodes, and the most commonly selected clinical episode was MJRLE. BPCI Model 2 accounted for nearly 90% of the approximately 796,000 episodes initiated during the first 13 quarters of the initiative.
  • Episode volume was lower than in Model 2. Skilled nursing facility (SNF) EIs were most likely to participate in MJRLE, where they initiated over 9,600 episodes during the first 13 quarters of the initiative. Congestive heart failure (CHF) had the greatest enrollment of home health agency (HHA) EIs and the largest patient volume, exceeding 4,800 episodes during the same period.
  • Participation in Model 4 continued to wane in the third year of the initiative. Only five hospitals participated in Model 4 in 2017 and another three Model 4 hospitals transitioned to Model 2 rather than withdraw entirely from the initiative. At the peak of enrollment, 23 episode-initiating hospitals participated in Model 4. A total of 13,551 episodes, primarily for MJRLE, were initiated under the Model through December 2016.



Post ACA Operating Margins: Health Systems and Health Plans

By Clive Riddle, September 14, 2018

Navigant this week released an eight-page report: Stiffening Headwinds Challenge Health Systems to Grow Smarter, that provides “an analysis of a three-year sample of the financial disclosures of 104 prominent health systems operating 47% of U.S. hospitals,” in which Navigant  “found broad-based and significant deterioration of operating earnings.”


Navigant reports that from 2015 to 2017:

  • The average operating margin decline for analyzed systems was 38.7%. Not-for-profit system margins fell 34%, while for-profit margins fell 39%.
  • 65% of systems experienced operating income declines totaling $6.8 billion, with the most significant reductions occurring in the U.S.’s fastest-growing regions: West/Southwest and South Central.
  • At the root of these declines were multiyear reductions in the rate of topline operating revenue growth, which fell from 7% (2015 to 2016) to only 5.5% (2016 to 2017), and a failure to contain expenses in line with revenue deterioration. 

Navigant cites these drivers of earnings deterioration:

  1. Weakening demand for such core hospital services as surgery and inpatient admissions, due in part to rising patient cost exposure from high-deductible health plans;
  2. Deteriorating collection rates for private accounts in non-ACA expansion states;
  3. Steady erosion in Medicare payment rates due to the ACA and the 2012 federal budget sequester; and
  4. Failure of health system value-based insurance contracts to deliver sufficient patient volume to offset steep upfront payer discounts and significant hospital population health investments.

Meanwhile on the other side of the post-ACA equation, Mark Farrah Associates this week “released an analysis brief providing insights into mid-year profitability for commercial and government lines of health insurance business. MFA compared second quarter, year-over-year profitability for the Individual, Employer-Group, Medicare and managed Medicaid segments.”

They found that:

  • At the end of second quarter 2018, the average medical expense ratio for the Individual segment was 70.8%, as compared to 77.2% the previous year.
  • Growth in premiums pushed the average medical expense ratio for the Employer-Group segment down to 80.9% for 2Q18 from 81.8% in 2Q17.
  • For Medicare Advantage, premium growth outpaced increases in medical expenses pushing the medical expense ratio down to 85.3% from 86.1% in 2Q17.
  • 2.9% increase in premiums per member per month pushed the medical expense ratio for Managed Medicaid down to 88.6% from 91.0% in 2Q17.

Mark Farrah Associates concludes the current outlook is better than the one Navigant finds for health systems: “At the mid-year point, all four health care segments are signifying improved profitability for health insurers over 2017.  The most significant change is once again in the Individual segment showing improvement over 2017, which ended up being a profitable year for the segment overall.  While this analysis of mid-year segment performance sheds light upon profitability trends for 2018, it’s a wait and see proposition until final financial results are revealed in spring of 2019.”


25 Things to Know About The CMS Medicare ACO Proposed Rule: Pathways to Success

By Clive Riddle, August 10, 2018

Here are 25 major points to note in the CMS Pathways to Success Proposed Rule introduced on August 9th:

  1. The redesigned Medicare Shared Savings program is called “Pathways to Success.
  2. There are five stated goals Pathways to Success is intended to advance: Accountability, Competition, Engagement, Integrity, and Quality.
  3. The CMS projected financial impact of the proposal would be savings to Medicare of $2.2 billion over ten years.
  4. CMS notes that 460 of the 561 or 82% of all ACOs in the Shared Savings Program in 2018 – are not taking on risk for increases in costs.
  5. The amount of time that an ACO can remain in the program with upside-only risk  would be limited to two years (or one year for ACOs identified as having previously participated in MSSP under upside-only risk) instead of the current timetable of up to six years.
  6. A 6-month extension would be provided for current ACOs whose agreements expire at the end of 2018, along with a special one-time July 1, 2019 start date that will have a spring 2019 application period for the new participation options.
  7. The number of tracks would be reduced to two, the “BASIC” track and the “ENHANCED” track, and would allow providers to pick between these two tracks. 
  8. The length of ACO participation agreements would expand from three years to five years.
  9. The BASIC track would feature a glide path for taking risk.  It would begin with up to two years of upside-only risk and then gradually transition in years three, four, and five to increasing levels of performance risk, concluding in year five at a level of risk that meets the standard to qualify as an Advanced Alternative Payment Model (APM) under MACRA. 
  10. Current upside-only ACOs would be limited to one year without risk before being required to transition to the risk level in year three of the glide path.
  11. The ENHANCED track would allow providers to take on risk and qualify as an Advanced APM immediately.  This track would offer the same amount of risk for each of the five years of the agreement period, at a level of risk sharing higher than the maximum amount reached in the BASIC track.
  12. Eligible ACOs (ACOs that are inexperienced with two-sided risk in Medicare) would be able to enter at any level of risk in the BASIC track’s glide path or go straight to the ENHANCED track.
  13. After completing a five-year agreement under the BASIC track, low revenue ACOs would be able to renew for a second agreement period at the highest level of risk in the BASIC track, while high revenue ACOs would be required to move to the ENHANCED track and take on additional risk.
  14. Each ACO would provide a standardized written notice to its Medicare beneficiaries, informing them at their first primary care visit of a performance year that they are in an ACO and what that means for their care.
  15. CMS would allow certain two-sided ACOs to provide an incentive payment of up to $20 to each assigned beneficiary for each qualifying primary care service that the beneficiary receives, as an incentive for taking steps to achieve and maintain good health. 
  16. CMS is seeking comment on an approach that would allow beneficiaries to opt in to an ACO as an alternative to assignment. 
  17. CMS would streamline the measures that ACOs are required to report, to ensure that all measures have a meaningful impact on patient care.
  18. CMS would require a specified percentage of the eligible clinicians participating in an ACO to adopt the 2015 edition of Certified EHR Technology (CEHRT) as part of the Administration’s MyHealthEData initiative promoting interoperability of medical data and patient control of their data.
  19. Physicians in ACOs that take on risk could receive payment for telehealth services provided to patients regardless of the patient’s location.
  20. Regional (county-level) spending would be incorporated into ACO benchmarks starting in their first agreement period.
  21. Methodology for risk adjustment would more accurately account for changes in beneficiaries’ health status.
  22. When calculating and updating benchmarks, CMS would factor in national spending growth rates in addition to regional rates, so ACOs that constitute a large fraction of their local market would not be penalized if they reduce the market growth rate.
  23. ACOs in two-sided models would be accountable for losses even if they exit mid-way through a performance year.
  24. Termination of ACOs with multiple years of poor financial performance would be authorized.
  25. The detailed Medicare Shared Savings Program Notice of Proposed Rulemaking (CMS-1701-P), “Accountable Care Organizations‑‑Pathways to Success,” is available at  and