July 2019 is a big month for the Medicare Shared Savings Program (MSSP). This value-based payment program is going through its biggest overhaul since the first MSSP accountable care organizations (ACOs) launched back in 2012. The revamped program, called Pathways to Success, requires ACOs to take financial risk on the cost of care for their patients much more quickly than in the past. The first Pathways ACOs got started on July 1 of this year. Caravan Health, the leader in accountable care for community health systems, is helping several new Pathways ACOs get their start.
That’s not all the news for Pathways to Success this summer. Deadlines for the next opportunity to join a Pathways ACO in January 2020 are coming up soon. Providers must get a full application in between July 1 and July 29, 2019. Existing ACOs can either finish one final year of the program under the old rules or move over to Pathways for a January 2020 start. There is a lot to think about as Medicare providers consider these choices.
Why Pathways?
If CMS has its way, traditional Medicare fee-for-service will soon be a relic of the past.  CMS Innovation Center Director Adam Boehler stated in November 2018 that one of his agency’s “prime goals – is to get rid of fee-for-service.” This means that providers should be actively considering how to move into value-based payment. The MSSP is one of the most established alternative payment models, with the added benefit of a new program structure that takes years of program experience into consideration.
In 2015, Congress passed the Medicare Access and CHIP Reauthorization Act (MACRA), essentially requiring Medicare providers to move to a value-based reimbursement system. Providers must take on some of the risk of the cost of care for their patients or their incomes could be frozen. An ACO with a substantial amount of two-sided risk will be exempt from those cuts and eligible for performance bonuses.
What Changes are Coming in Pathways?
The earliest years for an MSSP ACO have always been upside-only. ACOs can share in savings in those early years, but do not have to pay the government back for higher than expected costs. In Pathways, ACOs have to go to downside risk much more quickly. ACOs used to have up to two three-year agreement periods in an upside-only track. That gave providers up to six years to get their bearings in the program before any chance of having to pay back costs above their benchmark. Pathways to Success allows only two or three years as upside-only. After that, the ACO has to take on more and more downside risk each year. 
In addition to the faster path to risk, the Basic and Enhanced tracks of the new program will have five-year agreement periods, increased from three-years. This gives ACOs two extra years to reduce costs relative to the benchmark. After each agreement period the benchmarks resets to a lower level to reflect savings already earned. Those two additional years could mean a lot more predictability as ACOs are figuring out how to manage their population health and reduce costs. This becomes more critical as downside risk is introduced earlier.
There are a few other big changes that providers will have to consider – both could help ACOs as they work for shared savings. The first is that risk scores will allow for 3% growth over the length of the agreement period. This means that ACOs will get more credit for treating more complex or severe health conditions. Rigorous HCC coding has always been important in the Medicare Shared Savings Program, and this change makes that coding even more important. Another other change is to the initial benchmark calculation.  The benchmark for Pathways will take regional factors into account during the very first agreement period. This will provide a tailwind for organizations that are more efficient than their region and will challenge some organizations who are less efficient to improve more quickly.
In Pathways, the ACOs’ shared savings rate in the upside-only years will come down from 50% to 40%. When Pathways was first proposed a year ago, CMS wanted to take that rate all the way down to 25%, a proposal they changed after ACOs raised objections. Outweighing this change, however, are the benefits of a longer agreement period, incorporation of HCC coding, and (for some organizations) incorporation of regional costs described above. All things considered, an ACO achieving modest and growing savings can come out ahead. 
Caravan Health got its start working with smaller and rural hospitals that did not have enough covered lives to qualify as ACOs. We pioneered the concept of collaborative ACOs made up of unrelated health systems that work together to get the benefits of scale while maintaining their structural independence.  Pathways will aid smaller, rural, and physician-only ACOs with special rules for these low-revenue entities. Low-revenue ACOs, those that control less than 35% of Medicare claim revenue, will be able to spend an extra year as upside-only.  They will also get an extra five-year agreement period in the lower-risk Basic track, while other ACOs have to move on to the highest-risk Enhanced track for that second agreement period.
Pathways Looks Like a Good Bet
CMS Administrator Seema Verma announced at the Spring 2019 conference of the National Association of Accountable Care Organizations that 90% of ACOs that would have ended in 2018 extended for six months and 85% of those applied for Pathways to Success. While there are a lot of great reasons to consider Pathways, the most compelling is that providers need a stable way to transition from traditional fee-for-service to a value-based system.  With the Pathways to Success program, the way forward for providers is becoming clearer. 

Caravan Health is here to help

Caravan Health can work with you to figure out the best way for your organization to move forward. Contact our experts for more information by sending an email to  info@caravanhealth.com  or calling 916-542-4582.


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