Challenged by the coronavirus disease 2019 (COVID-19) pandemic, most Accountable Care Organizations (ACO) under Medicare Shared Savings Program (MSSP) program are concerned about the incurred financial losses due to COVID-19 related treatment. The MSSP program rewards ACOs for lowering expenditure and enhancing patient’s health outcomes, with the target benchmark set for each ACO largely based on the historical spending for attributed patients. As a consequence, the COVID-incurred costs will likely drive up historical spending starting in 2020, and the surge in spending would likely go way beyond the spending target, resulting in financial losses that many are worried about.
CMS regulations in response to COVID-19
In response to the COVID-19 pandemic, the Centers for Medicare & Medicaid Services (CMS) released a set of modifications for the MSSP participants in the interim final rule on May 8, 2020. Highlights of the policy changes include the following
- Removing COVID-19 associated spending from ACO performance calculations
- Adjusting program calculations to mitigate the impact of COVID-19 on ACOs
- Allowing ACOs with agreements ending on December 31, 2020, to extend the term of their agreements by one year
- Including telehealth as a delivery option for primary care services
Undoubtedly, COVID-19 poses unprecedented risks to ACOs in financial management. The challenge is to make well-informed, strategic decisions in response to both the ongoing pandemic and the changing regulatory environment. In the following paragraphs, we will discuss three main areas of challenges and opportunities brought by COVID-19 and CMS’s regulations: historical benchmark adjustments, risk scores, and beneficiary attributions.
Historical Benchmark Adjustment
Even though the COVID-19 pandemic did incur unexpected costs for most ACOs, there is still room for financial success through active management. According to the MSSP payment formula, historical benchmarks are adjusted based on spending trends in terms of the geographic market of each ACO, as well as the spending trends of the whole nation, with the former as the dominant driver of adjustment to the historical benchmark. Therefore, the updated (or adjusted) benchmark is reflective of both the regional and national spending trends. Regional and national adjustments may ease the financial burden for some ACOs, especially those that handle the difficulties of the pandemic better than their regional average level.
In an attempt to mitigate the effect of the COVID-19 pandemic certain expenditures which are dependent upon an ACO’s assigned beneficiary population, CMS will remove all inpatient expenditures in any months where there are episodes related to the treatment of COVID-19. These will be removed both in benchmark and performance year calculations. While the exemption of COVID-19 related inpatient expenditures may decrease spending for some ACOs, the deferred care and outpatient costs associated with COVID-19 may still drive up expenses, leading to potential financial losses.
Under CMS MSSP prospective regulations on risk adjustment, the COVID-19 pandemic will impact the risk scores of 2021 instead of 2020. The impact of risk management during the COVID-19 pandemic will impact ACOs’ finances in 2021, contributing to future financial outcomes. Delayed entry into the new five-year contract would allow ACOs to optimize HCC code capture for the future 2022 to Pathways. By increasing their risk scores, ACOs can boost the regional adjustment from CMS retrospectively, and the historical benchmark rate can be increased to a capped amount for financial performance.
ACOs that kept good practices with HCC coding during the calendar year of 2020 would most benefit from this new regulation for shared savings improvement in the upcoming performance year.
CMS expands the definition of assignment attribution in the interim final rule by the inclusion of telehealth. From the claim-based assignment attribution of MSSP (accompanied by voluntary alignment), the beneficiary who pays primary care visits to participating providers during the agreement period will be considered as assigned for the ACO. According to the interim final rule finalized in May, primary care service codes now extend to telehealth code, which means there is room for increased assignment for all ACOs.
The COVID-19 pandemic witnessed the drop in in-person visits due to patient’s fear of infection, but ACOs with active telehealth practices may counteract the drop in assigned beneficiaries, some would even have growth in this area.