Impact of the COVID-19 Pandemic on ACO Financials Under MSSP

COVID Impact on ACO FinancialsChallenged 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.

Risk Scores

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.

Beneficiary Attributions

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.

Our Services

The fundamental mission of Validate Health is to help ACOs make well-informed financial decisions. As an actuarial automation platform, we strive to make ACOs successful in a risk-bearing environment, particularly in difficult times of the COVID-19 pandemic. Through best practices in actuarial and data science methodologies, we provide root cause analysis as well as simulations and forecasts for better decision making in risk management.

In response to the changing regulatory environment from COVID-19, we added the following features into our current root cause and forecasting analysis for expenditure, utilization, and shared savings for better financial estimation.

  • COVID-19 episode exclusions for more accurate updated benchmark calculations
  • Risk score monitoring for optimal adjustment to the historical benchmark
  • Beneficiary assignment adjustment of inclusion of telehealth
  • Optimal solutions under COVID-19 adjusted analytics

For benchmark and shared savings calculation, our algorithm is tailored to capture COVID-19 episodes defined by CMS’s criteria. Exclusion of these COVID-19 episodes is performed in both the performance and benchmark year calculations so that clients would receive forecasts that align with the methodologies used by CMS. The benchmark and shared savings calculation accommodate for CMS policy changes, which allows clients to better assess their financial status for decision making.

For risk management, we monitor risk scores for clients throughout the calendar year for optimal regional adjustment. We keep track of the fluctuations of the risk scores, and provide suggestions to clients so that they can maintain their benchmark rate to the capped amount for optimal regional adjustment to the historical benchmark. In 2020 especially, we kept a careful eye on risk scores and provided suggestions for interventions to help our clients achieve positive financial outcomes in performance year 2021.

For beneficiary assignments, we also adjusted our algorithm on assignment for CMS’s inclusion of telehealth. We expanded the CPT code of telehealth in primary care services codes, so that it aligns with new CMS regulations on attribution methodology. The adjustment management of beneficiary assignment would also help us to better understand the financial situation of our clients, so as to provide better suggestions in decision making in terms of service provisions, provider recruitment, and expense management.

With our adjustments in response to the COVID-19 crisis, changing CMS regulations, and our automated approach combining actuarial models and data science algorithms, we provide tailor-made recommendations to clients who are handling risky situations like COVID-19. We strive to make ACOs thrive under unprecedented circumstances, and enable them to be well-informed of their potential financial outcomes, especially during the pandemic and policy changes.