Multi-million dollar opportunities (and risks) with PY 2024 decisions

Webinar: Optimizing PY2024 early renewal, track and participant selection

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Early Renewal into MPFS

ACOs have the option to renew their agreement period early in order to kick off changes dictated by the MPFS. There are several categories of changes that could result in big swings in benchmark. ACOs will need to identify how each of the following MPFS provisions affect them and quantify the combined impact:

1. HCC risk score capping based on demographic changes and aggregating enrollment types
2. 3-way national, regional, and ACPT administratively set benchmark trending to reduce ratcheting effect within agreement periods
3. Prior savings adjustment to reduce ratcheting effect between agreement periods
4. Regional calculation window consistent with ACO’s prospective/retrospective assignment method
5. Lower cap of negative regional adjustment cap to 1.5%
6. Receive partial savings below MSR, based on quality and low-revenue status

Additional considerations must be given in two other areas. First, how would early renewal impact the ACO’s glidepath? Renewing early may reduce the number of years conservative, risk-avoiding ACOs can stay in upside only. The more years an ACO has remaining in its current agreement period, the more impact. Second, how would removing COVID effects from benchmark years impact the ACO? An ACO’s benchmark may have either been positively or negatively impacted by COVID, depending on utilization changes compared to their region, the acuity of their patients, and the level of care avoidance experienced.

For all variants discussed here, it is possible to develop predictive probabilistic models to accommodate these changes based on a combination of the ACO’s performance history and those of its region and nation. There is an additional complication for 2024 due to CMS’s change to the HCC risk scoring model (V28) that went into effect starting PY 2023. With the needed risk score data not being provided by the time selections are due, ACOs need to proactively update their risk scoring calculations to accommodate for this change.

Participant Selection

When it comes to participant adds and drops, optimal selection requires the ability to simulate an “unbundled” ACO, where the true financial contribution to shared savings by participant is calculated. Based on a study conducted on national claims, 30% of ACOs would flip from savings to loss or vice versa if their single highest performing or lowest performing TIN were removed.

With the MPFS changes, ACOs also need to adjust their participant selection strategy. For example, attaining low revenue status would make it possible to receive partial savings, despite being below the minimum savings rate (MSR). Low revenue status is designated when the ratio of total expenditures to ACO expenditures is below the 35% threshold. ACOs can model different scenarios of participant lists to identify which would keep them below this threshold. For such cases, ACOs in upside-only tracks would be able to collect partial savings even if they didn’t attain their MSR threshold, whereas under previous rules they would have received no payment. Improved participant selection strategy could also drive eligibility for obtaining AIP payments.

Finally, some geographies have been particularly hard hit with competitive pressure from multi-ACO aggregators. In such cases, participant retention strategy, adds, and drops would be impacted. For example, it might make sense to retain a lower performing participant, depending on patient attribution, in-network revenue, or other strategic factors. Additionally, with a lot of “demand” for high performing participants, it becomes more important for ACOs to retain or add those that have the highest potential for improvement. Potential can be estimated based on modifiability of a particular performance metric in relation to the region, the sensitivity to shared savings from this metric, and the ACO’s core competence in making such improvements.

Managing Downside Exposure

ACOs in downside tracks have not had to figure out how to accommodate the risk of loss for the past three years, since the start of the COVID public health emergency (PHE). But with the PHE ending in May 2023, these ACOs will have downside exposure for 7 months of PY 2023 and into the future. ACOs can minimize downside risk exposure through new model and track glidepath options that go into effect with MPFS. For cases where shared savings performance is projected to be unfavorable, ACOs now have the ability to go in reverse from ENHANCED back to BASIC Level E. Additionally, new ACOs benefit from a longer onramp to risk by having the option to stay in upside-only tracks for up to 7 performance years.

ACOs in downside risk tracks have several tools available to them to accommodate the risk tolerance of their participants and organization. First, it’s important to calculate the true downside exposure outside of just shared loss limits by adding offsetting revenues to owned practices and facilities. The analysis is even more relevant if the incremental costs of providing such in-network services can be taken into account. Second, an aggregate reinsurance policy could be considered, with an attachment point that corresponds to the ACO’s risk tolerance. To accommodate cash flow limitations, financing of reinsurance premiums is an option that’s often readily available. Third, after offsetting revenues and reinsurance are taken into account, a reasonable loss reserve can be calculated. Typically, the loss reserve needs to be updated on an annual basis based on forecasted aggregate shared savings.

CMMI Program Extensions

Starting in PY 2024, ACOs can now serve as conveners for BPCI-A episodes. The decision of which participants should be signed up for which model, requires its own analysis. While the data provided by CMMI can be quite useful in this regard, having access to national claims gives the most granularity to the analysis and enables these decisions to be made sooner. There is also a strategic consideration for ACOs looking into these programs. In competitive geographies, adding these models might provide leverage to ACOs with participant addition and retention.

In Summary

Given the number of changes and considerations, as well as the potential lead times involved, ACOs that can put together a proactive project plan many months in advance will be in the best position to avoid missing the biggest opportunities or be subject to the biggest downside exposure.