Overwhelmed With Choice?
Upside only or upside/downside; 2% minimum loss ratio vs 1% or 0%; retrospective or prospective assignment; full capitation or partial capitation; repayment mechanism in escrow, as letter of credit, or surety bond; to purchase reinsurance or not? CMS’ Pathways Medicare Shared Savings Program (MSSP) and CMI’s Direct Contracting Program provide ACOs with the ability to tailor their ACO contract to the exact specifications they want. However, the large number of variables to choose among adds complexity to the decision tree and makes it harder to see the best option without actually modeling performance under different scenarios. This is where Validate Health comes in.
Simulating & Projecting Performance Under Different Scenarios
The key to understanding the optimum set of choices is to look at each variable independently. A risk averse ACO has, in fact, several means of protecting itself: it can select an upside-only track, a high MLR/MSR, or can purchase reinsurance. These options do not yield the same forecasted results. Upside-only contracts have a fixed MSR that can be a hard hurdle to beat, making it difficult for successful ACOs to share in the savings they generated. High MLR/MSR has the same issue of creating an unnecessarily high hurdle rate for successful ACOs to surmount. Reinsurance for historically successful ACOs will be more affordable than for those that have a poor track record.
A good simulation allows ACOs to forecast performance under different configurations of all these variables — what is the likelihood of earning shared savings in an upside-only model? What different MLR/MSR levels yield the most favorable results? Under what scenarios can reinsurance support the risk-aversion of leadership/provider participants without undermining financial success?
The Confidence You Need
Being able to explain track decisions to providers, investors, and other health system leaders strengthens the position of ACO leadership. In some cases it can help to have a 3rd party, following actuarially sound practices, providing the modeling and recommendations.