May 6, 2011
A key component for each ACO participating in the Medicare Shared Savings
Program (MSSP) will be Centers for Medicare and Medicaid Services’ (CMS)
determination of the ACO’s expenditure benchmark. The following article
discusses how the benchmark is established and how certain adjustments and
updates are made.
A. Establishing the Benchmark
In order to determine whether or not an ACO saves the Medicare program money,
CMS must set a per capita expenditure benchmark (Benchmark) by which to judge any
savings or losses the ACO generates for the program. In essence, the Benchmark
is a “surrogate measure of what the Medicare FFS Parts A and B expenditures
would otherwise have been in the absence of the ACO.” CMS has proposed the
following methodology to establish the Benchmark for each ACO.
CMS will begin the process by estimating a baseline for Medicare expenditures
using information CMS has for the ACO participants at the start of the ACO’s
three-year agreement period. CMS will use the claim records of those ACO
participants to determine a list of beneficiaries who receive the plurality of
their primary care services from primary care physicians participating in the
ACO in the prior three-year period (Beneficiaries). This is the Beneficiary attribution
model adopted by CMS in the proposed rule.
CMS will base the Benchmark on actual per capita Medicare Parts A and B fee
for service (FFS) expenditures for the Beneficiaries. To minimize variation from
catastrophically large claims, CMS will truncate an assigned Beneficiary’s total
annual per capita expenditure at the 99th percentile.
CMS will then determine an appropriate growth index for each of the Benchmark
years and trend them to Benchmark year three (BY3). This will be done by using
health status measures for the Beneficiary population from the data in each of
the three years leading up to the establishment of the Benchmark. The health
status indices for each year will be adjusted and restated to reflect BY3 risk.
By combining the actual initial per capita expenditures for each year with
the respective growth and health status indices, CMS will create risk-adjusted
per capita expenditures for Beneficiaries historically assigned to the ACO in
each of the three years used to establish the Benchmark and then restate those
amounts in BY3 risk and expenditure amounts. CMS will then create a single
Benchmark weighing each year of the estimate Benchmark as follows: BY3 at 60%;
BY2 at 30%; and BY1 at 10%.
Lastly, for years 2 and 3 of the three-year agreement period, CMS will update
the Benchmark by the projected absolute amount of growth in national per capita
expenditures for Parts A and B services under the original Medicare FFS program.
This update will be the same for all ACOs. All other Benchmark computations will
only be rebased at the start of a new agreement (once every three years).
B. Adjustments – Beneficiary Characteristics
The statute creating the MSSP states that the Benchmark “. . . shall be
adjusted for beneficiary characteristics and such other factors as the Secretary
determines appropriate . . .” In creating the adjustment factors, CMS stated
that “Our goal is to maintain improvements in care delivery of an ACO and to
make appropriate adjustments to reflect the health status of assigned patients
as well as changes in the ACO’s organizational structure that would affect the
case mix of assigned patients rather than apparent changes arising from the
manner in which ACO providers/suppliers code diagnosis.”
With this goal in mind, CMS proposes adjusting the Benchmark by using the CMS
hierarchical condition category prospective risk adjustment model used under the Medicare Advantage program
(MA CMS-HCC). The MA CMS-HCC model covers patient demographic factors (e.g., sex, age,
basis for Medicare entitlement and Medicaid status), as well as diagnostic
information to create a risk score for each Beneficiary.
Using the MA CMS-HCC methodology, CMS will create a risk adjusted score for
the ACO’s historically assigned Beneficiary population and a single Benchmark
risk score for each ACO. This risk score will then be applied throughout the
three-year agreement period to the annual per
capita expenditures for Beneficiaries attributed to the ACO. Changes in the
risk score for Beneficiaries attributed to the ACO for the three-year Benchmark period
during the performance year will not be incorporated.
C. Adjustments – Technical
In addition to the adjustments described above, CMS is considering some
technical adjustments, but declining others. These include:
- IME and DSH Payments. No adjustments will be made to account for the
impact on teaching hospitals providing individual medical education (IME) and
hospitals serving a disproportionate share of low-income Beneficiaries (a
Medicare disproportionate share hospital (DSH)). The proposal is to maintain IME
and DSH payments in the per capita costs included in the ACO Benchmark
- Geographic Payments. The proposal will not remove geographic payment
adjustments from the Benchmark calculation.
- Bonus Payments and Penalties. The proposal is to exclude Medicare
expenditures or savings for incentive payments and penalties under value-based
policy initiatives such as Physician Quality Reporting Systems, eRx and the EHR
incentives under the HITECH Act from the Benchmark calculation.
CMS is seeking comments on its proposals to establish and adjust the
Benchmark especially with respect to how various approaches might affect ACOs or
particular types of ACOs to participate in the MSSP.