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Accountable Care Organizations (ACOs) are gaining traction as providers collaborate in this new shared savings program alternative to traditional fee-for-service (read: fragmented, inefficient, over-utilized and soon-to-be-bankrupt) Medicare. Under this arrangement, providers will join together to provide a continuum of care that focuses on wellness and quality, as opposed to volume. Its description is of a win-win system where efficiency and quality are rewarded and incentives exist for providers to work together to that end.As participants in Medicare’s Shared Savings Program (MSSP), ACOs will agree to deliver care to Medicare beneficiaries at a cost that is at least two percent less than a benchmark established by the Centers for Medicare and Medicaid Services (CMS). CMS will split any savings beyond the two percent with the ACO. Sounds achievable, doesn’t it? The key is in Medicare’s calculation of the benchmark which is risk adjusted.
Before we explore the risk-adjusted benchmark, let’s take a moment to summarize how providers are currently paid. The payment of a practitioner’s claims for a Medicare beneficiary’s care is based on the services or procedures performed as conveyed by codes that relate to a specific CMS fee schedule. Aggregating the cost of all claims from all providers would be one way to determine a benchmark, but that is not the methodology that will be used for the ACO. CMS will apply the HCC model to fee-for-service (FFS) claims, in the same manner that it funds Medicare Advantage (MA) plans. The HCC model is centered on diagnoses that ideally are documented and reported to the highest level of specificity; this is something MA plans and their providers have been perfecting since at least 2007. CMS changed the MA plans’ payment methodology in 2003 and phased in the new system over five years. During that time, the plans and any groups with full-risk contracts had a rude awakening when they realized their providers’ documentation and coding were not adequate to generate the correct payment required to cover the cost of a member’s care. Massive provider education, diligent attention to provider documentation and coding, and some other interventions turned the tide for MA plans whose current revenues more closely approximate the true cost of medical care. However, the ACO may not be so lucky.
The concept of a risk adjusted benchmark makes all the sense in the world. Intuitively, we all understand that sicker patients consume more medical resources than their healthier counterparts. The issue is that sickness and health are determined by a provider’s submitted codes; our company’s anecdotal research since 2003 indicates that FFS practitioners completely document and properly code all diagnoses and associated co-morbidities less than 10% of the time. Moreover, the FFS claim cannot accommodate more than four diagnoses per procedure code, whereas MA plans have no limit to the number of diagnosis codes that can be submitted to establish the member’s health status. Consequently, sick patients may appear to be healthier than they really are because the practitioner has not reported the diagnoses correctly. This means the ACO’s benchmark will be unrealistically low and the savings will be more difficult, if not impossible, to generate.
One telling example that occurs more often than you might think is a Broward County 75-year-old, community-dwelling, diabetic female with multiple co-morbidities. Her true health status would generate an expenditure benchmark of approximately $39,259.68 per year; based on the FFS provider’s documentation, the data used in the benchmark points to a medical expense level of $23,533.92, which is 40% lower.
