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A Review of the Affordable Care Act at 10 Years, Part 4: Alternative Payment and Delivery Models

Today's post is the last in our series on the 10-year anniversary of the Affordable Care Act (ACA). While the Congress that passed the ACA recognized that health care delivery reform was necessary, the law included few mechanisms to address the deeper problems in this area. In this post, we will look at the changes that were made and what may lie ahead. 

Center for Medicare and Medicaid Innovation

The most significant delivery model changes were undoubtedly made through the Medicare program. The Center for Medicare and Medicaid Innovation (CMMI), also known as the “Innovation Center,” was created by Section 3021 of the ACA to test new payment and delivery models and lower Medicare, Medicaid, and CHIP spending while maintaining or improving patient care.  Even though CMS had the authority to design and test new payment models prior to the ACA, HHS could not unilaterally expand or mandate participation in a successful demonstration without Congressional approval.  CMMI provides for that authority, allowing the HHS Secretary to waive certain Medicare and Medicaid requirements in order to expand innovations for which there is evidence of a reduction in costs or improvement in health outcomes.  Congress also provided a long-term funding source for the CMMI, in essence protecting it from annual appropriations fights.  As enacted, the ACA appropriated $10 billion the CMMI for 2011 through 2019, and authorized another $10 billion for the following ten years.  Over the last decade, CMS has used CMMI to administer several demonstrations, including the Medicare Shared Savings Program for Accountable Care Organizations (ACOs) and the follow-on Pioneer ACO program.

As we wrote in 2016, Republican lawmakers often criticized CMMI’s extensive authority during the Obama years.  As such, it was unclear after President Trump’s election whether Congress would defund or move to limit the authority of the Innovation Center, or whether the new administration would find wielding such authority to be useful.  In 2016, then-representative Tom Price, who would later go on to become the Trump Administration’s first HHS Secretary, sent a letter to CMS along with several other congresspersons condemning CMMI’s large mandatory demonstrations.  Price had made other critical statements about CMMI in preceding years.  Instead of defunding or restraining CMMI, however, the Trump Administration has largely taken the latter approach, using it to issue proposals to lower drug prices through Medicare Part B and to test innovation in Medicare Advantage.

ACOs and the Medicare Shared Savings Program

The ACA defines ACOs as groups of doctors, hospitals, and other health care providers that voluntarily form partnerships to collaborate and share accountability for the quality and cost of care delivered to their patients. Generally, ACOs agree to take responsibility for the total costs of care for a patient population.  If the ACOs manage to reduce the total costs of providing care, they can share in those savings along with the payor.  Some ACO payment models force the ACO to remit losses if the ACO’s costs exceeds pre-set spending benchmarks. 

CMMI has utilized ACOs in several demonstrations over the last decade, the most prominent being the Medicare Shared Savings Program (MSSP).  An outgrowth of a demonstration project that began during the Bush Administration, the MSSP was expanded and codified by the ACA.  In April 2012, CMMI selected the first group of 27 ACOs in 18 states to participate in the program.  Through the MSSP, ACOs that met certain quality metric thresholds and realized savings below preset budget targets split the savings 50-50 with Medicare.  To obtain a 60% share of the savings, the ACO must also agree to share in excess costs if spending exceed budget targets.  The ACO program has grown considerably since 2012, with the number of assigned beneficiaries in an MSSP ACO jumping from 3.2 million to approximately 11.2 million today.  During that same period, CMS has attempted to leverage early results from the program to modify and streamline its administration, which we have written about extensively.

Under the MSSP, ACOs may select one of three models, or “tracks,” which include differing levels of risk and payment.  Track 1 ACOs do not take any downside risk, meaning they are not required to pay back spending over the historical benchmark.  The vast majority of ACOs to date participate in Track 1.  ACOs participating in Tracks 2 and 3 share in a larger portion of any savings under their benchmarks, but may also be required to share losses if spending exceeds the benchmarks.

In 2016, CMS finalized a rule updating the MSSP, which (among other things) modified how an ACO’s costs benchmarks are measured, established a more streamlined process for moving ACOs from Track 1 to Tracks 2 and 3, and defined timeframes and other criteria related to financial reconciliation.  In 2018, CMS proposed replacing the three Tracks with two options: a basic track and an enhanced track – in essence forcing all ACOs participating in the MSSP to take on downside risk.  At an American Hospital Association meeting in the spring of that year, CMS Administrator Seema Verma had discussed CMS’s goals of moving more ACOs to take on downside risk, remarking that “our system cannot afford to continue with models that are not producing results.”  The final rule included several other notable modifications, including updates to the benchmarking methodology as well as modifications to allow payment for telehealth services.

ACOs, the ACA, and Antitrust Law

As the number of ACOs grows, the ways in which these organizations interact with antitrust law has also been an interesting and developing topic.  By nature, Medicare’s ACO model involves collaboration and partnership between providers, which are activities that can implicate scrutiny from antitrust regulators.  Section 1 of the Sherman Act treats certain commercial activities as per se illegal, including agreements between competitors to fix prices or conspire to not to deal with customers. Agreements that do not facially and unambiguously injure competition are analyzed under the “rule of reason” standard, which takes into account the totality of the circumstances when determining whether the arrangement harms competition. 

The FTC and DOJ sought to clarify their thinking in 2011 when, simultaneously with CMS’ release of the final rule implementing the MSSP, the agencies jointly issued guidance articulating how they would apply antitrust enforcement policy towards ACOs, a subject Mintz’s Antitrust Section wrote about at the time.  The guidance provided ACOs with a voluntary, expedited 90-day review program, an offer no ACO appears to have accepted to date.  More significantly, it established “safety zones” for ACOs.  ACOs participating in the MSSP must satisfy specific criteria for the agencies to consider them sufficiently integrated to conduct certain activities – such as jointly contract with private payors – without harming competition. The agencies will not challenge ACOs that fall within the safety zone, absent extraordinary circumstances.[41]  The 2011 guidance explained that ACOs with two or more participants with a combined share of 30% or less for each common service in a defined geographic area would be declared to be in a “safety zone.”  ACOs outside the “safety zone” are not per se subject to antitrust scrutiny but must look to guidance in existing FTC advisory opinions. 

What Comes Next?

Ten years after its passage, the future of the ACA in its full breadth still remains uncertain.  Later this year, the Supreme Court in California v. Texas will likely either uphold or strike down the now-toothless individual mandate and could even potentially strike down the law entirely on severability grounds.  Depending on the outcome of this case and the 2020 elections, Congress may attempt to further address health care reform.

The ongoing COVID-19 pandemic has reignited some of the earlier debates over the ACA.  In particular, with large numbers of Americans filing for unemployment benefits in the last couple of weeks as a result of various shutdowns across the country, the risk of having portions of the population uninsured – and therefore unable to affordably access many of the services necessary to help contain the virus – has become more apparent.  As evidenced by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed into law on March 27th, the COVID-19 outbreak has paused many of the larger ideological fights over the law, with lawmakers across the spectrum signing on temporary measures to increase access to necessary services to contain the virus.  For example, one notable provision in the CARES Act allows state Medicaid programs to offer uninsured individuals COVID-19 tests and related services.  Further, some states have opened up special ACA enrollment periods to allow newly uninsured individuals to sign up for marketplace plans immediately, instead of waiting for the typical enrollment period towards the end of the year.[42]  While the Trump Administration initially signaled a willingness to implement special enrollment periods as a result of the pandemic, they have more recently rejected such proposals.[43]  As is the case with so many aspects of the ACA, it is unclear at this moment whether the COVID-19 outbreak will have any lasting impact on the future of the law. 

Going forward, we will continue to monitor the ACA, and the impact that any future litigation, legislation, rulemaking, or any intervening events may have on the law. 

[41] Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, 76 FR 67026, 67028

[42] Margot Sanger-Katz and Reed Abelson, Eleven States Now Letting Uninsured Sign Up for Obamacare, NY Times (The Upshot), (Mar. 25, 2020).

[43] Susannah Luthi, Trump rejects Obamacare special enrollment period amid pandemic, POLITICO (Mar. 31, 2020).

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Xavier represents clients in the health care and life sciences fields on health care regulatory and fraud and abuse matters. He also handles Medicare and Medicaid reimbursement issues in transactions and business arrangements.