Bloomberg Law
Feb. 21, 2020, 8:20 PMUpdated: Feb. 24, 2020, 3:29 PM

Doctors, Hospitals Balk at Medicare Pay Scheme’s Scarce Details (1)

Tony Pugh
Tony Pugh

The groups of providers expected to take a lead role in implementing two new Medicare payment models are warning they may not participate at all unless they get more detailed information to help them see how they’ll fare under the new payment options.

Without strong participation from these “accountable care organizations,” or ACOs—the networks of doctors, hospitals, and other providers that coordinate patient care in fee-for-service Medicare—the Direct Contracting payment models would be far less effective in helping move to traditional Medicare to value-based care.
The models, which are voluntary for doctors and other medical providers, are intended to allow the agency to experiment with alternate forms of payment.

The nation’s 517 ACOs are a vital component of that push to base traditional Medicare reimbursements on patient outcomes and cost efficiency rather than the volume of services provided. Nearly 30 percent of Medicare fee-for-service beneficiaries—about 11.2 million people—are now served by providers in ACOs, according to the Centers for Medicare & Medicaid Services.

ACOs share financial and medical responsibility for managing beneficiaries’ health. They get bonuses when they hold down costs, meet quality benchmarks, and keep patients with chronic diseases healthy. If they don’t save money for the cash-strapped Medicare program, however, some ACOs face financial penalties or have to make investments to improve care.

The Direct Contracting “global” and “professional” payment models call for primary care physicians to take more financial responsibility for the cost of beneficiary care. The “global” option allows providers to bear full financial risk for patient costs, and the “professional” option allows them to share risk with the CMS.

Both models, which begin in 2021, are targeted to beneficiaries with complex, chronic conditions, and both would provide caregivers a set monthly “capitated” payment to cover the cost of each patient’s care.

The application period to participate in the models’ 2021 performance year will open in the spring, according to CMS. But the National Association of Accountable Care Organizations wants the CMS to provide specific details as soon as possible—like information on benchmarking, risk adjustment, capitated payments, and other metrics—so providers can forecast their financial fortunes under the new options.

Because that detailed financial forecasting takes time, NAACOS is urging the agency to provide the information as soon as possible. It has been asking for the information since the CMS debuted the proposals in April 2019.

But “key details on the options’ financial methodology haven’t been released and “our members are finding the lack of information a tremendous hindrance to participation,” said Clif Gaus, NAACOS president and CEO, in a Thursday letter to Brad Smith, director of the Center for Medicare and Medicaid Innovation at the CMS. “Without these details, it’s impossible for the healthcare community to make informed decisions about program participation.”

Among other recommendations, the group wants the CMS to:

  • Minimize “discount” levels—the amount of savings that Medicare keeps to make sure the program saves money;
  • Waive the 2% “retention withhold,” a penalty that a provider organization would pay for withdrawing from the payment models within two years;
  • Increase the shared savings rate for the “professional option” to 75% to make it more attractive for providers; and
  • Align application timelines between Direct Contracting and other ACO models as much as possible.

“Direct Contracting was released with great fanfare and excitement, but the provider community is still lacking key information, such as that of the financial structure on which the model is based,” Gaus said in a statement. “We also hope other important aspects can be adjusted to ensure that robust early interest in the model translates to high participation.”

The CMS said it has received Gaus’ letter and will respond.

(Updates last paragraph in Feb. 21 story to include response from the CMS.)

To contact the reporter on this story: Tony Pugh in Washington at

To contact the editors responsible for this story: Fawn Johnson at; Brent Bierman at