Bloomberg Law
Feb. 28, 2022, 10:45 AM

Revamp of Medicare Pilot Program Seeks to Bolster Doctor Role

Tony Pugh
Tony Pugh

The redesign of a Medicare payment model is drawing mixed reviews from industry groups, advocates, and analysts who are still assessing the effort to marry a Trump administration idea with the vision and priorities of the Biden administration.

The Centers for Medicare & Medicaid Services announced that the global and professional direct contracting model will be replaced by the Accountable Care Organization realizing equity, access, and community health model. The transition to the ACO REACH model will begin Jan. 1, 2023. Current GPDC model participants must agree to meet all the ACO REACH model requirements by that date in order to continue participating.

The changes followed criticism from 54 House Democrats who said the global payment model was an attempt to privatize Medicare. They said the pilot program created a “perverse motive to decrease the quality and volume of seniors’ care” by allowing provider groups—some backed by private equity and venture capital funds—to share in cost savings they generate while treating beneficiaries.

To address these concerns, the CMS last week changed the required governance structure for groups that participate in the new ACO REACH model. The new pilot program also will give beneficiaries and patient advocates more input in the model’s operation, and increased the screening and monitoring of participating provider groups.

The original model, drafted by the Trump administration, hews close to Republican free-market beliefs by allowing private-sector health industry interests to operate within a federal health program. The Biden administration, which supports the model’s expansion of value-based care, has used it to further their goal of making health care more equitable for underserved populations.

Changes to Boards

The most significant change in the pilot program was requiring model participants, known as REACH ACOs, to have health-care providers make up at least 75% of their governing board’s voting members, said Spencer Perlman, managing partner and director of health-care research at Veda Partners, a policy consulting firm that works with institutional investors.

The old model required participating providers to hold 25% of votes on the governing boards, said Perlman, who authored a report on the model on Friday.

In addition, the old model allowed these governing boards to include a beneficiary representative and consumer advocate who could be the same person. These members were not required to hold voting rights.

Under the ACO REACH model, board members who are beneficiary representatives and consumer advocates cannot be the same person, and each must hold voting rights.

“All of the entities that are currently in the program will have to decide to either meet these new requirements or not participate,” a senior CMS official said last week. “But we are shifting this program to bring it back to its true moral calling, which is physicians working more with their patients. That will be the heart of what we believe these organizations should be going forward.”

Current participants in the global and professional model include 1Life Healthcare Inc., Oak Street Health Inc. and Clover Health Investments Corp., SVB Leerink analysts wrote in a Feb. 15 research note.

Sharing Financial Risk

In the new model, REACH ACOs, can assume either 50% or 100% of the financial risk for the cost of care for Medicare beneficiaries—while sharing in the savings and losses accordingly.

Under the 100% risk option, the CMS keeps a portion of these savings, which is known as the “discount.” Under the old model, the CMS “discount” was as high as 5%, so providers had to lower patient spending by at least 5% to see any savings. Under the new model, the CMS discount can range from 2% to 3.5%, with providers keeping more if they generate savings.

“That’s one of the things that made it very unfriendly to historically successful ACOs was this really high discount. So they’re lowering it,” said David Pittman, senior policy adviser at the National Association of ACOs. Accountable care organizations are groups of hospitals, doctors and other clinicians that provide coordinated care in fee-for-service Medicare. ACOs and their programmatic equivalent, direct contracting entities, both participate in the model.

Under the old model, the CMS also kept 5% of participating providers’ payment, depending on their performance on quality measures. Only the best performers would get back the full 5% “quality withhold.” Under the new model, the “quality withhold” will be reduced to 2%.

This again, helps smaller, less-capitalized ACOs participate in the pilot program, Pittman said. One of the main criticisms of the old model was the prevalence of venture capital- and private equity-backed DCEs.

“The reason for that is you have to have deep pockets to participate,” Pittman said. “Doing things like adjusting the discount and making a lower quality-withhold makes it so you don’t have to have” such deep pockets to participate. “So it levels the playing field for smaller, more traditional ACOs,” Pittman said.

Concerns Over ‘Upcoding’

The new pilot program also attempts to address concerns participants will resort to “upcoding,” or inflating the seriousness of patient illnesses in order to receive a higher payment from Medicare. Upcoding is a big problem in the Medicare Advantage program, in which private managed care plans cover program beneficiaries.

To guard against this, the new model—just like the old one—puts a 3% cap on upcoding growth over a two-year period for REACH ACOs.

But in later years of the five-year model, participating ACOs won’t be penalized for any upcoding increases that occurred due to changes in the demographics of patients, Veda’s Perlman said.

That’s because the new model encourages participation by underserved beneficiaries with multiple chronic illnesses who tend to have higher risk scores, Perlman said.

Despite these changes, the depth and impact of the revamped rule may not be all that significant, Perlman said.

“It’s sort of one part public relations effort, one part modest reforms to address the concerns of progressives,” he said.

In a fundraising email sent on Friday, Physicians for a National Health Plan said the model may have a different name, “but the same Wall Street profiteering as before. CMS, you can’t fool us,” the email said. “We know Medicare privatization when we see it, and we won’t back down until it’s stopped.”

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

To contact the editors responsible for this story: Brent Bierman at; Karl Hardy at