Bloomberg Law
April 3, 2020, 3:11 PMUpdated: April 6, 2020, 5:48 PM

Virus Sidelines Medicare’s Push for Value-Based Care (1)

Tony Pugh
Tony Pugh

New federal guidance could offer Medicare provider groups up to $25 million to help offset their losses due to the Covid-19 emergency.

About 100 accountable care organizations, the groups of doctors and hospitals that provide coordinated care for beneficiaries, will each have $150,000 to $200,000 in year-end penalties waived under new interim regulations issued this week by the Medicare agency.

ACOs are given a spending target, or benchmark, at the start of the year. If they save Medicare money compared to that benchmark, they may share in some of the savings. If they exceed that benchmark, they’re required to pay back some of the losses to the government.

The funding will help during a difficult period for these value-based care providers. This year, 192 accountable care organizations are taking “downside” financial risk for cost increases, meaning they could lose revenue and have to reimburse Medicare if beneficiary care costs exceed agreed-upon thresholds.

The flood of costly Covid-19 cases and fewer visits for elective services all but assures that many ACOs in the Medicare Shared Savings Program will take losses this year. The crisis has already caused ACO participants to redeploy nurses to acute care duties, postpone patient annual wellness visits that help spot gaps in coverage, and delay elective surgical procedures.

Unless Congress agrees to forgive all ACO losses this year, the shared savings program—traditional Medicare’s leading value-based care initiative—could face a massive exodus of providers.

“ACOs have a June deadline to quit the Shared Savings Program to avoid losses for this year, and without expedient action from Congress, many may be forced to quit the largest and most successful alternative payment model in Medicare, derailing the overall move to value,” Clif Gaus, CEO of the National Association of Accountable Care Organizations, said in a statement.

The fate of more than 500 ACOs and the upcoming rollout of new payment models for primary care physicians will provide a post-pandemic inflection point for traditional Medicare’s move to value-based care.

The value-based concept ties provider reimbursements to patient outcomes and cost efficiency—not the volume of services performed. It’s designed to reduce spending before millions of aging baby boomers are expected to double Medicare expenditures to $1.5 trillion by 2028.

A CMS spokesman said the agency is still committed to value-based care, but protecting Americans during the pandemic is now its top priority.

On the Back Burner

Adam Finkelstein, counsel with Manatt Health, said even after the pandemic, value-based care will remain in the background as larger issues raised by the crisis dominate the agenda—like the need to bolster our health-care infrastructure and figuring out how to pay for it.

“It seems unlikely to me that we will think about value-based care in the same way as before the pandemic,” Finkelstein said.

But with a decline in tax revenue due to the stalled economy, increased federal spending for Covid-19, and larger deficits as a result, Medicare faces intense financial pressure and should be “in a race to make value work” sooner rather than later, former HHS Secretary Mike Leavitt said during a recent webinar.

That includes, Leavitt said, implementing—without delay—five new value-based payment model options designed for smaller and larger physician practices.
Any changes to the payment model implementation - like possible timeline extensions - will be released on a rolling basis, the CMS said.

“I think the current administration will say, ‘We need this more than ever. We just added $2 trillion, maybe as much as $4 trillion to the deficit,’” said Leavitt, the founder and chair of Leavitt Partners, a health care consulting firm.

Three direct contracting payment models focus on beneficiaries with similar ailments. Providers would share in both the program savings and losses generated through their care.

But the two Primary Care First models would pay physicians a fixed amount each month for each Medicare patient in their care. They’d receive bonus payments for keeping patients out of the hospital and share in savings when care costs are low.

Steady Funding Stream

That steady monthly funding stream, similar to the per-person payments that Medicare Advantage plans receive, would help doctors avoid cash flow problems when a crisis occurs, said Aisha Pittman, vice president of policy at Premier, Inc., a health-care consulting firm.

The CMS recently implemented an accelerated payment program to reimburse doctors faster during the pandemic. But “if you can get more providers in the value models and moving towards capitation, then you don’t need those temporary patches,” Pittman said.

The monthly per beneficiary payments in the Primary Care First models would allow doctors to “shift dollars” where the need is greatest “without involving CMS,” Pittman said.

The Covid-19 outbreak “highlights the need to move to value, and Medicare will put more emphasis on doing so going forward,” Pittman added.

Any changes to the payment models’ implementation—like possible timeline extensions—would be released on a rolling basis, the CMS said.

(Updates April 3 story with additional context in fifth paragraph and comments from the CMS in fifth and last paragraphs. Prior version corrected story to note that ACOs will have a portion of their year-end payments waived due to Covid-19.)

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