Benchmark Regionalization in MSSP Disincentivized Higher-Spending ACOs

After CMS began incorporating regional spending into accountable care organization (ACO) benchmarks in the Medicare Shared Savings Program (MSSP), more higher-spending ACOs exited the program, a study published in Health Affairs found.

ACO benchmarking methodology can help incentivize or dissuade participation. Basing benchmarks on average risk-adjusted spending in the ACO’s region can incentivize providers with already lower risk-adjusted spending. This can lead to providers receiving bonuses without improving care quality and disincentivizes providers with higher risk-adjust spending.

Basing benchmarks on ACOs’ historical spending and adjusting for changes in ACO composition can help avoid favoring providers with lower initial spending. However, if the baseline period is not updated over time, providers that are initially less efficient have more opportunities to earn bonuses compared to more efficient competitors.

Originally, benchmarks in MSSP were determined by ACOs’ historical spending during a baseline period that trended forward at the national rate of Medicare spending growth. In response to concerns about unequal benchmarks for ACOs in the same market, CMS began including a regional adjustment that combined an ACO’s historical spending with the average spending in its region.

The change, referred to as benchmark regionalization, was finalized in June 2016 and impacted ACOs renewing their contracts in 2017 and later. The adjustment meant providers with lower baseline risk-adjusted spending in their region received higher benchmarks than they would’ve received under only historical benchmarking. Meanwhile, providers with higher baseline spending received lower benchmarks than they would’ve with historical benchmarking.

Researchers used MSSP Provider-level Research Identifiable Files from 2013 to 2019 and Medicare claims to determine how this benchmarking change impacted ACO participation in MSSP.

The study included 528 ACOs that entered MSSP before benchmark regionalization between 2012 and 2016 and 258 ACOs that joined after the change between 2017 and 2019. A stable number of ACOs entered MSSP each year, but the number of ACOs exiting the program grew over time.

An ACO could expect a consistent -$92 spending deviation during the first three performance years for every $100 their baseline three-year spending was below the regional average. This translated into a net advantage of $27 for every $100 of baseline spending below regional average.

ACOs that entered MSSP after regionalized benchmarks were introduced had baseline spending deviations that were significantly more negative than those for ACOs entering before. The average baseline spending deviation for those that joined after the change was nearly 3.5 times lower (-$81.48 per beneficiary) than ACOs entering before 2017.

Between 2017 and 2019, ACO-level exit and within-ACO reconfiguration shifted each group’s composition toward lower-spending participants. Among cohorts entering MSSP before 2017, exits and reconfigurations led to modestly positive changes in spending deviations. In contrast, after benchmark regionalization, exits and reconfigurations led to more negative spending deviations.

By 2019, ACOs remaining in MSSP had an average baseline spending deviation at entry of -$39.36, the study noted.

“The disproportionate participation of providers with more negative spending deviations led to higher benchmarks than would have occurred if only historical spending was used to set benchmarks and thus to larger bonuses than would have occurred through changes in practice patterns alone,” researchers wrote.

Due to a lack of a control group, they could not conclusively link the participation changes to benchmark regionalization, but the results were consistent with strategic selection behavior related to benchmarking changes.

For example, before 2017, annual compositional changes within groups did not shift toward providers with lower spending relative to region; instead, it favored those with higher spending. This led ACOs with less efficient practices to achieve greater savings. As the study showed, this trend reversed in 2017.

“Whether explained by strategic behavior or other factors, selective participation under regionalized benchmarking likely led to sizable subsidies for ACOs with lower preexisting spending levels,” the study stated.

Benchmarking methods should be reformed to help incentivize MSSP participation. One option is to slow or delay the convergence of historical benchmarks toward a regional average. In addition, if benchmark growth rates diverge from observed spending growth, it could help converge benchmarks to a common regional rate instead of average realized fee-for-service spending.