Verma: Alternative Payment Model Performance ‘Deeply Concerning,’ More Mandatory Programs Ahead

The nation’s top Medicare official this week expressed serious disappointment in the performance of alternative Medicare payment models, citing key design flaws and promising more mandatory programs to come.

The Centers for Medicare & Medicaid Services (CMS) recently completed an analysis of several early attempts at value-based payment structures, with administrator Seema Verma disappointed in the outcome.

“Unfortunately, the results are deeply concerning,” Verma said earlier this week. “To date, only five models have shown statistically significant savings, and of these five, only three have been expanded on a national scale. Just a handful have seen significant improvements on quality metrics.”

Verma made the comments during a virtual presentation about the state of value-based care and the Center for Medicare & Medicaid Innovation (CMMI), which has developed a range of new models such as the accountable care organization (ACO) and bundled payments programs.

“The bottom line is CMMI models are losing money, generating large losses and a weak return on investment for taxpayers,” Verma said. “The center stands in need of a course correction in model design and portfolio selection if value-based care is to advance.”

ACOs and bundled payments have drawn the ire of skilled nursing operators, which have generally seen the move to value-based care as a threat to nursing home utilization — and, in turn, the bottom line. Both models encourage collaboration up and down the continuum to improve care and reduce Medicare spending; in practice, this has resulted in reduced skilled nursing days in favor of lower-cost home health services.

Participation in these programs has largely been voluntary and regionalized, with small pockets of mandatory plans: The Comprehensive Care for Joint Replacement (CJR) bundled payment model, for instance, was not optional in multiple markets across the country.

Under that model, providers were required to share a single episodic payment for common joint replacements, which serve as the bread-and-butter Medicare funding stream for many skilled nursing facilities. During the CJR’s first two years, per-episode spending dropped by nearly $1,000, driven primarily by reductions in stays at SNFs and other institutional sites of care.

The CJR had a tangible impact on some providers: A non-profit in Wisconsin, for example, was forced to substantially scale back its Medicaid business after the model cut into Medicare rates. The provider, LindenGrove Communities, had relied on the Medicare dollars to help subsidize its money-losing long-term Medicaid services.

As Verma looked to the future of value-based care, she emphasized that mandatory participation — and the threat of harsher downsides for failing to meet benchmarks — will be vital to success. In particular, Verma pointed to increased risk requirements in the Medicare Shared Savings Program (MSSP), which covers ACOs, as a factor in its recent savings figures.

“Voluntary models designed with an abundance of financial carrots to attract participation are often not sufficient to avoid significant losses for taxpayers,” she said. “Models must incorporate design elements that require participants to have skin in the game. Models where providers have downside risk actually perform better.”

CMMI director Brad Smith echoed Verma’s comments, indicating that the agency is looking into a new mandatory bundling model that will look to correct perceived problems with adverse selection under voluntary systems.

“When necessary, we will also move forward selectively with mandatory models,” Smith said. “We believe making models mandatory is necessary in order for the model to be successful.”