Deep Risk Management, LLC (DRM) respectfully submits comments on the Proposed Rule for the Medicare Program: Proposed Changes to the Medicare Shared Savings Program as published in the Federal Register on May 10th, 2021. DRM is a company that was created specifically to support ACO’s and similar healthcare provider groups transition from fee-for-service to value-based care. We specialize in downside risk, and the relation between projected performance and pricing. Our unique knowledge and experience working with healthcare professionals and reinsurers guide our commentary.
BASIC Risk Track Advancement Deferral Option
Medicare proposes to allow MSSP ACOs participating in the BASIC track’s glide path the option to forgo automatic advancement to increasing levels of risk for Performance Year (PY) 2022, and instead remain in the same risk track for another year. For PY2023, an ACO that elects this option would automatically advance to the risk track they would have been entering in the absence of this flexibility.
We support Medicare’s proposal to allow BASIC track ACOs to remain in the same risk track for another year. However, rather than just continuing to defer risk due to myriad uncertainty, we also urge CMS to give groups more tools to address any potential future uncertainty. Specifically, we urge CMS to reinstate reinsurance as an acceptable repayment mechanism for all MSSP ACOs in two-sided risk tracks.
We recommend that CMS accept reinsurance as an acceptable repayment mechanism.
Background on MSSP ACO Repayment Mechanisms
MSSP ACOs in two-sided risk arrangements “must establish a repayment mechanism to assure CMS that they can repay losses for which they may be liable upon reconciliation for each performance year under which they accept performance-based risk” (42 CFR § 425.204(f)). Currently, the following three options are the only repayment mechanisms permissible to MSSP ACOs :
- Funds placed in escrow established with an insured institution
- A line of credit as evidenced by a letter of credit that the Medicare program could draw upon, established at an insured institution; or
- A surety bond issued by a company included on the U.S. Department of the Treasury’s List of Certified (Surety Bond) Companies.
For many APM Entities, having capital tied up in escrow or a line of credit is untenable. A surety bond is thus the only repayment mechanism typically available for ACOs that lack vast financial backing.
Reinsurance not only gives entities another option but offers several advantages over a surety bond.
- Performance Based: Reinsurance is structured based on participants expected performance relative to their benchmarks. For participants to avail themselves of this market, they must first demonstrate a deep understanding and command of the program.
- Appropriate “Skin in the Game:” Virtually all reinsurance policies require minimum deductibles, forcing participants to share risk. Even in the rare event that “first dollar” coverage is offered, the cost will be substantially higher than with a deductible. The net effect is the same: Groups will have to perform well to access the reinsurance market.
- Protection: Reinsurance offers protection where participants need it most. Surety bond requirements are designed to cover only certain expenditures consistent with § 425.204(f)(4)(ii). Reinsurance is designed to protect entities all the way up to a catastrophic loss.
- Predictability: When groups purchase reinsurance, they can better budget their resources based on premiums and deductibles.
- More Reliable CMS Recovery: Reinsurance that covers “total downside risk” assures CMS can recoup all losses from the MSSP Program.
In short, the reinsurance market is far more sophisticated and better positioned to address the practical needs of MSSP ACOs than the existing collateral alternatives.
Precedent to Allow Reinsurance as a Repayment Mechanism for MSSP ACOs
In the Medicare Final Rule “Medicare Shared Savings Program; Accountable Care Organizations-Pathways to Success and Extreme and Uncontrollable Circumstances Policies for Performance Year 2017” [CMS–1701–F2 and CMS–1702–F], published on 12/31/2018, CMS’ prior decision to eliminate reinsurance as a repayment mechanism in MSSP was due to 1) Concerns about administrative complexity, 2) ACOs had trouble obtaining reinsurance due to insurers’ lack of experience and 3) Because no ACO had established reinsurance as its repayment.
Concerns 2) and 3) are no longer applicable. Since the publishing of this rule, ACOs have purchased reinsurance. Further, the reinsurance market has developed considerably, and several options now exist to transfer MSSP downside risk. We expect the market to continue to develop, particularly if/ when CMS acknowledges reinsurance as an acceptable form of collateral.
As for concern 1) (administrative complexity), this would still need to be addressed, but can be overcome. Deep Risk Management is committed to working with CMS to discuss the types of companies and types of coverage available to participants. In the interim, we suggest a few criteria to simplify the administrative burden:
Standard Criteria for Reinsurers/ Reinsurance for CMS to Consider:
Minimum financial strength, registered and approved by CMS.
– Accept responsibility to directly repay CMS.
– Minimum coverage thresholds (aggregate or per claim) to help ensure repayment.
– Minimum shared risk (deductibles/ coinsurance)
– Insurance cancellation periods consistent with MSSP cancellation notice provisions.
In the aforementioned Medicare Final Rule for MSSP ACOs “Pathways to Success and Extreme and Uncontrollable Circumstances Policies for Performance Year 2017”, CMS “declined commenters’ suggestions to reinstate reinsurance as a permissible form of repayment mechanism arrangement” and said it “may revisit these issues in future rulemaking as we gain additional experience with program policies, and particularly as more ACOs participate under two-sided models, which we anticipate will be the result of this final rule.”
We believe the time is now for CMS to support the growing reinsurance market. An active market provides MSSP participants with essential options and we believe is imperative to the future success of the program. Without a reinsurance market, we fear that once downside risk is mandatory for all participants, many will choose to exit the program.
We appreciate your consideration of our comments and the great work you have done to create a more transparent and improved healthcare system for patients.
Brian S Kern, Esq.
CEO, Deep Risk Management, LLC