An overhaul for Medicare's pay transformation program

The Biden administration is trying to jump start a Medicare program that pays health providers based on patient outcomes rather than by how many services they perform.

Why it matters: The alternative payment effort was created through the Affordable Care Act, but participation has plateaued since 2018 amid waning interest from providers.

Driving the news: The Biden administration finalized an overhaul of the initiative, known as the Medicare Shared Savings Program, on Tuesday. Changes include offering groups of providers in rural and other underserved areas upfront payments to help them start out in the program.

• The rule includes other provisions to make it less financial risky for provider groups to join, and makes it easier for participants to earn money back from the government year after year — a central perk of joining the program.

Zoom out: Medicare traditionally pays on a "fee-for-service" basis pegged to the number of patients seen and volume of procedures performed.

• But one of the main funding sources for Medicare is set to run dry in 2028 if the federal government doesn't make changes. Advocates say the solution at least partially lies in value-based care programs, like the Shared Savings Program.
• Under the program, doctors, hospitals and other providers join form groups known as accountable care organizations. ACOs take responsibility for the care of a set of traditional Medicare patients.
• If ACOs reduce total care costs for their members, they can get back a portion of that savings from the government. ACOs at more advanced stages of the program must pay the government back if total patient spending crosses a threshold.

By the numbers: ACOs have saved the federal government more than $17 billion since 2012, according to the National Association of Accountable Care Organizations.

• In 2022, 483 ACOs participated in the program and took care of more than 11 million Medicare enrollees. But that's down from 517 ACOs participating in 2020.
• CMS set a goal last year to bring all 63 million-plus Medicare beneficiaries into a value-based care model by 2030. ACOs are a key player in achieving the goal.

Go deeper: Providers and value-based care advocates are also pushing Congress to extend a 5% pay bump for providers that participate in advanced alternative payment models, including some tracks of the Medicare Shared Savings Program. The bonus expires Dec. 31.

• "If the bonus is not continued, it will soften or dampen the momentum toward alternative payment models, because it would create this mentality, or the view, that we're not serious about that transformation," said Mara McDermott, vice president at McDermott+Consulting and executive director of the Value Based Care Coalition.

• Losing the bonus would also make it harder to recruit new providers into alternative payment models, she added.
• The American Medical Association and five other health care groups launched a separate coalition Tuesday to rally around an extension of the 5% bonus.
• “Patients and the healthcare system in the United States quite literally cannot afford to return to the days before Medicare incentivized healthcare providers for generating good results,” Clif Gaus, CEO of the National Association of ACOs, said in a news release about the coalition.

Also notable: The rule finalized Tuesday outlines physician payment rates for 2023. Interventional radiologists and vascular surgeons will see the largest Medicare cuts among physician specialties next year, though the final cuts are slightly lower than what CMS proposed in July.

• Congress could stave off the cuts when they come back to Washington later this month.
• “The Medicare payment schedule released today puts Congress on notice that a nearly 4.5 percent across-the-board reduction in payment rates is an ominous reality unless lawmakers act before Jan. 1," American Medical Association President Jack Resneck said in a statement.
• CMS finalized a slew of other policy proposals Tuesday, including provisions to reduce barriers to behavioral health care.