REACH ACO Rules & Plunder of Public Funds

June 23, 2022

Summary: CMS promised that the Medicare REACH ACO program, which supplants Direct Contracting Entities as a capitated replacement of fee-for-service Medicare, would prevent using diagnostic upcoding to drive up payment rates as seen with Medicare Advantage. However, scrutiny of recent guidance to contractors, combined with past CMS regulatory failures, suggest extreme skepticism.

CMS REACH ACO Financial FAQs
Dated April 2022; Downloaded June 2022

Q: What is the purpose of the Coding Intensity Factor (CIF) and the ACO-level symmetric 3% cap in risk adjustment?

• Coding Intensity Factor (CIF). The retrospective CIF will ensure that the change in normalized risk scores across all claims-aligned beneficiaries is zero between the baseline year (2019) and the PY. It will be applied uniformly across ACOs for a given risk adjustment model.

• Symmetric 3% cap. A symmetric 3% cap will be applied to ACO-specific risk score growth only for Standard and New Entrant ACOs in PY2021 and onwards, and beginning in PY2024 for High Needs Population ACOs, if significant risk score growth is observed. Risk score growth will be determined at the ACO-level and the symmetric 3% cap applied for each PY relative to an annual rolling risk score reference year. However, starting in PY2024, the application of the symmetric 3% risk score cap will be modified to: 1) adopt a static reference year population for the remainder of the model performance period (as a substitute for the rolling reference year population), and 2) cap the ACO’s risk score growth relative to the ACO’s independently calculated demographic risk score growth …

Comment by: Jim Kahn

What does this technical mumbo-jumbo mean? Well, CMS and MedPAC acknowledge that the Medicare Advantage program has been plagued by rampant diagnostic upcoding, as compared with traditional Medicare, and inadequate corrective action is leading to hundreds of billions in overpayments to private MA insurers.

So, for the REACH ACO program (rebranded DCEs) CMS promised to hold the diagnostic risk score to a reference year, presumably at the start of the program. No upcoding, they said.

Then come the details. The devil is always in the details.

The first bullet is tricky. What’s key to understand is that “normalized” means counting only the coding growth that exceeds traditional Medicare coding growth. So, it’s not zero coding growth, it’s zero compared with some reference growth rate. But how will that growth rate be calculated? When assessing Medicare Advantage over-coding, the reference comparison was clear – traditional Medicare. Yet REACH ACOs are displacing traditional Medicare. So is the reference the remaining un-REACHed corners of traditional Medicare? Or all of traditional Medicare, including the REACH parts, which leads to a self-referential paradox?

The second bullet says that each ACO will be permitted an annual growth of 3% in risk score, compared with the prior year. That’s huge. Is it 3% absolute, or 3% above “normalized” growth? Critically, the promised static “reference year” kicks in only in 2024, just two years before the program ends. And, if the program changes before 2026, it won’t even happen. Oops, the actual implementation drops the reference year promise. Just like that, poof, gone!

If you’re confused, you’re not alone. I certainly am. The language used obscures as much as it clarifies.

What we’ve seen with Medicare Advantage is that even with crystal clear rules, the insurers influence Congress and CMS to inadequately adjust for known MA over-coding. This failure shifts billions from the government and beneficiaries to insurance stockholders.

Two additional issues:

Note that there’s a separate “demographic” adjuster – another opportunity to increase payments and profits.

And, as we’ve noted before, with the tempting prospect of keeping 100% of the first 25% in savings, REACH ACOs will work hard to suppress utilization, via care denials, “lemon dropping”, and other techniques.

Gilfillin and Berwick recently re-iterated concerns that the corporate nature of REACH ACOs will exacerbate profiteering gaming. These worrisome risk adjustment details compound that fear.

I predict that if REACH continues, within 3-5 years we will see in technicolor how these complex and squishy rules provided the opportunity for ACO contractors to increase payment rates, decrease outlays, and generally fleece the government and Medicare beneficiaries of hundreds of billions of dollars. One could call it, I suppose, my “Exploitation Expectation”.

It’s imperative that REACH is stopped; inserting corporations into traditional Medicare is a travesty.