Health Highlights

Assessing the Medicare Shared Savings Program: Diverse Participants, Diverse Results

By Christopher Cantrell, Senior Analyst, Manatt Health | Jonah Frohlich, Managing Director, Manatt Health


Rising healthcare costs and declining reimbursements have placed immense pressure on providers and health systems to manage the health and costs of the populations they serve more effectively. These pressures coincided with the advent of the Medicare Shared Savings Program (MSSP) in the Affordable Care Act, which couples population health approaches with financial incentives to support the transition from volume to value.

The MSSP was met with a fair degree of enthusiasm and expectations (as well as some cynicism) when it launched in 2012. Some anticipated that the MSSP, along with the Pioneer ACO program, could save $1.5 billion nationwide over three years.

Manatt has supported more than a dozen MSSP applicants, ranging from independent practice associations (IPAs) to large health systems. Our experience has given us a unique perspective on the characteristics and development approaches of the ACOs participating in the program.

An Open and Transparent Program Design

The diversity of participating organizations reflects the MSSP’s open and transparent design, which is somewhat unique among federal programs. The MSSP established an annual open application period during which any healthcare organization that serves Medicare fee-for-service (FFS) beneficiaries and meets a basic set of requirements may apply. Those requirements are uniform regardless of the type or size of the applicant.

To be eligible, ACOs must serve at least 5,000 beneficiaries, report on 33 clinical quality measures, and meet cost benchmarks established by the Centers for Medicare and Medicaid Services (CMS). In exchange for meeting these and a host of other clinical, financial and organizational requirements, ACOs have the opportunity to realize shared savings if they outperform cost targets established by CMS and, in some cases, realize losses if they don’t.

Diverse Participating Organizations and Populations

The MSSP has generated significantly more interest than was first anticipated. More than 360 Medicare ACOs already have been established since the program’s launch. Among the MSSP’s participants are IPAs, academic medical centers (AMCs), regional hospitals, multistate delivery systems, and federations of all of the above. Each organization’s patient population reflects differing demographics, disease burdens, severity of illness and utilization patterns.

For example, one AMC was managing a population with more comorbidities and complex conditions than a community hospital located in a retirement community. As a result, the approaches that both institutions take to manage care should not necessarily be the same. The AMC needed more specialist and specialized care, while the community hospital focused more on primary care.

The ACOs that Manatt supported also showed significant differences in their clinical and information technology (IT) infrastructures, as well as their experience managing risk. One participating entity had no existing care coordination or care management infrastructure, requiring it to consider significant investments to support the ACO’s launch. Another already had a population health management system in place and National Committee for Quality Assurance (NCQA) certified patient-centered medical homes within a number of its primary care clinics, leaving the ACO better prepared for managing patient risk. Despite the differences between these two organizations, both applied for and were accepted into the MSSP. While the MSSP established a level playing field, it is decidedly uneven with respect to each organization’s capabilities and patient population profiles.

ACO Implementation Approaches Vary – A Lot

Given the wide variations among entities, it is impractical to create a single strategy for successful MSSP participation. Each organization must develop its own plan that takes into account both the specific characteristics of its patient population and its existing capabilities. Since an organization’s clinical and IT capabilities have implications for how effectively the ACO can manage care and achieve savings, it is critical that organizations engage in forecasting and assessments, as they develop their ACO implementation strategies:

  • Patient Population Characteristics. The CMS beneficiary attribution methodology assigns members to an ACO retrospectively by identifying where patients in the ACO’s geographic region receive the plurality of their primary care services. ACOs can use forecasting to anticipate the size and characteristics of the attributed beneficiary population, while also identifying hot spots and areas for potential savings.

    While beneficiary attribution is primarily driven by primary care services, Manatt’s forecasting experience suggests that it also may be driven by specialty care in certain settings. In one case, an AMC had twice as many attributed beneficiaries from specialists than a community hospital and 60 percent more than an IPA-based ACO. For some ACOs, higher specialty care utilization may require additional investments in care coordination for high-risk populations (e.g., specialist-based medical home models).

    Forecasting also may be used to predict with greater accuracy whether the ACO will meet the CMS minimum beneficiary requirement, which informs whether applicants should conduct further provider recruitment. Forecasting the expected attributed beneficiaries also provides insight into the ACO’s IT infrastructure needs to support more complex populations. For example, it can reveal whether the ACO needs more sophisticated clinical decision support and population health management tools.
  • Existing capabilities. Manatt’s experience in supporting MSSP applicants with gap assessments also uncovered significant differences in existing capabilities among different types of organizations. For instance, while some were more advanced than others, many federated provider groups, such as IPAs, did not have robust IT or care coordination infrastructures deployed across groups. Although IPA-based ACOs were typically developed through a physician-led governance model, they outsourced IT functions and relied on a “pod”-based care management model to coordinate care across practices. Since the IPAs lacked the kind of capital reserves available to hospital systems, they looked to national and regional payer partners to help support the ACOs’ implementation. These relationships do not preclude the ACOs from entering into contracts with other payers. In fact, there may be benefits to investors for the ACO to have multiple partners, if they can share in downstream savings.

    Larger institutions, such as AMCs and multistate delivery systems had more robust clinical and IT infrastructures and could centralize services to support their patient populations. However, these infrastructures often were fragmented across inpatient and ambulatory care settings. Manatt’s assessments revealed differing strategies and protocols across inpatient, ambulatory and post-acute care settings that need to be resolved. The MSSP pressed these ACOs to address fragmentation issues, reducing the likelihood of gaps in care as patients transition across settings.

According to the National Association of ACOs, the 114 MSSP ACOs that joined the program in 2012 have invested more than $400 million to build and operate their ACOs. However, as noted previously, the overall level of investment for each ACO varies based on its existing capabilities. Manatt’s business planning experience with MSSP applicants shows that ACO investments typically range from $1.3 million per year to $6 million per year, depending on an organization’s existing infrastructure and scale. These variations in costs underscore the need for accurate assessment and forecasting of needed resources.

Preliminary Program Results

Given that the existing capabilities, patient populations and ACO implementation approaches of MSSP participants varied so dramatically, it should come as no surprise that their performance also showed significant differences. In January 2014, CMS released preliminary performance results for the 114 MSSP ACOs that began operation in 2012.

Within this initial participant cohort, 27 of the 110 Track 1 participants, which are not liable for downside risk, generated shared savings. Of the four Track 2 participants, which are liable for downside risk if spending exceeds expectations, two generated shared savings and two generated shared losses. While only a small portion of the initial program participants generated shared savings during the first year, more than half of the 114 participating ACOs had lower than projected expenditures, generating $128 million in savings for the Medicare trust fund.

Following the release of the initial shared savings results, CMS released data in February on 5 of the 33 quality measures used to evaluate the clinical care that ACOs provide. The five released measures—which evaluate ACOs’ results with respect to patients with diabetes and coronary heart disease—provide additional insight into the performance of the initial participant cohort.

Similar to the shared savings results, the data indicate that performance varied across ACOs. For example, on the measure that assessed the percentage of diabetic ACO patients with documented daily aspirin use, one ACO achieved 81 percent while another achieved only 7 percent. ACO quality performance also varied dramatically across measures assessing blood pressure, tobacco use and hemoglobin control.

Looking Forward

The 2015 MSSP application cycle will begin in June and conclude in the fall, when CMS selects new program participants. While the 2015 cycle will likely not be affected, it is anticipated that CMS will release additional guidance for the MSSP program sometime this fall. Significant regulatory changes could potentially have an impact on how future ACOs are measured, as well as how they receive shared savings. Manatt will continue to monitor changes at the federal level that are of interest to current and prospective MSSP participants.

As current ACOs further develop care coordination and population health management capabilities, it is likely that some organizations will use the MSSP as a stepping stone toward assuming more risk for their beneficiary populations (i.e., Medicare Advantage and commercial HMOs). By waiving certain fraud and abuse requirements, the MSSP provides a pathway for healthcare organizations to be deemed clinically integrated by the Federal Trade Commission, adding a degree of protection from federal antitrust and antikickback rules.

While ACOs are still subject to state law, some are leveraging the MSSP waiver to engage in contracts with commercial payers. This approach allows ACOs to spread their clinical and IT infrastructure investments over commercial and public payer patient populations. As more organizations leverage this approach, it is likely that the spread of Medicare and commercial ACO arrangements will continue.

The preliminary results from the MSSP’s first year provide some insight into the varied performance of the initial MSSP ACOs. CMS intends to release final results later this year, which may shed further light on early experiences with the program. Given that ACOs in the initial cohort varied significantly in their existing capabilities and patient populations, it is noteworthy that some were able to outperform their cost projections and achieve shared savings. Time will tell whether other MSSP participants will be able to improve care while driving unnecessary costs out of the system. Their continued investment and participation in the program, however, suggest a longer-term commitment to adopting a care model that moves them away from traditional FFS medicine. That in itself may be the most significant achievement of the program to date.

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Hallmarks of the Accountability Model: Key Negotiating Points to Improve the Quality and Reduce the Costs of Healthcare

By Anne O. Karl, Associate, Manatt

Editor’s Note: The United States is undergoing a transformative shift in how we pay for healthcare, moving from fee-for-service models to accountability-based models. In a recent article published in the March issue of Executive Insight, summarized below, Manatt Health defines the key terms used in contracts implementing accountability-based models—and reveals how they can impact the value proposition of these arrangements for both plans and providers. Click here to read the full article.

Value-Based Contracting Models

Any model that compensates providers based on factors other than simply the volume of services provided can be categorized as value-based contracting. Contracting models employing bonuses/withholds or shared savings retain many of the features of a fee-for-service arrangement but with a value-based purchasing overlay. Providers receive most, if not all, of their standard fee-for-service payments for a given service. At the end of the year, the plan assesses whether a provider is eligible for bonuses, a repayment of the portion of fees withheld, or shared savings based on utilization, quality, or some combination.

In contrast, contracting models using global budgets represent a significant departure from fee-for-service arrangements. Providers may continue to receive a portion of their fee-for-service payments, but nearly all of their total compensation is based on patient utilization and quality scores.

Key Terms in Value-Based Contracts

Value-based contracts feature key terms that may dramatically impact the value proposition of the arrangement yet be unfamiliar to plans and providers, including:

1. Expenditure benchmarks

When negotiating the approach for calculating the expenditure benchmark, plans and providers must agree on:

  • Their approach to risk adjusting the benchmark to account for the acuity of the patient population attributed to the provider.
  • The frequency with which the benchmark will be adjusted in case of changes in the overall health of the patient population.
  • For multiyear contracts, the trend factor for the expenditure.
  • If and when the benchmark will be reset. (Providers prefer benchmarks based on spending levels prior to the value-based payment arrangement. Plans, in contrast, prefer that benchmarks be reset to reflect spending levels while the value-based contract is in place.)

2. Patient attribution

Patients can be attributed to providers on either a prospective or retrospective basis. Providers generally prefer that patients be attributed to them at the beginning of the year, so they can target coordination and outreach efforts. Conversely, plans prefer that patients be attributed at the end of the year, so providers are encouraged to improve quality and reduce costs.

Parties must also agree on how to attribute patients. For example, patients can be attributed based on a primary care provider selected by the patient or plan, or on where the individual received specified services.

3. Quality metrics

Quality metrics take on increased importance in value-based contracts, as payment is tied to performance. The parties must agree on the metrics and their associated performance targets, as well as on who will be responsible for data collection. Providers prefer metrics that assess activities that they perform, while plans prefer those tied to enrollees’ health outcomes.


Each contract negotiating process will differ. The key to success across the board, however, is ensuring that both parties understand fully the impact of various contracting terms on the arrangement’s overall value.

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Manatt Health Is Honored by Both Chambers USA and the Client Choice Awards

Chambers USA Names Manatt’s Healthcare Practice a 2014 Awards for Excellence Finalist

Manatt’s national Healthcare practice has been named a finalist for the Chambers USA 2014 Awards for Excellence. The awards honor outstanding law firms and lawyers across the United States, reflecting preeminence in key practice areas and notable achievements over the past 12 months, including outstanding work, impressive strategic growth and excellent client service. Manatt is one of five finalists chosen.

The awards are based on research conducted by Chambers and Partners for the upcoming 2014 edition of “Chambers USA: America’s Leading Lawyers for Business.” Manatt’s Healthcare practice is currently nationally ranked in Chambers, with eight partners recognized as leading individuals and two as “up and coming” attorneys. The Awards for Excellence ceremony will take place on May 22 in New York.

Manatt’s James Lytle Wins 2014 Client Choice Award

James Lytle, partner in Manatt’s Government and Healthcare Practice, has won a 2014 Client Choice Award in the public law category—the only attorney in New York State to receive that honor. The Client Choice Awards—in association with the “International Law Office” and “Lexology”— recognize law firms and partners around the world that stand apart for the excellent service they provide. The awards are unique in surveying senior corporate counsel only, with this year’s winners chosen from a pool of more than 2,000 individual assessments.

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HIE Helps Integrate Behavioral and Physical Healthcare, but Hurdles Remain

By Helen Pfister, Partner, Healthcare Industry, Manatt | Susan Ingargiola, Director, Manatt Health

Editor’s Note: Healthcare providers have long recognized that many patients have both behavioral and physical health needs—yet behavioral and physical healthcare services have traditionally been provided and paid for separately. The growing awareness of the prevalence and cost of comorbid behavioral and physical conditions—and the increased recognition that coordinated care can improve outcomes and achieve savings—has led to increasing acceptance of delivery models that integrate physical and behavioral healthcare. Electronic health information exchange (HIE) can facilitate integration—but challenges remain. In a new article published in the April 1 issue of iHealthBeat, summarized below, Manatt Health examines the benefits of and barriers to behavioral and physical care integration—and the strategies for overcoming the hurdles to electronic exchange of information between behavioral and physical healthcare providers. Click here to read the full article.

Benefits of Integrating Behavioral and Physical Healthcare

According to a national comorbidity survey, nearly 70% of adults with mental illness have co-occurring medical conditions, while 29% of adults with physical health problems have comorbid mental illness. Comorbid behavioral and physical health conditions are costly. New York’s Medicaid program found that 82% of potentially preventable 30-day hospital readmissions were for patients with behavioral health conditions, costing the state $665 million. Almost 60% of those readmissions were due to physical health conditions. Scores of randomized controlled trials have found that collaborative care interventions—those using an interdisciplinary team to address mental health conditions in primary care settings—improve quality and outcomes for some of the most prevalent and costly behavioral health conditions, including depression and anxiety. With consensus growing around both the need for and benefits of integrating services, some states have embraced a statewide approach to supporting the integration of behavioral health services in primary care and community clinic settings. For example, the Integrated Behavioral Health Project in California has conducted numerous studies and funded more than 30 initiatives to identify and promote best practices, creating a road map for better implementation across the state.

Electronic HIE Can Facilitate Care Integration

Behavioral and physical healthcare providers often have separate administration, financing and regulatory structures. A prerequisite to coordination, however, is for behavioral and physical healthcare providers to exchange information about their shared patients’ care, including their treatment plans, medications and lab results. Electronic HIE can make this information available in one place, instantaneously.

The Barriers to the Electronic Exchange of Behavioral and Physical Health Data

State laws or regulations that impose special protections on behavioral health information or limit what healthcare providers can do with it are a barrier to the electronic exchange of behavioral health data. Most electronic systems do not have the capacity to tag and separate patient information that is subject to more stringent privacy standards than other patient data, creating an obstacle to sharing behavioral health information through HIE.

Providers, however, often interpret confidentiality laws as more restrictive than they actually are. Examples include:

  • Some providers believe HIPAA requires patient authorization to disclose information for treatment purposes, when no authorization is required.
  • Some providers have the misconception that HIPAA places tighter restrictions on behavioral health information than on physical health information, which, in general, it does not.
  • Some providers think that Part 2 regulations—those requiring patient consent to disclose certain drug and alcohol treatment information except under limited circumstances—restrict disclosure by general medical providers who deliver a mix of substance abuse and other medical services. In fact, the regulations apply only to federally assisted alcohol and drug abuse programs.

Strategies to Overcome Barriers

Stakeholders have developed several tools to surmount the barriers to the electronic exchange of behavioral and physical health information. For example, HHS recently released clarifying guidance to ensure providers understand that HIPAA does allow the use and disclosure of behavioral health information for treatment, payment and healthcare operations without the patient’s consent. The guidance also reiterates the rules, for both adults and minors, around communicating with family, friends, caregivers and law enforcement; considering the patient’s capacity to agree or object to sharing his or her information; and involving others in dealing with a patient’s failure to adhere to treatment.

In addition, the Substance Abuse and Mental Health Services Administration, the federal agency that enforces Part 2 regulations, recently released a “frequently asked questions” document that reassured Part 2 providers interested in HIE initiatives. For instance, the guidance states that a single consent form may be used to authorize a Part 2 provider to disclose records to multiple providers participating in HIE or other data sharing arrangements. States also are working to remove barriers, with some enacting legislation to replace their patchwork of privacy laws with a single set of requirements governing electronic information exchange. These and other strategies for overcoming barriers to information sharing between behavioral and physical healthcare providers (both electronically and through more traditional channels) were recently outlined in a Robert Wood Johnson Foundation-sponsored white paper. (Click here to download the paper.)


With many providers eligible for payment incentives for sharing information under the Medicare and Medicaid EHR Incentives Program and participation growing in health reform initiatives that reward providers for coordinating care, information sharing between behavioral and physical health providers is likely to increase. How quickly this expansion occurs will depend on how effectively providers and policymakers identify barriers and create strategies to overcome them.

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New, Free Webinar From Manatt Health and Bloomberg BNA: “The Evolution of Health IT and EHRs”

Click here and Enter Code LGAUEXT5 to Register Free and Earn CLE.

Join Manatt Health and Bloomberg BNA at a new, free webinar, “The Evolution of Health IT and EHRs: Setting the Stage for Growth and Value.” The webinar details the emergence of health IT, focusing primarily on developments over the last decade that have accelerated the adoption and use of electronic health records (EHRs). The program will begin by providing a framework for understanding health IT, tracking its growth from its inception through the IOM (Institute of Medicine) to its implementation through HITECH (Health Information Technology for Economic and Clinical Health Act).

The session will provide definitions of key concepts and terms, deciphering the alphabet soup of acronyms around health IT. It also will share insights into the role that federal and state governments play in accelerating, coordinating and overseeing health IT.

In addition, the webinar will give participants an in-depth look at the benefits EHRs deliver, including how they increase the efficiency, effectiveness, quality and safety of care. The program will track the market and policy changes that have supported the adoption of EHRs, including a detailed assessment of the federal initiative for supporting their meaningful use. In addition, it will explore the impact of EHRs on medical practice—and offer a practical discussion of the legal liabilities and risks associated with EHR use. Attendees will gain valuable insights into:

  • The evolution and growth of health IT over the past 10 years, detailing key reports, programs, legislation and milestones.
  • The key concepts and terms around the electronic capture, transmission, exchange and use of health information.
  • Governmental coordination of health IT, including federal leadership and oversight, the roles that states play and the guidelines for public/private partnerships.
  • The value and benefits of EHRs.
  • Government actions to accelerate adoption, including actions to remove regulatory barriers and support implementation.
  • The meaningful use of EHRs, delving into the full range of requirements, incentives and penalties.
  • The effects EHRs will have on medical practice, including potential EHR-related errors; federal efforts to address EHR safety; and EHR use, legal liabilities and risks.


William Bernstein, Partner, Chairman, Healthcare Division, Manatt Jonah Frohlich, Managing Director, Manatt Health Anne O. Karl, Associate, Healthcare Industry, Manatt

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Now You Have a Second Chance to Benefit Free From Manatt Health’s Webinar Series, “A Practical Guide to Healthcare Reform”

Did you miss any of Manatt Health’s recent webinar series, “A Practical Guide to Healthcare Reform: The ABCs of Eligibility Under the ACA”? Now you have another chance to benefit from this valuable guide to how the ACA is transforming healthcare coverage. Just click here to view the programs free, on demand—and gain new insights into the changes under way. If you also would like to download a free copy of the presentations for your continued reference, just click here.

As a reminder, there are five programs in the series, designed to give you a complete view of how the ACA is redefining individual eligibility and reshaping the U.S. coverage landscape:

  • Affordable Care Act Primer. Examine how the ACA is transforming healthcare coverage. Learn how Medicaid and CHIP are changing—and how those changes fit within the broader context of healthcare reform, including the new marketplaces, Advance Premium Tax Credits, Cost-Sharing Reductions, private insurance reforms and the shared responsibility payment.
  • Medicaid 101. Understand the Medicaid eligibility and enrollment changes under the ACA. Review states’ decisions to expand Medicaid and their implications. Understand the new benefit requirements for adults covered as a result of the Medicaid expansion. Find out how Medicaid fits within the continuum of coverage opportunities available under the ACA.
  • Advance Payments of Premium Tax Credits (APTCs) and Cost-Sharing Reductions (CSRs): A Practical Guide. Identify the financial and nonfinancial eligibility criteria for APTCs and CSRs. Gain insights into the options for using APTCs to purchase plans. Learn the two ways APTCs can be received. Take a detailed look at how the APTC is calculated. Get an in-depth view of the income measure (Modified Adjusted Gross Income) used to evaluate eligibility and calculate the size of APTCs and CSRs.
  • Advance Payment of the Premium Tax Credit Reconciliation. Understand what reconciliation is, how it works and how to calculate it through real-world examples. Discover effective strategies for minimizing APTC repayment, including accurately projecting household size and income, taking less tax credit in advance and promptly reporting household and income changes. Get a step-by-step guide to obtaining and reconciling APTCs.
  • Qualified Health Plan Selection: Considerations for Consumers. Determine the factors to consider when selecting a Qualified Health Plan. Identify the key considerations to take into account beyond cost, including provider networks and formulary designs. Explore the interplay between premiums and cost-sharing across metal levels, as well as for catastrophic coverage. Walk through specific, real-life examples that demonstrate the implications of premium and cost-sharing options for consumers, depending on their ages, incomes and health needs.

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