The Center for Medicare & Medicaid Innovation (“CMMI”) has announced a new strategy for establishing payment systems that incentivize healthier lives through a focus on three key pillars: (1) promoting evidence-based prevention; (2) empowering patients to achieve their health goals; and (3) driving choice and competition. This strategy includes several positives for providers participating (or considering participation) in CMMI’s alternative payment models, including efforts to reduce administrative burden for participants, increase predictability through reducing significant mid-model changes and increased access to prospective payments and advanced shared savings. However, CMMI has also signaled an intent to prioritize models that include downside risk, with a likely requirement that at least some of that risk is borne by providers.

Separately, CMMI Director Abe Sutton recently indicated that CMS is abandoning its previously stated goal to have all fee-for-service Medicare beneficiaries under accountable care arrangements by 2030. Together, these changes signal a new direction for Medicare’s value-based alternative payment models, one which health care providers across the continuum of care must be aware of as they determine whether, and to what extent, to participate in these models.

Background

CMMI was established with the mission of transforming the U.S. health care system by promoting value-based care. CMMI’s primary focus is to test new payment models and service delivery strategies aimed at improving care quality and patient outcomes while simultaneously reducing costs for the federal government. To support its mission, CMMI allocates $10 billion in mandatory funding every decade to carry out its activities.

One of the key features that sets CMMI apart from other federal entities is its statutory authority under Section 1115A of the Social Security Act, as modified by the Affordable Care Act. This authority allows CMMI to test innovative payment and care delivery models without going through the traditional notice-and-comment rulemaking process, which can be time-consuming. This flexibility enables CMMI to launch, modify and terminate models more quickly, allowing for more timely and responsive reforms in Medicare, Medicaid and the Children’s Health Insurance Program. This agility has made CMMI a leader in driving health care transformation through rapid testing and iteration of new ideas.

Recent Developments: A New Strategic Focus for CMMI Models

CMMI will use three key pillars to inform its work and fulfill its statutory mandate: (1) promoting evidence-based prevention; (2) empowering patients to achieve their health goals; and (3) driving choice and competition. A closer look at each pillar and its practical implications for providers and the health care industry follows:

Promoting Evidence-Based Prevention

  • CMMI’s updated strategy emphasizes preventive health and chronic disease management as central components across all care and payment models. The approach includes areas such as nutrition, physical activity, behavioral health and early intervention, reflecting the goals of the “Make America Healthy Again” policy of the Trump administration.
  • In addition to working directly with patients, there will be options for working with community-based organizations to resolve nutritional needs, provide disease management counseling and exercise and nutrition support and offer access to evidence-based alternative medicine.
  • Accordingly, payment models will likely increasingly link provider compensation to preventive care activities and patient health outcomes. This includes incentives designed to encourage both providers and patients to engage in health promotion and disease management efforts. Hospitals and health systems will need to adapt by expanding preventive services and partnering with community organizations to support broader population health goals.

Empowering People to Achieve Their Health Goals

  • CMMI plans to increase options for providing cost-sharing support for Medicare beneficiaries attributed to accountable care organizations and in Medicare Advantage plans. This may include waivers that allow providers to reduce or eliminate out-of-pocket costs for high-value services, medications or devices shown to improve outcomes and reduce total cost of care. For providers participating in CMMI’s alternative payment models, these waivers could support strategies to boost medication adherence, reduce avoidable admissions and improve care transitions for attributed patients.
  • CMMI will also focus on providing patients with relevant data to understand health and costs by testing approaches for shared decision-making tools and providing education on health topics to Medicare beneficiaries.

Driving Choice and Competition

  • To make it easier for independent provider practices, rural providers and provider-led ACOs to participate in CMMI’s models, CMMI may expand the use of advanced shared savings and prospective payments. In addition, CMMI will consider allowing a longer timeframe for the collection of losses from participants. Rural and independent providers often face significant upfront resource constraints, making it difficult for them to engage in CMMI’s testing models. The focus on prospective payments may help remove financial barriers to entry for these providers and allow for sustained participation in a CMMI model without relying solely on retrospective reimbursements, which may not be available until one or two years after the model’s inception.
  • To ensure final decisions on a model’s future occur when the most comprehensive results are available, CMMI will allow models to operate until final evaluation results are available, provided that no successor model is designed and early results do not preclude certification.
  • To promote stability and reduce administrative burden, CMMI will standardize model features when appropriate and minimize significant mid-model changes.
  • CMMI appears to have a renewed appetite for testing payment changes in Medicare Advantage, such as testing the impact of inferred risk scores, regional benchmarks or changes to quality measures that better align with promoting health.
  • CMMI may design models that include site-neutral payments across settings and other mechanisms it views as promoting competition and investment in outpatient and community-based care settings.
  • CMMI is focused on protecting taxpayer dollars and has signaled that reviews of existing models and new model designs could include the following features:
    • Downside risk. Under a downside risk model, providers can face penalties if they exceed the expected costs of care or fail to meet performance benchmarks. While CMMI stops short of mandating downside risk for all models, the agency strongly hints that future payment models will likely include an element of downside risk, including a requirement that providers bear some of the financial risk of non-performance under the model, instead of allowing a convener or value-based care enabler (i.e., an entity that brings together value-based care participants and in many instances insulates providers from downside risk) to hold all of the financial risk under the arrangement.
    • Focus on Affordability of Care. As part of its broader strategy, CMMI is also focusing on making care more affordable for patients by testing mechanisms that directly impact hospitals’ cost-sharing structures and access to therapies. This may include waivers that allow hospitals to reduce or eliminate out-of-pocket costs for high-value services, medications or devices shown to improve outcomes and reduce total cost of care. For hospitals, these waivers could support strategies to boost medication adherence, reduce avoidable admissions and improve care transition. Additionally, CMMI is exploring value-based drug pricing and insurance designs, which could shift hospitals’ financial exposure while encouraging the adoption of cost-effective therapies. These reforms may ultimately alter how hospitals structure formularies, engage with payers and coordinate care across the continuum.

Why This Matters

CMMI’s shift in strategy marks a turning point in the agency’s use of alternative payment models to achieve broad reforms in the nation’s health care system. Rather than abandoning or minimizing value-based care as a lever to achieve meaningful change, CMMI appears to be leaning into its statutory mandate, particularly its role in producing cost savings for the Medicare program. Providers should be ready for new payment models from CMMI (or changes to existing models) with increased accountability and exposure to downside risk. The shift toward downside risk will require health care organizations to invest in systems and processes that improve both quality and efficiency. Smaller and rural providers may face particular challenges, but CMMI’s efforts to design simpler models and provide more up-front revenue opportunities to promote investment and sustained model participation should help ease their transition into value-based care. At the same time, the focus on preventive care will require a shift in how care is delivered. Incorporating behavioral health, nutrition and physical activity into care plans will become a central part of provider responsibilities.

Practical Takeaways

  • Increased Downside Risk: More models will require providers to take on financial risk, with penalties for failing to meet benchmarks.
  • Increased Use of Prospective Payments and Advanced Savings Payments: These up-front payments are essential for providers to manage the transition to value-based care, but they will be tied to performance metrics.
  • Focus on Prevention: Models will place a strong emphasis on early disease management, nutrition, physical activity and behavioral health to improve population health.
  • Possible Changes to Existing Models: CMMI may make changes to existing models to align with the agency’s new strategic direction. Current participants in CMMI models should be familiar with the participation terms of these models, including termination rights for participants, and be ready to evaluate the financial impact of any changes implemented by CMMI.
  • Value-Based Care Appears to Be Here to Stay: Across several administrations, the enthusiasm for and use of value-based care to achieve policy objectives and reform the health care system has proved remarkably resilient. Although CMMI is shifting priorities, it appears poised to continue implementing alternative payment models that have affected the care and treatment of Medicare beneficiaries, including those who are enrolled in Medicare Advantage plans.

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