Dr Farzad Mostashari Explains the New ACO Benchmarking Rule

The new accountable care organization (ACO) benchmarking rule changes it so ACOs aren't just competing against themselves and transitions so ACOs have to be better than others in their region, Farzad Mostashari, MD, chief executive officer of Aledade, explained at the National Association of ACOs Spring 2016 Conference.

Transcript (slightly modified)

What are the proposed changes to the ACO benchmarking rule and what impact will they have?

So the big question for ACOs has been, “Is this a destination or is this just a path towards capitation?” and there’s no question that comes up more often than, “Do you get the full ratchet?” If you get savings, does your benchmark now come down to here [gesturing] and now you got to beat this and, okay, run faster, et cetera.

At some point you run out of room, right? So do you have to keep setting personal bests in order to stay in the game? And Medicare kind of punted on the issue for a while, and then they came out with a rule last year and they said “well, we’ll divide it 30-30-30, we’ll blunt the ratchet, we’ll make it a partial ratchet,” but it’s still a ratchet. And now the benchmark rule says no, you don’t have to always be better than yourself. Over time we’re going to transition to saying “you got to be better than your neighbors.” And that is what we thought they would do, that’s what we encouraged them to do, and we think it’s the right way to go.

It really creates the possibility of accountable care as a third permanent pillar, right? You have Medicare Advantage and managed care, you have fee-for-service, there could be a third pillar which is softer than managed care, but more cost control than ungoverned fee-for-service. And in this middle area, you can begin to migrate towards where most of the benchmark that you’re trying to beat is, what’s going on in your region around you. Are you more efficient than those around you, are you better at reducing the trend in cost than those around you? That is the single most important thing in the benchmark rule.

But I think the other meta-message of the benchmark rule is Medicare is going to keep working on this program to get it right over the long run. And that gives me great comfort. If someone whose company is predicated on not ACO or MSSP—we’re not an MSSP company—but really in a sustainable path for physician-led groups taking on total cost of care contracts.