Background
The ACO Primary Care Flex Model (PC Flex) is a voluntary five-year program running from 2025 through 2029. It is offered by the Center for Medicare and Medicaid Innovation (CMMI) for accountable care organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP), which is administered by the Centers for Medicare and Medicaid Services (CMS). The deadline to submit a Phase 1 PC Flex application is August 1, 2024.
An introduction to the ACO PC Flex model and thoughts on how to evaluate participation may be found in this Milliman whitepaper: ACO Primary Care Flex: A Guide for ACOs Interested in the Latest CMS Primary Care Innovation Model.1
In this paper we share five key takeaways for ACOs as they evaluate the program. ACOs should be considering three aspects of revenue that may be changed by participation in PC Flex (relative to not participating):
- Prospective Primary Care Payment (PPCP): How does this payment relate to the fee-for-service (FFS) reimbursement reduction for primary care services?
- Shared savings impact: How will the PPCP affect shared savings/losses generated by the ACO?
- Enhancement credit: How impactful is the enhancement credit applied to the settlement after the shared savings/losses calculation?
This paper’s Appendix2 contains scenarios illustrating the takeaways. The scenarios are loosely based on the data released by CMS in the ”ACO PC Flex RFA Exhibits and Example Calculations,” with additional detail and adjustments.
Key takeaways from PC Flex
- We expect most ACOs that elect to participate in the PC Flex model will see increased revenues as a result of participation. Many participating ACOs will realize increased net revenues on the order of 1% to 3% of benchmark due to the PPCP enhancements and the enhancement credit applied to the settlement.
On the low end of this range is an ACO in the ENHANCED track with a large positive regional adjustment and/or prior savings adjustment. This situation is illustrated in Scenario 6 of the Appendix2, where most of the additional primary care revenue received via PPCP is netted out of shared savings. On the high end of the range is an ACO in BASIC Level A, with expenditures higher than the benchmark and no positive regional adjustment or prior savings adjustment. This situation is illustrated in Scenario 3 of the Appendix2, where the additional primary care revenue received via PPCP does not have a shared savings impact because the ACO is in a deficit, and the enhancement credit effectively doubles the increase in primary care revenue from the enhanced portion of the PPCP.
- While PC Flex will result in increased revenue for many ACOs, there are certain situations in which a participating ACO could realize decreased net revenues.
One example of this is illustrated in Scenario 4 of the Appendix2. The ACO is in BASIC Level A and has primary care expenditures significantly higher than the PPCP. This ACO receives a large reduction in primary care revenue because the PPCP is lower than the underlying FFS primary care revenue reductions. This can happen because the PPCP is set based on the average primary care spend by county, and even after adjustments and enhancements there is no guarantee that the PPCP is sufficient to cover FFS reductions. The low shared savings rate in BASIC Level A results in only a small increase in shared savings despite the large reduction in expenditures.
- ACOs with lower shared savings tracks will benefit more from PC Flex participation than ACOs with higher shared savings tracks, all else being equal. However, ACOs with higher shared savings tracks may still realize more overall net revenue than ACOs with lower shared savings tracks.
This situation is illustrated in Scenarios 1 and 6 of the Appendix2. The values in these scenarios are identical other than the ACO in Scenario 1 is in BASIC Level A, and the ACO in Scenario 6 is in ENHANCED. The change in primary care revenue and the enhancement credit are identical, but the higher shared savings rate in ENHANCED results in a larger decrease in shared savings in Scenario 6.
- ACOs with low or zero regional /prior savings benchmark adjustments will benefit more from PC Flex participation than ACOs with larger benchmark adjustments, all else being equal. However, ACOs with higher benchmark adjustments may still realize more overall net revenue.
This situation is illustrated in Scenarios 2 and 3 of the Appendix2. These two ACOs are identical except that the ACO in Scenario 2 has a positive regional adjustment and/or prior savings adjustment, and the ACO in Scenario 3 has a zero positive regional adjustment and/or prior savings adjustment. Both ACOs are in BASIC Level A and both have a shared loss, but the ACO in Scenario 3 earns a larger enhancement credit due to its lack of a positive regional adjustment and/or prior savings adjustment.
- ACOs with a higher proportion of participating Federally Qualified Health Centers (FQHCs) and Rural Health Centers (RHCs) will see more net revenue from this program, all else being equal due to the FQHC/RHC PPCP enhancement. However, ACOs with a high proportion of participating FQHCs and RHCs will not necessarily realize more net revenue than ACOs with a low proportion of participating FQHCs and RHCs due to differences in total expenditures, benchmark, or other factors.
Scenario 5 of the Appendix2 illustrates an ACO with a high proportion of FQHCs and/or RHCs. This is similar to Scenario 1, but both the primary care FFS reduction and PPCP before enhancement are higher, reflecting the FQHC payment adjustment. The FQHC adjustment is intended to be greater than, or equal to, the FFS payment that would have been made to an FQHC in lieu of participation in PC Flex. Therefore, Scenario 5 shows PPCP slightly higher than the underlying FFS reductions and results in a slightly larger aggregate revenue change. However, because of higher overall expenditures and lower shared savings, Scenario 5 results in slightly lower total revenue than Scenario 1.
Assumptions and methodology
The assumptions for beneficiary-months, PPCP, FFS reductions, expenditures, and benchmarks are hypothetical but within reasonable ranges for ACOs in our experience. We confirmed the reasonability of these assumptions by reviewing public use files and Milliman ACO Builder calculations. Our methodology follows the methodology in the RFA and accompanying Excel workbook that CMS published on May 30, 2024. These results represent a reasonable range of outcomes. However, some ACOs could see results outside the range presented herein. We recommend ACOs considering participation in the PC Flex program perform modeling of their expected performance before finalizing participation.
Conclusion
PC Flex offers substantial benefits to ACOs that have low-revenue status and are willing (and have a pending application) to start a new agreement period. In most, but not all situations, an ACO’s net revenue is expected to increase as a result of participation in PC Flex. ACOs should quantify the potential impact before deciding to participate in the program. Milliman has developed an estimate of the PC Flex rate book for each county using the 100% Medicare FFS dataset, which can be used to support modeling. For more information, contact your Milliman consultant.
1 Gusland, C., Grzeskowiak, D., & Shaikh, T. (May 16, 2024). ACO Primary Care Flex: A Guide for ACOs Interested in the Latest CMS Primary Care Innovation Model. Retrieved July 10, 2024, from https://www.milliman.com/en/insight/aco-primary-care-flex-guide-innovation-model.
2 A PDF version of the appendix is available here.
Appendix
| General Information | ||||||
|---|---|---|---|---|---|---|
| Scenario | 1 | 2 | 3 | 4 | 5 | 6 |
| Track | BASIC - A | BASIC - A | BASIC - A | BASIC - A | BASIC - A | ENHANCED |
| Total Assigned Beneficiary Months | 120,000 | 120,000 | 120,000 | 120,000 | 120,000 | 120,000 |
| Total PPCP Eligible Beneficiary Months | 117,600 | 117,600 | 117,600 | 117,600 | 117,600 | 117,600 |
| Primary Care Costs / Revenue | ||||||
| County base rate | $17.85 | $17.85 | $17.85 | $17.85 | $17.85 | $17.85 |
| FQHC/RHC enhancement | $0.00 | $0.00 | $0.00 | $0.00 | $25.00 | $0.00 |
| PPCP before Enhancements PBPM* | $17.85 | $17.85 | $17.85 | $17.85 | $42.85 | $17.85 |
| Total PPCP before Enhancements | $2,098,918 | $2,098,918 | $2,098,918 | $2,098,918 | $5,038,918 | $2,098,918 |
| Primary Care FFS Reduction PBPM | $17.85 | $17.85 | $17.85 | $50.00 | $42.00 | $17.85 |
| Total Primary Care FFS Reduction | $2,098,918 | $2,098,918 | $2,098,918 | $5,880,000 | $4,939,200 | $2,098,918 |
| Change in Primary Care Revenue Before Enhancements | $0 | $0 | $0 | ($3,781,082) | $99,718 | $0 |
| PPCP Enhancements | ||||||
| Total enhancement PBPM** | $16.67 | $16.67 | $16.67 | $16.67 | $16.67 | $16.67 |
| Total enhancement | $1,960,000 | $1,960,000 | $1,960,000 | $1,960,000 | $1,960,000 | $1,960,000 |
| Change in Primary Care Revenue After Enhancements | $1,960,000 | $1,960,000 | $1,960,000 | ($1,821,082) | $2,059,718 | $1,960,000 |
| MSSP Shared Savings / (Loss) before PC Flex | ||||||
| ACO Expenditures PBPY | $13,720 | $14,280 | $14,280 | $13,720 | $13,744 | $13,720 |
| ACO Benchmark PBPY | $14,000 | $14,000 | $14,000 | $14,000 | $14,000 | $14,000 |
| Total ACO Expenditures | $137,200,000 | $142,800,000 | $142,800,000 | $137,200,000 | $137,441,521 | $137,200,000 |
| Total ACO Benchmark | $140,000,000 | $140,000,000 | $140,000,000 | $140,000,000 | $140,000,000 | $140,000,000 |
| Gross Savings / (Loss) | $2,800,000 | ($2,800,000) | ($2,800,000) | $2,800,000 | $2,558,479 | $2,800,000 |
| Shared Savings / (Loss) | $1,097,600 | $0 | $0 | $1,097,600 | $1,002,924 | $2,058,000 |
| MSSP Shared Savings / (Loss) after PC Flex | ||||||
| Change in Primary Care Revenue After Enhancements | $1,960,000 | $1,960,000 | $1,960,000 | ($1,821,082) | $2,059,718 | $1,960,000 |
| Adjusted ACO Expenditures | $139,160,000 | $144,760,000 | $144,760,000 | $135,378,918 | $139,501,238 | $139,160,000 |
| Gross Savings / (Loss) | $840,000 | ($4,760,000) | ($4,760,000) | $4,621,082 | $498,762 | $840,000 |
| Shared Savings / (Loss) | $329,280 | $0 | $0 | $1,811,464 | $195,515 | $617,400 |
| Change in MSSP Shared Savings / (Loss) before Enhancement Credit | ($768,320) | $0 | $0 | $713,864 | ($807,409) | ($1,440,600) |
| Enhancement Credit | ||||||
| Maximum of positive regional adjustment and prior savings adjustment PBPM | $10.00 | $10.00 | $0.00 | $10.00 | $10.00 | $10.00 |
| Total enhancement credit applied to settlement after offset PBPM | $6.67 | $6.67 | $16.67 | $6.67 | $6.67 | $6.67 |
| Total enhancement credit | $784,000 | $784,000 | $1,960,000 | $784,000 | $784,000 | $784,000 |
| Aggregate Revenue Changes | ||||||
| Change in Primary Care Revenue After Enhancements | $1,960,000 | $1,960,000 | $1,960,000 | ($1,821,082) | $2,059,718 | $1,960,000 |
| Change in MSSP Shared Savings / (Loss) before Enhancement Credit | ($768,320) | $0 | $0 | $713,864 | ($807,409) | ($1,440,600) |
| Total enhancement credit | $784,000 | $784,000 | $1,960,000 | $784,000 | $784,000 | $784,000 |
| Total Revenue Change | $1,975,680 | $2,744,000 | $3,920,000 | ($323,218) | $2,036,308 | $1,303,400 |
| Revenue Change as Percent of Benchmark | 1.4% | 2.0% | 2.8% | -0.2% | 1.5% | 0.9% |
| Total Net Revenue*** | $3,073,280 | $2,744,000 | $3,920,000 | $774,382 | $3,039,232 | $3,361,400 |
* Includes county base rate, FQHC/RHC adjustment, and health equity adjustment
** Includes flex enhancement and county enhancement
*** Includes change in primary care revenue, total shared savings/loss, and enhancement credit