CMS Innovation Center: Model Implementation and Center Performance
Released: 2018-04-25T00:00:00

Letter

Background

Requirements for Innovation Center Models Implemented under Section 1115A

Section 1115A establishes certain requirements for the Innovation Center that relate to the selection of models, use of resources, and evaluation of models. These requirements include: consulting with representatives of relevant federal agencies, as well as clinical and analytical experts in medicine or health care management, when carrying out its duties as described in the law; ensuring models address deficits in care that have led to poor clinical outcomes or potentially avoidable spending; making no less than $25 million of the Innovation Center’s dedicated funding available for model design, implementation, and evaluation each fiscal year starting in 2011; evaluating each model to analyze its effects on spending and quality of care, and making these evaluations public; and modifying or terminating a model any time after testing and evaluation has begun unless it determines that the model either improves quality of care without increasing spending levels, reduces spending without reducing quality, or both.

Under section 1115A, certain requirements applicable to previous CMS demonstrations are inapplicable to models tested under the Innovation Center. For example, while prior demonstrations generally required congressional approval in order to be expanded, section 1115A allows CMS to expand Innovation Center models—including on a nationwide basis—through the rulemaking process if the following conditions are met: (1) the agency determines that the expansion is expected to reduce spending without reducing the quality of care, or improve quality without increasing spending; (2) CMS’s Office of the Actuary certifies that the expansion will reduce or not increase net program spending; and (3) the agency determines that the expansion would not deny or limit coverage or benefits for beneficiaries. In addition, certain requirements previously cited by the Medicare Payment Advisory Commission as administrative barriers to the timely completion of demonstrations are inapplicable. Specifically, section 1115A provides the following:

HHS cannot require that an Innovation Center model initially be budget neutral—that is, designed so that estimated federal expenditures under the model are expected to be no more than they would have been without the model—prior to approving a model for testing.

Certain CMS actions in testing and expanding Innovation Center models cannot be subject to administrative or judicial review.

The Paperwork Reduction Act—which generally requires agencies to submit all proposed information collection efforts to the Office of Management and Budget (OMB) for approval and provide a 60-day period for public comment when they want to collect data on 10 or more individuals—does not apply to Innovation Center models.

Innovation Center Staffing and Organization

The Innovation Center uses a combination of staff and contractors to test models. Since the center became operational in November 2010, the number of staff increased steadily through the end of fiscal year 2016. (See fig. 1.) As of September 30, 2017, there were 617 staff—a slight decrease in the number of staff from the end of the prior fiscal year. Officials indicated that, in the future, changes in the model portfolio may require additional staff to manage and support model development and implementation. However, officials do not anticipate needing to increase staffing levels at the same pace as they did between fiscal years 2011 and 2016. Additionally, the Innovation Center uses third-party contactors to perform functions related to the implementation of models and to perform evaluations of the changes in the quality of care furnished and program spending under a model.

The Innovation Center has organized its 617 staff members primarily into eight groups and the Office of the Director. Four of the eight groups are responsible for coordinating the development and implementation of models. Staff in these four groups primarily lead efforts in developing model designs and obtaining approval for their models from CMS and HHS. Once a model is approved, staff coordinate the remaining implementation steps, including soliciting and selecting participants and overseeing the model during the testing and evaluation period. The other four groups perform key functions that support model development and implementation, such as reviewing ideas submitted for consideration as possible models, overseeing the evaluations of models, providing feedback to model participants about their performance, disseminating lessons learned across models, and monitoring budget resources. The Office of the Director, in general, has oversight responsibilities for the models led by these groups. Table 1 provides information on the staffing groups within the Innovation Center.

Innovation Center Process for Model Development and Implementation

The Innovation Center has developed internal agency guidance that outlines a general process used by the four model groups for developing and implementing models. (See fig. 2.) Appendix I provides additional information about the general process for implementing models.

Innovation Center Categories for Models

The Innovation Center has organized its models into seven categories based on delivery and payment approaches tested and program beneficiaries covered. The seven categories are as follows:

Accountable Care. This category includes models built around accountable care organizations (ACOs)—groups of coordinated health care providers who are held responsible for the care of a group of patients. The models are designed to encourage ACOs to invest in infrastructure and care processes for improving coordination, efficiency, and quality of care for Medicare beneficiaries.

Episode-based payment initiatives. This category includes models in which providers are held accountable for the Medicare spending and quality of care received by beneficiaries during an “episode of care,” which begins with a health care event (e.g., hospitalization) and continues for a limited time after.

Initiatives Focused on Medicare-Medicaid Beneficiaries. This category includes models focused on better serving individuals eligible for both Medicaid and Medicare in a cost-effective manner.

Initiatives Focused on Medicaid and CHIP Populations. This category includes models administered by participating states to lower spending and improve quality of care for Medicaid and CHIP beneficiaries.

Initiatives to Accelerate the Development and Testing of New Payment and Service Delivery Models. This category includes models where the Innovation Center works with participants to test state-based and locally developed models, covering Medicare beneficiaries, Medicaid beneficiaries, or both.

Initiatives to Speed the Adoption of Best Practices. This category includes models in which the Innovation Center collaborates with health care providers, federal agencies, and other stakeholders to test ways of disseminating evidence-based best practices that improve Medicare spending and quality of care for beneficiaries.

Primary Care Transformation. This category includes models that use advanced primary care practices—also called “medical homes”— to emphasize prevention, health information technology, care coordination, and shared decision-making among patients and their providers.

For certain categories, the Innovation Center assigns primary responsibility for developing and implementing models to a single model group; for some other categories, the responsibility is shared across different groups. For example, the center assigned responsibility for models in the ACO and the Primary Care Transformation categories to the Seamless Care Model Group, whereas the responsibility for models in the Initiatives to Accelerate the Development and Testing of New Payment and Service Delivery Models categories were assigned across all four model groups. Appendix II provides a summary of the number of models organized under each category and a description of each model.

The Innovation Center Implemented 37 Models That Test Varying Delivery and Payment Approaches, and Obligated over $5.6 Billion

The Innovation Center Implemented 37 Models and Announced an Additional 2; Models Varied by Delivery and Payment Approaches Tested, Beneficiaries Covered, and Other Characteristics

As of March 1, 2018, the Innovation Center had implemented 37 models under section 1115A of the Social Security Act. (See fig. 3.) Of those 37 models, the testing period has concluded for 10 of them. In addition, the Innovation Center has announced two models to begin testing in 2018.

Innovation Center models varied based on several characteristics, including delivery and payment approaches tested and program(s) covered. Delivery and payment approaches varied across all implemented and announced models—even models organized by the Innovation Center under the same model category. For example, the six models that tested an episode-based payment approach varied in terms of how episodes were defined, including the clinical and surgical episodes to which models applied. In addition, some models included multiple approaches for achieving changes in health care delivery or payment. Models also differed in terms of the programs covered, with 22 models covering Medicare only, 9 models covering Medicare and Medicaid, one model covering Medicaid and CHIP, and 7 models covering all three programs. Other characteristics by which models varied include the nature of model participation for providers (voluntary or mandatory) and the source of innovation (i.e., federal, state, or local initiatives). See table 2 for a breakdown of models across selected characteristics. Appendix II provides a full description of all models implemented and announced by the Innovation Center.

In September 2017, the Innovation Center provided some insight into its future plans when it issued an informal “request for information” that identified guiding principles under which models will be designed going forward, described focus areas for new models, and requested feedback from stakeholders. One of the guiding principles focused on voluntary models—a principle consistent with a final rule published in December 2017 canceling four mandatory participation models in development and making participation in a fifth mandatory model voluntary for some geographic areas. Other guiding principles included promoting competition based on quality, outcomes, and costs; empowering beneficiaries, their families, and caregivers to take ownership of their health; and using data-driven insights to ensure cost-effective care that also leads to improvements in beneficiary outcomes. In addition, the Innovation Center indicated the following focus areas for new model development: additional advanced alternative payment models; consumer-directed care and market-based innovation models; physician specialty models; prescription drug models; Medicare Advantage innovation models; state-based and local innovation, including Medicaid- focused models; mental and behavioral health models; and program integrity.

The Innovation Center Obligated over 55 Percent of Its Initial Multiyear Appropriation through Fiscal Year 2016

According to Innovation Center documentation, through September 30, 2016, the center obligated over $5.6 billion of the $10 billion appropriated for fiscal years 2011 through 2019 under section 1115A of the Social Security Act. The obligated amounts for individual models during this period ranged from $8.4 million to over $967 million, and varied based on model scope and design. For example, a model where the Innovation Center used its waiver authority to provide additional flexibility to participants (rather than additional funding) required only $8.4 million in obligations for the evaluation of the model and implementation activities. In contrast, a model where the Innovation Center awarded funding to a broad set of partners, including providers, local government, and public- private partnerships, to test their own care delivery and payment models required more than $870 million in obligations for payments to awardees and used over $95 million for contractor evaluations and other activities that supported model development and implementation.

Innovation Center spending falls into three categories: model programs, innovation support, and administration.

Model programs include obligations that directly support individual models and delivery system reform initiatives.

Innovation support includes center-wide operational expenses that are not directly attributable to a single model.

Administration includes permanent federal full-time equivalent payroll expenses, administrative contracts, administrative interagency agreements, and general administrative expenses.

As the Innovation Center implemented additional models each year, total annual obligations increased steadily from approximately $95 million in fiscal year 2011 to more than $1.3 billion in fiscal year 2015, but decreased slightly in fiscal year 2016. (See fig. 4) Most of these total obligations were for model programs, which followed a similar pattern, increasing from $51 million in 2011 to about $1.1 billion in fiscal year 2015, with a slight decrease in fiscal year 2016. According to officials, the 2016 decrease in obligations for model programs was due in part to some of the earlier, expensive models ending and to newer models being less costly than the older models. Officials noted, for example, that a number of newer models incorporated basic program infrastructure used in previously implemented models, which allowed for reduced model costs. Officials also indicated that the decrease in obligations may be due to newer models using payment approaches that are funded by the Medicare Trust Fund, rather than funded by the Innovation Center’s dedicated appropriation. The center’s obligations for both innovation support and administration increased from around $20 million for each category in fiscal year 2011 to about $163 million for innovation support and $119 million for administration in fiscal year 2016. Officials told us that as obligations for model programs grew, so did obligations for innovation support and administration, which includes indirect costs and contractor assistance.

Evaluations Inform the Development of Models and Decisions to Certify Certain Models for Expansion

The Innovation Center Has Used the Results from Evaluations to Inform the Development of Additional Models and to Make Changes to Implemented Models

The Innovation Center has used the results from model evaluations to generate ideas for new models. For some of the early implemented models, evaluation results showed reduced spending and maintained or improved quality of care, but also identified model design limitations that could affect those results. According to officials, in some of these instances, the Innovation Center has developed new models that build upon the approaches of earlier models, but include adjustments intended to address identified limitations (see text box).

Evaluations of Implemented Models The evaluation of each model is performed by a third-party contractor, who generally determines the effect of a model on quality of care and program spending by comparing data for model participants to those of a comparison group of providers and beneficiaries with characteristics similar to model participants. For purposes of the evaluation, the Innovation Center has the authority to require the collection and submission of necessary data by model participants. Accordingly, the third-party contractor collects both quantitative and qualitative data. The quantitative data are used to assess program spending and quality of care and the qualitative data are used to provide the context needed to understand the quantitative results.

Example of A Model That Tests the Same General Delivery and Payment Approach of a Previously Implemented Model While Addressing Limitations Bundled Payment for Care Improvement (BPCI) Model 2 tested an episode-based delivery and payment approach in which the Innovation Center set a benchmark, or target, price for all Medicare services a beneficiary might receive during a clinical episode—defined by BPCI Model 2 as the initial hospital stay and all services received up to 90 days after discharge. If the total spending for Medicare services during an episode was lower than the target price, participating hospitals would receive payments in addition to the normal fee-for-service payments. If the total spending for Medicare services during an episode was higher than the target price, participating hospitals would have to reimburse Medicare. Participants could select up to 48 different clinical episodes under the model. The evaluation of BPCI Model 2 found that orthopedic surgery episodes—of which approximately 90 percent were hip and knee joint replacement surgeries—may have resulted in reduced program spending and improved quality of care. However, the evaluation also identified limitations affecting those results. For example, the target prices for hip and knee replacement surgeries did not account for potential differences in Medicare spending between elective surgeries and surgeries required after a fracture. As a result of this limitation, hospitals could attempt to control spending by limiting the number of episodes associated with higher cost beneficiaries (i.e., those requiring surgery due to a fracture). In part to address the design issue identified under BPCI Model 2, Innovation Center officials told us they developed the Comprehensive Care for Joint Replacement (CJR) model. Implemented in April 2016, the CJR model tests the same general delivery and payment approach used in BPCI Model 2, but focuses specifically on hip and knee joint replacement surgical episodes and adjusts the target price to account for the higher spending related to hip and knee joint replacement surgeries following a fracture. As of March 1, 2018, no evaluations of the CJR model have been publicly released.

The Innovation Center has also used the results from evaluations as one way to improve the operational and participant support for new models. According to officials, evaluations have helped them identify lessons learned regarding support systems, such as which types of systems work well with which types of models, and then the center incorporated those lessons when designing the systems for new models. For example, officials noted that the experience with the learning system from the Bundled Payments for Care Improvement (BPCI) models informed the learning system for the Comprehensive Care for Joint Replacement (CJR) model. The lessons learned helped the Innovation Center better identify where participants would need additional support and the learning activities—such as webinars and implementation guides—to provide the needed support during the early stages of model implementation. Innovation Center officials told us that these lessons from evaluations helped ensure that each successive model built upon the collective experience of models implemented by the center.

The Innovation Center also has used evaluation results to make periodic changes to models during the testing period. According to officials, these changes include adjustments to the delivery and payment approaches tested, such as refining the target population, broadening the geographic focus, and refinements of spending calculations. Innovation Center officials noted that, in general, such changes were limited to minimize their effects on the evaluation of program spending and quality of care. Officials also identified changes to operational and participant support systems, which have included changes to the timing of participant data reporting, revisions to how data are collected from participants, and changes to the way learning materials are delivered to participants. According to officials, these types of changes are generally intended to help improve the experience of participants.

According to Innovation Center officials, evaluation results may also be used in making a decision to terminate a model prior to the end of its planned testing period. However, officials stated that the Innovation Center has not terminated any models prior to the conclusion of their testing periods, either based on the results of an evaluation or for other reasons.

Evaluations Informed Innovation Center Decisions to Recommend Two Models be Certified for Expansion

The Innovation Center used evaluation results in recommending two models be certified for expansion. According to Innovation Center officials, the evaluation of each model adequately demonstrated that the delivery and payment approach tested reduced Medicare spending while maintaining or improving quality of care. Based on these results, the Innovation Center formally requested that CMS’s Office of the Actuary analyze the financial impact of a potential expansion of each model. The two models were:

Pioneer ACO. Pioneer ACO tested an ACO delivery and payment approach that gave providers an opportunity to be paid a relatively greater share of savings generated, compared to participants in other ACO models, in exchange for accepting financial responsibility for any losses. In year 3 of the model, ACOs that met certain levels of savings in the first two years could elect to receive a portion of their Medicare fee-for-service payments in the form of predetermined, per beneficiary per month payments.

YMCA of the USA Diabetes Prevention Program (Diabetes Prevention Program). The Diabetes Prevention Program applied a lifestyle change program recognized by the Centers for Disease Control and Prevention to reduce to the risk of Type 2 diabetes for at- risk Medicare beneficiaries. The Diabetes Prevention Program was a part of the Health Care Innovation Awards Round One model.

When assessing the Pioneer ACO and Diabetes Prevention Program models for expansion, the officials from the Office of the Actuary considered the model evaluation results that were available and information from other sources. For example, the assessment of Pioneer ACO used historical shared savings calculations and beneficiary attribution data from ACOs in the Medicare Shared Saving Program and Pioneer ACO; Medicare claims and enrollment data; and published studies. According to CMS officials, a model evaluation and a certification for expansion differ in that a model evaluation assesses the historical impact of a delivery and payment approach for model participants only, while a certification for expansion assesses the future impact on program spending across all beneficiaries, payers, and providers who would be affected by the expanded model.

Based on its assessments, the Office of the Actuary certified both models for expansion and steps have been taken to expand them. In certifying Pioneer ACO, the Office of the Actuary concluded that because ACOs, in general, have been shown to produce savings relative to Medicare fee- for-service, an expansion of Pioneer ACO would generate further savings to the Medicare program. According to officials, CMS expanded Pioneer ACO by incorporating elements of the model—through rulemaking—as one of the options that providers may choose under the Medicare Shared Savings Program. For the Diabetes Prevention Program, the Office of the Actuary concluded that certain changes considered as part of the expansion would, in the near term, improve upon the original savings achieved as part of the Health Care Innovation Awards as well as savings achieved in similar diabetes prevention programs. The Innovation Center has expanded—through rulemaking—the Diabetes Prevention Program under a new, nationwide model to be implemented in April 2018.

In addition, officials from the Innovation Center and the Office of the Actuary discussed potentially assessing whether Partnership for Patients should be certified for expansion. Partnership for Patients is a model that leveraged federal, state, local, and private programs to spread proven practices for reducing preventable hospital-acquired conditions and readmissions across acute care hospitals. According to officials, the Innovation Center shared the results for Partnership for Patients—which showed improved quality of care in the form of reduced preventable hospital-acquired conditions and readmissions—with the officials from the Office of the Actuary. After discussing these issues, Innovation Center officials decided not to request a formal analysis for certification of expansion.

The Innovation Center Established Performance Goals and Related Performance Measures and Reported Meeting Its Targets for Some Goals

To assess is own performance, the Innovation Center established three center-wide performance goals and related measures.

Goal 1: Reduce the growth of healthcare costs while promoting better health and health care quality through delivery system reform. This goal has three performance measures that focus on ACOs. As shown in table 3, the Innovation Center has reported mixed results in achieving the targets set. According to agency reported data, the Innovation Center met the targets for 2 of its 3 Goal 1 performance measures for 2015. For the remaining measure—the percentage of ACOs that shared in savings—the center did not meet its target during either of the two years for which data were available. According to officials, when results fall short of targets, they examine the causes and make appropriate adjustments to the program. Officials stated that the missed target was driven by the high growth in the number of ACOs that were new—and therefore would not yet be expected to achieve a level of savings in which they could share—and not by ACO performance deficits. As a result, officials decided that no adjustments were required to the Medicare Shared Savings Program or other ACO Models to help improve performance. However, as shown in table 3, the Innovation Center set a target for 2016 that was lower than the 2015 target. For 2017, the Innovation Center lowered the expectation for growth compared to previous years, setting a target that was 1 percent higher than the 2016 target. Moving forward, CMS believes that as more ACOs gain experience, more will share in savings. Additionally, the agency expects that with additional performance years, the targets for the measure will become more refined.

Goal 2: Identify, test, and improve payment and service delivery models. This goal has one performance measure, which identifies the number of models that currently indicate (1) cost savings while maintaining or improving quality or (2) improving quality while maintaining or reducing cost. As of September 30, 2016, the Innovation Center reported that four section 1115A model tests have met these criteria (see table 4).

Goal 3: Accelerate the spread of successful practices and models. For this goal, the first performance measure focuses on the number of states developing and implementing a health system transformation and payment reform plan. The second measure focuses on increasing the percentage of active model participants who are involved in Innovation Center or related learning activities. As shown in table 5, the Innovation Center reported meeting its target for the first measure for both fiscal years 2015 and 2016, but not meeting its target for the second measure. For the second measure, the Innovation Center noted in its report to Congress that although the results for fiscal year 2016 showed a slight decrease in overall participation in Innovation Center or related learning activities, the majority of models performed higher than their individual targets. Several models underperformed, however, bringing down the overall percentage rate.

In addition to the Goal 3 performance measures, the Innovation Center identifies two related contextual indicators—which according to officials are measures that provide supporting information to help understand trends or other information related to the goal. The first contextual indicator provides a snapshot of Medicare beneficiary participation at a given point in time for all models operational for more than 6 months. In fiscal year 2016, CMS reported that over 3.6 million Medicare fee-for- service beneficiaries participated in models, representing approximately 9 percent of Medicare fee-for-service beneficiaries. The second contextual indicator provides information to help understand the level of interest and participation among providers in the Innovation Center’s model portfolio. In fiscal year 2016, the Center estimates that 103,291 providers participated in Innovation Center payment and service delivery models.

In addition to the three goals established by the Innovation Center, CMS has established an agency-wide goal related to the center’s performance. In 2015, CMS announced goals to help drive Medicare, and the health care system at large, toward rewarding the quality of care instead of the quantity of care provided to beneficiaries. One of these goals was to shift Medicare health care payments from volume to value using alternative payment models established under the Innovation Center. This agency- wide goal has one performance measure, which is to increase the percentage of Medicare fee-for-service payments tied to alternative payment models, such as ACOs or bundled payment arrangements. As shown in table 6, CMS reported meeting its target for 2015 and 2016.

Looking forward, officials told us that the Innovation Center has developed a methodology to estimate a forecasted return on investment for the model portfolio, and is in the early stages of refining the methodology and applying it broadly across the portfolio in 2018. As part of the development efforts, the Innovation Center expects to utilize standard investment measures used in the public and private sectors.

Agency Comments

We provided a draft of this report to HHS for comment. The Department provided technical comments, which we incorporated as appropriate.

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If you or your staff have any questions about this report, please contact me at (202) 512-7114 or kingk@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix IV.

Appendix I: Center for Medicare and Medicaid Innovation’s General Process for Implementing Models

Appendix I: Center for Medicare and Medicaid Innovation’s General Process for Implementing Models An agency may issue a request for information for planning purposes.

Appendix II: Models Implemented or Announced by the Center for Medicare and Medicaid Innovation under Section 1115A

As of March 1, 2018, the Center for Medicare and Medicaid Innovation (Innovation Center) organized its models into seven categories based on delivery and payment approaches tested and program beneficiaries covered. Table 8 provides the number of models implemented and announced, organized under each category.

The Innovation Center organized seven of its models under the Accountable Care category. (See table 9.)

The Innovation Center organized seven of its models under the Episode- Based Payment Initiatives category. (See table 10.)

The Innovation Center organized three of its models under the Initiatives Focused on Medicare-Medicaid Enrollees category. (See table 11.)

The Innovation Center organized one of its models under the category, Initiatives Focused on the Medicaid and Children’s Health Insurance Program Population. (See table 12.)

The Innovation Center organized 14 of its models under the category, Initiatives to Accelerate the Development and Testing of New Payment and Service Delivery Models. (See table 13.)

The Innovation Center organized three of its models under the category, Initiatives to Speed the Adoption of Best Practices. (See table 14.)

The Innovation Center organized four of its models under the category, Primary Care Transformation. (See table 15.)

Appendix III: Models Required by Different Provisions of the Patient Protection and Affordable Care Act

In addition to models required by section 1115A of the Social Security Act, as added by the section 3021 of Patient Protection and Affordable Care Act, the Center for Medicare and Medicaid Innovation implemented six models under different provisions of the Patient Protection and Affordable Care Act. (See table 16.)

Appendix IV: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Greg Giusto (Assistant Director), Aaron Holling (Analyst-in-Charge), Ashley Dixon, and Rachel Rhodes made key contributions to this report. Also contributing to the report were Sam Amrhein, Muriel Brown, and Emily Wilson.