Vermont’s ACO Model: A unified payment structure focusing on health outcomes

The trial of an alternative payment model designed to incentivize “health care value and quality, with a focus on health outcomes, under the same payment structure for the majority of” Vermont health care providers throughout the state, including Medicare, Medicaid, and commercial health care payers, will begin on January 1, 2017, and end on December 31, 2022. According to CMS, the goal of this payment model, known as the Vermont All-Payer Accountable Care Organization (ACO) Model, is “to deliver meaningful improvements in the health of a state’s population by transforming the relationships between and amongst care delivery and public health systems across Vermont” (see HHS delivers on alternative payment model promises ahead of schedule, Health Law Daily, March 4, 2016). The Vermont All-Payer ACO Model builds on the Maryland All-Payer Model by bringing statewide health care transformation beyond the hospital (All-payer system helps Maryland keep cost growth below federal level, Health Law Daily, July 22, 2016).

The Vermont ACO model will be in effect for six performance years (PY0-PY5), each spanning a full calendar year. CMS will provide start-up funding of $9.5 million in 2017 to support care coordination and collaboration between practices and community-based providers. Vermont will be accountable for statewide health outcomes, financial, and ACO scale targets across health care payers. CMS also approved a five-year extension of Vermont’s section 1115(a) Medicaid demonstration, which enables Medicaid to be a full partner in the Vermont All-Payer ACO Model.

According to CMS, “the Vermont Medicare ACO Initiative is considered a Medicare Advanced Alternative Payment Model for the providers in the two-sided risk Medicare ACO portion of the model within CMS’ Quality Payment Program, and physicians and other clinicians participating in the Vermont Medicare ACO Initiative may potentially qualify for the Advanced Alternative Payment Model bonus payments starting in performance year 2018.”

Targets

Vermont’s statewide targets include ACO scale targets, all-payer and Medicare financial target, and health care and quality of care targets.

Although ACOs will continue payer-specific benchmarks and financial settlement calculations, the ACO design will be aligned across payers. Vermont payers and providers will be encouraged to participate in ACO programs with a goal of attaining 70 percent of all residents, including 90 percent of Vermont Medicare beneficiaries, participating in an ACO. Vermont’s ACO Model will help CMS attain itsgoal of “having 50 percent of all Medicare fee-for-service payments made via alternative payment models by 2018” (see New alternative payment models announced by CMS, Health Law Daily, October 26, 2016).

In terms of the financial target, Vermont will limit the annualized per capita health care expenditure growth for all major payers to 3.5 percent and the Medicare per capita health care expenditure growth for Vermont Medicare beneficiaries to at least 0.1-0.2 percentage points below that of projected national Medicare growth.

Vermont identified four priorities for its Health Outcomes and Quality of Care target: substance use disorder, suicides, chronic conditions, and access to care. Each of the priorities will be measured in three categories: (1) population-level health outcomes regardless of whether the population seeks care at the providers in the ACO; (2) health care delivery system measures and targets primarily related to the performance of care delivered by the ACO; and (3) process milestones measurable during the early years of the Model that would support achievement on the population-level and health care delivery system measures and targets.

Medicare ACO Initiative 

The CMS Medicare Fee-for-Service ACO initiative that is offered by CMS to ACOs in Vermont has been tailored for the Vermont All-Payer ACO Model. The Vermont Medicare ACO Initiative is based on CMS’ Next Generation ACO Model and will support ACO design alignment with other Vermont payers’ ACO programs. Participants in the Vermont Medicare ACO Initiative may not participate in the Medicare Shared Savings Program simultaneously.

Medicaid

The section 1115(a) Medicaid demonstration promotes delivery system and payment reform by allowing Vermont Medicaid to enter into ACO arrangements that align in design with that of other health care payers in support of the Vermont All-Payer ACO Model. For more information on Vermont’s section 1115(a) Medicaid demonstration extension see Fact Sheet and CMS Approval Letter.