Medical Billing ServicesRevenue Cycle Management (RCM)

Impact of Pandemic on Value-Based Contracts

The Healthcare industry is facing implications from the pandemic situations that can impact their ability to improve contract performance and potentially expose them to new risks. Value-based contracts are usually relying on historical data for starting claim targets, trend rates, and/or quality measures.

Impact on claims

The timing and severity of this pandemic situation is vary materially based on geography and market segment. At the same time, delays in care, negligence in care, and drops in non-COVID emergent care may decrease costs during the 2020 performance period and create claim surges in subsequent performance periods due to unexpressed requests during the quarantine period. Value-based care contracts are adding a layer of complexity for provider organizations impacted by the COVID-19 pandemic.

Capability to manage population health

ACOs are usually are expected to meet certain preventive care, chronic care, and other quality targets in addition to effectively managing overall usage. Non-emergent patient management becomes problematic during quarantine periods.

Impact on upcoming contracts

Value-based contracts are usually relying on historical data for starting claim targets, trend rates, and/or quality measures. Current alterations from COVID-19 can disturbing upcoming contract periods for the next one to three years. Additionally, existing risk adjustment models may not appropriately account for COVID-19 pandemic impacts.

Current Scenario

Value-based care and risk-based contracts have augmented significantly over the past 10 years in market segments. The Healthcare system is continuing to rely mainly on fee-for-service revenue, the majority have some share of their revenue tied to contract performance. COVID-19 pandemic has generated significant uncertainty with respect to costs, utilization, quality, and the ability to deploy typical population health strategies to manage these outcomes.

There is also uncertainty about the appropriateness of risk scores given the emergence of this novel condition combined with the disruption in traditional utilization patterns. In addition, the impact of COVID-19 itself varies considerably by geography, market segment, and socioeconomic variables. While most parts of the country will experience a temporary reduction and deferral of patient care, particularly for elective and routine services, COVID-19 treatment costs will vary based on areas with higher infection and morbidity rates.

In addition, certain contracts will face greater exposure to COVID-19 risk based on the type of population covered. Medicare contracts likely will have higher COVID-19 treatment costs due to older and disabled individuals who have a greater likelihood of hospital and ICU admissions. Similarly, Medicaid contracts likely face greater exposure due to socioeconomic disparities observed with infection, hospitalization, and death rates.

Accordingly, ACOs that participate in Medicare Shared Savings Programs (MSSP) have expressed significant concerns about COVID-19 and its impact on 2020 performance. 1

  • 77% are very concerned, 17% are somewhat concerned.
  • 90% believe COVID-19 will have a significant or very significant impact on the ACO’s ability to earn shared savings in 2020.
  • 35% are likely or very likely to leave Medicare ACO programs for 2021; 21% are somewhat likely.

CMS has recognized the potential impacts of COVID-19 by making several key amendments to its alternative payment models. These include:

  • MSSP — CMS modified the extreme and uncontrollable circumstances policy to cover all ACOs that may be unable to provide accurate and complete quality data. 2020 performance year losses will be reduced by the percentage of total months affected by the extreme and uncontrollable circumstances policy and any benchmarks will be adjusted to account for COVID-19.
  • Comprehensive Care for Joint Replacement (CJR) Model — CMS has extended the term of Performance Year 5 by three months and exchanged the uncontrollable circumstances policy to account for participant hospitals affected by COVID-19.

There may be a less financial impact for Medicare ACOs because the Centers for Medicare & Medicaid Services has unveiled updates to the Medicare Shared Savings Program as part of broader guidance for COVID-19 response. CMS’ updated regulations include:

  • Adjusting the financial methodology for 2020 to neutralize the impacts of treating COVID-19 patients on MSSPs.
  • Prorating the shared losses owed by ACOs in 2020 for the duration of the pandemic—up to full forgiveness.
  • Skipping the annual application process for 2021 for legacy MSSPs that are eligible to renew under the new program structure (Pathways to Success).
  • Maintaining the current risk level for 2021 for MSSPs as opposed to the automatic adjustment that now occurs under Pathways to Success. Participants will move into the scheduled risk track in 2022.
  • Reporting quality scores is optional for the 2019 performance year, and there will be no punishment for lack of reporting.

The impacts of COVID-19 on shared-risk initiatives will continue to be felt for several years. Provider organizations will need to weigh which arrangements they want to continue, and the impact on patients now and in the long run. For an industry pursuing greater accountability, both financially and for quality of care, COVID-19 could pause forward momentum for a few years.


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