ACO leaders say benchmark design, risk adjustment and 'ratchet' effect are slowing provider participation

At a Patient‑Centered Outcomes Technical Advisory Committee (PTAC) listening session hosted by the U.S. Department of Health and Human Services, Dr. Cliff Goss, past president and chief executive officer of the National Association of ACOs (NACOS), said benchmarking problems, risk‑adjustment differences and a so‑called “ratchet” in benchmarks remain primary obstacles to accountable care organization (ACO) growth.

Goss said benchmark design has three central challenges: determining an appropriate historical spending start point, adjusting for individual patient factors and accounting for changes in regional spending trends. “No one could predict precisely what our costs are gonna be next year nor for the next five years,” he said, calling the trend estimate mechanism a major source of unpredictability.

The issue has moved from theory to immediate concern because CMS used an “accountable care perspective trend” (ACPT) that, Goss said, CMS projected at about 3.9 percent for new contract years but which he and colleagues saw as “significantly off” for 2024. Goss told the panel that 2024 spending “is almost 9–10 percent,” and that differences of that magnitude could harm ACOs when a multi‑year trend is locked into contract benchmarks.

Why it matters: benchmark design sets the budget against which an ACO’s performance is measured and reconciled. If historical baselines, trend projections and risk‑adjustment methods understate future spending, ACOs can face unrecoverable losses even when they reduce utilization. Goss said the problem contributes to a “death spiral” or ratcheting effect in which past savings worsen future benchmarks, making it harder for successful ACOs to meet targets on contract renewal.

Goss also contrasted Medicare accountable‑care models with Medicare Advantage (MA). He noted that MA’s financial model includes subsidies and fewer caps on risk‑adjustment increases—features he said have contributed to MA’s growth and relative attractiveness for providers compared with MSSP and ACO REACH models.

Details from the panel and Q&A: - Historical baselines: Goss described the traditional benchmark as a weighted historical spend for the population the ACO manages and said establishing that starting point remains difficult because patient mixes vary widely between practices and systems. - Trend estimates: Goss and other panelists flagged the ACPT mechanism (a five‑year locked trend used for new contract cohorts) as especially risky if the underlying forecast is substantially wrong. - Risk adjustment and caps: Goss noted that risk‑score caps in accountable‑care programs differ from MA and that these caps limit how much an ACO’s benchmark can rise with documented increases in patient complexity. - Savings reported: Goss described gross historical savings from accountable‑care models of about $28 billion, while acknowledging savings have not always matched early expectations.

Discussion on remedies focused on making benchmarks more predictable, allowing adjustment mechanisms when projections fail, and finding ways to include prior savings fairly in new benchmarks to avoid penalizing successful participants. Goss said NACOS and others are preparing to engage the new administration about potential fixes.

Ending: Panelists and committee members asked for transparent, stable rules and predictable reconciliation mechanisms so that smaller physician groups and conveners can decide whether to invest the time and capital required to take on two‑sided risk.