The Center for Medicare and Medicaid Innovation (CMMI) is a powerful tool to drive care delivery system transformation through changes in payment models. Presidential administrations on both sides of the aisle have used it to advance changes that align with their policy preferences.
During President Donald Trump’s first administration, CMMI policy focused on promoting a risk-bearing, market-oriented care delivery system. Since the 2024 election, there has been significant speculation as to whether the second Trump administration might use CMMI in a similar way. Now, two recently published documents—a letter from Republicans on the House Ways and Means Committee to CMS Administrator Dr. Mehmet Oz and a new CMMI strategy document—provide some answers regarding the tack CMMI will take under the current Trump administration. In this article, we explore key takeaways from the two documents and why they likely signal more mandatory risk for hospitals and health systems in the coming years.
Capitol Hill Republicans Indicate Preferences for the CMS Innovation Center
On April 28, members of the House Ways and Means Committee sent a letter expressing their priorities for CMMI to CMS Administrator Oz and CMMI Director Abe Sutton. In the letter, the committee expresses support for CMMI’s recent action to prune its portfolio of models that were more focused on outcomes than savings. It further encourages the agency to focus on models that generate greater savings for the Medicare trust funds.
CMMI Director Sutton Charts a New Strategic Path
On May 12, Sutton issued a refreshed strategic direction for CMMI. Key themes in the document include:
- Ensuring models generate savings and are “certifiable,” meaning they could be expanded to the Medicare fee-for-service (FFS) payment system without additional legislation.
- Providing data and incentives to patients to empower healthcare choices.
- Encouraging competition—particularly by independent practices, CHCs, physician-led Accountable Care Organizations (ACOs), and rural providers.
- Renewing focus on prevention, including primary prevention to prevent, e.g., smoking cessation; secondary prevention to detect, e.g., cancer screenings; and tertiary prevention to slow disease progression.
Implications for Hospitals & Health Systems
The Ways and Means letter and Director Sutton’s new strategic plan clearly emphasize cost savings, both explicitly in the language used and implicitly in the focus on empowering patients with data and incentives, encouraging competition, and focusing on prevention, all of which are means to reduce the total cost of healthcare and Medicare spending by encouraging lower-cost sites of care and reducing avoidable expenditures. What could this mean for hospitals and health systems?
If CMMI wants savings, it needs more mandatory, two-sided risk models. When models are voluntary, providers will participate if there are financial opportunities based on the benchmarking methodology; conversely, eligible providers will sit out if the model is not financially advantageous. The Bundled Payments for Care Improvement Advanced (BPCI-A) Model is a prime example. When CMS changed the target price methodology and reduced participants’ ability to pick and choose certain procedures and diagnoses within an episode family, many participants (and their conveners) promptly exited the program.
In addition, when a model’s financial risk is upside only, participating providers suffer no negative consequences from not engaging in care transformation activities aligned with the model’s incentives. Both concepts—selection bias in voluntary CMMI models and upside-only inaction—have been observed repeatedly over the last decade.
Under its new direction, CMMI faces the challenge of only pushing mandatory risk to entities with the financial wherewithal to bear it and the inability to exit a market. Hospitals and health systems are among the few provider entities that might fit that description. Methods CMMI might use to push more risk to hospitals and health systems include:
- Expanding Bundled Payments: The Transforming Episode Accountability Model (TEAM) provides a blueprint for how CMMI could quickly push additional two-sided risk to hospitals and health systems. The Innovation Center could easily add new episodes to the model and/or expand the number of hospitals required to participate.
- Encouraging Site-Neutral Payments: TEAM currently includes two episodes that have site-neutral target pricing: lower extremity joint replacement (LEJR) and spinal fusion. Given the refocus on savings, it wouldn’t be surprising for CMMI to add new episodes to the model for procedures that can safely be performed either on an inpatient basis or as same-day surgery. The next logical step after adding more site-neutral procedures is expanding the settings included in the model. While including ambulatory surgical centers would be difficult from a policy perspective, it could achieve savings by furthering the goals of expanding site-neutral payments and encouraging more competition.
- Expanding Certified Models: The statute that authorizes CMMI allows it to expand any model it tests to the entire FFS population if CMS actuaries can prove it net saves the program money (after any savings-related payments distributed to providers) and does not hurt quality. The Pioneer ACO model is one of the few models that meets these criteria. While expanding this model nationally would be challenging, CMMI may look to do so in more integrated markets with less competition to manage the total cost of care while addressing concerns about beneficiary attribution and leakage. Further, while it has not been certified by the CMS actuary, other researchers have found LEJR episodes in the Comprehensive Care for Joint Replacement (CJR) and BPCI-A models have achieved net savings. Under current leadership, CMMI may try to have LEJR episodes certified by removing data from the COVID-19 public health emergency (due to the temporary cessation of downside risk) from BPCI-A and CJR.
- Using MSSP as a Mandatory CMMI Model: Given the focus on primary and preventative care, CMMI could import into its portfolio an ACO model similar to the Medicare Shared Savings Program (MSSP). As with TEAM, CMMI could develop criteria to require participation for select hospitals that have not, to date, participated in population-based models. Mandatory participation and the glide path to risk would help ensure net savings for the program and address all three phases of preventative care discussed in the strategy refresh.
Hospitals & Health Systems Should Prepare for Increased Risk
The recent changes to CMMI’s strategy add greater momentum to the transition to risk-based arrangements that most providers are already expecting. According to our Mindsets 2025 Healthcare Executive Leadership Report, nearly 56% of executives believe it is important to engage in more value-based care arrangements.
However, due to low historical risk exposure, most organizations do not have a mature platform, i.e., analytics, care management, network design and management, and change management capabilities, to succeed in risk-based models.
Less than 47% of executives believe their organization’s current operating model and capabilities align with their value-based care aspirations, and less than 40% believe their organization’s risk tolerance aligns with their value-based care goals.
As CMMI continues to experiment with new models that include mandatory, two-sided risk, organizations will need to improve their capabilities to minimize revenue disruption and prepare for success.
How Forvis Mazars Can Help
Navigating the complexities of risk-based payment models requires a deep understanding of their design, the targeted population, and the market dynamics surrounding participating organizations. Based on years of experience supporting healthcare organizations in bundled payment models, including BPCI, BPCI-A, CJR, and now TEAM, Forvis Mazars has identified proven strategies and keys to success to help hospitals and health systems manage risk and improve outcomes.
If you’d like to learn more about how Forvis Mazars can help you develop the core capabilities necessary to achieve health at your organization, reach out to a professional on our team today.