Medicare ACO regulations designed to deliver care efficiently

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By Craig D. Schneider, Ph.D

Dolan Media Newswires

BOSTON, MA – One of the most eagerly anticipated provisions of the Affordable Care Act is the Medicare accountable care organization (ACO) program, Section 3022 of the Act, which is now known as the Medicare Shared Savings Program.

The Centers for Medicare & Medicaid Services (CMS) released long-awaited proposed rules surrounding ACOs on March 31. The proposed rules were published in the Federal Register on April 7, and CMS is accepting comments on them until June 6.  The program will be effective on January 1, 2012.

The principle of an ACO is to integrate providers across the continuum of care and reward them for delivering high-quality and more efficient care, which the fee-for-service payment system does not.  According to CMS Administrator Donald Berwick, the current system’s payment and delivery systems are fragmented, and “[f]ragmentation leads to waste and duplication – and unnecessarily high costs.”

Medicare beneficiaries will not be required to receive care from a particular ACO.  While this preserves patient freedom of choice, it will create challenges for attribution of services and the ACO’s ability to manage the care for patients who seek services beyond the ACO’s network.

ACOs participating in the Shared Savings Program must meet quality standards in the categories of patient experience of care, care coordination, patient safety, preventive health and care for at-risk patients and the elderly. There are currently 65 different quality metrics an ACO must meet across these five categories to qualify for the program, and eventually to receive the maximum shared savings.

CMS believes that the proposed rule offers “considerable flexibility” to providers interested in forming an ACO. Under the rules, ACOs may be organized by physician group practices, networks of individual practices, hospitals or partnerships of these various provider organizations.  The governance of these Medicare ACOs must include community representation, including consumers.

Medicare proposes two levels to the program. For organizations trying to become an ACO for the first time, there is a one-sided risk model, in which there would be shared savings between Medicare and the ACO during the first two years and only a risk of loss in the third year. The other track involves a two-sided risk model, in which providers and CMS share both savings and losses for all three years, and there is a greater opportunity for upside gains.

CMS expects that the ACO program will save Medicare almost $1 billion over the next three years.

The new Center for Medicare and Medicaid Innovation (created by another Affordable Care Act provision) will be testing other models for ACOs that offer greater flexibility than Section 3022 of the statute permits. The Innovation Center will also develop a technical support platform for ACOs.

One of the reasons that the regulation was delayed is ACOs are thought to have implications for antitrust law. The CMS rule was accompanied by an Antitrust Policy Statement from the Federal Trade Commission, a guidance statement from the Internal Revenue Service, and a recommendation for laws to be waived by the HHS Inspector General.

Some observers say that the ACO program will be a boon to legal experts and consultants. Ian Morrison of Strategic Health Perspectives told The Washington Post that ACOs will create opportunities for consultants and the legal community.

“There are legal, information-technology and cultural changes needed to make it work,” and this should result in revenue for lawyers, IT experts, and management consultants, Morrison said.

Former CMS Administrator Dr. Mark McClellan and Dr. Elliott Fisher of The Dartmouth Institute (who is widely considered to have coined the term “ACO”) have identified the key questions regarding the Medicare Shared Savings Program.

Those questions include:

• Whether there will be limitations on access to care and stinting on care;
• Whether savings for payers will result;
• Whether ACOs will have enough data, from internal and external sources, and analytic capabilities to support the envisioned improvements in clinical care delivery.
• Whether antitrust violations will occur;
• Whether small providers will be able to afford to participate; and
• Whether attribution of patients and incentive structures will succeed.

Other commentators have noted challenges related to the application process and meeting Medicare requirements and predict that relatively few organizations will participate. CMS expects 75 to 150 nationally.

Another issue is retroactive assignment. CMS would not assign a Medicare beneficiary to an ACO until the end of the year, based on where he or she received the most care. This means, in effect, that the ACO would have to treat all beneficiaries as if they are part of their ACO throughout the year, just to be on the safe side.

The opportunity for risk sharing has surprised some analysts, as the regulation appears to go beyond the statute’s shared savings approach, and may make certain potential participants wary. There is also a requirement that more than 50 percent of the physicians in an ACO be meaningful electronic health record users, which will be a high bar to reach for many practices.

Clearly there are substantial challenges for CMS and for potential ACOs. However, for those of us who have been encouraging transformation of the delivery system to be more patient-centered and of the payment system to reward value rather than volume, the proposed ACO rule is an exciting development in the effort to achieve a more integrated and effective health care system.

Craig Schneider is the Director of Healthcare Policy at the Massachusetts Health Data Consortium in Waltham. The Consortium’s website is www.mahealthdata.org. This column originally appeared in the Massachusetts Medical Law Report, a publication of The Dolan Company.