Plans wary of ACO consolidation

May 1, 2011

After months of anticipation, the federal government unveiled proposed rules on how providers may establish Accountable Care Organizations.

WASHINGTON-After months of anticipation, the federal government unveiled proposed rules on how providers may establish Accountable Care Organizations (ACOs). The policy encourages doctors and hospitals to form entities that can better coordinate care for fee-for-service Medicare and thus meet quality standards and cut costs. Successful entities will benefit from "shared savings."

Many health plans and hospital groups have been establishing the framework for more coordinated provider initiatives, and a number of state health agencies are looking to lower Medicaid costs through this approach.

While there is general enthusiasm for moving Medicare away from a pay-for-quantity system to one that rewards quality of care, insurers fear the program will encourage further hospital consolidation and thus raise prices. Much of the delay in finalizing the ACO policy stemmed from internal government debate over how to assess potential ACO impact on local markets.

SETTING A FRAMEWORK

The March 31 proposed rule clarifies how the Centers for Medicare and Medicaid Services (CMS) will pay ACOs for providing services covered by Medicare Parts A and B, beginning Jan. 1, 2012. CMS officials are optimistic that a broad shift away from fragmented services and toward more coordinated care will generate some $960 billion in Medicare savings over three years. Even though a previous Medicare demonstration produced minimal gains, CMS Administrator Donald Berwick anticipates that this "more robust model for shared savings" will be more successful.

A broad range of entities are eligible to form ACOs, including physician group practices, networks of individual practices, and hospitals employing physicians, among others. Forming an ACO involves negotiating agreements with providers, creating a governing body and applying to CMS to join the program. CMS emphasizes that providers sign up for the ACO-and not beneficiaries, as under the Medicare Advantage program. Providers then are responsible for informing their patients of the ACO arrangement and that the patient's claims data may be shared with other ACO providers in order to better coordinate care.

To encourage smaller provider organizations to join the shared savings program, CMS is offering low-risk and high-risk alternatives. Those ACOs that are comfortable with risk acceptance can start right out assuming full downside risk as well as upside gains; less experienced provider groups may sign up for a two-year period without risk of loss, along with lower gains from savings, before transitioning to full participation in year three.

CMS will evaluate some 65 quality-performance measures, such as immunization rates, diabetes testing, preventing heart failure and providing care to at-risk patient populations, to see if an ACO meets standards. After the program's first year, CMS will examine data from the previous 12 months to determine whether the organizations should be credited for improving quality of care and reducing expenditures.

Related Content:

News | Politics and Policy