Lisa Remington’s Series on Accountable Care Organizations: Part VI

Lisa Remington

The Remington Report‘s Lisa Remington has provided this article special to HCAF that details Accountable Care Organizations, established in the Patient Protection and Affordable Care Act of 2010. This article is part one in a series. For more information about ACOs and other trends impacting the home care industry, consider joining Remington’s Executive Academy on Health Care Reform.

Part VI – Accountable Care Organizations (ACOs): Will The Industry Respond To The New Options And Incentives Offered By CMS?
By Lisa Remington, Publisher, The Remington Report

In the near future, Medicare will launch a shared savings program to reward primary care physicians, specialists, and hospitals that form accountable care organizations (ACOs) and collaborate in the redesign of care processes, improve care coordination, and promote high-quality, cost-efficient care. To receive payment, providers must demonstrate the impact their efforts have on specific quality-of-care and cost-reduction goals.

An ACO is a group of providers and suppliers of services (e.g., hospitals, physicians, and others involved in patient care) who will work together to coordinate care for beneficiaries in Original Medicare. ACOs will be patient-centered organizations where the patient and providers are true partners in care decisions.  Provider participation in ACOs is purely voluntary, and participating patients will see no change in benefits and will keep their freedom to see any Medicare provider.

The Centers for Medicare and Medicaid Services (CMS) has until 2012 to establish the shared savings program for ACOs. Health care organizations ranging from independent practice associations to hospitals and integrated delivery systems are gearing up to participate. Each must agree to be accountable for the overall care provided to at least 5,000 Medicare fee-for-service beneficiaries, have enough primary care physicians to meet the needs of that population, and have a legal structure in place to reward participating providers and suppliers.

The burning question: Is the industry buying into how ACO models will work? Recent ACO headlines reflect the industry’s deeper concerns.

Headline # 1 – ACO Start-Up Costs Higher Than Estimated

Accountable care organizations will likely face start-up and first-year costs six to 14 times higher than HHS has estimated, according to a study released by the American Hospital Association (AHA). The AHA study, which was based on an analysis of previous research, concluded that the various elements required to successfully manage the care of a specific population will cost between $11.6 million and $26.1 million — depending on the size of the hospital or hospital system involved in the ACO–and far more than the $1.8 million estimated by the CMS in its proposed rule.

Headline # 2 – Mayo, Geisinger, Cleveland Clinic May Not Participate In ACOs

Officials at four health systems often cited as models for accountable care organizations have doubts that they will participate in the ACO program, citing problems with the proposed rules for ACOs, according to a report by the Congressional Quarterly.

Officials from Mayo Clinic, the Cleveland Clinic, Geisinger Health System and Intermountain Health praised the ACO concept but criticized the proposed implementation. Here are some of their comments.

Mayo Clinic: “Are we interested? Absolutely,” said Patricia Simmons, the medical director of government relations at Mayo Clinic. “But is it feasible? There’d have to be substantial revisions for us to participate.”

Cleveland Clinic: “It’s clearly the right way to go and the journey is a good one. But it’s a matter of recommending ways in which we think CMS can make the ACO model and its structure better,” said Oliver Henkle, the chief government relations officer at the Cleveland Clinic. He said the clinic will send CMS a comment letter detailing a long list of barriers that need to be reconsidered.

Geisinger Health System: Since the system is involved in a CMS demonstration program, it would not be eligible to join an ACO until after it ends. But Thomas Graf, chairman of the Community Practice Service of Geisinger, said it’s unclear whether Geisinger would want to join an ACO. While the concept ACOs is sound, “it’s the regulations themselves that many organizations have a large number of concerns with,” he said. “A lot of the detail-level work is problematic. It seems to be very prescriptive and restrictive with a fair amount of administrative and regulatory oversight.”

Intermountain Health: “We’re way past [the ACO concept],” said Brent James, the executive director for Intermountain Healthcare’s Institute for Healthcare Delivery Research. “I look at the ACOs coming out as almost fluff and distraction on the side, not that it’s not good but it’s just that the mainstream is already moving out there on the front line [to other ideas].”

Here is a sampling of concerns about parts of the proposed ACO rules that the Congressional Quarterly gathered from the four institutions and other providers.

Financial risk. Many providers had expected the program to offer a way for institutions to get bonuses without having to face penalties.

Quality measures. ACOs will have to collect 65 quality measures, which very few institutions now do. Adding technology and training staff to track this information could be expensive.

Financial solvency requirements. Providers joining an ACO would have to meet financial solvency requirements that could be especially hard for small practices to meet.

Governance requirements. An ACO must be a certified legal entity recognized under state law. While ACO participants must control of three-fourths of the governing body, beneficiaries must be involved in oversight.

Baseline for improvements. The baseline from which providers must improve is set at the current expenses of the provider, which doesn’t reward providers who have already lowered their costs.

Member assignment. Since assignment of patients is retrospective, providers won’t know for certain which beneficiaries are in their ACO until a year after the program starts.

Start date too early. Many providers believe the start date of Jan. 1, 2012 is set too early. The final rule isn’t expected to be released until August, giving ACO-planners four months to meet financial requirements, set up quality metrics and enroll. However, applicants that do not meet the Jan. 1 deadline will be able to apply the following year.

Some providers are already looking ahead to other opportunities expected to be developed CMS’ center for Medicare and Medicaid Innovation. Offerings may include capitated models, which might offer more benefits to efficiently run organizations than ACOs can offer.

Headline # 3 – Multi-Specialty Groups Push-Back From ACOs

The American Medical Group Association (AMGA) notified CMS that 93 percent of its members would not participate in the ACO demonstration project. Ten of the nation’s biggest multi-specialty groups notified CMS administrator Don Berwick they will not take part in the ACO program. Concerns noted by both groups:

  • Financial risk: downside risk for shared savings compounded by high investment costs required for ACO start-up and operation
  • Severity adjustment for complex patients: limits on accounting for beneficiary acuity level dilutive to savings and potentially compromising proper patient management
  • Excessive quality measurement requirements: too many quality measures in the first year (65 measures in five domains)
  • Patient attribution: retrospective attribution will limit efforts to reduce costs
  • Patient opt-out: an impractical opt-out system for Medicare beneficiaries

The same groups participated in the Physician Group Demonstration Project (circa 2005), considered the predecessor to the ACO. Only two were able to attain better than a two percent savings in the first year, and two were able to achieve the threshold after three years. Per CMS, the minimum savings threshold ranges from 3.9 percent for an ACO managing 5,000 Medicare

Not too far after the concerns of the industry were raised, CMS unveiled three initiatives to help give providers new options and incentives to participate in ACOs.

The three initiatives:

1. The Pioneer ACO Model

The Pioneer ACO, a model for more integrated organizations. It would be available to providers by this summer, before the January start date for traditional ACOs. CMS’ Innovation Center released a request for applications for the Pioneer model in May.

The Pioneer ACO is designed to work in coordination with private payors and is estimated to save Medicare as much as $430 million over three years by better managing care for beneficiaries and eliminating duplication.

The Pioneer ACO Model is designed for health care organizations and providers that are already experienced in coordinating care for patients across care settings.  It will allow these provider groups to move more rapidly from a shared savings payment model to a population-based payment model on a track consistent with, but separate from, the Medicare Shared Savings Program.  And it is designed to work in coordination with private payers by aligning provider incentives, which will improve quality and health outcomes for patients across the ACO, and achieve cost savings for Medicare, employers and patients.

The payment models being tested in the first two years of the Pioneer ACO Model are a shared savings payment policy with generally higher levels of shared savings and risk for Pioneer ACOs than levels currently proposed in the Medicare Shared Savings Program.  In year three of the program, participating ACOs that have shown a specified level of savings over the first two years will be eligible to move a substantial portion of their payments to a population-based model. These models of payments will also be flexible to accommodate the specific organizational and market conditions in which Pioneer ACOs work.

The Pioneer ACO Model includes strong patient protections to ensure that patients have access to and receive high quality care.  To accomplish this goal, Pioneer ACOs will be expected to improve the health and experience of care for individuals, improve the health of populations, and reduce the rate of growth in health care spending.  Participating ACOs will be held financially accountable for the care provided to their aligned beneficiaries.  In addition, CMS will publicly report the performance of Pioneer ACOs on quality metrics, including patient experience ratings, on its website.

To learn more about Pioneer ACOs, click here.

2. The Advanced Payment Model

The Advance Payment ACO, a second model on which CMS is still seeking comment. It would provide additional up-front funding to providers to support the formation of new ACOs. It would help organizations “make the infrastructure and staff investments crucial to successfully coordinating and improving care for patients.” The Innovation Center is seeking public comments on whether it should offer an Advance Payment Initiative (see below) that would allow certain ACOs participating in the Medicare Shared Savings Program access to a portion of their shared savings up front, helping providers make the infrastructure and staff investments crucial to successful ACOs.

3. Accelerated Development Learning Sessions

CMS will be offering ACO Accelerated Development Learning Sessions to provide the executive leadership teams from existing or emerging ACO entities the opportunity to learn about essential ACO functions and ways to build capacity needed to achieve better care, better health and lower costs through integrated care models.   Four sessions will be offered in 2011.  Each will include a focused curriculum on core competencies for ACO development, such as improving care delivery to increase quality and reduce costs; effectively using health information technology and data resources; and building capacity to assume and manage financial risk.  Participation in these sessions will not be considered as a factor for selection or participation in any CMS ACO program. Additionally, the Accelerated Development Learning Sessions will not discuss elements of or specific requirements for participation in any CMS ACO program, including the Medicare Shared Savings Program.

Advance Payment Initiative

The Innovation Center is also considering an Advance Payment Initiative for ACOs entering the Medicare Shared Savings Program to test whether pre-paying a portion of future shared savings could encourage participation in the Medicare Shared Savings Program.  Early comments on the proposed Medicare Shared Savings Program rules suggest that some providers lack ready access to the capital needed to invest in infrastructure and staff for care coordination.  As such, CMS is seeking comment on the idea of allowing eligible organizations participating in the Medicare Shared Savings Program to receive an advance on the shared savings they are expected to earn, in the form of a monthly payment for each aligned Medicare beneficiary.  ACOs would need to provide a plan for using these funds to build care coordination capabilities, and meet other organizational criteria.  Advance payments would be recouped through the ACOs’ earned shared savings.

To learn more about the Advance Payment Initiative, click here.

Other Tools Medicare Is Using To Motivate Quality Improvement

ACOs are just one part of a wide-ranging effort by the Obama Administration to improve the quality of health care and lower costs for all Americans, using important new tools provided by the Affordable Care Act.  The National Quality Strategy provides strategic direction for ensuring progress toward delivery system reforms that reward quality rather than the volume of services provided.  The recently launched Partnership for Patients is bringing together hospitals, doctors, nurses, pharmacists, employers, unions, and State and Federal government to keep patients from getting injured or sicker in the health care system and to improve transitions between care settings.  CMS intends to invest up to $1 billion to help drive these changes through the Partnership initiative. And beginning in FY 2013, for the first time, the Hospital Value-Based Purchasing program authorized by the Affordable Care Act will pay hospitals’ inpatient acute care services based partially on care quality, not just the quantity of the services they provide.

For more information on the Value-based Purchasing program, the Partnership For Patients, the National Quality Strategy and our Series On ACOs go to:

If you are interested in accelerating your agency’s alignment with health care reform, please see the brochure on Remington’s Executive Academy On Health Care Reform.

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