skip to Main Content

Accountable Care Organization Rules Come Out – Part I

Over the past several months, we have felt a little like the kids in the back seat of the car asking, “are we there yet?” Finally, we are.

On March 31, 2011, CMS issued its long-awaited proposed rules governing the establishment of Accountable Care Organizations (ACOs) as directed by the Patient Protection and Affordable Care Act (PPACA).

CMS indicated that ACOs are an opportunity for Medicare beneficiaries to receive high-quality, evidence-based healthcare that eliminates waste and reduces excessive costs through improved care delivery. Public comments will be accepted through June 6, 2011.

We will be exhaustively analyzing the proposed rules over the next several weeks and intend to write often on various aspects of ACOs. But a few things are immediately clear from our early review.

First, despite what is a mixed record on pilot ACOs, CMS is committed to the concept. The nearly 500 pages of rules make that clear. CMS leadership, including Administrator Donald Berwick, view ACOs as an alternative to full-fledged managed care that, if done correctly, can take a huge bite out of existing Medicare costs and future trend.

CMS also makes it clear that not every organization that fancies itself an ACO will be accepted. This is a retreat from previous pilot initiatives.

The two main themes of ACOs are cost-effectiveness and quality. In this post, we will share with you what we know so far about the former. Tomorrow, we will discuss the latter.

Cost-effectiveness/shared savings:

Enrollment in ACOs can best be described as “passive enrollment,” with doctors informing beneficiaries that they are associated with an ACO and allowing beneficiaries to opt out by choosing another doctor. A retrospective look at all beneficiaries’ use of services and costs will be taken in order to arrive at a benchmark and determine whether an ACO has saved Medicare money.

One problem area we immediately see is that a beneficiary might stay with their doctor, but opt out of data sharing. Since sharing data is key to overseeing patients and clinically managing them, this is a concern. Since traditional utilization management will not occur, case and disease management will be key. But how can ACO case managers and physicians manage the patient without actionable data? Also, the universe of beneficiaries used to set savings targets (more retrospective) and to monitor beneficiaries through data-sharing and mining (more prospective) may not be the same. This could lead to issues in terms of assessing whether an ACO truly saved Medicare dollars.

The new rule proposes two different shared-savings models, in part to broaden the universe but also to show CMS means business. In the first model, an ACO can elect a smaller share of upside savings, but assume no risk of loss for two years. In the third year, the ACO must transition to accept risk.

In the second model, an organization willing to take on both upside gains and downside risk can qualify for a higher proportion of shared savings from the start. Medicare will continue to pay individual providers and hospitals as it does under FFS.

Marc Ryan

Marc S. Ryan serves as MedHOK’s Chief Strategy and Compliance Officer. During his career, Marc has served a number of health plans in executive-level regulatory, compliance, business development, and operations roles. He has launched and operated plans with Medicare, Medicaid, Commercial and Exchange lines of business. Marc was the Secretary of Policy and Management and State Budget Director of Connecticut, where he oversaw all aspects of state budgeting and management. In this role, Marc created the state’s Medicaid and SCHIP managed care programs and oversaw its state employee and retiree health plans. He also created the state’s long-term care continuum program. Marc was nominated by then HHS Secretary Tommy Thompson to serve on a panel of state program experts to advise CMS on aspects of Medicare Part D implementation. He also was nominated by Florida’s Medicaid Secretary to serve on the state’s Medicaid Reform advisory panel.

Marc graduated cum laude from the Edmund A. Walsh School of Foreign Service at Georgetown University with a Bachelor of Science in Foreign Service. He received a Master of Public Administration, specializing in local government management and managed healthcare, from the University of New Haven. He was inducted into Sigma Beta Delta, a national honor society for business, management, and administration.

Back To Top