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ACO Final Rules Issued: CMS Bows To Provider Pressure, But Will It Be Enough?

The Centers for Medicare and Medicaid (CMS) released its final Accountable Care Organizations (ACOs) rules this past week and made a number of concessions to providers worried that the original regulations stymied the reform effort. The response to the final regulations has generally been positive, but many organizations are still non-committal or exhibiting caution as they continue to weigh the pros and cons of setting up the infrastructure demanded by CMS.

There is no question that the final regulations make the prospect of setting up an ACO more attractive to any number of entities. Most specifically, federally qualified health centers (FQHCs) and rural health clinics (RHCs) will now be allowed to form an ACO rather than just participate in one. This offers ACO opportunities in underserved areas where certain hospitals and provider groups may not have been willing to take the plunge.

Some other important changes made by CMS include:

  • While still voluntary with beneficiary opt out, ACOs will now know who their members are because a prospective assignment will be done by measuring where a beneficiary gets a plurality of their primary care services with information from CMS each quarter. Reconciliation will occur at the end of each year. Under the draft rules, ACOs would have passively enrolled members but never quite know whether these members were actually counted by CMS in the ACO savings calculation.
  • Bowing to heavy criticism, CMS also has streamlined the number of quality measures from 65 to 33 and is better phasing in the measures over a three-year period. The reduced number of measures is a boon for the separate Pioneer ACO demonstration project (set up separately via the Innovation Center) as it will use the same count.
  • While the start date remains January 1, 2012, applications are now due in early 2012 and will be accepted on a rolling basis through July 1
  • For the more cautious ACO prospects, mandatory downside risk was removed in one of the two shared-savings reimbursement tracks. First-dollar shared savings is also included for all participants in the final regulation once minimum-savings thresholds are met.
  • The mandate that 50% of participants have meaningful use of Electronic Medical Records (EMR) was removed
  • CMS also announced an Advanced Payment Program for ACOs where physician-owned and rural providers gain prospective access to some of the expected savings ($170 million in total) to defray initial startup and ongoing operations costs. These lucky ACOs will receive upfront payments and monthly payments for operating costs.

Whether all this is enough to resurrect a project on life support after the draft regulations were released will not be known for some time. Big obstacles remain, including:

  • Many ACO prospects have little experience and the timeframes are still very aggressive
  • ACOs need to make the right personnel and infrastructure investments to share data and forge team-based care planning and quality improvement. This is a heavy burden for little reward and other pilots, such as the physician pilot, still have better shared-savings ratios.
  • Smaller ACOs will still need to achieve savings of as much as 3.9 percent before they can ever see a reward for their investments
  • Beneficiaries still can opt out of data sharing, which complicates efforts to coordinate and manage care

The only certainty is that CMS, always the whipping boy, will be criticized and second-guessed. On one hand, some of the concessions were necessary to entice providers to experiment with the ACO concept. But the concessions may not be enough. On the other hand, CMS will be criticized for watering down the cost-savings and quality focus by reducing the number of quality measures and eliminating downside risk for all.

Judging from what we see now, it is likely that the well-qualified and experienced entities may do one of two things:

  • Jump into the Pioneer ACO demonstration, where shared-savings will be 75 percent vs. 50 to 60 percent in the regular ACO program
  • In areas where Medicare Advantage rates will remain robust after scheduled reductions, providers may decide that their future is as a payer as much as it is a provider. Despite heavy regulation, rewards in MA are likely greater and they may apply for insurance licenses to compete with health plans in Medicare and the commercial Exchanges.

In the end, the regular ACO program might wither away, but substantial changes could come to Medicare just the same.

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.

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