While the Supreme Court could strike down the entirety of the Patient Protection and Affordable Care Act (PPACA) this month, the Centers for Medicare and Medicaid Services (CMS) is signaling its commitment to many of the cost-savings initiatives in the act. At various times, CMS has noted that it intends to push forward with the dual demonstrations no matter what happens with health reform. This is an important initiative for both Medicaid and Medicare moving forward. CMS seems equally committed to moving the Medicare Shared Savings program or Accountable Care Organization (ACO) pilots forward as well. Activity has been vigorous.
Initially, CMS announced the Pioneer ACO Demonstration program, whose 32 participants seem to be more well-heeled and experienced integrated health systems throughout the country. Further, the regular ACO program regulations were issued and later revised to make it more palatable and encourage broader participation. First round applications were received and reviewed. Only three were turned down. CMS says there are 150 applicants for the second round, to be announced July 1 and it expects as much interest in the third round for January 1, 2013.
While many predicted doom for the program, the revisions to the regulations have indeed helped bolster interest from the provider community. Between the Pioneer and first round of the regular program, ACOs will serve over 1.1million Medicare members. Yes, it is small, but Medicare Advantage started small as well.
There are still obstacles, though, that CMS needs to overcome. Of the 27 ACOs that CMS announced for the first round of the regular program, only two chose the model that has better upside risk in return for the penalty of downside risk if savings and quality outcomes are not achieved. It would appear that many entities are proceeding cautiously and this will necessarily impact short- and perhaps long-term savings for the Medicare trust funds. The aggressive quality outcomes, although halved in the final regulation, are likely a big part of the reason. Quality tracking is new to many Medicare FFS providers and CMS has included a myriad of different types of measures in the ACO program. Thus, many ACO organizations now are undoubtedly struggling with the IT and other infrastructure needed to monitor and perform.
Interesting, too, is that over half of the ACOs are physician led. This runs counter to the original notion that only well-capitalized hospitals would have the financial wherewithal to enter the market. How these organizations perform will be interesting; they will still need to forge strong working relationships with hospitals to save on the 50% of the Medicare dollar tied to Inpatient and other complex outpatient procedures. As well, they will need cooperation from hospitals to perform well on readmissions and other hospital-related quality measures.
Republicans in Congress are increasingly lashing out at the duals and ACO projects as potentially too large, costly and outside the bounds of CMS authority. We don’t share that view. While ill-structured pilots tend to be wasteful, what we have seen so far of the duals and ACO constructs is impressive: while some of the mandates may go too far, the programs are well-structured and attempt to align incentives to two logical and imperative goals – cost-containment in a system that is almost 100% based on utilization and improving quality in a very fractured Medicare FFS health care system. These goals and the overall efforts are bolstered by a just-released CBO report that says that the graying of America will push federal spending on Medicare and Social Security to more than 16 percent of the economy over the next 25 years. Put Medicaid in there, which essentially captures both poor and middle-income Americans later in life (Grandma and Grandpa spend down their assets for Medicaid long-term care coverage because there are few cost-effective solutions for them.), and America is clearly on an unsustainable course that will rival the European pension and health care crises we now see.
So, CMS should be applauded for tackling the issues in a thoughtful way. Whatever the outcomes, it should bear fruit in giving us a better picture of how cost controls and quality can be made priorities in the antiquated Medicare FFS system.