Since 2005, CMS has been running a Physician Group Practice Demonstration (PGP) that operates similar to an Accountable Care Organization (ACO). Under the Demonstration, PGPs were responsible for providing integrated, coordinated care to a specified Medicare FFS population, which has provided the framework for the rules governing the Shared Savings Program. Under the Demonstration, PGPs increased quality of care for patients and six of the ten PGPs shared in $46 million in savings over three years.
Earlier this week, sources close to the Marshfield Clinic, the most successful PGP partaking in the Demonstration, indicated it will not likely participate in the initial phase of the Shared Savings Program. The Marshfield Clinic has shared in the greatest savings from the Demonstration and their decision not to form an ACO at the onset is certainly interesting given their success. There has been some whispering throughout the industry that the Clinic’s decision to abstain from the ACO program is an indication that CMS’ proposed rule is too restrictive (The Marshfield Board has yet to officially vote on the decision).
Under the PGP Demonstration, participants are eligible to receive as much as 80 percent of the savings. In the proposed rule, ACOs accepting both up and down-side risks are eligible for a maximum of 65 percent of the savings. The PGP Demonstration does not require entities that lose money to repay a portion of any losses; under the ACO proposed rule, ACOs are on the hook if they overspend.
So what does the preliminary decision by the Marshfield Clinic mean for the Shared Savings Program and is it really a commentary on the ACO regulations?
First, the Marshfield Clinic PGP does not contain a hospital. We believe that to be successful under the Shared Savings Program it will be necessary to include a hospital in the ACO structure or at least have a strong relationship with one. Under the regulations, it appears CMS will only entertain a joint venture arrangement between a hospital and ACO rather than a contractual relationship. For some entities, that type of business arrangement is not feasible for their organization and could be a deterrent.
Second, entities that have been participating in the PGP Demonstration and have had success similar to Marshfield have already reduced expenditures and improved quality of care for the population of Medicare beneficiaries that would be assigned. It’s hard to imagine how they would be able to further reduce expenditures and increase quality in order to be allowed to share in savings.
We don’t think anyone should read too much into Marshfield’s initial decision not to participate in the ACO program, as it isn’t necessarily a commentary on the regulations. Don’t get us wrong, the regulations are certainly nothing to sneeze at and any participants in the program will be subject to significant rigor before they can share in savings. The Marshfield Clinic has seen success under the PGP Demonstration which is entering phase two in the next month or so. We think that Marshfield might have made their decision more because of the old adage “if it ain’t broke…then don’t fix it” rather than based on the proposed ACO regulations.