Accountable care organizations, or ACOs, have been touted as a way to address the fragmentation, duplication, and perverse financial incentives plaguing America’s health care system. ACOs are groups of providers who are jointly held financially accountable for meeting quality benchmarks and reducing the rate of spending growth.
By Julian D. "Bo" Bobbitt
The concept gained momentum initially after the Medicare Shared Savings Program was included in the 2010 federal health reform legislation. Because Medicare is the country’s largest payer, it was predicted that if it shifted to ACOs, so would the other payers.
However, many gave up on ACOs after the secretary of the Department of Health and Human Services in March issued the proposed rule for the Medicare Shared Savings Program.
Organized medicine, including the American Academy of Family Physicians, the American College of Physicians, and the American Medical Association, joined most of the other 1,320 public comments in suggesting numerous needed improvements to the rule. The requirements were onerous and capital investments extensive, and all ACOs were required to accept financial risk of loss – all of which were virtual "deal killers" for primary care physicians.
Did HHS listen? Can the federal bureaucracy adapt? Is it too far removed from the front-line realities of health care delivery?
On Oct. 20, 2011, HHS issued the final rule for the Medicare Shared Savings Program. On the same day, it launched the Advance Payment Model.
Initial reactions from primary care leaders have been favorable. This could truly be a "game changer" for the prepared primary care physician.
The American College of Physicians responded with a press release that "applauded [the Centers for Medicare and Medicaid Services] for making substantial improvements" to the rule and "concluded that the changes will make it easier for internal medicine physicians, specialists, and other primary care physicians to participate in this important effort to improve patient care."
The American Academy of Family Physicians’ president, Dr. Glen Stream, stated that "the Medicare final rule recently released by the Centers for Medicare and Medicaid Services represents substantial steps toward mending America’s broken health care system."
Why the renewed optimism?
While the final rule is complex and runs 696 pages, it is clear that HHS was intent on making ACOs more flexible, feasible, and attractive financially to providers, particularly primary care physicians and rural providers.
Primary care-friendly highlights include:
• Up-front payment option: The Advance Payment Model will prepay a portion of the anticipated shared savings to qualifying ACOs that are basically provider-only or are in rural settings. The payment may be up front and fixed, variable or on a per-member/per-month basis. This could remove a serious barrier to entry for the typical medical-home–centric ACO.
• Primary care–only providers required to be in ACOs: Mandated by the statute, the final rule has been faithful to the edict that primary care physicians are the only specialty or facility that must be in all Medicare ACOs. Internal medicine and family practice are mentioned specifically. A primary care–only, medical home–centric ACO is allowed, but all ACOs must have processes to transition to specialists and hospitals.
• No downside financial risk: Commentators noted that a new ACO cannot know or control all the cost variables to allow it to prudently accept risk of financial loss. HHS listened, and ACOs are allowed to receive a hefty 50% of savings without taking any risk of loss for the full length of the 3-year contract with CMS. This is in addition to full fee-for-service payments.
• Fewer report requirements: The onerous 65 reporting requirements were reduced to 33 quality measures, with relaxed timetables for implementation.
• No mandatory electronic health record system: Though encouraged, EHR usage is no longer required.
• Primary care–weighted metrics: There is a clear preference for outpatient metrics. This is further evidence of the primary care tilt of the final rule. In other settings, such a shift in focus has often been a precursor to a concomitant weighting to primary care of the shared savings distribution.
• Transparent savings pool distribution tied to achieving goals: The savings pool distribution allocation is not fixed, so there is some cause for caution by physicians joining an ACO. But the distribution formula must be transparent to all, and the ACO must justify how it creates incentives to meet the rule’s goals for ACOs.
Primary care will have choices. You are the only specialty mandated. Your skills will drive many quality and savings improvements. CMS is offering up-front dollars to build ACOs, and the quality benchmarks are tilted toward primary care.