The health care industry is buzzing about the concept of Accountable Care Organizations ("ACOs") as set forth in the recently enacted Patient Protection and Affordable Care Act and related amendments ("PPACA"). The Centers for Medicare and Medicaid Services ("CMS") purports that ACOs will facilitate coordination and cooperation among providers in order to improve the quality of care for Medicare beneficiaries and reduce unnecessary costs. Uncertainty exists, however, regarding how an ACO can be successfully structured and implemented. Therefore, providers and pundits anxiously await guidance from CMS and currently anticipate the formal establishment of an ACO program by January 1, 2012.
We encourage providers to take a step back from the hype and take this opportunity to determine whether your organization will likely benefit from participating in an ACO. As we wait for further guidance from CMS, there is time to carefully evaluate your organizational needs and perform a cost-benefit analysis of the anticipated impact that participating in an ACO may have for your organization. ACO concepts are very promising and will likely benefit many but not all Medicare providers. Some providers may be better served by developing cost-savings and quality-focused programs based upon ACO concepts on a relatively small scale. Therefore, providers need to understand the practical implications of creating and/or participating in an ACO. Only then can you determine whether your organization would likely benefit from participating in a "systemic" ACO structure; and if so, what your organization's most appropriate role would be within the structure. In the alternative, you may determine that your organization would benefit from implementing some of the clinical integration and risk sharing components of an ACO in discreet programs or service lines within your organization.
The purpose of this article is to provide some general information and basic concepts regarding Accountable Care Organizations.
What are ACOs?
ACOs are essentially a new class of clinically and financially integrated health care entities with whom Medicare directly contracts to provide care to beneficiaries. In simplest terms, an ACO is a group of providers who are willing to become jointly responsible for the quality, cost, and overall care of at least 5,000 Medicare beneficiaries.
ACOs may take a variety of forms, and models may include: 1) a single integrated delivery system (e.g. a Mayo Clinic model); 2) a large multi-specialty physician group which contracts with other provider entities, such as acute-care, long-term care, rehabilitation and home-health care providers; 3) a hospital-based system which either employs or contracts with a network of physicians; and 4) a virtual network of independent physicians and other providers. However, despite the precise form, all ACO models heavily emphasize the coordination of care across the various health care settings, through primary care providers. Additionally, the majority of commentators agree that in order to achieve HHS targets for incentive cost-savings, a hospital component will be essential to the success of an ACO.
What are the Organizational Requirements of an ACO?
At a minimum, an ACO must have a formal legal structure with established mechanisms for a shared governance, and to receive and distribute shared savings. The ACO must have a leadership and management structure that includes clinical and administrative systems. It must have a sufficient number of primary care professionals to manage and coordinate at least 5,000 assigned Medicare beneficiaries and each ACO must agree to participate in the program for a minimum of three (3) years. Additionally, ACOs must have defined processes to: (a) promote evidence-based medicine; (b) comply with quality and cost reporting requirements; c) actively coordinate and manage patient care via tele-health, remote patient monitoring or other enabling technology; and d) demonstrate it meets "patient-centered criteria," as determined by the Secretary.
How do ACOs Qualify for Shared Savings?
ACO providers and suppliers will continue to bill Medicare under the current fee-for-service system. If the care delivered by the ACO providers to beneficiaries meets CMS quality performance standards and the total cost of care is below a pre-determined benchmark, then CMS will share a portion of the cost savings with the ACO. The benchmark is established using the most recent available three (3) years of cost data for the Medicare fee-for-service beneficiaries assigned to the ACO. This benchmark will then be adjusted depending upon each beneficiary's health status and "other characteristics" deemed appropriate by HHS. In order for an ACO to receive a shared savings payment, it must demonstrate that it reduced Medicare expenditures by a certain percentage (to be specified by HHS) below historical costs. ACOs will not incur a payment penalty if savings targets are not achieved.
In order to more accurately assess the potential incentive to develop or participate in an ACO, providers will be keenly interested in: 1) how HHS risk-adjusts its historical Medicare costs to determine the ACO benchmark used for cost comparison; 2) the percentage below historical costs by which the ACO will be required to cut costs in order to be eligible for the incentive payment; and 3) what portion of any resulting cost savings below the target will be shared with the ACOs.
The specifics of the quality performance standards are still to be determined by the Secretary and will be promulgated along with the program’s regulations. However, we anticipate these metrics to incorporate and expand on the quality measures currently identified in the EHR Incentive program, and to generally include measures in categories such as clinical processes, outcomes of care, patient experience, and utilization of services.
How will this Impact a Medicare Patient's Choice in Providers?
Medicare beneficiaries will continue to be able to choose their health care professionals and other providers. Beneficiaries will be automatically "assigned" to an ACO based upon their utilization of an ACO provider for the majority of their primary care services. Assignment will be invisible to the beneficiary, and will not affect their guaranteed benefits or choice of doctor.
Caveat, even though assigned to an ACO, a beneficiary may continue to seek potentially high cost services from physicians and other providers outside the ACO network. Therefore, it is imperative that an ACO carefully evaluate how broad its network needs to be in order to effectively manage the total cost and quality of care of its assigned beneficiaries.
When will CMS Release more Guidance?
The creation and operation of an ACO will require substantial clinical, technical and financial resources. The critical question that remains unanswered is whether HHS will offer providers and suppliers with sufficient incentive to take on the cost of developing the necessary infrastructure and capacity to support an ACO. We expect CMS to publish further details regarding ACOs this fall, via its publication of a Notice of Proposed Rulemaking and we will update you as details evolve.
If you have questions or would like additional information regarding Accountable Care Organizations and other Shared Savings programs and developments, please contact Angela Smith (asmith@hallrender.com or 317-977-1448), Kendra Conover (kconover@hallrender.com or 317-977-1456), or your regular Hall Render attorney.
