On March 31, 2011 the CMS released the proposed regulations for implementation of the new Accountable Care Organizations (ACO) program. Discussions regarding the scope of these programs were covered in previous posts here, here and here.  ACO are part of CMS’s effort to reign in health care costs by becoming what it considers to be an aggressive procurer of healthcare services as apposed to someone who exists to simply pay the bills as they accrue. This new focus will manifest itself by altering provider’s actions from simply supplying a series of services to a focus on what the actual outcomes of the services provided are. Taking this approach is projected to significantly lower costs. To help motivate providers into adopt this new way of thinking, the CMS will offer an incentive in the form of a share in any savings that the ACO accrues.

The release of the proposed regulations last month give us an opportunity to review some concerns/issues surrounding the actual implementation of the program. Some of which have been around for a while and some of which are now arising as the rules and regulations are documented. It’s become clear that hospitals will likely take the lead in developing ACO’s. From their perspective there are a number of issues that need to be discussed and ultimately resolved. One important set of issues are the additional internal system requirements and the establishment of appropriate credentialing standards. For example: What standards, if any, are going to be established to determine whether a physician can participate in an ACO. Who is going to develop those standards? What standards, if any, are going to be employed to determine a physician’s on going participation in the ACO? Again who is going to develop those standards? Who within the organization will be responsible to gather all the data necessary for reporting purposes? What resources will they require?

The new proposed regulations add a new wrinkle by making the rewarded program a two-way street. There are two proposed reward options. In one option the ACO will be paid based on the current Medicare fee schedule, but if, at the end of the year, they have not met the agreed to goals, they must reimburse Medicare for a portion of the cost overruns. To compensate for the additional risk under this proposal the ACO would get a higher percentage (60%) of the savings. Under the second option, there would be no payback provision but the ACO would receive a lower percentage (50%)of the year end bonus. The second version is really designed only for the early years of an ACO. In the third year of it’s existence anyone using this approach must move to shared risk version. This begs the question, how and when are the savings bonuses to be distributed among ACO participating members?

The system developments, provider enrollment /credentialing and program decisions need to be thought through during the early stages of the ACO planning process. The ACO program start date is January 1,2012, less than 8 months away. Despite the various legal issues surrounding the Affordable Care Act it would appear that there is keen interests in the medical community to give the program a try and, at this point, there is little chance that anything will prevent it from commencing on the scheduled date.

As part of our plans to explore provider enrollment issues that lay beyond the current time horizon. The following is Part 3 of a 3 part series of posts on Accountable Care Organizations part of the new healthcare legislation. Credentialing ACO’s is likely to be a complex task. Not only will each individual medical professional within the ACO need to be credentialed with Medicare but the ACO entity itself will need to pass muster as well. The ACO credentialing standards are currently under development by the CMS. An initial proposal was sent to interested parties for review and comment. Among the first to respond was the American Medical Group Association (AMGA). Their comments should be quite reviling since they will likely become the industry trade group that will represent these newly formed ACO group practices.

It might be noted that the AMGA fully supports the ACO initiative in the new health care law and , to my mind at least, had surprisingly few comments or problems with the draft criteria for credentialing ACO groups. Overall they agreed with the framework. There were a couple of issues with which they registered some concern. Their primary problem was with a tiered approach described in the guidelines. The CMS proposed that four classifications for ACO’s be created. Each level would be based upon how close an ACO was to the established standard in terms of client services provided and administrative structure established. The AMGA felt that this approach was unnecessarily complex and suggested that ACO’s be limited to just two levels: Fully developed ACO’s which already possessed the infrastructure necessary to handle the cost and quality requirements and a provisional ACO which could develop the required structure in a three year time frame. It was likely that the CMS suggested the four level approach to make it easier for ACO to get established and qualify for the saving remuneration program.

In addition, the AMGA suggested the requirement that ACO’s carry stop-loss insurance be eliminated, feeling that it was premature in the development of the program. A new set of more stringent privacy standards were proposed. The AMGA felt they should be scaled back to existing federal laws and regulations already on the books. Further, they suggested that the recommended full continuum of care offered by an ACO needed clarification and definition. Finally the standard reporting requirements should apply to private as well as public payors alike.

Here is a copy of the full AMGA Comment Letter.

ACO’s may well become a significant organizational structure in the not too distant future. Its focus on outcome based health services could well assists in reducing healthcare costs. The final look, regulatory requirements and incentive structures are still a work in process, and as we all know the devil is in the details. It’s important that those involved in the provider enrollment issues stay on top of these rules and regulations as they evolve.

As part of our plans to explore provider enrollment issues that lay beyond the current time horizon. The following is Part 2 of 3 part series of post on Accountable Care Organizations. A proposed organization structure designed to help reduce healthcare costs. This installment deals with the financial side of the program. In other words, how are they to be motivated and compensated.

Providers participating in ACO’s will continue to receive payments under the normal of the Medicare fee-for-service program. However, those that participate in an ACO can receive additional compensation for any cost reduction in the care of its’ clients if the ACO meets the quality performance standard set by the CMS, and the ACO’s average per patient Medicare expenditures is at a specified level below a “benchmark” set by the CMS. As an example, suppose an independent practice association (IPA) joins with a community hospital and they create an ACO in, say, the state of New York. Medicare has established a benchmark used to measure the ACO’s cost savings record. That benchmark is what it will cost to treat the average patient, per year, in New York. Again let’s say that that number is $10,000. As mentioned above the traditional fee-for-service system remains in place. The physicians and the hospital submit their traditional claims to Medicare following their usual procedures. However, at the end of the year, Medicare determines if the ACO has provided care for less than benchmark of $10,000. If they have, Medicare will rebate to the ACO a share in those savings, and that is divided up among the providers and hospital.

What the actual sharing ratios between the CMS and ACO have yet to be determined, but it’s clear that there will be a strong incentive to keep cost at the ACO below the benchmark level.

The final post in this series will look at the provider enrollment, contracting and credentialing issues surround ACO’s.

To take a look at the new health care law in all it’s glory click on the link below

Patient Protection and Affordable Care Act

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