One of the keystone provisions contained within the Affordable Care Act (ACA or health care reform) was the idea of Accountable Care Organizations (ACOs). The provision states that ACOs will begin on January 1, 2012, with each capable of treating at least 5,000 Medicare patients.
Over the past several months, the issue of ACOs has been widely discussed and debated. ACO’s are a “symbol of the Obama administration’s belief that driving providers to deliver better care will also eliminate large amounts of unnecessary spending.”
Consequently, a recent article from POLITICO noted that ACOs are “in danger of being crushed under its own weight.”
Background
The goal of ACOs is to facilitate coordination and cooperation among providers to improve the quality of care for Medicare beneficiaries and reduce unnecessary costs. The program is intended to encourage providers of services and suppliers (e.g., physicians, hospitals and others involved in patient care) to create a new type of health care entity, an “Accountable Care Organization” that agrees to be held accountable for improving the health and experience of care for individuals and improving the health of populations while reducing the rate of growth in health care spending. To participate as an ACO, organizations must:
- Have a formal legal structure to receive and distribute shared savings
- Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum)
- Agree to participate in the program for not less than a 3-year period
- Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings.
- Have a leadership and management structure that includes clinical and administrative systems
- Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care
- Demonstrate it meets patient-centeredness criteria, as determined by the Secretary.
As POLITICO noted, the idea of ACOs “is to get different kinds of health care providers to band together to provide coordinated care to a population of patients. The ACA says that if they do it “efficiently and in a way that gives better care to the patients, they’d be able to keep a share of any savings they create.”
Consequently, several weeks ago, the Centers for Medicare and Medicaid (CMS) issued a long-awaited proposed rule for entities interested in becoming ACOs,
“The proposed rule goes a step further than the statute, requiring ACOs to be at risk of losing money if their costs wind up higher than expected. It also imposes a high bar before providers can pocket any savings. The savings have to be big enough that they’re clearly the result of real changes to the delivery of care, not just random variation.”
Proposed Rule
Before the rule came out, “it had been eagerly anticipated for months, with many providers signaling they would enroll as soon as there were details.”
At the time, Health and Human Services Secretary Kathleen Sebelius said the “department had spent months carefully digesting all of the feedback so it could write a rule flexible enough to allow many different kinds of providers to take part.”
However, as POLITICO notes, “now that providers have had time to digest it, even the most likely candidates have rejected it as written.”
Specifically, the article noted that providers “biggest concerns include the provisions that are supposed to keep the ACOs from potentially increasing Medicare spending — costing, rather than saving, money — if savings targets aren’t reached.” While experts say this is “necessary caution, given the potential scope of the program … if this makes it unworkable for providers, the administration will have choked the goose that is supposed to lay the golden savings.”
Moreover, providers only have the proposed rule. Whether “the final version of the rule is stricter or looser than the current version is not clear and depends on whether the Obama administration can actually get the savings it wants.”
In other words, if the rule is too restrictive and “nobody participates, you’re not going to get the savings,” which appears to be very likely according to Tevi Troy, deputy secretary of HHS under former President George W. Bush. But if projected savings are reduced because they “loosen up the rule, … you won’t get the same amount of budget savings.”
In response to this concern, Richard Sorian, HHS assistant secretary of public affairs, said the department was “100 percent confident that Accountable Care Organizations will be established on schedule, improve the quality of care and lower costs.”
One of the biggest signs of disappointment in the proposed rule came a few weeks ago when “10 medical groups participating in a Medicare pilot program that paved the way for the ACO program declared that none would participate if the rule were not substantially modified.”
In a letter they wrote to CMS Administrator Donald Berwick, MD, the 10 groups asserted that they “ALL have serious reservations about the economics and the complexity of the Medicare Shared Savings Program/ACO NPRM.”
They further noted that, “as currently proposed, ACOs have a greater potential for incurring losses … than for generating savings. This risk-reward imbalance makes it difficult, if not impossible, for internal decision makers to accept the financial design.”
While the comment period continues, Gail Wilensky, who oversaw Medicare and Medicaid under President George H.W. Bush, noted that Berwick may not have much authority to change what the final rule looks like. Specifically, POLITICO noted that sources indicated that “at least two of the provisions most worrisome to providers were included in the proposed rule at the Office of Management and Budgets (OMB’s) insistence, and this may make them hard to change.
OMB has the final word on all regulations and is charged with policing their impact on the economy and the federal budget. David Spahlinger of the University of Michigan Medical School, one of the people who signed the May 12 letter to Berwick, explained to POLITICO that “OMB and the other agencies with jurisdiction have most of the responsibility for the proposed rule’s shortcomings.”
Conclusion
Given these recent developments, the future of ACOs remains uncertain, especially given the recent letter from the leaders who pioneered this idea. As providers continue to submit comments on the proposed rule, the shortcomings of ACOs and the bureaucratic process behind them will come to the forefront, and it will ultimately be up to the public to voice its concerns about controlling costs. Since this is a major initiative of the Obama Administration, officials will likely begin addressing this issue soon as election activities draw closer. President Obama will want measurable to deliver to voters, and failing at ACOs will not bode well for his reelection efforts.
What these events demonstrate is that the government’s focus on saving money and cost effectiveness clearly does not take into account the ability of providers to meet such “idealistic” proposals as ACO’s. For example, as noted in their letter, there are a large number of quality measures, especially new quality metrics in several domains,
that go into effect starting year one. As an example, on average, it costs about $30,000 just to program a single new quality metric. The proposed rule has more than 60 new ones, which equates to nearly $2,000,000 for each organization. Accordingly, ACOs seem to have a long way to go. The government will have to add many more incentives for providers in order for ACO’s to get off the ground, it will be interesting to see if they can do it.