Medicare proposal would use Accountable Care Organizations to improve quality, rein in costs

April 27, 2011

The Centers for Medicare & Medicaid Services is proposing a rule under the health care reform law to help doctors, hospitals and other health care providers improve care and reduce costs for Medicare patients through the Medicare Shared Savings Program and Accountable Care Organizations.

An ACO is a patient-centered organization where groups of providers partner to manage and coordinate the care of Medicare beneficiaries.

Under the proposal, the Medicare Shared Savings Program would reward ACOs that demonstrate improved quality of care and lower growth in health care costs by sharing in some portion of the cost savings achieved.. The new program is expected to begin Jan. 1, 2012 and would apply only to Medicare fee-for-service beneficiaries, not to Medicare Advantage or private insurance members. Patient and provider participation is voluntary.

The Medicare Shared Savings Program would offer shared savings payments and other incentives to groups of providers that work together to coordinate patient care across a variety of settings, such as physician’s offices, hospitals and long-term care facilities. In order to qualify for shared savings payments, the ACOs would have to meet high quality standards to ensure that patients have better health outcomes and are satisfied with the care received.

The proposed program links the amount of shared savings an ACO may receive to 65 quality measures across five domains of individual and population health: 

• Patient and caregiver experience of care 
• Coordination of care 
• Patient safety 
• Preventive health 
• At-risk population or frail and elderly health 

During the first year of the program, quality performance data would be used only for informational purposes. Performance measures are expected to affect the amount of shared savings during the second and third years.

In addition to sharing in a portion of any savings, all ACOs are expected to eventually assume risk for losses. The proposal sets two tracks based on the readiness of the ACO:

• One-sided model. Under this model, ACOs do not assume a downside risk until the third year of the three-year contract and, as a result, would receive a lower percentage share of the savings. 
• Two-sided model. ACOs would assume the downside risk for losses immediately, but in return, they would be eligible for a higher share of any savings.

The rule proposes to assign beneficiaries retrospectively to ACOs, based on where beneficiaries previously received the majority of their primary care services. Assignment to an ACO, however, does not limit beneficiaries’ rights to visit any provider they choose; ACOs cannot limit them to certain providers, use utilization management or require prior authorization.

• They are participating in an ACO. 
• Their claims data may be shared with CMS 
• The ACO may be eligible for shared savings, or responsible for losses, based on its performance. 

The beneficiary may choose to continue with the provider and ACO or seek care from an unaffiliated provider. Beneficiaries could also opt out of the data sharing arrangement, which would prohibit the ACO from receiving claims data about the beneficiary from CMS.

Providers must form or join an Accountable Care Organization and apply to CMS (existing ACOs are not automatically accepted). If accepted, the ACO must agree to serve at least 5,000 Medicare patients and sign an agreement to participate in the program for three years.

Each ACO must have certain IT infrastructure in place to collect and evaluate data, and at least 50 percent of all participating primary care providers must become “meaningful electronic health record users” by the start of year two. ACOs also have to establish a governing body representing providers, suppliers and Medicare beneficiaries. They would be responsible for routine self-assessment, monitoring and reporting of the care delivered.

CMS estimates that between 1.5 million and 4 million Medicare beneficiaries will align with a participating ACO, helping to save between $170 million and $960 million during the first three years of the program.

This program is a proposed rule that may change significantly before final regulations are released. CMS will consider comments during a 60-day public comment period that concludes June 6. More information is available from both the CMS and HealthCare.gov sites.

In conjunction with the proposed rule, the Federal Trade Commission and the Department of Justice have proposed their own policy for enforcing antitrust provisions for ACOs and will take comments from the public until May 31.

The information on this website is based on BCBSM's review of the national health care reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.