At the start of next year analysts widely expect that CMS will hand down regulations dictating the rules behind setting up and running an Accountable Care Organization, as authorized by the new Medicare Shared Savings Program and established by the Patient Protection and Affordable Care Act. In short, the regulations will outline the precise ACO formation rules as well as the system through which CMS will appropriate shared savings to providers. However, on the eve of this important event certain commentators are focusing on the wrong issues. Calls from both federal and private organizations to increase provider risk and tighten ACO credentialing will only deter providers from participating in the voluntary program.
Public health policy experts lauded the Shared Savings Program after the passage of the Affordable Care Act because of its power to tackle the broken fee for service Medicare system. If CMS wants the program to usher in a patient-centered era of healthcare delivery, it should remain true to the program's flexibility. Only by attracting the biggest pool of participating providers will CMS be able to determine if the ACO model works in practice. That is, after all, what a pilot program is all about.
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Brief History and Overview
ACO Myopia: Why CMS Should Focus on Removing Provider Barriers to Entry
Soon after the Affordable Care Act was signed into law this past March, much attention was given to the insurance mandates, coverage reforms, health insurance exchanges and the like. Yet, as the attention to these provisions started to wane, many policy experts turned their attention to the Shared Savings Program. The ACO model, if properly nurtured, could serve as the model for change in healthcare delivery - a model that private payers could adopt should the Medicare model prove successful.
An ACO in theory works fairly simply. In an ACO groups of providers - including groups of physicians or groups of physicians and hospitals - are held accountable for the health of a defined population of patients. If that group of providers increases the overall level of care of the patient population using various quality measuring factors over a defined period of time and does so at a lower cost than expected, then that group of providers gets to enjoy part of the financial savings it produces. In a way an ACO is similar to a managed care model with a pay for performance aspect, though the two crucially differ in that an ACO provider does not take on additional risk. In other words, an ACO is not paid under a capitation model - even if the cost of care comes in over the expected estimate, the providers are not penalized as a result. Thus the underlying system can be characterized as a conditional bonus payment system, not an equity-modeled system.
As applied to Medicare through the Shared Savings Program, the ACO assumes a prominent place in Medicare payment administration. The program is voluntary and allows participating providers to share in additional savings it produces when treating a defined population of Medicare patients. The bonus payments, however, are in addition to standard fee for service Medicare payments, making participation in the program potentially lucrative. Nonetheless, the model as structured by the Affordable Care Act maintains its separation from a capitation system, as it does not penalize providers that miss financial or quality targets other than disqualifying those providers from capturing extra bonus payments (though, notably, it does leave CMS the discretion to alter this portion of the model to its liking in the future). Finally, as the program is voluntary providers must assume all costs of forming an ACO network. If the ACO meets the guidelines soon to be released by CMS, it is allowed entrance into the program once it goes live on January 1, 2012.
Recent Developments
Because the Affordable Care Act leaves much of the Shared Savings Program details to be determined by CMS, healthcare consultants and attorneys have been eagerly awaiting the pending regulations. However, other organizations have taken a more proactive role in the process by suggesting to CMS what the ACO program needs to assume viability.
An organization currently advising CMS to such lengths is the Medicare Payment Advisory Commission. In a letter sent to CMS last month, MedPAC suggested that CMS implement a two-sided risk aspect to the ACO model. Essentially, this suggestion would completely alter the ACO delivery model. In this instance providers would expose themselves to cost overrun risk, where they would be penalized for charges above the ACO's financial target. What, then, this would boil down to is a pure capitation model - precisely the type of model that managed care built itself around, and the same model that failed in the 90s.
Other groups have made suggestions as to what criteria an ACO must meet, beyond the criteria that CMS puts out later this year, in order to seek accredited status. One such organization is the National Committee for Quality Assurance, a private, nonprofit healthcare accrediting organization. In a released draft stating qualifying and monitoring standards for ACOs in October of this year, the NCQA advocated a process where each ACO would be graded on a tiered system, based on existing infrastructure and other qualifications criteria. Though the organization still has yet to put out the final draft of its criteria, adding a further credentialing process will only deter providers from voluntarily joining or forming an ACO. Providers are already expecting to comply with what projects to be a long list of requirements set out by CMS. Forcing them to comply with more accrediting requirements will turn some away from embracing the ACO model.
Conclusion
As things currently stand, providers in the process of forming an ACO are already facing large startup costs. These costs range from the nonfinancial, such as retraining their staffs and learning a new electronic health record software system, to the financial, such as legal and consulting fees paid to create a new accountable entity. Nonetheless, many providers have considered the above and moved forward with the hope that the additional savings payments will more than offset the investment cost.
Adding a burdensome credentialing process will undoubtedly deter some of the willing providers from joining an ACO. Moreover, injecting a substantial risk of absorbing losses in a two-sided risk model will have an even greater effect of preventing providers from joining the program. If CMS wants the Shared Savings Program to succeed, it will remove as many barriers as possible in order to attract the largest number of providers it can. Only then will it know if expanding the program in the future is a good idea.
ACO Myopia: Why CMS Should Focus on Removing Provider Barriers to Entry
Minimize Risk. Maximize Profit. Wagner Healthcare Consulting [http://www.wagnerhc.com]
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