CMS’ Proposed Rules on Accountable Care Organizations Finally Released

On March, 31, 2011, the Centers for Medicare & Medicaid Services (CMS) proposed a new 429-page document detailing the rules for the development of Accountable Care Organizations (ACO’s). Under the Affordable Care Act (section 3022), CMS is required to create a Medicare Shared Savings Program by January 2012. ACO’s, also known as Medicare Shared Savings Programs, are a type of managed care organization in which a group of healthcare providers (various networks or physicians, hospitals and specialists) share responsibility for providing care to an assigned patient population (i.e. Medicare beneficiaries) and are one of the most talked about provisions of the Healthcare Reform Law. ACO’s create incentives for healthcare providers to bring together a patient’s care components to one network.

When the final rules are established, regulators estimate that anywhere between 75 and 150 ACO’s could be formed and approved by CMS and these ACO’s would care for 1.5 to 4 million Medicare beneficiaries. CMS estimates that this program will save Medicare approximately $960 million over the next 3 years which is only a small portion of the estimated $1.8 trillion in estimated spending over the same time frame, but initial success could lead to expansion of the program into the private insurance sector.

According to CMS, they have “worked closely with agencies across the Federal government to ensure a coordinated and aligned inter- and intra-agency effort to facilitate implementation of the Medicare Shared Savings Programs.” Below is a summary of the proposed rules released by CMS.

To participate in the Shared Savings Program, an ACO must complete an application process with CMS which includes how the ACO plans to deliver high quality care at lower costs for the beneficiaries it serves. To be eligible to become an ACO, a group of providers (the proposed rules leave the makeup of ACO’s flexibility in meeting the needs of its community) must:
• Manage a minimum of 5,000 Medicare beneficiaries for 3 years
• Have a leadership and management structure that includes clinical and administrative systems
• Report on quality, cost and care coordination measures (some may be required to publicly report certain aspects of their performance and operations)
• Form a legal structure to share and distribute savings
• Meet patient-centeredness criteria set forth by the HHS secretary
The proposed rule would establish quality performance measures and a methodology for linking quality and financial performance. There are 65 standards by which quality will be judged. They fall into five areas: patients’ experiences in receiving care, the extent to which care is coordinated, patients’ safety, the degree of emphasis on preventive health, and the teams’ effectiveness in treating Medicare patients who are sick and frail. Click here for a copy of the proposed measures for quality-performance standards.

If an ACO meets the program’s quality performance standards, it would be eligible to receive a share of the savings it generates below a specific expenditure benchmark set forth by CMS. There are two different models of shared savings the proposed rules state. The first model allows an ACO to operate on shared savings only (no risk of loss) for the first two years, and then would assume risk for shared losses in the third year. The second model allows an ACO to share in the savings and risk liability for losses beginning in the first year. The second model allows for a greater share of any savings it generates as the risk of loss is present from the very beginning.

There are also some additional requirements for established ACO’s:
• Must notify beneficiaries that they are participating in an ACO and that the providers will receive Medicare payments for improving patient care
• Must notify beneficiaries that their claims data may be shared within the ACO and give the beneficiaries an opportunity to opt-out of the sharing arrangements
• CMS may terminate the agreement with the ACO if there is avoidance of “at risk” beneficiaries or a failure to meet the quality performance standards
One other major topic that came with the proposed rules was that on antitrust laws which attempt to limit market power that drives up prices and stifles competition. ACO’s with less than a third of the market share (Medicare fee-for-service business) will be given leeway to the antitrust law unless they engage in deliberately anticompetitive behavior. Those with greater than a half the market share will be under subject to antitrust review. The Department of Justice and Federal Trade Commission have issued a joint “Antitrust Policy Statement.” Under the policy, there are different levels of antitrust scrutiny depending on the ACO arrangement Also, there is an expedited 90 day review for these larger ACO’s

It should be noted that all the above is part of the proposal and CMS will take into account any feedback and comments they received during the 60-day public comment period (deadline of June 6th) on the proposal before issuing a final rule later in the year.

Click here for a full set of fact sheets that address in greater detail specific aspects of the proposed rule, including a summary of the proposed regulations, legal issues, quality scoring, and fact sheets specific to providers and customers.

ADVOCATE will continue to keep you updated on any new information that becomes available.

With best regards,
Ty Meyer, CPA
Manager of Client Relations