ACO Regulations Announced

Orlando—After several months of anticipation, healthcare professionals received some guidance regarding accountable care organizations (ACOs) on March 31 when the Centers for Medicare & Medicaid Services (CMS) announced proposed federal rules pertaining to ACOs. The 429-page document revealed numerous aspects of ACOs, such as an emphasis on quality, cost-savings, and care coordination. Still, ACOs will not be fully implemented until 2014, and questions remain about if and how they will transform the industry, according to Elizabeth Simpkin, vice president of consulting services at Valence Health. “I hope [ACOs] won’t be a big, resounding thud,” said Ms. Simpkin, who spoke at the Spring Managed Care Forum in a session titled Turning Today’s PHO into Tomorrow’s ACO. “But a lot of people I talk to are taking a wait-and-see approach.” Unveiled in the Patient Protection and Affordable Care Act, ACOs will begin as a CMS demonstration project in January 2012. Ms. Simpkin said the shared savings program revolves around integration among providers in various settings and a focus on quality and care coordination. She said the proposed rules offer a framework for providers to be more innovative and responsible for patient care. However, she was surprised at the administrative and operational requirements needed to form an ACO, which may hinder widespread adoption. Eligibility requirements to form an ACO include ACO professionals working in a group practice, hospital, or provider network, as well as hospitals employing ACO professionals. An ACO also must be a legal entity with a tax identification number, install a governing body with ≥1 Medicare beneficiary and ≥75% control by ACO professionals, and employ a leadership team with an executive officer, full-time board certified medical director, and a compliance officer. Primary care physicians can only join one ACO, and their performance will be evaluated based on 65 quality measures across 5 domains: patient safety, patient/caregiver experience, preventive health, care coordination, and at-risk population/elderly health. They will be eligible for shared savings if they report their quality measures in the first year and meet threshold levels in the next 2 years. To receive money, they must meet all minimum quality performance standards, spend less than a benchmark, and achieve more savings than a minimum that will be determined in the coming months. “Will there be a real, clinical benefit [with ACOs]?” Ms. Simpkin said. “The jury’s still very much out on that.” Lewis D. Bivona, CPA, AFE, principal for Withum Smith and Brown in Princeton, New Jersey, cited a 2011 HealthLeaders Media Industry survey that found 44% of industry executives said their institution would join an ACO within 5 years, although only 25% said the industry was on the right track. “They know something’s wrong, but they don’t know how to fix it,” said Mr. Bivona, who spoke in a session titled So You Think You Want to Form an ACO? When deciding whether to be part of an ACO, organizations must consider several factors, according to Mr. Bivona, such as if they want to invest in an ACO now or wait to examine how others fare with ACOs; if they have the clinical capacity to manage risks; if they have strong relationships with insurers, payers, and providers; and if they are willing or able to hire specialists in difficult situations, including attorneys, actuaries, or case managers. According to Ms. Simpkin, physician hospital organizations (PHOs) and independent provider associations (IPAs) may be in a good position to form ACOs because their leadership, governance structure, policies, and procedures are intact. Still, many PHOs and IPAs will have to upgrade their information technology (IT) infrastructure and adopt electronic health records (EHRs) and computerized physician order entries (CPOEs), which are required in ACOs. Another important aspect of ACOs, according to Ms. Simpkin, is an incentive program for physicians. She said ACO leaders must clearly identify components of the compensation system and communicate the components to physicians, who may be resistant to the changes. She noted a sample incentive program that would base 60% of the payment on performance measures such as using online tools, attending education programs, adopting IT, and taking a patient safety course. The remaining 40% would be based on whether they emphasize generic prescriptions rather than expensive branded drugs. Mr. Bivona cited an article from the New England Journal of Medicine that found most ACOs would lose money in the first 3 years. The article discussed 10 Medicare physician group practice (PGP) demonstration projects that began on April 1, 2005. Those projects were limited to large groups and required an average investment of $1.7 million. The program was the first pay-for-performance initiative for physicians in the Medicare program and created incentives based on cost-efficiency and performance on 32 quality measures. In addition, in the Medicare Shared Savings program, 80% of the projects received no savings in year 1, 60% received no savings in year 2, and 50% received no savings in year 3. “Promising something down the road won’t change behavior,” Mr. Bivona said. “They weren’t seeing anything coming from their efforts.” “We should focus on accountability,” Ms. Simpkin said. “It’s integration, changing cultures, changing delivery systems.… We really need to build up that expertise to make us accountable.”