October 24, 2011

The finalized regulations on Accountable Care Organizations (ACOs) are here.  CMS will begin accepting applications from potential ACOs on January 1, 2012, for April 1 or July 1 start dates.

The Centers for Medicare and Medicaid Services (CMS) issued the final rule for the Medicare Shared Savings Program on October 20, 2011.  Under the Shared Savings Program, health care providers and suppliers may form Accountable Care Organizations (ACOs) to benefit financially from cost-effectively coordinating patient care while meeting certain quality standards.

The final rule is quite different from the proposed regulations, which were issued in March 2011.  The proposed version elicited a uniformly and broadly negative reaction from the medical community.  Even integrated health systems that were presumably models for the Medicare ACOs proclaimed their inability to comply with the CMS requirements, as these appeared originally.  Although the CMS discussion accompanying the final regulations suggests serious efforts to meet a slew of provider objections, the nearly 700-page document will take some time to analyze properly.  Our initial impression is that the final version will help anesthesiologists and others who wish to launch ACOs, but there will still be roadblocks.  The most significant of the obstacles is, of course, that ACOs are structured around primary care, not specialty services.  In this Alert, we will simply summarize some of the most significant changes, including the reduction by half in the number of quality measures that ACOs must meet.

Major Differences between the Proposed and the Final ACO Regulations

• Beneficiaries will be assigned to ACOs prospectively instead of retrospectively.  ACOs will be notified in advance about the patients for whose cost and quality of care they are likely to be held accountable, with quarterly updates on the list of patients and feedback on the care they have received.  There will be a final reconciliation after each performance year based on patients served by the ACO.  This is clearly an area where the devil is in the details, but at least with prospective assignment physicians will know that the patient in front of them is one whose overall care they can and should help to manage within the structure of the ACO.  Retrospective assignment offers no real behavioral incentive; indeed, it would seem to defeat the purpose of ACOs.
• ACOs will have agreements with a first performance “year” of 18 or 21 months.  ACOs starting 4/1/2012 and 7/1/2012 have option for an interim payment if they report CY 2012 quality measures.
• ACOs may choose one of two incentive options.  The One-Sided Model allows providers to share in the ACO’s savings (up to 50 percent); the Two-Sided Model allows greater shared savings (up to 60 percent) in exchange for sharing the risk of loss of cost increases.  Previously the One-Sided Model required a switch to risk-sharing in the third year.  The final regulations do away with the potential penalty of the One-Sided Model.
• The potential bonus has increased.  One-Sided Model ACOs will be able to share in savings beginning with the first dollar once the minimum savings rate has been achieved.  In the proposed regulations, savings would only have been shared with the ACOs once a two percent threshold had been reached. 
• CMS will not require a "withhold" of part of any shared savings. Under the previously proposed rule, 25 percent of the shared savings would have been withheld for a period of time.  Not having the withhold will permit providers to receive more of their shared savings faster.
• The proposed rule would have required that 50 percent of primary care physicians in the ACO qualify as meaningful users of electronic health records (EHRs) by the start of the second performance year. In the final rule, meaningful use of EHRs will be heavily weighted as a quality measure, but it is no longer required for participation in the program.
• The number of quality measures required to be reported has been reduced to 33 from 65 in the proposed rule... There also will be a longer phase-in period, with payment for reporting on the measures during the first year and payment for both reporting and performance during the second and third years.  The proposed rule limited payment for reporting to the first year only. The quality measures fall into four basic categories or domains: (1) quality standards on patient experience; (2) care coordination and patient safety; (3) preventive health; and (4) at-risk populations.  They are listed in the table below.

In a complementary program announced on October 20th, HHS invited applications from providers to help test the Advance Payment model. This model will test whether pre-paying a portion of future shared savings will increase participation of physician-owned and rural ACOs in the Medicare Shared Savings Program, and whether advance payments will allow teams of providers to improve care for patients and generate Medicare savings more quickly. The advance payments would be recovered from any future shared savings achieved by the team of physicians and other providers.

There will be a great deal to be learned about the feasibility, for anesthesiologists, nurse anesthetists and anesthesiologist assistants as we study the ACO regulations in detail.  We are also reviewing the Final Waivers in Connection with the Shared Savings Program issued by the Office of Inspector General in conjunction with the release of the ACO Final Rule, the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program issued jointly by the Federal Trade Commission and the Department of Justice, and  the Internal Revenue Service’s Tax-Exempt Organizations Participating in the Medicare Shared Savings Program Through Accountable Care Organizations.  Please watch for Monday Alerts with further information on all of the above.

With best wishes,

Tony Mira
President and CEO