Healthcare Business News

CMS issues proposed ACO regulation

By Rich Daly and Jessica Zigmond
Posted: March 31, 2011 - 11:15 am ET

HHS has issued its proposed regulation on accountable care organizations (PDF), the new delivery and payment model the agency estimates could serve up to 5 million Medicare beneficiaries through participating providers, and also potentially save the Medicare program as much as $960 million over three years.

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An ACO is a group of providers and suppliers of healthcare services who work together to coordinate care for patients they serve with “original” Medicare, or those who are not in Medicare Advantage private plans. Under the rule, the CMS would continue to pay individual healthcare providers and suppliers as it does under Medicare, and also develop a benchmark for each ACO against which its performance is measured to determine if the ACO qualifies to receive shared savings or be held accountable for losses.

The rule states that an ACO shall enter into a three-year agreement to participate in the program; have a formal structure that would allow the organization to receive and distribute payments for shared savings to participating providers; have at least 5,000 beneficiaries assigned to it; and include primary-care professionals.

The rule will measure quality in an ACO in five essential areas: patient/caregiver experience of care, care coordination, patient safety, preventive health, and at-risk population/frail elderly health.

In a conference call with reporters Thursday, CMS Administrator Donald Berwick said the agency proposed 65 measures among those five domains. The Patient Protection and Affordable Care Act required that ACOs must define processes to coordinate care. The rule outlined a range of strategies for ACOs to do this, including predictive modeling; use of case managers in primary-care offices; use of a specific transition-of-care program that includes clear guidance and instructions for patients, their families and their caregivers; remote monitoring; and telehealth.

Regarding payment, under the proposed regulations, ACOs would be separate organizations with their own tax identification numbers and not necessarily participants in Medicare. The incentive system would provide shared “savings” payments directly to the ACO, which would decide how to distribute those payments among its member providers, hospitals and suppliers. The ACO rules would allow them to receive shared savings if they meet both the quality performance standards established by the HHS secretary and their target spending goals. The Medicare program would receive the other part of the shared savings.

The target spending goals would be set for each ACO by HHS, based on reducing the average per-patient spending by a specific percentage, as adjusted by “beneficiary characteristics.” The percentage of reduced spending required to receive the shared savings also would be based on the number of Medicare beneficiaries assigned to the ACO. HHS can also limit the total amount of shared savings paid to an ACO.

There will be no administrative or judicial review of determinations of an ACO's eligibility for shared savings, the percentage of shared savings it receives or “termination of an ACO” for failing to meet quality performance standards.

ACOs can participate under either a model that shares both savings and losses from the beginning of a three-year period or an approach that shares only savings in the first two years and shares both savings and losses in the last year.

Meanwhile, ACOs will be required to demonstrate a partnership with Medicare fee-for-service beneficiaries by having a beneficiary represented in the ACO's governing body. “We believe the best way to demonstrate a patient-centered program is for Medicare beneficiaries to have a voice in the decisionmaking process,” the rule states. “Although, there may be concerns or differences in the ability of some ACOs to include a beneficiary on the governing board, given state laws, we are seeking comment on the inclusion of a Medicare beneficiary serviced by the ACO on the governing body.”

The agency will accept public comment on the rule for the next 60 days.

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