HHS Releases Final Regulations For ACOs

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The Obama administration Thursday released its much-awaited final rule for Medicare accountable care organizations, which make it easier for doctors and hospitals to participate by cutting in half the number of performance measurements, removing the electronic health records requirement and eliminating financial risks for some groups.

The Centers for Medicare and Medicaid Services also relaxed the timetable for the launch of the ACOs with groups allowed to apply throughout 2012.

To entice providers, CMS said it will make $170 million available starting next year to physician-owned and rural providers to start ACOs.

Dr. Donald Berwick, who heads Medicare, wrote in a commentary released Thursday morning by the New England Journal of Medicine that “[t]aken together, these changes and numerous others create a more feasible and attractive on-ramp for a diverse set of providers and organizations to participate as ACOs.”

A move to ACOs has been seen as one of the most promising new models of delivering health care since it would reward doctors and hospitals for providing high-quality care to Medicare beneficiaries while keeping costs down. Today, hospitals and doctors generally get paid more for delivering more care, not necessarily better care.

The provision’s inclusion in the 2010 health law sparked a frenzied race by providers to join in as quickly as possible. But when the proposed regulation for the program was announced in March, excitement fizzled.

The administration made several concessions to the health industry in its final rule, compared to its earlier in proposal in March.

Among the key changes:

• Providers will be able to participate in an ACO and share in savings with Medicare without risk of losing money. ACOs will be able to start sharing in the savings earlier rather than letting Medicare retain all the initial savings.
• The number of quality measures that ACOs will have to meet to qualify for performance bonuses was reduced from 65 to 33.
• The ACOs will also be told up-front which Medicare beneficiaries are likely to be part their system. Under the earlier rule, ACOs would not know which patients were in the ACO until their contract ended.
• Community health centers and rural health clinics will be allowed to lead ACOs. They were left out of the prior proposal.

CMS officials hope the final rule, which runs 696 pages, will restore interest among many skittish provider groups. “We believe the policies implemented in this final rule will be more attractive to participants and have a positive impact,” officials wrote in the rule.

Regulators estimate that between 50 and 270 ACOs would be formed in the next three years, affecting the care of 2 million Medicare beneficiaries, or about 4 percent.

Medicare beneficiaries will be assigned to an ACO based on who their doctor is. If a patient’s doctor is part of an ACO, that patient is automatically included, though the beneficiaries can choose to not to included by keeping their records outside the ACO system.

Unlike beneficiaries in Medicare HMOs, patients in ACOs are free to visit any health care provider, just as they are in the traditional Medicare program.

ACOs aim to improve care and save money by having doctors, hospitals and other providers better coordinate their services to among other things reduce unnecessary emergency room use and reduce hospital readmissions.

But the government’s efforts to push hospitals and doctors to work more closely together to improve care has raised anti-trust issues.

Actuaries for CMS anticipate that the program could save Medicare $940 million over four years –a drop in the bucket compared to the $2 trillion Medicare anticipates spending during this period. ACO proponents, however, hope that the new organizations would proliferate and be expanded both for Medicare beneficiaries and privately insured patients.

When administration officials released their preliminary rule last spring, hospital and doctor groups complained that the program created more financial risks than rewards and imposed onerous reporting requirements. The American Medical Group Association, which represents nearly 400 large provider organizations, told CMS officials in a letter that more than 90 percent of its members would not participate. In particular, industry groups objected to a provision in the proposed rule that would impose penalties for ACOs that do not achieve savings.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.