CMS redesigns Medicare ACOs to be more appealing to physicians

Washington -- The Obama administration's final rule on Medicare accountable care organizations removes several proposed conditions on participants in an effort to make the new shared savings payment model more enticing to physicians and other key players.

As many as 270 ACO networks are expected to participate in the Medicare pay model that encourages physicians and hospitals to coordinate patient care in a way that improves quality and saves the program money. From 2012 through 2015, Medicare could save an estimated $1.8 billion and let groups share in $1.3 billion in bonuses for hitting savings targets, thus saving Medicare a net of about $500 million.

After criticism about its March 31 proposed rule, the Centers for Medicare & Medicaid Services released an Oct. 20 final rule that gives physicians the option to join an ACO without being exposed to financial penalties if saving targets are not achieved. CMS also softened program requirements by reducing the number of quality measures physicians must report and removing a condition that at least 50% of participants must satisfy meaningful use standards for electronic medical records.

The administration also adjusted antitrust rules to allow physicians and other health professionals to form ACOs quickly, while still protecting patients and preserving competition in the marketplace, officials said.

More than 1,300 comments were submitted to CMS after the release of the proposed ACO rule. Members of organized medicine, including the American Medical Association, were critical of the proposal because they said it made participating in an ACO too risky and tooburdensome.

The Medicare agency listened carefully to the concerns before finalizing the rule, said CMS Administrator Donald M. Berwick, MD. "For example, the final rule will increase the incentives and streamline the shared savings program, extending the benefits of the new program to a broader range of beneficiaries."

The proposed version of the ACO program had two tracks establishing potential risks and rewards for participating groups. The first track had less risk and reward, while the second track had greater risk but also larger bonus potential.

The AMA and other organizations argued that Medicare should reduce the exposure to financial risk, especially for newly formed ACOs, because typical startup costs per network are estimated at $1.8 million -- posing a de facto financial risk for participants. The Medicare agency agreed, eliminating risk in the first track.

CMS also announced an advance payment initiative that would help small practices and rural community hospitals with upfront implementation costs. The program is committing $170 million for ACOs that launch in 2012.

"As the cost of forming an ACO is high, physician practices will also benefit from the new advance payment initiative created through the Center for Medicare and Medicaid Innovation to provide financial assistance for physician-owned organizations," said AMA President Peter W. Carmel, MD.

Doctors take a second look

Physician practices had strongly disapproved of the proposed ACO rule and wrote CMS letters outlining their concerns. The American Medical Group Assn. had conducted a survey of its members in April and found that 93% of respondents said they would not participate unless the proposed rule underwent major revisions. After an initial review of the final rule, the association said it was pleased that CMS heeded many of its suggestions.

"We are optimistic that the model will get rolled out nationally on Jan. 1, 2012, with sufficient participation to allow the promise of this ideal of better, less costly, more coordinated care will become a reality over time," said AMGA President and CEO Donald W. Fisher, PhD.

M. Douglas Leahy, MD, an internist at Summit Medical Group in Powell, Tenn., said his practice had a problem with the proposed rule's use of a retrospective method for selecting patients participating in an ACO. CMS changed the rule to allow prospective assignment, so doctors would know ahead of time which patients were in the ACO. This would allow physicians and patients to partner together better to address health problems, Dr. Leahy said.

"Now it's clearly aligned," he said. "Both will understand how they're going to move forward together, discuss what the goals are and how they hope to accomplish those goals."

Summit Medical Group had been interested in the initiative before the proposed rule and had dedicated seed money to forming an ACO. But, like many others, physicians and administrators at the group thought the proposal was too onerous. Dr. Leahy said he believes his group will like many of the changes in the final rule, but it needs to review the regulations further to determine whether it will participate.

No mandatory antitrust review

The Justice Dept., Federal Trade Commission, Internal Revenue Service, and Health and Human Services Office of Inspector General issued guidance documents to supplement the ACO final rule. In doing so, the agencies removed a provision mandating a regulatory antitrust review of ACOs, although they pledged to protect markets by monitoring the competitive impact of the networks.

The AMA was pleased that CMS and the OIG adopted its recommendations to expand waivers from certain Medicare laws -- such as the physician self-referral law and the anti-kickback statute -- for ACOs in a separate interim final rule.

"The agencies adopted the AMA recommendation that the waivers begin sooner so that they will apply during the process of planning Medicare ACOs," Dr. Carmel said. "It is important that the agencies issued these new waivers as an interim final rule, as the AMA had recommended, which allows for greater flexibility."

America's Health Insurance Plans had favored the antitrust protections in the proposed regulation. Insurers remain concerned about physician and hospital consolidation in the marketplace and the impact consolidation has on patient prices and quality of care.

"Doing away with the mandatory review process raises concerns that provider market power may not be scrutinized sufficiently, potentially increasing health care costs for consumers and employers," said AHIP President and CEO Karen Ignagni.

However, it's clear that the FTC and Justice Dept. still will be actively monitoring ACOs, said William Maruca, a health care attorney at Fox Rothschild in Pittsburgh. Federal regulators will be open to investigating complaints, which probably would come from smaller groups or employers, against large ACOs engaged in anti-competitive practices. "If you cross the line, they will come after you," Maruca said.