Will the ACO Final Rule Actually Motivate Provider Integration?

On October 20, 2011, the Federal Government issued the Accountable Care Organization (”ACO”) final rule. The Government received approximately 1300 comments about the proposed rule objecting to overly administrative burdens, high costs and reporting requirements that exceeded the capacity of current providers. The new rule attempted to address some of these concerns.

Specifically, the new rule reduced the number of quality metrics that the providers must report on from 65 to 33. The quality metrics will focus upon the patient-care giver experience, preventative health, care coordination and patient safety and caring for at-risk populations. Specifically, patients will be surveyed on their actual experience with their caregiver. The patient’s experience will drive whether or not the provider met the quality indicator. If a patient had a bad experience and providers did not achieve at least 30% satisfactory results on those quality indicators, providers will not be eligible for receiving a share of the savings possible for that metric.

Another significant change under the ACO rule is to permit Federally Qualified Health Centers (”FQHCs”) and Rural Health Clinics (”RHCs”) to participate in an ACO model. Under the previous rule, FQHCs and RHCs were left out as eligible ACO entities. However, there is a large population of Medicare beneficiaries who live in rural areas and who receive their primary care services in FQHCs and RHCs. Accordingly, this change expands the types of providers and organizations that can participate and may also provide additional outreach in the communities that need access to integrated care and specialty services.

In addition, providers are very concerned about how Medicare beneficiaries will be assigned to ACOs. Under the previous rule, it was a retrospective review of where Medicare beneficiaries historically received a plurality of their primary care services. This may or may not give an accurate portrayal of where patients actually go to receive their primary care services and adversely impacts the ability of any ACO to reduce the cost of that individual’s care because the ACO is not the actual provider. Under the new ACO model, Medicare beneficiaries will be assigned initially based upon where they receive services over the last 12 months. This assignment will be updated annually so that the ACO is assigned Medicare beneficiaries that actually received their primary care services from the ACO participant. The Medicare beneficiaries will be assigned based upon where they received their primary care services either from a primary care physician or if they do not have a primary care physician from a specialist who provides primary care services. Notwithstanding the assignment of Medicare beneficiaries, patients will always have a right to choose their providers and will not be limited to only using the ACO providers. ACOs will be able to send marketing and educational materials to the Medicare beneficiaries. The marketing materials will now be submitted to the Government and if the Government does not object to the materials within 5 days, the ACO can continue to use the marketing materials. The marketing materials are limited to the same types of marketing materials permitted under the federal privacy and security laws.

In addition to the changes on the quality metrics and the assignment of Medicare beneficiaries, the final rule also modified the 2 types of ACO models available. Providers can now participate in a model wherein they do not share in the loss if they do not achieve the minimum savings set by the Government. In that instance, the percentage of shared savings is limited, but under the final rule it is a greater share in saving than under the previous proposed rule. Under the 2nd model, if providers elect to share in a loss in year one, if they do not meet the savings, the Government will offer them a higher percentage of the savings among ACO participants. Accordingly, if they are willing to take the risk of having to pay back the loss, the providers have an opportunity to share in more of the savings which is financially beneficial to the participants.

Notwithstanding these changes, the types of administrative infrastructure required for an ACO, although controversial, remain mainly intact. Specifically, an ACO must be a legal organization that has a Board of Directors comprised of at least 75% of the ACO participants. Patients and members of the community must also be represented on the Board. There must also be an infrastructure to permit quality reporting and quality assurance activity. There must also be a separate and distinct compliance program that specifically oversees the activities of an ACO and reviews on it on a continual basis to ensure that it is in compliance with applicable laws and regulations.

Time will only tell as to whether or not the reduction in the quality measures, the changes in the 2 models, the assignment of the Medicare beneficiaries and some of the relaxed regulations with regard to the marketing and administrative reporting are sufficient to incentivize providers to engage in the ACO model. Notwithstanding the Medicare ACO model, it is important for providers to stay focused on the tenets of an ACO model which are to engage and clinically integrate providers to reduce the cost and improve outcomes to care. The bundled payment program, the value based purchasing and third party payor performance initiatives are all driving a change in behavior of healthcare providers. The tenets of clinically and financially integrating providers together to ensure one full continuum of care from prior to admission to post acute care services is changing the healthcare delivery system, nationally. Regardless of whether or not the providers adopt and apply to be a part of an ACO model, providers’ behavior and consolidation of healthcare services is being driven on multiple fronts and will continue to change how providers act and how patients receive care.

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Bill Custer

October 27th, 2011
10:00 am

This is a very nice summary of a complicated regulation. Your last paragraph is exactly on point. The movement toward bundled reimbursement, reportable quality measures that focus on episodes of care, and integration of services predated the Affordable Care Act. That trend will continue regardless of the political fortunes of the ACA.

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