AMA, for One, Supports Accountable Care Organizations

Following the enactment of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) on March 23, 2010, and the release of the Accountable Care Organization (ACO) Proposed rule back on April 7, 2011, the medical community was abuzz about the new entities called ACOs, like how they would be created and what kind of savings would result.  After nearly six months, the Final rule was finally published on November 2, 2011, clarifying some of the details of the program.  The American Medical Association (AMA), an organization whose members have potential for significant savings (and losses) from the program, which had voiced a number of concerns related to the ACO program in response to the Proposed rule, hailed it a victory that CMS incorporated many of its suggested changes into the Final rule.  As lauded by Dr. Peter W. Carmel, AMA President, in a commentary directed to physicians that appeared on the AMA’s website, “[The AMA is] delighted that when we asked CMS to make Medicare ACOs more accessible for physicians, CMS listened.”

Provisions of the Shared Savings Program

Section 3022 of PPACA established the Medicare Shared Savings Program, which called for the formation of ACOs, to provide better coordination of care and better health to beneficiaries and to reduce the growth in Medicare Part A and B expenditures.  Eligible to participate in the program are :

  1. ACO professionals in group practice arrangements;
  2. Networks of individual practices of ACO professionals;
  3. Partnerships or joint venture arrangements between hospitals and ACO professionals;
  4. Hospitals employing ACO professionals;
  5. Rural health clinics (RHCs);
  6. Federally qualified health centers (FQHCs);
  7. Certain critical access hospitals (CAHs); and
  8. Other groups of providers of services and suppliers as the Secretary determines appropriate.

ACO participants must enter into a participation agreement with CMS and agree to be accountable for coordinating care to at least 5,000 beneficiaries assigned to the ACO annually for a three-year period.  Other requirements must be met including those regarding the ACO’s legal structure and governance, distribution of savings, reporting requirements, leadership and management, promotion of new processes and methods, patient-centeredness criteria, marketing guidelines, and program integrity.  ACO participants will continue to receive traditional payment under the original Medicare fee-for-service program under Parts A and B, but if participants meet specified quality and savings requirements, they would qualify for shared savings, based on the ACO’s quality score.

Under the Proposed rule, it was posed that ACOs would be able to choose whether to be involved in a one-sided (where savings only is shared in the first two years and both savings and losses in the third year) or two-sided risk model (where both savings and losses are shared for all three years).  After the minimum savings rate is met, the one-sided risk model provides a maximum sharing percentage of 50 percent for ACOs, but the maximum sharing percentage would 60 percent for ACOs in the two-sided model.  Further, ACOs in the one-sided model would have to meet a two percent threshold before it can receive shared savings, and payments would be capped at 7.5 percent of an ACO’s benchmark.  There would be no minimum threshold for two-sided models, and their payment cap would be 10 percent of an ACO’s benchmark.  Alternatively, should the per capita cost per beneficiary exceed two percent above the benchmark, shared losses would result to ACOs.  There would be a cap on the amount of shared losses an ACO would be liable for– five percent of the benchmark for the first year of the program, 7.5 percent in the second year, and ten percent in the third.

AMA’s Reaction to the Proposed Rule and the Resulting Final Rule

Carmel found the Proposed rule “highly discouraging,” citing the huge start-up costs and antitrust obstacles, as well as fact that physicians would have to share in losses, but would be ineligible for shared savings until the threshold was met.  As a result, AMA responded to CMS’ call for public comments by rallying its troops to submit suggestions, along with oral testimony, on how to improve the program and how to help physicians be able to afford to set up ACOs.

By the time the Final rule was released in November, CMS had made a number of changes to those provisions provided in the Proposed rule.  Among them were the eligibility of rural health clinics, federally qualified health centers, and certain critical access hospitals to participate, two start dates being provided for the first year of the agreement period (April 1 and July 1, 2012), and the simplification and streamlining of quality performance standards.  Along with those changes, Carmel took credit for the following changes, among others:

  • Allowing ACOs to share in savings for the entire first three-year agreement period (this differs from the Proposed rule in that it was proposed that ACOs would receive shared savings for only the first two years, but would share in both savings and losses in the third year);
  • The creation of the Advanced Payment Model which allows certain ACOs to receive their shared savings in advance to help with start up costs, as was announced by Noticealso on November 2, 2011;
  • A rolling application process that gives more time to prepare and allows greater participation; and
  •  ACOs have fewer quality measures on which they are required to report under the Final rule.

On the same day as the Final rule was released, the Department of Justice and the Federal Trade Commission announced an Interim final rule providing for the waiver of certain fraud and abuse laws for those providers participating in Shared Savings that might otherwise be raising antitrust issues.  [Susan Smith’s recent post discussed the antitrust waivers in further detail.]

As noted by Dr. Carmel, “[t]hroughout the entire process, the AMA [has] stressed our support for ACOs,” and sees that “ACOs will offer physicians and hospitals financial incentives to provide good quality care to Medicare beneficiaries while keeping costs down.”  The ultimate goal of the ACO program is a lofty one, but with the support of the AMA, it has some powerful backers.

It is yet to be seen whether the medical community as a whole will support the effort.  Stay tuned to see what happens as the program gets off its feet in the coming year.