Healthcare Providers Applaud Updated ACO Guidelines
Las Vegas—When the Centers for Medicare & Medicaid Services (CMS) released preliminary guidelines for the Shared Savings program in March, many in the healthcare industry criticized the provisions. Most providers said they would not participate in accountable care organizations (ACOs), which had been heralded as a major component of the Affordable Care Act (ACA) and a way to improve care and reduce costs. After receiving complaints and listening to feedback, CMS made numerous changes before announcing the final rules in October.
Industry leaders applauded CMS for heeding their concerns and vowed more ACOs would be created, although it is still uncertain how many ACOs will be in place by January 1, 2012, when the program begins. Still, ACOs and other provisions of the ACA will remain hot topics, as providers and payers determine how they will adapt to an ever-changing environment.
“It’s hard to undersell the impact of the Affordable Care Act,” Fred Bentley, MPP, MPH, managing director with The Advisory Board Company’s healthcare industry committee, said at the Fall Managed Care Forum in a keynote session titled Healthcare 2020. “It ranks right up there as a real game-changer.” In the coming years, the number of people on Medicare is expected to increase rapidly. However, Mr. Bentley said, “there’s a broad consensus [that] the current fee-for-service model is not equipped to handle” the growing number of beneficiaries. Thus, the government has introduced alternatives such as pay for performance, hospital–physician bundling, episodic bundling, and Shared Savings models that are intended to shift the cost accountability to providers and force them to embrace integrated care models. “We really need to rein in the spending,” Mr. Bentley said. “We’ve said that before. It’s serious this time.”
In April, CMS issued the final rule for the first year of the Hospital Value-Based Purchasing Program, which is mandatory and set to begin in October 2012. CMS will evaluate hospitals on clinical care and patient experience measures, and calculate a Total Performance Score (TPS) in achievement and improvement categories for each hospital. Hospitals will be compared with each other: those ranked in the bottom 50% in achievement and those that do not improve from baseline will not receive points toward their TPS.
To finance the program, CMS will withhold Medicare payments to providers, beginning with a 1% reduction in fiscal year 2013 and continuing in 0.25% increments annually until finishing with a 2.0% reduction in fiscal year 2017. Providers who fall at or below the 25th percentile will not get the money back, while those at or above the 75th percentile will get the money back and also receive a bonus payment. “There will be winners and losers among hospitals,” Mr. Bentley said. “This is a pretty drastic change.”
The Shared Savings program is another major initiative included in the ACA. The program begins on January 1, 2012, and is open to physician groups and hospitals that serve ≥5000 Medicare beneficiaries. Groups that form ACOs are required to participate for ≥3 years and receive bonus payments based on cost savings and performance metrics. In the model, providers receive standard fee-for-service payments, but their total cost of care is compared with risk-adjusted target expenditures. If the costs are less than the target, providers will share in the savings.
Mr. Bentley said CMS “stumbled badly” when introducing the initial Shared Savings guidelines in March, and the program received a lot of criticism. In conversations with many of the Advisory Board Company’s 2800 hospital and health system clients, Mr. Bentley said few were interested in starting an ACO. However, since the final rules were released in October after CMS made revisions, Mr. Bentley said 50% to 60% of the clients were seriously considering ACOs, although he predicted “that was not a true proxy” and “that number will scale back.” “It’s not at all surprising the [healthcare] industry panned the idea [initially],” Mr. Bentley said. “CMS did a huge favor in changing the rules. Everything CMS has done is a boon for providers.”
According to Mr. Bentley, the final rule had several advantages over the proposed rule. In the proposed rule, an ACO would receive payments in the first 2 years if expenditures were ≥2% below a benchmark. In the third year, the ACO would have to repay a share of the losses if the expenditures were <2% below the benchmark. In the final rule, CMS said an ACO could share in the savings if expenditures were below the benchmark and would not be penalized for exceeding the expenditure targets.
There were 33 quality measures across 4 domains in the final rule compared with 65 across 5 domains in the draft rule. Providers will have more time to adjust to performance-based compensation, too. In the draft rule, they would be paid for reporting quality measures in year 1 and then would have to meet certain performance measures beginning in year 2 to get compensation. In the final rule, they will be paid for reporting the measures in the first year, but the pay-for-performance measures would be phased in gradually. Also, whereas providers would receive a stiff penalty for failing on a single measure in the draft rule, they will not receive a harsh penalty for failing on a measure in the final rule.
As part of the Shared Savings program, patients will be assigned to 1 of 4 cohorts: end-stage renal disease beneficiaries; disabled beneficiaries; aged and dual-eligible (Medicare and Medicaid) beneficiaries; and aged non–dual-eligible beneficiaries. Each cohort will be assigned a different risk score, which will be updated each year to account for any changes in the risk of the population.
In May, CMS announced a pioneer ACO program for organizations looking to create ACOs. However, according to a Kaiser Health News article in September, 4 health systems (the Mayo Clinic, Cleveland Clinic, Geisinger Health System, and Intermountain Healthcare) declined to participate, and most hospitals and health systems were not interested in the program. CMS would not reveal to Kaiser Health News how many applications it received for the pioneer program, but Mr. Bentley predicted 28 to 30 programs would be implemented. Mr. Bentley added that there will be no one-size-fits-all ACO model. Instead, organizations will have several options when considering program design. Mr. Bentley mentioned several programs designed to reduce costs and foster cooperation among providers and payers.
Blue Cross Blue Shield of Michigan, which accounts for 70% of the state’s commercial payer market, created a provider-led initiative in which groups are measured based on quality, cost, and patient experience benchmarks. Physician organizations and physician hospital organizations work together to establish patient-centered medical homes, and top performers receive increased reimbursement for reducing costs. In Ohio, Lowe’s partnered with the Cleveland Clinic, signing a 3-year contract in which employees would be encouraged to go to the clinic. As part of the deal, Lowe’s pays bundled rates for cardiac procedures and any readmissions, and designed the employee benefit to waive cost-sharing and cover travel expenses for patients who undergo cardiac surgery at the Cleveland Clinic.
According to Mr. Bentley, a patient visiting a local hospital for 3 complex cardiac procedures would cost $531,000 compared with $469,000 for a patient undergoing the same procedures at the Cleveland Clinic. Mr. Bentley said that in addition to saving Lowe’s money on readmissions, employees are provided with high-quality care. So far, the program has exceeded expectations. Lowe’s anticipated 10 employees would participate in 2010, but 23 signed up. To cut costs, some employers are also offering employees vouchers to cover their healthcare expenses, according to Mr. Bentley. For instance, Orion Corp, a 70-employee residential services firm in Minnesota, switched from a high-deductible plan after facing a 40% premium increase in 2010 to contributing $125 to $130 per month toward coverage. Employees are enrolled in a private exchange run by Bloom Health and are able to choose their own policy.
With the voucher program, Mr. Bentley said Orion has saved 10% on health insurance costs. Mr. Bentley anticipates more alterations are ahead as the industry undergoes a transformation. “There are clear market signals to change the delivery system,” he said.
