aco final report

8/2/2019 ACO Final Report

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THE FINAL REGULATIONS ON ACOS

FOR MEDICARE SAVINGS PROGRAM:WILL IT BE A RECIPE FOR SUCCESS OR FAILURE?

RUMA GHOSH

SOWMYA PARTHASARATHY

AMINA SULTAN

JUSTIN LEE

April 4th

2012


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CONTENTS

Executive Summary .............................................................................................................................. 3

Background: What is an Accountable Care Organization? ..................................................... 4

Introduction .................................................................................................................................................. 4

Eligibility .................................................................................................................................................. 5

Key Principle Underlying ACO Formation ..................................................................................................... 5

Design Structure............................................................................................................................................ 6

Shared Savings and Losses ................................................................................................................. 7

Shared Savings and Losses model ................................................................................................................. 7Calculating the Benchmark ........................................................................................................................... 8

Establishing the minimum saving rate .......................................................................................................... 8

Sharing or Loss Rate ...................................................................................................................................... 9

Quality and Reporting ......................................................................................................................... 9

Quality Measures ........................................................................................................................................ 10

Requirements for data submission .........................................................................................................1110

Quality performance Standards .................................................................................................................. 11

Beneficiary Assignment & Protection .......................................................................................... 13

Beneficiary and Physician assignment ........................................................................................................ 13

Beneficiary Protection ................................................................................................................................ 15

Final Thoughts on ACOS ................................................................................................................... 16

References ............................................................................................................................................. 18

Appendix ................................................................................................................................................ 19


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EXECUTIVE SUMMARY

An Accountable Care Organization (ACO) is an organization that includes physicians, hospitals,

health clinics, managed care organizations and other healthcare service providers within a legal

structure that enables them to manage patient care across healthcare delivery settings in a

coordinated and comprehensive manner to facilitate improved quality outcomes, cost

effectiveness and overall patient satisfaction. The final regulations on the Accountable Care

Organization4 for the Medicare Shared Savings Program were released on October 20, 2011 and

were published in the federal Register on Nov 2nd 2011. The new regulations include many

improvements over the Proposed Regulations7 that was released in March 2011. The Centers for

Medicare & Medicaid Services (CMS) received over 1,300 comments on the Proposed

Regulations from various groups and individuals and has incorporated them to ensure that ACOs

can be viable entities. This report provides a detailed breakdown, impact and provisions of the

189 page final rules and regulation on the implementation of ACOs as written in the AffordableCare Act.

The Accountable Care Organization for the Medicare Shared Savings Program will be based on

Medicare fee-for-service (FFS) payment structure, as well as shared savings or losses. During the

first year of the 3-yr agreement period, ACOs will have the option to enroll in the One-Sided

model, which will not hold them accountable for losses. However, in subsequent years, ACOs

will be mandated to transition into the Two-Sided model, holding them accountable for losses as

well as savings. The maximum sharing rate for the Two-Sided model will be up to 60%

depending on the savings generated and quality performance score.

CMS has established 33 measures across 4 quality domains (patient/caregiver experience, care

coordination/patient safety, preventive health, and at-risk population) for evaluating ACOs

performance during the first year of the shared savings program. ACOs must achieve the

minimum attainment level on at least 70 percent of the measures in each domain in order to

continue in the program. Even though participation in the Electronic Health Records (EHR) is no

longer required, it remains as one of the stronger quality measures. ACOs failing to completely

and accurately report the EHR measure would miss the 70 percent cut-off for the Care

Coordination domain, since this measure is double-weighted for both scoring purposes and for

purposes of determining poor performance.

CMS will use survey measures, claims & administrative measures and GPRO web interface as

means of ACO quality data reporting. In addition to that, beneficiary protection will be provided

through patient engagement and transparency. A beneficiary will be aligned with the ACO from

which he or she received the largest amount of primary care services in the past three years.

However, unlike in HMOs, beneficiaries will be given a free choice to choose/change medicalservice providers. CMS will have the power to terminate an ACO from participation if it results

in questionable performance or excessive expenditures.


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BACKGROUND: WHAT IS AN ACCOUNTABLE CARE ORGANIZATION?

The U.S. health care system faces unprecedented challenges such as rising costs that threaten the

affordability of care, and a widening gap between the promise of biomedicine and the reality of

care that is often impersonal, inaccessible, unsafe, unreliable, and poorly coordinated. This

creates the impetus for change in the healthcare system and drives for the creation of

accountable care organizations in the US.

ACOs haveACOs have emerged over the last few years as a way of promoting integration while

avoiding some of the perceived problems within the health care network. The concept evolved

with the observation that physicians who were tied to a particular hospital functioned better, and

that their patients tended to stay within the network for most of their care. This observation

suggested that groups consisting of one or more hospitals and doctors could be brought together

in organized systems. Public and private payers could then hold these systems accountable by

assessing whether they provided high-quality care to their patients and did not frivolously spend

their resources. Organizations that take steps to improve their performance could be financially

incentivized to be part of the ACO structure.

INTRODUCTION

An ACO is an organized group of physicians, hospitals, payers, labs, and pharmacies that

provides coordinated care to patients, while being accountable for patient outcomes. At one end

of the spectrum an ACO could be a corporate entity (everyone on the same payroll) that formally

enrolls patients under a full-risk, capitation arrangement. And on the other end of the spectrum,

an ACO can be a collaboration of providers with no legal ties who serve patients ascribed to

them via evidence based medicine. They share limited savings while being paid fee-for-service.

Thus an ACO is a highly elastic concept, and is often referred to as a high-performing system of

care.

The concept and formation of ACOs dates back many decades but the modern ACO was born

out of a 2006 conversation between health Care leader Elliot Fisher and the MedPAC

commissioners. MedPAC was exploring fresh ways to control Medicare Costs. This paved thepathway for ACOs. The ACO idea caught on and led to a wave of published papers and

legislative proposals. Baylor Health Care System, a network of 27 hospitals and health facilities Comment [p1]: Who is Baylor health system


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in Dallas-Fort Worth,announced in 2009 that it will transform itself into an ACO by 2015.Similarly Robert Wood Johnson Foundation is sponsoring an ACO pilot in New Jersey. Thus

ACO pilots found their way into both the House and Senate reform bills.

The health care reform legislation enacted in March 2010 authorizes the Medicare program to

contract with Accountable Care Organizations (ACOs). Guidelines on how a network of

physicians and other providers should work together forms the crux of the final regulation

published by CMS on Nov 2nd 2011. ACOs are required to improve the quality of health care

services and reduce costs for a defined Medicare patient population.

ELIGIBILITY

KEY PRINCIPLE UNDERLYING ACO FORMATION

Achieving Better Health at Lower Costs The core requirement for accountable care

organization is to align payments, benefits, and other health care policies. Their goal will be to

establish measurable and meaningful progress in improving health care while lowering costs.

Exhibit 1 illustrates how accountable care addresses the underlying causes of a poorly

coordinated health care delivery system3.

Exhibit 1:Key Requirements/ Principles of Accountable Care

ACO eligibility will require ACO participants to have at least 75 percent control of the ACO,with at least one Medicare beneficiary with no conflict of interest on the governing board. A

minimum of 5,000 beneficiaries will be required to form an ACO.


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DESIGN STRUCTURE

Additional Requirements for ACOs design structure include:

Local Accountability: ACOs must aim to be accountable to their patients and the community

they serve by improving patient health and overall care while reducing costs.

Legal Structure: ACOs must have a formal legal structure with a governing board responsible

for measuring and improving performance.

Primary Care Focus: ACOs must be established on a strong foundation of primary care to

impact care at the patient level. The patient population for which an ACO is accountable must be

selected based on patients use of outpatient evaluation and management services, with primary

care given the highest priority.

Sufficient Size in Patient Populations: ACOs must have a sufficient number of patients

(minimum of 5,000) to ensure that quality and cost impacts at the patient level can be reliably

benchmarked and evaluated.

Investment in Delivery System Improvements: ACOs must implement meaningful and

identifiable reforms in care delivery, patient engagement, and other aspects of health care that

will credibly improve health and costs.

Shared Savings: ACOs must offer a realistic and achievable opportunity for providers to share

in the savings created from delivering higher-value care. The incentive system must reward

providers for delivering efficient care as opposed to the current volume-driven system.

Performance Measurement: ACOs must participate in ongoing performance measurement that

provides meaningful evidence of health and cost impacts. Results must be transparent and

accessible by patients.

With greater experience and further technical progress, ACO care improvements are expected to

become more sophisticated. Examples include electronic health records, comprehensive care

improvement activities, better performance measures (such as meaningful outcome measures,

including patient experience measures) and other incentives that rely more on performance thanon volume.


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SHARED SAVINGS AND LOSSES

In order to shed light on how the ACOs will be compensated, we have to understand the shared

savings and losses model.

SHARED SAVINGS AND LOSSES MODEL

Under this payment model, ACO participants will receive fee-for-service (FFS) payments under

Medicare part A and B in the same way as they did before. However, they will also be entitled to

receive payments as shared Medicare savings if they meet the established quality standards and

achieve savings beyond the benchmark ACOs will also have the option to choose between two

tracks to pursue during the initial agreement period of 3 years:

1. Track one will be the shared savings only model,2. Track two will be the shared savings and losses model.

Eventually all ACOs will be mandated to transition to track two, also known as the two-sided

model. The reason for this is that as ACOs gain experience, they are expected to take on greater

risk and be more accountable for their performance. Both tracks will require the same eligibility

criteria. Important differences between the two tracks are highlighted below and can also be

referred to in the appendix (Table 5):

Track one (Shared savings only model / One-sided model): ACOs will not be responsible for

losses above the benchmark for the first agreement period. Minimum Savings Rate (MSR) will

vary from 2% - 3.9% above the benchmark, after which a maximum sharing rate of up to 50%

can be enjoyed by ACOs. MSR will depend on the number of assigned beneficiaries and the

sharing rate will depend on the quality score. After exceeding the MSR, the shared savings will

be on first dollar basis, with the performance payment limit of 10% of benchmark.

Track two (Shared savings and losses model / Two-sided model): ACOs will be able to share in

savings or losses above the 2% MSR or MLR (minimum loss rate) on the benchmark. Maximum

sharing and loss rate will be up to 60%, depending on the quality score. The shared savings will

be on first dollar basis, with the performance payment limit of 15% of benchmark.

In order to understand how the Shared Savings and Loss Model will work, it is important to

answer the following three questions.

Comment [p2]: Can you include the ryour table in the a ppendix


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1. How will the benchmark be calculated and updated?2. How will the Minimum Savings Rate be determined?3. How will the sharing or loss rate be calculated?

CALCULATING THE BENCHMARK

The Historical Expenditure Model will be used to calculate the benchmark. Under this model,

ACOs previous three years of expenditures for the assigned patient population are trended

forward (to current year dollar), using the national growth rate in Medicare Part A and B. The

most recent year will be weighted at 60%, second yr at 30%, and the first yr at 10% in the

calculation. In addition to that, beneficiaries will be categorized for benchmark expenditures

depending on where they fall into the following four categories: aged dual eligible (Medicare &

Medicaid), aged non-dual eligible, disabled, and ESRD (end stage renal disease). A Risk-

adjustment model (CMS-HCC model) will be used to adjust expenditures for beneficiary

characteristics such as demographic and health status. For instance, each beneficiarys HCC

score (hierarchical condition category score) and demographic score will be divided by the

normalization factor for current FFS payment to risk-adjust for assigned beneficiaries. A cap of

$100,000/yr will applied to each beneficiary for Medicare parts A& B claims. ACOs

expenditures will be compared to the calculated benchmark to determine if they are eligible for

shared savings or losses. The benchmarks will be updated at the start of each agreement period

using the national growth rate and beneficiary risk-adjustment model for new beneficiaries.

ESTABLISHING THE MINIMUM SAVING RATE

The MSR establishes the borderline savings that an ACO must achieve beyond the benchmark in

order to be eligible for shared savings. The reason for an MSR is to provide assurance that

savings are not a result of random variations in beneficiaries claims from YOY, but a result of

actual performance improvement.

For the one sided model, the MSR will be based on statistics, taking into account the number of

Medicare beneficiaries assigned to an ACO and a sliding scale confidence interval (CI). For

instance, the CI will range from 90% to 99% as the number of beneficiaries increase from 5,000to 50,000. This methodology will result in lower MSR for large practices because it is believed

that they will have greater experience, processes, and ability to achieve savings beyond normal


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variations whereas small practices may not be as efficient. The MSR will thus range from 2% to

3.9% for the one-sided model in order to assure that savings are a result of quality performance,

not random fluctuations. However, the two sided model will have a flat 2% MSR, the lowest

MSR in the one sided model, in order to encourage participation in this model and also because

there is greater risk involved (accountability for losses in the two-sided model).The minimum

savings rate, in combination with the quality sharing rate will determine the amount of shared

savings that an ACO can receive.

SHARING OR LOSS RATE

The ACOs whose savings exceed the MSR in the one-sided model will enjoy a maximum

savings sharing rate of up to 50% on a first dollar bases with the payment cap of 10% of

benchmark. Shares of savings will depend on the quality score: For instance, if an ACO receives

$200,000 in savings above MSR, and receives a quality score of 100%, it would receive

maximum savings of $1,000,000 ($200,000*100%*50%). On the other hand, if the quality score

was 50%, the savings would be 50,000 ($200,000 *50%*50%).

The ACOs under the two sided model will qualify for a maximum sharing rate of 60% with the

payment cap of 15% of the ACOs benchmark expenditure. The sharing will be on first dollar

basis after MSR is met just like in the one-sided model. Since the two-sided model is also

exposed to the risk of loss, there is also a loss rate determined for this model. The minimum loss

rate (MLR) will be set at 2% just like the MSR to protect against random variations. Once the

MLR is exceeded, shared loss rate will be 1-final sharing rate (based on quality score), applied to

first dollar losses. The maximum loss rate will be set at 60% just like the maximum sharing rate

for this model.

QUALITY AND REPORTING

For the shared savings and losses to be implemented and measured three of the five CMS rules2

with regards to quality and reporting have been discussed below-

Measures to assess quality care provided by ACOs Requirements for data submission by ACO Quality performance standards


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ACOs performance will be measured over a period of 3 years. Quality performance standard at

the reporting level for the first year of the Shared Savings Program has been established and

quality measures for the remaining 2 years of the 3-year agreement would be proposed in future

rulemaking. The Final Regulations provide for multiple start dates in 2012. ACOs that are

accepted by CMS will be permitted to start on either April 1 or July 1 of 2012, or on January 1,

2013. Performance periods for 2012 are extended from 12 months to 21 months and 18 months,

respectively. The agreement periods in both cases will cease at the end of 2015.

For example, an ACO accepted into the program with a start date of July 1, 2012 will benefit

from an initial performance period of 18 months, ending on December 31, 2013 whereas an

ACO with a start date of January 1, 2013 will only have an initial performance period of 12

months. An ACO that starts July 1, 2012 will benefit from the longer performance period

because it is eligible for an optional interim payment based on the first 12 months of operations.

QUALITY MEASURES

Initially, sixty-five quality measures were proposed by CMS to assess the care provided by

ACOs (Appendix, Table 1). The proposed 65 measures spanned the following five quality

domains:

1. Patient/caregiver experience of care2. Care coordination (including transitions of care and Health Information Technology)3. Patient safety4. Preventive health5. At-risk population/frail elderly health : (including Diabetes, Heart Failure, Coronary

Artery Disease, Hypertension, & Chronic Obstructive Pulmonary Disease)

The quality measures in the final regulation have been reduced to 33 across 4 domains

(patient/caregiver experience, care coordination/patient safety, preventive health, and at-risk

population) by grouping patient safety with care coordination and elimination of measures

perceived as redundant, operationally complex, and burdensome. The new measures focus on

areas of high prevalence and high cost in the Medicare population. A list of the new measures

can be found in Table 2 in the appendix.

Comment [A3]: July 1st is 21 months


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REQUIREMENTS FOR DATA SUBMISSION

CMS plans to use the following methods for ACO quality data reporting:

Survey-based measures Claims and Administrative Data-based measures, and GPRO (Group Practice Reporting Option) Web Interface

Consumer Assessment of Health Providers and Systems (CAHPS) survey-based measures data

would reflect care received during the first performance period. Scoring on the patient

experience of care survey would become part of the assessment of the ACOs quality

performance. CMS would derive the claims-based measures from claims submitted for services

during the first performance period, which therefore would not require any additional reporting

on the part of ACO professionals. During the year following the first performance period, each

ACO would be required to report via the GPRO web interface all applicable proposed quality

measures with respect to services provided during the performance period. ACOs will have a 12-

month, calendar year reporting period, regardless of ACOs start date.

Electronic Health Record (EHR) participation is no longer a condition of participation but

remains one of the quality measures. The EHR measure will be double weighted in quality

measuring and scoring. As providers gain more experience with EHR technology, certified EHR

technology will be an additional reporting mechanism used by ACOs under the Shared Savings

Program. Health Information Technology is thus perceived to play an important role in the

future.

QUALITY PERFORMANCE STANDARDS

Key highlights of Quality Performance standards are:

ACOs that do not meet the Quality Performance Standard (reporting, accuracy andperformance) will not be eligible for shared savings.

For Year 1 of an ACO contract, an ACO will be considered to meet the ACO QualityPerformance Standard if it has reported completely and accurately on all quality

measures, which will be followed by an audit.

For Years 2 and 3, an ACO will also be required to achieve performance minimums.


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CMS also expects that at a minimum, at least 50% of an ACOs primary care physiciansmust attain Stage 1 HITECH5 (Adoption of Health Information technology) meaningful

use requirement

CMS is considering two alternative options for establishing quality performance standards for

the measures: Performance Score approach and the Threshold approach

1. Performance score approach-Rewards for better performance. The performance scoreapproach would reward ACOs for better quality with larger percentages of shared

savings.

2. Threshold approach- Minimum quality threshold for shared savings. This would ensureACOs exceed minimum standards for the quality of care before allowing for full shared

savings.

Quality performance standards would be used to arrive at a total performance score for an ACO

on each of the 33 measures. For each measure, a performance benchmark and a minimum

attainment level is set as defined in Table 3 in the appendix. Each of the 4 measure domains

(patient/caregiver experience, care coordination/patient safety, preventive health, and at-risk

population) will be weighted equally at 25 percent for purposes of determining an ACOs overall

quality performance score. Equal weight to the domains signals equal importance for each of

these areas and will encourage ACOs to focus on all domains in order to maximize their sharing

rate. The total points earned for measures in each domain would be summed up and divided by

the total points available for that domain. The resulting percentage will then be applied to the

maximum sharing rate under either the one-sided or two-sided model to determine the ACOs

final sharing rate for purposes of determining its share. This approach also means that an ACO

could fail one or more individual measures in each domain measure and still earn shared savings.

ACOs must achieve the minimum attainment level on at least 70 percent of the measures in each

domain in order to continue in the program.

ACOs failing to achieve the minimum attainment level on at least 70 percent of the measures in

each domain could result in:

Receiving a warning from CMS

Ineligibility for shared savings and


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Termination from ACO participation if underperformance continued for the 3 yragreement

ACOs failing to completely and accurately report the EHR measure would miss the 70 percent

cut-off for the Care Coordination domain, since this measure is double-weighted for both scoring

purposes and for purposes of determining poor performance. ACOs failing to report one or more

measures will be sent a written request to submit the required data by a specified date and to

provide reasonable explanation for its delay in reporting the required information. If an ACO

fails to report by the requested deadline or does not provide a reasonable explanation for delayed

reporting, the ACO will be terminated for failing to report quality measures. ACOs that exhibit a

pattern of inaccurate or incomplete reporting or fail to make timely corrections following notice

to resubmit may be terminated from the program. An ACO that has been terminated from the

program will be disqualified from sharing in savings.

BENEFICIARY ASSIGNMENT & PROTECTION

In addition to identifying quality measures, CMS has also provided regulations on patient

assignment and protection.

BENEFICIARY AND PHYSICIAN ASSIGNMENT

The final regulation states that beneficiary assignment to an ACO is only for the purposes of

determining the population of Medicare FFS beneficiaries for whose care the ACO is

accountable for, and for determining whether an ACO has achieved savings. It does not in any

way diminish or restrict the rights of beneficiaries assigned to an ACO to exercise free choice in

determining where to receive health care services.

The beneficiaries aligned with a Pioneer ACO will be determined on the basis of their 3-year

historical utilization prior to the start of the performance year. For instance, a beneficiary will be

aligned with a Pioneer ACO if he or she received the largest amount of primary care services

from physicians affiliated with that ACO compared to services received from physicians

affiliated with any other ACO or non-ACO-affiliated providers. However, beneficiaries assigned

to ACOs under the Shared Savings Program will retain their rights to seek and receive services

from other physicians/medical practitioners of their choice at their will, unlike the HMOs. There

will also not be any exclusions or restrictions based on health conditions or similar factors.


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The physicians and other practitioners affiliated with an ACO will be identified based on their:

Taxpayer Identification Numbers (TINs) CMS Certification Number (CCNs) Individual National Provider Identifiers (NPIs)A primary care physician or practitioner will be allowed to affiliate with only one Pioneer ACO,

but specialists will be allowed to be affiliated with more than one ACO.

The claims data that will be used to perform beneficiary alignment will include professional

claims for qualifying Evaluation and Management (E&M) services, and claims for services

provided by Federal Qualified Health Centers (FQHCs), Rural Health Centers (RHCs), and

Critical Access Hospitals. The calculations will make use of claims for qualifying services that

are provided during any alignment year in which the beneficiary is alignment-eligible. If a

beneficiary was not alignment-eligible for one or more months during the alignment year, none

of thebeneficiarys claims for qualifying E&M services provided during that alignment year will

be used in the calculations.

Under the proposal, CMS would need data that identify the precise services rendered, type of

practitioner providing the service, and the physician specialty in order to be able to assign

beneficiaries to the entities that wish to participate in the Shared Savings Program.

Operationally, the assignment involves following these steps:

1. Identifying (A) all combinations of TINs and NPIs that are submitted by providersaffiliated with each ACO; (B) all CCNs that are submitted by FQHCs and RHCs

affiliated with each ACO; and (C) all CCNs and NPIs that are submitted by Critical

Access Hospital affiliated with each ACO.

Only those claims that are associated with the specific TIN/NPI combination, CCN, or

CCN/NPI combination will be attributed to the ACO for purposes of beneficiary

alignment.

2. Identifying all Part B physician/supplier claims for qualifying E&M services providedduring the three-year alignment period.

3. Identifying all Part B facility claims for qualifying E&M services provided by FQHCs,RHCs, and CAH providers during the three-year alignment period.


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4. Identifying all Medicare beneficiaries with a qualifying E&M services from step 2 & 3.5. For each beneficiary, calculating (A) the total allowed charge for qualifying E&M

services provided by primary care physicians; (B) the total allowed charge for

qualifying E&M services provided by specialists; and (C) the sum of A & B.

If a beneficiary with A is 10% or more of C, align each beneficiary with a provider

using allowed charges for qualifying E&M services from primary care providers. On the

other hand, if a beneficiary with A is less than 10% of C, align each beneficiary with a

provider using allowed charges for qualifying E&M services from specialist providers.

BENEFICIARY PROTECTION

One important aspect of patient centeredness is patient engagement and transparency. The ACOs

under the Shared Savings Program will ensure this through: beneficiary notification, monitoring,

and strict enforcement.

Beneficiary Notification:

CMS requires ACO participants to post signs in their facilities indicating their ACOproviders/suppliers in the Shared Savings Program and to make available this

standardized written information for their Medicare FFS beneficiaries. The beneficiaries

should also be made aware of the potential for CMS to share beneficiary identifiable data

with the ACO.

If an ACO participant does not renew its agreement at the end of agreement period or theagreement has been terminated, ACOs are required to provide their beneficiaries with

advance notice of the change, including the date of termination.

The final regulation does not mandate ACOs to provide information to beneficiaries about the

Shared Savings. However, the educational materials and other forms of outreach are encouraged

to provide beneficiaries with timely, accurate, clear, and understandable information about the

Shared Savings Program.

Monitoring and Oversight:

CMS will Site Visit to ensure compliance Review and approve all ACO marketing materials. Review annual and quarterly reports, as well as specific financial and quality data.


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Assess and follow up investigation of beneficiary and provider complaints. Audit, such as for analysis of claims, chart reviews, beneficiary surveys, coding etc.Enforcement:

The proposed rule also specifies that CMS may, at its discretion, terminate an ACO from

participation in the Shared Savings Program for questionable performance and/or excessive care

expenditure. It may also impose lesser ACO sanctions, such as warning notices, requirements for

corrective action plans, or placement of the ACO on a special monitoring plan.

SUMMARY

The final rules have lowered the threshold on ACO measurements and have provided additional

guidelines and reporting procedures. Given below is a list of changes provided in the final rules

and regulations-

1. A minimum of 5,000 patients2. Fee for service continues3. Refinement of the two models to choose from4. Reduction in the number of quality measures to 335. Application procedures and Disclosure requirements6. Multiple Start Dates7. Electronic Health Records not a requirement for participation yet double weighted for

scoring

8. Termination ProceduresFINAL THOUGHTS ON ACOS

Although the formation of ACOs seems like a good idea and CMS seems to have answered many

questions on how the ACO model will work, there are still a few issues that will need to be

addressed or monitored.

1. Since the ACOs are partly rewarded on cost effectiveness, they may try to generatesavings by placing limitations on necessary care, which will hurt the beneficiaries.


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2. The historical expenditure model may incentivize ACOs to avoid specific riskybeneficiaries after their benchmark expenditure is set so that their average expenditures

will seem less, and qualify them for savings.

3. CMS will have to watch for Upcoding, where ACOs may fraudulently change theirpatient coding to obtain higher risk adjustment for their beneficiaries.

4. CMS will have to audit ACOs at regular intervals to ensure that ACOs are in compliancewith quality standards and not just cutting down costs.

5. The reduced risk to ACOs under Track 1 will make it easier for providers to get togetherand shield themselves from incurring huge losses in the early phase of implementation.

However, this puts CMS at more risk.

6. The four areas of focus are patient experience/customer satisfaction, patient safety,coordination/integration of care, and case management for special needs. However,

whether the ACOs will be able to meet the patient demands remains to be seen.

7. With budget deficit and spending cuts, it is not clear how CMS will support this program.8. The ACO approach builds reform efforts that focus on specific groups of providers, such

as the medical home model, or on a discrete episode of care, such as bundled payments.

On their own, these other initiatives may help strengthen primary care and improve care

coordination, but they do not address the problem of supply-driven cost growth. A

comparison of these payment reform models is provided in Appendix 1.

CMS has provided a refined ACO concept for large players who are capable of putting a system

together by spending millions of dollars. CMS has estimated that an average ACO will recoup its

expenses by a ratio of 2.9 that is if an ACO spends $3 million to become established then it will

earn $ 5.7 million in profits. (2.9 times $3 million is $8.7 million and $8.7 million minus $3

million is $5.7 million). This does not include profits that ACOs may derive from private

insurance incentive programs. In addition CMS estimates that it will cost approximately

$600,000 for an ACO to be formed, with $1.3 million a year additional administrative and

upkeep expenses.6

There will be future guidelines from CMS on ACO formation, but the revisions from the

Proposed Regulations to the Final Regulations make it clear that the large players will be able toimplement it. It remains to be seen how the remaining healthcare network adopts the concept of

ACOs.


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REFERENCES

1. Title Image,www.excenda.com2. http://report.heritage.org/bg26473. Engelberg Center for Healthcare Reform, The Dartmouth Institute, ACO Tool Kit

January 2011

4. Final Regulation, Federal Register/ Vol. 76, No. 212 / Wednesday, November 2, 2011/ Rules and Regulations

5. HITECH-The Health Information Technology for Economic and Clinical Health Actamends Title XXX of the Public Health Service Act by adding a number of funding

opportunities to advance health.

6. Section IV.C. of the Preamble to the Final Regulations.7. http://www.gpo.gov/fdsys/pkg/FR-2011-04-07/pdf/2011-7880.pdf76 Fed. Reg. 19528
http://www.excenda.com/http://www.excenda.com/http://www.excenda.com/http://www.gpo.gov/fdsys/pkg/FR-2011-04-07/pdf/2011-7880.pdfhttp://www.gpo.gov/fdsys/pkg/FR-2011-04-07/pdf/2011-7880.pdfhttp://www.excenda.com/


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APPENDIX


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aco final report

Documents