Federal Officials Release Proposed Accountable Care Organization Rules
Background on ACOs
ACOs, mandated by the federal health reform law, aim to lower costs and improve care by fostering cooperation between physicians, hospitals and other providers. The overhaul requires federal health programs to begin contracting with ACOs starting in January 2012 (California Healthline, 3/29). In addition, health care executives plan to form similar organizations through private insurance.
HHS Secretary Kathleen Sebelius said the organizations will cut costs by avoiding duplicative tests and reducing hospital readmittance rates (New York Times, 3/31).
HHS estimates that ACOs will save Medicare between $510 million and $960 million during the first three years (Goldstein, Washington Post, 3/31). Officials expect 75 to 150 ACOs to launch, caring for 1.5 million to four million of Medicare's 47 million beneficiaries (New York Times, 3/31).
Proposed ACO Regulations
According to the rules, groups of care providers can qualify as ACOs when they are able to provide primary care for at least 5,000 patients. In order to achieve savings, they also must meet 65 quality standards, which encompass five categories:
- Patients' care experience;
- Extent of care coordination;
- Patient safety;
- Emphasis on preventive health; and
- Success in treating Medicare beneficiaries who are sick and frail.
Under the rules, some ACOs will receive federal bonus payments if they meet certain benchmarks (Washington Post, 3/31). The rules also include financial penalties if organizations exceed their spending targets (Reichard/Norman, CQ HealthBeat, 3/31).
The government will allow two months for public comment before issuing the final rules (Washington Post, 3/31).
Rules Allow Antitrust Exemptions for Smaller ACOs
Health providers already have merged or formed joint ventures and alliances in anticipation of the ACO rule, prompting concern that some organizations will be big enough to run afoul of federal antitrust laws by leveraging high prices (New York Times, 3/31).
However, the Federal Trade Commission and the Department of Justice have proposed less scrutiny for ACOs accounting for less than 30% of Medicare fee-for-service business in certain areas, as well as expedited review under federal antitrust laws for organizations making 30% to 50% of the market share (Evans, Modern Healthcare, 3/31). ACOs with more than 50% of patients in a given market would require a normal antitrust review (Washington Post, 3/31).
IRS Offers More Guidance to Not-for-Profit Hospitals
On Thursday, IRS asked whether not-for-profit hospitals needed more guidance before deciding whether to form or join an ACO because of the complexities that result from partnering with private care providers.
In a notice, IRS said that not-for-profits must ensure their participation in an ACO will not lead to net earnings that benefit "insiders" in an organization. In addition, it said not-for-profits must avoid being operated for the benefit of private parties, such as other participants in the ACO (Norman, CQ HealthBeat, 3/31).
CMS Prepares for Criticisms of Rules
CMS has circulated an internal document with possible questions about the ACO rule and responses to those concerns. Some of the questions and answers posted in the document are below. The suggested answers follow the bolded questions.
- Has the rule gone beyond the scope of the reform law by imposing financial penalties on ACOs that exceed their spending targets? "No, we propose to intensify the incentive for shared savings â¦ making the policy more likely to meet the goals laid out in the law" (Reichard/Norman, CQ HealthBeat, 3/31).
- Since physicians can join ACOs without asking patients, will this lead to patients switching physicians, despite a pledge from President Obama that individuals could keep their doctors? Physicians and patients do not have to take part in ACOs. In addition, if a patient's doctor is in an ACO and the patient does not want to be part of it, the patient can continue to see the physician outside of the ACO.
- Will ACOs have incentive to make money by limiting care access? ACOs will not qualify for bonuses if they do not provide adequate care, and the organizations must maintain certain standards to be recognized as ACOs.
- Is more widespread sharing of patient data risky? Patients can refuse sharing of their health data.
- Will the requirement that at least 50% of participants use electronic health records lead to fewer rural providers and physicians in small group practices joining ACOs? This proposal aims to foster better communication and quality data reporting among all care providers, but "we welcome comments on this and other provisions of the proposed regulation."
- It seems hospitals have the most resources to pay financial penalties if ACOs overspend. Will physicians be forced to give up their practices and join hospitals? ACOs can wait until their third year before becoming subject to such penalties (Reichard, CQ HealthBeat, 3/31).
For more coverage on what the proposed ACO regulations mean for California, see today's Capitol Desk post.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.