On October 20, 2011, the Centers for Medicare and Medicaid Services (CMS) issued its final rule for Accountable Care Organizations (ACO) under the Medicare Shared Savings Program enacted in 2010 as part of the Patient Protection and Affordable Care Act. The proposed rule for this program, published April 7, 2011, created a large number of comments that have led to several significant changes to the final regulations. Many of these changes are intended to encourage the provider community to participate in ACOs.
Significant changes in the final rule include the following:
- A significant area of concern for the provider community in the proposed rule was the retrospective assignment process of beneficiaries to ACOs—an ACO could not identify its assigned beneficiaries until after the end of any agreement period. In the final rule, the beneficiary assignment process has been modified to provide ACOs with information regarding assigned beneficiaries on a quarterly, rolling-year basis, with final determination of assigned beneficiaries at the end of a given agreement year. This change offers ACOs more timely information regarding potential assigned beneficiaries, although final determination remains on a retrospective basis.
- In the proposed rule, CMS required all ACOs—even those electing a one-sided risk arrangement known as Track 1—be subject to sharing both savings and losses in the third year of their initial program participation term. Under the final rule, ACOs electing a Track 1 arrangement participate in shared savings for the initial three-year term without participating in shared losses.
- In the proposed rule, primary care services for Medicare beneficiaries in a rural health clinic (RHC) or federally qualified health center (FQHC) participating in an ACO were not considered in the process of assigning beneficiaries to that ACO. The final rule considers such services within the assignment process, creating an opportunity for RHCs and FQHCs to play a greater role in an ACO and even to independently form an ACO in some circumstances. As a result, the final rule also eliminates the separate incentives within the shared savings calculation associated with including an RHC or FQHC in an ACO.
- The number of quality measures required to be reported by an ACO were reduced from 65 to 33 in the final rule. Additionally, the phase-in for adjusting shared savings and losses by performance on certain quality measures was delayed from Year Two of the initial agreement term to Year Three for seven measures and after Year Three for one measure.
- In order to prevent ACOs from being paid for shared savings for normal variances in the cost of beneficiary care from year to year, the proposed rule set a minimum savings threshold of two percent that must be achieved before savings were shared on amounts greater than that threshold. The final rule changes this methodology to allow for all savings to be shared if the two percent threshold is met.
- The proposed rule included a required 25 percent withhold of shared savings paid to an ACO in any given agreement year, to be held by CMS until the end of any three-year agreement period. The final rule eliminates this withhold provision.
- Medicare direct medical education (DME) and disproportionate share (DSH) reimbursements were included in program costs for benchmark and actual expenditure purposes in the proposed rule, but are not included in the final rule.
- In the final rule, CMS has allowed two alternative dates to begin participating in the shared savings program—April 1, 2012, and July 1, 2012. ACOs beginning on April 1 will have their first performance period be 21 months, and ACOs beginning on July 1 will have their first performance period be 18 months. ACOs wishing to begin participation after July 1, 2012, will have an opportunity to begin on January 1 of each successive year.
- The proposed requirement that 50 percent of an ACO’s primary care physicians achieve “meaningful use” of certified electronic health record (EHR) technology has been eliminated in the final rule. The EHR criteria remain a heavily weighted quality measure in the final rule to encourage adoption.
Several other regulations recently have been released from the Federal Trade Commission, U.S. Department of Justice and IRS to address issues related to ACO formation. In addition, CMS and the Office of Inspector General have issued an interim final rule for establishing waivers under the federal Stark, anti-kickback and civil monetary penalty laws for ACOs.
Health care organizations should remain aware of the development of ACOs and the Medicare shared savings program, which may result in significant changes to the provider landscape. Health care organizations should continue to ask questions such as the following:
- Is becoming an ACO in our organization’s future? If not, where should we focus to make ourselves desirable to a forming ACO when the appropriate time comes?
- How strong is the primary care physician component of our proposed ACO? (Primary care is the driver of the beneficiary assignment to an ACO, and ACOs will have difficulty succeeding without a strong primary care physician base.)
- How effective can our potential ACO be at controlling costs for organizations not in our ACO but providing services to potentially assigned beneficiaries?
- Is the benefit of shared savings distributions greater than the potential increased cost and oversight of an ACO? Each organization needs to evaluate this early in the process, as ACO formations are anticipated to require significant time and resources.
For more information on the final ACO rules, please contact your BKD advisor.