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CMS Releases ACO Final Rule

October 20, 2011
by Mark Hagland
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Agency makes dramatic changes to encourage providers to participate

Responding to tremendous provider reaction to the preliminary rule on accountable care organizations (ACOs) released on March 31, the Centers for Medicare and Medicaid Services (CMS) released its final rule for the ACO shared-savings program on Oct. 20, making dramatic changes to the rules for participation under the program.

After March 31, leaders of patient care organizations nationwide had complained loudly regarding several key issues, including the risk models involved in the program; the problem around patient assignment; and some issues surrounding the number and scope of quality outcomes measures involved. In response, when the top officials of CMS unveiled the final rule on Oct. 20, they noted upfront that they had made numerous concessions to providers’ concerns, responding to providers’ 1,300-plus comments with major changes.

In a telephonic press conference, CMS administrator Donald Berwick, M.D., Richard Gilfillan, M.D., director of the new Center for Medicare and Medicaid Innovation (“CMI,” or “Innovation Center”), and Jonathan Blum, M.D., deputy administrator and director at CMS, explained to the media the final rule.

“What does this mean for healthcare? ACOs can represent a major step forward in transforming Medicare, Medicaid, and the children’s health insurance programs, through high-quality care,” Berwick said at the press conference. “ACOs can be a step forward for the whole healthcare system.” Fully coordinated care “has not been the kind of care that Medicare has rewarded under fee-for-service,” Berwick added. “An ACO is intended to be a way to organize care that is great, that is coordinated, that makes sense for patients every time and all the time.”

Among the key changes CMS has made to the final rule, based on provider input regarding the proposed rule:

  • CMS has retained a two-payment model program, but the agency has eliminated a potential penalty in the final year of three years under the so-called “one-sided risk model”; the other model, the “two-sided risk model,” still requires ACOs to accept risk for all three years (but also offers a greater potential financial reward). This means that providers entering the one-sided risk model will not have to risk paying Medicare back for potential losses in year three of their participation.
  • The final rule has reduced the number of quality measures to be collected to 33 measures across four domains, from the 65 measures across five domains originally proposed.
  • Patients will now be assigned prospectively to accountable care groups. Under the proposed rule, patients would have been assigned retrospectively, potentially causing significant problems around identification and accountability for the care of those patients.
  • CMS has also created a complementary program to test its Advance Payment ACO Model, which will provide additional support to physician-owned and rural providers participating in the shared-savings program, through upfront funding to be provided in the form of loans that CMS will eventually recoup from those providers. The amount of monies being made available will be up to $170 million.
  • The final rule provides a more flexible starting date in 2012.

Also, significantly, the original requirement that half of the primary care physicians participating in an ACO be live on electronic health records by the second year of an ACO’s participation in the program, will now instead be included as the most highly weighted quality measure under the program.

Michael Millenson, president of Health Quality Advisors, LLC, told Kaiser Health News that the proposed rule’s requirements “were too complicated, the money wasn’t very good, and the cost to enter the game was way too high. What they’ve done in the final rule is they’ve simplified the rules, they’ve sweetened the pot, and they’ve opened up a few new chairs.”

Federal regulators estimate that between 50 and 270 ACOs might be formed in the next three years, affecting the care of 2 million of Medicare’s 47 million beneficiaries.

Healthcare Informatics will continue to provide updates and information on this story as it unfolds.

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