2 ACO Experts, 2 Viewpoints, Too Much to Know

If you feel as though just about every week or so something new comes out involving accountable care organizations, you’re not mistaken. The Centers for Medicare & Medicaid Services recently announced two initiatives related to the ACO model: The ACO Pioneer Program and the Advanced Payment Initiative. So, what do these two programs mean for hospitals and health systems? Well that depends on your thoughts on ACOs, and more than a few experts, including the two I spoke with, disagree.

The ACO Pioneer Program: Launching in fall 2011, the ACO Pioneer Program allows 30 organizations, or “Pioneers,” to more rapidly move from a shared savings payment model to a population-based payment model “on a track consistent with, but separate from, the Medicare Shared Savings Program,” according to the CMS Center for Medicare & Medicaid Innovation.

• work in coordination with private payers by aligning provider incentives
• achieve cost savings for Medicare, employers and patients

For the first two years of the Pioneer program, the payment models being tested are a shared savings payment policy with generally higher levels of shared savings and risk than those currently proposed in the Medicare Shared Savings Program. In the third year of the program, participating ACOs showing specified levels of savings over the first two years will be eligible to move a substantial portion of their payments to a population-based model. 

Advanced Payment Initiative: Also launching in the autumn, the Advanced Payment Initiative offers organizations the opportunity to receive financial assistance to set up an ACO. “Under the proposed initiative, eligible organizations could receive an advance on the shared savings they are expected to earn as a monthly payment for each aligned Medicare beneficiary. ACOs would need to provide a plan for using these funds to build care coordination capabilities, and meet other organizational criteria. [These] advance payments would be recouped through the ACOs’ earned shared savings,” according to the CMS’ Center for Innovation website.

What does all this really mean for your hospital or health system? Should healthcare leaders revisit the idea of establishing a Medicare ACO program?

Scratch that, No.

If you’re not sure, take comfort in the knowledge that even experts don’t quite agree on what these programs will and will not do for hospitals or health systems.

“It’s a step in the right direction because the innovation office is signaling flexibility around individual terms and conditions, and spending more time concentrating on the readiness of the afflicted organizations for the task at hand,” says Mark Lutes, senior member of the Washington, DC office of Epstein Becker and Green, P.C.

On the other hand, Nathan Kaufman, strategic director and founder of the San Diego-based Kaufman Strategic Advisors disagrees. “I don’t think these are helpful at all. The fundamental business fallacies that are baked into the [original] ACO regulations are still in the Pioneer regulations,” he says.

As with many new healthcare programs there are pluses and minuses for healthcare leaders to consider. A few positives of the pioneer program include, according to Lutes:

• The Application: Unlike the application to participate as a Medicare ACO, the Pioneer program application is more free-form. Applicants are being asked to make their case to participate in the program through a narrative.
• Acceptance Criteria: The narrative portion allows CMS to accept providers into the program without using rigidly defined criteria, such as it uses with the Medicare ACO program. “It’s evident with this program that they heard the comments of the industry and they are trying to address some of them through this proposal,” says Lutes.
• Larger Portion of Shared Savings: In this model CMS is willing to share a larger percentage of the savings--approximately double what’s available in the Medicare Shared Savings program.

A few drawbacks of the program, according to Kaufman:

• The Patient: The Pioneer Program doesn’t offer providers the ability to penalize the patient for going out of network for treatment. Nor does it allow providers to know which patients they are treating are participating in the program.
• Capital Investment: The amount of capital that needs to be invested in the infrastructure to set up an ACO is still high, which means most providers who want to participate in an ACO would need to affiliate with a hospital. “Most physicians can’t come up with the [approximately] $2 million they’d need on their own. All the Pioneer Program does is provide medical groups with a slighter easier way to buy in to a flawed business model,” says Kaufman.
• Shared Saving Cap: There is a shared savings cap of 15% for the providers who participate in this program.

If you’re still not sure if the Medicare ACO or the ACO Pioneer Program sound like opportunities you’d like to pursue at your organization, the CMS is dangling one more carrot to encourage participation through the Advanced Payment Initiative.

“I think going to be helpful, and it’s important [to offer financial aid] but it doesn’t go far enough … there needs to be a loan authority,” says Lutes.

With 93% of American Medical Group Association members recently responding in a survey that they would not be participating in the Medicare ACO program, Kaufman says he views this initiative as an attempt by the government to spark interest and quell their own embarrassment.

“If they weren’t going to get participants, then they needed seed money to try to make it easier to get started,” he says.

So, how do the ACO Pioneer Program and the Advanced Payment Initiative affect your organization? Well, if you were about to launch an ACO, then you may want to take advantage of these two new programs. However, if you have yet to make a decision about starting an ACO, then you may want to attend Beyond Medicare Shared Savings: Effective ACO & Clinical Integration Strategies. This June 7 webcast, featuring Lutes and Kaufman, will describe in greater detail the commercial and Medicare alternatives for your organization’s ACO strategy.

With all there is to know about ACOs—and with all that continues to come out about on it—healthcare leaders must understand not only how new programs and demonstrations will affect their organization, but they must also know a variety of alternative pathways that can be taken to ensure a steady financial and clinical position in the years to come. 

Leaders Respond to CMS' Proposed ACO Regulations
The Bridge to Accountable Care Organizations
The Leap to Accountable Care Organizations