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Medicare ACOs Add 106

 |  By John Commins  
   January 11, 2013

Providers across the nation launched 106 new Medicare Accountable Care Organizations on January 1 in the latest ramp-up of the coordinated care program. Since the program's inception in late 2011, more than 250 ACOs have been formed in almost every state, Centers for Medicare & Medicaid Services officials said Thursday.

"By CMS's estimate these total organizations are serving more than 4 million Medicare fee-for-service beneficiaries. That represents more than 10% of the overall fee-for-service program," Jonathan Blum, CMS acting principal deputy administrator and director of the Center for Medicare, told reporters in an afternoon teleconference.

"Beyond the growth we are pleased by the diversity—both geographic diversity and organizational diversity. Forty-nine states plus the District of Columbia and Puerto Rico now have one or more ACOs operating within that area. But also the organizations that are participating are large and small, physician-led and physicians partnering with hospitals," Blum said.

The formation of Cedars-Sinai Accountable Care, which is the new ACO for Cedars-Sinai in Los Angeles, is a means of preparing for implementation of the Patient Protection and Affordable Care Act, says Thomas Gordon, CEO of Cedars-Sinai Medical Delivery Network, an umbrella group of physicians' organizations associated with Cedars-Sinai Medical Center.

"When you look at healthcare reform, and the need to improve patient care and reduce the cost of care, this program was a way to do that," says Gordon, who will head up the ACO. "All the doctors and executives thought this was the right approach."

About half of all ACOs are physician-led and serve fewer than 10,000 beneficiaries. About 20% of ACOs include community health centers, rural health centers, and critical access hospitals that serve low-income and rural communities. Fifteen of the newest 106 ACOs are under the Advanced Payment Model, which provides physician-based or rural providers with greater access to upfront capital to invest in staff, electronic health record systems, or other infrastructure needed to improve care coordination. Medicare recoups advance payments through future shared savings, CMS said.

The shared-savings initiatives began in late 2011 when CMS launched the Pioneer ACO program for large provider groups able to take greater financial risk for the costs and care of their patients over time.

Dignity Health Arizona, a three-hospital system in Phoenix, was very interested in the Pioneer ACO program but found the specifications too lacking in detail, says Chief Integration and Development Officer Mark Hillard. Dignity Health Arizona spent the ensuing 15 months establishing a network of physicians to enter into an ACO structure, now launched as Arizona Care Network.

This ACO encompasses more than 1,200 physicians—300 primary care and 900 specialists—across greater Phoenix. "It took a lot of time [to create the ACO network] because the concepts of the ACA are complex and hard to explain, but these providers are very interested in protocols and taking variation out of clinical care," says Hillard, who is also CEO of Arizona Care Network.

Medicare beneficiaries using ACOs can choose doctors inside or outside of the ACO. The ACOs share with Medicare any savings generated from lowering the growth in healthcare costs, while meeting 33 quality-of-care measures that address coordination, patient safety, prevention, and specialized care for at-risk populations.

Federal officials have estimated that ACOs could generate about $940 million in savings over the next four years. However, Blum says more time is needed to assess the programs' effectiveness.

"These are programs that started just in 2012 and it's too early to talk about results. But we are very optimistic that the program will reduce overall costs, particularly the fact that we have so many more physicians coming into the program," he says.

Blum says he believes ACOs will demonstrate their worth by squeezing savings out of an inefficient healthcare delivery system. "There is clearly wide variation in healthcare spending across the country. There are clearly ways to improve care," he says.

"The opportunity that's presented by the ACO program is not to provide care in the same way at lower payment rates but to fundamentally change care, to improve the care coordination, to avoid unnecessary care, to reduce rehospitalizations, to improve post-acute care, to ensure that pharmacy benefits are aligned with traditional medical benefits."

Of the more than 250 ACOs in the shared-savings program, only eight have chosen the so-called "risk track" that provides greater earning potential if metrics and savings are met, but also leaves providers on the hook if those savings don't materialize.

In addition to the 106 new ACOs, Blum says an additional 60 ACO applications were rejected.

"By far the biggest reason for organizations not getting a contract from CMS was the statute that says that ACOs have to demonstrate they can serve a population of 5,000 beneficiaries," Blum says. 

"To demonstrate true cost savings beyond random variation there has to be a sizeable population, so Congress determined the population was 5,000 or more. We are bound to follow that."

The next application period for the shared-savings program that begins in January 2014 is summer 2013.

Also this week, HHS is crediting the PPACA with reducing the growth rate of Medicare spending. According to a new report from HHS, Medicare spending growth per beneficiary hit "historic lows," averaging 1.9% from 2010 to 2012, which is more than one percentage point lower than the average annual growth of 3.2% per capita for the Gross Domestic Product.

Projections by both the Office of the Actuary at CMS and by the Congressional Budget Office estimate that Medicare spending per beneficiary will grow at approximately the rate of growth of the economy for the next decade, breaking a decades-old pattern of spending growth outstripping economic growth, the report said.

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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