Medicare ACOs Move Closer to Commercial Model Under Final Rule

The Department of Health and Human Services is making Medicare accountable care organizations look more like commercial ACOs in effort to gain the interest of providers. A sweeping set of revisions to the final rules governing Medicare ACOs was announced by the Centers for Medicare & Medicaid Services Thursday.

Prospective assignment, advanced payment, and accelerated shared savings are among the commercial ACO features that will now be available in Medicare ACOs, explains Michael Nugent, managing director of managed care practice for Navigant Consulting. Nugent said he had already fielded calls on Thursday from providers who want to take a second look at ACOs.

Retrospective assignment as presented in April in the proposed ACO rules was a stumbling block for provider participation. Providers said they couldn't manage risk if they didn't know who their patients were. The final rules use prospective assignment, which will allow hospitals and physicians to know upfront the Medicare beneficiaries assigned to their ACO. This is the approach commercial plans have always taken.

Advanced payment will be used to help the Medicare ACOs cover capital reserves, short-term losses, and other expenses. Blue Shield of California recently provided about $20 million to 18 California hospitals, health systems, clinics and physician groups to help the health information systems that ACOs need to share clinical information.

Commercial payers use accelerated shared savings to help offset the reduced utilization experienced by providers in ACOs. Initially the Medicare program was expected  retain the early savings; under the final rules Medicare ACOs will have quicker access to their shared savings dollars.

The final regulations also reaffirm certain features of Medicare ACOs, says Sharon Siler, director of healthcare networks for Washington, D.C.-based Avalere Health.

The added good news for health plans is that the features align with many of the operational functions, and management tools and processes that health plans already have in place, such as:

• Quality assessment. The final rule reduces the proposed measures to assess quality. Instead of meeting 65 measures in five domains, the ACOs will need to meet 33 measures in four domains. Most health plans already have robust quality reporting programs in place to support the collection, aggregation and reporting of data on a real time basis.
• Health and disease management. Commercial health plans have been promoting disease management for years and already have in place successful programs that providers can use to improvement outcomes for chronic illnesses such as diabetes and heart disease.
• Data analytics. Siler termed managing financial risk as the "bread and butter" of health plans. "They have the numbers to help providers understand what is happening to their finances and why."

On the flip side, Siler says health plans need to be concerned that the new rules may weaken antitrust protections. She explains that the proposed rules issued in April 2011 required all ACOs to participate in an antitrust review as one way to ensure that an ACO wouldn't limit competition by dominating a market and having an adverse affect on reimbursement rates.

The final rules make the antitrust review voluntary. Siler says that means there will not be a way to stop providers from being so large that they shift the balance of financial power completely to their side. "Payers and employers are very worried that this will create a situation where they have no control over costs," she said.

In a statement, Karen Ignagni, president of America's Health Insurance Plans, said that the program takes important steps towards achieving greater accountability and better quality care." She added, however, that the organization remains "concerned about the trend of provider consolidation that drives up medical prices and results in additional cost-shifting to families and employers with private coverage."

"The initial regulation," Ignagni said, "created an antitrust screening mechanism that would have protected consumers with a mandatory up-front antitrust review and exclusion from the program for those ACOs facing a legal challenge.  Doing away with the mandatory review process raises concerns that provider market power may not be scrutinized sufficiently, potentially increasing health care costs for consumers and employers.

AHIP , which filed in June a 20-page comment letter on the proposed ACO regulations, declined to comment on how the final regulations address the specific concerns expressed in that letter. "We are still going through the regulations and will have additional comments in the future," explained Robert Zirkelbach, press secretary for AHIP.

While the final regulations hold promise for health plans, Siler said that as stakeholders have a chance to completely review the 626-pages of regulations they may discover that "CMS has made this an easier pill to swallow, but it's still difficult to digest."