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June 2011

ACOs – “Just Say No”?

The Centers for Medicaid and Medicaid Services’ (CMS’) deadline for comments on the Accountable Care Organization (ACO) rules closed on June 6, and since then, there have been many dynamic discussions on the topic. From the many opinions, publications, and presentations we have read and heard, the majority opinion seems to be that ACOs are definitely not for everyone; in fact, they may be only for a very small percentage of providers.

Our summary of notable comments:

1. According to Pillsbury health law practice attorneys David Main and Linda Kotis, 17 major health systems have significant concerns with the draft rules. In fact two health systems that were “inspirations” for the ACO model, Geisinger and Intermountain Health Care have said they do not plan on developing ACOs. What are main concerns of these health systems? First, they believe beneficiaries should be assigned to ACOs prospectively so that providers can know up front the patient population they will be caring for. Second, they are concerned the start-up costs are too expensive, and the shared savings rates should be adjusted so as to account for the exact number of enrollees.

   Third, the total number of proposed quality measures (currently 65) is too many. A broad industry consensus with respect to the number of quality measures (as voiced by provider, hospital, payer and think tank groups) is that 65 measures are just too many, and starting with 32 would be a better option.

 

2. A recent MedeAnalytics analysis focuses on “…leading healthcare constituencies’ recommendations on the key drivers of the ACO business model”. Key comments included: 

 

• a. AHA, AMA, and MGMA: Eliminate the CMS withhold rate (25%) applied to any earned performance payment for years 1 and 2.
• b. With respect to the shared savings rate for ACOs tracks 1 and 2 (proposed at a maximum of 50% and 60% respectively), the overwhelming industry consensus was that this should be raised to 60 - 80% (track 1) and 70 – 90% (track 2). I tend to agree – ACOs are taking on a significant risk given the estimated start-up costs. Their compensation in shared savings needs to better reflect this.  As for what the “tracks” are (from CMS’ website): “CMS is proposing to implement both a one-sided risk model (sharing of savings only for the first two years and sharing of savings and losses in the third year) and a two-sided risk model (sharing of savings and losses for all three years), allowing the ACO to opt for one or the other models”.
• c. Comments regarding the minimum savings rate (MSR). Per CMS: The MSR “…is a percentage of the benchmark that ACO expenditure savings must exceed in order for an ACO to qualify for shared savings in any given year”. There is consensus here that a standard, flat MSR of 1-2% should be established for all ACOs, rather than the sliding scale as proposed by the current CMS rules.