Accountable Care Medicare Shared Savings Rules and How they Benefit Consumers

Accountable Care Organizations and Medicare Shared Savings Program
The federal Department of Health and Human Services (HHS), which includes the Centers for Medicare and Medicaid Services (CMS), announced proposed rules for the much vaunted Shared Savings Program for qualifying Accountable Care Organizations on March 31st. What struck me about the program, was how much of the risk management formula was taken directly from the private insurance sector, which is an indication of a public/private hybrid for program management. Since it is my belief that we can provide optimal public services through this model, I am keen to evaluate, follow, and measure the results for this revolutionary change in health care delivery for Americans. This article explains the risk sharing mechanisms in the new program and what it may mean for consumers.
Private Sector Influence
The Centers for Medicare & Medicaid, which administer the largest health care program in the country, have created a health care program, called Accountable Care which requires clinical results within a certain range in order to get optimal reimbursement levels. Additionally, organizations which outperform the government set standards have an opportunity to receive a gain or a share of the unused funds. In the insurance business this is called retrospective financing, where the provider reimbursements and participant insurance rates are established based on certain assumptions by actuaries at the beginning of the plan year. About three months after the close of the plan year a final report is given, which illustrates the true performance compared to the expected levels. At this time the corporate insurance client either owes money or has a credit toward the new plan year. It is this type of accounting that CMS is using to gauge the “Shared Savings” for ACO participants. But before we examine the shared savings program let’s briefly review what it takes to qualify as an Accountable Care Organization.
Eligibility Rules for Accountable Care Organizations
Who is eligible to be part of an ACO? All clinicians in group practice arrangements, networks of individual practitioners, joint venture partnerships with hospitals and other professionals, hospitals who employ ACO professionals, Critical Access Hospitals, and any health care practitioner or entity receiving Medicare reimbursements for services are eligible for ACO status.
Potential Roadblocks in Achieving ACO Status
Rural and semi-rural areas may have difficulty with the ACO status (Wenatchee Valley Medical Center for eastern Washington comes to mind) because anti-trust hurdles must be cleared with respect to market share. I imagine the way an organization will address this is to make sure the mix of employed clinicians versus contracted ones meets the 50% or less rule for Primary Service Area standards. It also looks like the non-urban exemptions and critical access rules will allow organizations like these to qualify.
All organizations who wish to participate in the ACO program must maintain a minimum level of patient volume of 5,000 patients.
The Accountable Care Agreement is binding for Three Consecutive Years
Organizations participating in the ACO Shared Savings Program have a choice of two models, either the one-sided or two-sided version. The names are humorous to me, but let me explain where they come from in terms of insurance risk management programs. The one-sided program means the organization shares only in the “up-side” or gain for performance improvements under the contract. However, CMS always likes to be a little different and this more limited risk exposure is just for the first two years, after which the organization experiences the full risk sharing. The “two sided” model means the organization is exposed to both gains and losses from the beginning of the three year contract. This seems like a no-brainer, why would a clinic want to be on the hook for losses right away in a new Medicaid program? However there is more to it than that, because the potential for gain differs.
Government Incentive for Meeting Benchmarks
Using a complicated formula of a per-enrolled-patient-risk-adjusted cost benchmark CMS has created a financial incentive of 2% to 3.9% depending on the number of patients involved in the ACO. In my previous ACO article in September, I highlighted some of the clinical outcomes the agency was seeking, to be eligible for the shared savings. CMS has identified 65(yes, it is complex) quality measures in these five areas under ACO provisions:
1. Patient/caregiver experience
2. Care Coordination
3. Patient Safety
4. Preventive Health
5. At-risk population/frail elderly health

Conversely, in terms of shared losses, the organization’s cost basis must be 2% or more over the cap to be required to pay CMS a differential based on ACO patient performance. What is important is that the participating ACO organizations report their quality metrics using the Medicare Physician Quality Reporting System (PQRS) and also using an electronic health record or HER or EMR. This incentive system will allow Medicare, the administrator for the largest health program in the United States to make assessments and extrapolate information on its population, for better program management. This is a great thing for the consumer, which is anyone who is on Medicare now and all of us who are paying for Medicare. There is also an additional incentive to use the Medicare reporting system which is the equivalent of one half percent of the total clinician’s billing to Medicare for each eligible professional’s Medicare Part B fee (out-patient doctor’s visits). This is significant and should encourage providers to participate in the program. Another ACO rule states that at least 50% of primary care physicians must be users of a certified electronic health record by the beginning of the second year of the contract. (Tremendous opportunity for EMR companies). Another aspect of the ACO rules is public reporting of some of the quality measures, which will create a nationwide standard for health care quality measures.
The Centers for Medicare and Medicaid Services has anticipated that some organizations will have difficulty meeting 100% compliance, so they have a Corrective Action Plan process. The CAP process includes noncompliance warnings, special monitoring, and a formalized corrective plan. If an organization fails to meet the ACO compliance rules and is removed from the program, it must wait three years before re-applying for participation. The review process for noncompliance is rigorous and participating organizations must submit to period audits.
Consumer Benefits
One of the positive aspects of ACO reporting is the data which will be gathered in a standard format and shared in aggregate with participating Accountable Care Organizations. There are also methods to coordinate with other Medicare Demonstration Programs, to avoid “double-dipping.” Other Medicare Demonstration Projects include: the Independence at Home Medical Practice Demonstration, Medicare Health Care Quality Demonstration, Medical Home Demonstrations, Physician Group Practice Transition Demonstration, Community Home Health Teams supporting Patient-Centered Care, and various state initiatives supporting Medicaid patients with chronic conditions.
Conclusions for Consumers
The ground breaking requirements of the Accountable Care Organization Rules enacted in 2010 are the result of a peer review process since the International Order of Medicine’s infamous report on the poor patient safety record in many United States health care facilities. Consumers will start to have access to standardized reports on participating health care facilities clinical safety measures and patient care data. This is a tremendous step forward for American consumers, as transparency in reporting is one of the hallmarks of high quality organizations. Integrated health care organizations like Virginia Mason already provide detailed patient quality information and the CMS Shared Savings Program will help others achieve similar reporting and patient quality standards. This is an example of good governance at its best, with an incentive to respond to the consumer push for greater efficacy in patient care.