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  • April 13 2011


    Accountable Care Organizations & the CMS proposed rule for the Medicare shared savings program

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    On March 31st, the Centers for Medicare & Medicaid Systems (CMS) released its much anticipated proposed rule for the Medicare shared savings program. The Medicare shared savings program, legislated as part of the Affordable Care Act, allows Medicare-enrolled providers to form Accountable Care Organizations (ACOs). As one of the few provisions in the Affordable Care Act that is perceived to have a chance at flattening the healthcare cost curve, the administration is keen to see successful ACOs emerge from this program. In a rare and highly-coordinated effort (that gives some hint at the visibility this initiative has within the administration), the Office of the Inspector General, Federal Trade Commission, Justice Department and the Internal Revenue Service simultaneously released clarifying guidelines or policy statements related to ACOs and the proposed rule.

    Having been in the throes of some client-led ACO projects over the last several months, I was eagerly awaiting the proposed rule's release. I was curious to see how CMS was going to create a program that allows ACOs to be flexible in their design and approaches (after all, no one really has THE answer) while simultaneously including sufficient beneficiary protections and ensuring the integrity of the Medicare program. It's a delicate balance to be sure and not an enviable position for CMS. And given that this is only the proposed rule, I remain curious to see what happens over the next several months – because it's clear that CMS has, in many areas of the proposed rule, thrown everything at the wall in order to see what sticks. Below are some areas of the proposed rule that I found interesting and are sure to evoke lots of public comments.

    Risky Business

    Given that most of the fundamental changes in the design of the U.S. healthcare system have been predicated on financial incentive changes, I've often wondered how a shared savings model where the provider has a relatively limited upside opportunity and virtually no downside risk has any hopes of truly succeeding in lowering total cost of care. My guess is that CMS ultimately agreed with that thought because the proposed rule requires an ACO to take on downside risk for at least one of the three performance years in its contract.

    The rule introduces two different risk models for ACO participants. The first model is a one-sided, shared savings only model. The second is a two-sided, shared savings and losses model. CMS allows a greater upside sharing rate for the two-sided model (60% compared with 50% for the one-sided model) to offset the model's increased risk. CMS gives ACOs the ability to declare which risk model they want to participate in at the outset of the contract, but even ACOs that choose the one-sided risk model for the first two performance years are required to assume risk liability for losses in the third year. Even though losses are capped for years 1, 2 and 3 at 5%, 7.5% and 10% respectively, I think this requirement will give pause to many potential ACO applicants.

    Minority Report

    As the introductory section of the proposed rule points out, the primary objectives of an ACO are to accomplish the healthcare “triple-aim” of reducing the total cost of care, providing better care for individuals and improving the health of populations. With CMS' proposed rule, an ACO can't benefit by having one without the others. The ability to share in any savings generated is predicated on the ACOs ability to report on quality measures in performance year 1, and then achieve quality standards in performance years 2 and 3.

    CMS proposes using 65 nationally recognized measures to evaluate the quality of care provided by the ACO - which would be quite an ambitious task. Compare that to the roughly 32 measures that participants in the Physician Group Practice (PGP) demonstration (the nexus for the ACO program) must submit. Most of these proposed measures are NQF-endorsed and are already included in other federal quality reporting programs such as the Physician Quality Reporting System (PQRS), Meaningful Use, ePrescribing initiative and the Consumer Assessment of Healthcare Providers and Systems (CAHPS). In total, the measures span five key domains:

    • Patient experience
    • Care coordination
    • Patient safety
    • Preventive health
    • At-risk population/frail elderly health

    A few of the measures are self-attestations or are based on an analysis of claims data (which CMS will handle directly for the ACO), but most of them need to be generated directly by the ACO. ACOs will require information technology (IT) solutions to collect, manage, understand and report that data on a continuous basis.

    Mission: Impossible

    In my opinion, the growth and maturity over the last 20 years of the IT systems in healthcare is one of the strongest reasons that ACOs have a chance at succeeding. A plethora of data now exists that ACOs can use to make informed decisions about their clinical performance, operational efficiency, risk position, and individual/population health status. Leveraging a strong technology infrastructure will be paramount for the success of ACOs.

    As I mentioned previously, it's going to be nearly impossible to collect the necessary data for, and calculate and report on the required measures without a strong IT infrastructure. The shared savings program proposed rule is packed with other requirements that will also be nearly impossible to fulfill without the ACO's use of advanced information technology. A few examples include the need to:

    • Use data to assess a population to identify high-risk individuals,
    • Provide consumers access to their own medical records and clinical knowledge,
    • Integrate and adhere to evidence-based care protocols, and
    • Electronically exchange care summary information at transitions of care.

    The proposed rule is actually very explicit when it comes to ACO participants' use of information technology when they discuss the relationship between the shared savings program and the EHR incentive program. As a start, CMS proposes that 50% of all primary care ACO participants must meet the Stage 1 meaningful use criteria. But this is clearly only a starting point because the proposed rule states that this only “represents a first step towards achieving our objective of incenting full participation of ACOs' providers in the EHR Incentive Program over time.” There is also a very good possibility that CMS will require up to 50% of ACO participating hospitals to also meet the Stage 1 meaningful use criteria - they are soliciting public comment specifically on that topic.

    A Few Good Men

    Regardless how you read it, participating in the Medicare shared savings program is going to be a struggle for many providers. I've already described the requirement to take on downside risk and the need for advanced clinical, financial and operational technology infrastructures – both of which pose serious hurdles for potential ACOs. Additionally, the Government Accountability Office (GAO) estimates that ACO start-up costs will average at about $1.75 million (which the Feds will not cover) per ACO based on similar investments reported from PGP demonstration participants.

    The documentation required for the application process, combined with appropriate legal review to ensure compliance with antitrust, Stark and anti-kickback guidelines is also substantial. And, this must all be done rather quickly! Think about the timetable under which this must all occur…public comment period closes on June 6, 2011, then CMS must generate a final rule and publish it (can they do it faster than the 5 months it took for the Meaningful Use final rule?), then ACO applicants must examine and understand the final rule then generate their applications, CMS must then review and accept for ACOs to be up and running by January 1, 2012.

    I also wonder how many organizations considering participation in the Medicare shared savings program have the organizational depth to support the additional levels of governance and bureaucracy to administer the program, routinely self-assess, monitor and report on their performance. Taken as a whole, these factors alone make me question the government's estimate that 75 – 150 ACOs will participate in the program (if I were a betting man, I'd be taking the under…)

    I believe the factors discussed in this post - the significant required resource and capital investments, the requirement to take on downside risk, advanced technical infrastructure, operational excellence, the burden of numerous quality measures – will make for a smaller pool of ACO applicants than previously anticipated. What has been proposed represents an ambitious set of requirements for an equally ambitious program slated to alter existing payment and care delivery models. I know there will be some very exciting transformations that arise out of organizations involved in this program and I look forward to working strategically with healthcare providers who are contemplating ACOs as a next step for their communities.

    As Managing Director, Healthcare Reform at Cerner, Chad Greeno develops business strategies and coordinates internal resources to better position Cerner and its clients in the shifting healthcare economy and policy environment. He currently serves as executive lead for Cerner's Accountable Care Organization (ACO) strategy. Greeno joined Cerner in 2007 as a member of the Executive Development Program, where he served in various capacities across the ClientWorks and CernerWorks™ leadership teams. He was responsible for creating the business case for development of the new Cerner long-term care solution, as well as enhancing the CernerWorks remote hosting option operations model to project future impacts to datacenter space, headcount, revenue and profitability. Prior to joining Cerner, he served as the Detroit Section Manager at Dynetics, Inc.,where he led the company's regional automotive application engineering organization.

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