By Rebecca Adams, CQ HealthBeat Associate Editor

May 6, 2011 -- The nation's highest-profile health care centers—think of the Cleveland Clinic, the Mayo Clinic, Intermountain Healthcare or the Geisinger Health System—are the models for the Obama administration's accountable care organization (ACO) proposal. But officials at those tightly organized institutions have so many concerns with the proposed rule to create ACOs that they doubt that they will participate.

The 2010 health care law (PL 111-148, PL 111-152) created the authority to establish ACOs—networks of providers within the Medicare system that include physicians, hospitals and health systems. The aim of the integrated networks is not only to improve the quality of care but also to save money, with any savings to be shared by the government and the ACOs. The Centers for Medicare and Medicaid Services (CMS) released a proposed rule at the end of March that spells out the details of how the program will work, how much financial risk medical providers will face, and what type of data the organization need to collect.

Interviews with officials at integrated care organizations yield a similar reaction to the proposal: The idea behind the Medicare rule is a good one. But there have to be major changes to the details before the program would be workable. Even the most sophisticated health care systems in the nation, which have already adopted a number of the practices that Medicare officials want providers to carry out, say there isn't enough incentive for them to apply to become an ACO under the Medicare proposal.

"We think the principles and concepts are very good and very important and we've worked long and hard to provide accountable care," said Patricia Simmons, the medical director of government relations at the Minnesota-based Mayo Clinic. "Are we interested? Absolutely. But is it feasible? There'd have to be substantial revisions for us to participate."

Oliver "Pudge" Henkle, the chief government relations officer at the Cleveland Clinic, said, "The assumption has been that Cleveland Clinics of the world are ideally suited for this. We are very supportive of the idea. It's clearly the right way to go and the journey is a good one. But it's a matter of recommending ways in which we think CMS can make the ACO model and its structure better." Henkle said the clinic will soon send CMS officials a comment letter outlining what he called "constructive recommendations." The current proposal contains a long list of barriers that clinic officials believe need to be reconsidered.

A similar theme was struck by Thomas Graf, chairman of the Community Practice Service of Geisinger Health System in Pennsylvania. Geisinger is already participating in a different demonstration program and would only be eligible to join the ACO program after that concludes. But Graf said it's unclear whether Geisinger officials would want to take part in the ACO program at that point.

"The concept of the ACO program is certainly sound: the idea of improving quality while reducing cost," said Graf. "It's the regulations themselves that many organizations have a large number of concerns with. A lot of the detail-level work is problematic. It seems to be very prescriptive and restrictive with a fair amount of administrative and regulatory oversight."

CMS officials are well aware of the criticism. The written responses that came in during the first month of the comment period have been relatively pointed.

Jonathan Blum, the CMS deputy administrator and director of the Center for Medicare, said at a briefing earlier this week, "We tried to signal as hard as we could we want feedback, we want comment.".

And in private conversations, including a conference call with stakeholders this week, CMS Administrator Donald M. Berwick has stressed that the agency is interested in working with providers and wants the program to live up to its potential of transforming medical care in the United States.

But the fact that the even the institutions that were the inspiration for the program are reluctant to participate unless big changes are made shows that CMS officials face a tough task. Officials who are weighing changes to the proposal before they finalize it later this year will have to consider how far they want to go to attract interest.

The complaints against the proposed rule are many and multi-faceted.

One basic issue is that all institutions who sign up will face a financial risk if they do not generate savings required by the rule. The proposal suggests a two-track system. Providers could choose to get a bigger financial reward if they subject themselves to penalties starting in the first year. Or they could have the potential of a less generous reward if they choose to wait until the third year of the program to face penalties.

Many providers had expected the program to offer a way for institutions to get bonuses without having to face penalties and were disappointed that the rule proposes a potential financial hit for any group that doesn't find required savings.

Another deterrent is that providers will have to collect 65 measures of quality. The quality metrics are a way to safeguard against the risk that doctors will stint on care in order to save money. But very few institutions collect that kind of data now, so adding technology and training staff to track that information can be an expensive investment.

Before a group of medical providers can join the program, they would have to meet financial solvency requirements that could be especially hard for smaller physician practices to meet.

Mayo Clinic officials said they are concerned about some of the requirements about how the ACO would be governed. The proposal said that ACOs must be a certified legal entity recognized under state law, that ACO participants must have control of three-fourths of the governing body and that beneficiaries must be involved in overseeing the ACO.

Officials at Mayo and the Cleveland Clinic also expressed concern that the financial starting point that providers must improve is based on the current expenses of providers. They say that low-cost, high-quality providers will have a more difficult time further reducing costs than would high-cost providers that haven't already made improvements.

A separate challenge is that providers won't know for certain which patients are in the ACO until the year is completed. The assignment of patients is retrospective, and patients will continue to be able to see other providers if they want. Physicians and other providers will not be able to prevent patients from seeing other specialists or providers who are not in the ACO network. In other words, at the end of the year, CMS officials will look back and see which patients got a significant amount of their care, but not necessarily all of their treatment, from providers in the ACO. The experiences of those patients will count toward the evaluation of how well the ACO providers did, said clinic officials.

Because of all of the concerns, many of the nation's top integrated care institutions are concluding that the start date of Jan. 1, 2012 needs to be delayed. Health center officials say it will be hard to review the requirements in a final rule, which isn't expected to be released before late summer at the earliest, meet financial requirements, set up quality metrics and enroll by Jan. 1.

And some of the providers are already looking ahead to other opportunities that may come out of the CMS Innovation Center. Berwick has said that he wants to test new ways of delivering care, and many industry officials believe that the center will offer providers funding through demonstration projects that have not yet been announced. Those potential opportunities— which could include funding for providers that accept part or all of the reimbursements for patients based on a preset, fixed amount— could offer more benefits for some of the nation's largest integrated care clinics than the ACO rule would.

"I look at the ACOs coming out as almost fluff and distraction on the side, not that it's not good but it's just that the mainstream is already moving out there on the front line" to other ideas, said Brent James, the executive director for Intermountain Healthcare's Institute for Healthcare Delivery Research. "We're way past it."

By John Reichard, CQ HealthBeat Editor

May 5, 2011 -- While a House subcommittee hearing yielded no clues in the unending mystery over how Congress will fund an overhaul of the Medicare physician payment system, it did reveal a consensus among physician groups that a five-year period of experimentation is needed to test new ways to pay doctors.

Republicans and Democrats at the Energy and Commerce Health Subcommittee hearing appeared interested in accommodating the groups.

American Medical Association President Cecil B. Wilson urged lawmakers to follow a three-pronged approach: replace the current sustainable growth rate (SGR) payment system that has doctors expecting a 29.5 percent payment cut Jan. 1; move into a five-year period of stable Medicare payments; and use that time to test and begin adopting "new payment models that reward physicians and hospitals for keeping patients healthy and managing chronic conditions."

Physician groups generally appear to be on board with that approach.

Harold D. Miller of the Center for Healthcare Quality and Payment Reform outlined basic ways in which payments could be changed to lower costs without rationing and to improve the quality of care. The center includes a number of leading policy analysts, health care foundations, and health care systems.

"One is to keep people well," Miller said, "so that they don't have costs at all; second is that if they do have something like a chronic disease, to help them manage that in a way that avoids them having to be hospitalized, and if they do have to be hospitalized to make sure that they don't get infections, complications and re-admissions. And all of those things save money, but they also are improvements for patients and I think that patients would find desirable."

But "the current payment system goes in exactly the opposite direction," he continued. "Doctors and hospitals lose money whenever they prevent infections. We don't pay for things that help patients stay out of the hospital, and in health care nobody gets paid at all if they stay well."

You can't fix those problems by changing fee levels or adding regulations, you do it by "putting in fundamentally different payment models," Miller said.

Two fundamental changes are needed, he added. The first "is to pay for care on an episode basis rather than on a service-by-service basis, such as having a single price for all of the care associated with an episode" of care such as a heart attack; and also including a "warranty" so that no charges are made by providers when infections or complications occur.

"This is the same way that every other industry in America charges for its products and services—a single price with a warranty," Miller said.

The other approach, he said, is "comprehensive care payment, which is to have a single payment for a physician practice for all of the care that a patient needs to manage the particular conditions that they have, and in that way provides the flexibility for physicians to decide exactly what the right way is for care to be delivered to that patient.

"Where these programs have been tried they have worked," he said. Small physician practices can be "the innovators in this if we provide the right kind of support."

Lawmakers such as Rep. Michael C. Burgess, R-Texas urged that doctors play a leadership role in retooling physician payment, and witnesses agreed.

Former Centers for Medicare and Medicaid Services Administrator Mark McClellan said, "No one knows better than physicians how to answer the key questions: Where are the best opportunities to improve care and avoid unnecessary costs for their Medicare patients, and how can we implement practical payment reforms that support these improvements in care?"

Doctors see opportunities every day to improve the value of care," he said, "but are frustrated by a Medicare payment system that often works against them."

For example, McClellan said, oncologists focus on chemotherapy because that is what generates Medicare reimbursement. But they "get little support for doing many of the things that their patients need, things like spending time working out a treatment plan that meets each patient's individual needs; managing patient symptoms; and coordinating care with other providers."

Harvard Medical School Professor Michael Chernew described the "alternative quality contract" (AQC) implemented by Blue Cross Blue Shield of Massachusetts as a promising approach. Used in the insurer's HMO model, it consists of a five-year contract with a physician group that agrees to provide all of the enrollee's care. To prevent the provider from stinting on care, the AQC varies payment substantially based on quality of care assessed by 64 different measures.

M. Todd Williamson of the Coalition of State Medical and National Specialty Societies urged legislation (HR 1700) that would give doctors the option of contracting privately with Medicare patients to provide care. That approach appears to be of particular interest to the GOP Doctors Caucus in the House.

The measure would allow patients "to apply their Medicare benefits to the physician of their choice and to contract for any amount not covered by Medicare," he testified. "Physicians would be free to opt in or out of Medicare on a per-patient basis, while patients could pay for their care as they see fit and be reimbursed for an amount equal to that paid to 'participating' Medicare physicians"—those who agree to accept the Medicare reimbursement rate as payment in full.

Private contracting has been controversial in the past, arousing concern that lower income Medicare patients would lose access to care.

Of course having a period of experimentation hinges on finding huge sums of "pay-fors" to put off cuts required under the current SGR payment formula. For now, Republicans and Democrats appear intent on postponing the fight over how to do that while seeking agreement on the details of policy to replace the SGR.

By Rebecca Adams, CQ HealthBeat Associate Editor

May 5, 2011 -- The Vermont House of Representatives has cleared for Gov. Peter Shumlin's signature a bill to create a publicly financed health care program that some supporters call a state "single payer" system.

Shumlin, a Democrat, has said that he is eager to sign the measure.

The legislation follows through on the requirement in the 2010 health care law (PL 111-148, PL 111-152) for states to create health insurance exchanges, markets for individuals and small businesses to buy coverage. The Vermont exchange would provide a public health program, known as Green Mountain Care, for Vermont residents. The Vermont bill would allow people covered under the state plan to buy supplemental private insurance policies from private insurers.

State officials say that about 47,000 people in Vermont are uninsured.

The measure does not solve the problem of how to pay for the new system. Future legislation would be needed to resolve that question.

By Jane Norman, CQ HealthBeat Associate Editor

May 5, 2011 -- A report to be released by the Department of Health and Human Services (HHS) will show that more than 18,000 Americans now have signed up for the high-risk pools created in the health care law, HHS Secretary Kathleen Sebelius told lawmakers.

Sebelius said that there has been a 50 percent increase in enrollment in recent months as more Americans learn about the program, intended to enroll sick people who can't otherwise obtain affordable insurance. Sebelius' comments came during testimony before the House Education and the Workforce Committee. Reports on enrollment numbers are made quarterly and will be released Friday.

Sebelius also said that HHS is exploring ways to make the program more affordable and accessible, possibly including lower premiums and easier eligibility standards. The health care law, however, bars people from joining unless they have been uninsured for at least six months, a big hurdle for some individuals.

The Obama administration's Preexisting Condition Insurance Plan (PCIP) began operating in July 2010 after being enacted in the health care overhaul (PL 111-148, PL 111-152). The high-risk pools are temporary, scheduled to end when the health care law goes fully into effect in 2014 and health insurers can no longer discriminate against people with preexisting conditions.

Republicans have sharply criticized the program as duplicative and wasteful since states also have high-risk pools, and they say it's not performing as expected. Initial estimates from experts had been that 375,000 Americans would sign up in the program's first year. The law makes $5 billion available for the program through 2014 but administration officials have said they'd spent less than $100 million as of February.

Sebelius acknowledged the numbers are still not high enough. "It's encouraging to see that more people that need health insurance are getting it but we know that's not enough," she said.

HHS now is actively reaching out to groups such as the American Cancer Society and American Heart Association to spread information about the program to their members, and people who apply for disability benefits also receive information. For many sick people these plans provide access to lifesaving treatments so it's vital to get them enrolled, said Sebelius.

By John Reichard, CQ HealthBeat Editor

May 5, 2011 -- The number of hospitals that have agreed to join a patient safety partnership announced several weeks ago by Medicare officials has grown to more than 1,200 now, Centers for Medicare and Medicaid Services Administrator Donald M. Berwick said.

That's up from 500 hospitals when the program was first announced.

An aide to Berwick said the agency hopes to have 2,500 hospitals on board sometime this summer because of the strong level of interest shown in the program. Berwick spoke at a event sponsored by the Institute of Medicine.

In remarks to reporters after his appearance, Berwick also defended the recently issued rule varying payment levels to hospitals based on the quality of their care. Hospitals have complained that the rule gives insufficient weight to their comments and pays too much attention to imperfect measures of patient satisfaction with care. Berwick said the payment system is "a work in progress" but the rule was carefully considered, and he defended the weight given to measures of patient satisfaction.

By Jane Norman, CQ HealthBeat Associate Editor

May 4, 2011 -- The percentage of young adults going without health insurance took a big drop, according to a recently released Gallup poll.

Supporters of the health care law said it's due to a provision that allows families to keep their adult children on their policies.

The Gallup-Healthways Well-Being Index said 24 percent of Americans between the ages of 18 and 26 who were polled between January and April said they lacked insurance.

That's down from 28 percent in 2010, 28.6 percent in 2009 and 27.2 percent in 2008, the poll said. In addition, young adults were a unique group in that their number of uninsured actually went down.

"Previously, 18- to 26-year-olds were the most likely of all age groups to be uninsured," pollsters said in their analysis of the results. "Those aged 27 to 35 have now taken that place. Additionally, the percentage of uninsured in every age group—except 18-to 26-year-olds—has so far in 2011 increased or remained unchanged."

Tobin Van Ostern of the group Campus Progress, part of the liberal-leaning Center for American Progress, said the poll results follow a report by the Kaiser Family Foundation that 600,000 young adults have gotten insurance coverage under their parents' policies since the requirement in the health law (PL 111-148, PL 111-152) went into effect in September.

"This safety net helps young adults stay healthy in a struggling economy, and gives parents peace of mind," said Van Ostern. "We are encouraged that young adults, their parents and insurance companies alike have recognized: This common-sense provision is truly a win-win."

The Gallup results were based on telephone interviews with a random sample of 102,584 adults aged 18 and older living in all 50 U.S. states and the District of Columbia. For results based on the total sample, the maximum margin of error was plus or minus 1 percent, though smaller samples would have a larger margin of error.

Gallup poll (pdf)