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CMS Makes Three Quick Moves to Quell ACO Criticism

By John Reichard and Jane Norman, CQ HealthBeat

Medicare officials moved on three fronts to quiet a growing chorus of criticism that has fueled doubts about whether a key program under the health care law to control Medicare spending—the formation of accountable care organizations—will ever get off the ground.

But early reaction from groups representing two key players, hospitals and doctors, was tepid. Too many other problems remain with the proposed ACO rule, they said. "I think it's a positive step forward but pretty marginal. I don't think it's going to be a big game changer," said Lisa Grabert, senior associate director for policy at the American Hospital Association.

Efforts by the Centers for Medicare and Medicaid Services (CMS) to launch the program have been marred by the statements of leading-edge organizations that they will not seek ACO status to contract with Medicare. At the other end of the spectrum, many hospitals lacking in resources have complained that creating ACOs requires too much money and that they won't be able to participate.

The CMS response: The agency will confer "pioneer ACO" status on some 30 leading-edge organizations contracting with Medicare to begin this fall. The agency is using its authority under the health care law (PL 111-148, PL 111-152) to test innovative programs through the Center for Medicare and Medicaid Innovation to launch the program. It's estimated that the Pioneer ACO Model will save the Medicare program $430 million over three years. Letters of intent from interested groups must be submitted by June 10 and applications are due by July 18.

The pioneers would move more quickly from the shared savings model in the proposed ACO rule to a population-based payment model, officials said. In other words, there would be a single price up-front for the health care services needed by a specific group of people, along with a reduction in fee-for-service payments.

But officials said it would not be the same as capitation, a practice in managed care in the 1990s in which doctors received a set amount of money per patient and were paid in advance.

The pioneers would also have higher levels of shared savings and higher levels of risk than the ACOs as currently proposed in the shared savings program. They could be allowed to move to the population-based model in their third year of being a pioneer, if they have shown specified levels of savings.

For the providers lacking expertise and resources, CMS invited comments on a proposal to give them access to upfront money to create ACOs. The undetermined sum of money would come from "early access" to the savings the ACO provided to the Medicare program. Monthly payments for each Medicare beneficiary would go to the organizations and ACOs would have to detail to Medicare how they plan to use the money.

In its announcement, CMS acknowledged that early comments on the ACO proposed rule indicate many providers lack the capital needed to pay for becoming an ACO. Comments on the proposal are to be submitted by June 17.

In its third initiative, CMS will convene four free learning sessions in 2011, the first as early as June, to help the executive leadership teams from existing or emerging ACOs acquire the expertise to form ACOs.

CMS Administrator Donald M. Berwick said, "We feel we're on schedule," when asked whether contracting with ACOs would begin Jan. 1, as agency officials have previously stated.

Berwick Praises Comments

Berwick called the many comments on the ACO proposal published two months ago "good news" despite the flood of negative reactions. He also denied that the moves announced in effect represent a revamping of the ACO program in response to complaints that as proposed they are unworkable because of the upfront costs involved and some 65 measures with which they must comply to ensure quality care.

Berwick said the agency is also conducting feedback sessions with providers to get the right balance between regulations to ensure quality and efficiency and avoid onerous demands that deter participation and savings.

Asked to what extent the 30 organizations are cutting-edge systems such as the Mayo Clinic, Cleveland Clinic, and Geisinger Health System that had said they would not seek ACO status, a CMS official said, "We're not necessarily just looking at leading-edge organizations. There are a lot of physician-based groups that we think will be ready to take advantage of this model." The official added that "pioneers will be paid on what we're calling a population-based model—where they will see an upfront block payment per person, along with a reduction in fee-for-service payments."

Grabert of the hospital association said that CMS made a positive step forward with the initiative and clearly is trying to be responsive to concerns from providers. But hospitals have many concerns with the proposed rule that weren't addressed, she said, and they would affect both large, highly organized hospitals that might be "pioneer" candidates as well as smaller hospitals with worries about capital investments.

The American Medical Association in a statement said CMS is taking a step in the right direction but more is needed to ensure all physicians who want to take part in an ACO can do so, no matter how small the practice. J. James Rohack, immediate past president of the AMA, said that 78 percent of office-based doctors work in practices with nine physicians or less.

"The benefits of this new care delivery model cannot be fully realized unless physicians in all practice sizes can be involved," he said. The AMA has encouraged CMS to provide help for doctors in the form of start-up capital and small business loans to meet the ACO startup costs.

One afternoon with stakeholders, Berwick was asked about the role of home care and mental health in the ACOs. He said the intent of lawmakers was to focus on primary care in formation of ACOs but he also believes ACOs should be reaching out to those other sectors of health care.

Officials with AARP issued a statement praising Medicare for its announcement. "The opportunity to pilot new and innovative models of care is precisely why AARP supported creating the Innovation Center," said David Certner, legislative policy director. "The pilot programs will allow a range of providers to form ACOs and test new payment models, whether they are integrated medical groups with a history of care coordination, small physician practices or hospitals."

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