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Model ACO Health Centers Skeptical of Proposed Rule

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."

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