Focus on Health Care Reform: Accountable Care Organizations and the Medicare Shared Savings Program (Sec 3022)

Accountable Care Organizations (ACOs) are an emerging health care delivery model comprised of  groups of providers that join together to coordinate and improve quality and efficiency of health care by fostering greater accountability in the delivery of health care.   The concept of ACOs arose out of a desire to address the wide variations in the cost and quality of care across the US.

While there are a few successful examples of ACOs, such as Mayo Clinic, Intermountain Healthcare, and the Geisinger Clinic, to name a few, ACOs are currently the exception not the norm. Enactment of the Patient Protection and Affordable Care Act of 2010 (the Act) and demands by the private sector to control health care costs, however, are likely to increase pressure on the health care community to organize into ACOs.

As outlined in the Act, the goal of the Medicare shared saving program is:

[T]o establish a shared savings program that promotes accountability for a patient population and coordinates items and services under parts A & B and encourages investment in infrastructure and redesigned care processes for high quality and efficient services. Sec. 3022. Medicare Shared Savings Program. 

As currently envisioned by the Patient Protection and Affordable Care Act, services provided by ACO providers to Medicare fee-for-service beneficiaries would still be billed under fee-for-service, but the care would be provided in a more coordinated manner for the shared Medicare patients.  ACOs would receive a percentage (to be determined by the Secretary, DHHS) of savings that result from better care coordination, provided quality performance standards are met, including process and outcomes measures, patient and caregiver experience of care, and utilization (such as rates of hospital admissions for ambulatory sensitive conditions–specifics still to be determined). The amount of savings will be determined based on the estimated per capita Medicare expenditures under the ACO for Medicare fee-for-service beneficiaries for parts A & B services, adjusted for beneficiary characteristics, compared to the estimated costs if the services were not provided by the ACO.  The amount of shared savings available to ACOs is subject to a total amount limitation (to be determined by the Secretary).

Furthermore, continuous quality improvement will be pursued through the establishment of higher standards, new measures, or both (to be determined by the Secretary). Certain reporting requirements will be required to evaluate the quality of care provided by the ACO that also may incorporate PQRI reporting requirements and incentive payments as well as requirements and incentives for the meaningful use of electronic health records and electronic prescribing (also to be determined). 

The health system reform legislation defines eligibility standards for ACOs and envisions the following groups of providers that have established a mechanism for shared governance, including: group practice arrangements; networks of individual practices of ACO professionals; partnerships or joint ventures between ACO physicians and hospitals; hospitals employing ACO professionals; and others to be determined.   

ACOs further must be accountable for quality, cost, and overall care of Medicare fee-for service beneficiaries.  The fundamental requirements for eligible ACOs include:

  • a formal legal structure that would allow the organization to receive and distribute payments for shared savings to participating providers of services and supplies;
  •  clinical and administrative leadership;
  • processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies
  • demonstration of patient-centeredness criteria such as use of patient and caregiver assessments or the use of individual care plans (specific criteria to be determined);

In addition, eligible ACOs must agree to participate for a minimum of three (3) years, include a sufficient number of primary care physicians, cover at least 5,000 Medicare fee-for-service beneficiaries, and provide information on the ACO professionals participating in the ACO.

The development of ACOs is likely to create expectations from other payors seeking to improve quality while containing costs.  ACO also may accept other forms of payment such as bundled payments, capitation, etc.  

The NCMS believes that it is imperative for physicians across specialties to work together and to be actively engaged in the formation and leadership of these arrangements. NCMS President Douglas Sheets, MD, has called for an ACO summit of representatives of all specialties.  The summit has been tentatively set for Saturday, August 7, 2010 at the NCMS office in Raleigh.  In addition, the NCMS has appointed an ACO Workgroup to develop guidelines for NCMS members on ACOs and is working with law firms and other consultants to develop information that will assist physicians form successful ACOs.


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