Today, the Obama administration released newly revised rules for “accountable care organizations” (ACOs) that are designed to persuade hospitals, doctors, and other health care workers to collaborate in providing better value for our health care dollars. In an ACO all providers involved in treating a particular patient or condition share a single flat fee. That fee will be higher if they succeed in achieving better outcomes for less, lower if they fail. In other words, providers are being asked to share in the risk that patients and payers now face when they agree to undergo treatment—or to pay for it. The lump sum payment creates an incentive for hospitals and doctors to work together to achieve the best possible results. They will win the wager only if they co-ordinate care.
If teamwork leads to more efficient diagnosis, fewer unnecessary tests and procedures, fewer infections, better communication among providers, speedier recoveries, and happier outcomes for patients, both providers and the Centers for Medicare and Medicaid (CMS) will profit. The administration estimates that ACOs could save the government $940 million from 2012 through 2015. But the goal is not just to save money: when care is coordinated, and patients receive the right care at the right time, they suffer less. Higher quality care and more affordable care go hand in hand.
Needless to say, providers are wary of the risks. Moreover, when the administration released a draft of proposed regulations for ACOs earlier this year, many groused about the high cost of complying with the rules. Hospitals and doctors argued that the bonuses were too small when compared to the burden of being required to report on sixty-five measures of quality, while also investing in electronic health records (EHRs). (The draft stipulated that primary care physicians involved in the program must show that they are making “meaningful use”of EHRs by the second year of the program.)
Changes in the Regulations
Under the new rules, providers will no longer be required to share risks from the outset. Instead, they will have two choices. If they select “track 1,” they will enjoy a slice of any savings, but will not share losses during their first two years as an ACO. In year three, however, they will be expected to share in risks as well as rewards. By contrast, if they choose “track 2”, they will share in losses as well as savings from the very beginning, and will enjoy a larger share of savings. “Two tracks are offered for ACOs at different levels of readiness” the Appendix to the report explains. (To see the entire Appendix—which does an admirable job of detailing changes in just three pages—click on the three pictures at the end of this post.)
As the Appendix reveals, the administration responded to many of the providers’ complaints. They are now asked to report on thirty-three measures of quality—not sixty-eight—and the EHR requirement has been dropped, though having an EHR is retained as one measure of quality. This seems to me a wise change: when it comes to Health Information Technology, the state of the art is still evolving. Physicians who sink capital into EHRs today may discover that they have chosen technology that is neither user friendly nor easily linked to EHRs that other doctors and hospitals are using.
In addition, instead of compensating providers for reporting on quality measures only in the first year, then paying for performance in the second and third year, ACOs will be paid for reporting in the first year, and paid both for reporting and for performance in the second and third year.
The revised regulations also expand on who is eligible to become an ACO, including Federally Qualified Health Centers (a.k.a. community clinics) and Rural Health Clinics. Since reform legislation provides funding to expand community clinics by 50 percent, I think they will become increasingly important providers, especially for many patients who now go to an ER for care. Giving them the opportunity to share in the rewards of providing better care is an excellent idea.
Accountable Care Organizations provide a model for radically transforming our health care system. Recognizing the challenges of converting a money-driven fee-for-service system hooked on “growth” (more tests and more procedures equals more revenues) to a patient-centered system that focuses on providing safe, effective, affordable care, the administration is giving ACOs more time to improve performance. While the first round of applications are due early in 2012, and some ACO agreements will start as early as April 1, 2012, others will not begin until July 1, 2012. Most importantly, the first performance “year” will be eighteen or twenty-one months. ACOs that start up in April or July of 2012 will not have to report on quality measures until calendar year 2013.
Let me add that accountable care organizations are just one model for reform. Rather than joining an ACO, many family physicians may well elect to turn their practices into “patient homes” that help patients manage chronic diseases so that they can stay out of hospitals. If they’re successful, they too will receive bonsues My guess is that some community clinics will choose to become patient homes. Going forward I also hope that we will see more nonprofits like Kaiser Permanente and Geisinger that offer insurance coverage as well as medical care, giving insurers and providers a motive to work together to improve the health of patients over the long-term.
Many in the media have pointed out that the Mayo Clinic, Geisinger and some other highly respected organizations have announced that they do not intend to become ACOs. This makes sense. They already are streamlining care and improving outcomes. Why would they possible want to throw out a model that is working, and start over? They are not rejecting the notion of “accountable care.” In many ways, they have inspired the ideas behind ACOs: doctors are on salary and are encouraged to share their knowledge, looking over each others’ shoulders as they strive to improve outcomes. Electronic Health Records help them offer evidence based care. Performance is constantly measured, with an eye to continuous improvement.
Below, the Appendix to the revised regulations. Each page is an image you can click on to enlarge (once open, click again to make it even larger).