Health Care Reform Calls for Shared Savings Programs

ACO Model Could Offer Lower-cost, Higher-quality Care

October 27, 2010 04:00 pm Sheri Porter

One of the goals of the recently enacted health care reform legislation is to improve the nation's health care system by providing higher quality health care for more individuals at a lower cost. And, according to Section 3302 of the Patient Protection and Affordable Care Act(frwebgate.access.gpo.gov), accountable care organizations, or ACOs, may play a leading role in achieving those goals.

The section of the legislation titled "Medicare Shared Savings Program" requires the secretary of HHS to establish a shared savings program that "promotes accountability for a patient population and coordinates items and services under (Medicare) parts A and B." The program also is tasked with encouraging "investment in infrastructure and redesigned processes for high quality and efficient service delivery."

Although the legislation includes language that defines participation, eligibility and reporting requirements, much of the fine print as to how ACO test programs will function under HHS will be left to the rulemaking discretion of the HHS secretary.

Laying Out the Framework of the Law

According to wording about accountable care organizations, or ACOs, in the Patient Protection and Affordable Care Act, HHS is required to establish a shared savings program as of Jan. 1, 2012. To participate as an individual ACO, physicians, other providers and suppliers must establish a mechanism for shared governance. In addition, each ACO must, among other things,

  • accept accountability for the quality, cost and overall care of the Medicare-fee-for-service beneficiaries assigned to it;
  • agree to participate in the program for at least three years;
  • develop a formal legal structure to allow the organization to receive and distribute payments for shared savings;
  • include primary care professionals sufficient for the number of Medicare patients (at least 5,000 beneficiaries) assigned to the ACO;
  • have a leadership and management structure that includes clinical and administrative systems;
  • define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care; and
  • demonstrate that it meets patient-centeredness criteria, such as the use of patient caregiver assessments or the use of individualized care plans.

Physicians and other providers in an ACO will continue to receive payment from the original Medicare fee-for-service program, but a participating ACO is eligible to receive additional payments for shared savings if it meets quality performance standards, the savings requirement and a benchmark established by the HHS secretary.

The ACO will receive a percentage of the difference between the estimated average per-capita Medicare expenditures and the benchmark amount; Medicare will keep the remainder of the savings.

However, if an ACO takes steps to avoid at-risk patients in an effort to keep its costs down, it may be sanctioned, and the secretary of HHS may terminate an ACO agreement if the ACO does not meet quality performance standards.

Academy Weighs Pros and Cons of ACO Model

According to AAFP President Roland Goertz, M.D., the Academy is pleased that the health care reform law leaves certain elements of ACOs open to interpretation. "At this point, the law allows a broad definition of an ACO, and that allows physicians to play a significant role in how ACOs can be organized," said Goertz.

"There are a considerable number of things that need to be done, including the development of organizational and payment structures," he told AAFP News Now. "It's a lot like building a new business. I'm convinced that any successful ACO will have physicians at the top managing the organization and woven into the very fabric of the ACO's operations -- unless, of course, physicians are creating ACOs themselves, which certainly should be considered."

Goertz acknowledged that the health care bill gives a lot of power to a single agency in the federal government -- namely, HHS. "Hopefully, the secretary respects that power and puts deliberate thought into making decisions that are going to affect all of the Medicare population and probably the rest of the population in the country," said Goertz.

He cautioned family physicians to carefully consider any offers to join an ACO. "Be very deliberate in analyzing whatever proposal is brought to the table, and assess the advantages and disadvantages for your practice and your patients," he said.

ACO Expert Urges FPs to Take Control

Harold Miller, executive director of the Center for Healthcare Quality and Payment Reform and a recognized expert on ACOs, wants family physicians to go out and proactively form their own ACOs.

Miller told AAFP News Now that if family physicians don't lead the charge, "they're going to be at the mercy" of what some other entity decides -- be it a hospital or big health system -- and those decisions may not be in the best interest of physicians.

AAFP ACO Activities

The AAFP began studying accountable care organizations, or ACOs, more than a year and a half ago and, in October 2009, released an accountable care organization task force report.

In addition, the AAFP's Government Relations Division examined ACOs in depth in a June 2010 information document titled "Accountable Care Organizations: Can They Rein In Health Care Spending for States?(32 page PDF)"

Also, at the recent Congress of Delegates in Denver, AAFP delegates expressed concern about the impact ACOs would have on family physicians' practices and, subsequently, adopted a resolution(405 page PDF) (Members Only) that directs the AAFP to take a leadership position in educating members about the formation of ACOs and to encourage and facilitate strong family physician leadership in ACO development and governance.

The AAFP, along with its primary care partners the American Academy of Pediatrics, the American College of Physicians and the American Osteopathic Association, also is developing a document that outlines what the four organizations see as the guiding principles of an ACO. That document will be released in coming weeks.

He pointed out that family physicians are perfectly positioned because they know how to manage chronic health care conditions for their patients and already work to keep those patients out of the hospital.

Miller said the success of the ACO model depends a lot on the payment system. "One of the concerns I have about the shared savings payment model -- which is the principal method that's in the federal law -- is that it creates a strong incentive for hospitals to acquire primary care practices."

That's because the biggest cost savings in the ACO model comes from keeping patients out of hospitals, said Miller, and that reduces the hospitals' revenue.

"Under the shared savings model, hospitals can't recoup any of those revenue losses unless they own physicians' practices, because shared savings don't go to hospitals, they go to doctors. In fact, they go to primary care doctors," he said.

Family physicians "should recognize that under these payment models, they are in control," said Miller. "So hospitals are out trying to acquire physician practices, and in a lot of cases, it's not because they are trying to improve integration of care, but because they're trying to make sure that they can capture some of those shared savings or prevent the savings from occurring in the first place," he said.

"The best way for hospitals to do either of those things is to be able to employ or control the physician with whom the savings are associated," Miller added.

"Conversely, family practice physicians have the biggest potential upside in all of this if they can find ways to achieve savings," said Miller. "They can get a share of that, and for every hospitalization they prevent -- if they can get a portion of the money saved -- that's a lot of money."

Miller also noted the reams of HHS rules left to be written. He said that the rule makers would be influenced by the wants and needs of early ACO implementers.

"The attitude has always been that family practice doctors are waiting for somebody to do something to them or for them," said Miller. But, he added, family physicians need to take the lead now and start organizing their own ACOs.


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