Success or failure of ACOs will likely be determined some years from now, but if the initial reactionkrakauerRandy.jpg to the CMS draft rule on ACOs is any indication, it may be a bumpy ride unless the agency makes significant changes in a final rule expected this fall.

What’s the problem? For starters, even hospitals and health systems interested in being part of the ACO model were surprised by the agency’s estimates for up-front costs and the heavy organizational burden and risk participants must assume.

To be an ACO under the government design, the agency envisions that the total average start-up investment and first-year operating expenses will be $1.8 million. In addition to the money, ACOs will have to meet quality performance reporting requirements, public reporting rules, and possible CMS audits.

Other surprises in the draft are retrospective beneficiary assignments, strict readmission standards for ACOs after the first three-year agreement period, limited antitrust and fraud protections, and no pre-emption of state laws. Randall Krakauer, MD, Aetna national Medicare medical director, says the expectation by CMS for 5 million beneficiaries to be part of the first set of 75 to 100 ACOs across the country starting next year is highly suspect given the disapproval to the draft plan. 

“I doubt [those numbers], based on the current draft,” Krakauer says. He sees changes needed in infrastructure requirements, alleviation of downside risks if quality and cost improvements do not happen on schedule, and the start-up cost factor. “The model they propose requires extraordinary infrastructure,” Krakauer notes.

Aetna is moving forward in the area of integrated care under its existing Aetna Medicare Advantage offering, which currently has 27,000 members. The plan has been popular with doctors and has seen reduced acute care hospitalizations, Krakauer says.

Senators Want Draft Yanked

In light of the negative reaction to the draft ACO plan, seven Senate Finance Committee Republicans recently asked the Obama administration to withdraw the rule.

A number of health care providers have also gone public with objections. In a May 24 letter to CMS Administrator Donald Berwick and Health and Human Services Secretary Kathleen Sebelius, the senators said they have been “struck by the increasingly diverse chorus of concerns many of our leading health care institutions have raised in recent days about the proposed ACO regulation.”

The letter went on to name the Billings Clinic in Montana, Intermountain Healthcare in Utah, the Cleveland Clinic in Ohio, the Mayo Clinic in Minnesota, Sutter Health in California, and the Marshfield Clinic in Wisconsin as “innovative integrated health providers” expressing serious concerns with details of the CMS draft rule on ACOs. 

“The concerns over the ACO regulation from some of our nation’s most knowledgeable and innovative health care providers are clear,” the seven senators wrote. “Incentives and accountability are misaligned.”

Benefits Of Revised ACO Plan

The model of ACOs remains promising, the group of senators noted, saying more ACO-like coordination among providers and beneficiaries is a worthwhile goal.
“An ACO model that can increase provider coordination and patient accountability would be a step in the right direction compared with today’s fragmented delivery system. However, it is increasingly clear this proposed rule misses the target,” the letter said.
In addition to the senators asking for a redraft, all 10 participants of the CMS Physician Group Practice Demonstration sent a joint letter to the agency saying they had “serious reservations” about many of the major provisions, including the downside risk, the required financial investment on the part of the ACOs, and the large number of quality measures. The American Medical Group Association (AMGA) and the American Hospital Association have also raised red flags in advance of submitting formal comments.
AMGA, which represents big multi-specialty medical groups like Mayo, listed its objections in a letter to CMS. The group wants big changes to the draft, including not requiring providers to face financial risks if they participate in ACOs and do not save money; lowering the threshold for required savings from as much as 3.9 percent to a rate of 2 percent; and telling providers ahead of time, not retroactively, which patients are in the ACO, among other items.

New CMS Programs Unveiled

CMS did respond in part to the criticism by coming out with a new plan in May aimed at speeding ACOs to implementation. The so-called Pioneer ACO Model is intended to attract organizations experienced in care coordination to move rapidly by a mid-July deadline to a shared savings model and population-based payments.
This “Pioneer” version will seek to find 30 teams of doctors, hospitals, and other providers of care across the country that have coordinated-care experience and the ability to be up and operational by the fall. CMS also announced it would consider help for less mature, cash-strapped provider groups to form ACOs by giving them some of their share of expected savings up-front.
It is not known how many providers or groups of providers will take part in either the accelerated Pioneer ACO model or the cash up-front program.