Will Accountable Care Organizations Take Hold in Oncology?

Dawn Holcombe, MBA, FACMPE, ACHE
Editor-in-Chief
President, DGH Consulting, South Windsor, CT

When accountable care organizations (ACOs) were first proposed as part of healthcare reform possibilities, many in the healthcare industry jumped all over the term. An ACO is a group of healthcare providers who contract with Medicare to be responsible for taking care of the needs of 5000 or more patients under the terms of Medicare’s new ACO payment program that will begin on January 1, 2012.

According to the outline of this program, the providers (who may or may not be owned by hospitals) agree to adhere to certain “quality of care” requirements while they take care of these patients for a 3-year period. For each year, Medicare will compare the amount that it actually spent caring for these patients with some predicted amount that it expected to spend. If less is spent on these patients than expected—while still adhering to government-mandated quality standards—the Centers for Medicare & Medicaid Services (CMS) would share the savings with the members of the ACO. If more is spent on the patients than predicted, the ACO shares the losses.

Consultants were advising hospitals, physician groups, and other organizations how to prepare to become an ACO before the clarifications and proposed rules were issued by the government. Now that CMS has issued its 429-page proposed rule and groups have gotten a solid look at the expectations for risk, savings, and both the rewards and penalties attached to Medicare spending, reality has started setting in.

According to CMS, the program is voluntary, but there is a downside risk to participation. Participants will be paid as usual under “original” Medicare, but their performance as an ACO will be measured by CMS on an annual basis over a 3-year period. CMS assumes that 75 to 150 ACOs could participate, and that aggregated start-up investments and first-year operating expenses for all of these organizations could range from $131.6 million to $263.3 million. Participating ACOs can choose 1 of 2 shared savings and risk models (Table). Participants also will not know which beneficiaries are assigned to them until the care-year has ended, which increases the uncertainty and risk.

Apprehension Growing
Comments were due back to CMS on the proposed rule by June 6, 2011. Already some of the comments are being made public through press releases and articles, and most are very apprehensive. The American Medical Group Association warned CMS in its letter of May 13, 2011, that the proposed rules are “overly prescriptive” and “operationally burdensome.”

In a 2011 HealthLeaders Media Impact Analysis on ACOs, many key healthcare leaders from companies including Scripps Health, Alegent Health, Kaiser Foundation Hospitals, and Dean Health System expressed their reservations (www.healthleadersmedia.com/impactanalysis/265335). In this report, George Halvorson, CEO of Kaiser Foundation Hospitals—an organization that many may have expected to participate as an ACO—stated that his system, with 8.8 million members nationally, would not be participating, but would continue to participate in Medicare Advantage.

With comments unfolding up until the deadline, spokespersons for CMS have indicated that the proposed rule is receiving intense criticism, and that a high volume of comments and significant reaction could affect the final role of ACOs in oncology.

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