Accountable Care Organizations: A Framework for Evaluating Proposed Rules

Elliott Fisher and
Elliott Fisher Director, Center for Population Health
Mark B. McClellan
Mark B. McClellan Former Brookings Expert, Director, Margolis Center for Health Policy - Duke University

March 31, 2011

The Centers for Medicare & Medicaid Services (CMS), the Office of the Inspector General, the Federal Trade Commission and the Antitrust Division of the Department of Justice, and the Internal Revenue Service have released proposed regulations for implementing Section 3022 of the Patient Protection and Affordable Care Act (ACA), the Medicare Shared Savings program. The program will govern the short-term implementation of Accountable Care Organizations (ACOs) in Medicare.

The publication of these proposed regulations is an important step in enabling Medicare to help providers deliver better care for patients. The regulations represent a comprehensive and thoughtful effort to address a wide range of key issues for Medicare ACOs. Careful review and constructive analysis by the many groups who may be affected by the regulations – important work for all of us – is needed now to build on the proposed regulations. In this commentary, we provide a brief overview of the origins and rationale for the ACO program, and some initial details on the just-released regulations. We then outline the major issues that we believe will be important to consider as a very wide range of interested groups develop responses to the proposed regulations. We expect to provide further comments on these issues as the ACO implementation process continues.

The goal of the ACO program is a simple one: to improve care for Medicare beneficiaries and thereby improve their health and lower health spending. The approach focuses on helping physicians, hospitals, and other health care providers achieve this goal by providing more financial support when they work together to improve quality while lowering costs.

ACOs are expected to carry out a number of activities toward this end. Doing so will likely require investment in health information technology (HIT); establishing effective referral and transition procedures; and working with nurses, pharmacists or other health professionals to prevent costly complications of chronic diseases. These activities take time, effort, and money; the ACO regulations are intended to provide new financial support for effective investments to improve care.

As set forth in the regulations released today, the Centers for Medicare and Medicaid Services is proposing to implement two different tracks for organizations wishing to become ACOs. The first track is a “one-sided risk model,” in which there would be sharing of savings only for the first two years and sharing of savings and losses in the third year. A second track would be for a two-sided risk model in which providers and the government alike share in savings and losses for all three years. An ACO could opt for either model, based on its experience and capacity to implement reforms to improve care and lower costs. Under both models, ACOs will be required to produce and then improve on 65 different quality metrics across five domains: The patient or caregiver’s experience of care; care coordination; patient safety; preventive health; and at-risk population health or the health of frail elderly populations. ACOs will also have to meet a number of other regulatory oversight requirements.

The Department of Justice (DOJ) and the Federal Trade Commission (FTC) also issued guidance today about allowing ACOs and other innovative health care delivery organizations to form without running afoul of antitrust laws. For example, DOJ and FTC propose to give so-called “rule of reason” treatment to an ACO if the ACO follows similar structures and processes in the commercial market; describe a “safety zone” as well as what might be described as risky zones based on the ACO’s market share; and propose a process for potential ACOs to seek an expedited antitrust review.

Clearly the ACO program alone is unlikely to be a silver bullet to improve quality or lower costs. As we have noted previously, it is likely to work best when it is implemented along with other reforms in payment and benefits to promote better care. But depending on how the regulation and implementation process move forward, ACOs could have a substantial impact on real health care reform.

Read the full post at Health Affairs Blog »