CMS ACOs Cannot Fail

Quite a bit of news around Physician Payment Reform has been released these last two weeks – rather silently from CMS. The ACA is built on three main premises; Coverage ExpansionInsurance ReformPhysician Incentive & Payment Change. And you know about how each of these pillars depends on each other. So when we read about new rules for ACO’s (Accountable Care Organizations) I hope you can align that with physician payment and payment reform.

In 2015 we see little ACA rollout of new components, but we see regulation change that will “remove the carrot and leave only the stick”. So I characterize 2015 as the “Year of the Penalty”. We will see penalties for hospitals increase AND for the first time, physicians will see reduced payment penalties (of up to 4%) for not including quality metrics for their Medicare patients.

ACO’s – that may be the benchmark for the future have undergone some significant changes as well. We saw a number of providers leave the Medicare ACO program earlier this year – as they we unable to meet the savings benchmarks that CMS set. The news around that was that key players left…like Sharp Health in San Diego which was the Pioneer ACO poster child for Medicare. CMS (and the ACA) can’t let the ACO model fail – as it is the platform for payment reform. Both the bundled payment and global payment models are being used here first. So CMS is changing the rules and most importantly DELAYING the penalties that would have happened this year. CMS had to act – commercial ACO’s are outstripping the savings seen in Medicare ACOs because they can configure the model differently.

So what’s the difference?  – If I can over simplify this: CMS Medicare ACO’s are built around patient and delivery metrics only. Commercial ACO’s can configure against either the patient side or more macro saving venues. The best example of a successful flagship commercial ACO is the CIGNA/ Dartmouth Hitchcock ACO in New Hampshire. CIGNA splits savings 50/50 with the Dartmouth system based on global metrics like readmission rates, cross site medical record sharing, prescription fill rates, etc.  Does this improve care? The short answer is yes, as the system becomes more efficient and system becomes more patient supportive, care improves. CMS wasn’t blind to this and had to act to preserve their ACO base….so they increased the “keep” side of the savings from .60 cents on the dollar to .75 cents and they delayed (for 3 years) the downside penalty of costing Medicare more ( the risk was 10% but increased to 15% under new rules). This rule delay may keep more Medicare ACO’s afloat – at least long enough for the new payment models to become implemented and field tested.

Does This Impact You?

Yes…as long as you have products used within Medicare you will indeed be impacted by both payment changes and quality requirements. Additionally, the commercial dialog may have to change as well – the question is, can you align your products to perform around those saving dynamics within a commercial ACO?

While there is no contest about 2014 being the biggest year for ACA roll out, if you thought that 2015 was going to be quiet, think again. Once physicians learn that they will be required to capture patient improvement (quality metrics) or be penalized up to 4% on reimbursement – it could alter the Medicare provider landscape. The fact that this was done without fanfare or much public notice could spell trouble for Medicare providers’ nationwide.

Watch for more market driven changes for ACO’s….payment change based on quality is just now upon us.

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