In our last post, we discussed the basics of ACOs: what they are and why they have become such a hot topic in the healthcare industry. Before ACOs officially launch in January 2012, there are many details still to be worked out, both within the industry and by potential patients.
How would ACOs be paid?
In Medicare’s traditional fee-for-service payment system, doctors and hospitals are usually paid more when they give patients more tests and do more procedures — but this drives up costs. ACOs would create savings incentives by providing bonuses to providers who keep costs down and meet specific quality benchmarks, who focus on prevention and managing patients with chronic diseases. Providers would get paid more for keeping their patients healthy and out of the hospital.
Under the rule proposed by The Centers for Medicare and Medicaid Services (CMS), Medicare would continue to pay individual health care providers and suppliers for specific items and services. CMS would develop benchmarks and rate ACO performances to see which organizations would receive shared savings or be held accountable for losses. If an ACO is not able to save money, it would have to pay the costs of investments made to improve care, such as adding new nurse care managers, but would still get to keep the standard Medicare fees.
ACOs will be under pressure to provide high quality care because if they don’t meet standards, they won’t get to share in any savings – and could lose their contracts.
CMS has designed both a one-sided risk model (sharing of savings only for the first two years, sharing of savings and losses in the third year) and a two-sided risk model (sharing of savings and losses for all three years), allowing the ACO to opt for either model.
How would patient care be measured?
CMS’s proposed rule proposes quality measures in five key areas that affect patient care:
• Patient/caregiver experience of care
• Care coordination
• Patient safety
• Preventive health
• At-risk population/frail elderly health
CMS has set out proposed performance standards for these measures and a planned scoring methodology, including safeguards to prevent ACO providers from being penalized for treating patients with more complex conditions.
How would an ACO be different for patients?
Primary care doctors who belong to an ACO would be required to inform their patients, especially if they refer patients to hospitals and other practitioners within their ACO. Patients would still be free to see doctors of their choice outside the network without paying more, but this would defeat the purpose of an ACO.
If a patient doesn’t like HMOs, why would they consider an ACO?
ACOs may sound a lot like health maintenance organizations, but one critical difference is that ACO patients are not required to stay in the network.
Is the healthcare industry prepared to make this change?
Steve Lieberman, a visiting scholar at the Engelberg Center for Health Care Reform at the Brookings Institution, says that the health industry tends to operate with “kind of a herd behavior,” rushing to implement an idea “without working through the detailed business questions of how they’ll work.”
Many economists fear that the rush to form ACOs could have a significant downside: hospital mergers and provider consolidation. As hospitals purchase physician practices in attempt to create integrated systems, this will leave fewer independent hospitals and doctors. Greater market share will give these health systems more leverage in negotiations with insurers, which can drive up health costs.
Are ACOs legal?
Some doctors, hospitals and other professionals in the health care industry have wondered whether ACOs violate antitrust and anti-fraud laws, which try to limit market power that drives up prices and stifles competition. Another concern is that ACOs in smaller markets could grow so large that they would employ the majority of providers in a region.
In response to these concerns, the Department of Justice and the Federal Trade Commission have worked together to give medical practitioners guidance on how to avoid running afoul of antitrust law when forming ACOs.