Final Regulations for Accountable Care Organizations

On Thursday, October 20, 2011, the United States Department of Health and Human Services (“DHHS”) released its final regulations for accountable care organizations (“ACOs”). As you may recall, the primary goals of ACOs are to realize cost savings and improve quality of care by encouraging primary care physicians, specialists, hospitals, and other health care providers to coordinate their care for Medicare fee-for-service beneficiaries and commercially- insured patients.

When DHHS released its proposed ACO regulations, a wide spectrum of health care providers voiced concerns that the program was overly burdensome in light of the anticipated savings that would be shared by participants. The recently-released ACO final regulations contain a number of changes that were implemented in response to commenters from the private sector. Highlights of the changes include the following:
• Removing two-sided risk from Track 1 of the Medicare Shared Savings Program (“MSSP”).
• Adopting a preliminary prospective-assignment method with beneficiaries identified quarterly, with a final reconciliation after each performance year based on patients served by the ACO.
• Reducing the number of measures to assess quality to 33 measures in 4 domains.
• Implementing longer phase-in measures over the course of the MSSP agreement: first year, pay for reporting; second year and third year, pay for reporting and performance.
• Realizing shared savings on the first dollar for all ACOs in both Track 1 and Track 2 once the minimum savings rate has been achieved.
• Providing eligibility to Federally Qualified Health Centers and Rural
Health Clinics to form and participate in ACOs.
• Providing for establishment of the MSSP by January 1, 2012, with the first round of applications due in early-2012, and the first ACO agreements commencing on April 1, 2012 and July 1, 2012.
• Removing meaningful use of EHR as a requirement for participation.
• Adopting a two-step process for assignment of beneficiaries to an ACO.

Under the MSSP models initially proposed by DHHS, many commenters expressed concerns that the allocation of risk under the MSSP would serve as a barrier to ACO participation. As a threshold matter, this article will discuss important changes to the process of selecting a “track” under the MSSP which will allow an ACO that is unsure whether it will achieve savings in the initial term to participate in the MSSP without risk of loss.

As background, under the MSSP, groups of providers in ACOs who meet certain quality standards are able to share in savings the ACO achieves for the Medicare program. The general model is structured such that the higher the quality of care an ACO’s providers deliver, the more shared savings the providers can retain.

In the proposed rule, ACOs would be able to choose from two tracks when entering into the required three-year agreement with CMS to participate in the MSSP. Track 1 would consist of two years of one-sided shared savings with a mandatory transition in the third year to performance-based risk under a two-sided model of shared savings and losses (i.e., for the first two years, the ACO would not be at risk for loss in the event that it was unable to achieve savings). Track 2 would comprise three years under the two-sided performance-based risk model. Therefore, under the proposed rule, any ACO participating
in the MSSP would ultimately be required to undertake some risk of loss in the event it failed to achieve savings.

Under the final rule, DHHS elected to remove the two-sided risk from Track 1. Thus, two tracks will still be offered for ACOs: Track 1, which permits first dollar sharing without the requirement to repay losses, and Track 2, which provides higher sharing rates for ACOs willing to also share in losses. This change, and others made by DHHS in its final regulations, addressed many of the concerns expressed by private commenters, and should encourage participation in the MSSP.

If you are interested in learning more about ACOs, the Blalock Walters Health Care Team is ready to assist. Please contact our office for additional information.