Published 12/1/2011
Richard J. Martin, JD

ACO final rule affords providers greater flexibility

Changes ease requirements for participation, address AAOS concerns

On Oct. 20, 2011, the Centers for Medicare and Medicaid Services (CMS) released its final rule setting out parameters for accountable care organizations (ACOs) to be formed under the Medicare Shared Savings Program (MSSP). ACOs are arrangements among healthcare providers designed to reduce healthcare expenses through improved care coordination and higher quality care. The final rule will go into effect on Jan. 3, 2012.

The final rule significantly modified provisions of the proposed rule that was released on March 31, 2011, by easing requirements for ACO participation. Implementation of the final rule is expected to move quickly. The ACO program will be established by Jan. 1, 2012, and the first round of applications will be due in early 2012, with initial ACO agreements starting in April and July 2012. CMS hopes expanded eligibility, reduced structural requirements, and enhanced financial incentives may encourage more providers to participate.

Shared-savings models
The final rule retains two shared-savings models that were presented in the proposed rule. The first model, however, has been modified to eliminate sharing of downside risk. Under both models, providers that achieve certain quality and cost goals will be eligible for bonuses based on savings. Under the final rule, the maximum shared savings with the ACO will be increased to 10 percent of the benchmark for the one-sided risk model (without downside risk) and 15 percent of the benchmark for the two-sided risk model.

Moreover, ACOs will receive shared savings that exceed the threshold, starting with the first dollar of savings. Other modifications to the proposed rule will also offer ACO participants greater flexibility. For example, recognizing it may take longer than the initial term for an ACO to realize shared savings, CMS will allow continued participation by ACOs that experience a net loss during their first agreement period.

Providers will have greater flexibility in board and governance structures. The requirement that each ACO participant must choose someone from within its organization to represent it on the governing body has been eliminated. Although the provision requiring beneficiary representation on the governing body has been retained, the final rule allows providers to offer an alternate proposal for innovative ways to involve beneficiaries in governance.

An ACO that does not meet the 75 percent participant control requirement may offer an alternate proposal for engaging participants. The requirements that the physician leadership of clinical management and oversight be engaged full-time in those activities and that the ACO establish a physician-directed quality assurance and process improvement committee have also been eliminated. Rather, the rule requires the ACO applicant to have an ongoing quality assurance and improvement program. The final rule also clarifies that an ACO participant cannot also participate in another Medicare program or demonstration project involving shared savings.

Beneficiary assignment
Significantly, the methods for assigning beneficiaries to an ACO was modified to allow for preliminary prospective assignments followed by retrospective reconciliation. Beneficiaries will be prospectively assigned and identified quarterly, with final reconciliation after each performance year.

A two-step assignment process. is outlined. Assignment of beneficiaries who have received at least one primary care service from a physician will be based on the plurality of allowed charges for primary care physicians. If the beneficiary has not received any primary care services from a primary care physician, assignment will be based on the plurality of allowed charges for primary care services rendered by any other ACO professional.

This new beneficiary assignment methodology, which allows assignment of beneficiaries based on how they receive primary care services, takes into consideration the primary care services provided by specialist physicians. The proposed rule had excluded consideration of primary care services provided by specialists in assigning beneficiaries.

Quality measures
The number of quality measures that ACOs will have to meet to qualify for performance incentives has been reduced from 65 to 33 and phases in performance requirements over a 3-year period. It eliminates the requirement that 50 percent of primary care physicians must be meaningful electronic health record (EHR) users, but gives extra weight to EHR as a quality measure.

The final rule also enhances data sharing with participants and establishes an advanced-payment program for small, physician-owned, and rural hospitals that lack capital to start an ACO. Under expanded eligibility requirements, both federally qualified health centers and rural health centers can now form and participate in an ACO.

Risk adjustment
Calculation of the risk-adjustment benchmark was also modified. The proposed rule based the risk-adjusted benchmark on historical expenditure data for assigned beneficiaries. Under the final rule, CMS will re-state the risk adjustment benchmark for each performance year, based on risk-adjustment severity and case mix scores for assigned beneficiaries. This annual risk adjustment, however, will use only demographic factors.

CMS explains this modification to the proposal by expressing concern “that liberally adjusting for changes in risk scores for beneficiaries assigned to the ACO for the entire agreement period could create an incentive for ACOs to use coding practices intended to optimize their risk scores to achieve shared savings.”

Self-referral and antikickback
Related policy statement documents released jointly by the Federal Trade Commission and the Department of Justice antitrust division eliminate mandatory antitrust review and add a grandfather rule that extends the policy statement to groups formed before the passage of the Accountable Care Act (March 23, 2010).

The agencies will offer voluntary, expedited 90-day reviews for ACO applicants that desire additional antitrust guidance. It is important to note, however, that the policy statements do not weaken substantive antitrust rules. Moreover, under the final rule, CMS will assist the antitrust agencies by providing aggregate claims data regarding allowable charges and fee-for-service payments for ACOs participating in the shared-savings program to help identify potentially anticompetitive conduct, including consolidation.

The policy statements do enhance waivers of the physician self-referral law and the federal antikickback statute. The final waiver document, an interim final rule with comment period, includes two waivers as previously proposed and three new waivers. The waivers will now apply to the following situations:

  • start-up arrangements in anticipation of participating in the MSSP
  • ACO-related arrangements during the term of the ACO’s participation agreement and for a specified time thereafter
  • distributions and uses of shared-savings payments
  • arrangements that implicate the physician self-referral law and meet an existing exception
  • medically related incentives offered by ACOs under the shared-savings program to beneficiaries to encourage preventive care and compliance with treatment regimes

AAOS input
A number of the changes made in the final rule are consistent with the comments submitted by the American Association of Orthopaedic Surgeons (AAOS) on the proposed rule. Earlier this year, the AAOS expressed concern that draft provisions made it difficult for solo practitioners, small groups, and small hospitals to participate. The AAOS advocated for relaxing governance requirements, eliminating downside risk sharing from one of the shared savings models, waiving the EHR requirements for participation, and reducing the number of quality measures to be reported. The final rule attempts to accommodate these concerns.

The AAOS also was critical of mandatory antitrust review, which has been eliminated in the final rule. The AAOS remains proactive on this issue and will address outstanding concerns in its comments and other communications with agency and Congressional leadership.

Richard J. Martin, JD, is manager, federal regulatory affairs, in the AAOS office of government relations. He can be reached at rmartin@aaos.org