ACO regulations....

Well, the HHS finally released the new ACO regulations. CEO's and CFO's at numerous hospitals, health care systems, centers, and even large and small group practices finally have some information.

To be honest, the entire ACO concept has been scaring pretty much every health administrator in the country since the PPACA was passed last year.

The reason lies in Section 3022 of the bill, which outlines the ACO concept, and was originally intended for all practices caring for at least 5,000 patients. PA's were included in the original language.

The original provisions called for a formal legal structure that would allow the organization to receive and distribute payments for shared savings to participating providers of services and suppliers.
Enough primary-care providers to handle at least 5,000 patients.
A way of implementing "quality and other reporting requirements".
A leadership and management structure that includes clinical and administrative systems.
Processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies.

Sounds simple right?

Well, it scared everyone because of the history of ACO's. To be honest, we haven't seen an "actual" ACO in existence, but in 2005 CMS sponsored a 10 site pilot project called the "Medicare Physician Group Practice Demonstration", this was the forerunner to the current ACO.

8 of the 10 saw no savings in the first year. This was complicated by high initial start up fees, with 1.65 million needed for the first years costs, and average up front costs of 489,000.

This, while expected, as the real savings inherent in the ACO construct are only realized after several years, obviously scared the living daylights out of almost every hospital or group administrator.

Under the regulations just released (429 pages), those organizations which join or become ACO's and are caring for up to 5,000 patients will still be reimbursed on a fee for service scale, for now at least. There will subsequently be two paths for these organizations to take.

Larger organizations with more tolerance for risk, such as CCF, Mayo, Intermountain Health, etc., can see a bonus of up to 60% of any savings generated through the new model. They can also have to repay CMS for any cost overruns, for starters, up to 10% of what Medicare would have spent on those patients in a NON ACO setting.

Smaller organizations can still participate, though with less risk exposure, and can see a bonus of up to 50% of any savings generated. They can also have to repay amounts up to 7.5% in the form of penalties in the third year.

CMS estimates that organizations could earn bonuses of up to 800 million dollars over the next three years, while spending less per Medicare enrollee, and meeting quality objectives. Conversely, they estimate payments in the form of penalties of close to 40 million over the same time period by organizations that are not able to keep cost overruns under control.

I don't think this will quell many nerves....