Final ACO rule includes several changes favorable to hospitals

Facilities may find requirements to be less burdensome

More often than not, when the Centers for Medicare & Medicaid Services (CMS) issues a proposed new rule, the comment period is opened and several months later a final rule emerges that bears fairly close resemblance to the original. In the case of CMS's final rule on accountable care organizations (ACOs), however, its recent unveiling showed several significant changes — and hospital professionals couldn't be more pleased.

"I think the agency really heard the comments from the provider community, and we're hearing that folks are very satisfied with a lot of the changes," says Amanda Forster, senior director, public relations for Premier Healthcare Alliance.

One of the biggest changes she says Premier is "very supportive of" is CMS's modification of the whole approach to risk. "There is now a no-downside risk option, which is a big change and very welcome," she says.

In earlier versions of the rule, there were to be two tracks of risk and reward for participating groups, with the first track defining lower risks and reward than the second track. However, several groups argued that the first track should be risk-free, in light of the high startup costs for an ACO (some estimates put them at nearly $2 million), and CMS responded by eliminating risk in the first track.

"As we learned through our collaboratives, different providers are at different points on their journey, and some are less risk-averse," says Forster. "This change really helps encourage some levels of participation, as more conservative organizations may need more capital on-hand. Essentially, it means CMS will allow you to join the shared savings program and if for whatever reason you do not achieve savings you will not be liable for those expenditures."

The way it worked in the proposed rule, she explains, was that you had to assume some risk in three years — even with the Track One option. "If your spending was higher than the targets, you would owe CMS money; there was a lot of pushback because many facilities were not experienced or able enough," says Forster.

Other financial benefits

There are other changes that will help hospitals financially, says Lisa Grabert, senior associate director for policy at the American Hospital Association. "The biggest change is found within the incentive section," she says. "Originally the scale was tipped a little toward CMS in taking the lion's share of the bonuses being generated from the program, and they significantly backed away from that in the final rule." The final rule, she says, will allow hospitals to get back a greater portion of the up-front investment they have to make to become an ACO.

"This was a change we really needed to see; previously there was a 2% threshold CMS would take right off the top, but instead of doing that the finalized ACO rule enables hospitals to share in first-dollar savings," Grabert says.

Forster is also supportive of the new approach to first-dollar savings. "This represents very big savings in terms of funding an ACO, and CMS deserves a lot of credit in terms of being more realistic," she says.

Quality requirements "more manageable"

Forster also responded positively to the reduction in the number of quality measures ACOs would have to report — from 65 to 33. "They have made it much more manageable," she says. "Now, they can be phased in over time — it's not too big a bite. ACOs can get their feet wet, and learn over time."

Grabert agrees. "First, it allows people to concentrate on more of a core set of measures so they can really affect change; a much broader set might be much more difficult to get your hands around and produce real quality improvement," she says. "In addition, collecting quality measures is pretty burdensome and costly — so with a smaller set you'll not only see greater improvement overall but it will be less financially burdensome."

One of the reasons more core measures would be so burdensome, she explains, is that there is "not a whole lot of overlap" between these measures and the more traditional CMS core measures, or those of The Joint Commission. "This is more about managing populations rather than inpatient care, so the measures are a lot different," Grabert says.

Speaking of quality, Forster sees "a huge, huge role" for quality managers as ACOs start forming. "Central to all of this will be ensuring a quality experience, so when someone has a condition and requires a hospital stay you want to make sure there is no harm, no infection, no stinting on care that would result in a readmission," she says. "The quality folks have a role to play in ensuring the ACO achieves those measures; a high-quality hospital system is needed."

"One of the benefits of the Affordable Care Act (of which ACOs are a part) is the increased emphasis on quality; it heightens the profile of quality because it is more tied to reimbursement," Grabert says. "Specifically, the role of quality within the ACO program is that your scores will yield a higher or lower sharing rate in terms of the overall bonus you can generate, so [the quality manager is] a really critical component of the ACO."

Accountability is key

On the larger scale, what will the advent of ACOs mean for hospitals and patients? "I think overall we're asking our members to focus on the first two words — accountable care," says Grabert. "The whole ACO concept has helped our members grasp that concept more. They're looking beyond what they provide to patients outside the four walls of their facilities and trying to improve upon care after discharge, and periodically following up with patients. They're going above and beyond what they have traditionally been reimbursed for."

"From the perspective of our members — and we have two collaborations of hospitals and systems working to put these sorts of capabilities in place — we have learned that the fee-for-service model can be very limiting," says Forster. "You're not as able to coordinate care, and it's tougher to align incentives." Under this model, she continues, "it's no secret that all these payments are in line for future cuts by Congress. A lot of people are saying that's just not a sustainable system, and we need to look at alternatives."

The ACO model, says Forster, "creates those incentives so providers are able to coordinate care better and work as a team. In the past you had things like Stark and anti-trust that kept providers separated and silo-ed. This is our first opportunity to take that leap."

The change, she continues, will also be good for patients. "People will really like their care under these new models," she says. "They are very person-centric, and intended to be customized. The patient will feel they are an integral member of the care team and everyone will work together to make sure you have the best possible outcome."

[For more information, contact:

• Amanda Forster, Senior Director, Public Relations, Premier Healthcare Alliance, 444 N. Capitol St. NW, Suite 625, Washington, DC 20001. Phone: (202) 879-8004. E-mail:

• Lisa Grabert, Senior Associate Director for Policy, American Hospital Association, 155 N. Wacker Dr., Chicago, Illinois 60606. Phone: (312) 422-3000. 325 7th Street, N.W., Washington, DC 20004-2802. Phone: (202) 626 2305. E-mail:]