Final Rule on Medicare Shared Savings Programs for ACOs Released
Today's post was authored by FWH attorney Sue Nolan
The final rule implementing provisions of the Medicare Shared Savings Program for Accountable Care Organizations (“Final Rule”) was released by the Centers for Medicare and Medicaid Services ("CMS") on October 20, 2011. The Final Rule will be published in the Federal Register on November 2, 2011, and sets forth requirements for Accountable Care Organizations ("ACOs") under the Medicare Shared Savings Program. These requirements pertain to how ACOs are formed, the governance of an ACO, the entry into an ACO agreement with CMS, who may form an ACO, who may join an ACO, beneficiary assignment, quality reporting, calculation of and sharing of savings and losses and termination of an ACO.
The Final Rule contains several changes that addressed comments made by the various stakeholders on a proposed rule published by CMS on March 31, 2011 (“Proposed Rule”).
Listed below are some of the most important changes made in the Final Rule. On the whole, the changes are expected to make formation of and participation in an ACO more appealing to providers and health systems, in part because the financial incentives are stronger and the compliance burdens are somewhat less. (Note: A separate Health Care Lawyer Blog post will follow addressing the interim final rule issued by the OIG setting forth certain waivers of Stark, the Federal Anti-Kickback Statue, and certain civil monetary penalties law provisions that apply to specified arrangements involving ACOs.
Background on ACOs. The goals of the Medicare Shared Savings Program are to provide better care to Medicare beneficiaries, promote better health for the Medicare population, and reduce the growth in Medicare expenditures. In short, an ACO is expected to increase the quality of care while at the same time reducing the cost of care. An ACO is a legal entity recognized and authorized under applicable state, federal or tribal law, is identified by a taxpayer identification number, formed by one or more ACO eligible participants, and may include other participants. The ACO provides the structure for coordinating care, controlling the quality of care given to Medicare beneficiaries, distributing shared savings payments or paying for losses.
After the jump - Important highlights from the Final Rule
More Streamlined Quality Reporting. The Final Rule reduces quality measures by at least half. Under the Final Rule, ACOs must report on 33 quality measures in four domains instead of the previously 65 quality measures over five domains set forth in the Proposed Rule. Complicated care coordination measures relating to complications of chronic disease have been eliminated. The quality reporting changes are expected to benefit organizations that are just beginning to build a clinical integration model.
EHR Use Not Required but Encouraged. Lack of meaningful use of Electronic Health Records ("EHRs") is no longer a barrier to participation in an ACO. The Final Rule has eliminated the eligibility requirement that at least 50% of the primary care physicians in an ACO be meaningful users of EHRs. However, use of EHRs is a quality measure that is weighted more highly than any other measure for quality-scoring purposes. Accordingly, meaningful use will affect the amount of shared savings payments since the payments vary with quality scores.
No Mandatory Loss Sharing. The elimination of the requirement that all ACOs share in losses during their first three-year agreement is one of the most important changes that will benefit an ACO’s bottom line. The Final Rule still sets forth two ACO tracks or models but has significantly modified the one-sided model. In the “one-sided” model, ACOs share in any savings but do not share in any losses. In the two-sided model, ACOs share in both savings and losses. ACOs may share up to 50 percent of the savings in the one-sided model and up to 60 percent of the savings in the two-sided model.
The amount of shared savings also depends on how well the ACO performs on various quality measures. During the first year of an ACO’s existence, shared savings payments are based upon accurate reporting. During subsequent years, shared savings payments are based on both accurate reporting and performance.
First Dollar Shared Savings. Another important change impacting an ACO’s bottom line is the elimination of the provision that allowed CMS to establish a minimum savings rate that had to be met prior to sharing any savings. Under the Final Rule, shared savings (and shared losses) will be calculated on the total savings or losses and not just the amount by which the savings or losses exceed the minimum savings or loss rate.
No Withholding of Payments. The Final Rule does not require CMS to withhold a certain portion of the shared savings to offset potential future losses. Under the Proposed Rule, CMS would have withheld a flat 25 percent of the shared savings payments, with positive balances being returned to the ACO only at the end of the three-year agreement period. Under the Final Rule, an ACO participating in the two-sided model must specify how it will repay losses and propose a mechanism that must provide for repayment of potential losses equal to at least 1 percent of total per capita Medicare Pats A and B fee-for-service expenditures for assigned beneficiaries based either on the most recent performance year or expenditures used for the benchmark. An ACO participating in the one-sided model and requesting an interim payment must also propose such a mechanism.
New Advance Payment Model -- Financing Help. Under the Advanced Payment Model, CMS will now provide upfront payments to certain ACOs to help with the capital costs of forming an ACO. Under the Advanced Payment Model, physician-led practices and rural hospitals participating in the Shared Savings Program could receive upfront payments for ACO participation. Such payments are intended to help defray start-up costs for personnel and IT infrastructure. CMS expects to recoup such payments by deducting them from the ACO’s future shared savings. The advance payments are only available to ACOs that do not include inpatient facilities and have less than $50 million in revenue, or ACOs in which the only inpatient facilities are critical access hospitals and/or Medicare low-volume rural hospitals and have less than $80 million in total annual revenue.
Assignment of Patients. Under the Final Rule, patients will be assigned prospectively each year instead of retrospectively. At the end of every year there will be a reconciliation to make sure that CMS assigned the beneficiaries to the appropriate ACO.
Rolling Start Dates. The Final Rule permits ACO agreements to start on April 1, 2012 and July 1, 2012. Such ACOs will have agreements with a first performance “year” that is either 18 months long (for those ACOs starting in July) or 21 months long (for those ACOs starting in April). For 2013 and any subsequent year, ACOs may start on January 1 of that year. The term of the ACO’s agreement with CMS is three years except for ACOs staring April 1, 2012 which have a term of 3 years and 9 months and ACOs starting July 1, 2012 which will have a term of 3 years and 6 months.
Marketing Materials. The Final Rule does not require CMS to approve the marketing materials to be used by the ACO. ACOs will still need to file their marketing materials with CMS and certify that such materials comply with all marketing guidelines. The ACO may begin using such materials 5 days after they are filed.
Federally Qualified Health Centers and Rural Health Clinics. These groups are now eligible to form an ACO.
