Managing Your Dermatology Practice: Accountable Care Organizations

My recent post on the potential impact of Congress's 2010 health care legislation generated numerous questions about one of its centerpieces, the Accountable Care Organizations.

Many of those questions cannot be answered to anybody's satisfaction, because ACOs don't exist yet, and we won't know exactly what form they will take until finalized rules emerge from the Centers for Medicare and Medicaid Services (CMS).

ACOs are billed as Medicare's vehicle for "improving the quality and efficiency of care," which, in government-speak, typically translates to cutting costs.

The CMS envisions each ACO as a coalition of providers, hospitals, and suppliers working together to coordinate care for patients. Each will be run by a board composed of both providers and patients; increased patient input is a core tenet of the legislation. "We believe the best way to demonstrate a patient-centered program is for Medicare beneficiaries to have a voice in the decision-making process," the rule proposal states.

Medicare patients can join an ACO if they wish. Those who join can see any Medicare provider, inside or outside their ACO, and there is no penalty for going out of network.

What exactly will constitute an ACO is left vague. Since each ACO will be responsible for a minimum of 5,000 Medicare beneficiaries, any private health care organization of sufficient size, and with sufficient financial resources, could develop and operate one. This might include a primary care group or multispecialty clinic, a coalition of individual practices, a large teaching hospital, or a consortium of smaller community hospitals.

It is not clear how sparsely populated areas encompassing less than 5,000 beneficiaries will be accommodated. Equally undefined is the role of specialists; presumably they could join several different ACOs, or in some situations form coalitions of their own, but no guidance has been given.

The Department of Health and Human Services (HHS) will negotiate a 3-year contract with each ACO, set target spending goals – based on reducing the average per-patient spending by a specific percentage, as adjusted by "beneficiary characteristics," – and establish care-quality benchmarks.

Each ACO, in turn, will be required to define processes to coordinate care. Suggestions in the rule proposal include use of case managers, remote monitoring, and telehealth. Electronic health records will, of course, be strongly encouraged as well.

ACOs that "improve care" (read: save money) will divvy up the shared "savings" via an incentive system, and those that don't will be held accountable for "losses." Each ACO will decide how to distribute incentive payments among its member providers, hospitals, and suppliers.

ACOs can opt to share both savings and losses for the entire 3-year period, or they can share savings in the first 2 years and both savings and losses in the last year. The advantage, if any, in sharing savings without sharing losses is not clear to me – but I haven't made it through all 400 pages yet.

The buzzword, as I've said before, will be "outcomes" – the better your measurable results, the higher your reimbursements. This is supposed to reward quality of care over volume of procedures; but the result could be exactly the opposite if the smaller, community-based ACOs "cherry pick" the quick, easy, least risky cases, and refer anything time consuming or complex to academic centers.

Under current proposals, HHS rulings would be final: Eligibility for shared savings, percentages of shared savings received, and penalties (which include "termination" for failing to meet performance benchmarks) are non-negotiable. There is no provision for administrative or judicial review; nor is there any clue as to the fate of patients cast out of "terminated" ACOs.

ACO rules do not include private insurers or employers, but they will be permitted to form ACOs for their Medicare patients if they so desire. If the concept proves successful in driving down costs (don't hold your breath), look for private carriers to adopt similar models, each with its own completely different set of rules to add to the confusion.

As I mentioned a few months ago, this sounds like a large potential problem for private practice as we know it. But again, it's too early for reliable predictions; and we haven't even discussed other "reform initiatives" in the legislation, such as medical homes, value-based purchasing, and bundled payments. The next few years are going to be interesting.

My recent post on the potential impact of Congress's 2010 health care legislation generated numerous questions about one of its centerpieces, the Accountable Care Organizations.

Many of those questions cannot be answered to anybody's satisfaction, because ACOs don't exist yet, and we won't know exactly what form they will take until finalized rules emerge from the Centers for Medicare and Medicaid Services (CMS).

ACOs are billed as Medicare's vehicle for "improving the quality and efficiency of care," which, in government-speak, typically translates to cutting costs.

The CMS envisions each ACO as a coalition of providers, hospitals, and suppliers working together to coordinate care for patients. Each will be run by a board composed of both providers and patients; increased patient input is a core tenet of the legislation. "We believe the best way to demonstrate a patient-centered program is for Medicare beneficiaries to have a voice in the decision-making process," the rule proposal states.

Medicare patients can join an ACO if they wish. Those who join can see any Medicare provider, inside or outside their ACO, and there is no penalty for going out of network.

What exactly will constitute an ACO is left vague. Since each ACO will be responsible for a minimum of 5,000 Medicare beneficiaries, any private health care organization of sufficient size, and with sufficient financial resources, could develop and operate one. This might include a primary care group or multispecialty clinic, a coalition of individual practices, a large teaching hospital, or a consortium of smaller community hospitals.

It is not clear how sparsely populated areas encompassing less than 5,000 beneficiaries will be accommodated. Equally undefined is the role of specialists; presumably they could join several different ACOs, or in some situations form coalitions of their own, but no guidance has been given.

The Department of Health and Human Services (HHS) will negotiate a 3-year contract with each ACO, set target spending goals – based on reducing the average per-patient spending by a specific percentage, as adjusted by "beneficiary characteristics," – and establish care-quality benchmarks.

Each ACO, in turn, will be required to define processes to coordinate care. Suggestions in the rule proposal include use of case managers, remote monitoring, and telehealth. Electronic health records will, of course, be strongly encouraged as well.

ACOs that "improve care" (read: save money) will divvy up the shared "savings" via an incentive system, and those that don't will be held accountable for "losses." Each ACO will decide how to distribute incentive payments among its member providers, hospitals, and suppliers.

ACOs can opt to share both savings and losses for the entire 3-year period, or they can share savings in the first 2 years and both savings and losses in the last year. The advantage, if any, in sharing savings without sharing losses is not clear to me – but I haven't made it through all 400 pages yet.

The buzzword, as I've said before, will be "outcomes" – the better your measurable results, the higher your reimbursements. This is supposed to reward quality of care over volume of procedures; but the result could be exactly the opposite if the smaller, community-based ACOs "cherry pick" the quick, easy, least risky cases, and refer anything time consuming or complex to academic centers.

Under current proposals, HHS rulings would be final: Eligibility for shared savings, percentages of shared savings received, and penalties (which include "termination" for failing to meet performance benchmarks) are non-negotiable. There is no provision for administrative or judicial review; nor is there any clue as to the fate of patients cast out of "terminated" ACOs.

ACO rules do not include private insurers or employers, but they will be permitted to form ACOs for their Medicare patients if they so desire. If the concept proves successful in driving down costs (don't hold your breath), look for private carriers to adopt similar models, each with its own completely different set of rules to add to the confusion.

As I mentioned a few months ago, this sounds like a large potential problem for private practice as we know it. But again, it's too early for reliable predictions; and we haven't even discussed other "reform initiatives" in the legislation, such as medical homes, value-based purchasing, and bundled payments. The next few years are going to be interesting.

My recent post on the potential impact of Congress's 2010 health care legislation generated numerous questions about one of its centerpieces, the Accountable Care Organizations.

Many of those questions cannot be answered to anybody's satisfaction, because ACOs don't exist yet, and we won't know exactly what form they will take until finalized rules emerge from the Centers for Medicare and Medicaid Services (CMS).

ACOs are billed as Medicare's vehicle for "improving the quality and efficiency of care," which, in government-speak, typically translates to cutting costs.

The CMS envisions each ACO as a coalition of providers, hospitals, and suppliers working together to coordinate care for patients. Each will be run by a board composed of both providers and patients; increased patient input is a core tenet of the legislation. "We believe the best way to demonstrate a patient-centered program is for Medicare beneficiaries to have a voice in the decision-making process," the rule proposal states.

Medicare patients can join an ACO if they wish. Those who join can see any Medicare provider, inside or outside their ACO, and there is no penalty for going out of network.

What exactly will constitute an ACO is left vague. Since each ACO will be responsible for a minimum of 5,000 Medicare beneficiaries, any private health care organization of sufficient size, and with sufficient financial resources, could develop and operate one. This might include a primary care group or multispecialty clinic, a coalition of individual practices, a large teaching hospital, or a consortium of smaller community hospitals.

It is not clear how sparsely populated areas encompassing less than 5,000 beneficiaries will be accommodated. Equally undefined is the role of specialists; presumably they could join several different ACOs, or in some situations form coalitions of their own, but no guidance has been given.

The Department of Health and Human Services (HHS) will negotiate a 3-year contract with each ACO, set target spending goals – based on reducing the average per-patient spending by a specific percentage, as adjusted by "beneficiary characteristics," – and establish care-quality benchmarks.

Each ACO, in turn, will be required to define processes to coordinate care. Suggestions in the rule proposal include use of case managers, remote monitoring, and telehealth. Electronic health records will, of course, be strongly encouraged as well.

ACOs that "improve care" (read: save money) will divvy up the shared "savings" via an incentive system, and those that don't will be held accountable for "losses." Each ACO will decide how to distribute incentive payments among its member providers, hospitals, and suppliers.

ACOs can opt to share both savings and losses for the entire 3-year period, or they can share savings in the first 2 years and both savings and losses in the last year. The advantage, if any, in sharing savings without sharing losses is not clear to me – but I haven't made it through all 400 pages yet.

The buzzword, as I've said before, will be "outcomes" – the better your measurable results, the higher your reimbursements. This is supposed to reward quality of care over volume of procedures; but the result could be exactly the opposite if the smaller, community-based ACOs "cherry pick" the quick, easy, least risky cases, and refer anything time consuming or complex to academic centers.

Under current proposals, HHS rulings would be final: Eligibility for shared savings, percentages of shared savings received, and penalties (which include "termination" for failing to meet performance benchmarks) are non-negotiable. There is no provision for administrative or judicial review; nor is there any clue as to the fate of patients cast out of "terminated" ACOs.

ACO rules do not include private insurers or employers, but they will be permitted to form ACOs for their Medicare patients if they so desire. If the concept proves successful in driving down costs (don't hold your breath), look for private carriers to adopt similar models, each with its own completely different set of rules to add to the confusion.

As I mentioned a few months ago, this sounds like a large potential problem for private practice as we know it. But again, it's too early for reliable predictions; and we haven't even discussed other "reform initiatives" in the legislation, such as medical homes, value-based purchasing, and bundled payments. The next few years are going to be interesting.