The Centers for Medicare and Medicaid Services (CMS) released the much-anticipated proposed regulations governing Accountable Care Organizations (ACOs) on March 31, 2011, and so far their reception by the healthcare industry has been decidedly negative. ACOs, a product of the Patient Protection and Affordable Care Act, are collaborative organizations of healthcare providers that are supposed to provide better care for Medicare beneficiaries at reduced costs. In return for meeting certain quality and spending targets for Medicare patients, CMS will share the savings with healthcare providers in ACOs..
Under the proposed regulations, ACOs would enter into three-year agreements with CMS, but could choose between two different options. Under the first option, if the ACO produced a savings of at least 2%, it would equally split the savings above that threshold with CMS. For the first two years of the three-year agreement, the ACO would not face penalties if it did not produce savings. Under the second option, the ACO would be able to keep 60% of its savings above the threshold, but would be penalized if it produced higher costs in any year of the agreement. Under either option, the participants in the ACO would have to meet 65 quality measurements to be eligible to share in any of the savings.
Since CMS released the proposed regulations, hospital systems, the American Medical Association, the American Hospital Association, and many providers have been critical of the regulations. They have two primary complaints. First, they argue that the potential rewards are too small and the risks are too high for providers. Second, they are concerned that CMS has not done enough to protect ACO participants from liability under antitrust and fraud and abuse laws.
Healthcare providers point out that to form an ACO, they will need to make significant investments in infrastructure and data collection, but they feel that the potential rewards if the ACO is successful will not be enough to justify the risk of such investments. The American Hospital Association has suggested that CMS share 80% to 90% of savings with ACOs—at least in the early years. Several providers have suggested that CMS reduce the risks for ACO participants in the initial years and then add more rigorous requirements once the participants have gained some experience.
Since the beginning of the public discussion surrounding ACOs, healthcare providers have expressed concern that the collaborative efforts that are at the heart of the ACO concept may create liability for participants under the antitrust and fraud and abuse laws. Although the proposed regulations offer some protection for ACO participants under these laws, providers say that the regulations do not go far enough in allying their concerns.
Now that the comment period for the proposed regulations has ended, CMS will have to decide if it wants to make changes to the regulations or even start over before it makes the regulations final. Its decisions will likely determine whether ACOs are a successful component of healthcare reform or a failed experiment.
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