'Accountable care' expected to save millions for Medicare

Kaiser Health NewsMarch 31, 2011 

WASHINGTON — The Obama administration released proposed rules Thursday to help hospitals and doctors form a new type of health care delivery system called accountable care organizations, and officials estimated the ACOs could save Medicare up to $960 million over three years.

Top federal health officials have billed ACOs, which are being established in the Medicare program under the new health law, as a way to help providers work together more closely and lower costs. But critics worry that ACOs could give too much power to hospitals and doctors and increase costs.

ACOs would bring together the different component parts of care for patients — primary care, specialists, hospitals, home health care, etc. — and ensure that they work well together.

The goal of ACOs is to help create a model to replace the current fee-for-service payment method, which rewards doctors and hospitals for doing more procedures and tests, and fosters disjointed and duplicative care, increasing costs. ACOs also are seen as a way to spur the creation of integrated health systems, such as Kaiser Permanente and the Mayo Clinic, which President Barack Obama has applauded for improving care and holding down costs.

While the ACO program would start in Medicare, most health experts say private insurers will adopt it quickly.

Officials at the Centers for Medicare and Medicaid Services hope that ACOs will provide the benefits of managed care without the restrictions on consumers that helped lead to a backlash against HMOs in the 1990s.

Under the proposed rules, Medicare would continue to pay ACO providers that see at least 5,000 patients on a fee-for-service basis, as it does under the traditional Medicare system. If the ACO spends less money than the CMS projected, however, it would qualify for financial incentives.

The amount of the bonus depends on whether an ACO meets or exceeds quality performance standards, such as reducing infection or hospital readmission rates. In some cases, if the ACO spends more money than projected, the ACO providers would lose money.

ACOs are one of the few major efforts in the health law to help reduce rising costs. The projected savings over three years would be modest, making up less that 1 percent of Medicare's budget. '

Providers that are thinking of forming ACOs have been worried that they could run afoul of antitrust laws. As part of the new rules, the Federal Trade Commission declared that any ACO that controlled less than 30 percent of the local market would get great leeway. The FTC would evaluate larger proposed ACOs within 90 days determine whether they'd violate antitrust laws.

"We are going to continue to be vigorous in enforcing the antitrust laws ... but are committed to making the ACO systems work," said Jon Leibowitz, the chairman of the Federal Trade Commission. "It's a brave new experiment."

Patients will be informed by their doctors that they're in ACOs, although being in one doesn't restrict their choices of providers, said Dr. Donald Berwick, the administrator of CMS.

In a commentary published Thursday in the New England Journal of Medicine, Berwick wrote, "Whatever form ACOs eventually take, one thing is certain: The era of fragmented care delivery should draw to a close. Too many Medicare beneficiaries — like many other patients — have suffered at the hands of wasteful, ineffective and poorly coordinated systems of care, with consequent costs that are proving unsustainable. CMS believes that with enhanced cooperation among beneficiaries, hospitals, physicians and other health care providers, ACOs will be an important new tool for giving Medicare beneficiaries the affordable, high-quality care they want, need and deserve."

The law calls for ACOs to begin next January. Comments on the proposed rules will be accepted for 60 days. The CMS will respond to all comments in a final rule to be issued later this year.

(Kaiser Health News is an editorially independent news service of the Kaiser Family Foundation, a nonpartisan health care policy organization that isn't affiliated with Kaiser Permanente.)

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