Leaked Internal CMS Memo Provides Frank Answers to Controversial Questions on ACOs

// internal CMS memo obtained by the Hill provides some unusually frank answers to "sensitive or controversial" questions that might be asked about the proposed regulations for accountable care organizations released on March 31.

Here are 16 key points gleaned from the leaked document.

1. Organizations that qualify. The list of qualifying organizations comprises group practices, including physicians and hospitals meeting the statutory definition; networks of individual practices; partnerships or joint ventures between hospitals and professionals; and hospitals that employ physicians and other professionals. Certain critical access hospitals would also be eligible. The law focuses on physicians in primary care, rather than specialists. While some specialists offer primary care, the proposed rule identifies only certain types of physicians as primary care providers.

2. Requiring broad use of EHRs. At least 50 percent of participants in and ACO would have to be using electronic health records to qualify for the Medicare program. This would "ensure that the ACO providers and suppliers have the means of communicating with each other, coordinating care and minimizing the new reporting requirements," the memo said.

3. Patients could opt out of data sharing. When beneficiaries first see an ACO provider, they would be given written notice that their personal health data would be shared and would be offered the opportunity to opt out of such data-sharing. If they opt out, the ACO would still accept the beneficiary for treatment but would not be able to make requests for their medical data.

4. Physicians get full Medicare data. Physicians in ACOs would get enough data to give them "the whole picture of medical services their patients are receiving," the memo states. Part A and B data elements could include beneficiary ID, date of birth, gender, procedure codes, diagnosis codes, dates of service, provider/supplier ID and claim payment type. And Part D data elements could include beneficiary ID, prescriber ID, drug service date, drug product service ID and formulary identifier.

5. Fraud and kickback waivers. Existing rules designed to limit fraud and kickbacks "were often designed before organizations like ACOs were on the horizon," the memo said. "The rule seeks public input on the possibility of additional or different waivers, as well as any additional safeguards that might be necessary to protect beneficiaries and the federal health care programs."

6. Monitoring for quality. To qualify for bonuses, ACOs would have to meet quality standards in five areas: patient and caregiver experience of care, care coordination, patient safety, preventive health and at-risk population and frail elderly health. To monitor compliance, CMS would analyze claims and specific financial and quality data, generate quarterly and annual aggregated reports, make on-site visits and survey beneficiaries.

7. Guarding against cost shifting. A number of safeguards would ensure against ACOs shifting costs to private payors. For example, ACOs would probably have to apply the same performance standards to all patients. In addition, CMS would remove ACOs that were "avoiding at-risk patients as way to save money," the memo said, adding, "We will monitor spending closely and calibrate the program policies."

8. Minimum savings threshold for shared savings. The program would require ACOs to reach a minimum 2 percent savings threshold before they could qualify for any shared savings. The memo says the threshold would address annual fluctuations in health spending. Small ACOs have to meet a higher threshold of 3.9 percent because their smaller numbers of cases would cause greater fluctuations. However, small ACOs in rural and underserved communities would be exempt from the threshold, allowing them to achieve savings more quickly.

9. Adding 'downside risk' to shared savings. The proposal would "intensify" the shared savings formula outlined in the reform law by financially penalizing all ACOs that lose money by the third year. It would also provide a higher shared savings level (60 percent versus 50 percent) for ACOs that agree to the penalty in the first two years. The memo said adding the penalty for "downside risk" came from the Medicare Payment Advisory Commission. MedPAC proposed this so-called "two-sided risk model" as a way to "increase the strength of the incentives to control spending and volume," the memo said.

10. Initial withhold of shared savings. The proposed rule would withhold 25 percent of an ACO's shared savings performance payment to make sure it is able to pay back any losses. Answering concerns that this would make is more difficult for organizations to make necessary investments in the ACO, CMS said it is balancing the need to invest in the ACO with "the need to protect the Medicare Trust Funds."

11. Structural requirements. The proposed regulation would make several requirements on how ACOs must be structured, covering governance, program integrity, use of savings and 12 patient centeredness criteria. These criteria are meant to ensure ACOs are "real organizations that are prepared to accept accountability for beneficiary health," the memo stated.

12. Calculating financial benchmark. While the reform law described a straightforward way to calculate the benchmark, basing it on historical costs to treat the assigned beneficiaries, proposed rule's benchmark is more complicated. It is based on average beneficiary expenditures, adjusted for demographic characteristics. Planners did this because "the benchmark is the standard to which an ACO's performance is compared," the memo stated. "It should represent the best estimate of what would otherwise happen in the absence of the ACO."

13. Quality measures. The proposed rule directs ACOs to report 65 quality measures but does not give specifics for each measure or establish performance standards until after the period ends. But the memo said an upcoming sub-regulatory guidance would provide more details on the measures. Also, ACOs in the first year would only have to report the measures and would not be penalized or rewarded for their performance on them. The memo added that the quality measures should be familiar because the National Quality Forum has endorsed many of them.

14. No funds for start-up. The proposal does not provide funding to help start up the ACO. In the Physician Group Practice demonstration, the model for ACOs, most organizations did not recoup their investments in the first three years, but memo maintained that ACOs include "some design differences" from the demonstration. "We believe many organizations are eager to innovate and make the investments necessary to change the delivery system," the memo said. "We also believe ACOs may see cost savings from improved efficiency."

15. Prospect of many ACO 'reevaluations.' Under the proposed rules, CMS would reevaluate an ACO's application every time it changes a business process or any provider joins or leaves the ACO. "Significant changes in ownership trigger review to ensure the entity continues to meet standards," the memo stated.

16. Some rules could change later.
As CMS gains experience in ACOs, it might change some aspects of the program, such as quality measures, routine program integrity requirements, quality management and patient engagement processes, and patient-centeredness criteria. But these "are unlikely to affect the ACO's underlying organizational structure or its continued eligibility to participate in the program," the memo stated. "Fundamental aspects" of the ACO rules are unlikely to change, such as structure and governance of the ACO, calculating the shared savings rate and beneficiary assignment, it stated.





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