The draft Accountable Care Organization rules are here. Now show us the money!!

As most agree, the single biggest problem with health care delivery in the United States is that the payment system is not in alignment with the core objectives of providing the best care at the lowest cost.  Under the existing fee-for-service model, healthcare providers generally are not rewarded for improving overall health or minimizing cost.  Indeed, some argue that the present fee-for-service model rewards less than optimal quality care;  the more services delivered the more revenue for providers, and the more services avoided the less revenue.  Proposed rules for Accountable Care Organizations (ACOs) could change that for the better, and patients should be the biggest beneficiaries.  We are very encouraged.


Last Thursday, March 31, HHS’s Center for Medicare and Medicaid Services (CMS) released proposed rules for Accountable Care Organizations.

Chilmark Research CEO and analyst John Moore referred to this as  “a Neutron Bomb” that “will leave buildings standing, but any healthcare organization (HCO) planning to become a successful ACO will need to decimate cherished internal processes to create new models of care delivery.”   Assuming the final rule is close to this proposed rule, the effect for patients and families is as profound—though from a patient perspective, perhaps there is a better metaphor.

Whereas 2009’s HITECH Act provides incentives to Medicare and Medicaid providers to adopt health information technology (HIT) but says little about how HIT should be used, this rule, issued under authority of the 2010 Affordable Care Act (ACA), speaks directly to the way in which healthcare is delivered.  This rule is about process with HIT at its core.

So, what is an Accountable Care Organization?  It is a group of healthcare providers, who have implemented electronic health records, health information exchange, and quality data warehouses to coordinate care and measure population health, to “improve quality and lower growth in expenditures.”

At the heart of the new ACO rule is a revenue sharing model called the Medicare Shared Savings Program (MSSP).  This is a simple yet sophisticated concept.  As described in the proposed rule, “Under these provisions, providers can continue to receive traditional Medicare fee-for-service payments under Parts A and B, and be eligible for additional payments based on meeting specified quality and savings requirements.”

The basic idea is this:  The Center for Medicare and Medicaid Services (CMS) will establish spending benchmarks by reviewing aggregate beneficiary-level payment data for the last three years, and will establish cost targets that are slightly less than past experience (generally 2 percent below the benchmark).  Actual spending will be compared to these cost targets and the savings will be shared.  The savings allocation starts at 50 or 60 percent for the ACO (depending on the degree of risk accepted by the ACO for cost overruns), but can be reduced depending on the ACO’s ability or inability to meet certain quality and performance measures.  (The proposed rule includes 65 measures across five measurement domains.)

For some ACOs this could result in a very large net income stream.  For others, the cost of HIT systems and compliance may make it difficult to come out ahead.

At 429 pages, we will not try to summarize the many regulations and guidance.  (There are good articles and blog posts that summarize the rules.  One good starting point is “50 Things to Know about ACO rules” by legal expert Scott Becker.)  Our interest is in patient empowerment and patient experience.

According to the proposed rule, “…to be eligible to participate in the Shared Savings Program, the ACO [must] provide documentation in its application describing its plans to:

(1)     Promote evidence-based medicine;

(2)     Promote beneficiary [patient]engagement;

(3)     Report internally on quality and cost metrics; and

(4)     Coordinate care.”

Here is part of what the rule says about care coordination and patient-centeredness:

Care Coordination

Coordination of care involves strategies to promote, improve, and assess integration and consistency of care across primary care physicians, specialists, and acute and post-acute providers and suppliers, including methods to manage care throughout an episode of care and during its transitions, such as discharge from a hospital or transfer of care from a primary care physician to a specialist. Compliance with this requirement may involve a range of strategies which may include the following examples:

  • A capability to use predictive modeling to anticipate likely care needs.
  • Utilization of case managers in primary care offices.
  • Having a specific transition of care program that includes clear guidance and instructions for patients, their families, and their caregivers.
  • Remote monitoring.
  • Telehealth.
  • The establishment and use of health information technology, including electronic health records and an electronic health information exchange to enable the provision of a beneficiary’s summary of care record during transitions of care both within and outside of the ACO.


A patient-centered, or person-centered, orientation could be defined as care that incorporates the values (to the extent the informed, individual patient desires it) of transparency, individualization, recognition, respect, dignity, and choice in all matters, without exception, related to one’s person, circumstances, and relationships in health care. Patient-centered care should extend not only to the patient but to the family and caregivers of the patient.

As a consumer of health services, it just makes sense that care coordination and patient-centeredness should be at the heart of our healthcare system.  This proposed rule removes the barriers and provides incentives for healthcare providers to make this important change.

In our next post, we’ll take an early pass at the revenue sharing model itself to see if we can glean who the early adopters might be, with a view of which patients may be most affected.  Updates will be posted as this develops.

We know that the final rule will undergo significant revision.  Still, we can’t see how CMS can back away from the core principals.  For that reason, we are indeed very encouraged.

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