Changes Pondered in How to Pay Accountable Care Organizations

Changes Pondered in How to Pay Accountable Care Organizations

By Rebecca Adams, CQ HealthBeat Associate Editor

A top Medicare official suggested Monday that federal officials planning to release a proposed rule soon may be rethinking the way that accountable care organizations are paid.

Centers for Medicare and Medicaid Services Deputy Administrator Sean Cavanaugh said at a Brookings Institution forum that “the new rule will be out shortly” and officials will “hopefully have a final rule early next year.”

One complaint that current Medicare ACO participants have is that the health care alliances must save a certain amount of money before they can share in the savings.

Another concern is that the cost targets that ACOs are expected to hit are tied to national increases in Medicare spending. Some ACOs say that costs in their communities are rising higher than the national average.

If ACOs significantly reduce their costs in the short run, providers can share in the savings. But it may make it more difficult to reap long-term savings if federal officials expect even deeper reductions in the future.

If an ACO has saved a lot of money, its federal budget target could be lowered. Hitting that lower target may be difficult, and providers fear that they may not be able to reduce costs further in order to get bonus payments in the future.

The task of meeting lowered spending targets may be even more difficult in the current era, when Medicare costs are growing at a historically low rate.

Cavanaugh recognized the challenges.

“We need to improve the incentives that the ACOs receive, improve the information and help build the capacity of the ACOs,” he said.

Cavanaugh said that federal officials are listening to the concerns of providers that are part of ACOs.

“We heard quite a bit of talk about changing the payment rules for the ACOs,” he said.

The ACOs want to get rid of or narrow the minimum savings thresholds they have to meet before they can share in the savings, he said.

“Many ACOs balked at that, feeling like they did generate change and it wasn’t a statistical anomaly and would like to be paid for that,” he said.

The health care law stated that CMS officials should have a national benchmark so that ACOs would have to reduce the costs of beneficiaries based first on the patients’ historical spending, and then get an adjustment based on how much national fee-for-service program costs go up.

“The fee-for-service program has essentially been not growing at all, so that’s a very difficult benchmark to meet,” said Cavanaugh —especially in communities where costs may be growing faster than the national average.

“The only thing I would say is we have been listening very closely to these, but this was a point of contention in the drafting of the Affordable Care Act and it is very delicate regional balances that come out in those discussions,” he said. “But we are hearing quite a bit about whether the benchmarking methodology is the one we should stay with.”

Cavanaugh also said federal officials are taking seriously the concerns about how much CMS should lower the spending targets of groups that have already reduced costs.

And he said some ACOs have asked to provide care differently, such as by providing more generous home health benefits or waiving certain hospitalization rules.

Some ACOs want to use a capitated model so that they would get a flat fee for each member — an idea that Cavanaugh said “raises some conceptual challenges” because the ACO might be acting more like a health plan that has a network.

But he said, “These are all ideas we’re taking seriously and considering as we propose a new rule.”