Health Affairs: ACOs on horizon, regulations need to be flexible

Accountable care organizations have the potential to lower costs, improve the quality of care, facilitate delivery system reform and promote innovation in healthcare, but they need time to organize and evolve, according to a recent article published in the January edition of Health Affairs.

“Although some organizations are already in operation, most have to make plans, train leaders, establish infrastructure, and develop strategies to improve patient care,” wrote Steven M. Lieberman and John M. Bertko, both visiting scholars at the Engelberg Center for Health Care Reform at the Brookings Institution in Washington, D.C.

The Patient Protection & Affordable Care Act (PPACA) created accountable care organizations (ACOs), which will be a new part of Medicare as of January 2012, together with a “shared savings program” that will modify how these organizations will be paid to care for patients.

The federal government is set to create rules to regulate these organizations and has broad discretion to allow them to pursue a variety of approaches. Drawing on experience from some ACO pilot programs and the Medicare Part D prescription drug coverage program, the authors argued that regulations governing ACOs should be flexible, encourage diversity and innovation and allow for changes over time based on lessons learned.

Regulations for ACOs should focus on a limited set of specific, high-level goals, according to the authors. The goals include:

• Facilitate ACO Creation: Regulations should permit primary-care providers to create ACOs if they coordinate the full continuum of care.
• Reach New Groups Of Patients: To avoid limiting options for patients enrolled in fee-for-service Medicare, regulations should set standards for the quality of care and financial performance, but should not mandate a single payment model.
• Require Organization And Governance: Regulations should require ACOs to establish a coherent system of patient-centered care, with the capability to improve care. The new systems of care must be more than “virtual organizations,” in which a budget is the only element that providers have in common.
• Maintain Or Improve Quality Of Care: Regulations should establish a framework to measure and improve quality. However, the regulations should permit both the framework and the process to evolve and be rapidly updated.
• Guarantee Savings For Medicare: To make sure that the Medicare program realizes the savings envisioned in the PPACA’s provisions on ACOs, regulations should ensure that ACOs’ actual results are monitored and compared to annual budget targets during a period of three to five years, which would provide stability for organizations that invest in infrastructure. Regulations should also permit the Centers for Medicare & Medicaid (CMS) to terminate a contract before three years in cases of low quality or high costs.
• Establish An Evaluation Framework: In addition to the timely collection of information to meet other goals above, regulations should require accountable care organizations to provide data on their performance and any site-specific organizational factors that may have contributed to the organizations’ success or failure.

“Our close observation of several emerging ACOs that are contracting with private payers—as well as our discussions with dozens of provider entities interested in creating ACOs—suggests that some organizations may need two to five years to prepare for participation in accountable care,” the authors concluded. “CMS needs to accommodate different levels of preparedness around the country.

"The regulations should allow CMS to limit the number of applicants it initially approves, with priority going to different approaches to encourage innovation, and permit changes based on lessons learned from early variations. Following the model of Part D, we recommend using regulations as a general framework, while relying on notices and other guidance below the regulatory level for specific requirements."