An important final rule was released today by Administration officials on a key concept, Accountable Cares Organizations, that garnered bi-partisan support during the health reform debate. Both parties believe in delivery system reform, but have alternative approaches in doing so.
An Accountable Care Organization (ACO) is a network of doctors and hospitals that share responsibility for providing care to patients. A few networks, like the Mayo Clinic in Minnesota, and Inter-Mountain Health Care in Utah, formed the blueprint for the Affordable Care Act (ACA), but ultimately the design of the program fell upon the Federal bureaucracy. ACO’s are attractive because they provide excellent care with high efficiency. This is appealing since our country continues to spend more per capita on health care than any other industrialized nation.
The new rule establishes a voluntary Medicare Shared Savings Program intended to help doctors, hospitals, and other providers improve their ability to coordinate care across all health care settings. Providers who meet certain quality standards would be eligible for financial incentives through shared savings with the Federal government. The new rule makes several revisions to the original proposed rule released in March, 2011. Some of the highlights include:
- $170 million is available for providers to set up Accountable Care Organizations. This includes rural providers and physician-owned hospitals, a key addition to the original proposal.
- The Final Rule relieves at least some of the Proposed Rule’s burden of set up costs, and the possible delay of not recouping shared savings within a reasonable time frame.
- Community health centers and rural health clinics can now take leadership roles in setting up ACO’s. They were left out of the prior proposal.
- Administration officials estimate that between 50 and 270 ACO’s would be formed in the next three years, affecting the care of about 4 percent or 2 million Medicare beneficiaries.
Today the Medicare program is based on a model called Fee for Service (FFS) which is what it sounds like – Medicare reimburses hospitals, doctors and other health care professionals for each procedure they perform. This has created a system based on volume instead of quality, where unnecessary tests and procedures are often ordered.
This impacts all of us, and some experts believe nearly 1/3 of all collective health care costs are spent on unnecessary tests, procedures and administrative costs, an astronomical number considering the fact that we spend 1/6 of our GDP on health care. Clearly, this path is not sustainable without serious efforts to curb the skyrocketing costs of health care. The ACA is progress, but more action is needed.
The health care system is changing, whether we like it or not. The good news is the ACO provision and several other provisions in the law, take steps toward addressing the cost issue. It will be an ongoing process. Check back for more on this rule and other information on health reform implementation.