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Policy Watch: CMS Final Rule Paves Way for ACO Contracts

Butcher, Lola

doi: 10.1097/01.NT.0000408571.24925.1c


After hearing sharp criticism from the AAN and other organizations, the Centers for Medicare & Medicaid Services (CMS) reworked its proposal for accountable care organizations (ACOs) and issued a final rule that is expected to make ACO participation more attractive.

“CMS very much wants this to work…and they were smart enough to listen to people with experience and concerns that were coming from all sectors,” said Laura B. Powers, MD, a former AAN board member.

The ACO model is designed to financially reward physicians and hospitals that simultaneously reduce the costs and improve the quality of care for a given population of patients. It is widely seen as a vehicle that could eliminate the problem inherent to fee-for-service payment.

The fee-for-service pay system rewards caregivers for the volume of services provided, which incentivizes waste, experts contend. The government's plan for ACOs keeps fee-for-service payment, but it overlays the concept of “shared savings.” If physicians and hospitals reduce costs beyond a certain set level — and hit certain quality benchmarks — they get financially rewarded at the end of the year.

At the beginning of this year, health care policy-watchers were excited about the potential of ACOs to help solve some of the serious cost and quality problems in medical practice. But the federal government's proposed rule, issued in March, killed that enthusiasm because it asked physicians and hospitals to accept too much financial risk for too little reward.

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The final rule, issued on Oct. 20, included several changes that made it more likely that ACO participants could succeed in a contract with CMS, according to Mark Pascu, the AAN manager of regulatory affairs.

“The increased monetary incentives are probably the biggest reason why the ACO model is more attractive, but there's also a lot more flexibility that CMS is granting to ACOs in how they are governed,” he said.

The final rule allows more diverse organizations, including federally qualified health centers and rural health centers, to form ACOs and is less prescriptive about how ACOs will be managed and receive input from patients.

CMS also eliminated about half the quality measures it had originally proposed. While the final rule includes no neurology-specific measures, it does add a measure that recognizes the importance of specialty care.

“They gave a nod to specialists by including a question in the patient survey about whether or not the patients perceive that they are getting adequate referrals to specialists,” Dr. Powers said.

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Whether ACO participation is good or bad for an individual neurologist depends on how ACOs emerge in various communities, said Neil Busis, MD, an Academy board member and chair of the Medical Economics and Management Committee.

“I think that it's probably going to be different in each market,” said Dr. Busis, who also serves on the editorial advisory board of Neurology Today.

For example, if the primary care physicians who generate most of a neurologist's referrals join an ACO, it may behoove the neurologist to join as a way of maintaining the referral base. But if an ACO encourages its primary care physicians to treat neurological conditions to avoid the expense of specialty care, that obviously may be a disservice to patients and neurologists as well.

In some markets, most neurologists are employed by hospitals. That's the case in northeast Ohio, said Bruce H. Cohen, MD, director of the department of pediatric neurology at Akron Children's Hospital.

“Not too many neurologists are going to be making independent decisions whether to join an ACO,” he said. “That decision is going to be made at the level of the hospital.”

Success in an ACO will require neurologists to be able to document that they provide high-quality, evidence-based care and are cost-conscious in their diagnostic and treatment decision-making.

Dr. Busis encourages neurologists to acquire the electronic health record technology and practice patterns that support high-value care, regardless of whether they join an ACO. Even if the ACO model does not catch on, some other reimbursement strategy that penalizes waste and inattention to quality will.

“These forces are going to continue … The insurance companies are doing the same thing,” he said. “This is the future.”

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  • For a summary of the government's final rule for ACOs — and how it affects neurology, visit the AAN website at
  • Dr. Busis recommends “ACOs, CO-OPs and Other Options: A ‘How-To’ Manual for Physicians Navigating a Post-Health Reform World.” The book, published by the American Medical Association, is available for free online at “This is extremely well done,” he said. “It goes soup-to-nuts through a lot of these options.”
  • Watch for guidance from the AAN. The Medical Economics and Management Committee has appointed a task force to review the final rule and make recommendations to the membership. Its report is expected in a few weeks.
  • The CMS website for ACOs is
  • Also, look for past coverage in Neurology Today: “In Practice: Accountable Care Organizations Trigger Merger Frenzy: What It Could Mean for Your Day-to-Day Practice,”; “Policy Watch: Rules for Federal ACO Program Coming Soon to Your Area,”
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The term “accountable care organization,” or ACO, is being used to describe a group of physicians and other providers who plan to reduce healthcare costs and assure quality for a specific population and share the savings they create for a payer.

Most large private insurers are preparing to contract with ACOs — and some contracts are already in place. The terms of those contracts and the makeup of the ACOs involved vary widely.

The Affordable Care Act created the Medicare Shared Savings Program, which authorizes the Centers for Medicare & Medicaid Services to contract with ACOs and share savings with physicians, hospitals and other caregivers. The CMS definition of an ACO and its rule for how the contracts work apply only to those ACOs that seek to contract with the government.

  • ACO professionals — the government's term for physicians, nurse practitioners, physician assistants and clinical nurse specialists — must be included in any ACO. They can form a joint venture with a hospital, or group practices and networks of physicians can contract as an ACO on their own.
  • Each ACO must serve at least 5,000 Medicare patients who receive most of their primary care from the ACO.
  • CMS will start taking applications in January. ACO agreements that go into effect April 1 will run for three years and nine months; those that go into effect July 1 will run for three years and six months. Beginning in 2013, all new ACO agreements will start on Jan. 1 and have three-year terms.
  • CMS will not “share savings” with an ACO unless it meets quality standards. To do so, the ACO must score at least 70 percent on four measure domains with a total of 33 measures: patient/caregiver experience; care coordination/patient safety; preventive health; and at-risk population. In year 1, ACOs must only report the measures; in subsequent years, their performance will be judged on their scores.
  • ACOs can choose from two financial arrangements: Track 1 is for ACOs that do not want to assume any risk for shared losses, and Track 2 is for ACOs that are willing to share losses, if any, with CMS. ACOs choosing Track 1 can share up to 50 percent of the savings they create for Medicare, after a minimum savings rate has been achieved; those that choose Track 2 can share up to 60 percent.
  • Savings is the difference between the ACO's actual spending in a performance period and a spending “benchmark” that CMS sets for that particular ACO. The benchmark is risk-adjusted and based on the spending for the ACO's assigned patients during the previous three years.
  • An ACO with less than a 30 percent market share will not be challenged; if it has a more than 50 percent market share, a letter will be required from the Federal Trade Commission (FTC) and/or Department of Justice (DOJ) saying the ACO arrangement will not be challenged. A 30- to 50-percent market share is recommended to seek FTC/DOJ guidance, but this is not required for participation in ACO program.
©2011 American Academy of Neurology