What You Should Know About Accountable Care Organizations

Beth A. Kase, JD

Accountable care organizations (ACOs) may permit podiatric physicians to participate in shared savings via a Medicare program. This author details how podiatric practices can take advantage of ACO participation and provides insights on the specifics of the programs.

Healthcare reform has ignited many buzzwords. By now, you certainly have heard about accountable care organizations (ACOs) and the Medicare Shared Savings Program although you still may have questions about how they affect you as a DPM.

   More than 250 organizations are participating in various Medicare shared savings initiatives.1 The Centers for Medicare and Medicaid Services (CMS) report that as of January 2013, more than 4 million traditional Medicare fee-for-service beneficiaries (up from 2.4 million in 2012) are receiving care from providers participating in Medicare shared savings initiatives.2 That represents more than 10 percent of the overall Medicare fee for service program, according to Jonathan Blum, the CMS Acting Principal Deputy Administrator and Director of the Center for Medicare.3 You may or may not be participating in an ACO yet but either way, you need to be informed about what an ACO is and how it might affect your practice.

   The ACO is a separate legal entity with its own taxpayer identification number. Often hospital systems and networks of physician groups form the ACO, but roughly half of all Medicare Shared Savings ACOs are physician-led organizations. Approximately 20 percent of ACOs include community health centers, rural health centers and critical access hospitals that serve low-income and rural communities.4 The ACO contracts with the CMS to participate in the Medicare Shared Savings Program, which the CMS established on January 1, 2012 pursuant to the Patient Protection and Affordable Care Act of 2010 § 3022.4

   The Medicare Shared Savings Program’s goals are to promote accountability for a patient population; coordinate care under Medicare Parts A and B; and encourage investment in infrastructure and improved care processes for high quality care and efficient service delivery. The ACO is the central healthcare model to establish the Medicare Shared Savings Program’s goals.

   The ACO’s revenue comes from shared savings it receives from Medicare if the cost of Medicare Parts A and B services to the ACO’s patient population is lower than the benchmark and the ACO meets certain quality measures.4 Accountable care organizations that also share the risk of increased costs would receive a greater potential share of cost savings than ACOs that are solely aligned to share in potential savings. Healthcare providers still get traditional Medicare fee-for-service payments for providing the care whether or not the ACO meets the cost saving and quality measure targets. Therefore, if you are part of an ACO, you are still getting paid on a fee-for-service basis from Medicare for your services.

   The structure of an ACO is “patient centered” with the primary care physician playing the central role of coordinating and facilitating access to needed services and specialists. The ACO must be accountable for at least 5,000 Medicare fee-for-service beneficiaries for a three-year period while also adhering to CMS defined quality measures.4 As I will explain later in this article, generally beneficiaries are attributed to the ACO to which the primary care doctor belongs. Keep in mind that rules governing ACOs are subject to change as all entities involved, including the CMS, gain more experience and knowledge.

   Is ACO just another name for HMO? While the ACO network bears some resemblance to health management organizations (HMOs), there are significant differences. Unlike with HMOs, patients are free to seek services or providers outside of the ACO network. The cost to the patient does not change if he or she sees a provider outside of the ACO network. Also unlike HMOs, generally the ACO does not function as a pre-paid per capita (i.e., capitation) model although ACOs could move in this direction in the future. Medicare patients enrolled in a Medicare Advantage Plan are not Medicare ACO beneficiaries.

Understanding The Role Of DPMs In ACOs

Podiatrists may provide podiatric medical care to ACO patients and may also participate in shared savings. However, a DPM is not an ACO “professional” who is eligible to form an ACO under the Patient Protection and Affordable Care Act.

   An “ACO professional” is a role that is limited to an MD, DO, NP, PA or clinical nurse specialist. There are various arrangements that satisfy eligibility to form an ACO:

1) accountable care organization professionals in group practices
2) networks of individual ACO professionals
3) partnerships or joint venture arrangements between hospitals and ACO professionals
4) hospitals employing ACO professionals
5) federally qualified health centers
6) rural health clinics
7) some critical access hospitals

   Since a DPM does not qualify as an ACO professional, you cannot form your own ACO with other DPMs. However, the practical effect of podiatric physicians’ exclusion from the definition of ACO professional appears to be minimal given your ability to participate in the ACO and receive shared savings.

   Even though a DPM is not an ACO professional who is eligible to form an ACO, a DPM may be an “ACO participant.” ACO participants are eligible to participate in the ACO’s governing body. There is no requirement that all or any specific specialties be represented within the governing body.

   An accountable care organization must have a senior-level medical director overseeing clinical management. Among other requirements, the medical director must be a “board-certified MD.” Keep in mind that all ACO participants must comply with the ACO’s processes and are accountable for the ACO’s performance standards. There may be other leadership positions that DPMs may fulfill. To stay informed about your ACO’s activities and reinforce the podiatrist’s integral role in the provision of coordinated care to the ACO’s patients, it is beneficial for you to seek leadership responsibilities when they are available.
Unlike primary care physicians who are generally limited to participating in only one ACO, podiatrists, like other specialists, may have a contractual relationship with more than one ACO. You would then be responsible for any potential risks, rewards or requirements associated with each agreement.

   At this time, podiatrist participation in an ACO is largely limited to podiatrists who are part of or who contract with a large physician group or health system. The sizable start-up costs, information technology requirements and care coordination requirements necessary to qualify for an ACO contract with the CMS impede small physician groups from applying to the CMS for an ACO contract. An ACO network is not required to accept any specialty or “any willing provider” into its network. Therefore, your ability to demonstrate quality outcomes, evidence-based medicine and cost containment is particularly important if you are interested in participating in an ACO.

   However, remember that Medicare beneficiaries in an ACO are not required to see doctors who participate in their ACO. The patients’ freedom to see out-of-ACO-network physicians distinguishes the Medicare Shared Savings Program ACO from a HMO.

   While individual DPMs cannot form their own ACO and there is no requirement to include any specific specialty or any individual provider in an ACO, the Patient Protection and Affordable Care Act prohibits discrimination against classes of providers, such as podiatrists. This is effective on January 1, 2014. This is an important protection for DPMs and one we are sure to hear more about in the future.

   If you are not a participant in an ACO, a patient still has the freedom to go outside of the ACO network for medically necessary services and this can include you as a DPM. According to CMS, a beneficiary always retains the right to see the specialist of his or her choice, whether the specialist is a part of an ACO or not. The CMS is responsible for providing educational materials for beneficiaries so they understand their rights. However, you may want to communicate proactively with your patients. Your relationship with a patient need not end, even if you do not contract with or are not part of the Medicare ACO.

A Guide To Beneficiary Assignment To An ACO

Beneficiary assignment occurs in two steps. The first step is that CMS assigns beneficiaries who have received primary care services from a primary care physician to that primary care physician’s ACO. For any remaining beneficiaries who did not receive any primary care services from a primary care physician but received at least one such service from a physician specialist, nurse practitioner, clinical nurse specialist or physician assistant, the second step is the CMS assigns such beneficiaries to the ACO of the non-primary care physician from whom the beneficiary received the plurality of primary care services.

   The CMS provides the ACO with a preliminary prospective assignment of beneficiaries based upon the patients’ past utilization of primary care services. The CMS will conduct a final reconciliation of assigned beneficiaries after each performance year based on actual utilization. The healthcare community has voiced concerns that this final retroactive reassignment impedes the ACO’s ability to coordinate and monitor patient care for the ACO population. However, the CMS has refused to assign patients to an ACO prospectively.

Essential Insights On Savings Considerations With ACOs

The agreement between the CMS and an ACO is three years in duration. The CMS allows ACOs to elect to participate under two different shared savings models, either one-sided or two-sided. Under the one-sided model, during the first three-year agreement, an ACO shares only savings (if any). Upon the next agreement, the ACO assumes risk for shared losses in addition to shared savings, effectively transitioning to the two-sided model. Under the two-sided model, during the initial three-year agreement, an ACO assumes risk for losses as well as shared savings (if any).

   By sharing risk, the ACO must repay to the CMS any shared losses for expenditures that exceed the benchmark, subject to certain limitations. The benchmark is initially based on the weighted average of Parts A and B expenditures for the ACO population for the three years preceding the initial agreement. Then it will be updated to the applicable performance year based on certain demographic changes and projected risk factors for new beneficiaries.

   An ACO is eligible for shared savings only if actual Medicare Parts A and B expenditures are below the benchmark amount by at least the “minimum savings rate.” The minimum savings rate for the one-sided (shared savings only) model is between 2 and 3.9 percent depending upon the size of the ACO’s assigned population. The minimum savings rate for the two-sided model (shared savings and risk) is 2 percent. The shared savings is based on the first dollar once the ACO meets the minimum savings rate.

   The CMS also established maximum percentage savings. In the one-sided model, the ACO can share up to 50 percent of savings while the two-sided model enables ACOs to share up to 60 percent of savings. The purpose of these boundaries is to protect the CMS from paying bonuses to ACOs for random, statistical fluctuations that are unrelated to ACO activities while also encouraging participation and investment in the program.

   An ACO must have clear criteria by which it will distribute possible shared savings among participants and how it will use shared savings to improve care for beneficiaries and decrease beneficiary spending. Conversely, an ACO that is subject to shared losses must have a mechanism for payment of its share of losses. The CMS will make shared savings payments directly to the ACO, not to the individual providers. To reiterate, providers and suppliers in the ACO will still receive traditional Medicare fee-for-service payments for their services.

   Accountable care organizations have the opportunity to decide how to distribute shared savings among participants with agreements that encourage participants to adhere to quality and program measurements. A plan for distribution is part of the ACO’s application process that must be approved by the CMS. An ACO’s distribution of shared savings among its participants is exempt from Stark and anti-kickback laws although distribution of savings outside of the ACO entity is not. Again, your participation within an ACO is an opportunity to share in savings although an ACO will be calculating the cost/benefit of including you within the entity.

   How does the cost savings and risk mechanism affect the DPM? It varies by the ACO.

   One DPM ACO participant, who is a partner in a 300+ multispecialty medical group in Southern California, explained that because he has an equal membership share, he will share equally with other physician owners in any Medicare Shared Savings Program savings the ACO distributes to its physician members.5 He explained that his entry into ACO participation did not require a lot of effort on his part since the group practice’s administrative staff took care of the paperwork, and quality and care reporting mechanisms are already in place. He is not expecting a significant savings distribution from the Medicare Shared Savings Program. Other ACOs allocate only a small percentage of any shared savings to specialists, including podiatrists.

How Quality Measures Come Into Play

Eligibility for shared savings is predicated on complete and accurate data reporting for all 33 quality measures as deemed by the CMS.4 The 33 quality measures mostly focus on ambulatory care and are categorized into four domains: patient/provider experience; care coordination and patient safety; preventive health; and at-risk populations.

   For an ACO to be eligible for shared savings, it must perform at the 30th percentile on at least 70 percent of the measures in each domain. An ACO can fail a measure in one domain and still earn shared savings. There is one caveat though. A score of zero in any domain precludes an ACO from receiving any shared savings.

   The “patient/provider experience” domain, as measured by patient surveys, is seemingly the most relevant measurement for DPMs.6 All seven questions within this domain could include a patient’s experience with you. The questions address the patient’s perception of his or her experience with the practitioner. Specifically, patient surveys measure the following seven items:

1) timely care and appointments
2) how well doctors communicate
3) patient ratings of their doctors
4) access to specialists
5) health promotion and education
6) shared decision making among doctors
7) health and functional status

   These measures are more challenging to fulfill given they are subjective but you should work closely with your ACO team members to ensure you are adhering to the governing body’s defined ACO care processes.

   The “at-risk population” domain, which includes measures focused on care provided to patients with diabetes, also bears on the DPM’s role within the ACO. Although the quality outcomes measure biochemical changes, the very fact that this population is targeted for measuring the ACO’s performance is significant. Among other diabetes care considerations is recognition of the high rate of risk for lower extremity amputations. Accountable care organizations will likely need to coordinate care for the patient with diabetes with the DPM either as an ACO participant or outside the ACO structure if he or she does not participate in the ACO.

Comparing Commercial ACOs To Medicare ACOs

The ACO model exists in both the public and private sectors with many private health insurance companies having ACO-like contracts with providers. As with Medicare ACOs, typically the physician providers in commercial ACOs are large groups or independent practice associations that have the necessary infrastructure and information technology capacity to meet the ACO’s care coordination and reporting criteria.

   Health industry consulting firm Oliver Wyman reports that in addition to the 2.4 million Medicare beneficiaries who receive care under a Medicare ACO, up to another 15 million non-Medicare patients receive care through Medicare ACOs.7 Eight million to 14 million individuals are part of commercial ACOs run by large national and regional insurance companies for their non-Medicare populations. Commercial ACOs are having a growing impact on healthcare delivery throughout the nation.

   Commercial ACOs share a similar mission with Medicare ACOs, namely to reduce cost while improving care. However, the implementation of a commercial ACO can be different in a number of significant ways including eligibility requirements for physicians. Commercial ACOs do not need to adhere to the same number and types of quality measures as defined by the CMS. Nor does the commercial ACO need to adhere to the governance structure and cost sharing formula applicable to Medicare ACOs. The commercial payer, rather than Medicare, provides the financial incentive for quality and cost performance. Each commercial ACO differs. Therefore, your participation in a commercial ACO should be informed by the specific guidelines of the specific commercial ACO.

   A representative of a Blue Cross ACO commented that its commercial ACOs include large physician groups that may employ or contract with podiatrists, but the insurer does not dictate the group’s arrangement with the podiatrist.8 If the group shares any cost savings, it determines how such savings are distributed to group physician providers, including podiatrists and other specialists. Commercial ACOs are evolving and many variations are developing.

In Conclusion

There is an increasing number of ACOs across health systems in the United States. Providers who have the resources and infrastructure available to meet ACO requirements, such as health quality and expenditure data reporting, are in the best position to adopt this model. For DPMs who are interested in participating in an ACO, relationships with health systems, health plans, hospitals and independent practice associations will be critical.

   Medicare and commercial ACOs reward improved outcomes along with a reduction in the cost of healthcare spending. Whether you are interested in participating in an ACO or not, you are best prepared for continued changes in healthcare delivery and reimbursement if you have a process to monitor your quality, efficiency and expenditures. Demonstrating your provision of cost-effective care will continue to be an imperative in this healthcare market.

   Ms. Kase is an attorney at Fenton Nelson in Los Angeles.

1. Available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavi... .
2. Commins J. Medicare ACOs add 106. HealthLeaders Media, January 11, 2013. Available at http://www.healthleadersmedia.com/content/HEP-288223/Medicare-ACOs-Add-106 .
3. Blum J. 106 New ACOs – good news for people with Medicare. The CMS Blog, January 10, 2013. Available at http://blog.cms.gov/2013/01/10/106-new-acos-good-news-for-people-with-me... .
4. Available at https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavi... .
5. Personal communication.
6. Quality Measurement & Health Assessment Group Office of Clinical Standards & Quality Centers for Medicare & Medicaid Services, Accountable Care Organization 2012 Program Analysis: Quality Performance Standards Narrative Measure Specifications, December 12, 2011. Available at http://www.cms.gov/medicare/medicare-fee-for-service-payment/sharedsavin... .
7. Available at http://www.oliverwyman.com/media/OW_ENG_HLS_PUBL_The_ACO_Surprise.pdf .
8. Personal communication.

Additional References
9. Health and Human Services Press News Release, HHS announces 89 new Accountable Care Organizations, July 9, 2012.
10. Anderson C. Report: 31 million patients in US receive care from an ACO, Healthcare Finance News, November 27, 2012. Available at http://www.healthcarefinancenews.com/news/report-31-million-patients-us-... .

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