The Centers for Medicare and Medicaid Services (CMS) announced the creation of so-called “Pioneer ACOs” on May 17 in an attempt to blunt heavy criticism over the draft regulations on Accountable Care Organizations (ACOs) issued on March 31, 2011 (the “Draft Regulations”).¹ The Draft Regulations have been criticized due to their burdensome data collection requirements, large start-up costs, uncertain savings, possible losses and troublesome governance mandates.

ACOs, which are a cornerstone of the Patient Protection and Affordable Care Act, are supposed to bring hospitals, physicians and health systems together to increase quality and decrease costs. However, the Draft Regulations contain so many objectionable elements that even institutions that were the inspiration for the concept – the Cleveland Clinic, the Mayo Clinic, Intermountain Healthcare and the Geisinger Health System – have announced they are not likely to start an ACO unless major changes are made.² Facing such universal criticism – and a January 1, 2012 deadline to get ACOs up and running – CMS officials earlier this week announced three initiatives designed to entice providers to embrace ACOs. However, the initiatives – the Pioneer ACO, the Advance Payment ACO and Accelerated Development Learning Sessions – do not address the barriers in the Draft Regulations that are causing so many providers to shun the ACO concept.

Pioneer ACOs

The first initiative is the creation of the “Pioneer ACO,” designed to allow up to 30 integrated organizations that have already begun coordinating patient care to move forward with the ACO process. The Pioneer ACO is a slimmed-down version of the ACO model described in the Draft Regulations. However, the Pioneer ACO model does not address the main criticisms of the Draft Regulations – namely the burdensome data collection requirements, governance mandates, start-up costs, financial risks, expensive IT capabilities, compliance dictates, infrastructure needs, performance metrics and expenditure baseline calculations that favor high cost/low quality providers.

The Pioneer ACO model has a faster timeline than that contained in the Draft Regulations: prospective Pioneer ACOs must submit a letter of intent to CMS by June 10, 2011 and a full application by July 18, 2011. The anticipated start date of the Pioneer ACO initiative would be in the third or fourth quarter of 2011 and the initial performance period would last until December 31, 2012, with subsequent renewal periods of 12 months. In contrast, the Draft Regulations require a three-year performance period.

The Pioneer ACO model does provide a greater baseline of Medicare beneficiaries (15,000 versus 5,000 in the Draft Regulations), some flexibility in payment arrangements that, over time, escalate the degree of financial accountability for the ACO, and the possibility of a prospective beneficiary alignment instead of a retrospective alignment. Nonetheless, these “cosmetic” changes don’t address the very real concerns about ACOs and are unlikely to spur providers to develop ACO arrangements.

Advance Payment ACOs

The second initiative allows for an “Advance Payment ACO.” CMS is seeking comments on how to provide cash-strapped providers up-front financial assistance to lessen the burden of the estimated $1.7 million in start-up costs that ACOs are expected to face. The advance payments would then be recouped from the ACO’s savings in future years. CMS has asked that reactions and suggestions on this potential effort be submitted by June 17, 2011. What is unknown, however, is how CMS would recoup savings if an ACO lost money. This proposal also does nothing to offset the unusually high start-up and operating costs of an ACO. Moreover, CMS does not commit to establishing an Advance Payment ACO – it has only said it will examine the concept.

Accelerated Development Learning Lessons

In its final initiative, CMS announced it will offer four (4) training sessions, called “Accelerated Development Learning Lessons,” to teach providers how to improve care delivery and develop an action plan toward providing better coordinated care. These programs will also show providers how to effectively use health information technology, build capacity and manage financial risk. It is noteworthy however, that the sessions will not discuss elements of, or specific requirements for, participation in any ACO program.

Initiatives Not Likely to Quell Criticism

CMS has clearly heard the criticism leveled against the ACO Draft Regulations. Realizing that it is up against a fast-approaching deadline of January 1, 2012, CMS is attempting to placate critics with minor modifications to the ACO structure. However, the modifications do not remove the many serious barriers contained in the Draft Regulations. CMS must still address these concerns if it is to achieve widespread acceptance of a major element of the Patient Protection and Affordable Care Act.

More Information

For more information regarding ACOs or other health care legal developments, please contact one of the following Haynes and Boone, LLP lawyers.