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AComg! The regulation that could determine the future of health care

at 11:46 AM ET, 10/20/2011

It’s a big moment in health policy wonk land right now: the Obama administration has just published the final Accountable Care Organization rule. You can read all 694 pages of it here.

Sound dull? Let’s rephrase: The Obama administration has just released a regulation that could decide whether the American health-care system moves past the broken, expensive fee-for-service model. The idea is to encourage groups of providers to band together into “accountable care organizations” and accept a flat fee for all care related to a particular patient or condition. If they could deliver high-quality care in a cost-effective way, they could keep the money they saved. The hope is to do nothing less than change the basic business model of American medicine from making money by getting patients to spend more money to making money by saving patients money.

There. That’s better.

This is not the administration’s first crack at encouraging ACOs. A proposed rule in April, which detailed the requirements to become an ACO, was greeted with howls of protest by the provider community. In hundreds of comment letters, hospital and doctor groups blasted the program as unattractive, with too much risk and not enough reward. The American Medical Group Association, which represents nearly 400 large provider organizations warned CMS that virtually none of its members would participate. The group called the rule “overly prescriptive, operationally burdensome, and the incentives are too difficult to achieve to make this voluntary program attractive.”

The New England Journal of Medicine captured their concerns in this graph, which looks intimidating at first glance, but lays out with unusual clarity the rewards ACOs could get for providing better care at a lower price, and why they thought the administration’s initial offer wouldn’t work.

There are two things that really irked health care systems here. First, look at right side of the graph: if an ACO ended up spending more money than the target set by Center for Medicare and Medicaid Services it would have to pay back some funds. Second, look at the section labeled “minimum savings” in the middle: any ACO would have to show savings above 2 percent before they could reap any of the financial rewards.

The rule published today eliminates both of those barriers to entry. It creates an ACO track with no “downside risk,” meaning that right part of the graph essentially becomes irrelevant (there is also an option that does include downside risk and greater rewards, for ACOs more confident they’ll succeed). The 2 percent gap gets cut, too: under the final rule, ACOs share in any savings from the very first penny.

CMS made a lot of other adjustments too that make the program easier to participate in, like lowering the quality reporting requirements and eliminating requirements that ACOs show significant use of electronic medical records. As one CMS official put it this morning, the agency wanted to “smooth the on-ramp” into the program.

What will providers think of the rule? I’m reaching out for comments as we speak. But CMS is sure hoping they like it. The agency went through more than 1,300 comments submitted on the draft regulation, many suggesting changes reflected in this morning’s rule. CMS estimates that its ACO program will have anywhere from 50 to 270 participants.

“This is a rule I think we can be proud of,” CMS administrator Don Berwick told reporters at a briefing this morning. “It's responsive to many of the concerns we heard. It’s balanced and I think we’ve done the job of carefully listening to what could be strengthened.”

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