by Carrie Nixon on November 13, 2012 in ACO News, Affordable Care Act
by Carrie Nixon, Carson Porter, and Caroline Klocko *
An aging population with increased longevity and chronic health problems, coupled with a fee-for-service model of care that rewards volume of services over outcomes, has created a perfect storm of rising healthcare costs in America that, if left unchecked, spells disaster for our economy. This dire scenario led to passage of the Affordable Care Act, and with it, a fundamental shift in our healthcare system from a fee-for-service model to a patient-centered model of care.
The so-called “Triple Aim” – improved care experience for individual patients, better health of patient populations, and reduced cost of care per capita – provides the underpinnings of this new healthcare model and with it, the advent of Accountable Care Organizations (ACOs) as vehicles for reform. Post-acute and long-term care providers in particular have a significant role to play in the evolution of ACOs.
What is an ACO?
An ACO is an alliance of physicians, hospitals, treatment facilities and other healthcare providers that coordinate treatment to improve the quality of care and reduce costs across a patient population. It is essentially a patient’s one-stop-shop for basic medical needs, achieving the three goals of the Triple Aim through increased care coordination. The Affordable Care Act approved the formation and use of ACOs in the Medicare system, and as of August 2012, the Center for Medicare & Medicaid Services has already approved well over 100 ACOs nationwide.
The ACO model is based on pooling the resources of primary care providers, specialists, therapy centers, long-term care facilities, hospitals, and other healthcare providers to concentrate, coordinate, and streamline patient care. In the current healthcare model, a patient’s care is often cobbled together through different care providers who are not effectively coordinating their treatment plans, leading to redundant and ineffective care that drives up costs with little benefit to the patient. In contrast, the ACO model creates incentives for outcome-driven quality care to Medicare beneficiaries at overall cost savings.
The Role of Post-Acute Care
The time is ripe for post-acute care providers to seize the opportunity to shape the ACO model as it develops and expands. CMS is targeting savings through reducing the number of expensive hospital readmissions and incentivizing care in lower cost, non-hospital settings. Post-acute care centers are uniquely positioned to meet this need, particularly through concerted management of cardiac care and pneumonia patients who account for a large portion of preventable hospital readmissions.
In October 2012, CMS began enforcing a new policy under the inpatient prospective payment system (IPPS) that penalizes hospitals if a patient who was discharged to a post-acute care setting is readmitted to the hospital. This policy creates a strong incentive for hospitals to coordinate treatment with post-acute care providers, and ACOs are an obvious mechanism for doing so.
CMS’ Shared Savings Program (“SSP”) allows post-acute providers who are part of an ACO to share up to 50% of estimated savings with CMS if they participate in a “one-sided model,” or up to 60% of savings in a “two-sided model,” where participants must also share in any losses. Under the SSP, CMS establishes a benchmark for each ACO, estimating what Medicare Fee-For-Service expenditures would have been for the given population in the absence of an ACO; savings or losses are calculated against this benchmark. Under both the one-sided and two-sided models, providers are still paid for specific items and services, as they would be under a fee-for-service model. Then the percentage of savings is calculated, with the exact percentage that an ACO receives based upon 33 individual quality performance measures grouped into four key areas: patient experience, care coordination/patient safety, preventive health, and the overall health improvement of the at-risk population. The goal is to incentivize quality, outcome-based care as the unifying objective of all ACO participant members.
Weighing the Options
What does all of this really mean for today’s post-acute care providers? In a healthcare system that is rapidly evolving, there are three main options:
1) Maintain the status quo. In doing so, post-acute providers avoid the risk of shared losses associated with CMS’ two-sided ACO model; but they also lose out on the potential of shared savings available to them as the provider best positioned to reduce hospital readmissions. In addition, stand-alone post-acute providers are likely to become less attractive as referrals for hospitals who need to avoid penalties for unnecessary readmissions.
2) Establish a Post-Acute Care Network (PACN). Such a network could consist of skilled nursing facilities, rehabilitation services and therapy providers, home care providers, and/or hospice. A PACN that highlights its ability to provide quality, coordinated care is an attractive partner to contract as a unit with ACOs, other provider networks, or private health plans to share in savings.
3) Join an ACO. Many newly forming Medicare and private ACOs are recognizing the advantages of adding quality post-acute providers to their organizational structure as a means of increasing overall savings. In deciding whether to join or form an ACO, there are numerous business and legal issues to consider, including legal structure, governance, financing, health IT, and quality measures. For details on these and other considerations, see our article titled “Should you join an ACO?”
Conclusion
America’s health care system is experiencing a sea change, and the tides are favorable for post-acute and long-term care providers who embrace a patient-centered model of care. New Medicare and private ACOs are forming every day with the goal of providing high quality, cost-effective care for optimal patient outcomes. Forward-looking post-acute providers are well positioned to share in the savings generated by the new models, and to shape the future of healthcare in the process.
Carrie Nixon is President of Accountable Care Law & Policy (www.accountablecarelaw.org) and CEO of Nixon Law Group. Carson Porter is Chairman of Accountable Care Law & Policy and Partner at Rimon Law. Caroline Klocko is an affiliate attorney at Nixon Law Group.
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