The Centers for Medicare and Medicaid Services clearly listened to the provider and insurer communities in determining the final rule for how to establish accountable care organizations (ACOs). CMS is much more systematic about the establishment of ACOs, laying out a ramp-up period and then a shared savings model down the road, according to payers and their stakeholders.
"So it's not an immediate risk taking," said Dr. David Hanekom, vice president of medical management and chief medical officer of Blue Cross Blue Shield of North Dakota.
However, for North Dakota and several other Western states with large rural areas, the provision for benchmarking costs, which will be based on historical Medicare costs for the area, will be a hardship.
[See also: CMS releases dramatically revised final ACO regulations; ACO regs and reality: Did CMS close the patient vs. provider gap?]
About 50 percent of the income of healthcare systems in North Dakota relies on CMS, and the state has an aging population. North Dakota has one of the lowest Medicare costs.
"For that reason, the large systems in North Dakota probably will not play in the [CMS] ACO," he said.
The fix for that is enmeshed in congressional politics.
The Frontier amendment, passed in 2003 as part of Medicare modernization, leveled the playing field by increasing Medicare reimbursements, which are based on cost of living and not the cost of doing business.
"But now it is under threat in the budget deficit talks," Hanekom said. In addition to North Dakota, the Frontier amendment applies to Nevada, Montana, Wyoming, and South Dakota.
"From the insurers' perspective, I wish they would not base it on the previous three years because that doesn't allow any of the health systems in North Dakota to play. If you're already at a loss with Medicare patients, if you try to take that further down, our systems would be jeopardy financially," he said.
Blue Cross pays about 65 percent higher than Medicare on average for the same care for the same patient, cross-subsidizing the federal programs. But that is not sustainable, he said.
"With the higher payment of the Frontier amendment, I'm convinced the healthcare systems and us would step forward and say we're ready and able to do this," he said.
Accountable care already describes how health care is delivered in North Dakota because the few integrated systems and rural providers work together to coordinate care and improve quality, and Blue Cross Blue Shield is the single dominant insurer, Hanekom said.
On Oct. 20, CMS released its final ACO rule, in which providers will share in the savings when they reduce costs and improve quality. CMS will officially publish it in the Nov. 2 Federal Register.
Purchasers believe that ACOs have the potential to improve affordability, quality, and coordination of care not just in Medicare but in the private sector as well, said Bill Kramer, executive director for national health policy for the Pacific Business Group on Health, an organization of large employers, including Target Corp. and Boeing Corp.
To be successful, ACOs must deliver real measurable improvements in health and value while reducing costs, he said. However, ACOs risk further increases in market concentration and Kramer advocates for lower trigger points for review.
"The employers' concern is that existing antitrust tools may be inadequate to address the rapidly accelerating trend towards consolidation of hospitals, physician groups and insurers," Kramer added.
Some providers are able to use their market power to demand higher prices or to strengthen their bargaining positions in negotiations for the best insurance arrangements for employees, and the concern is that "forming ACOs might make this worse," he said.
Employers also worry about cost shifting related to Medicare. Whenever providers feel pressured to reduce their costs because of lower Medicare reimbursement, which could occur as the result of the ACO shared savings program, providers in the past have shifted those costs to commercially insured patients, he said.
"This results in higher premiums for covered employees," Kramer said.
Payers already have 30 ACO pilots under way around the country, according to America's Health Insurance Plans. Karen Ignagni, AHIP's president and CEO, said that the CMS ACO final rule takes important steps towards more accountability and quality care but should build on flexible models thriving in the private marketplace.
Private payer ACO programs can help the healthcare system adjust to the coming changes in delivery models, said Dr. Charles Kennedy, CEO of accountable care solutions at Aetna.
"CMS is such a high percentage of overall revenue to any physician's office that they're kind of like the blocking fullback," he said, adding, "Whatever they do the whole industry has to react to."
"We're going to be more flexible, more nimble, and quicker so that the delivery system gets comfortable operating in this way and then they can go do the more rigid government model," Kennedy said.