Open Letter to Centers for Medicare and Medicaid Services

Accountable Care Organizations

To: Centers for Medicare and Medicaid Services

From: Carol Corp.

The new option for Medicare providers to form Accountable Care Organizations (ACOs) starting in 2012 is an extraordinary opportunity. The ACO option holds tremendous promise for simultaneously improving beneficiary quality of care while saving taxpayer dollars. We commend Congress and the administration for including the Medicare Shared Savings Program in the Patient Protection and Affordable Care Act (PPACA).

As Centers for Medicare and Medicaid Services (CMS) develop proposed rules for ACOs and the Medicare Shared Savings Program, Carol would like to offer several recommendations. Our recommendations are based on our extensive experience in helping innovative providers realize the financial benefits of delivering market leading clinical performance.

1. Learn from ACO Leaders:

In establishing the policies for ACOs, CMS is in an excellent position to take advantage of the experience and lessons learned from successful efforts to redesign care delivery and realign payment incentives. Fortunately, CMS is doing just that.

Despite what must be an overwhelming workload associated with PPACA implementation and day-to-day Medicare administration, you and your staff have taken the time to hold numerous meetings and forums to listen to those in the community working to transform care delivery and reward high-value patient care. In particular, the Carol team has had many productive discussions with CMS leadership and staff about future Medicare innovations and the framework for ACOs. We are grateful for this openness and the opportunity to share our extensive experience in working with leading health systems, hospitals and physicians to design and implement value-based, accountable care.

We applaud the cooperation between CMS, the Federal Trade Commission and the Department of Justice, and hope that this collaboration is successful in eliminating some of the structural barriers to creating a more accountable health care delivery system. Relief from the Stark and CMP laws would encourage more participation and drive greater success in transitioning to sustainable accountable care delivery.

Also, please consider dedicating funds to assist participating providers in offsetting the cost of ACO development and transition. It is critical for CMS to appreciate that transitioning to accountable care requires visionary health care leaders who are willing and capable of gaining the support of their boards of directors, colleagues and communities for what may seem a substantial financial undertaking. Building the necessary infrastructure and aligning the clinical and financial systems will be resource intensive for providers.

With comprehensive care redesign and value-driven payment innovations developed by Carol, health systems are actively changing the delivery and financing of health care resulting in lower costs, better quality of care and higher patient satisfaction. We are demonstrating how accountable care produces positive results for patients, physicians and payers / purchasers. Early data shows:
• Lower total cost of care, with significant first year savings at demonstration sites compared to control sites.
• Improved quality of care and better, evidenced-based care delivery, including significantly improved diabetes care management.

As CMS implements the Medicare Shared Savings Program, please consider supporting regular collaboration and information sharing among innovative providers and early adopters, including the many private sector accountable care initiatives Carol and others are assisting throughout the nation.

2. Support Value-Based Payment:

Transformation of America's health care system requires replacing volume-driven payment with value-based payment. The ACO model is an excellent opportunity for CMS to help move Medicare (and ultimately other purchasers and payers) to a genuinely value-based approach to payment.

While taxpayer interests must be protected in setting the parameters of shared savings, ACO policies should ensure strong, predictable rewards for providers that improve quality and reduce costs. Therefore, we recommend:

Risk Adjustment:

No risk adjustment methodology is perfect, but CMS has made great strides in the development and use of risk adjustment methodologies. To adjust historical Medicare costs to determine the ACO benchmark used for cost comparisons, CMS should rely on existing methods already used elsewhere in Medicare. A straightforward, well-grounded methodology is most appropriate here, especially given the fiscal buffers provided by the threshold for shared savings and the sharing of the savings between Medicare and the ACOs themselves.

CMS should also approach this as a learning opportunity for all parties in the system. CMS should collaborate with researchers, leading ACOs and other purchasers such as Medicaid to refine the risk adjustment methodology over time.

Threshold for Sharing Savings:

In order for an ACO to be eligible for a share of Medicare's savings, its actual beneficiary health care costs must be lower than the set percentage predicted costs based on Medicaid historical fee-for-service experience. It is critically important for CMS to set this threshold at a reasonably modest level within the 2 to 5% range.

Portion of Savings Shared with ACOs:

The portion of resulting savings shared with ACOs should be set at 80% or above to ensure a strong rate of return for the investments and actions needed, notably:
• Comprehensive care redesign
• Clinical performance management systems
• Financial model innovation
• Realignment of inpatient and outpatient capacities

This would ensure taxpayers also share in the financial benefits of the improved clinical and economic performance of ACO providers without jeopardizing the incentives essential to successful implementation and operation of an ACO. We should also not lose sight of the savings beneficiaries will experience in lower patient cost sharing as ACOs eliminate unnecessary costs.

3. Support Multi-Payer ACOs

Medicare has a great opportunity to lead the way in promoting accountable care. While Medicare is the largest single buyer of physician and hospital services, CMS should structure its rules to permit the early creation of multi-payer ACOs wherever possible. CMS should avoid the temptation to delay giving permission to form multi-payor ACOs.

In light of nationwide Medicaid expansion in 2014, the new Federal Coordination Office for dual eligible issues, and the Center for Medicare and Medicaid Innovation, state Medicaid programs should be strongly and immediately encouraged to participate with Medicare in the ACO program. Private health plans and large self-insured employers should be permitted to participate as well. The effect would be to greatly enhance the nationwide, positive impact of the ACO model.

Carol is committed to helping Medicare and the provider community make the journey to accountable care and from volume-based to value-based financing. We look forward to commenting on your forthcoming proposed rules for ACOs.