Medicare rules hammer hospitals, docs

Being an accountable care organization will be the major leagues of health care after the federal Medicare program set a high bar for the new kind of doctor-hospital organization.

Medicare, administered by the Centers for Medicare and Medicaid Services, issued proposed rules for accountable care organizations, or ACOs, on March 31. And boy are they tough.

“It’s going to be burdensome for a lot of ACOs,” said Brian Betner, an attorney at Indianapolis-based Hall Render Killian Heath & Lyman PC, a health care law firm. He added, “You’re going to have people say, ‘It’s not for me now. We don’t have the resources right now.’”

Other industry observers drew the same conclusion. Vince Kuraitis, an Idaho-based health care strategy consultant, cut his estimates for the number of ACOs that would form by as much 90 percent—from a range of 750 to 1,000 nationwide, to about 75 to 150.

“Thus, at least for now ACOs will not be mainstream armies occupying every American community. Approved ACOs will be elite, highly trained and well equipped special forces units,” Kuraitis wrote in a blog post.

Medicare was asked to create rules for ACOs by the 2010 health reform law. They must include physicians who will not merely provide health care services, but will also commit to managing the health of a specific population of patients. That population must include at least 5,000 Medicare recipients and it can include hospitals, nursing homes and other health care providers.

The idea is that by coordinating care across many so many providers, errors and costs will go down while overall health will go up.

No health care providers are required to form ACOs. But for those who do, Medicare is offering to share up to 60 percent of money the ACO saves, compared with previous years’ of health expenses for patients the ACO takes responsibility for. The shared savings money would come as a bonus on top of the fee-for-service payments Medicare makes to doctors and hospitals.

But that’s where the first difficulty comes in. Health care providers will need to implement highly sophisticated computer systems to track the patients in 65 separate categories established by Medicare—and file regular reports for each category.

Also, within a year of starting a shared-savings contract with Medicare, an ACO will need to show that at least half its physicians are using electronic medical records in a “meaningful” way—sharing records seamlessly with other doctors, making them available to patients, and using the data on electronic records to improve their clinical decision-making and patient management efforts.

Buying and implementing those software systems can be hugely expensive.

“The difficult entry issues in my opinion are going to relate to the capital requirements, the health information technology,” said Betner, the Hall Render attorney. “The ability to to gather data and crunch it and report it is very difficult. But the biggest shift is, ‘You mean we now have to use it?’”

If that weren’t enough, Medicare’s proposed rule requires all ACOs—by at least their third year of a contract—to take at least some of the financial hit if the cost of caring for their patients goes up.

So instead of having a no-risk shot at earning a bonus, ACOs face the prospect of losing money if they don’t do things right.

“They’re trying to get you to assume some of the risk,” said Betner, adding, “You’ve got to make a commitment. You’ve got be all in.”

He expects the major hospital systems in Indianapolis to still try to form ACOs. All of them have been working toward that goal since even before the health reform law was passed a year ago. It’s far less likely that health care providers in smaller communities will conclude they have the scale to absorb the significant costs to start an ACO, he said.