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“Some third person decides your fate: this is the whole essence of bureaucracy.” Kollontai Alexandra

We all agree that with the escalating healthcare costs in the US, we must start to deliver healthcare in a more cost effective manner. Currently we spend 17% of our gross domestic product, a whopping $2.7 trillion, on healthcare, of which physicians receive only 18%. Medicare, Medicaid, and commercial insurers are looking for ways to pay only for evidence-based, cost-effective services and not for treatments that have shown less compelling outcomes. The Center for Medicare and Medicaid Services (CMS) states that the three major goals for the ACO model of healthcare are to provide 1) better care for individuals, 2) better health for populations, and 3) lower growth in Medicare Parts A and B expenditures. A successful healthcare model of the future must incorporate preventive care and wellness programs into the payment models as well as better documentation of cost efficiency and quality of services. However, I am NOT convinced that the ACO model as it is currently structured is THE answer or even a viable alternative.

As an allergist, even if you are convinced you will NEVER be associated with a Medicare ACO, you must understand how ACOs operate, as I guarantee that they will impact your practice and your revenue stream! It is also very likely that commercial payers will model very closely after the Medicare ACO model.

Definitions used in defining ACOs that you need to know:

Primary Care Provider (PCP): a physician who practices primarily in internal medicine, general practice, family practice, or geriatric medicine (not pediatrics as this is Medicare)

Primary Care Services (as would apply to allergists): E & M services 99201 through 99215

Plurality of Services: the greater proportion of primary care services as measured in allowed charges. The plurality can be less than a majority of total services.

Benchmark for savings/loss calculation: Average per capita Medicare part A and B fee-for-service (FFS) expenditures comparing 3 years pre-ACO (growth rate adjusted) to a trend forward adjusted benchmark at end of year 1,2, and 3. Benchmark measurements will use a national growth factor for determining the baseline and future benchmarks, having the effect of penalizing high growth/high cost areas, e.g., Dade and Broward counties in Florida. In these areas, shared savings will become increasingly harder to produce each year. However, there will be some adjustments for the beneficiary population mix, e.g., the highest risk individuals such as end-stage renal disease or Medicare/Medicaid patients.

ACO Participant: an individual or group of ACO provider(s)/supplier(s), who are identified by a single Medicare-enrolled Tax Identification Number (TIN). The individual physicians’ National Provider Identification numbers listed as either PCP or specialty physician must also be supplied to CMS.

ACO “other entity”: A physician or group, e.g., an allergist, who has a contractual relationship with an ACO but is not an ACO participant.

Minimum Savings Rate (MSR): that % of savings that determine the shared savings paid to the ACO each of the first three years of the ACO’s existence. The amount will be calculated each year with the one-sided model but is fixed at 2% each year for the two-sided model. Savings are determined based upon the difference in baseline per capita expenditures and current year per capita expenditures (including services that are provided by ACO and non-ACO physicians, as well as all in-patient care) for the patients assigned to a specific ACO. On the average, a small ACO (approximately 5000 assigned beneficiaries) would be required to show at least a 3.9% savings, while a large ACO (50,000 or more assigned beneficiaries) would be required to show at least a 2% savings. Furthermore, the % of shared savings can be adjusted even lower in years where the total Medicare FFS expenditures are lower, e.g., due to a random cycle. This calculation will be done in such a way as to impact more negatively the smaller ACOs.

ACO one-sided model: shared savings only, no risk for the first 3 years. Savings are based upon meeting the MSF (see above), but will receive a max of 50% of shared savings (based upon meeting quality performance measures) up to 10% ($$ ceiling) of updated benchmark expenditures.

ACO two-sided model: shared savings and loss, has risk from year Shared savings are based upon meeting the MSR, but will receive a maximum of 60% of shared savings (based upon meeting quality performance standards) up to 15% ($$ ceiling) of updated benchmark expenditures.

There are various models for a Medicare ACO, including group practice arrangements, networks of individual practices, partnerships or joint venture arrangements between hospitals and ACO professionals, or hospitals employing ACO professionals. Legally an ACO can be structured as a corporation, partnership, limited liability company, foundation, or other entity permitted under state law.

The first step in acquiring the 5000 (minimum) patients to establish an ACO (let’s name it SQU) is to assign a beneficiary to SQU if the beneficiary receives the plurality (defined above) of his or her primary care services from a primary care physician who is part of SQU. When SQU is first formed, CMS will look at the most recent year before the ACO formed, but subsequently will focus on the “performance year”, the most recent of ACO year 1-3. Beneficiaries who have not received a primary care service from any PCP (regardless of ACO membership) but who have received primary care services from non-primary care physicians (e.g., you, the allergist, provided that you are part of SQU and that the plurality of primary care services provided were under your care), will be assigned to the specialist and will be part of SQU. However, patients who are assigned to SQU may see any physician, i.e., those who are providers in SQU and those who are in another ACO or no ACO. The patients can be reassigned to another ACO if they have a plurality of services with another ACO’s PCP participant within the performance year. Patients may decline to be assigned to SQU or to any other ACO and may also refuse to have their medical data shared. The burden will be upon SQU to convince the patient that it is in his or her own best interest to become part of SQU and to allow data sharing.

It is commonly stated that primary care physicians are required to be exclusive to a single ACO and that specialists are free to participate in multiple ACOs. However, this is not exactly true. Indeed the TIN of an individual or group is not allowed to appear on the participant list for more than one ACO. But, individual practitioners (PCPs and specialists) are free to participate in multiple ACOs if they bill under several different, unique TINs, with each of these TINs being Medicare-enrolled. However, if you have ever tried to change your Medicare enrollment from an individual to a group, you are familiar with the delays and hassles that follow just the change or reauthorization of one Medicare number, let alone trying to request multiple Medicare enrollments. And the accounting would be a nightmare with multiple tax numbers. So, practically speaking, a PCP, and, most likely, all other physicians, will only belong to one ACO.

Primary care physicians may be given ownership and rights to a percentage of profits in exchange for being willing and able to participate in the ACO and to bring significant portions of their patient bases in for enrollees. Profits may be allocated among primary care physicians and specialists in recognition of how their ACO patient expenses compare to those of others in the ACO. One should also know that non-physicians may have part ownership and economic participation in the ACO. An individual specialist or specialist group may help fund the ACO in exchange for rights of participation and percentages of profits as well.

So what will most allergists likely do? Allergists will probably not want to be associated with just one ACO, unless it happens to be one with 50,000-100,000 members for which they are the exclusive allergist. Instead, allergists and other specialists will likely become “other entities”, perhaps more appropriately entitled “second-rate citizens”. “Other entities” are not included in ACO benchmarking, assignments of beneficiaries, or quality reporting sampling. They will not qualify for Physician Quality Reporting System (PQRS) incentives through the ACO. While ACO participants must have at least a 75% representation on the governing board, no such Medicare-directed rules apply to “other entities”. However, an “other entity” must agree to comply with the Medicare Shared Savings Program rules. CMS recommends that the ACO contracts with “other entities” permit the ACO to terminate the agreement unilaterally if the “other entity” fails to comply with program rules. It is somewhat vague what these program rules entail, but quality measure reporting and some electronic health record exchange of information will likely be included. Rights and obligations of the “other entity” will be determined by his/her contract with the ACO. The “other entity” will have to negotiate before signing the contact how much shared savings they will receive, if any. The allergist as an other entity would want to discern and, more ideally, to help develop the algorithm and rules that determine which patients would be referred and what services the allergist would provide. Since these parameters are not clearly defined in the CMS regulations, they would need to be detailed in the contract agreement. The allergists and the PCPs would continue to receive their usual FFS Medicare payments, but the allergist might not see any of the shared profits or, on the other hand, might share in both the profits and the losses in the two-sided ACO model. Whether the ACO limits the number of same specialty “other entities” is also important. Perhaps more important is whether the ACO will permit multiple “other entity” specialists to perform evaluations/tests that allergists currently perform, thereby shrinking the referral numbers to allergists. As each ACO will have different rules of engagement, it seems likely that each ACO contract will be unique and will require careful negotiation and oversight.

ACO participants and, more than likely, the “other entity” allergists will have to follow and to report on quality performance measures. The 33 quality performance measures (for a total of 48 points) are organized into the 4 following domains: (1) Patient/Caregiver Experience; (2) Care Coordination/ Patient Safety; (3) Preventive Health; and (4) At-Risk Population/Frail Elderly. Chronic Obstructive Pulmonary Disease (COPD) is one of the diseases that would fall into the 4th domain. Interestingly, one of the quality performance measures is “Access to Specialists”. A minimal performance score will be determined for each quality performance measure, with some measures being given more points, For example, the EHR measure is weighted double that of any other measure and would be worth 4 points. And even if “other entity” specialists are not required to report on the quality measures to the ACO, guideline-directed algorithms used by PCPs will likely result in fewer referrals for specialty visits and procedures.

Based upon my review of the 33 quality measures, the following are the ones for which allergists might be asked to be accountable:

  • Getting Timely Care, Appointments, and Information
  • How Well Doctor Communicates
  • Patients' Ratings of Doctor
  • Health Promotion and Education
  • Shared Decision Making
  • Health Status/Functional Status
  • Ambulatory Sensitive Conditions Admissions: Chronic Obstructive Pulmonary Disease
  • If you qualify for an EHR Incentive Program Payment
  • Influenza Immunization
  • Pneumococcal Vaccination
  • Adult Weight Screening and Follow-up
  • Depression Screening
  • Proportion of Adults 18+ who had their Blood Pressure Measured within the preceding 2 years
  • The ACO will require a lost of professional administrative support. For example it will be required to complete the patient experience survey measures, claims-based measures, the Electronic Health Record Incentive Program measure, and the Group Practice Reporting Option (GPRO) web interface quality measures that are required for purposes of ACO participants earning a PQRS incentive. The individual incentives for EHR, electronic prescriptions (eRx), and PQRS will no longer be given once a physician becomes an ACO participant. It is unclear how “other entities” will be treated with regard to the current individual incentives.

    Many medical economic specialists believe that the current EHRs do NOT meet the criteria for a sophisticated information technology (IT) system that will support distributed care management across a diverse care team that extends from the primary care physician, to the specialists, to the care manager, to the patient, and to others. To add to the confusion, if the allergist becomes an “other entity” to several different ACOs, how will they handle the diverse IT systems which often do not communicate well with each other?

    One issue that is not addressed in any way in the ACO regulations is medical liability. What will happen if physicians use their best judgment, limit diagnostic studies when the probability of missing a rare disease or a unknown complication of an known disease is low, and then are surprised with a missed diagnosis and/or an inadequate treatment plan? Will the ACO, CMS, or commercial carriers help the physician defend against a malpractice lawsuit? This part of the puzzle must be solved if we truly want to reduce healthcare costs.

    Perhaps you’re wondering by this point why any allergists in their right minds would consider joining or even signing an “other entity” contract with an ACO. As you probably have discerned, our world of referrals and reimbursements could change dramatically and quickly. ACOs will make it more important than ever for PCPs to be aware of what is happening with the patients they refer to specialists. The PCP can be hurt financially if the specialist isn’t doing his or her job correctly or cost-effectively. Thus PCPs will choose to establish referral patterns to select allergists for their Medicare patients and will likely use the same allergists for their younger patients who are not assigned to the Medicare ACO. As “other entities”, allergists may have to agree to be available within a certain time framework for new patient appointments, follow-up care, and acute care. They may also be requested to sit on ACO committees, e.g., the quality care committee.

    Under the ACO umbrella, the allergist is no longer selling office visits, procedures, and allergy injections. Instead, he or she is selling positive patient outcomes. With time, this should lead to lower costs. But do you really believe that treating allergic rhinitis with immunotherapy will reduce medical costs over the three years of the ACO contract? Would you be willing to pay back dollars if it doesn’t? Would effective but time-consuming preventative management of the asthmatic, resulting in reduced hospitalizations, be more likely to result in shared savings than giving more allergy injections? How long will the ACOs be willing to wait to see if immunotherapy lowers the overall health costs of the atopic patient with chronic sinusitis? Is the allergist willing to accept responsibility for patients who drop out of allergy immunotherapy, as the outcome standard would likely include all those who start immunotherapy? Under the ACO model all physicians are responsible for lack of patient compliance, as it is well understood that these patients will ultimately ratchet up the cost of healthcare.

    How will you balance the variety of pay situations, some patients within and some outside an ACO, in terms of value vs. volume? Are you willing to bite the bullet and take a value-based approach for all? If you decide to do so, can you partner with enough like-minded payers in addition to Medicare to make a living?

    The American College of Physicians suggests that you ask these questions when considering joining as a participant or signing an "other entity" contract with an ACO:

  • What are the ACO’s by-laws, and do they protect my interests?
  • What representation will I have on the ACO’s governing body?
  • What are the administrative and organizational requirements to participate (for instance, pertaining to data submission, committee participation, etc.)?
  • What practice transformation changes will be required to participate (for instance, use of an electronic health record system, 24/7 access or triage, provision of case management)?
  • What financial or “in kind” assistan
  • ce can I expect from the ACO to implement and to maintain any required practice transformation?

  • What are reasonable estimates of shared savings or extra payments that the ACO can earn?
  • How will any earned shared savings or extra payments be distributed?
  • Is there any potential for accrued loses and participation in a “pay back” to the payer?
  • Is the ACO adequately protected from relevant federal and state penalties (related to anti-trust and anti-kickback statutes)?
  • What are the advantages and disadvantages of ACO participation versus establishing an independent service contract with the ACO, particularly for subspecialty physicians?
  • The plan is to transition the one-sided ACO model into the two-sided model after the first three years. ACOs that are not successful in meeting the minimal quality performance measures may not have their contracts renewed. Most analysts expect that even if the ACO model is considered successful, up to 30% of ACOs will not continue beyond 3 years.

    Perhaps a bigger question is how long the ACO concept will be sustainable. When we attempt to standardize around best practices, improve efficiencies, and eliminate waste, this usually results in decreased compensation to providers and others in the health care system. We will soon reach the point beyond which no more water can be squeezed out of the towel. So what model do we follow at that point? That’s a rhetorical question, because some third person decides your fate.

    Dana V. Wallace, MD, FACAAI
    ACAAI Past President
    Florida Center For Allergy And Asthma Care
    Ft. Lauderdale, FL

    Reference materials:
    The link to the CMS updated FAQ is:

  • The Shared Savings Program complete 806 page final rule can be downloaded at: