Go to homepage
News & Publications
e-Reports
Here are some reactions to proposed ACO rules
e-Reports, May 2, 2011
Font size: A  AIRSS feedRSSPrint
Untitled document

The Centers for Medicare & Medicaid Services (CMS) is awaiting comments about new rules and guidelines for accountable care organizations (ACO). In case you’re forming an opinion on the proposed rules to share with CMS by the June 6 deadline, ISMA Reports has reactions of physician leaders whose own health care organizations are moving toward ACO formation.


Tim Hobbs M.D.
Tim Hobbs, M.D.,
chief physician executive 
Community Health Network

“I think these initial rules have set a high bar; to accomplish all of them would be a big stretch. We understand what they are trying to achieve in aligning patient care with outcomes, but there is a lot of skepticism.

“You can see they (CMS) have been very thoughtful about the rules. They have put a lot on the plate, and they are getting everyone’s attention. I was surprised how complete the rules were and how fast they are trying to do this.

“The rules are pushing hospital/physician integration. They are attempting to change the payment model, which will change the health care delivery model. The present model only values volume. A lot of physicians would support being rewarded for good care, not volume.

“The ACO concept makes sense – instead of fragmented care. If patients can get better care and access at lower costs, that’s a win/win situation.

“We (Community Health Network) are working to invest in integrating physicians and developing an IT infrastructure. With all that cost, you are trusting the payment model will yield a return on investment.

“We’re here to put our patients first, but we’re not making an investment just to get a return from the ACO. CMS/ government may or may not know how the real world works, but they are trying to change it. We must change it wisely.

“Fundamentally, I think this is the right direction. The system is going to change, but it needs to be led by physicians and by our professional values. We need to be team leaders and players.”


Ben Park
Ben Park, M.D.,
president and CEO
American Health Network

“When you look at start-up costs in Medicare’s Physician Group Practice Demonstration, you find an average of $1.76 million – $0.49 million for investment and $1.27 million for first-year operation. There was wide variation and few groups have as much in place in terms of infrastructure as these groups. Eight of 10 of the groups had an EMR in place. This start up cost will keep many physician groups from participating.

“Another issue will be the number of Medicare patients required to offset start-up costs in a reasonable time frame. An ACO with 5,000 assigned Medicare patients averaging $10,000 in annual cost would have a budget target of $50 million. Since the first $1 million (2 percent) goes to Medicare, in the first year the ACO would appear to need $5.5 million in total savings to offset start-up cost (assuming full credit for reporting quality data, the ACO receives 50 percent of savings above the 2 percent threshold).

“CMS mandates withholding 25 percent of ACO savings during the three-year agreement, plus the added year or two it takes to ‘close’ the books. This means you would need to save $6.7 million (13.4 percent) in year one on 5,000 lives, which I believe is overly aggressive.

“For medical groups that have not had a discipline of retaining earnings, meeting the capital requirements may prove difficult. CMS requires ACOs demonstrate the ability to pay back amounts over budgeted amounts.

“All in, there is a lot of complexity in the published regulations. The potential reward is substantial for a medical group equipped with an EMR, the ability to manage illness so as to avoid hospital care and willing to use evidence to guide referrals.”


Tomchaney, M.D.
Al Tomchaney, M.D.,
senior VP/chief medical officer
Franciscan Alliance

“We have been extremely focused on development of the ACO rules and regulations set out by CMS. In our opinion, it reaffirms our belief in a general direction and shift the health care delivery system needs to make and, as a consequence, will have significant impact on both patients’ and providers’ experiences in the very near future. In part, this validates our efforts and direction in the evolution of the Franciscan Alliance ACO.

“Patient engagement and empowerment will need to take a considerable leap from its current level to make this system of care work and will likely change the expectations of both providers and patients in what will be the necessary ingredients to provide significantly better care at lower costs. That is the positive message sent out by the regulations.

“However, the regulations seem to prevent many providers from making that transition and actively participating in that care delivery metamorphosis. This program would seem to limit participation to only very large organizations that already have the IT infrastructures and advanced care delivery systems in place. By their own estimates, only 75-150 organizations will be likely to participate.

“The methodology of reimbursements and varied requirements of infrastructure and governance seem to be putting most smaller providers on the sidelines. It will be challenging to evolve other models with private payers or on our own, with this structure and process superimposed.

“All that said, the Franciscan Alliance views the ACO rules and regulations as an affirmation that change, as we envisioned it, is coming more broadly to the U.S. health care arena.”

Accountable care organization (ACO) - 
A clinically integrated network of physician groups or physicians and hospital(s) focused on managing patient care to meet cost and quality targets. Incentives – from cost savings – are distributed for achieving those goals. ACOs maintain a strong primary care network, share patient health care information and adopt common treatment protocols. Under Medicare, an ACO must provide care for a minimum of 5,000 patients for at least three years.

The voluntary program starts Jan. 1, 2012.

Visit the ISMA ACO page here

Copyright: Information written and displayed on www.ismanet.org is the property of ISMA and may not be reproduced without expressed written permission of the Indiana State Medical Association.

For a more detailed sitemap click here.