CMS Administrator Dr. Donald Berwick has been a strong proponent of Accountable Care Organizations as the ACO model embodies his triple aim of better care for individuals, better health for populations, and lower growth in expenditures.  He has committed CMS to launching ACOs under the Shared Savings program and the Center for Innovation demonstration program by the Congressional deadline of January 2012 as a hallmark of his leadership.

Dr. Berwick currently serves as the CMS Administrator under a recess appoint that expires at the end of 2011.  If he is not confirmed, which is the conventional wisdom based on Republican opposition in the Senate, ACOs will lose their strongest Administration advocate.

In March, The New York Times reported that Marilyn Tavenner, CMS Principal Deputy Administrator, was the candidate most likely to succeed Dr. Berwick.  Marilyn Tavenner's role at CMS primarily focuses on administering the agency and managing the huge new workload created by health reform.  This role capitalizes on her management experience at Hospital Corporation of America and her experience as Secretary of the Virginia Department of Health and Human Resources under Governor Tim Kaine. She is also a nurse.

On March 28, the Congressional Quarterly (CQ) discussed her low Washington profile and noted that she has not testified before Congress or talked to the press.  With regard to ACOs, the CQ article reminded us that at a speech in March she mentioned that the Administration might delay the launch of ACOs which was quickly corrected by HHS officials and then again by Secretary Sebelius two weeks ago who said the final ACO regulations were not likely until year end.

ACOs have strong bipartisan support and strong support from Secretary Kathleen Sebelius.  Thus, any potential leadership changes in CMS should have little to no effect in the launch of the Pioneer ACO Demonstration and the Shared Savings program.

The State of Play on Medicare ACOs

The comment period for the Medicare Accountable Care Organization (ACO) Notice of Proposed Rulemaking closed yesterday, June 6.  In the last two months CMS has taken a beating from virtually every corner on the draft regulation as being overly burdensome. 

Dozens of groups, including the American Hospital Association (AHA), American Medical Association (AMA) and America's Health Insurance Plans (AHIP), submitted their comments on the proposal. High-profile Physician Group Practices (PGPs) such as the Cleveland Clinic and Mayo Clinic have said they are unlikely to participate in the Medicare ACO initiative.

AHA fears high implementation costs and excessive quality requirements will prevent hospitals from forming ACOs. AHA believes it will cost a 200-bed hospital with 80 primary care physicians and 250 specialists $11.6M to launch a Medicare ACO; a 1,200-bed, 5-hospital system with 250 primary care physicians and 500 specialists is expected to run $26.1M.

Battle lines were drawn on antitrust issues in comments from AMA and AHIP, which offered diametrically-opposed recommendations.

We believe CMS will listen to entreaties to reduce the quality reporting burden and will help provide improved cash flow for ACOs (we hope through partial capitation and getting rid of the 25% withhold) and possibly increase the share of savings that ACOs can keep, to encourage adoption.  But given the huge volume of comments and political sensitivities in Congress on ACOs, we think it will be toward year-end before a final regulation is issued. 

The "Pioneer ACO" Demonstration is scheduled to begin this fall, with applications due to CMS July 18 and a full program launch January 1st.  We are seeing moderate interest among marquee providers — especially those with their own Medicare Advantage plans -- in participating in the Pioneer ACO Demonstration and believe chances are good that CMS will fill its 30 slots for these "ready to launch" ACOs if the agency listens to industry input on partial capitation arrangements in the coming weeks.