Medicare’s ACO programs, which are tied to the Affordable Care Act, could find themselves in a vulnerable position in 2012, with both a Supreme Court decision on the reform statute and potential budget cuts looming on the horizon. But some say that no matter what the legal and political outcomes are next year, ACOs will find a way to survive in the Medicare space.

“If you look across the three lines of business, Medicaid, Medicare and the commercial sector, there’s going to be lot of opportunities for integrated health systems and ACO entities to grow in the future,” Marc Ryan, chief operating office of MedHOK, a health care information technology company based in Tampa, Fla., tells ABN.

Medicare has three areas where ACOs will be “picking up” in 2012, he predicts. The liberalization of the final Medicare Shared Savings Program (MSSP) (ABN 11/11, p. 1) regulations will help drive that program, and “I think the Pioneer ACOs are going to do extremely well with a lot of experienced entities. I’m also encouraged by the Comprehensive Primary Care Initiative by CMS, because I think over time you could see those CPCIs grow into much heartier hospital and physician entities.”

Ryan acknowledges that MSSP participation “is probably still going to be challenging for CMS,” if the substantial changes made to the final rule to attract more providers aren’t enough to drive enrollment into the ACOs. “But I do think the Pioneer demonstration project will probably thrive with more of the experienced entities. And if you’re very experienced,” the Pioneer ACO is a much better deal than MSSP, he says.

CMS had initially estimated that 75 to 150 organizations would show interest in participating in MSSP. For some reason, the agency reduced its low estimate to 50 but increased its high estimate to 270, an indicator that CMS “doesn’t exactly know what’s going to happen” with the program, William MacBain, senior vice president of Gorman Health Group LLC, said during an AIS webinar Nov. 15 (ABN 12/11, p. 3).

A webcast poll conducted in late 2011 of more than 100 hospital and health leaders and about 40 insurer leaders revealed some hesitancy among health care executives about participating in MSSP. The poll, conducted by KPMG LLP, law firm Epstein Becker Green and health care consulting and management firm JHD Group, found that the majority of the respondents were still undecided about their organization’s participation in MSSP, admitting they did not have a comprehensive understanding of the various CMS programs and their financial implications, even after publication of final rules.

When asked how long it would take the MSSP program to achieve real results in coordinated care on a national scale, close to half of the respondents said 10 years.

Applicant Numbers ‘Will Be Healthy’

Other industry insiders are confident the program will attract a healthy number of applicants for MSSP. “Organizations are carefully assessing this. They’re modeling the economics of the program, [and] they’re making sure that this is a business they feel they can be successful at, not just in execution but in the economics,” Bruce Merlin Fried, a partner in the Washington, D.C., office of law firm SNR Denton US LLP, tells ABN.

In Fried’s view, “it would not be good for this to be unsuccessful,” mainly because there’s got to be a means by which the Medicare program transitions away from the volume-driven, fee-for service methodology.

“I think one of the benefits of MSSP and even the Pioneer is these are efforts to turn the battleship of Medicare in a way that’s feasible. You can’t just stop the Medicare program and say, ‘we’re going to do it differently beginning tomorrow.’ The culture’s got to change, provider shifts have to be evolved, and the CMS program itself, the staff, their assistants, all of that is going to require a complex change. And I think one of the benefits of the ACO strategy is just that: trying to evolve instead of just slamming on the brakes,” he says.

High Court Holds Cards on MSSP

What could potentially throw these programs into reverse is how the Supreme Court eventually rules on the health reform law, which directed CMS to create ACO programs.

The court’s deliberations have several outcomes, Fried said. The justices could say, “We’re going to consider the Anti-Injunction Act implications.” Since taxes under the law have yet to be imposed on anyone, the question is: does the Anti-Injunction Act prevent the court from considering this issue until a tax* has* been imposed, he explains. If the court decides that it does not yet have the authority to consider the ACA, “implementation rolls on.”

But “If the court says: we do have authority, notwithstanding the fact that the taxes haven’t been levied to review the question that’s before the court,” which is primarily the law’s individual mandate, then the next question is: how does the court rule on that, Fried continues.

If the high court supports the individual mandate, “we’re done and implementation rolls on. If they find the mandate unconstitutional, then that’s done, but then begs the question: what about remainder of the ACA? It’s the question of severability. Can the remainder of the ACA proceed with being implemented? If it rules against the mandate, then what other sections of the ACA may proceed and what other sections ought to be altered? If the whole thing goes down, then the program’s over,” including the Medicare ACO programs, he says.

Many observers believe that some incarnation of MSSP and the Pioneer program would live on, no matter what the high court rules on the reform law.

“Assuming that they can’t implement the current programs the way they’re currently configured from the legal challenges, and that the accountable care movement excels on the commercial side, Medicare will find a way to make those changes to the program,” Jordan Battani, principal researcher in the Global Institute of Emerging Healthcare Practices Group at consulting firm Computer Sciences Corp. (CSC), tells ABN.

“The cross-fertilization between the commercial sector and government-sponsored programs is happening now at a faster rate than it ever has. Nothing’s going to change about that, because getting at the cost and quality problem is a major concern for everybody,” Battani says.

CMMI’s Fate Is Also Uncertain

The high court’s decision on health reform isn’t the only factor in 2012 that could potentially affect Medicare ACO programs. With just a year to come up with an alternative to a planned set of budget cuts in 2013, Fried says that Congress will be fishing around for funding sources, and one of them, conceivably, could be CMS’s Center for Medicare and Medicaid Innovation (CMMI).

The sequestration issue “looms large of course,” Fried says. Congress had established the bipartisan committee as part of the Budget Control Act of 2011 enacted last August to boost the debt ceiling. The committee’s failure to meet a Thanksgiving deadline to come up with a plan to cut federal budget deficits by at least $1.2 trillion over 10 years set in motion a “sequestration” process that calls for across-the-board spending reductions without any further congressional action, including a 2% reduction to Medicare in 2013.

The effects of sequestration won’t hit until next year, “but we can almost guarantee that there will be a robust congressional debate about how to achieve $1.2 trillion in a manner other than what sequestration provides. Read: we can’t cut the defense budget. So where do we get the money? You can guarantee you’ll see a replay in 2012 of many of the issues we’re struggling with today,” Fried says. “There’s everything from the implementation of the innovation center program, revisiting the expansion of Medicaid, the changing structure of Medicare supplemental insurance. Do we increase the contribution of high-income Medicare beneficiaries?” All of those issues will be part of the debate next year in the context of avoiding massive cuts to the Defense Department and the run up to the November elections, he says.

CMMI, Medicaid expansions, the health reform law’s prevention fund, “all of those will be live issues,” Fried says. While MSSP is technically part of the larger Medicare program, the Pioneer program directly comes out of CMMI. If the innovation center is eliminated due to the budget cuts, “one of the results is Pioneer goes down,…and [some] of those ACOs could apply to be an MSSP ACO,” he says.

House Republicans, in considering how they want to fund an extension of the Medicare physician payment fix, may look to defund some or all of the innovation center funds. “Do they have the political wherewithal to do this? No, but who knows in 2013?” The flip side is by the time 2013 rolls around, a significant amount of innovation center money will have been given out, and contracts will have been signed. “It will become harder to pull back innovation center money,” Fried says.

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