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Obama revises Medicare program

WASHINGTON — The Obama administration on Thursday substantially revised the rules of a program under the 2010 health care law aimed at encouraging doctors and hospitals to coordinate care. The final regulations grant medical providers far more flexibility than a draft proposal released in March.

Groups representing doctors and hospitals welcomed the move. But organizations for insurers and employers complained that the administration's concessions increased the likelihood that providers will consolidate, reducing competition and driving up prices.

The program directs Medicare to offer financial incentives for medical providers to band together in "accountable care organizations," or ACOs, which handle care for patients across a range of settings, including primary care and specialist offices, hospitals and nursing facilities.

Advocates maintain it could set an example that prompts private insurers and employers to enter into similar arrangements, transforming the way care is delivered in the United States.

In the current "fee-for-service" system, providers are individually compensated for each procedure they order, effectively giving them an incentive to pick the costliest approach.

The hope is that by coordinating care, ACOs will improve quality and efficiency, enabling them to charge Medicare less. Medicare would then share the savings with the ACOs. Obama officials estimated the program would reduce Medicare spending by up to $940 million over four years.

To ensure that ACOs do not stint on care, they will have to meet detailed quality standards in four areas: patient experience, care coordination and patient safety, preventive health and care for at-risk populations.

Medicare beneficiaries whose doctors join an ACO are not obligated to remain with the doctor. Similarly, providers in an ACO cannot limit patients' access to other health care professionals or hospitals that participate in Medicare but do not belong to the ACO.

Among the changes to the rules was the administration's decision to slash the number of quality measures that ACO's must meet from 65 to 33.

Obama officials have also adjusted the formula for calculating the proportion of savings that ACOs can keep to give them a greater share.

Perhaps most significantly, the administration scrapped a requirement that ACOs take the hit if their costs exceeded government targets. That would have been a deterrent to providers with little experience working as part of a coordinated team, said George Roman, senior director of health policy for the American Medical Group Association.

Under the revised rules, ACOs can insulate themselves from that risk in exchange for taking a smaller portion of savings they generate.

Like other representatives of providers, Roman said it was too soon to predict whether the modified rules would spur large numbers of providers to form ACOs.

But he said he was pleasantly surprised at the administration's responsiveness to the industry's critiques. "They clearly heeded what people said, and it's a big step in the right direction."

Obama revises Medicare program 10/20/11 [Last modified: Thursday, October 20, 2011 10:45pm]
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