ACO rule: Good, bad or ugly for payers?

Now that the long-awaited proposed rule on accountable care organizations has been published, health payers are trying to determine how the regulation will impact them in the healthcare marketplace.

Insurers have been consistently concerned whether ACOs will discourage competition among hospitals and doctors. The fear is that if hospital profits are squeezed, they will be motivated to consolidate, giving them better bargaining power when negotiating fees with insurers. "If you're a payer, one thing you're worried about with an ACO is that it's sort of a pseudo-insurance organization, it bears insurance risks for the health of a population and there are a lot of incentives to create some scale around an ACO to make it succeed," says Chas Roades, chief research officer, healthcare, at the Advisory Board Company.

Indeed, AHIP CEO Karen Ignani, in response to the proposed rule, cautioned that ACOs "could accelerate the trend of provider consolidation that drives up medical prices and results in additional cost-shifting to families and employers with private coverage."

Although consolidation poses antitrust concerns for payers, they should take solace that CMS seems to be cognizant of these worries. "CMS is very sensitive to the competitive marketplace implications of all this, they obviously got a lot of feedback and a lot of concern from commercial payers that ACOs will have too much market and pricing power in contract negotiations," notes Roades. "It was apparent that HHS Secretary Sebelius has been working very closely with the Justice Department and the FTC to avoid that type of outcome."

Roades also says the tone of the comments by federal officials indicates regulators from the DOJ and FTC are going to be very willing to creatively approach ACOs to allow integrated organizations to emerge. "That's a pretty striking change in the tone of how the Justice Department typically views the emergence of more integrated provider organizations."

The ACO proposed rule raises another question for payers--how it will affect Medicare reimbursement rates for doctors. Some health insurers contract their own rates with hospitals and doctors using Medicare rates as a reference, almost always paying more than 100 percent of Medicare's rates. "The most interesting question: what's the reimbursement system going to look like in five years," said Keith Stover, a lobbyist for the Connecticut Association of Health Plans.

The real reactions to the ACO rule are still forthcoming, as individual health plans are currently parsing through the voluminous rule. For its part, Aetna looks forward to "creating a more effective and cost-efficient healthcare system that delivers better coordinated, more personalized care and saves patients time and money, while improving their health," says spokesman Mohit Ghose.

Before reading the rule, Dick Salmon, Cigna's national medical director for performance measurement and improvement, wondered whether it would require ACOs to operate in an open access environment or require consumers to "lock-in" to the ACO. He hopes the rule will explain how cost, quality and patient experience of care will be measured.

Payers have 60 days to read and submit comments on the ACO rule and I've no doubt they will take the opportunity to represent their concerns to CMS. We'll have to wait and see if and how CMS responds. - Dina