Health care providers that start accountable care organization (ACO) plans can no longer use reinsurance to show the government they are ready to handle health care risk.
See also: The ACO: A reinsurance opportunity?
Officials at the Centers for Medicare & Medicaid Services (CMS) have taken reinsurance off from the mechanisms a Medicare ACO sponsor can use to show that the ACO has the ability to share financial risk with Medicare.
An ACO sponsor can still demonstrate its ability to handle financial risk by putting money in escrow, getting a line of credit, or getting a surety bond.
CMS officials have announced the change in a set of Medicare Shared Savings Program ACO final regulations that’s set to appear in the Federal Register Tuesday.
Medicare managers have been working with health care providers to set up ACOs for years.
Back in the late 1980s and 1990s, some large group physician practices tried to simplify the process of administering health care by agreeing to manage all care for patients in exchange for a flat fee, or capitation fee, for each patient served. The group practices were unable to track and manage the fluctuations in risk, and many went out of business.
See also: Aetna Health Plans Sued Over Capitation
In recent years, organizations have tried to develop better cost tracking systems, and mechanisms for helping Medicare and other large payers share enough risk with providers to give the providers flexibility, and an incentive to hold the cost of care down, without exposing the providers to unmanageable levels of risk.
One of the results of that effort is the ACO concept. If the health care providers participating in an ACO combine to maintain the quality of patient care and save money, they can keep some or all of the savings. If they fail to meet the cost and quality targets, they’re supposed to handle the losses themselves.