Senators propose changing ACO reimbursement formula to benefit rural providers

U.S. senators have introduced legislation they say would "fix a glitch" in the Medicare formula used to reimburse rural providers in ACOs.

The Rural ACO Improvement Act — introduced by Sens. Catherine Cortez Masto, D-Nev., and Pat Roberts, R-Kan., — applies to ACOs in the Medicare Shared Savings Program.

Under the program, providers and hospitals in ACOs receive part of the money they save Medicare when they work together to improve care quality and reduce costs. A new analysis of CMS data from consulting firm Avalere showed low-revenue, physician-led accountable care organizations participating in the Medicare Shared Savings Program reduced Medicare spending by $739 million in 2018, significantly outperforming high-revenue, hospital-led ACOs.

Sens. Cortez Masto and Roberts said in a news release the current ACO reimbursement formula inadvertently penalizes healthcare providers in rural areas because the payment rates are determined by comparing the per-patient costs of a region's ACO with the operating costs of regional peers that aren't part of an ACO.

"In many rural areas, an ACO may be the dominate healthcare provider. Without peers for comparison, rural ACOs have a lower spending benchmark and often receive less of a savings bonus than their urban counterparts that compete against more providers," they explained. "This bill would fix the glitch by excluding the ACO's beneficiaries when calculating the per-patient costs of a region."

Healthcare groups are behind the proposed legislation. In a letter to Sens. Cortez Masto and Roberts, they thanked the lawmakers for introducing the act, saying "no ACO should be placed in a less favorable financial position due to their geography alone."

Signees of the letter include the American Academy of Family Physicians, American College of Physicians, American Hospital Association, American Medical Association, American Medical Group Association and America's Essential Hospitals.

Read the full letter here.  


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