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Edwards Wildman Healthcare Update: CMS Announces First ACO Participants; HHS Proposes Delaying ICD-10 Compliance Deadline, Adopts Unique Health Plan Identifier; New York Governor Issues Executive Order for Health Exchange

April 17, 2012

On April 10, the Centers for Medicare & Medicaid Services (CMS) announced the first 27 accountable care organizations (ACOs) that will participate in the Medicare Shared Savings Program (MSSP), established under the Patient Protection and Affordable Care Act (PPACA). The 27 organizations chosen for the first round of the program, which began as of April 1, were selected from 50 applicants. Most of the organizations selected are led by physician groups, rather than hospitals.

Five of the 27 initial ACOs will participate in the Advance Payment ACO Model, under which participants will receive advance payments to help cover their startup costs. Advance payments will have to be repaid out of the shared savings an ACO earns.

The ACO program is kicking off despite uncertainty regarding the future of PPACA. In oral arguments before the Supreme Court last month, the law’s opponents argued that its linchpin, the so-called individual mandate, is unconstitutional. It is unclear whether the mandate will be struck down or, if so, whether other parts of PPACA will be allowed to remain in effect. The Court’s decision is expected in June.

The goal of the MSSP is to incentivize healthcare providers to improve coordination of care, and reduce costs, for the Medicare beneficiaries for whom they are responsible. Quality of care will be measured by an ACO’s performance on 33 qualitative measures, and those ACOs that provide high-quality care while reducing costs will be entitled to share in the savings achieved by Medicare.

At a press briefing, Jonathan Blum, Deputy Administrator of CMS, said that CMS is reviewing another 150 applications from organizations wishing to begin operating as ACOs on July 1. This group includes about 20 applicants that had wanted to begin on April 1 but whose applications were deferred. A third round will begin operations on January 1.

The first 27 ACOs will serve about 375,000 Medicare beneficiaries in 18 states. Another 32 organizations were selected last December as Pioneer Model ACOs. The Pioneer model, designed for organizations that already have experience offering coordinated care, allows participating ACOs to receive a greater share of the cost savings they achieve, in exchange for assuming more risk. Including the six organizations participating in the Physician Group Practice Transition Demonstration, more than 1.1 million Medicare beneficiaries are assigned to ACOs as of April 1.

On April 9, the Department of Health and Human Services (HHS) released a proposed rule that would delay the compliance deadline for the International Classification of Diseases, 10th Revision (ICD-10) diagnostic code set from October 1, 2013 to October 1, 2014. HHS issued a fact sheet on the proposed compliance delay.

The proposed rule, to be published in the Federal Register on April 17, would also require that health plans adopt a unique health plan identifier for all Health Insurance Portability and Accountability Act (HIPAA) transactions. The identifier would help standardize and streamline electronic transactions and save the industry $4.6 billion over the next 10 years, according to HHS Secretary Kathleen Sebelius. HHS issued a separate fact sheet regarding the identifier.

HHS had promised in February to delay the ICD-10 compliance date. The delay will give providers and insurers additional time to prepare for the transition from ICD-9 to ICD-10, which many medical societies complained was coming amidst an “imminent storm” of other new federal regulations (“AMA Asks CMS for a Break,” April 2). The proposed rule states, “Since publication of the ICD-10 and Modifications final rules, a number of other statutory initiatives were enacted, requiring health care provider compliance and reporting. Providers are concerned about their ability to expend limited resources to implement and participate in . . . initiatives that all have similar compliance timeframes.”

Other industry commentators, however, expressed concern that the delay will be costly for those providers and insurers that are already in the process of implementing the transition, and result in procrastination (with no improved readiness by the new deadline) by those that aren’t.

Already in use in more than 20 countries, ICD-10 contains 69,000 diagnosis codes, compared to the 13,500 in ICD-9, and another 72,000 procedure codes. The new codes will provide much more specific patient data, which HHS expects will lead to better care.

On April 12, New York Governor Andrew M. Cuomo issued an Executive Order establishing a statewide Health Exchange. According to the New York Times, Gov. Cuomo took matters into his own hands after the state’s Republican-controlled Senate refused to consider proposed legislation. The Democratic-controlled State Assembly had approved the Exchange last year.

State Health Exchanges, online marketplaces where people can compare and choose insurance plans, are an important component of health reform under PPACA. In a statement, Gov. Cuomo said that “creating this health exchange will lower the cost of health insurance for small businesses, local governments and individual New Yorkers across the state.”

Edwards Wildman’s Healthcare Practice Group will continue to monitor healthcare news from Capitol Hill, CMS and HHS, and other federal and state agencies, and will bring you timely updates as new developments occur.

Edwards Wildman Palmer LLP is pleased to provide regular updates on issues affecting the Healthcare industry. Our lawyers not only provide sophisticated legal services to a broad array of clients in the healthcare industry, we also monitor and analyze federal and state legislative and regulatory processes to ensure that our clients are informed of government actions and initiatives.

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