New fed loans to promote rural ACOs

The Obama administration plans to offer infrastructure loans to small and rural healthcare providers to participate in Medicare’s program for accountable care organizations.

The advances will fund capital investment and hiring at ACOs with fewer than 10,000 patients that want to participate in the Medicare Shared Savings program. In addition to physician groups, all critical-access hospitals will be eligible for the program. The CMS also will consider applications from hospitals with up to 100 beds.

The new program, called the ACO Investment Model, is administered by the CMS’ Center for Medicare & Medicaid Innovation, the policy laboratory created by the Patient Protection and Affordable Care Act to test new ways to deliver and pay for healthcare.

ACOs that sign up for the new model would receive a loan and additional monthly payouts, which would be paid back with deductions from bonuses they earn under the program. The CMS is also offering the loans to existing Medicare ACOs that may be poised to exit. A number of Pioneer ACOs have dropped out of the program. The total cost of advance payments is projected to be $114 million.

Those that apply must meet certain eligibility criteria and agree to switch to the program’s higher-risk tracks, which obligate them to accept potential penalties alongside potential bonuses starting in 2016 or 2017.

The agency is attempting to address barriers that policy experts say are preventing medical groups in rural communities from joining Medicare’s test of accountable care, which began more than two years ago. Medicare has expanded the initiative each year, and the new capital program will be available to those seeking to join in 2016.

Capital constraints present “a constant barrier” for small, physician-operated ACOs, said Larry Kocot, a visiting fellow working with the Brookings Institution’s ACO Learning Network.

Smaller hospitals also struggle to pay for IT beyond electronic medical records, including software to analyze data and report quality. “Just because you have an EMR doesn’t mean you’re ready to be an ACO,” said Dr. Kavita Patel, managing director of clinical transformation at the Engelberg Center for Health Care Reform.

Capital constraints present “a constant barrier” for small, physician-operated ACOs. —Larry Kocot, visiting fellow, Brookings Institution’s ACO Learning Network