Health regulators on Thursday relaxed rules to make it easier for hospitals and doctors to receive financial incentives if they work together to coordinate patient care.
The so-called Accountable Care Organizations (ACOs) are an experimental part of President Barack Obama's healthcare overhaul, meant to improve the quality of care while lowering costs in Medicare, the federal insurance program for the elderly and disabled.
Officials from the Centers for Medicare and Medicaid Services (CMS) said they expect the program to save Medicare up to $940 million over the next four years.
That is less than 1 percent of the $2.4 trillion the government will pay out in Medicare benefits during that time, according to the Congressional Budget Office.
The program gives hospitals and doctors financial incentives to band together to follow up on patients when they are sent to the hospital or prescribed a course of treatment.
It aims to avoid unnecessary or duplication in treatment that can occur under the traditional model that pays doctors for each test or procedure they perform.
Providers get to share in cost savings from the program. But most said initial ACO rules proposed in March were too strict in how they measured quality and gave them too few financial incentives to sign up.
Responding to more than 1,300 comments, CMS officials made changes in the final rule, released on Thursday, letting providers off the hook if they failed to achieve savings in the program's initial phase.
"The final rules created a stronger ACO program than was presented in the proposed rule," said CMS Administrator Don Berwick. "We want to give caregivers the financial support to invest in that change."
The final rules also halve the number of quality measures plans have to comply with and no longer require electronic health records as a condition of participation. They also let some participants get prepaid as part of any future shared savings, so they have money to invest in infrastructure.
In conjunction with the CMS announcement, the Federal Trade Commission and Justice Department, which enforce antitrust law, issued guidance saying that ACOs that stayed below 30 percent of the market share in their service area would be unlikely to encounter antitrust scrutiny.
The agencies also offered a 90-day antitrust review for any ACO formed after March 23, 2010 which wanted to ensure that its collaboration was not running afoul of laws against tying or other antitrust violations.
Groups may opt to stay below 30 percent of market share, which the agencies defined as the antitrust safety zone, if they are risk averse, said Jeffrey Brennan, a veteran of the FTC now with the law firm McDermott, Will & Emery.
CMS said it now expects 90 ACOs to participate in the initial three-year stage of the program.
The transition to a new type of healthcare payment system will take time, said Susan DeVore, president and chief executive of the Premier healthcare alliance, a group that represents nearly 40 percent of the hospitals in the country and helps providers improve their patient care and finances.
"I think health systems know that this united, connected care delivery system is potentially the model of the future, and that fee for service will not be the model," she said.
DeVore said none of its members had intended to take part in the shared savings plan under the original proposal.
"With the final rule, we think it will make it much more of an option for many of our members, giving them an on-ramp to build the capabilities they need."
(Reporting by Anna Yukhananov and Diane Bartz; Editing by Tim Dobbyn)