Telehealth and Accountable Care Organizations

If 2015 was the year that brought telehealth to the consumer market, 2016 will be the year of telehealth and Accountable Care Organizations (ACOs). Last year, the government issued special rules allowing expanded telehealth services for patients in ACOs, both for the Medicare Shared Savings Program (MSSP) and for new Next Generation ACOs. Only 20% of ACOs used telehealth in their care processes last year, and only 27% of ACOs received shared savings incentive payments from the government. Thus, 2016 is an ideal environment of regulatory flexibility coupled with operational need, all pointing to telehealth as a key tool for ACOs to improve their quality and cost targets to trigger incentive payments.

MSSP ACOs are a key component of the Medicare delivery system reform initiative designed to reduce fragmented or unnecessary care and excessive costs for healthcare services furnished to Medicare fee-for-service beneficiaries. ACO financial rewards are predicated on the ability to control costs and improve quality. One way ACOs can use telehealth to accomplish those goals includes leveraging post-discharge care to minimize the likelihood of an avoidable hospital readmission. Another approach is to direct patient to the appropriate level of triage care (e.g., urgent care center or physician office) instead of using the ED as the primary venue for unassigned patients. Some studies1 indicate up to a quarter of all ED visits are for non-emergent care, resulting in over $4 billion of otherwise avoidable health costs. Using telehealth as an available outlet patients can use before heading to the ED is a powerful component of ACO cost-management and care coordination.

ACOs can share costs of telehealth and remote patient monitoring services among their hospitals, providers/suppliers and other participants, according to federal rules enacted last year under MSSP fraud and abuse waivers. In protecting these arrangements, CMS and OIG recognize how telehealth technologies and innovative care processes can help reduce costs for the Medicare program.

The mention of telehealth services among the waivers in these rules2 confirms CMS’ and OIG’s belief that “coordinating care, such as through the use of telehealth, remote patient monitoring and other enabling technologies” is an activity reasonably related to the purposes of the Medicare Shared Savings Program and therefore is eligible for protection under one or more of the fraud and abuse waivers. One example CMS and OIG gave was a hypertensive patient using home telehealth monitoring of blood pressure. Since ACOs have already made substantial commitments to improving quality and reducing costs in a comprehensive, integrated way, they are among the most obvious beneficiaries to harness the power of telehealth. With these new waiver provisions, CMS and OIG appear to encourage ACOs strongly consider and incorporate telehealth into their overall operations and services.

CMS also announced last year a new ACO payment initiative called the Next Generation ACO Model,3designed for entities experienced in coordinating care for populations of patients. Next Generation ACOs reflect CMS’ commitment to exploring different Medicare payment arrangements that encourage providers to assume higher levels of financial risk and reward while delivering quality care, as this ACO Model is focused even more on value-based contracting. CMS announced special telehealth waivers for patients participating in Next Generation ACOs, including paying for telehealth services for patients located in urban and non-rural areas.

These rule changes come at a perfect time for ACOs. CMS’ report on ACO quality and financial performance results in 20144 revealed that, while ACOs saved the Medicare program nearly $600 million and notably improved quality, only 27% of the 353 ACOs participating in the MSSP received any shared savings incentive payments from the government. That means, while CMS concluded ACOs did a good job in 20145, most ACOs did not perform well enough to reach their quality and cost savings benchmarks. Despite making significant investments in infrastructure and operations to create an ACO (whether Pioneer or MSSP), the majority of ACOs still need to move the needle further in order to enjoy the financial incentives of these programs.

Increasing the quality of ACO performance by increasing quality will only become more important as CMS expands its Medicare alternative payment models. CMS intends for 30% of Medicare payments to be made in alternative payment models by the end of 2016.6 That number increases to 50% by the end of 2018. Additionally, CMS seeks to have 85% of Medicare fee-for-service payments in certain value-based purchasing categories by 2016 and up to 90% by 2018.

The low rate of incentive payments may come as no surprise to some, as a recent study revealed7 only 20% of ACOs currently use telehealth or telehealth technologies in their operations. Are the 20% of telehealth -using ACOs among the 27% who received incentive monies?  That question has not been studied, but there are ACOs that use telehealth which received incentive monies in 2014.

ACOs and telehealth providers continue to create new solutions and changes to outdated regulatory barriers to growth and innovation. ACOs that capitalize on these opportunities, and use telehealth and remote monitoring technology, may see an improvement in their financial incentive payments at the end of the year.


  1. Burns, Rachel M., Mehrotra, Ateev, Weinick, Robin M. “Many Emergency Department Visits Could Be Managed at Urgent Care Centers and Retail Clinics,” Health Affairs, vol. 29, no. 9, Sep. 2010, p. 1630-1636.
  2. MSSP Fraud and Abuse Waivers.
  3. Next Generation ACO Model, Centers for Medicare & Medicaid Services.
  4. CMS 2014 report on ACO quality and financial performance results, Centers for Medicare & Medicaid Services .
  5. Medicare ACOs Provide Improved Care While Slowing Cost Growth in 2014, Centers for Medicare & Medicaid Services.
  6. Better Care. Smarter Spending. Healthier People: Paying Providers for Value, Not Volume, Centers for Medicare & Medicaid Services.
  7. 2015 ACO Survey Results Webinar, eHealth Initiative.

Nathaniel Lacktman is a partner with the law firm of Foley & Lardner and heads its telemedicine and virtual care practice, working with hospitals, health systems and start-ups to build telemedicine arrangements across the United States and internationally. His practice emphasizes strategic counseling, creative business modeling and fresh approaches to realize clients’ ambitious and innovative goals.

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