HealthReformGPS is made possible through generous financial support from the RCHN Community Health Foundation. Visit them at

Medicare Accountable Care Organizations

Posted on April 20, 2011 | No Comments

PDF Version
Key Developments

By Sara Rosenbaum


An earlier Implementation Brief provided an overview of the Medicare Shared Savings Program (MSSP) for Accountable Care Organizations (ACOs), which was established by §3022 of the Affordable Care Act (ACA) by adding §1899 to the Social Security Act.  On April 7, 2011, the federal Centers for Medicare and Medicaid Services (CMS) published a proposed rule[1] implementing the MSSP.  This proposed rule was accompanied by several additional policy documents:

  • a policy issuance from CMS and the Office of the Inspector General (OIG) regarding waivers of certain civil money penalty provisions of law, the federal anti-kickback statute, and provisions of the physician self-referral law (i.e., the Stark Law) in the case of physicians and physician practices participating in ACOs in the MSSP/ACO program;[2]
  • a “Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program,” issued jointly by the Department of Justice and the Federal Trade Commission, which oversee the enforcement of antitrust laws in the United States;[3] and
  • a notice from the Internal Revenue Service (IRS) seeking comment on the application of Internal Revenue Code §501(c)(3) (relating to tax exempt organizations) to nonprofit health care entities participating in ACOs.[4]

CMS estimates that over the 2012-2014 time period, ACOs will achieve median net savings of $510 million[5] as a result of participation by between 75 and 150 ACOs, and a decision by between 1.5 and 4 million beneficiaries to align with an ACO provider.[6] CMS estimates start-up and first-year costs per ACO of slightly more than $1.75 million, with aggregate start-up/initial operational costs of between $131.6 and $263.2 million.[7]

This Implementation Brief provides an overview of the April 7th proposed rule, as well as the Proposed Statement of Antitrust Enforcement Policy and the initial policies related to participation by nonprofit health care corporations and waiver of federal fraud and abuse laws.

The structure of the proposed rule, as well as CMS’ estimates of participation rates, suggests an incremental approach to ACO development in light of CMS’ overall projections of ACO growth and Medicare patient alignment.  It is too early to gauge how rapidly ACO growth will happen in insurance markets other than Medicare, including the Medicaid and Children’s Health Insurance Program (CHIP) markets, the employer-sponsored market, and the forthcoming Exchange markets.  These payers may follow CMS’ lead on matters of ACO formation and operation, but the ACO rule is not preemptive in that it leaves other payers free to modify the standards that will apply to ACOs under the MSSP.  Indeed, because of important restrictions and requirements in the Medicare model, it may be that for ACOs to spread — particularly in the Medicaid market — certain requirements will need to be modified.

Key Elements of the Proposed Rule

1. Defining an ACO: CMS defines an ACO as a “legal entity that is recognized and authorized under applicable state law…comprised of an eligible group of ACO participants that work together to manage and coordinate care for Medicare fee-for-service beneficiaries and have established a mechanism for shared governance that provides all ACO participants with an appropriate proportionate control over the ACO’s decision-making process.”[8] The regulation does not prohibit the formation of multi-state ACOs licensed under the laws of one or more states.

2. Participating in and forming MSSP ACOs: Under the proposed rule, an ACO is comprised of “participants.”  CMS has elected to define who may be an ACO “participant” to include all providers and suppliers under Parts A and B (as defined in 42 C.F.R. §400.202), and ACO “professionals” who include physicians, nurse practitioners, physician assistants, and clinical nurse specialists.[9] However, only certain ACO participants are eligible to form an ACO for MSSP participation purposes.[10] Participants that can form an ACO are:

  • ACO professionals working in a group practice;
  • networks of individual practices of ACO professionals;
  • partnerships and joint ventures between hospitals and ACO professionals;
  • hospitals employing ACO professionals; and
  • providers and suppliers that are not ACO professionals but that are recognized under the Medicare Act.

Notably, federally qualified health centers (FQHCs) and rural health clinics (RHCs) are explicitly excluded from the groups that can form an ACO for MSSP purposes, because their payment systems do not allow verification that primary care is provided by a physician, a key requirement for patient assignment to an ACO.[11]

3. MSSP eligibility conditions for ACOs: ACOs must meet a series of eligibility conditions:[12]

  • Commitment to accountability. Every participant on whom beneficiary assignment is dependent must commit to a 3-year participation agreement and must be exclusive to one ACO. Other participants must make a 3–year commitment but ACOs cannot condition their participation on exclusivity. Commitment means being accountable for quality, cost, and overall care, and must make information on quality, cost, and overall care available to the public as specified by CMS.
  • Antitrust clearance. ACOs falling within the Statements of Antitrust Enforcement pre-clearance requirements (discussed below) must request an expedited review from the enforcement agencies and must include a letter from the agencies indicating that they do not challenge or intend to challenge the proposed ACO.
  • Binding and certified agreements. Upon being notified of eligibility to participate, an ACO CEO must sign a binding 3-year commitment agreement and certify information for accuracy and completeness. Violation of the certification can result in termination.
  • Marketing and communications. The ACO must submit marketing materials to CMS before use and must notify beneficiaries about its existence and participants. Certain communication materials must be pre-approved.
  • Election of “track.” ACOs may elect to participate as either a Track 1 (the “one-sided” model of shared savings, with risk of loss only during year 3), or Track 2 (the “two-sided” model with shared risk of savings and loss throughout the 3-year agreement period) ACO.  Beyond the initial 3-year time period, all agreements will be two-sided, with shared risk of savings and loss.  Both models are subject to a 25% payment withhold to “help ensure repayment of any losses to the Medicare program.”[13]
  • Legal structure. An ACO must have a legal structure that can receive and distribute shared savings, and be recognized as a legal entity in the state in which it is incorporated. Existing Medicare providers such as hospitals or group practices may serve as the legal ACO structure if they can satisfy all applicable ACO requirements.  However, where multiple independent and competing entities are involved, the governing body must be a separate entity.
  • Governance. The governing body of an ACO must include both participants (who must have at least 75% control) as well as at least one beneficiary representative. The governing body must have full governing powers in the areas of administrative, fiduciary, and clinical operations.
  • Leadership and management. ACOs must have a leadership and management structure that demonstrates that clinical and administrative functions have been aligned with those of the MSSP.[14] A key factor is that the leadership must show a “meaningful commitment to the ACO’s clinical integration program [through investment of funds and human resources] to ensure its likely success.”[15]
  • Compliance plan. The ACO must have an “effective” compliance plan in accordance with OIG standards.
  • Distribution of savings. The ACO must describe in its application how it plans to use shared savings, including the criteria for shared distribution, how the plan will achieve MSSP goals, and how the proposed plan will achieve the “general aims of better care for individuals, better health for populations, and lower growth in expenditures.”[16] The ACO must make a written, certified request for shared savings.
  • Sufficient numbers of primary care providers and beneficiaries. ACOs must have a sufficient number of primary care physicians and beneficiaries, established with at least 5,000 beneficiaries historically assigned to ACO participants. 
  • Processes and patient-centeredness. The proposed rule identifies 9 separate patient-centeredness criteria:[17]
    • use of a patient experience of care survey;
    • patient involvement in ACO governance;
    • a process for evaluating health needs among the assigned population;
    • a system for identifying high-risk individuals and evaluating their needs, developing individualized care plans, and integrating community resources;
    • a care coordination mechanism;
    • a process for communicating clinical and evidence-based information in a way that is understandable;
    • a process for patient engagement;
    • written standards for beneficiary access and communications; and
    • clinical service performance measurement over time.  
  • Furthermore, ACOs must provide CMS with documentation of plans to: 
    • promote evidence-based medicine; 
    • promote beneficiary engagement (defined in the Preamble as “the active participation of patients and their families in the process of making medical decisions”[18]);
    • internally report quality and cost metrics; and
    • coordinate care. 

ACOs must notify beneficiaries of their status and participation and offer them an opportunity to leave the practice.  Thus, the basic beneficiary protection is framed as an “opt-out” provision.

4. Assigning Medicare fee-for-service beneficiaries to ACOs. Patient assignment lies at the heart of the shared savings program.  CMS limits patient assignment to patients who receive their care from a primary care physician who participates in the ACO.[19] Thus, while ACO participants can be a broad range of clinical health care professionals as well as health care entities such as FQHCs, RHCs, or nurse-managed clinics, patients cannot be assigned to an ACO unless their care is “provided” by a primary care physician who is a member of the ACO.  Because FQHCs and RHCs use health care teams and are paid on an all-inclusive per encounter rate that prevents CMS from determining which procedures are furnished by physicians, FQHC and RHC Medicare patients cannot be assigned to an ACO for shared savings purposes.  This same rational would exclude as assigned patients Medicare patients treated by other providers such as nurse practitioners.

The assignment methodology is retrospective and contains five steps,[20] which are designed to identify participating primary care physicians as well as the retrospectively assigned beneficiaries based on whether they received the “plurality” of primary care from a participating primary care physician. In assigning patients, CMS considers allowed Medicare A and B charges.

5. The shared savings program. Shared savings are derived by comparing ACO expenditures for assigned patients against federally established benchmarks, as well as by measuring the quality of their care.

  • Setting the benchmark. The first step is establishing a benchmark, which in turn will determine whether the ACO has achieved Medicare savings for assigned beneficiaries.  The benchmark is developed by calculating Medicare Part A and B expenditures for the 3 most recent years for each beneficiary and adjusting the expenditures for outlier costs as well as health status and beneficiary characteristics.  The benchmark is then updated annually for each year of the agreement to achieve a risk-adjusted per capita expenditure for patients historically assigned to the ACO.[21] The most recent benchmark year is weighted most heavily in order to assure that the benchmark reflects the most recent expenditures.  Certain expenditures under ongoing initiatives (including HITECH) are excluded.[22]
  • Determining shared savings. To qualify for shared savings, both expenditures and quality performance count.
    • In the case of one-sided ACO models (shared savings in years 1 and 2, risk of losses commencing in year 3 and in years thereafter), the ACO must exceed its minimum savings rate, meet the minimum quality performance standards established by the proposed rule, and maintain its MSSP eligibility standard.[23] For one-sided ACOs, CMS determines whether Medicare A and B expenditures for assigned beneficiaries, adjusted by beneficiary characteristics, fall below the ACO’s benchmark.[24] Shared savings depend on whether the ACO exceeds its “minimum savings rate” (or MSR, which varies depending on size).  An ACO that exceeds its MSR is eligible to share savings net 2 percent of its benchmark. One-sided ACOs with fewer than 10,000 assigned beneficiaries can qualify for an exemption from the 2 percent net savings threshold if certain criteria are met, including a special exemption for ACOs whose assigned patients have at least one encounter with a participating FQHC or RHC. Final shared savings determined by adding the ACO’s “earned quality performance sharing rate” (which can raise the shared savings payment by up to 50 percent) with an additional shared savings of up to 2.5 percentage points “if the ACO includes a rural health clinic or federally qualified health center within its structure.”[25] ACO shared savings in the one-sided model are capped at 7.5% of an ACO’s benchmark.[26]
    • Under the two-sided model, CMS similarly determines whether the estimated average per capita ACO expenditures for Medicare A and B services, adjusted for beneficiary characteristics, are above or below the benchmark.  To be eligible for savings or exposed to losses, the ACO’s expenditures for the performance year must be above or below the benchmark by the minimum loss or savings rate, respectively.[27] The minimum savings rate and loss rate are both set at 2 percent of the benchmark.[28] The FQHC/RHC shared savings incentive is raised to 5.0 percentage points as well.[29] The 2-sided ACO performance payment limit is capped at 10%, with limits placed on the magnitude of losses. These limits are 5 percent, 7 percent, and 10 percent respectively in years 1-3.  One-sided ACOs must begin to share losses in their third year; losses are capped at 5 percent.[30]
Design Element One-Sided Model Two-Sided Model
Maximum sharing rate 52.5% 65%
Quality scoring 50.0% 60.0%
FQHC/RHC participation incentives 2.5% 5%
Minimum savings rate Between 2% and 3.9% based on the number of assigned beneficiaries 2% regardless of ACO size
Savings eligible for sharing All savings exceeding the minimum savings rate. For ACOs with fewer than 10,000 beneficiaries who meet certain requirements, sharing begins at first dollar of savings First dollar of savings
Maximum sharing cap 7.5% of benchmark 10% of benchmark
Losses eligible for sharing N/A First dollar of losses
Minimum loss rate N/A 2% regardless of ACO size
Maximum losses N/A Year 1: 5%Year 2: 7.5%Year 3: 10%
Source, Manatt Phelps and Phillips LLP, “CMS Releases Proposed Rule Governing Accountable
Care Organizations” (April 9, 2011).

6. ACOs and quality improvement.  Meeting quality and continuous improvement measures is a precondition to shared savings. CMS designates the measures to be used to calculate the standard. The rule identifies 5 domains for the quality measurement (patient/caregiver experience, care coordination, patient safety, preventive health, and at-risk population/frail elderly health).[31] These domains are similar to those used in the electronic health records (EHR) meaningful use program: quality, safety, and efficiency; patient engagement; care coordination; public health; and privacy and safety of personal health information. For each measure (and contingent upon data availability), CMS will designate quality performance standards including benchmarks and attainment levels.[32] ACOs are eligible for shared savings if they can demonstrate satisfaction of the quality performance requirements, the payment requirements, and the ACO eligibility requirements.[33] ACOs must score above a “minimum” attainment level to be eligible for shared savings.

7. ACOs and public reporting. Shared savings are contingent on public reporting by ACOs on a variety of matters, including basic information about the ACO and its operations and board, its shared savings and losses, and information on how shared savings are distributed (including reinvestment in quality performance in accordance with the aims and goals of the MSSP).

8. Monitoring ACO activities: The proposed rule provides for monitoring ACOs for compliance with the provisions of law and for “avoidance of at-risk beneficiaries.”[34] CMS says that it will look for “trends and patterns suggestive of avoidance of at-risk beneficiaries.” The rule defines at-risk beneficiaries as dually eligible beneficiaries, people considered high-cost, and people with 2 or more hospitalizations each year or high HCC scores, or with a recent diagnosis expected to result in increased cost.[35] Penalties apply if “trends and patterns” are found. Quality performance, changes to ACO eligibility requirements, beneficiary notifications, and marketing materials also will be monitored.

9. Termination of ACO participation: The proposed rule provides extensive standards for the termination, suspension, and sanction of ACOs, including repayment of shared savings.[36] The rule spells out procedures that “in its sole discretion” the agency can use if it concludes that an ACO’s performance “may subject the ACO to termination from the shared savings program.”[37] Penalties range from corrective action plans to suspension, being barred from shared savings, required repayment of shared savings, and outright terminations by CMS. CMS activities do not apply to the enforcement agencies, which are free to impose their own sanctions. The rule lists eight separate categories of conduct that can trigger sanctions.  Suspension of shared savings is the penalty for avoidance of at-risk beneficiaries.

10. ACOs and data submission and data sharing. Although beneficiary assignment is retrospective for purposes of shared savings, data sharing is prospective so that during the “benchmark” period of performance, providers will have both aggregated and patient-specific patient data.[38] ACOs must be HIPAA-compliant to receive such data and either be a HIPAA covered entity (e.g., a provider, health plan, or health care clearinghouse) or the business associate of HIPAA covered entities (e.g., physicians participating in the ACO). ACOs (either as a covered entity or the business associate of a covered entity) will be required to execute a data use agreement with CMS that will govern the ACOs use of the data. Beneficiaries are given “opt out” rights to refuse to permit CMS to share claims data with ACOs, but the presumption is that data will be shared.

* * *

FTC/DOJ Proposed Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program

The FTC/DOJ Statement addresses the FTC/DOJ analytic approach to formed ACOs.  Thus, ACOs in the formative stage must get private advice.  Furthermore, the Statement addresses only new entity formation by independent providers that do not already possess market power but does not address the issue of ACO participation by entities, such as major hospitals, that already possess market power.[38]

For ACOs that meet CMS eligibility criteria, FTC & DOJ will apply the “rule of reason” test across both the Medicare and commercial markets rather than apply the “per se illegal” standard that normally applies to price-setting activities by independent competitors. This shift to the “rule of reason” test recognizes that ACOs are, by definition, clinically integrated under the CMS rule and thus qualify for this more balanced test.

In reviewing ACOs, the agencies will focus on an entity’s Primary Service Area (PSA) penetration:[40] the greater the penetration, the greater the scrutiny. The Statement establishes a safety zone of less than 30% of the combined share of each common service in each participant’s PSA, wherever two or more participants provide the same service.  ACOs that fall within the safety zone do not need to contact the agencies at all. The PSA for each service is defined as “the lowest number of contiguous postal zip codes from which the ACO participant draws at least 75% of its patients.”  Hospitals and ambulatory surgery centers must be non-exclusive to the ACO to fall within the safety zone, and there are rural exceptions in relation to physicians. The Statement also includes a Dominant Provider limitation to ensure that where there are Dominant Providers (i.e., greater than 50% share in a PSA), the Dominant Provider must be non-exclusive. ACOs with a dominant provider cannot require a commercial payer to contract exclusively with the ACO or otherwise restrict a commercial payer’s ability to deal with other ACOs or provider networks.

Large and very large ACOs that exceed the safety zone are subject to review but are not per se unlawful. Very large ACOs must in most cases undergo agency review and can participate only if they have received a letter indicating no actual or recommended challenge. The Statement makes clear that this review will be a “rule of reason” review. Mid-sized ACOs that fall between 30-50% on the PSA measurement scale also can go through a review and get a letter or can begin operating and simply refrain from certain anti-competitive conduct such as steering, tying, exclusive contracting, interfering with value-based purchasing activities, or sharing competitively sensitive pricing information.

Application of Fraud and Abuse Laws to ACOs and ACO Participants

In their notification on application of the fraud laws, CMS and OIG propose to grant waivers of the Stark Law, the Anti-Kickback Statute, and the “gainsharing” provisions of the Civil Money Penalties law, which prohibit payments to induce referrals as well as payment to induce the limiting of care.  The Anti-Kickback Statute and the Stark Law would be waived with respect to the distribution of shared savings in the case of ACO MSSP participants.

Nonprofit Entities and ACO Participation

The IRS guidance is intended to address those situations in which one or more ACO participants are a nonprofit entity. The IRS preliminarily concludes that participation is lawful if properly structured, because membership is consistent with an entity’s nonprofit status. In the IRS’ view, participation of a tax-exempt organization in an ACO is substantially related to its exempt status and therefore does not threaten its tax exempt status. The IRS also concludes that ACO participation should not raise unrelated business income concerns, a limitation on the activities of tax-exempt organizations. 

Agency and Key Dates

The comment period for the proposed ACO rule and the OIG waiver rule closes on June 6, 2011. The FTC and DOJ, as well as the IRS, also invite comments by May 31, 2011.

Key Issues

  • ACO establishment and operation costs versus shared savings: Establishing an ACO is estimated to cost nearly $2 million while, according to one expert, the amount of savings available to share under the CMS formula means that it would take several years for an ACO — even one that performs exceptionally well — to recoup its outlay before it could begin to pay bonuses.[41] Is the shared savings formula sufficiently favorable to ACOs to encourage start-ups?
  • Risk of loss: Even one-sided ACOs must agree to accept a risk of loss by their third year of operation.  Will this risk for financial losses reduce the willingness of smaller, independent practice groups to form ACOs?
  • Retrospective assignment of patients: An ACO will not know its assigned patients until after the fact, although an ACO will be able to receive prospective information on all patients for purposes of care management and patient care quality.  CMS’ rationale for retrospective assignment is to encourage high quality for all patients; but will retrospective assignment make it more difficult for ACOs to take affirmative steps to improve quality right from the outset? 
  • Barring FQHC and RHC Medicare patients from being assigned to ACOs for shared savings purposes, and barring FQHC and RHC-formed ACOs: The proposed rule bars FQHC- and RHC-formed ACOs while also barring their Medicare patients from being assigned to an ACO in which they participate.  Given the importance of FQHCs and RHCs in medically underserved urban and rural communities — collectively the two types of clinics care for nearly 3 million Medicare beneficiaries — what are the prospects for ACO growth in such communities?  Should RHCs and FQHCs entities be permitted to form ACOs?  Should patients who receive care from these providers be treated as assignable and, if so, how might CMS fashion an alternative to what the agency sees as the laws requirement that, in order for patients to be assigned, physicians must “provide” care? 
  •  Quality measures: The rule proposes to use 65 quality measures; is this too high a measurement set for initial use?  Should fewer measures be used initially? 
  • Patient considerations: ACOs need include only one beneficiary to meet board composition requirements, and beneficiaries are presumed to be included in ACOs and in CMS data release unless they “opt out.” Is an “opt out” provision sufficient protection?

[1] 76 Fed. Reg. 19528 (April 7, 2011).
[2] 76 Fed. Reg. 19655 (April 7, 2011).
[3] (accessed April 11, 2011).
[4] (accessed April 11, 2011).
[5] 76 Fed. Reg. 19634.
[6] 76 Fed. Reg. 19635.
[7] 76 Fed. Reg. 19639.
[8] 42 C.F.R. §425.4.
[9] Id.
[10] 42 C.F.R. §425.5(b).
[11] 76 Fed. Reg. 19528.
[12] 42 C.F.R. §425.5.
[13] 42 C.F.R. §425.5(c)(6).
[14] 42 C.F.R. §425.5(c)(9)(vi). Again, this reflects both the requirements of the MSSP as well as antitrust considerations, which require that the entity function as a truly integrated entity, rather than as a loose confederation of competitors.
[15] 42 C.F.R. §425.5(c)(9)(iv).
[16] 42 C.F.R. §425.5(c)(11)(i)-(iii).
[17] 42 C.F.R. §425.5(c)(15).
[18] 76 Fed. Reg. 19547.
[19] 42 C.F.R. §425.6(a).
[20] 42 C.F.R. §425.6(b). See generally, Preamble pp. 19562-19567.
[21] 42 C.F.R. §425.7(b)(4).
[22] 42 C.F.R. §425.7(b)(7).
[23] 42 C.F.R. §425.7(c)(3).
[24] 42 C.F.R. §425.7(c).
[25] 42 C.F.R. §425.7(c)(7).
[26] 42 C.F.R. §425.7(c)(8).
[27] 42 C.F.R. §425.7(d).
[28] 42 C.F.R. §425.7(d)(2).
[29] 42 C.F.R. §425.7(d)(6).
[30] 42 C.F.R. §425.7(d)(9).
[31] 42 C.F.R. §425.10(a).
[32] 42 C.F.R. §425.10(b).
[33] 42 C.F.R. §425.10(c).
[34] 42 C.F.R. §425.12(a) and (b).
[35] 42 C.F.R. §425.4.
[36] 42 C.F.R. §425.14.
[37] 42 C.F.R. §425.13.
[38] Preamble, at 19566.
[39] Id.
[40] A methodology is set out for determining the PSA.
[41] Steve Lieberman, Proposed CMS Regulation Kills ACOs Softly, Health Affairs Blog (accessed April 16, 2011).
76 Fed. Reg. 19528 (April 7, 2011).
76 Fed. Reg. 19655 (April 7, 2011). (accessed April 11, 2011).
76 Fed. Reg. 19634.
76 Fed. Reg. 19635.
76 Fed. Reg. 19639.
42 C.F.R. §425.4.
42 C.F.R. §425.5(b).
76 Fed. Reg. 19528.
42 C.F.R. §425.5.
42 C.F.R. §425.5(c)(6).
42 C.F.R. §425.5(c)(9)(vi). Again, this reflects both the requirements of the MSSP as well as antitrust considerations, which require that the entity function as a truly integrated entity, rather than as a loose confederation of competitors.
42 C.F.R. §425.5(c)(9)(iv).
42 C.F.R. §425.5(c)(11)(i)-(iii).
42 C.F.R. §425.5(c)(15).
76 Fed. Reg. 19547.
42 C.F.R. §425.6(a).
42 C.F.R. §425.6(b). See generally, Preamble pp. 19562-19567.
42 C.F.R. §425.7(b)(4).
42 C.F.R. §425.7(b)(7).
42 C.F.R. §425.7(c)(3).
42 C.F.R. §425.7(c).
42 C.F.R. §425.7(c)(7).
42 C.F.R. §425.7(c)(8).
42 C.F.R. §425.7(d).
42 C.F.R. §425.7(d)(2).
42 C.F.R. §425.7(d)(6).
42 C.F.R. §425.7(d)(9).
42 C.F.R. §425.10(a).
42 C.F.R. §425.10(b).
42 C.F.R. §425.10(c).
42 C.F.R. §425.12(a) and (b).
42 C.F.R. §425.4.
42 C.F.R. §425.14.
42 C.F.R. §425.13.
Preamble, at 19566.
A methodology is set out for determining the PSA.
Steve Lieberman, Proposed CMS Regulation Kills ACOs Softly, Health Affairs Blog (accessed April 16, 2011).

No Comments

Public comments are closed.

The U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius announced that health care providers have formed 106 new Accountable Care Organizations (ACOs) in Medicare, covering as many as 4 million Medicare beneficiaries. The new ACOs include a practices from 47 states in total, including the Billings Clinic in Montana; Cedars-Sinai Accountable Care in Louisiana; the Marshfield Clinic in Wisconsin; Geisinger Health System in New York and Pennsylvania; and UCLA Health System. About half of all ACOs now are physician-led groups serving fewer than 10,000 beneficiaries, and 20 percent serve rural or low-income areas. Since passage of the Affordable Care Act, more than 250 Accountable Care Organizations have been established. ACOs share with Medicare any savings generated from lowering the growth in health care costs, while meeting standards for quality of care. ACOs must meet quality standards to ensure that savings are achieved through improving care coordination and providing care that is appropriate, safe, and timely. The Centers for Medicare & Medicaid Services (CMS) has established 33 quality measures on care coordination and patient safety, appropriate use of preventive health services, improved care for at-risk populations, and patient and caregiver experience of care. Federal savings from this initiative are estimated to be up to $940 million over four years.
The Centers for Medicare & Medicaid Services (CMS) released frequently asked questions (FAQs) regarding the Medicare Shared Savings Program, a program established by the Affordable Care Act (ACA). Specifically, the guidance addresses Accountable Care Organizations (ACOs). ACOs are formed by providers that have agreed to work together to better coordinate patient care. Information included in the FAQs include general facts regarding ACOs, the ACO participant list form CMS-588 electronic funds transfer, and governing body background. On July 9, CMS announced 89 new ACOs had been selected to participate in the second wave of the Medicare Shared Savings Program.
U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius announced yesterday that as of July 1, 2012, 89 new Accountable Care Organizations (ACOs) began serving 1.2 million people with Medicare in 40 states and Washington, D.C. ACOs are organizations formed by groups of doctors and other health care providers that have agreed to work together to coordinate care for people with Medicare. These 89 new ACOs have entered into agreements with CMS, taking responsibility for the quality of care they provide to people with Medicare in return for the opportunity to share in savings realized through high-quality, well-coordinated care. Federal savings from this initiative are estimated to be up to $940 million over four years. The 89 ACOs announced today bring the total number of organizations participating in Medicare shared savings initiatives to 154, including the 32 ACOs participating in the testing of the Pioneer ACO Model by CMS’s Center for Medicare and Medicaid Innovation (Innovation Center) announced last December, and six Physician Group Practice Transition Demonstration organizations that started in January 2011. For 2012, CMS has established 33 quality measures relating to care coordination and patient safety, appropriate use of preventive health services, improved care for at-risk populations, and patient and caregiver experience of care.
According to a study released last week by Dobson DaVanzo and Associates, the Medicare program could save as much as $100 billion over the next decade and the Part A trust fund could be extended by two-and-a-half years if post-discharge patients were served in a more clinically appropriate post-acute care setting. Experts have estimated that the Medicare trust fund will go bankrupt by 2024 without reform. The consulting group's report offers ideas regarding how the Medicare system could improve the efficiency and quality of care delivered to effectively bend the cost curve and thus extend the solvency of the program. The report found that Medicare savings can be achieved by identifying the patient pathways to the receipt of care, targeting ways to avert readmissions, and placing patients in the most clinically appropriate and cost-effective setting.
A new report issued by the Center for American Progress (CAP) examines three alternatives to fee-for-service payments: 1) Bundled payments, 2) Patient-centered medical homes, and 3) Accountable care organizations. The report compiles and highlights recent data from organizations testing these reform options. This report also includes new findings from our conversations with a variety of health care providers and payers who are implementing these reforms. Together, these data and feedback highlight key lessons, strategies for success, and implementation challenges that can help guide the movement away from the current payment system to one that emphasizes value and patients. Each of the three payment reforms...
Health care delivery systems that reward providers for coordinating and improving care hold promise for slowing the rise of health care costs for the most vulnerable patients, according to a new study by Dartmouth researchers published in the Journal of the American Medical Association (JAMA). To learn how such models, such as accountable care organizations (ACOs), are likely to perform for patients with severe health conditions, researchers from the Dartmouth Atlas Project and The Dartmouth Institute for Health Policy & Clinical Practice studied the Medicare’s Physician Group Practice Demonstration (PGPD). The study focused on the care provided to patients covered by both Medicare and Medicaid, also known as “dual eligible” patients. The nation’s 9 million dual eligibles comprise 20 percent of the Medicare population but account for 31 percent of its spending, and comprise 15 percent of the Medicaid population but 39 percent of its spending. The study highlights the potential benefits of the ACO model for dual eligible patients. Dartmouth’s analysis of Medicare spending for PGPD patients found that the participating health systems achieved their savings largely by reducing hospital stays. An accompanying analysis of quality indicators also showed that quality of care did not decline.
Accountable care organizations (ACOs) are groups of providers that agree to take collective responsibility for delivering and coordinating care for a designated population. A report recently released by the Commonwealth Fund shares the perspectives of hospitals and health systems taking part in the Premier health care alliance’s accountable care implementation collaborative. Lessons emerging from the collaborative relate to the need for ACOs to have six core structural components: 1) the viability of different organizational models; 2) the importance of people-centered care in all interactions; 3) the need to align business with value-based payments and design incentives to encourage providers to collaborate; 4) the use of financial modeling to assess the impacts of the accountable care model; 5) the need for investments in information technology to enable care coordination; and 6) the importance of performance assessment across a broad range of clinical quality, efficiency, and satisfaction measures.
Affordable Care Act (ACA) provisions have spurred efforts to develop integrated health care delivery systems that seek to coordinate the continuum of health services. It remains to be seen how safety-net providers, which include community health centers and public hospitals, will be included in integrated delivery systems. An issue brief released by the National Academy of State Health Policy (NASHP) and the Commonwealth Fund explores key considerations for incorporating safety-net providers into integrated delivery systems and discusses the roles of state and federal agencies in supporting and testing models of integrated care delivery. The authors conclude that the most important principles in creating integrated delivery systems for vulnerable populations are: 1) an emphasis on primary care; 2) coordination of all care, including behavioral, social, and public health services; and 3) accountability for population health outcomes.
The Kaiser Family Foundation recently released an issue brief which compares the expected value of benefits for individuals ages 65 and older under Medicare's fee-for-service program to two "typical" plans offered by large employers: a typical large employer preferred provider organization (PPO) plan and the Blue Cross/Blue Shield Standard Option for enrollees in the Federal Employees Health Benefits Program (FEHBP), also a PPO plan. The analysis updates a 2008 Kaiser Family Foundation report that found...
The Urban Institute, funded by the Robert Wood Johnson Foundation (RWJF) recently released, "The Center for Medicare and Medicaid Innovation: Activity on Many Fronts," which explores the first year of operation of the Center for Medicare and Medicaid Innovation (CMMI). The paper argues that although CMMI has a long list of accomplishments, some observers express concern that its fast-paced approach may be overwhelming to smaller delivery systems. The paper provides a comprehensive review of CMMI's activities to date, including a survey of the goals envisioned by Congress. The authors address CMMI's major initiatives, including those that address primary care redesign, bundled payments, ACOs, dual-eligible beneficiaries, and the health care system’s capacity for spreading innovative ideas.