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Accountable Care Organizations Could Share in Medicare Savings

April 13, 2011:

New rules issued under the Affordable Care Act and published April 7 in the Federal Register propose providing and coordinating patient care through ACOs. These organizations would create health care provider incentives for working together to treat an individual patient across care settings. This includes doctor’s offices, hospitals, and long-term care facilities. ACOs that provide high-quality care by meeting performance standards while lowering growth of health care costs would receive rewards.

The proposals released will have a 60-day comment period before a final guideline is adopted.

The ACO model is defined as a “patient-centered organization where the patient and providers are partners in care decisions.” The proposed ACO would be a group of providers and suppliers working together to coordinate the care of “original Medicare,” defined as Medicare Part A and B, as opposed to patients enrolled in Medicare managed care model plans. It is anticipated that an ACO will provide “seamless, high-quality care” for beneficiaries. The proposal also defines the current care delivery model as fragmented due to “different providers receiving different, disconnected payments.”

The eligible providers include:

  • ACO professionals (physicians and hospitals) in group practice arrangements
  • Networks of individual practices of ACO professionals
  • Partnerships or joint venture arrangements between hospitals and ACO professionals
  • Hospitals employing ACO professionals
  • Other Medicare providers or supplies as determined

ACOs may apply to the Centers for Medicare and Medicaid Services (CMS) to be considered part of the shared savings program.

Under the proposal, Medicare would continue to reimburse the individual providers and suppliers under current payment systems. In addition, CMS would develop a benchmark for each ACO to measure its qualification to receive the shared savings, or to be held accountable for the losses. The benchmark would be updated for each performance year during the three-year performance periods. The two models proposed are:

  • One-sided risk—shared savings in years one and two, and shared savings and losses for year three
  • Two-sided risk—shared savings and losses all three years

Notably, two-sided risk provides greater financial opportunity for shared savings, with the added risk of losing more for not meeting the benchmark. The maximum incentive in a one-sided risk arrangement is a share of 50 percent of the savings above a certain savings threshold, compared with 60 percent under a two-sided risk arrangement. The percentage is also based upon quality and performance scores.

Quality and performance would be measured using the following nationally recognized domains:

  • Patient experience
  • Care coordination
  • Patient safety
  • Preventive health
  • At-risk population/frail elderly health

The measures are closely aligned with other CMS programs, including the electronic health record (EHR) and physician quality reporting system (PQRS). The ACO would report specified quality measures to demonstrate achievement of the established benchmarks.

Providers who are already participating in other shared savings programs or demonstrations, such as CMS Innovation or Independence At Home Medical Practice pilot, may not participate in an ACO.

Existing ACOs do not need to restructure to be eligible to participate. They may request claims information from CMS to coordinate patient care after notifying the beneficiary.

The notice for proposed rule making (NPRM) regarding shared savings programs for ACOs was published in the Federal Register on April 7, 2011, and comments will be accepted until June 6, 2011.


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