Centers for Medicare and Medicaid Services (CMS)
Office of Legislation
Medicare "Accountable Care Organizations"
Shared Savings Program – New Section 1899 of Title XVIII
Preliminary Questions & Answers
The Affordable Care Act (ACA) improves the health care delivery system through incentives to enhance quality, improve beneficiary outcomes and increase value of care. One of these key delivery system reforms is the encouragement of Accountable Care Organizations (ACOs). ACOs facilitate coordination and cooperation among providers to improve the quality of care for Medicare beneficiaries and reduce unnecessary costs. This document provides an overview of ACOs and the Medicare Shared Savings Program.
Q: What is an "accountable care organization"?
A: An Accountable Care Organization, also called an "ACO" for short, is an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.
For ACO purposes, "assigned" means those beneficiaries for whom the professionals in the ACO provide the bulk of primary care services. Assignment will be invisible to the beneficiary, and will not affect their guaranteed benefits or choice of doctor. A beneficiary may continue to seek services from the physicians and other providers of their choice, whether or not the physician or provider is a part of an ACO.
Q: What forms of organizations may become an ACO?
A: The statute specifies the following:
1) Physicians and other professionals in group practices
2) Physicians and other professionals in networks of practices
3) Partnerships or joint venture arrangements between hospitals and physicians/professionals
4) Hospitals employing physicians/professionals
5) Other forms that the Secretary of Health and Human Services may determine appropriate.
Q: What are the types of requirements that such an organization will have to meet to
A: The statute specifies the following:
1) Have a formal legal structure to receive and distribute shared savings
2) Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum)
3) Agree to participate in the program for not less than a 3-year period
4) Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings.
5) Have a leadership and management structure that includes clinical and administrative systems
6) Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care
7) Demonstrate it meets patient-centeredness criteria, as determined by the Secretary.
Additional details will be included in a Notice of Proposed Rulemaking that CMS expects to publish this fall.
Q: How would such an organization qualify for shared savings?
A: For each 12-month period, participating ACOs that meet specified quality performance standards will be eligible to receive a share (a percentage, and any limits to be determined by the Secretary) of any savings if the actual per capita expenditures of their assigned Medicare beneficiaries are a sufficient percentage below their specified benchmark amount. The benchmark for each ACO will be based on the most recent available three years of per-beneficiary expenditures for Parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO. The benchmark for each ACO will be adjusted for beneficiary characteristics and other factors determined appropriate by the Secretary, and updated by the projected absolute amount of growth in national per capita expenditures for Part A and B.
Q: What are the quality performance standards?
A: While the specifics will be determined by the HHS Secretary and will be promulgated with the program's regulations, they will include measures in such categories as clinical processes and outcomes of care, patient experience, and utilization (amounts and rates) of services.
Q: Will beneficiaries that receive services from a health care professional or provider that is a part of an ACO be required to receive all his/her services from the ACO?
A: No. Medicare beneficiaries will continue to be able to choose their health care professionals and other providers.
Q: Will participating ACOs be subject to payment penalties if their savings targets are not achieved?
A: No. An ACO will share in savings if program criteria are met but will not incur a payment penalty if savings targets are not achieved.
Q: When will this program begin?
A: We plan to establish the program by January 1, 2012. Agreements will begin for performance periods, to be at least three years, on or after that date.
Further details for the shared savings program will be provided in a Notice of Proposed Rulemaking which CMS expects to publish this fall.
Link to text of Sec. 1899 (under Sec. 3022) with a brief summary (plus text and summary of Sec. 2706 - Pediatric ACO Demonstration Project):
Comment: Since enactment of the Patient Protection and Affordable Care Act (PPACA) there has been considerable enthusiasm and hype over the provisions establishing accountable care organizations (ACOs). The purpose of today's message is to look past the hype to see precisely what PPACA says about ACOs.
Today's quote is the explanation of the applicable section of PPACA as provided by the Centers for Medicare and Medicaid Services (CMS). A link to the precise language of the section is also provided.
Sec. 3022 Of PPACA amends Title XVIII of the Social Security Act by adding Sec. 1899, the Shared Savings Program. The title alone provides a hint of what this really is about since it is not named Accountable Care Organizations.
Many entities already exist that can be called accountable care organizations. These include group practices, networks of individual practices, partnerships or joint ventures between hospitals and health care professionals, and hospitals employing health care professionals. Under PPACA, the Secretary of Health and Human Services (HHS) can include as ACOs any other group of providers and suppliers deemed appropriate.
What the law does is to add another administrative layer that is designed to reduce costs and promote quality. The existing entities plus any new ones formed have to meet certain requirements to qualify as an ACO, and then that allows them to participate in the shared savings program.
The specific requirements:
* Willing to become accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to it
* A legal structure to receive and distribute shared savings
* A leadership and management structure that includes clinical and administrative systems
* A minimum participation of 5000 patients
* A sufficient number of primary care professionals
* Agree to participate for a minimum of three years
* Define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies
* Demonstrate patient-centerness criteria specified by the Secretary
* Measure quality of clinical processes and outcomes, patient experience of care, and utilization
This program applies to patients in the traditional fee-for-service Medicare program. Patients do not enroll in the ACOs. They are assigned by the Secretary based on utilization of primary care services. The patients may not even know that they have been assigned, as they are free to go to any providers of their choice, in or out of the ACO.
The ACOs are still paid fee-for-service by Medicare just as they always have been. That doesn't change (though an amendment authorizes the option of a partial capitation model).
So how do ACOs achieve higher quality and lower cost?
The ACOs are not rewarded monetarily for meeting the quality standards. Their motivation to comply is to avoid being suspended from the program.
Costs are reduced by the shared savings program. A benchmark is established for each ACO "using the most recent available 3 years of per-beneficiary expenditures for parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO." If the ACO can provide care for costs below the benchmark, the ACO then shares those savings with HHS. The benchmark is reset at the beginning of each 3 year agreement.
If the costs are above the benchmark, then the fees are still paid as usual, with no adjustments.
Think about this. The incentives continue to promote greater volume. There is no penalty for running the charges up. Is the reward for reducing the volume and intensity of services enough? Since fixed costs for the ACO are relatively unchanged, the reductions in marginal overhead expenses due to reduced volume must be greater than the amount of savings that HHS shares with the ACO in order to come out ahead. Since this is the opposite of "making it up in volume," it is more likely that net income will be reduced. Further, since the benchmarks are reset every 3 years based on lower utilization, it is very unlikely that that the ACO could continue to ratchet down services to qualify for shared savings.
Some models of integrated health systems function well and should be encouraged as long as the goal is higher quality and greater value, while shunning policies that provide perverse incentives for greater profits by reducing beneficial health care services. But why would a well-functioning integrated health care system want to add an additional administrative layer, with additional quality-reporting requirements, just to be designated as an ACO, especially when the net result likely reduces the bottom line?
It is truly unfortunate that the fervor and hype over ACOs have provided yet one more distraction from the important task at hand. We need to replace our flawed health care financing system with one that works - a single payer national health program. That would include everyone of us in a quality system that we could pay for.