CMS Proposes 3-Year Penalty Delay for Accountable Care Organizations & New ACO Model

Accountable Care Organizations (ACO) are voluntary organizations that providers may choose to participate in which are comprised of doctors, hospitals, and other health care providers. The Centers for Medicare and Medicaid (CMS) created Accountable Care Organizations with the goal of coordinating care to ensure that patients get the right care at the right time while avoiding unnecessary duplicaiton of services an preventing medical errors. Currently Medicare offers the Medicare Shared Savings Program that allows ACOs to share in the savings it achieves for the Medicare program. ACOs may also be penalized for poor performance. 

Penalty Delay
However, CMS recently proposed that health care systems experimenting with a new way of being paid by Medicare would have three extra years before they could be punished for poor performance. This three-year delay is in addition to the three-year extension currently in place, for a total of six years. The proposal can be found here. The new rule applies to both new and existing ACOs. 

While ACOs wouldn't face penalties for an additional three years, any ACO that chose to avoid penalties after the initial delay period of three years would be limited to 40-percent of the money they save Medicare. There is a 50-percent maximum cut off of savings ACOs are able to keep during the first three years. 

Track Three ACO Model
The new ACO model, known as "Track Three," allows ACOs to keep up to 75-percent of the money they save Medicare. Track Three ACOs would be responsible for 15-percent of any excess spending they cost Medicare. This is higher than the 10-percent limit to the other models of ACOs that are in place now. 

CMS Contracts With 27 ACOs Covering 375,000 Medicare Beneficiaries

In a press release dated April 10, CMS announced contracts with 27 Accountable Care Orgnizations, launching a new program authorized by the Affordable Care Act that is intended to help physicians, hospitals, and other health care providers work together to improve care for people with Medicare.

Under the new Medicare Shared Savings Program (Shared Savings Program), 27 Accountable Care Organizations (ACOs) have entered into agreements with CMS, taking responsibility for the quality of care furnished to people with Medicare in return for the opportunity to share in savings realized through improved care.

The Shared Savings Program and other initiatives related to Accountable Care Organizations were authorized by the Affordable Care Act, the health care law of 2010. Participation in an ACO is purely voluntary for providers and beneficiaries and people with Medicare retain their current ability to seek treatment from any provider they wish.

Accounding to CMS, the first 27 Shared Savings Program ACOs will serve an estimated 375,000 beneficiaries in 18 States. This brings the total number of organizations participating Medicare shared savings initiatives on April 1 to 65, including the 32 Pioneer Model ACOs that were announced last December, and six Physician Group Practice Transition Demonstration organizations that started in January 2011. In all, as of April 1, more than 1.1 million beneficiaries are receiving care from providers participating in Medicare shared savings initiatives.

According the CMS, anyone who has multiple doctors may have experienced the frustration of fragmented and disconnected care: lost or unavailable medical charts, trouble scheduling an appointment or talking to a doctor, duplicated medical procedures, or having to share the same information over and over with different doctors.

Accountable Care Organizations are designed to lift this burden from patients, while improving care and reducing costs. The Shared Savings Program was created by the Affordable Care Act after a number of efforts in the private sector showed that improving care can lead to lower costs. The selected ACOs include more than 10,000 physicians, 10 hospitals, and 13 smaller physician-driven organizations in both urban and rural areas. Their models for coordinating care and improving quality vary in response to the needs of the beneficiaries in the areas they are serving. CMS is reviewing more than 150 applications from ACOs seeking to enter the program in July.

To ensure that savings are achieved through improving and providing care that is appropriate, safe, and timely, an ACO must meet strict quality standards. 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 the patient and caregiver experience of care.

CMS also announced today that five ACOs are participating in the Advance Payment ACO Model beginning April 1. This model will provide advance payment of expected shared savings to rural and physician-based ACOs participating in the Shared Savings Program that would benefit from additional start-up resources. These resources will help build the necessary care coordination infrastructure necessary to improve patient outcomes and reduce costs, such as new staff or information technology systems. CMS is reviewing more than 50 applications for Advance Payments that start in July.

To learn more about the ACOs announced today, visit: http://www.cms.gov/apps/media/fact_sheets.asp

For more information on the Advanced Payment ACO Model, including the participating ACOs, visit: http://innovations.cms.gov/initiatives/ACO/Advance-Payment/

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