On November 2, 2011, the Center for Medicare & Medicaid Services (CMS) final rule governing Accountable Care Organizations (ACOs) under the Medicare Shared Savings Program appeared in the Federal Register. ACOs are legal entities that are designed to encourage collaboration between health care providers by allowing members of the ACO to share in any savings it generates with respect to Medicare beneficiary expenditures. The final rule presents several substantial changes from the proposed rule, many of which may make the formation of an ACO a more attractive option to healthcare providers. The most significant of the new developments are discussed below.
First, the track one ACO model no longer presents a downside risk to formation as the final rule eliminates the requirement of the proposed rule that an ACO pay back any incurred shared losses. In line with this change, the provision that CMS will withhold the first 25% of any savings in order to recover potential future losses has been eliminated. Second, the addition of the advance payment ACO initiative now offers selected participants access to capital to aid in the formation of an ACO. CMS will recoup the advance payments from the ACO’s shared savings. Third, the proposed sixty-five quality measures used to establish quality performance standards have been reduced to thirty-three. Fourth, ACOs may now share in the first dollar of any savings that they generate. This rule is in contrast to the proposed rule requirement that the ACO shares only in savings that are in excess of 2% of the savings benchmark. Finally, the savings cap has been increased to 10% for the first three years of participation (up from 7.5% in the first two years).