Proposals for ACOs Need Further Study

On March 31, the Centers for Medicare and Medicaid Services (CMS) released its long-awaited and highly anticipated proposed rulemaking for implementing accountable care organizations (ACOs) and participating in the Medicare Shared Savings program. Separate notices contained proposed changes to physician self-referral laws and antitrust and taxation policies.

We at the Mass Medical Society are undertaking a thorough analysis of the extensive proposals.

In an article posted to the New England Journal of Medicine Web site on the same day as the release of the proposed rules, CMS Administrator Dr. Don Berwick described the three-pronged goal of ACO formation as “better care for individuals, better health for populations, and slower growth in costs through improvements in care.”

To temper the potential downside financial risk for ACO providers, the rule proposes two ‘tracks.’ In the first, ACOs would be eligible for modest shared savings but not responsible for losses in the first two years of the three-year agreement. In year three, track-one ACOs would become responsible for some losses.

Track-two ACOs would be eligible for a higher percentage of shared savings, starting with first-dollar savings, but also responsible for shared losses throughout the three-year agreement period.

At first glance, the proposed rule’s use of penalties for those who form an ACO — but fail to meet financial measures — seems stronger than anticipated.

Among other notable stipulations in the proposal are the following:

  • Each ACO must share a legal, governance, leadership, and management-structure. “An ACO will be governed by a body that primarily comprises the health care providers in that ACO,” said Berwick, and the governing body will also include Medicare beneficiaries.
  • An ACO can consist of a variety of providers, including but not limited to physician-hospital arrangements, networks of individual practices, or hospitals employing ACO professionals.
  • Each ACO must include at least 5,000 beneficiaries. Medicare beneficiaries would not enroll in a specific ACO. Instead, Medicare will retrospectively determine which particular ACO should be credited with improving a beneficiary’s care and reducing expenditures. Beneficiaries participating in an ACO would be advised of that fact to allow them to see another provider or opt out of ACO-mandated data-disclosure requirements.
  • The proposed rule states that primary care providers may participate in only one ACO, while hospitals and specialists could participate in several.

CMS estimates that aggregate start-up investment and first-year operating expenditures for an ACO would range from $131,644,000 to $263,288,000. It also predicts that between 75 and 150 ACOs will participate nationally, with a total aggregate net savings of $510 million between 2012 and 2014.

The MMS is working closely with our internal committees and other physician organizations to develop comments on the proposed rules. Our response will be based on our guiding principles regarding cost and delivery system reforms, which emphasize the central role of physicians, the need to explore and support a variety of different models, and the critical importance of pursuing these models on a voluntary basis. As always, our overarching goal will be to ensure that all health care delivery systems help physicians provide the highest-quality and most cost-efficient care to their patients.

Alex. Calcagno writes about government affairs for Vital Signs, a publication of the Mass. Medical Society. To read the complete ACO proposal and CMS summaries of it, go to