Update: CMS Releases Final ACO Rule

November 9, 2011

Update: CMS Releases Final ACO Rule

On Thursday, October 20, 2011, The Centers for Medicare and Medicaid Services (CMS) released the final Medicare Shared Savings Program rule, formalizing policies for voluntary Accountable Care Organizations (ACOs), which differs significantly from the earlier proposed plan.

Under the proposed rule, CMS proposed two tracks for ACOs. Track 1 would have allowed an ACO to share the savings for the first two years and would have been required to transition in the third year to performance-based risk, sharing in both saving and losses. Track 2 would have required ACOs to assume risk for all three years of the program with more opportunity to share a higher percentage of the savings it generated.

Now under the final rule, the two-track system remains but changes Track 1 to avoid downside risk. Inclusion of a one-sided risk model allows ACOs to participate in the Shared Savings Program without the threat of financial losses. The final rule requires that after the initial three-year participation agreement, if an ACO opts to remain in the Medicare Savings Program, it must participate in the Track 2 full-risk model described in the proposed rule.

In addition, CMS adopted recommendations to reduce the number of required quality measures from 65 to 33 and better align these measures with other quality reporting programs. Furthermore, CMS was cautioned that ACOs without a hospital would have difficulty reporting hospital-acquired conditions measures and that the majority of primary care physicians would be unable to adopt the burdensome “meaningful use” stage one requirements. Consequently in the final rule, CMS removed the hospital-acquired conditions composite measure and the requirement that at least 50 percent of an ACO’s primary care physicians must be “meaningful users” of electronic health records by the program’s second year. In its place, ACOs will be measured by the percentage of primary care providers who successfully qualify for an EHR incentive program payment.

If interested in participating in the program in 2012, ACOs can apply to enter the program on April 1 or July 1, 2012.

For more information on the final rule, please read the following full articles from the American Medical Association (AMA)and Arent Fox, LLP.