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Wednesday, May 4, 2011

Accountable Care Organizations and the Medicare Shared Savings Program

David Newman
Specialist in Health Care Financing

The provision of health care in the United States has been described as fragmented, with patients seeing multiple unrelated providers. Fragmented care has been found to be, among other things, both costly, since provider payments are not linked to performance or outcomes and services can be duplicative, and of lower quality, since providers lack financial incentives to coordinate care. Section 3022 of the Patient Protection and Affordable Care Act (P.L. 111-148, PPACA), as amended, directs the Secretary of Health and Human Services (the “Secretary”) to implement an integrated care delivery model in Medicare, the Medicare Shared Savings Program, using Accountable Care Organizations (ACOs)—a model of integrated care formulated to reduce costs and improve quality.

ACOs are modeled on integrated delivery systems such as the Mayo Clinic, Geisinger Health System, Kaiser Permanente, and Intermountain Healthcare. While ACOs can be designed with varying features, most models put primary care physicians at the core, along with other providers, and emphasize simultaneously reducing costs and improving quality. The emphasis is on physicians rather than insurers or hospitals because physicians influence almost 90% of all personal health spending.

In the simplest case, the ACO contracts with payers to be accountable for the entire continuum of care provided to a defined population, and if the costs of care provided are less than targeted amounts, and certain quality measures are achieved, the ACO and the payer will share the savings generated. Under the Medicare Shared Saving Program, the Centers for Medicare & Medicaid Services (CMS) will contract for ACOs to assume responsibility for improving quality of care provided, coordinating care across providers, and reducing the cost of care Medicare beneficiaries receive. If cost and quality targets are met, ACOs will receive a share of any savings realized by CMS. The Congressional Budget Office scored the Medicare Shared Savings Program as reducing Medicare expenditures $4.9 billion in the FY2013 through FY2019 period.

PPACA Section 3022 leaves many of the design features to be determined by the Secretary. On March 31, 2011, the Department of Health and Human Services issued its Notice of Proposed Rulemaking for accountable care organizations. At the same time, the Department of Justice and Federal Trade Commission issued a joint policy statement on ACOs to address antitrust issues. In addition, CMS and the HHS Office of the Inspector General issued a joint statement on the civil monetary penalties law, federal anti-kickback statute, and the physician self-referral law for financial arrangements involving ACOs, and the Internal Revenue Service issued a statement on the participation of tax exempt organizations in ACOs. HHS will accept comments from stakeholders on the NPRM for 60 days and intends to release a final regulation some time afterwards. The Appendix to this report outlines key parts of the proposed regulations.

The Medicare Shared Savings Program is slated to begin January 1, 2012. While ACOs hold out the prospect of improving care, reducing costs, and raising quality, there are still gaps in knowledge of what existing ACOs have achieved and whether they can be widely replicated. Moreover, there may be unanticipated consequences from encouraging the formation of ACOs, such as further health provider market concentration, that could adversely affect efforts to control overall health costs.

Date of Report: April 25, 2011
Number of Pages: 37
Order Number: R41474
Price: $29.95

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