ACOs and the Shared Savings Program: Some Common Misconceptions

by Reed Tinsley, CPA

Section 3022 of the Patient Protection and Accountable Care Act (the Act) creates the Shared Savings Program for Medicare. Under the Shared Savings Program, which is to take effect no later than Jan. 1, 2012, Accountable Care Organizations (ACOs) that meet certain requirements established by the Secretary of Health and Human Services will be eligible to receive additional payments from Medicare where certain performance guidelines are met and cost-savings targets are achieved. The amount of the additional payment will be a percentage of the difference between the estimated per capita Medicare expenditures for patients assigned to the ACO and the cost-savings per capita Medicare expenditures threshold.

While ACOs are often touted as the solution to many of the ailments of the current model of healthcare delivery for Medicare, including the need for enhanced quality, improved outcomes, better coordination of care, and greater cost-savings, there are many misconceptions about the Shared Savings Program and a growing list of questions about what form ACOs will take under the law.

The Centers for Medicare and Medicaid Services (CMS), which will be responsible for implementing the Shared Savings Program under the authority of the Secretary, has issued scant guidance on any specifics aside from a brief Preliminary Questions & Answers document posted on its website (the Q&A).

A number of unknowns exist at this time. This article tackles some of the common misconceptions about ACOs and the Shared Savings Program. In a second installment, we will address a number of unanswered questions about ACOs and the Shared Savings Program.

ACOs do not necessarily have to involve a hospital. ACOs are defined by the Medicare Payment Advisory Commission as a set of physicians and hospitals that accept joint responsibility for the quality of care and the cost of care received by the ACO’s patients. Many confuse the concept of ACOs with the concept of payment bundling models involving hospital and physician services and hospital and physician integration efforts.

While existing and developing ACOs often involve the integration of hospitals and physicians through contractual arrangements or employment of physicians, the Act and the Q&A make clear that, for purposes of the Shared Savings Program, group practices, physician networks, and networks of group practices can all be ACOs without including a hospital.

There is not much detail available at this time about specific participation requirements for ACOs that want to participate in the Shared Savings Program, but the Act does specify some minimum requirements, including: having a formal legal structure that allows the ACO to receive and distribute payments for shared savings; having a leadership and management structure that includes clinical and administrative systems; and having a defined process to promote evidence-based medicine, report on quality and cost measures, and coordinate care. The Act also specifies that, in order to participate in the Shared Savings Program, an ACO will be required to enter into an agreement with the Secretary to participate for no less than a three year period. In addition, the ACO must be of a size sufficient to provide the bulk of primary care services to a minimum of 5,000 beneficiaries. As the rule-making process with CMS proceeds, we will have more information about the particular characteristics that a given organization must have to participate in the Shared Savings Program.

An ACO is not a “provider network.” Beneficiaries assigned to an ACO are…… (read complete article, here)

Reed Tinsley is a Houston-based CPA, Certified Valuation Analyst, and healthcare consultant. He works closely with physicians, medical groups, and other healthcare entities with managed care contracting issues, operational & financial management, strategic planning, and profit strategies. His entire practice is concentrated in the health care industry.