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Medicare Offers ACOs Greater Flexibility, Rewards

June 8, 2015


Medicare accountable care organizations now can enjoy greater financial rewards and greater flexibility under rules just finalized by the Centers for Medicare & Medicaid Services (CMS).

The rules, which were proposed in December, 2014, and go into effect August 3, 2015, adjust the Medicare shared-savings program which now serves some 7 million beneficiaries through more than 400 ACOs. Among the changes:


  • A longer period for ACOs to share in financial savings before having to also share in losses.
    Currently, shared-savings ACOs can only operate for three years before they must begin sharing in losses as well. The new rule permits ACOs to participate for one additional three-year period before making this transition—six years total.

  • Greater potential savings if ACOs take on greater financial risk for caring for patients.
    The new rule creates a “Track 3” ACO that allows higher rates of shared savings if ACOs also agree to share in a greater percentage of any losses. Such ACOs would be permitted to share in up to 75% of savings if they were also willing to share in up to 75% of losses.

  • Greater opportunity for providers already achieving high levels of quality and cost-savings to benefit from continued improvement.
    CMS is changing the way it determines the historical costs that it uses for calculating how much an ACO improves, thus allowing a fairer comparison for already high-achieving providers.


These changes reflect the CMS commitment to link a much greater percentage of Medicare payments to provider performance in quality improvement and cost savings. Earlier this year, it said that by 2018, some 50% of payments would be made in this way via alternative payment models such as ACOs.


Toward this end, CMS also introduced a separate type of ACO model in March called the Next Generation ACO. It will allow providers to take on even more financial risk than Pioneer or Track 3 ACOs, including full capitation, in which the ACO accepts a set payment to cover all services for a specific patient population. Next Generation ACOs will begin in January, 2016. Click for related article. 


Click to read CMS summary of the new shared savings ACO rules.

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