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Medicare ACO Overhaul Proposed

Medicare ACO Overhaul Proposed

The Centers for Medicare & Medicaid Services (CMS) is overhauling its largest accountable care organization (ACO) program to push more ACOs to share in a portion of any financial losses they create for Medicare. Currently, some 82% share only in the savings that they generate. 


The proposed changes, to be made in the Shared Savings ACO program with its 561 ACOs serving 10.5 million Medicare beneficiaries, would force ACOs to share financial losses much sooner than they do now. In exchange, CMS is offering new regulatory flexibility, including expanded use of telehealth services.  


CMS detailed the changes in a proposed regulation issued in August 2018, with comments due to the agency by October 16, 2018. A final regulation will be completed after that. 




  • ACOs are groups of doctors, hospitals, and other health care providers that join together to provide coordinated care for patients. They are held accountable for the total cost of care and quality of outcomes.
  • Under the current Medicare Shared Savings program, ACOs are allowed to share in any savings if they meet quality performance metrics, but do not have to share in any financial risks for 6 years.


Proposed Changes:


  • CMS proposes eliminating Tracks 1 and 2 of the current Shared Savings program and replacing them with a new BASIC track. CMS will also revise Track 3 of the current program to create a new ENHANCED track.  The agreement period for the new tracks would be 5 years.
  • In the BASIC track, ACOs would be able to use a shared-savings model for 2 years.   

- In years 3 – 5, they would also assume risk for financial losses, with the degree of risk growing incrementally and automatically each year. As the level of financial risk grows, so would the level of potential financial reward.


- In year 5, ACOs would share in up to 50% of potential savings and up to 30% of potential losses.


- At that point, they also would qualify as Advanced Alternative Payment models (AAPM), which, under the current MACRA law, means that physicians can qualify for 5% annual pay incentives.


  • In the ENHANCED track, ACOs that are experienced in sharing financial risk would be able to share in savings and losses at an even higher rate than those in the BASIC track—up to 75% for savings and losses.


Regulatory Flexibility:


  • Once ACOs take on financial risk in either the BASIC or ENHANCED track, they would receive greater regulatory flexibility and additional benefits:

- They could offer payment incentives to encourage patients to get primary care services.

- Physicians in certain ACOs would receive payment for telehealth services without geographic limitations, even when the beneficiary’s home is the originating site.

- CMS would waive the requirement that patients must stay in a hospital 3 days before being transferred to a skilled nursing facility.


An entirely separate category of Medicare ACOs, called Next Generation ACOs, would not be affected by these changes.



See CMS fact sheet

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