On March 31, 2011, the Centers for Medicare and Medicaid Services (CMS) published the long-awaited proposed rules for accountable care organizations (ACOs). We will send more detailed analyses of the proposed rules soon (they run 429 pages!), but the highlights are as follows:

  • An ACO is a group of providers and suppliers of services (e.g., hospitals, physicians, and others involved in patient care) that will work together to coordinate care for the patients they serve with Original Medicare.
  • Medicare will continue to pay individual health care providers and suppliers for specific items and services as it currently does under the Original Medicare payment systems, but CMS will also develop a benchmark for each ACO against which ACO performance is measured to assess whether it qualifies to receive shared savings, or to be held accountable for losses.
  • An ACO will be entitled to shared savings only when savings exceed the minimum sharing rate.
  • Each ACO must be comprised of at least 5,000 beneficiaries and will enter into a three-year contract with CMS.
  • An ACO may opt for either a one-sided risk model (sharing of savings only for the first two years and sharing of savings and losses in the third year) and a two-sided risk model (sharing of savings and losses for all three years).
  • ACOs will be judged in five key areas: (i) patient/caregiver experience of care; (ii) care coordination; (iii) patient safety; (iv) preventive health; and (v) at-risk population/frail elderly health, with proposed performance standards for these measures and a proposed scoring methodology.
  • The Federal Trade Commission and the Department of Justice have issued a joint policy statement in which they propose to establish different levels of antitrust scrutiny depending on the specific ACO arrangement.

Stay tuned for more information on these fast-moving developments which will redefine the health care industry!

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