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Accountable Care Organizations Enable Providers to Earn Shared Savings Payments for Providing Cost-Effective, High-Quality Care

For providers seeking to be rewarded for the high-quality care they provide – and who may be willing to bear additional financial risk for failing to meet certain cost and quality benchmarks – Accountable Care Organizations (“ACOs”) are an innovative way to tie compensation to cost-effectiveness and quality outcomes associated with the care they provide to Medicare beneficiaries. The Centers for Medicare & Medicaid Services (“CMS”) defines an ACO as “an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.” Introduced to Medicare through the implementation of the Affordable Care Act, ACOs operate in one of several programs within Medicare, including the ACO Investment Model, the Advanced Payment ACO Model, and the Medicare Shared Savings Program (“MSSP”).

ACOs can be formed from any combination of one or more individual practitioners, group practices, networks of practices, and hospitals. To be eligible to participate in the MSSP, an ACO must: have a formal legal structure to receive and distribute shared savings; have a sufficient number of Medicare beneficiaries; and agree to participate in the MSSP for a minimum of at least five years. Depending on which “track” of the MSSP the ACO chooses to participate in, it may operate under a “one-sided model” during its first few years – being eligible for shared savings payments but avoiding any liability for shared losses – before transitioning to a “two-sided model” which includes risk of liability for shared losses. During the course of its participation in the MSSP, an ACO will coordinate care for its beneficiaries, measure and improve the quality of its care, and report its performance results, both publicly and to CMS.

ACOs participating in the MSSP are eligible to receive shared savings payments – or may be liable for shared losses – based on their performance against annual cost benchmarks and quality performance standards. For each “performance year” of an ACO’s participation agreement with CMS, CMS calculates a cost benchmark based on historical expenditure data that is risk-adjusted based on the demographics and health status of the ACO’s assigned beneficiary population. In order to receive shared savings payments in a given performance year, the ACO must meet the expenditure benchmark and fulfill the minimum quality performance standards. In performance years in which the ACO is assuming the risk of shared losses, the ACO’s failure to meet the benchmark will result in liability for shared losses.

If you are a provider interested in creating a new ACO or entering into an existing ACO, our experienced health care attorneys can assist you every step of the way. Call or contact us online to speak with a member of our team.