Fall 2015 - Innovation

Third Track for Shared Savings ACOs Offers More Flexible Rules

A final rule issued by the Centers for Medicare and Medicaid Services (CMS) is intended to maintain the rigor of the Medicare Shared Savings program (created by the Affordable Care Act), while ensuring providers continue to participate. Under the final rule, a third track will be added for shared savings for accountable care organizations (ACOs). Providers opting into track three will take on more financial risk but could also share in potentially higher savings. According to CMS, the upside and downside risk for the third model will be 75 percent, meaning an ACO’s bonus or penalty would be 75 percent of its savings or loss. ACOs in track three are also given a fixed population of beneficiaries to care for.

The first (and safest) track of Shared Savings ACOs originally called for providers to receive rewards for meeting cost and quality targets for three years, after which they would be responsible for both rewards and penalties. However, earlier this year, CMS finalized a proposal that allows ACOs to enter another three-year period in which they can avoid financial penalties. According to Jeffrey Spight, president of Collaborative Health Systems, a division of health insurer Universal American, allowing no risk “is a very strong message from CMS and the administration that they are committed to the long-term viability of the program.” In a separate rule later this year, CMS readjusted its methodology for benchmarking and rebasing since several pioneer ACOs have said they faced significant penalties even though they had high-quality scores and saved Medicare money. The new method will account for regional trends and future savings, rather than solely ACOs’ own recent spending.

Health and Human Services (HHS) Secretary Sylvia Mathews Burwell set a goal in January to tie 30 percent of all traditional Medicare payments to alternative payment models such as ACOs and bundled payments by the end of 2016. That goal increases to 50 percent by the end of 2018. An independent evaluation report released by HHS showed that the payment model created by ACOs generated more than $384 million in savings to Medicare over its first two years — an average of approximately $300 per participating beneficiary per year — while continuing to deliver high-quality patient care.

BSTQ Staff
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