All Content

Policy Corner: Are ACOs Back? Has CMS Listened to Provider Concerns?


The final rule on accountable-care organizations (ACOs) indicates that the government has taken comments from SHM and other organizations to heart.

ACOs are one of the central vehicles in the 2010 Affordable Care Act (ACA) touted as having the potential to achieve improved care delivery while reducing costs. The theory is that through shared savings, ACOs will provide the financial incentive for providers to develop high-quality, integrated models of care, which will result in the efficiencies needed to reduce overall costs to Medicare.

On March 31, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule designed to turn the ACO theory into reality. In crafting their proposal, CMS had to walk a fine line between establishing sufficient patient protections while still making ACO participation appealing to providers. In the eyes of providers, that proposal flopped. Providers of all types were unified in opposition due to inflexible, overly burdensome requirements that allowed for very little return on an enormous upfront investment.

In commenting on the proposed rule, SHM challenged CMS by stating that limiting the provider incentive within ACOs also will limit the results. Thus, CMS was faced with a choice: Address concerns or risk implementing a program that would likely have very little participation.

Six months later, CMS released a response in the form of a final rule. At 696 pages, the details cannot be covered here, but it appears that CMS has listened. They have made many of the requested changes and it seems as if they have attempted to meet providers halfway in areas where they have not fully adopted suggestions.

For example, the initial proposal would have forced ACOs choosing the one-sided risk model to take downside risk during the third year of their three-year contract period. Providers opposed this proposal because they felt it would not be enough time for some ACOs to develop before taking on risk. The final rule allows ACOs choosing the one-sided model to remain free of risk for the duration of their first contract. Also notable is the elimination of a proposed 25% payment withholding on shared savings.

CMS also is showing some flexibility in areas where they might not have fully made desired changes. A key example can be found in the reduced number of quality measures for ACOs. Although fewer measures would certainly be welcome, it is hard to deny that cutting 65 proposed measures down to 33 is significant. Additionally, CMS has increased the cap on shared savings to 10% from 7.5% in the one-sided model, and to 15% from 10% in the two-sided model. This may seem like a small increase, but it should be remembered that the goal of the program is to save Medicare dollars, and any such increase ultimately reduces the savings that can be realized by Medicare. By making these and many other changes, it is clear that CMS has taken public comments seriously—and acted upon them. The final rule is a major improvement on what was originally proposed; it will breathe new life into the ACO concept.

It is too early to tell how much interest this rule will generate, but with the first round of applications due in early 2012 and the first ACOs slated to become operational April 1, 2012, hospitalists should not be surprised by renewed ACO discussions among colleagues and hospital administrators.

For more information on ACOs and other advocacy issues affecting hospitalists, visit

Next Article:

   Comments ()