Proposed rule for ACOs includes new model, timeframe

A new proposed rule acknowledges the struggles of accountable care organizations (ACOs) and changes the structure of the Medicare Shared Savings Program to encourage greater participation.

The Centers for Medicare & Medicaid Services (CMS) issued the rule on Dec. 1. The rule allows for an additional three years before ACOs are financially penalized for poor performance rather than the current 18 months. It also aims to "codify existing guidance, reduce administrative burden and improve program function and transparency."

The rule acknowledges widespread concern that some organizations need more than three years before penalties take effect. Switching after three years “may be too steep” for organizations that lack the experience and infrastructure to achieve quality and cost-saving targets leading organizations to leave the voluntary program altogether.

In the first year of the program, 118 ACOs saved Medicare $705 million with about half earning bonuses, government records show. Another 102 ACOs spent more and did not earn bonuses but only one had to repay Medicare because most ACOs have a three-year grace period when they can earn bonuses but are exempt from penalties.

In exchange for the extended timeframe, ACOs that after their first three years decide to avoid penalties for the next three could keep no more than 40 percent of the money they save Medicare, rather than the 50 percent maximum they can keep during their first three years. In addition, CMS is proposing the creation of a new type of ACO. Currently, there’s been the Pioneer ACO model, which assumed the most financial risk and ends in 2016, and the more widely adopted Shared Savings model. The third type would be known as “Track Three,” and would allow ACOs to keep up to 75 percent of the money they save Medicare.

If they cost Medicare extra, those ACOs would be held responsible for up to 15 percent of the excess spending instead of the current 10 percent.

Read the proposed rule.