Health Care Law Blog

Braving the New Frontier of Accountable Care Organizations

On May 17, 2011, the Center for Medicare and Medicaid Innovation, a part of the Centers for Medicare & Medicaid Services ("CMS"), announced a "Pioneer ACO Model" designed for providers that are already experienced in coordinating care for patients across care settings.

The Pioneer ACO program provides higher risks and greater rewards in the first two years of the program than those available to non-Pioneer Accountable Care Organizations ("ACOs"). Specifically, non-Pioneer ACOs can choose from two tracks that vary on risk and reward under the CMS proposed ACO regulations.  Track One ACOs are those involved in a “one-sided model” that begins as a no-risk shared-savings payment system for the first two years and converts to a risk-sharing payment system in the third year. Track Two ACOs are those that are involved in a "two-sided model,” with risk-sharing (of both savings and losses) beginning in year one. Pioneer ACOs also participate in two-sided risk sharing from year one.

Generally, if any net Medicare savings exceed the minimum savings rate, the ACO can receive a portion of the additional net Medicare cost savings in excess of the minimum savings rate (the "Shared Savings").  The percentage depends on the type of ACO and amount of shared risk, as follows:

ACO Type	Year 1 Shared Savings	Year 2 Shared Savings
Track One	Up to 50%	Up to 52.5%
Track Two	Up to 60%	Up to 65%
Pioneer	Up to 60%	Up to 70%

Pioneer ACOs that have met a "minimum average annual savings amount" in those first two years will then transition to a population-based payment system, which yields a per-beneficiary per month payment amount.  This type of payment system is intended to replace a significant amount of the ACO's fee-for-service payments with a prospective payment.

While the potential rewards are quite high, as noted above, the risk and CMS requirements are also quite high.  Pioneer ACOs will be held financially accountable for the care they provide and be expected to improve health while reducing spending.  Moreover, CMS will publicly report the performance of Pioneer ACOs on its website.

CMS is looking for 30 organizations to partake in its Pioneer ACO Model program.  Interested organizations are required to submit a Letter of Intent by June 10, 2011 and an application by July 18, 2011. For more information on Pioneer ACOs see CMS's Pioneer ACO Application website.

Overall, those choosing to embark on the Pioneer ACO track, like anyone exploring new frontiers, will face great risk and unknowns in order to obtain a potentially great reward.

Related ACO Articles from Foster Swift

• Antitrust Enforcement Policy Statement
• CMS Finally Proposes to Waive Certain Fraud and Abuse Laws for ACOs
• Is the IRS a Friend or Foe of Accountable Care Organizations?
• Accountable Care Organization ("ACO") Analysis

Categories: Accountable Care Organizations, Health Care Reform, Hospitals