Two ACO Shared Savings Models

Last Thursday, October 20, the Centers for Medicare & Medicaid Services  released the final rule on the formation of accountable care organizations.  This final rule contains many revisions from the March 31 proposed rule.  The revisions represent CMS’s response to the numerous comments that it received. 

The final rule will be published in the Federal Register on November 2.   The CMS press release and other information on the 696 pages composing the final rule are available from CMS.

One important revision in the final rule deals with the the two different shared savings models for ACOs.  The final rule adopts the two shared savings models as set forth in the proposed rule, but with some significant changes. 

First, there is the “one-sided model” which provides for shared savings among the participants during entire initial agreement period with no sharing of losses (the first “year” of the initial agreement for ACOs that actually begin in 2012 will be 18 or 21 months).  The proposed rule had required that after the first two years, an ACO choosing the one-sided model would transition into the “two-sided model,” and its participants would share savings and losses during the third year. 

Second, there is the “two-sided model” where participants share savings and losses for the entire first agreement period.  CMS believes that accountability for losses is an important motivator for providers to change their behavior.  To reduce unnecessary expenditures, the final rule adopts the requirement that all ACOs after their initial agreement period must utilize the two-sided model. 

However, CMS also recognizes that many providers may not be ready to share risk, and the one-sided model is available to them for the initial agreement period.  An ACO in the one-sided model which experiences a loss during the initial agreement period will be allowed to apply to remain an ACO in the two-sided model for a subsequent agreement period. 

The final rule also adopts the proposed rule’s requirement of a minimum savings rate of 2% before there is any shared savings.  ACOs in the one-sided model with a smaller population would have a larger minimum savings rate, and ACOs in the one-sided model with a larger population would have a smaller rate.  The maximum amount to be shared, subject to meeting reporting and quality requirements, is 50% for the one-sided model, and 60% for the two-sided model. 

Another very important change in the final rule is the elimination of the proposed 25% withhold on all shared savings; now ACOs will share in all savings after meeting the requirements.

Akerman is committed to providing its healthcare clients with timely information regarding the ACO final rule.  My colleagues, Rob Slavkin, Betsy Hodge, and I are available to answer any questions that you may have.

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