ACO rules released

The U.S. Department of Health and Human Services has released new rules to help doctors, hospitals, and other providers better coordinate care for Medicare patients through Accountable Care Organizations (ACOs), according to Kaiser Health News.  Comments on the proposed rule are being accepted for 60 days. 

The article states that it is estimated that new ACOs could save Medicare between $170 million and $960 million over three years, with the hope that if these models succeed, they will be expanded to privately insured patients. 

Key components of the rules include:

  • Medicare would continue to pay ACO providers seeing at least 5,000 patients on a fee-for-service basis.
  • ACOs will have two options to participate in a three-year arrangement, starting as early as January, 2012.
  • ACOs who wish to accept more risk could opt for potential bonuses of up to 60 percent of savings, but they would have to agree to repay Medicare for cost overruns, which would be at most 10 percent of what Medicare would have spent on those patients if they weren't in the ACO.
  • ACOs who wish to accept less risk would be eligible for smaller bonuses, up to 50 percent of the savings they achieved for Medicare. These ACOs would face potential penalties in the third year of up to 7.5 percent of what CMS estimated their patients should have cost.
  • ACOs would have to notify patients that they were participating in the program at the time they sought services, as patient information sharing is a key component of the model.
  • Beneficiaries could opt out of the ACO or decline to let their information be shared.
  • ACOs could be cut out of the program if their participating patient volume falls below 5,000 patients.
  • CMS plans to require pre-approval of all marketing materials to make sure patients aren't mislead.

One of the big challenges for ACO setup will be the initial costs, which include installing electronic health records for information sharing.  Critics of the ACO model worry that increased market power of these entities will actually drive up costs. 

(Sources: Kaiser Health News,, March 31, 2011; U.S. Department of Health and Human Services,, March 31, 2011)