The ACO Rules — Striking the Balance between Participation and Transformative Potential

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Abstract
In April, the Centers for Medicare and Medicaid Services (CMS) issued a long-awaited Notice of Proposed Rulemaking with a proposed policy for the accountable care organization (ACO) program authorized by the Affordable Care Act (ACA). Under this policy, ACOs could participate in one of two types of 3-year arrangements. In the first path, in years 1 and 2 they would be eligible to share any savings they achieved relative to a spending target without accepting “downside” risk. In year 3, the ACOs would be required to repay Medicare for a percentage of any spending over their target level. In the second path, an ACO could accept downside risk beginning in year 1 and thereby be eligible for a higher proportion of any savings (60% vs. 50%). All shared-savings payments would be contingent on meeting established quality goals and minimum savings thresholds (3.9% for the one-sided risk model and 2% for the two-sided risk model). Shared-savings payments to the ACO could not exceed 7.5% of the total target costs; payments by the ACO to Medicare would not exceed 5% of those costs in the first year it accepted downside risk (then 7.5% in year 2 and 10% in year 3.)

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