CMS Releases Proposed Rule on Accountable Care Organizations

On March 31, 2011, the Centers for Medicare & Medicaid Services released a proposed rule under the health reform law (PPACA) to help doctors, hospitals, and other health care providers better coordinate care for Medicare beneficiaries by establishing accountable care organizations (ACOs).

The proposed rule calls for a 60-day public comment period. Under PPACA, the shared savings program will reward ACOs that lower costs while meeting express quality standards. The program must be established by January 1, 2012.

The proposed rule also states that CMS would implement both a one-sided risk model (sharing savings only for the first two years and sharing savings and losses in the third year) and a two-sided risk model (sharing savings and losses for all three years), allowing the ACO to opt for one model or the other. ACOs that participate in the two-sided model would be able to obtain greater savings. However, the rule also proposes to establish a minimum sharing rate. ACOs in the one-sided risk program that have smaller populations (and have more variation in expenditures) would have a larger sharing rate. Alternatively, ACOs with larger populations (and have less variation in expenditures) have a smaller rate. Under the two-sided approach, CMS proposes a 2% minimum sharing rate.