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By January 1, 2012, the Secretary of Health and Human Services (the Secretary) must establish a Medicare Shared Savings Program (MSSP) that promotes accountability for a defined patient population, coordinates items and services under traditional Medicare Parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery. [1] What follows is a description of the new program.

Under the MSSP, groups of providers of services and suppliers that meet criteria established by the Secretary may work together to manage and coordinate care for Medicare fee-for-service beneficiaries through an Accountable Care Organization (ACO). An ACO that meets quality performance standards established by the Secretary is eligible to receive payments for shared savings. The Secretary plans to issue regulations to implement the MSSP in the fall of 2010.

It is important to note that the provisions for the MSSP outlined below bring many of the features that are associated with Medicare Advantage (MA) coordinated care plans into the traditional Medicare program. Because the MSSP operates only in the traditional Medicare program, beneficiaries enrolled in a Medicare Advantage (MA) plan under Medicare Part C, a competitive medical plan, or in a Program of All-inclusive Care for the Elderly (PACE) cannot receive services through an ACO under the MSSP.

Eligible Providers and Suppliers

As determined by the Secretary, the following groups of suppliers and providers of services, who have established a mechanism for shared governance, are eligible to participate as Accountable Care Organizations under the program. The groups include:

  • ACO professionals (physicians and other professionals recognized under the Medicare program) in group practice arrangements;

  • Networks of individual practices of ACO professionals;

  • Partnerships or joint venture arrangements between hospitals and ACO professionals;

  • Hospitals employing ACO professionals;

  • Such other groups of suppliers or providers of services as the Secretary determines appropriate.

Ineligible Providers and Suppliers

Under the Medicare Shared Savings Program, a supplier or provider of services who participates in any of the following shall not be eligible to participate in an ACO

  • A model tested or expanded under the demonstration projects authority of the Secretary that involves shared savings under this title;

  • Any other program or demonstration project that involves such shared savings;

  • The independence at home medical practice pilot program.

ACO Contractual Requirements

An ACO must:

  • Be willing to become accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to it;

  • Enter into an agreement with the Secretary to participate in the program for not less than a 3-year period (the 'agreement period');

  • Have a formal legal structure that would allow the organization to receive and distribute payments for shared savings to participating suppliers and providers of services;

  • Include primary care ACO professionals that are sufficient for the number of Medicare fee-for-service beneficiaries assigned to the ACO (at a minimum, the ACO shall have at least 5,000 beneficiaries assigned to it);

  • Provide the Secretary with information regarding professionals participating in the ACO as the Secretary determines necessary to support the assignment of Medicare fee-for-service beneficiaries to an ACO, the implementation of quality and other reporting requirements, and the determination of payments for shared savings;

  • Have in place a leadership and management structure that includes clinical and administrative systems;

  • Have a defined process to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of tele-health, remote patient monitoring, and other such enabling technologies; and

  • Demonstrate to the Secretary that it meets patient-centeredness criteria specified by the Secretary, such as the use of patient and caregiver assessments or the use of individualized care plans.

Quality Measures Reporting

The Secretary is to determine appropriate measures to assess the quality of care furnished by the ACO, including such measures as:

  • Clinical processes and outcomes;

  • Patient and (where practicable) caregiver experiences; and

  • Utilization, such as rates of hospital admissions for conditions for which good outpatient care could potentially prevent the need for hospitalization, or for which early intervention could prevent complications or more severe disease ("ambulatory care sensitive conditions").

An ACO must submit data in a form and manner specified by the Secretary on measures she determines necessary to evaluate the quality of care furnished by the ACO. Such data may include transitions across health care settings, including hospital discharge planning and post-hospital discharge follow-up by ACO professionals.

The Secretary shall establish quality performance standards to assess the quality of care furnished by ACOs. For purposes of assessing the quality of care provided by ACOs, the Secretary shall seek to improve the quality of care furnished by ACOs over time by specifying higher standards, new measures, or both.

The Secretary may, as she determines appropriate, incorporate reporting requirements and incentive payments related to the physician quality reporting initiative, including electronic prescribing, electronic health records, and other similar initiatives, and may use alternative criteria than would otherwise apply under such section for determining whether to make such payments. Incentive payments shall not be taken into consideration when calculating payments otherwise made under the ACO provision.

Assignment of Traditional Medicare Beneficiaries to ACOs

The Secretary shall determine an appropriate method to assign traditional Medicare beneficiaries to an ACO, based on their utilization of primary care services provided by an ACO professional. Under the program, payments shall continue to be made to suppliers and providers of services participating in an ACO in the same manner as they would otherwise be made except that a participating ACO is eligible to receive payment for shared savings if the ACO meets quality performance standards established by the Secretary and the ACO meets the contracting requirements above.

Savings Requirement and Benchmark

An ACO shall be eligible to receive payment for shared savings only if the estimated average per capita Medicare expenditures for traditional Medicare beneficiaries for parts A and B services under the ACO, (adjusted for beneficiary characteristics) is below the applicable benchmark by at least the percentage specified by the Secretary for a given year. The Secretary shall determine the appropriate percentage to account for normal variation in expenditures under this title, based upon the number of Medicare fee-for-service beneficiaries assigned to an ACO.

The Secretary shall estimate a benchmark for each agreement period for each ACO. The benchmark will be based on the most recent data available for 3 years of per-beneficiary expenditures for Medicare Parts A and B services for fee-for-service beneficiaries assigned to the ACO. The benchmark shall be adjusted for beneficiary characteristics and such other factors as the Secretary determines appropriate, and shall be updated by the projected absolute amount of growth in national per capita expenditures for Medicare Parts A and B services under the original fee-for-service program, as estimated by the Secretary. The benchmark shall be reset at the start of each agreement period.

Payments for Shared Savings

The Secretary shall establish limits on the total amount of shared savings that may be paid to an ACO. If the Secretary determines that an ACO has taken steps to avoid more costly patients to reduce the likelihood of increasing expenses to the ACO, the Secretary may impose an appropriate sanction on the ACO, including termination from the program.

Payment of shared savings to ACOs, based on meeting quality performance measures established by the Secretary, shall be a percentage (as determined by the Secretary) of the difference between the estimated average per capita Medicare expenditures in a year (adjusted for beneficiary characteristics) under the ACO, and the benchmark established for the ACO. The remainder of such difference shall be retained by the MSSP.

Termination, Administration, and Waiver Authority

The Secretary may terminate an agreement with an ACO if it does not meet the Secretary's quality performance standards. Rules concerning the coordination of federal information policy and security (printing and documents) shall not apply to the ACO program. In addition, the Secretary may waive civil money penalties requirements for false claims and the criminal penalties for fraud under the Medicare program as may be necessary to carry out the MSSP.

Limitations on Review

There shall be no administrative or judicial review of:

  • The specific criteria for establishing an ACO;

  • The assessment of the quality of care furnished by an ACO and the establishment of performance standards;

  • The assignment of Medicare fee-for-service beneficiaries to an ACO;

  • The determination of whether an ACO is eligible for shared savings and the amount of such shared savings, including the determination of the estimated average per capita Medicare expenditures under the ACO for Medicare fee-for-service beneficiaries and the average benchmark for the ACO;

  • The percent of shared savings specified by the Secretary and any limit on the total amount of shared savings established by the Secretary; and

  • The termination of an ACO.


Permitting providers and suppliers to share in cost savings creates important incentives to encourage Accountable Care Organizations. ACOs should, over time, align coordinated care under traditional Medicare with emerging care coordination efforts under Medicare Part C. Advocates should pay particular attention to whether movement toward ACOs creates access to care issues, particularly for isolated populations where resources for care coordination are fewer.

[1]See Pub. L. 111-148, §3022, the Patient Protection and Affordable Care Act (PPACA or the Affordable Care Act), creating the Medicare Shared Savings Program (MSSP), effective March 23, 2010. Section 3022 amends the Social Security Act to add a new section, §1899, 42 U.S.C. 1395jjj.

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