CMS’s final regulations (final rule) implementing the Accountable Care Organization (ACO) shared savings program (Shared Savings Program) and the complementary regulations and guidance from CMS/OIG and DOJ/FTC are materially different from the proposed rules. After the proposed rule generated little interest in actually undertaking ACO development, CMS changed the final rule to focus on the themes of flexibility, accountability and innovation. The final rules and guidance provide health care providers with flexibility and, importantly, clear answers and guidance aimed at encouraging the development of ACOs for participation in the Shared Savings Program.

The Affordable Care Act (ACA), signed into law in March 2010, included incentives for the creation of ACOs. Congress established the Shared Savings Program in the ACA to promote accountability of providers to patient populations and to coordinate services under Medicare, as well as to encourage providers to make investments in infrastructure and to design care processes for high-quality, efficient service delivery. Almost a year later on March 31, 2011, several federal agencies (CMS, OIG, DOJ, FTC and IRS) jointly announced the release of proposed rulemaking and guidance regarding the ACO program. CMS released its much anticipated final rule on October 20, 2011, in time to garner participation before the January 1, 2012 statutory deadline. In addition, CMS and OIG have issued an interim final fraud and abuse waiver rule in an attempt to remove the existing legal impediments in the areas of fraud and abuse. Simultaneously, FTC/DOJ issued additional antitrust guidance and the IRS clarified its previous guidance to allow for the development of ACOs, providing clarity on such issues as eligibility to participate, governance, legal structure, quality and privacy.

The three goals stressed under the Shared Savings Program are (1) to provide better care to patients with respect to safety, effectiveness, patient-centeredness, timeliness, efficiency and equity; (2) to provide better health for populations through preventive service and education for issues such an substance abuse and physical inactivity; while (3) decreasing the cost of health care and eliminating waste in the system. CMS seeks to move the health care industry towards this patient-centered care approach by adding patients to the governance structure of ACOs, requiring patient satisfaction data and requiring attention to care coordination issues. ACOs will receive shared savings only if they can meet quality standards related to these goals. The final rule emphasizes flexibility with respect to governance and other elements of operations, and CMS allows for a reimbursement track with no down-side risk.

ACOs can take a variety of forms, but all include primary care physicians and other types of providers that provide care to Medicare beneficiaries in a way that will control costs. Achieved savings are shared with the providers and suppliers through the ACO organization when quality metrics are also met. In order to implement the ACA’s ACO and Shared Savings Program, CMS’s final regulations still provide for a range of issues critical to the development of ACOs, including their organizational structure and governance, internal operations, contracting obligations with CMS, reimbursement systems for ACOs under the Shared Savings Program, and quality reporting and monitoring. The following paper discusses the various provisions of the final rule and other guidance and analyzes the manner in which the changes from the proposed rule to the final rule are designed to encourage more interest in Medicare ACOs.