More Providers Form Accountable Care Organizations; Growth in Medicare Spending Continues to Decrease

by King & Spalding

On January 10, 2013, HHS Secretary Kathleen Sebelius announced that 106 new Accountable Care Organizations (ACOs) have formed and begun participating in the Shared Savings Program as of January 1, 2013.  She also announced the release of a new report linking Affordable Care Act provisions, including the Shared Savings Program, to continued reductions in the growth rate of Medicare spending per beneficiary.

According to Secretary Sebelius, the 106 new ACOs include “a diverse cross-section of physician practices across the country [and] approximately 20 percent of [them] include community health centers, rural health centers and critical access hospitals that serve low-income and rural communities.”  Of the new ACOs, fifteen are Advance Payment Model ACOs.  The Advance Payment Model is designed for smaller ACOs comprised of physician and rural providers that receive up-front payments, as well as monthly payments, that can be used to make investments in care coordination infrastructure. 

To date, HHS reports over 250 ACOs are participating in the Shared Savings Program.  The Program was established by the Affordable Care Act with the purpose of encouraging physicians and other providers of Medicare-covered services and supplies to integrate and be held accountable for improving health care quality.  ACOs share with Medicare any savings generated from lowering the growth of health care costs and meeting standards for quality of care.  The next application period for organizations wishing to participate in the Shared Savings Program beginning January 2014 is summer 2013. 

It appears that the efficiencies achieved through ACOs may be paying off for the Medicare program.  HHS’s Assistant Secretary for Planning and Evaluation (ASPE) Office of Health Policy released a report dated January 7, 2013 attributing reductions in the growth of Medicare spending per beneficiary to Affordable Care Act provisions, such as the Shared Savings Program.  Among other things, HHS’s report shows that expenditures per Medicare beneficiary increased by only 0.4% in fiscal year 2012, which is substantially below the 3.4% increase in per capita GDP.  It notes further that both the Congressional Budget Office (CBO) and CMS Office of the Actuary (OACT) now project Medicare spending per beneficiary to grow at approximately the rate of growth of per capita GDP over the next decade.  The reduction in growth over the past few years and “projections of spending growth at GDP+0 for 2012-2022 is unprecedented in the history of the Medicare program.”

HHS indicated that, while more work needs to be done and other factors contribute to the reduction in growth rate, the Affordable Care Act has been an important factor contributing to reductions in the rate of growth in Medicare spending per beneficiary in 2011 and 2012 and “is the primary cause of the projections of continued slow growth over the next decade.”  Indeed, in this regard, the report reflects HHS’s belief that the growth of ACOs and other innovative delivery and payment models authorized by the Affordable Care Act (e.g., Medical Homes, bundled payments, etc.) “have the potential for reducing expenditure growth below projected levels.” 

More information regarding the new ACOs and the new report regarding the reduction in Medicare spending per beneficiary can be accessed here.

Reporter, Tracy Weir, Washington, D.C., +1 202 626 2923,



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