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Accountable Care Organizations: Analysis of Proposed Regulations


The Patient Protection and Accountable Care Act (ACA) of 2010 included dozens of novel policies designed to cover 33 million uninsured Americans and slow the exponential rise of costs in our health care system.  The legislation introduced various new payment and delivery models that will encourage payers and providers to coordinate care and incentivize efforts that lower costs.

Among these are a National Pilot Program on Payment Bundling[1] and a five-year Pediatric Accountable Care Organization (ACO) Demonstration Project. The bill also created the Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services (CMS) to test new payment and delivery models for their ability to lower costs and increase quality.[2] The law also expands the Medicare Rural Flexibility Program to allow ACO incentive payments.

ACOs have been tested with successful outcomes in patient care, cost, and quality improvements.[3] The model has been embraced by both the Medicare Payment Advisory Commission[4] (MedPAC) and the Institute of Medicine (IOM).[5] California has the opportunity and strong infrastructure to expand on previous pilots and programs.[6] California providers[7] (such as Health Care Partners, Sharp, Monarch, Hill Physicians Group, Brown and Toland) are already developing ACO pilots for California’s privately insured with major health plans including Anthem, Blue Shield, Aetna and United, as well as payers like CalPERS.

The ACO concept has moved quickly to the fore as a model with the potential to radically change the way hospitals, doctors, and payers relate and interact. CMS has defined a Medicare ACO as a group of providers and suppliers who work together to coordinate care for the Medicare fee-for-service beneficiaries they serve. According to the ACA, this group could include health professionals (such as physicians or hospitals), networks of individual practices, partnerships or joint ventures between hospitals and ACO professionals, and hospitals employing ACO professionals.[8] As an ACO, a team of providers – including the primary care doctor, specialists and a hospital – would more closely coordinate care and therefore be able to produce better health outcomes for patients at a lower price to the system. The ACO network will negotiate a price, benefit structure and improved patient outcomes with Medicare programs, and both patients and doctors can choose to participate in an ACO or not.

The ACA provides for ACO formation through the Medicare Shared Savings Program (MSSP). The law offers a loose framework for ACO structure, governance and means of attainment of shared saving. The specifics of the program – requirements, parameters, and scope – were left to CMS, former Virginia Health Secretary Marilyn Tavenner and Jonathan Blum, former staffer to Senate Finance Committee chair Max Baucus.[9] In order to gain recognition as an ACO, organizations must apply to the Secretary of HHS for certification by January 1, 2012.

Full PDF download: Accountable Care Organizations: Analysis of Proposed Regulations Accountable Care Organizations: Analysis of Proposed Regulations.pdf

[1] ACA § 3023.

[2] ACA § 3021.

[3] Physician Group Practice demonstration, at https://www.cms.gov/DemoProjectsEvalRpts/downloads/PGP_Fact_Sheet.pdf

[4] Medicare Payment Advisory Commission: http://www.medpac.gov/documents/jun08_entirereport.pdf

[6] McClellan & Fisher, Accountable Care Organizations: A Framework For Evaluating Proposed Rules,

[8] Summary of proposed rule provisions for Accountable Care Organizations under the Medicare Shared Savings Program, Centers for Medicare and Medicaid. March 31, 2011 at https://www.cms.gov/sharedsavingsprogram/.

[9] Watson, S. Accountable Care Organizations. Insure the Uninsured Project. September 2010, at http://itup.org/Reports/Health%20Reform/ACO_100610.pdf.