An ACO can be defined as an integrated health care delivery system that contracts to provide a full continuum of services to a defined patient population with specific reimbursement incentives established for meeting both quality and expense cost targets. The driving force of the ACO model is the provision of tangible, financial benefits to providers who can consistently provide better quality of care at reduced costs.
Since the inception of the Patient Protection and Affordable Care Act, more than 360 ACOs have been created, serving 5.3 million Medicare beneficiaries. Each ACO serves a population of at least 5,000 traditional fee-for-service beneficiaries who are assigned to that ACO on the basis of the primary care services the beneficiaries receive from ACO providers. ACOs must agree to participate in the shared savings program for at least 3 years (the agreement period), with any early termination potentially resulting in exclusion from future participation in the program.
Each year of the agreement period, an ACO is entitled to share in any savings (or losses) it generates, as long as the ACO satisfies its savings and quality performance requirements. CMS develops a cost benchmark, which is adjusted annually, for each ACO by determining the fee-for-service expenditures for the ACO’s beneficiaries assigned to the ACO. Participation in shared savings or losses will depend not only on the operation of the ACO, but also on the track model the ACO decides to participate in. Track 1 allows an ACO to receive 50% of any shared savings generated in connection with the operation of the ACO while insulating the ACO from sharing in any losses for the first 2 years of the agreement period. ACOs participating in Track 2 are given an increased upside (60% of shared savings), but also are liable for shared losses throughout the entire agreement period.
Before receiving any potential shared savings, an ACO must achieve its minimum savings rate (MSR) each year. This means that an ACO must generate savings of at least the MSR as measured against the benchmark established by CMS for the particular ACO. For ACOs on Track 1, CMS uses a sliding scale to establish the MSR, which ranges from 3.9% to 2.0% on the basis of the number of beneficiaries assigned to the ACO. Track 2 ACOs have a flat 2% MSR. If an ACO generates savings in excess of the MSR, it may receive a portion of those savings, provided the ACO has met its quality performance score.
To assess the quality of care, CMS requires ACOs to track and report patient outcomes and experiences on the basis of specific quality measures in 4 domains:
(1) patient and caregiver experience, (2) care coordination and patient safety, (3) preventive health, and (4) at-risk population.
For the first year of the agreement period, an ACO is required to completely and accurately report on all quality measures to be eligible to participate in shared savings. Thereafter, CMS sets a minimum attainment level for each domain, and for ACOs to participate in shared savings, they must meet or exceed that level on their reported scores per domain.