The Medicare shared-savings program is a new accountable delivery structure, designed to encourage fee-for-service Medicare providers to form accountable care organizations that improve the efficiency and effectiveness of care. To date, 27 ACOs have signed contracts with the Centers for Medicare and Medicaid Services, each agreeing to participate in the program for three years. CMS has indicated its strong commitment to the success of this program, and the shared-savings structure is poised to fund the development of critical accountable delivery system skills and networks as it matures.
Legislative basis: The Medicare shared-savings program was established under section 3022 of the Patient Protection and Affordable Care Act. Many specifics of the program were not detailed in the legislation, and were later outlined by CMS via rule fact sheets.
Rules and regulations: CMS governs shared-savings ACOs through the final rule on the shared-savings program, published in the Federal Register on Nov. 2, 2011. It previously published a proposed rule for the program, which was highly controversial and widely panned. Key concerns about the proposed rule—including the process for accountable physician assignment, measures to assess quality, and the savings share model—were addressed in the final regulatory document.
In addition, several government entities have published supplemental guidance to the final rule. These include the Internal Revenue Service, Office of the Inspector General, and Justice Department and Federal Trade Commission.
Funding model: Using a complex formula, CMS predicts the payments an organization should receive for services, then shares any savings on that amount with the ACO. These incentive payments also rely in part on 33 quality metrics that each ACO reports on. The savings share is capped at either 50% or 60%, depending on which ACO track the organization implements. Track one, also known as the one-sided model, is an upside-only structure with a 50% cap on the savings share. Track two, also known as the two-sided model, exposes providers to potential loss as well as gain. This option has a 60% cap on savings share.
Most shared-savings ACOs will be physician-led; however, hospitals and payers are also running these delivery systems.
Care model: The Medicare shared-savings program addresses services under original fee-for-service Medicare (parts A and B). It excludes Part D prescription drug benefits. In these plans, accountable physicians coordinate all aspects of care for their patients. This is usually a primary care physician; however, patients who have not received care from a primary care physician will generally be assigned to the specialist who bills the greatest dollar amount of primary care services on behalf of the patient.
Critical success factors: For a shared-savings accountable care organization to succeed, it must excel at certain functions that have historically been the purview of health plans and other payers. These include measurement, advanced analytics and reporting, payment distribution, compensation management, and compliance oversight. In addition, a shared-savings arrangement requires an ACO to bear significant risk. This means provider-led organizations—the most common scenario—must rapidly develop significant population health management and care coordination skills to survive and thrive.
Challenges: There are two primary challenges for the shared-savings program. First, the accountable care organization must understand how best to contract with hospitals and physician groups to achieve cost and quality goals. This depends on factors such as hospital competition and the organization of physician groups in the market, whether hospitals own physicians, and where providers are in the transition from fee for service to accountable care.
Second, the success of non-hospital shared-savings ACOs requires the willingness of hospitals to participate in the management of care, or the ability of physicians and payers to manage hospitals effectively even as the hospitals remain under a fee-for-service structure.
Advantages and disadvantages: Advantages of the shared-savings program include:
- Shared-savings structure is appropriate “bridge” option for organizations that want to move from fee for service to full-risk payment and care models
- Program likely to fund development of critical accountable delivery system skills and networks
- CMS has indicated strong commitment to the success of the program, as evidenced by substantial modifications of regulations from the proposed rule to the final rule
Potential disadvantages of the shared-savings program include:
- High cost of entry and concerns that returns for participants will diminish over time
- Challenging to motivate individual providers because of savings cap, and no clear way to provide incentives to external providers without prefunding
- CMS expects slow adoption rate, which may erode support
Also in the series
Accountable care delivery and payment structures: An overview
Pioneer accountable care organizations
State health insurance exchanges
Medicare Advantage with physicians at risk
Medicaid health maintenance organizations
Private accountable care organizations
Bundled payment arrangements