Foundations for a Successful
Patient-Centered ACO:
Federal Law Background
Jim Dearing, D.O., FACOFP, FAAFP
Chief Medical Officer, Physician Network
John C. Lincoln Health Network
ACO Video
There have been many precursors to ACOs (PHOs,
MSOs, HMOs, patient centered medical homes), but
recent interest in Accountable Care Organization
development started with the passage of the Affordable
Care Act of 2010.
What is an ACO?
An Accountable Care Organization “. . . is an organization
of health care providers that agrees to be accountable for
the quality, cost, and overall care of Medicare beneficiaries
who are enrolled in the traditional fee-for-service program
who are assigned to it.” (Centers for Medicare and Medicaid Services,
2010.)
Accountable Care Organizations are established to
manage the care of populations.
 ACOs must have, at a minimum, sufficient numbers
of primary care physicians to provide primary care for
at least 5,000 Medicare patients.
 ACOs also must “have defined processes to
(a) promote evidenced-based medicine;
(b) report the necessary data to evaluate quality
and cost measures, Electronic Prescribing (eRx),
and Electronic Health Records (EHR); and
(c) coordinate care.”
Other requirements for ACOs
 Have a formal legal structure to receive and distribute
shared savings
 Have sufficient information regarding participating
ACO health care professionals as the Secretary
determines necessary to support beneficiary
assignment and for the determination of payments for
shared savings.
 Demonstrate it meets patient-centeredness criteria,
as determined by the Secretary.
ACO Payment Flow from CMS
CMS Assigns Medicare Patients to
ACOs based on historic E/M billing
by the ACO’s primary care
physicians.
Years 1 - 3
ACO providers (Physicians,
Hospitals and others) bill Medicare
fee for service.
End of Year 3
CMS calculates costs of caring for
patients assigned to the ACO and
distributes incentive payments
In October 2010, 64% of all US health systems
were planning to create ACO programs.
October 2010 –
ACO = Awesome Consulting Opportunities!
March 2011 – Proposed CMS rules for ACO’s caused
most health care organizations to re-think and postpone
ACO development
Suddenly, ACOs didn’t look like such a good idea . . .
 Tremendous costs to establish
 High financial risk and limited upside rewards
 ACOs would be required to track at least 64 quality
measures
 Retro Attribution of patients!
AAFP response to CMS proposed ACO rules
 Allow primary care physicians to join multiple ACOs
 Provide more flexibility so that ACOs don’t have to
be part of a large health care system
 Limit number of quality measures to reduce cost and
complexity
 Narrow definition of primary care physicians to family
medicine, internal medicine, pediatrics and geriatrics
What is next for ACOs and Healthcare Integration?
 Continued cost pressure from CMS and commercial
payors will result in new “ACO” like organizations
which allow providers to accept population risk.
 The development of payor sponsored provider
networks designed to severely limit hospital and
subspecialist physician utilization.
 New provider-sponsored clinical integration models
that allow investment in information systems, quality
management and other tools necessary to manage
the health of populations.
April 2012

FIRST ACCOUNTABLE CARE ORGANIZATIONS UNDER THE MEDICARE
SHARED SAVINGS PROGRAM

On April 10, 2012, the Centers for Medicare & Medicaid Services (CMS)
announced the selection of the first 27 accountable care organizations (ACOs)
to participate in the Medicare Shared Saving Program (Shared Savings
Program). The selected organizations have agreed to be responsible for
improving care for nearly 375,000 beneficiaries in eighteen states through better
coordination among providers.

http://www.cms.gov/apps/media/press/facsheet.asp?
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