Accountable Care Organizations

For Original Medicare Plans


The Patient Protection and Affordable Care Act contains provisions surrounding the establishment of Accountable Care Organizations (ACOs) under the Medicare Shared Savings Program. Under the final rule issued by the Centers for Medicare & Medicaid Services (CMS) on Oct. 20, 2011, ACOs – a group of physicians, hospitals and other health care professionals working together – would coordinate care and share in certain savings or losses for Medicare beneficiaries assigned to it in an attempt to improve results for patients with original (fee-for-service) Medicare – Medicare Parts A and B. The rule does not cover Medicare Advantage plans, Medicaid or commercial insurance.

The Medicare Shared Savings Program would reward ACOs that lower health care costs for Medicare beneficiaries (by allowing the ACO to share in certain savings) while also meeting performance standards on quality of care and other measures. ACOs could also have to share certain losses for failing to provide efficient, cost-effective care.

The final rule states three aims to the ACO Shared Savings Program: (1) better care for individuals, (2) better health for populations, and (3) lower growth in Medicare Parts A and BOpens a new window expenditures.

Quality Standards

To share in savings, ACOs must meet certain quality standards. There are approximately 33 quality measures and these standards fall into four key areas:

  • Patient/caregiver care experiences
  • Care coordination/patient safety
  • Preventive health
  • At-risk population

Patient, physician, facility or health care professional participation in an ACO is purely voluntary.

Groups of Providers Eligible to Participate

The following groups of physicians, facilities and health care professionals are eligible to participate as an ACO under the Medicare Shared Savings Program:

  • ACO professionals (physicians, hospitals and other eligible health care professionals) in group practice arrangements
  • Networks of individual practices of ACO professionals
  • Partnerships or joint venture arrangements between hospitals and ACO professionals
  • Hospitals employing ACO professionals
  • Critical access hospitals
  • Rural Health Clinics
  • Federally qualified health centers
  • Such other groups of providers of services and suppliers as the Secretary of Health and Human Services (HHS) determines appropriate, including certain critical access hospitals

Participation Requirements

Physicians, facilities and other health care professionals must meet certain eligibility requirements to participate in the Medicare Shared Savings Program. For example:

  • The ACO shall be willing to become accountable for the quality, cost and overall care of the original Medicare plan beneficiaries assigned to it.
  • The ACO shall enter into an agreement with the Secretary of HHS to participate in the Shared Savings Program for not less than a three-year period.
  • The ACO must be a formal legal entity with a tax ID number under state law and capable of receiving and distributing payments for shared savings to participating providers and performing other required ACO functions (such as certain reporting requirements).

The ACO must include:

  • Primary care ACO professionals that are sufficient for the number of Medicare beneficiaries assigned to the ACO.
  • At a minimum, the ACO needs at least 5,000 such beneficiaries assigned be eligible to participate in the Medicare Shared Savings Program.


The Shared Savings Program begins Jan. 1, 2012, but the final rule allows two start date options of April 1 and July 1, 2012 for the first year of the program.

Antitrust, Anti-kickback and Fraud and Abuse Guidance

In the final rule, HHS eliminated the proposed mandatory antitrust review requirement, and adopted a three-prong approach to allow the Federal Trade Commission and Department of Justice (Antitrust Agencies) to maintain competition among the ACOs:

  • A voluntary expedited antitrust review to any newly formed ACO before it is approved to participate in the Medicare Shared Savings Program.
  • The sharing of aggregate claims data regarding allowable charges and fee-for-service payments, which will assist the Antitrust Agencies in calculating market share for ACOs participating in the Medicare Shared Savings Program. In addition, HHS will require ACOs formed after March 23, 2010, to agree, as part of their application to participate in the Medicare SSP, to permit HHS to share a copy of their application with the Antitrust Agencies. Both the aggregate data and the information contained in these applications will help the Antitrust Agencies assess and monitor ACOs' effects on competition and take enforcement action, if appropriate.
  • The Antitrust Agencies will rely on their existing enforcement processes for evaluating concerns raised about an ACO's formation or its conduct in reaction to an antitrust complaint.