December 12, 2014

Proposed Medicare ACO Rule Delays Penalties An Additional Three Years

According to a recent Kaiser Health News article, a new rule proposed by the federal Centers for Medicare and Medicaid Services (CMS) would give Medicare accountable care organizations (ACOs) an extra three years before they face penalties for poor performance.

ACOs are voluntary networks of doctors, hospitals, and other health care providers that coordinate care for Medicare patients. They assume medical and financial responsibility for their Medicare patients’ care and are eligible for bonuses when they coordinate care, reduce Medicare spending, and meet certain benchmarks. Underperforming ACOs are subject to penalties, however most have a three-year grace period that allows them to earn bonuses while being excused from these penalties.

According to the article, the new proposed rule would extend this grace period to six years. However, those ACOs taking advantage of the grace period can only keep up to 40% of their Medicare savings, instead of the 50% they are allowed to keep during their first three years.

The proposed rule also establishes a new Medicare ACO program, “Track Three,” that would allow participating ACOs to keep up to 75% of their Medicare savings. Those that exceed Medicare spending benchmarks would be responsible for up to 15% of excess spending, instead of the current 10% maximum.  The new program is similar to the “Pioneer ACO Model” program, a high-risk Medicare ACO pilot program that ends in 2016.

The proposed rule is open for public comment until February 6, 2015.

For more information on Medicare ACOs, see OLR Report 2014-R-0238.