Shared Savings Program for ACOs Part I

March 4, 2011, 11:39 AM

Our last couple of posts provided an overview of Accountable Care Organizations (ACOs) and introduced the concept of the shared savings program that ACOs will be permitted to participate in. This post aims to provide additional information with respect to the shared savings program, with the caveat that we are all still waiting for the proposed regulations to be released to shed more light on these issues, which may change or alter the calculations and framework discussed in this post.

Based on what we know now from the statute, the Secretary of Health and Human Services will set a benchmark for each ACO by analyzing the past three years of data pertaining to the Medicare beneficiaries assigned to the ACO. The benchmark will be based on the programs analysis and data crunch regarding the estimated per capita expenditures for the beneficiaries assigned to the ACO over the course of the contract period (3 years). That benchmark will be used to track the ACOs performance and will serve as the benchmark number for determining whether a particular ACO will qualify for shared savings payments.

The Secretary will also set a target savings percentage and a savings shared percentage. The target savings percentage will represent the amount of savings (expressed as a percentage) that the ACO must realize as compared to the benchmark established by the Secretary for the ACO as discussed above. The shared savings percentage will be set to determine how much of the savings the ACO will receive in shared savings payments.

If the ACO can achieve cost savings in an amount equal to at least the target savings percentage (which in Medicares demonstration projects has been in the 2-4% range), then the ACO would be entitled to a shared savings payment equal to the amount of the savings generated multiplied by the shared savings percentage (which in Medicares demonstration projects has been roughly 80% to the ACO, with the program benefitting from a 20% cost savings).

Of course, the forthcoming regulations will likely clarify how the shared savings payments to ACOs will function. --Aaron J. Ambrose