The MD Daily Contract review

October 10, 2018 • By Guest

Medicare ACOs are not Meeting Expectations

The Affordable Care Act (ACA) was meant to usher in a new era of healthcare, insuring millions more Americans and improving health care access. Unfortunately, years after its passage, some programs are falling short of expectations. One such area is the Accountable Care Organization (ACO). This program was intended to address the exorbitant costs of Medicare while improving patients’ quality of care. Unfortunately, ACOs have not lived up to expectations, and the Centers for Medicare & Medicaid Services (CMS) are putting their foot down by requiring new levels of accountability.

What are ACOs?

ACOs are voluntary groups of physicians, hospitals and other healthcare providers that band together to take responsibility for the quality of care for Medicare patients while decreasing costs. These organizations were formed under the ACA Medicare Shared Savings Program. Its three-part mission is to promote accountability for the patient population, coordinate services for beneficiaries, and encourage investment in high-quality, efficient services. ACOs were supposed to be accountable for quality, cost, and experience of the Medicare beneficiaries while being rewarded by benefits and savings for their organization. Currently, 561 ACOs care for 10.5 million Medicare patients.

What went wrong?

Under the current law, there are three tracks of the ACO. The tracks are separated by risk level; Organizations that take on greater risk are rewarded with greater amount of the cost-savings they generate. Save more on health care costs—assuming care levels stay the same— and pocket more of those savings. Unfortunately, most ACOs function under the one-sided Track 1, in which they have more time to reap the benefits of the program by receiving a share of cost savings, but do not have to pay back their share of spending over the benchmark. As such, the CMS estimates that about 82% of ACOs do not take any risk for patient care, and are increasing Medicare costs. Therefore, CMS is proposing a new rule in which ACOs have only two years—rather than the current six—to participate in such a risk-free model before being required to pay up.

The CME believes that the benefits to taxpayers and Medicare recipients should have been realized after six years of the program, but this has not been the case. Under the new rule, CMS will reduce the three tracks to only two. New ACOs receive up to 25% of their savings over the first two years, but also have to assume risk by paying back a percentage of any losses. As ACOs assume more risk, they are granted exemptions from federal laws, like the Stark laws that block physician self-referrals which are financially profitable.1,2  Even better, ACOs that take on higher risk patients and join the “Enhanced” track will get up to a whopping 75% of their savings under this new rule, according to CMS.

What now?

With the current trajectory, it is likely that up to 70% of the current ACOs will drop out of the program if this new rule goes into effect, saving taxpayers about $2.24 billion over 10 years. However, what about the quality and coordinated care the program was supposed to achieve? That may be on pause. Millions of beneficiaries will return to the uncoordinated, time-consuming and difficult-to-navigate maze that is Medicare health policy.

Interestingly, it appears that physician-led ACOs have had the most success. While the specific reasons for this are unclear, the physician-led model may be a way to salvage ACOs going forward. It is intriguing to think that we may have come back to where we started—a system in which physicians control their own practices and reimbursements.


  1. Ault, A ACOs failing to deliver, says CMS in issuing proposed overhaul. Aug 10, 2018. Medscape. Retrieved at:
  2. Center for Medicare & Medicaid Services. About the Program: Shared Savings Program. Mar 27, 2018. Retrieved at:
  3. Center for Medicare & Medicaid Services.  Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations- Pathways to Success. Proposed Rule. Federal Register. Aug 17, 2018. Retrieved at:
  4. Gosfield A. The stark truth about the Stark law: part 1. Fam Pract Manage. 2003. Nov-Dec; 10(10):27-33.

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