Fact Sheets

ADVANCE PAYMENT ACCOUNTABLE CARE ORGANIZATION (ACO) MODEL

Overview:

On Oct. 20, 2011, the Centers for Medicare & Medicaid Services (CMS), an agency within the Department of Health and Human Services (HHS), finalized new rules under the Affordable Care Act to help doctors, hospitals, and other health care providers better coordinate care for Medicare patients through Accountable Care Organizations (ACOs).  ACOs create incentives for health care providers to work together to treat an individual patient across care settings – including doctor’s offices, hospitals, and long-term care facilities.  The Medicare Shared Savings Program (Shared Savings Program) will reward ACOs that lower their growth in health care costs while meeting performance standards on quality of care and putting patients first.  Provider participation in an ACO is purely voluntary.

In developing this final rule, CMS worked closely with agencies across the Federal government to ensure a coordinated and aligned inter- and intra-agency effort to facilitate implementation of the Shared Savings Program.

CMS encourages all interested providers and suppliers to review this final rule and consider participating in the Shared Savings Program.

This fact sheet provides a general description of the Advance Payment ACO Model and the application process for participating.

Summary of the Advance Payment ACO Model:

The Advance Payment ACO Model is an initiative developed by the Centers for Medicare and Medicaid (CMS) Innovation Center designed for organizations participating as Accountable Care Organizations (ACOs) in the Medicare Shared Savings Program (Shared Savings Program). 

Through the Advance Payment Model, selected participants in the Shared Savings Program will receive a advance payments that will be recouped from the shared savings they earn.  CMS will recoup these advance payments from an ACO’s shared savings. 

The Advance Payment ACO Model will test:

• Whether providing an advance (in the form of up front payments to be repaid in the future) will increase participation in the Shared Savings Program, and
• Whether advance payments will allow ACOs to improve care for beneficiaries and generate Medicare savings more quickly, and increase the amount of Medicare savings. 

Background

The Innovation Center

The Innovation Center was created by the Affordable Care Act to test new models of health care delivery and payment, offer technical support to providers to improve the coordination of care, and diffuse lessons learned and best practices widely throughout the health care system. It is committed to transforming the Medicare, Medicaid and CHIP programs to deliver better care for individuals, better health for populations, and lower growth in expenditures through improvement for Medicare beneficiaries.

Accountable Care Organizations

Accountable Care Organizations (ACOs) are one way CMS is working to meet the three-part aim of better health care, better health, and lower growth in expenditures through continuous improvement. 

CMS is encouraging providers to participate in ACOs through the Shared Savings Program, which creates financial incentives for ACOs that lower growth in health care costs while meeting performance standards on quality of care and putting patients first.  Mandated by the Affordable Care Act, CMS released final rules for the Shared Savings Program in October 2011.

Working in concert with the Shared Savings Program, the Innovation Center is developing and testing alternative models of ACOs, including the Advance Payment ACO Model and the Pioneer ACO Model, and sponsoring learning activities that help providers form ACOs and provide better care.  More information on all of these initiatives is available on the Innovation Center website at www.innovations.cms.gov.    

In developing the Advance Payment ACO Model, CMS is responding to comments received on the proposed rule for the Shared Savings Program, and comments received on the Advance Payment Model announced in May 2011.  

Structure of Payments

Under the Advance Payment ACO Model, participating ACOs will receive three types of payments:

• An upfront, fixed payment:  Each ACO will receive a fixed payment.
• An upfront, variable payment:  Each ACO will receive a payment based on the number of its historically-assigned beneficiaries.
• A monthly payment of varying amount depending on the size of the ACO:  Each ACO will receive a monthly payment based on the number of its historically-assigned beneficiaries.

The structure of these payments addresses both the fixed and variable costs associated with forming an ACO. 

Recoupment of Advance Payments:

CMS will recoup Advance Payments through an ACO’s earned shared savings. ACOs selected to receive advance payments will enter into an agreement with CMS that details the obligation to repay advance payments. 

If the ACO does not generate sufficient savings to repay the advance payments as of the settlement scheduled for Shared Savings Program participants midway through the ACO’s second performance year, CMS will recoup the balance from earned shared savings in the subsequent performance year. CMS will not pursue recoupment on any remaining balance of advance payments after the ACO completes the first agreement period. CMS will pursue full recoupment of advance payments from any ACO that does not complete the full, initial agreement period of the Shared Savings Program.

Eligibility/Selection:

The Advance Payment Model is designed to provide support to organizations whose ability to achieve the three-part aim would be improved with additional access to capital, including rural and physician-owned organizations. 

The Advance Payment ACO Model is open only to two types of organizations participating in the Shared Savings Program:

1. ACOs that do not include any inpatient facilities AND have less than $50 million in total annual revenue.
2. ACOs in which the only inpatient facilities are critical access hospitals and/or Medicare low-volume rural hospitals AND have less than $80 million in total annual revenue.

Only ACOs that enter the Shared Savings Program in April 2012 or July 2012 will be eligible for advance payments.  ACOs that are co-owned with a health plan will be ineligible, regardless of whether they also fall into one of the above categories.

The scoring criteria for evaluating applications will favor ACOs with the least access to capital, ACOs that serve rural populations, and ACOs that serve a significant number of Medicaid beneficiaries.  

Application Process

To apply for the Advance Payment ACO Model, interested parties must both apply for the Shared Savings Program and complete a separate application for the Advance Payment ACO Model. 

More information on applying for the Advance Payment ACO Model is available on the Innovation Center website. http://innovations.cms.gov/areas-of-focus/seamless-and-coordinated-care-models/advance-payment/. 

Note: The Shared Savings Program final rule can be downloaded at: www.ofr.gov/inspection.aspx. 

It will appear in the Nov. 2, 2011 issue of the Federal Register.  The Shared Savings Program will be established Jan. 1, 2012.

For information about applying to participate in the Shared Savings Program, please see: www.cms.hhs.gov/sharedsavingsprogram/.

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