An hfm Web Extra

James Nguyen
Ben Choi

Participation in CMS's Hospital Value-Base Purchasing program necessitates a three-year agreement with CMS that requires an accountable care organization (ACO) to comply with the proposed rules. During those three years, the ACO may elect one of two options based on its appetite for risk.

Option 1. The one-sided model allows the ACO to share in the savings for the first two years, with no downside risk, but it must assume risk in the third year along with any savings it may receive. The purpose is to help organizations with less experience with risk models, such as some physician-driven organizations or smaller ACOs, to get their feet wet with population management before transitioning to a risk-based model.

Option 2. The two-sided model is targeted towards more experienced ACOs that are already positioned for risk sharing to enter into an arrangement that provides a greater upside at the danger of having to repay Medicare a portion of any losses. Both options require providers to move to the two-sided model after 3 years.

The exhibit below,provides a high-level overview of both options.



Both proposed models are an answer to opponents of the ACO concept who have argued that as long as a fee-for-service model remains in place, meaningful change cannot occur in health care, because such a model would inevitably create incentives for providers to continue focusing on quantity over quality. CMS has addressed this concern by phasing risk sharing into the program, and effectively requiring it after three years of participation.

Diagram: Shared Savings Program Overview (Federal Register/Vol. 76, No. 67/Thursday, April 7, 2011/Proposed Rules

For more information, see James Nguyen and Ben Choi's "Accountable Care: Are You Ready?," hfm, August 2011

Publication Date: Monday, August 01, 2011

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