The Centers for Medicare & Medicaid Services (CMS) today released a final rule improving how Medicare pays Accountable Care Organizations in the Medicare Shared Savings Program for delivering better patient care. Medicare is moving away from paying for each service a physician provides towards a system that rewards physicians for coordinating with each other. Accountable Care Organizations are a major part of that transition, rewarding providers that deliver high-quality, efficient, and coordinated care for patients.

Medicare bases Accountable Care Organizations’ payments on a variety of factors, including whether the Accountable Care Organization can deliver high-quality care at a reasonable cost.  The final rule should help more Accountable Care Organizations successfully participate in the Medicare Shared Savings Program by improving the shared savings payment methodology and providing a new participation option for certain Accountable Care Organizations to move to the more advanced tracks of the program.

“Today’s changes will encourage more physicians to improve patient care by joining Accountable Care Organizations, while also refining how the program measures success, so that current participants are better rewarded for quality,” said CMS Acting Administrator Andy Slavitt. “These new flexibilities are based on significant input from participants and will help physicians prepare for the new Quality Payment Program, part of bipartisan legislation Congress passed last year repealing the failed Sustainable Growth Rate.”

Already, the Medicare Shared Savings Program includes over 430 Accountable Care Organizations in 49 states and the District of Columbia serving over 7.7 million Medicare beneficiaries. This final rule changes how Medicare pays Accountable Care Organizations by basing one of the payment factors on whether the Accountable Care Organization is able to deliver high-quality care at a lower cost compared to other providers in their region. This change recognizes that health cost trends vary in communities across the country and will give Accountable Care Organizations more opportunities to be successful. In addition, the rule provides a smoother and quicker transition to the more advanced tracks for certain Accountable Care Organizations by allowing an extra year under their first agreement before the organization takes on financial risk.

By improving the Medicare Shared Savings Program, Accountable Care Organizations will have more opportunities to provide high quality care while reducing costs. The early results of the Medicare Shared Savings Program and the Pioneer Accountable Care Organization Model show that in 2014, Accountable Care Organizations had a combined total net program savings of $411 million while also achieving quality improvements and enhancements in patient and caregiver satisfaction. We look forward to learning about the 2015 results later this summer.

Today’s changes build on that progress, so that more patients benefit from coordinated care and Medicare pays for what works to help doctors, nurses, and other clinicians focus on the quality of care, not the quantity of services. Today’s announcement is part of the Administration’s broader strategy to improve the health care system by paying providers for what works, unlocking health care data, and finding new ways to coordinate and integrate care to improve quality.  In March 2016, the Administration estimated that it met the ambitious goal – eleven months ahead of schedule – of tying 30 percent of Medicare payments to quality and value through alternative payment models by 2016. The Administration’s next goal is tying 50 percent of Medicare payments to alternative payment models by 2018. The Health Care Payment Learning and Action Network established in 2015 continues to align efforts between government, private sector payers, employers, providers, and consumers to broadly scale these gains in better care, smarter spending, and healthier people.

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