American Osteopathic Association

Advancing the distinctive philosophy and practice of osteopathic medicine

ACO Facts Every Physician Should Know

Physician and attorney Raymund King, based in Dallas, is one of the few attorneys in the country with practical experience setting up physician-owned accountable care organizations (ACOs) on behalf of physicians.  After practicing medicine for 10 years as an otolaryngologist, he became a health care attorney almost 14 years ago. Here are his insights.

Perhaps the most commonly touted program that is currently available is called the Medicare Shared Savings Program (MSSP). Two other prior programs (the Pioneer ACO Model and the Advance Payment Initiative) are no longer available. The government sets a national benchmark that represents the amount of health care dollars allocated per patient per year. The regulations require a minimum of 5,000 Medicare patients covered in order to qualify as an ACO. If the national benchmark for your region is, for example, $10,000 per patient, then an ACO with 5,000 patients represents a total of $50 million.

In an MSSP, the government looks at what dollars are spent per patient at the end of the year, and if the amount is less than the national benchmark, that amount is called the “shared savings.” In our previous example, if the ACO spends $40 million in one year to treat 5,000 covered lives, then the difference between our example national benchmark and the amount spent is $10 million. The $10 million constitutes the shared savings, which is split 50/50 with the U.S. government. In the third year of participation, however, the government may require the ACO to participate in the losses incurred by the ACO if it spends more than the benchmark for that region.

An ACO is either owned by a hospital/health care system, or it is owned by a group of physicians. In the system-owned ACO, the 50%  portion of shared savings goes to the system. In the physician-owned ACO, however, the 50%  portion of shared savings goes to the physicians.

CMS is not involved in the details of how the money is distributed among the shareholders or members of the ACO, nor does CMS ensure that distribution is fair based upon the work done, or even if the amount paid is distributed in a sustainable way. Therein lies a tremendous opportunity to design a sustainable business model for health care.

Can I Participate in More Than One ACO? 

Primary-care doctors (which include internal medicine, pediatrics, and geriatrics) may join only one ACO. However, specialists may join as many ACOs as they want. An ACO can only participate in one governmental shared-savings program at a time. It is very important to read the fine print in the ACO participation agreement as well as the operating or shareholders agreements, there can be restrictive clauses buried in these documents that create restrictions above and beyond any that are in the regulations.  For ​example, some ACOs attempt to limit contractually the specialist physician’s ability to participate in more than one ACO.

Counting Beneficiaries

There are also concerns with how the beneficiaries are counted. The ACO must provide for 5,000 beneficiaries to be recognized. However, CMS only counts the physician with the “plurality of visits” with the patient. A specialist physician with 3,500 patients may find that only 350 are actually recognized by CMS, because the primary-care physician has been credited with the lion’s share of the patients.

Protect Yourself By Understanding ACO Agreements

What can physicians do to protect themselves? Physicians need to understand that all ACOs are not created equal. Are they being offered ownership interest, or merely a right to work for the ACO? Is the management agreement structured to fairly compensate the ones doing the work? Large chains, be they insurance or hospital, are known for being top-heavy in administrative costs. Physicians must ensure that they read the entire agreement to ensure they are not limiting their rights beyond what is required in regulations.​​​​​


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