The Department of Health and Human Services (HHS) on Thursday published its proposed rule on the formation of accountable care organizations (ACOs), in order to fulfill one of the requirements of the federal Affordable Care Act (ACA), the healthcare reform legislation passed one year ago this week.

According to the press release issued on its website along with the proposed rule, HHS officials believe that the Medicare program could potentially save as much as $960 million over three years under its ACO program.

Under the proposed rule, an ACO could include:

• Hospitals, and physicians meeting group practice arrangement requirements
• Networks of individual practices of ACO professionals (physicians)
• Hospitals employing ACO professionals
• Other Medicare providers and suppliers, as determined by the HHS Secretary

The press release accompanying the release of the regulation said that “CMS is proposing to implement both a one-sided risk model (sharing of savings only for the first two years and sharing of savings and losses in the third year) and a two-sided risk model (sharing of savings and losses for all three years), allowing the ACO to opt for either model. This will help organizations with less experience with risk models, such as some physician-driven organizations or smaller ACOs, to gain experience with population management before transition to a risk-based model, while also providing an opportunity for more experienced ACOs that are ready to share in losses to enter a sharing arrangement that provides a greater share of savings, but at the risk of repaying Medicare a portion of any losses.”

Further, the proposed rule links the amount of shared savings an ACO may receive to its performance on quality standards in five key areas:

• Patient/caregiver experience of care
• Care coordination
• Patient safety
• Preventive health
• At-risk population/frail elderly health

In a Perspective article published online in the New England Journal of Medicine this morning, timed to the release of the ACO proposed rule today, Donald M. Berwick, CMS’ Administrator, wrote:

“A critical foundation of the proposed rule is its unwavering focus on patients. We envision that successful ACOs will honor individual preferences and will engage patients in shared decision making about diagnostic and therapeutic options. Information management—making sure patients and all health care providers have the right information at the point of care—will be a core competency of ACOs. Held to rigorous quality standards, ACOs will be expected to be proactive in their orientation and to regularly reach out to patients to help them meet their needs for preventive and chronic health care. Patients who seek care at their ACO will know that their physicians are part of that ACO, but as beneficiaries of fee-for-service Medicare, they will continue to be free to seek care from any Medicare provider they wish. They will not be locked into seeing only particular health care providers.”

Healthcare Informatics will continue to provide up-to-the-minute coverage of this unfolding story as information becomes available to us.