Free EMR Newsletter Want to receive the latest news on EMR, Meaningful Use, ARRA and Healthcare IT sent straight to your email? Join thousands of healthcare pros who subscribe to EMR and EHR for FREE!

Medicare ACOs May Be Slated For Big Changes — And Health IT May Be Part Of It

Posted on May 25, 2018 I Written By

Anne Zieger is veteran healthcare consultant and analyst with 20 years of industry experience. Zieger formerly served as editor-in-chief of and her commentaries have appeared in dozens of international business publications, including Forbes, Business Week and Information Week. She has also contributed content to hundreds of healthcare and health IT organizations, including several Fortune 500 companies. Contact her at @ziegerhealth on Twitter or visit her site at Zieger Healthcare.

Before I get started, I want to offer a hat tip to Becker’s Hospital Review, which turned me onto the following news. That news, in brief, is that CMS might make changes to its ACO program that could have a big impact on the doctors and hospitals that participate.

According to Becker’s, CMS Administrator had some negative things to say about so-called “upside only” risk contracts, which don’t pay out anything to the agency if they miss financial and clinical benchmarks: “These ACOs are actually increasing Medicare spending, and the presence of these ‘upside-only’ tracks may be encouraging consolidation in the marketplace, reducing competition and choice for beneficiaries,” Verma told the AHA’s Annual Membership Meeting earlier this month.

At present, a whopping 460 of 561 ACOs in the Medicare Shared Savings Program are in Track 1, the agency’s upside-only program. At present, ACOs can only participate in two three-year contracts on this track, so next year 82 ACOs will be required to take on financial risk. Obviously, they don’t like this.

However, CMS isn’t exactly being unreasonable to consider curtailing Track 1. Looked at one way, the Medicare Shared Savings Program has failed utterly achieving its core purpose, and upside-only contracts are the primary reason.

According to Becker’s, which cited research from Avalere, while the program was supposed to generate $1.7 billion in net savings from 2013 to 2016, upside-only contracts were responsible for $444 million in federal spending. On the other hand, downside-risk ACOs cut spending by $60 million, a relatively tiny number when you consider the scale of CMS’s budget but positive side nonetheless.

All that being said, let me interject here and note that HIT may be part of the problem. I’m betting some of the expected savings was based on assumptions about how health IT would help ACOs meet clinical and financial benchmarks.

After all, the federal government spent many billions of dollars paying doctors and hospitals Meaningful Use incentive, which obviously gave them a convincing reason to adopt EMRs. No one approves that level spending without believing it would make everything better.

As it turns out, though, that might have been a flawed assumption. If I’m right, the Track 1 failure suggests that health IT isn’t doing as much to create efficiencies as federal health leaders had hoped. I know, particularly if you’re a doctor reading this, you’re saying “I could’ve told you this a decade ago.” Still, it’s worth repeating.

While health IT organizations — especially those housed in progressive health systems — are making great progress with improving care, we haven’t met the lofty goals of such approaches by any means. But if they want to progress toward value-based care, they’ll probably have to put their health IT to better use.

Accountable Care Organization (ACO) Investment Model

Posted on June 25, 2015 I Written By

John Lynn is the Founder of the blog network which currently consists of 10 blogs containing over 8000 articles with John having written over 4000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 16 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of and John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.


Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, who come together voluntarily to provide coordinated, high-quality care to their Medicare patients to help them deliver better care at lower cost.

The goal of coordinated care is to ensure that patients, especially people with chronic conditions, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors.

ACOs represent one part of a comprehensive series of initiatives in the Affordable Care Act that are designed to lower costs and improve care. When an ACO succeeds in both delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program.

Medicare currently offers or is planning to offer several ACO initiatives:

  • Medicare Shared Savings Program
  • Pioneer ACO Model
  • Next Generation ACO Model
  • Advance Payment ACO Model
  • Comprehensive End Stage Renal Disease (ESRD) Care Initiative

This fact sheet provides a general description of the ACO Investment Model, a new ACO model being offered to support the Medicare Shared Savings Program ACOs.

Summary of the ACO Investment Model

The ACO Investment Model is an initiative developed by the Center for Medicare & Medicaid Innovation (Innovation Center) for organizations participating as ACOs in the Medicare Shared Savings Program (Shared Savings Program). The ACO Investment Model is a new model of pre-paid shared savings that builds on experience with the Advance Payment Model to encourage new ACOs to form in rural and underserved areas and current Medicare Shared Savings Program ACOs to transition to arrangements with greater financial risk.

The ACO Investment Model will be available to:

1) New Shared Savings Program ACOs that joined in 2015 or are joining in 2016. The ACO Investment Model seeks to encourage uptake of coordinated, accountable care in rural geographies and areas where there has been little ACO activity, by offering pre-payment of shared savings in both upfront and ongoing per beneficiary per month payments. CMS believes that encouraging participation in areas of low ACO penetration may spur new markets to focus on improving care outcomes for Medicare beneficiaries.

2) ACOs that joined the Shared Savings Program starting in 2012, 2013 or 2014. Here, the ACO Investment Model will help ACOs succeed in the Shared Savings Program and encourage progression to higher levels of financial risk, ultimately improving care for beneficiaries and generating Medicare savings.


CMS is encouraging providers to participate in ACOs through the Medicare 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 Medicare beneficiaries first.

The Innovation Center

The Innovation Center was created by the Affordable Care Act to test innovative payment and service delivery models to reduce program expenditures while preserving or enhancing the quality of care. It is committed to transforming the Medicare, Medicaid and Children’s Health Insurance Programs and is expected to help deliver better care for individuals, better health for populations, and lower growth in expenditures for Medicare, Medicaid and CHIP beneficiaries.

Working in concert with the Shared Savings Program, the Innovation Center is testing the ACO Investment Model and the Pioneer ACO Model, and has sponsored learning activities that help providers form ACOs and improve their results.  More information on all of these initiatives is available on the Innovation Center website at

The ACO Investment Model was developed in response to concerns and available research suggesting that some providers lack adequate access to the capital needed to invest in infrastructure necessary to successfully implement population care management.

Structure of Payments

New ACOs

Under the ACO Investment Model, ACOs that will begin participating in the Medicare Shared Savings Program on January 1, 2015 or January 1, 2016 will receive three types of payments:

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

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

Existing ACOs

Under the ACO Investment Model, ACOs that began participating in the Medicare Shared Savings Program on April 1, 2012, July 1, 2012, January 1, 2013, or January 1, 2014 will receive two types of payments:

  • An upfront, variable payment:  Each ACO receives a payment based on the number of its preliminarily prospectively-assigned beneficiaries.
  • A monthly payment of varying amount depending on the size of the ACO:  Each ACO receives a monthly payment based on the number of its preliminarily prospectively-assigned beneficiaries.

The structure of these payments addresses both the fixed and variable costs associated with making ongoing investments to improve care coordination for existing ACOs.

Recovery of ACO Investment Model Payments

For ACOs already participating in the Shared Savings Program, CMS will recover the ACO Investment Model payments through an offset of an ACO’s earned shared savings. ACOs selected to receive ACO Investment Model payments will enter into an agreement with CMS that details the obligation to repay ACO Investment Model payments.

If the ACO does not generate sufficient savings to repay the ACO Investment Model payments as of the first settlement for the Shared Savings Program, CMS will continue to offset shared savings in subsequent performance years and any future agreement periods, or pursue recovery where appropriate.

For ACOs new to the Shared Savings Program in 2015 and 2016, CMS will recover payments from earned shared savings for as long as the participant remains in the Shared Savings Program ACO. CMS will pursue full recovery of pre-paid shared savings from any ACO that does not complete its initial Shared Savings Program agreement period or the full term of the ACO Investment Model agreement.


The ACO Investment Model is expected to help provide support to organizations whose ability to invest in infrastructure and redesigned care processes would be improved with additional access to capital.

In order to be eligible for the ACO Investment Model, an ACO already participating in the Shared Savings Program must meet the following criteria:

1) The ACO must be accepted into and participate in the Shared Savings Program. The ACO’s first performance period in the Medicare Shared Savings Program must have started in 2012, 2013, 2014, or 2015 or will start in 2016.

2) If the ACO started in the Medicare Shared Savings Program in 2012, 2013 or 2014, it has completely and accurately reported quality measures to the Medicare Shared Savings Program in the most recent performance year, excluding ACOs that started in 2015 or that will start in 2016.

3) The ACO has a preliminary prospective beneficiary assignment of 10,000 or fewer beneficiaries for the most recent quarter, as determined in accordance with the Shared Savings Program regulations.  However, ACOs that started the Medicare Shared Savings Program in 2015 or will start in 2016, and are determined to be from a rural area using the application selection criteria, are permitted to exceed the 10,000 beneficiary assignment limit.

4) The ACO does not include a hospital as an ACO participant or an ACO provider/supplier (as defined by the Shared Savings Program regulations), unless the hospital is a critical access hospital (CAH) or inpatient prospective payment system (IPPS) hospital with 100 or fewer beds.

5) The ACO is not owned or operated in whole or in part by a health plan.

6) The ACO did not participate in the Advance Payment Model.

During the selection process, the ACO Investment Model will target new ACOs serving rural areas, areas of low ACO penetration, and existing ACOs committed to moving to higher risk tracks. CMS will also give preference to ACOs that provide high quality of care, achieved their financial benchmark, and demonstrate exceptional financial need.

Application Process

The application period for ACOs that started in 2014 and 2015 — or will start in 2016 — will open July 1st, 2015 and close July 31, 2015.

CMS staff will review applications for the applicant organization’s ability to meet criteria identified in the solicitation. All applicants are also required to be accepted into the Shared Savings Program, in accordance with program rules.


In the first round of applications for ACOs that started in the Medicare Shared Savings Program in 2012 and 2013, the ACO Investment Model has accepted six ACOs into the model.

Additional Resources

More information about the ACO Investment Model, including the Request for Application, is available on the Innovation Center website at  Any questions about the program can be directed to

For information about the Shared Savings Program, please see:

CMS Blog:

Health IT Expenses Burden ACO Startups, But CMS Doesn’t Get It

Posted on May 16, 2011 I Written By

Katherine Rourke is a healthcare journalist who has written about the industry for 30 years. Her work has appeared in all of the leading healthcare industry publications, and she's served as editor in chief of several healthcare B2B sites.

A new study sponsored by the American Hospital Association has concluded that developing an Accountable Care Organization is likely to be substantially more expensive than CMS has projected.  Not surprisingly, the AHA expects buying and managing EMRs and clinician decision support systems to be a major percentage of the added expense.

CMS has estimated it will cost an average of $1.8 million to start and sustain an ACO.  But the AHA dismisses that number as far short of the mark. Its own research, conducted by McManis Consulting, concluded that the actual startup and first-year costs for ACOs range from $11.6 million for a 200-bed, one-hospital system to $26.1 million for a 1,200 bed,  five-hospital system.

The AHA estimates that hospitals will spend anywhere from $2 million to $7 million to buy an EMR, and hundreds of thousands to integrate the system and build a health information exchange.  Not only that, health systems are likely to spend anywhere from $1.5 million to $3.9 million per year to maintain the EMR, manage the integration process and keep building out the HIE.  (My instinct is that the study’s estimates of systems integration and HIE linkages are rather low;  check out page two of the report and let me know what you think.)

If the AHA has it right — and I suspect it does — something is out of order here.  It’s hard for me to imagine how the agency could underestimate health IT costs so significantly, unless there’s some political game afoot here.

I’m not surprised to read that HIT costs are just as heavy a burden as recruiting, managing and and supporting affiliated physicians.  And I’m pretty sure that hospital CIOs aren’t kidding themselves on this front either.

Somehow, though, the Medicare folks have made some rather flawed assumptions and embedded them in the proposed  Medicare Shared Savings Program for ACOs.  If you agree that CMS is on the wrong foot here, I encourage you to submit comments on the proposed rule.  (See the beginning of the document for how to file those comments.) You have until June 6, so have at it!