Ron Evans, MPH, FACHE, FACMPE  |  Senior Healthcare Consultant

On March 31, 2011, the Department of Health and Human Services published in the Federal Register the much-anticipated Proposed Rule for the Medicare Shared Savings Program: Accountable Care Organizations.  It is important to note, there is a prescribed 60-day window in which the public may comment on this rule. I encourage anesthesiologists to provide feedback and comments either directly, or through the ASA or other applicable professional society.  The ACO program is scheduled to go into effect January 1, 2012.

In typical governmental fashion, the proposed rule is weighty, comprised of 429 pages which translate only six pages of the Affordable Care Act (ACA).  What do the Feds have in mind for this new addition to the healthcare lexicon? Who is accountable, for what are they accountable, and how will the Feds ensure this accountability is appropriate and sufficient?

INTRODUCTION   Distilling 400+ pages of the rule is a challenge, and requires more detailed analysis than can be provided in this short missive. After preliminaries, the document provides some background information, starting with an introduction and overview of Value-Based Purchasing. According to HHS, “[v]alue-based purchasing is a concept that links payment directly to the quality of care provided and is a strategy that can help transform the current payment system by rewarding providers for delivering high quality, efficient clinical care.” 1   As I described in a previous article on ACOs, the intent is to unlink physician (and other healthcare entity) payments from volume of services, replacing the traditional FFS payment methodology with a payment mechanism based on quality, outcomes, and other government-defined measures.  This new approach to the delivery (and payment) of healthcare is referred throughout the document as the three-part aim, all laudable goals, to be sure:

1.  Better care for individuals;
2.  Better health for populations; and
3.  Lower growth in expenditures. 2

Contained within this three-part aim lies the “what” providers will be accountable for. Anesthesiologists will have the most impact on goals one and three. The “who” can vary depending on what eligible entities come together to form an ACO.

PARTICIPATION   The following groups of providers of services and suppliers are eligible to participate in this program:

  • ACO professionals in group practice arrangements.
  • Networks of individual practices of ACO professionals.
  • Partnerships or joint venture arrangements between hospitals and ACO professionals.
  • Hospitals employing ACO professionals.
  • Such other groups of providers of services and suppliers as the Secretary determines appropriate. 3

Thus, there are a number of ways anesthesia providers could conceivably participate in an ACO. They could do so as ACO professionals as part of a group practice, as part of a network of individual practices, through a partnership or joint venture with a hospital, as hospital employees, or lastly, as seen in some pilot programs, with an insurance entity.

The rule further delineates the requirements eligible groups must meet in order to participate in the program as ACOs:

  • Willing to become accountable for the quality, cost, and overall care of the Medicare FFS beneficiaries assigned to it.
  • Agree to participate in the program for not less than three years.
  • Have a formal legal structure allowing the organization to receive and distribute payments for shared savings to participating providers of services and suppliers.
  • Include primary care professionals that are sufficient for the number of Medicare FFS beneficiaries assigned to the ACO. At a minimum, the ACO shall have at least 5,000 such beneficiaries assigned to it to be eligible.
  • Provide the Secretary information regarding ACO professionals as the Secretary deems necessary to support assignment of beneficiaries, implementation of quality and other reporting requirements, and the determination of payments for shared savings.
  • Leadership and management structure that includes clinical and administrative systems.
  • Define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies.
  • Demonstrate to the Secretary that it meets patient-centeredness criteria specified by the Secretary, such as the use of patient and caregiver assessment or the use of individualized care plans. 4

Clearly, being aligned with a core group of primary care providers of sufficient size and sophistication will be imperative for anesthesiologists who want to be part of an ACO.  This could be problematic for most anesthesiologists because their routine physician-to-physician relationships are with surgeons, not primary care providers. Rather than on their own, the best avenue for anesthesiologists gaining such alignment with primary care physicians would appear to be through their established surgeon relationships, or via a hospital-sponsored or health plan-sponsored ACO structure. Anesthesiologists may belong to more then one ACO.

ACO MECHANICS  Regarding the mechanics of an ACO under the Shared Savings Program, there are a number of troubling issues, in my opinion.  First (and assuming the ACO actually garners some savings for the Medicare program), the Secretary determines “a percent…of the difference between the estimated average per capita Medicare expenditures in the year, adjusted for beneficiary characteristics, and the benchmark for the ACO may be paid to the ACO as shared savings and the remainder of the difference shall be retained by the Medicare program. The Secretary is required to establish limits on the total amount of shared savings paid to an ACO.” 5   It takes a certain leap of faith to believe that distribution to the ACO is going to be fair and not contingent upon other budgetary or political vagaries.  This distribution fairness issue could be further exacerbated by the fact that anesthesiologists may wield relatively limited power within the ACO itself despite their involvement in and control of 85% of all inpatient surgical costs, i.e., the entire peri-operative care continuum. This is where leverage derived from group size, excellent hospital and surgeon relationships, and exemplary informatics to validate optimal quality and efficiencies, will pay dividends for anesthesia groups. Anesthesiologists must be able to clearly demonstrate their positive impact on patient safety, quality, and efficiencies throughout the peri-operative care continuum.

The ACO model is clearly one with primary care providers (internal medicine, general practice, family practice and geriatric medicine specialties) at the center, although they invite comments on other options that may better address the delivery of primary care services provided by specialists. 6 These options may be needed in those areas where a shortage of primary care physicians exist, predominantly rural and inner city areas, but they recognize “that certain specialists (for example, cardiologists, endocrinologists, neurologists, oncologists) are often the principle primary care provider for elderly and chronically ill patients…” . 7

RISK   Another issue is the inherent assumption of risk under the ACO model. The aforementioned 5,000 FFS Medicare beneficiary threshold for ACO eligibility will likely be difficult for many smaller primary care groups to attain from a sheer numbers perspective or from the perspective of spreading risk.  Patient panels for most primary care physicians number 2,000 to 2,500.  Affiliating with larger group practices, hospital systems or insurers would be the best strategy for specialists like anesthesiologists to minimize that risk. The very nature of the required ACO structure and monitoring/reporting requirements mean that successful ACOs will likely be comprised of beneficiary populations considerably larger than the minimum required 5,000 lives.  Larger group practices, hospitals, or insurers will also be better equipped from an administrative and systems sophistication standpoint to assume and manage the risk associated with ACO participation.  Stay away from the small ACO players-they’ll be too risky!

There is no doubt while two of its three-part aims pertain to improved quality of care and enhanced health of the Medicare population, a key component of the ACO model is lowering the growth of expenditures, which involves a risk transfer arrangement. The Federal government is looking to transfer its financial risk to the providers of care.  This shouldn’t surprise anyone; it occurs with HMO arrangements now (and in the past). The ACO model incorporates the added “carrot and stick” approach for paying for services and rewarding providers for quality and improved health status of their enrolled population.

There will initially be both a one-sided shared savings model and two-sided risk model. All ACOs will be required to move to the two-sided risk model in the third year, which provides both the upside potential of shared savings and downside risk for failure to achieve certain quality measures.  To “earn” monies under the quality measures, an ACO must achieve 90% or better in 65 applicable quality measures categorized under five broad domains:

1.  Patient/Care Giver Experience: 7 measures of patient satisfaction, health promotion, shared decision making & health/functional status

2.  Care Coordination: 16 measures of readmissions, post-discharge visits & medication reconciliation, disease-specific measures for diabetes, COPD, CHF, bacterial pneumonia, & UTI and meaningful use of information systems (EHR) for clinical decision support, prescribing, etc.

3.  Patient Safety: 2 measures for healthcare-acquired conditions with multiple sub-measures

4.  Preventive Health: 9 measures of immunizations, screenings & management for certain conditions, tobacco cessation intervention, etc.

5.  At Risk Population/Frail Elderly Health: 31 total measures: 28 on care of patients with diabetes, heart failure, CAD, HTN, COPD, and 3 measures on care of frail elderly patients. 8

Anesthesiologists would be involved in some measures of the patient/care giver experience domain, but mostly in domain 3, Patient Safety, where conditions include: foreign object retained after surgery and central line associated bloodstream infection/central venus catheter-related bloodstream infection.

As a whole, “if an ACO fails to meet quality performance standard (that is, fails to meet, the minimum attainment level for one or more domain(s)), [HHS will] give the ACO a warning, provide an opportunity to resubmit, and reevaluate the ACO’s performance the following year. If the ACO continues to significantly under-perform, the agreement may be terminated. ACOs that exhibit a pattern of inaccurate or incomplete reporting or fail to make timely corrections following notice to resubmit may be terminated from the program.” 9

PAYMENT METHODOLOGY   If an ACO meets the quality performance standards established by the Secretary, “a percent (as determined appropriate by the Secretary) of the difference between such estimated average per capita Medicare expenditures in a year, adjusted for beneficiary characteristics, … may be paid to the ACO as shared savings and the remainder of such difference shall be retained by the program under this title.” 10 This percentage is called the “sharing rate.” The Secretary is also required to “establish limits on the total amount of shared savings that may be paid to an ACO.” This limit is referred to as the “sharing cap”. 11 Again, the power granted to the Secretary regarding how much of the shared savings going to the provider(s) is “determined appropriate” gives one pause.

Under the two-sided risk model, the ACO will be subjected to a 25% withhold of any savings earned in a participation year.  The government retains 25% of any annual savings in order to offset any future losses the ACO might incur under the two-sided model for three years. Failure of an ACO to complete its 3-year obligation will result in a forfeiture of any withheld monies. 12

ORGANIZATIONAL STRUCTURE   The rule prescribes certain organizational conditions that must be met to qualify as an ACO. Each ACO must be a legal entity “appropriately recognized and authorized under applicable State law,” 13 but does not necessarily require a separate new entity be formed just for the purpose of Shared Savings Program participation. Each ACO must have a “governing body comprised of ACO participants or their designated representatives, include Medicare beneficiaries served by the ACO, and possess broad responsibility for the ACO’s administrative, fiduciary, and clinical operations.” 14 While some physician groups may be already experienced with having patient representatives on their board of directors, this is a rare occurrence in most private practice groups.  This represents very unfamiliar territory for most physician groups, including anesthesia practices.

An ACO’s leadership and management structure is also described, and will need to include clinical and administrative systems that meet the following criteria:

  • Managed by an executive, officer, manager, or general partner, whose appointment and removal are under the control of the ACO’s governing body, and whose leadership has demonstrated the ability to influence or direct clinical practice to improve efficiency processes and outcomes.
  • Clinical management and oversight managed by a senior-level medical director who is a board-certified physician, licensed and physically present in the State the ACO operates.
  • ACO would have meaningful commitment to the ACO’s clinical integration program, “meaningful” defined as meaningful financial investment or meaningful human investment (e.g., time and effort) in the ongoing operations of the ACO.
  • Have a physician-directed quality assurance and process improvement committee that would establish internal performance standards for quality of care, cost effectiveness, and process and outcome improvements, holding ACO providers accountable for meeting performance standards. This includes processes and procedures for identifying and correcting behaviors to ensure compliance and those for promoting continuous quality improvement.
  • Develop and implement evidence-based medicine for delivering care consistent with the 3-part aim of ACOs (better individual care, better population health, and lower growth in expenditures).
  • An infrastructure, such as information technology, to enable the ACO to collect and evaluate data and provide feedback to ACO providers “to influence care at the point of care”, e.g., shared clinical decision support, patient feedback, internal and external quality and utilization assessments. 15

IMPLICATIONS  It is evident from studying the 429 pages of this ACO Proposed rule that the time, effort and expense to set up an ACO structure to meet the plethora of mandates will be enormous.  And that is just on the provider side. The bureaucracy required to manage these entities from the Federal government/HHS perspective will also be staggering. For example, the proposed rule establishes a requirement that every ACO document or other form of publication or communication with patients, and any change thereto, be approved by HHS. 16

Hopefully through reasoned comments to HHS in the succeeding two months, some of the arguably unwieldy aspects of the ACO program will be modified or eliminated. Even if the ASA and other professional groups are able to effect some changes to this program, it promises to be one that provides attorneys with many billable hours! Anesthesiologists must stay engaged in this process and continue to explore ways to give themselves a voice in how ACOs are structured and to demonstrate their own key role in the peri-operative care continuum. Group size, relationships with colleagues of other specialties, as well as those with hospitals and payors will remain important.  Possessing solid processes and informatics systems for monitoring and reporting exemplary patient safety, satisfaction, quality of care, and peri-operative efficiencies, will all become even more critical under this new healthcare paradigm.



1 Department of Health and Human Services, Center for Medicare & Medicaid Services, 42 CFR Part 425, [CMS-1345-P], RIN 0938-AQ22; “Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations”(March 31, 2011); p. 11, available at or by PDF at
2 Ibid. p. 15
3 Ibid. p. 16
4 Ibid. p. 17
5 Ibid. p. 20
6 Ibid. pp. 151-153
7 Ibid. p. 148
8 Ibid. pp. 173-174
9 Ibid. p. 204
10 Ibid. p. 234
11 Ibid.
12 Ibid. p. 68
13 Ibid. p. 53
14 Ibid. p. 56
15 Ibid. pp. 62-64
16 Ibid. p. 66


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