On October 20th, 2011, CMS issued its Final Rule on Medicare accountable care organizations (ACOs). ACOs are a key component of the Affordable Care Act aimed at slowing rising Medicare costs while delivering high quality healthcare to Medicare beneficiaries. When CMS announced its proposed rule on ACOs in March, 2011, many in the healthcare industry argued that the rule was unnecessarily restrictive and that, as a consequence, they would not organize into ACOs.

In the Final Rule, CMS relaxed several requirements. Most notably, CMS reduced the number of quality measures required to qualify for performance bonuses from 65 to 33. CMS also eliminated a requirement that 50% of participating physicians achieve meaningful use of electronic medical records. In addition, under the Final Rule, healthcare providers can participate in an ACO and share in savings without risk of losing money.

Another change contained in the Final Rule relates to beneficiary assignment. Based on their history of utilization of primary care services, Medicare beneficiaries will be preliminarily assigned prospectively to an ACO instead of retrospectively as they would have been under the proposed rule. Also, the Final Rule allows community health centers and rural health clinics to organize their own ACOs or join already existing ACOs and it relaxes the timetable to launch an ACO with healthcare providers allowed to apply in 2012. Lastly, to entice healthcare providers to organize into ACOs, CMS will give physician-owned and rural providers early access to expected savings to use to start an ACO.

The Final Rule was accompanied by: 1) an interim final regulation from the Office of Inspector General relating to waivers of fraud and abuse provisions; 2) a final policy statement from the Federal Trade Commission and Department of Justice on antitrust enforcement relating to ACOs participating in the Medicare Share Savings Program (MSSP); and 3) a fact sheet from the IRS confirming that IRS Notice 2011-10 continues to state the position of the IRS as to ACOs and the MSSP.

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