Medicare Overhaul to Favor More ACOs

The U.S. Department of Health & Human Services (HHS) announced Monday new, historic goals that encourage quality over quantity of Medicare-based care. 

Part of that goal centers around more Accountable Care Organization (ACO) participation as well as bundled payments that will help identify higher quality partners, rather than those who see the greatest number of patients.

ACOs were set forth by the Affordable Care Act and built to improve care, cut costs and reduce hospital readmissions. In 2014, the initiative caught the attention of senior living providers big and small looking for ways to coordinate and compete.


HHS set a goal of tying 30% of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as ACOs or bundled payment arrangements by the end of 2016, and tying 50% of payments to these models by the end of 2018.

HHS also set a goal of tying 85% of all traditional Medicare payments to quality or value by 2016 and 90% by 2018 through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs.

“This is the first time in the history of the Medicare program that HHS has set explicit goals for alternative payment models and value-based payments,” HHS said in a statement. 


HHS also announced the creation of the Health Care Payment Learning and Action Network, to make these goals scalable beyond Medicare.

“Through the Learning and Action Network, HHS will work with private payers, employers, consumers, providers, states and state Medicaid programs, and other partners to expand alternative payment models into their programs,” HHS said.

HHS will also “intensify” its work with states and private payers to support adoption of alternative payments models through their own aligned work, HHS said.

“There is considerable bipartisan support for moving away from fee for service toward alternative payment models that reward value, improve outcomes, and reduce costs,” said Janet Marchibroda, health innovation director and executive director of the CEO Council on Health and Innovation at the Bipartisan Policy Center.

Today, many health care providers receive a payment for each individual service, such as a physician visit, surgery, or blood test, and it does not matter whether these services help – or harm – the patient, HHS said about the need for changes in current reimbursement methods.

HHS has seen a combined total program savings of $417 million to Medicare due to existing ACO programs, and “HHS expects these models to continue the unprecedented slowdown in health care spending,” HHS said.

ACOs and other initiatives have helped reduce hospital readmissions in Medicare by nearly 8%, translating into 150,000 fewer readmissions between January 2012 and December 2013. In addition, quality improvements have resulted in “saving 50,000 lives and $12 billion in health spending from 2010 to 2013, according to preliminary estimates,” HHS said.

Written by Cassandra Dowell

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