On May 17, 2011, CMS made several announcements designed to encourage hospitals, physicians and other providers to participate in “accountable care organizations” (ACOs) that offer cost-effective, coordinated care to Medicare beneficiaries. By way of background, CMS issued a major proposed rule on April 7, 2011 to implement the Affordable Care Act’s Shared Savings Program, under which ACOs that meet established quality and performance standards and surpass a minimum savings target will be able to share a percentage of Medicare savings (in additional to traditional fee-for-service payments under Medicare Parts A and B). Advance Payment Initiative under the Shared Savings Program In response to provider concerns about access to capital needed to form a successful ACO under the proposed rule, CMS is now considering an Advance Payment Initiative (API) to test whether providing ACOs with an advance on expected shared savings could increase participation in the Medicare Shared Savings Program. ACOs would be required to provide a plan for using these funds to build care coordination capabilities and meet other organizational criteria, and any advance payments would be recouped through the ACOs’ earned shared savings. Comments on this option will be accepted until June 17. Also with regard to the Shared Savings Program, CMS is hosting a series of accelerated development sessions (ADSs) to educate executives about ways to build successful ACOs. The first 3-day, in-person ADS is scheduled for June 20-22 in Minneapolis (note that CMS has published corrections to the original announcement of the session). Registration is required. Alternative Pioneer ACO Model CMS has announced the launch of a separate “Pioneer Accountable Care Organization Model” – a new ACO model that will be available as early as the fourth quarter of 2011 to advanced ACOs (that is, organizations with extensive experience with systematic care improvement efforts that are prepared to enter payment arrangements that include financial accountability and performance incentives). The Pioneer ACO Model is intended to complement the Medicare Shared Savings Program, but it will provide more opportunities for rapid escalation of shared savings and risk. An ACO may participate in either the Shared Savings Program or in the Pioneer ACO Model, but not both concurrently. CMS expects to partner with approximately 30 organizations in the Pioneer ACO Model, with a minimum of 15,000 Medicare beneficiaries in each (5,000 for rural ACOs). The program will test alternative payment models that (1) include escalating levels of financial accountability through successive performance periods during the participation agreement; (2) provide a transition from fee-for-service to population-based payment by the third performance period, and (3) generate Medicare savings. Many components of the Pioneer ACO Model match what CMS proposed to adopt in the Medicare Shared Savings Program. However, several aspects of the model differ substantially. For example, the Pioneer ACO Model may include a prospective identification of the Medicare beneficiaries for whom an ACO is accountable, rather than a retrospective assignment of beneficiaries. Pioneer ACOs also must commit to entering outcomes-based contracts with other purchasers (private health plans, state Medicaid agencies, and/or self-insured employer) so that the majority of the ACO’s total revenues (including from Medicare) will be derived from such outcomes-based payment arrangement by the end of the second performance period (in December 2013). In the third year of participation in the Pioneer Model, the ACO’s payment will transition to a population-based payment (per-beneficiary per month payment) that replaces a significant portion of the ACO’s fee for service payments. While CMS describes in detail one payment arrangement for Pioneer ACOs, the agency notes that it will offer variations in the shared savings, shared loss, and savings and loss maximums to accommodate the needs of a given Pioneer ACO. In addition, CMS strongly encourages applicants to propose alternative payment models for the agency’s consideration that offer similar or greater savings to the Medicare program. CMS intends to use recommendations it receives from applicants to develop and offer an alternative payment arrangement that participating ACOs may choose to utilize.  Pioneer ACOs must meet quality performance measures and other CMS standards adopted in the final rule implementing the Shared Savings Program. If a Pioneer ACO finds the terms of the final rule to be unacceptable, the ACO may withdraw from the Pioneer ACO Model program anytime before January 2012. In addition, CMS will test the use of technical support in the form of rapid data feedback and shared learning activities. Interested organizations must submit a nonbinding letter of intent by June 10, 2011, and applications must be postmarked no later than July 18, 2011.  A related May 20 Federal Register notice is available here.