Thriving in a Value-Based Healthcare Reality

Improving practice efficiencies and patient outcomes for a sustainable future


Change is Here

Since the passage of the Affordable Care Act in 2010, the industry has begun a disruptive shift from payments based on number of visits to payments based on quality metrics and cost savings. And even though we are just at the base of a rising quality/penalty reimbursement curve, providers are already feeling the effects of the value-based payment structure.

*Payments based on quality metrics and cost savings vs. number of visits

Did you know that only 6% healthcare dollars spent go to primary care physicians? The reality is that Primary Care Physicians are already being impacted by value-based payments and the changes have only yet begun.


Medicare FFS will shift to value-based programs with risk sharing by 2019


Privately insured patients falling under value-based payments by 2017

Private Practice Pressure

The reality is that Primary Care Physicians are already being impacted by value-based payments and the changes have only yet begun.


Average practice billing claims cost per FTE physician & rising


Decrease in patient office visits since 2000


Average practice IT cost per FTE physician and rising


of physicians spend an average of 3 days per week on paperwork

Challenging Future Ahead

The Medicare and CHIP Reconciliation Act (MACRA) launched a new Quality Payment Program on the healthcare community in 2015 that further shift reimbursements to the value-based model, eliminating FFS as we know it by 2021. In order to be reimbursed for services under MACRA, physicians must either participate in a Merit Based Incentive Payment System (MIPS) or be part of an Advanced Alternative Payment Model (APM).

Although this shift represents a first step to a fresh start for a better, smarter Medicare that fosters healthier patients and a sustainable ecosystem, it will have significant and long-reaching impact on Independent providers.

Advanced Alternative Payment Model (APM)

Most Commonly Known as Accountable Care Organizations (ACOs)

  • Additional 5% lump sum bonus is available to Qualified Participants (QPs) which is not available under MIPS
  • ACO leverages regulations in your favor and mitigates risk
  • ACO provides stepwise, built-in programs and technology proven to achieve: quality, efficiency meaningful use and practice improvement requirements
Merit Based Incentive Payment System (MIPS)
  • PCPs bear 100% of the brunt for: quality, efficiency, EHR meaningful use and clinical practice improvement activities.
  • You are on your own for learning curve, technology and program expense and risk
  • Odds stacked against independent providers with 87% of solo practitioners projected to incur ongoing penalties under MIPS

APM: ACO is the Answer

The future will require independent provider to do much more with less, managing the health of more patients while keeping tighter control on quality, service and efficiencies. Success and longevity will depend upon the long-term alliances formed today. That long-term alliance is the APM Accountable Care Organization (ACO).

An ACO is a group of health care providers who voluntarily band together to share the responsibility for providing care to a particular, defined patient population. Collaborating makes managing the quality and cost of care for these patients across multiple settings (primary and secondary physician offices, hospitals, and more) easy, and helps providers better meet quality benchmarks, improve outcomes and realize shared cost savings.


Of GDP will be taken up by healthcare costs by 2021


Patients are added to Medicare daily


ACOs nationwide and growing rapidly


Projected growth in ACO lives by 2020

ACO 101: A Brief Overview and History

ACOs were created and/or outlined in section 3022 of the Patient Protection and Affordable Care Act (ACA) in 2010, and final guidelines for establishment of ACOs under the Medicare Shared Savings Program (MSSP) were defined on March 31, 2011.

ACO Defined

According to the Centers for Medicare and Medicaid Services (CMS), an ACO is “an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.”

Pioneer Model

The Centers for Medicare and Medicaid Services (CMS) launched an initiative to test the ACO theory and program design before making final rules for the Medicare Shared Savings Program. These beta test ACOs were called “Pioneer” ACOs. The Pioneer ACO Model is separate and distinct from the Medicare Shared Savings Program (MSSP) and is no longer being licensed.

Medicare MSSP Model

CMS officially licensed Medicare Shared Savings Program (MSSP) ACOs on January 1, 2012, and continues to license ACOs on an annual basis. The Shared Savings Program rewards ACOs that lower their growth in health care costs while meeting performance standards on quality of care and putting patients first.

Next Generation Model

Built upon the experience from MSSP, the Next Generation ACO Model allows provider groups to assume higher levels of financial risk than the Pioneer or MSSP ACO models. The goal of this model is to test whether strong financial incentives for ACOs couples with tools to support better patient engagement and care management, can further improve health comes and lower expenditures.

Commercial Model

Commercial ACOs are similar to Medicare ACOs, but there is no licensing process. Currently, there are 169 commercial ACOs who have negotiated with insurance carriers for shared savings contracts.

Advanced Payment Model

This is an initiative available only to ACOs participating in the Medicare Shared Savings Program (MSSP) and offers additional start-up resources to physician- owned and rural providers ACOs to build the necessary infrastructure.

Frequently Asked Questions

What is shared savings?

The Medicare Shared Savings Program (MSSP) is the funding mechanism for ACOs participating in the Medicare ACO model. The MSSP rewards ACOs that lower the rate of growth in health care costs for Medicare beneficiaries while meeting specific performance standards on quality of care and patient experience over the three-year contract.

Medicare ACOs are required to coordinate care, define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and encourage investment in infrastructure and redesigned care processes. In return for meeting quality and cost targets, the ACO is eligible to receive shared savings which are annual bonuses on top of traditional fee-for-service payments.

What's the difference between a Medicare and a Commercial ACO?
A Medicare ACO focuses on care coordination for Medicare beneficiaries. It has been licensed by CMS and utilizes one of the two shared savings models. A commercial ACO is like a Medicare ACO, but they are focused on care coordination to non-Medicare patient populations and are often formed in conjunction with insurance companies. A commercial ACO can also be licensed as a Medicare ACO if they meet the licensing criteria.
What are the requirements and costs to become an ACO?

The Department of Health and Human Services (DHHS) final regulation adjustments on October 20, 2011 outlined the ACO requirements. Some of the key requirements state that an ACO must:

  • Accountable for the quality, cost and overall care of its Medicare fee-for-service beneficiaries
  • Sign 3-year contract
  • Have a formal legal structure to allow for shared savings distributions
  • Have a minimum of 5,000 Medicare beneficiary lives assigned to its primary care doctors
  • Have a leadership and management structure, including clinical and administrative systems
  • Have defined 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 technologies
  • Demonstrate they meet patient-centeredness criteria, such as the use of patient and caregiver assessments or the use of individualized care plans
What Quality Metrics is an ACO responsible for?
ACOs have to measure and report on five (5) quality measures which are: patient/ caregiver experience, care coordination, patient safety, preventative health, and at-risk population/ frail elderly health.
What is the application process?
Medicare has a formal and lengthy application process. A typical application is 350 – 400 pages, and Medicare meticulously reviews each in a three-step process before licenses are provided. In addition to the initial application process, most physician-led ACOs require a second application step for the large funding cost to start up the ACO. *This second application process is not required for privately funded ACOs such as those associating with Premier Management Company.
What costs are involved?
It is estimated the average cost to form an ACO is between $1.8 to $4 million dollars per ACO per year. This is due to the amount of labor involved as well as legal fees and IT costs for the data extraction process and population health management systems needed.
How are patients assigned to ACOs?
Specialists can be part of multiple ACOs, but PCPs must be exclusive to one ACO. These providers sign an agreement to participate with an ACO like Premier PHC. CMS then assigns patients to a PCP based upon the majority of their outpatient E&M visits. Once assigned, those beneficiaries become “aligned beneficiaries” of their PCP’s ACO meaning that are eligible to participate in the ACO. Most assigned patients are your existing patients. There is no mechanism for beneficiaries to self-align with an MSSP ACO at this time.

More ACO Information

If you have any questions about Premier’s ACOs, please email or call 855-792-4584. For general questions or additional information about Accountable Care Organizations, please visit or call 1-800-MEDICARE (1-800-633-4227) TTY users should call 1-877-486-2048.