Fragmented care, where patients see multiple unrelated providers, has been found to be, among other things, both costly, since provider payments are not linked to performance or outcomes and services can be duplicative, and of lower quality, since providers lack financial incentives to coordinate care. Research has suggested that integrated care delivery models can reduce costs and improve quality. Section 3022 of the Patient Protection and Affordable Care Act ( P.L. 111-148 , PPACA), as amended, directs the Secretary of Health and Human Services (the "Secretary") to implement an integrated care delivery model in Medicare, the Medicare Shared Savings Program, using Accountable Care Organizations (ACOs)—a model of integrated care formulated to reduce costs and improve quality. Appendix A outlines key parts of the proposed regulations, and Appendix B addresses antitrust issues. Appendix C discusses the Pioneer ACO Demonstration that "is designed for health care organizations and providers that are already experienced in coordinating care for patients across care settings." The key elements of an ACO, highlighted in the definition, are that
ACOs bring together and integrate, either actually or virtually, a broad range of providers across care settings; they emphasize primary care; they can achieve savings for a payer by effectively integrating care across providers; providers share with payers in the savings that providers generate; the savings are not at the expense of quality; providers are responsible for improving quality and reducing costs; and improvements are measured across a specified population. The emphasis is on physicians rather than insurers or hospitals since physicians "control (directly or indirectly) 87% of all personal health spending." Existing ACO Models and Are They Replicable

ACOs are modeled on entities seen as quality leaders in health care, such as Kaiser Permanente, the Mayo Clinic, the Cleveland Clinic, and Geisinger Health System. If actual medical expenditures are less than the benchmark, adjusted for changes in costs, savings exceed the target, and quality measures are met, the ACO, and either directly or indirectly its providers, will share in the savings realized by the payer. Other groups of providers of services and suppliers as the Secretary determines. Section 5: Discussion and Likely Impact of PPACA § 3022

		Scope of ACOs and Likely Savings

The CBO scored the Medicare Shared Savings Program as reducing Medicare expenditures $4.9 billion over the FY2013 through FY2019 period. Summary of HHS Draft Proposed Regulations
On March 31, 2011, the Department of Health and Human Services (HHS) issued its Notice of Proposed Rulemaking (NPRM) for accountable care organizations. At the same time, the Department of Justice and Federal Trade Commission issued a joint policy statement on ACOs to address antitrust issues. In addition, CMS and the HHS Office of the Inspector General issued a joint statement on the civil monetary penalties (CMP) law, federal anti-kickback statute, and the physician self-referral law for financial arrangements involving ACOs, and the Internal Revenue Service issued a statement on the participation of tax exempt organizations in ACOs. HHS will accept comments from stakeholders on the NPRM for 60 days and will release a final regulation some time afterwards. The primary care physician, however, is now a member of the ACO which has assumed responsibility for the patient's complete continuum of care. Though each proposed ACO under the Medicare Shared Savings Program will have different effects on the health care provider market, general principles may be extracted to provide guidance to market participants wishing to participate in the Medicare Shared Savings Program.
The provision of health care in the United States has been described as fragmented, with patients seeing multiple unrelated providers. Fragmented care has been found to be, among other things, both costly, since provider payments are not linked to performance or outcomes and services can be duplicative, and of lower quality, since providers lack financial incentives to coordinate care. Section 3022 of the Patient Protection and Affordable Care Act (P.L. 111-148, PPACA), as amended, directs the Secretary of Health and Human Services (the "Secretary") to implement an integrated care delivery model in Medicare, the Medicare Shared Savings Program, using Accountable Care Organizations (ACOs)—a model of integrated care formulated to reduce costs and improve quality.
ACOs are modeled on integrated delivery systems such as the Mayo Clinic, Geisinger Health System, Kaiser Permanente, and Intermountain Healthcare. While ACOs can be designed with varying features, most models put primary care physicians at the core, along with other providers, and emphasize simultaneously reducing costs and improving quality. The emphasis is on physicians rather than insurers or hospitals because physicians influence almost 90% of all personal health spending.
In the simplest case, the ACO contracts with payers to be accountable for the entire continuum of care provided to a defined population, and if the costs of care provided are less than targeted amounts, and certain quality measures are achieved, the ACO and the payer will share the savings generated. Under the Medicare Shared Savings Program, the Centers for Medicare & Medicaid Services (CMS) will contract for ACOs to assume responsibility for improving quality of care provided, coordinating care across providers, and reducing the cost of care Medicare beneficiaries receive. If cost and quality targets are met, ACOs will receive a share of any savings realized by CMS. The Congressional Budget Office scored the Medicare Shared Savings Program as reducing Medicare expenditures $4.9 billion in the FY2013 through FY2019 period.
PPACA Section 3022 leaves many of the design features to be determined by the Secretary. On March 31, 2011, the Department of Health and Human Services issued its Notice of Proposed Rulemaking for accountable care organizations. At the same time, the Department of Justice and Federal Trade Commission issued a joint policy statement on ACOs to address antitrust issues. In addition, CMS and the HHS Office of the Inspector General issued a joint statement on the civil monetary penalties law, federal anti-kickback statute, and the physician self-referral law for financial arrangements involving ACOs, and the Internal Revenue Service issued a statement on the participation of tax exempt organizations in ACOs. HHS will accept comments from stakeholders on the NPRM for 60 days and intends to release a final regulation some time afterwards. Appendix A outlines key parts of the proposed regulation, and Appendix B addresses antirust issues. Appendix C discusses the Pioneer ACO Demonstration "designed for health care organizations and providers that are already experienced in coordinating care for patients across care settings."
The Medicare Shared Savings Program is slated to begin January 1, 2012. While ACOs hold out the prospect of improving care, reducing costs, and raising quality, there are still gaps in knowledge of what existing ACOs have achieved and whether they can be widely replicated. Moreover, there may be unanticipated consequences from encouraging the formation of ACOs, such as further health provider market concentration, that could adversely affect efforts to control overall health costs.