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Pathways to Success ACO Model

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Pathways to Success ACO Model

Authored by Joanne Lax (retired Member of Dykema)

On December 21, 2018, the U.S. Centers for Medicare and Medicaid Services (CMS) issued a final rule redesigning the Medicare Accountable Care Organization (ACO) program via a new Pathways to Success ACO model.[1] See 83 FR 67816 (Dec. 31, 2018). CMS stated five goals for this redesign: ACO Accountability, Competition, Engagement, Integrity, and Quality.

A major thrust of the final rule is to require ACOs to take significant financial risk for cost overruns in the provision of care without sacrificing the quality of that care. According to CMS, the final rule accomplishes this by reducing “the amount of time that an ACO can remain in the program without taking accountability for healthcare spending from six years to two years for new ACOs and three years for new “low revenue” (physician-led) ACOs, including some rural ACOs.” In return, ACOs will be rewarded with higher shared savings rates as ACOs transition and accept greater levels of risk. CMS views this as essential to its goal of transitioning Medicare to a value-based payment model and to achieving financial sustainability for the Medicare program.

In addition, the final rule expands the use of telemedicine for the provision of care to ACO beneficiaries. ACOs will be allowed to use this technology to serve ACO beneficiaries in their own places of residence, which may enhance access to care for rural, disabled, or very elderly beneficiaries.

In a relaxation of some anti-fraud regulatory limitations, the final rule also permits ACOs to pay beneficiaries incentives to take charge of their own health care. Beneficiaries can receive financial payments for seeing their primary care practitioner and for obtaining the follow-up care recommended by these practitioners.

Finally, the final rule incorporates regional Medicare spending data to establish financial benchmarks for ACO spending on care. CMS intends this to enhance evaluation of an ACO’s financial performance.

CMS projects that these redesigned ACO requirements will save Medicare 2.9 billion dollars within the next ten years. CMS asserts that its six-year prior experience with other ideations of the ACO program demonstrate that ACOs perform better—financially and in terms of quality of patient care—when they assume greater financial risk.

Practitioners and providers interested in participating in the Medicare Pathways to Success program should carefully read the final rule. Along with the opportunities touted by CMS in the publicity surrounding the final rule are financial and operational responsibilities that may not be right for everyone. 

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[1] Per CMS Administrator Seema Verma, “ACOs are groups of healthcare providers that take responsibility for the total cost and quality of care for their patients. In exchange for this, ACOs are able to receive a portion of the savings that they achieve as long as they meet quality standards.”


Joanne R. Lax is a retired member of Dykema. Her career with Dykema’s Health Care Practice Group spanned 40 years, starting in 1978. Her areas of concentration included post-acute and long-term care, behavioral health, clinical ethics, data privacy/HIPAA, and assisted reproductive technology. Joanne presently serves on the Board of Directors of the American Health Lawyers Association (term expected to end in 2021), after serving for nine years as Chair and Vice Chair of AHLA’s Post-Acute and Long-Term Care Practice Group. She also served as Chair of the State Bar of Michigan’s Health Care Law Section. During her career, Joanne earned many honors and awards, including designation as a Super Lawyer, designation as a Best Lawyer and Best Lawyer’s Lawyer of the Year for health care in Detroit in 2012, Fellow of the State Bar of Michigan Health Care Law Section, and designation as a Leading Lawyer. In her retirement, Joanne is a guest blogger for Homeostasis.