The Advance Payment ACO Model provides upfront and monthly payments to Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings Program. This is intended to help providers coordinate care and generate savings for Medicare more quickly. Eligible ACOs include physician groups and those in rural areas with limited access to capital. Participation in the Advance Payment Model and Shared Savings Program is voluntary for providers and Medicare beneficiaries can continue seeing any provider they choose. Payments to ACOs include a fixed upfront amount, a variable amount based on the number of beneficiaries, and monthly stipends of varying amounts depending on the ACO size. The goal is to incentivize high quality care delivery at a lower cost to Medicare.

1. Advance Payment
ACO Model
KMYRVIK-HI215-02

2. Advance Payment ACO Model
The Advance Payment Model is designed for physician-based and rural providers
who have come together voluntarily to give coordinated high quality care to the
Medicare patients they serve. Through the Advance Payment ACO Model,
selected participants will receive upfront and monthly payments, which they can
use to make important investments in their care coordination infrastructure. On
Nov. 2, 2011, the Centers for Medicare & Medicaid Services (CMS), an agency
within the Department of Health and Human Services (HHS), published a final rule in
the Federal Register implementing an Affordable Care Act provision to help
doctors, hospitals, and other health care providers better coordinate care for
Medicare patients through Accountable Care Organizations (ACOs). ACOs create
incentives for health care providers to work together to treat an individual patient
across care settings – including doctor’s offices, hospitals, and long-term care
facilities. The Medicare Shared Savings Program (Shared Savings Program) will
reward ACOs that lower their growth in health care costs while meeting
performance standards on quality of care. Provider participation in an ACO is
purely voluntary, and Medicare beneficiaries retain their current ability to seek
treatment from any provider they wish (Centers for Medicaid and Medicare
Services 2013).

3. Summary of the Advance Payment
ACO Model
The Advance Payment ACO Model will test:
• Whether providing an advance (in the form of up-front and monthly payments to be
repaid in the future) will increase participation in the Shared Savings Program, and
• Whether advance payments will allow ACOs to improve care for beneficiaries and
generate Medicare savings more quickly, and increase the amount of Medicare savings.
The Advance Payment ACO Model is meant to help entities such as smaller practices and rural
providers with less access to capital participate in the Shared Savings Program.
The Advance Payment Model was initially only made available to ACOs who began
participation in the Medicare Shared Savings Program on April 1, 2012 or July 1, 2012. On June
12, 2012, CMS announced that it will also accept applications from ACOs that are applying for
participation in the Shared Savings Program with a start date of January 1, 2013 (Centers for
Medicare and Medicaid Services 2013).

4. Structure of Payments
Under the Advance Payment ACO Model, participating ACOs receive
three types of payments:
• An upfront, fixed payment: Each ACO receives a fixed payment.
• An upfront, variable payment: Each ACO receives a payment based
on the number of its preliminarily prospectively-assigned beneficiaries.
• A monthly payment of varying amount depending on the size of the
ACO: Each ACO receives a monthly payment based on the number of
its preliminarily prospectively assigned beneficiaries (Centers for
Medicare and Medicaid Services 2013).
An ACO is comprised of a group of providers who organize themselves
to take on the shared responsibility of administering care to a group of
patients while seeking to improve quality of care, lowering of
healthcare costs, and increased access to care (Jones, J., 2015)

5. ACO’s must deliver quality care at a lower price point and would prevent
reimbursement. The Pioneer ACO Model will test the impact of different payment
arrangements in helping these organizations achieve the goals of providing better
care to patients and reducing Medicare costs (Centers for Medicare and Medicaid
Services 2013). In Medicare’s traditional fee-for-service payment system, doctors and
hospitals generally are paid for each test and procedure. That drives up costs, experts
say, by rewarding providers for doing more, even when it’s not needed. ACOs don’t
do away with fee for service, but they create an incentive to be more efficient by
offering bonuses when providers keep costs down. Doctors and hospitals have to
meet specific quality benchmarks, focusing on prevention and carefully managing
patients with chronic diseases. In other words, providers get paid more for keeping
their patients healthy and out of the hospital (Kaiser Family Foundation 2015). One of
the key challenges for hospitals and physicians is that the incentives in ACOs are to
reduce hospital stays, emergency room visits and expensive specialist and testing
services — all the ways that hospitals and physicians make money in the current fee-
for-service system (Gold, J., 2014)