As a physical therapist, you’re likely well-versed in the acronyms that drive your documentation practices: HIPAA, CPT, CMS, PQRS, FLR, and FML (just kidding). But there’s one more to watch for: ACO. By now, you’ve probably heard this one being bandied about in discussions about healthcare reform and alternative payment models, but you might not be super familiar with what it means. So, here you go: In response to the Affordable Care Act, CMS created the Shared Savings Program, which encouraged healthcare providers to join forces and create new entities called accountable care organizations (ACO). According to this article from PTPN, an ACO is a network “of health care providers that will be rewarded financially if they slow the growth in their patients’ health care spending while maintaining or improving the quality of the care they deliver.”

Basically, an ACO agrees to be accountable for the quality, cost, and overall care of Medicare patients. While CMS doesn’t allow PTs (or OTs and SLPs) to form these provider groups, PTs can still choose to participate in them (participation is voluntary for both providers and patients). With the US healthcare industry entering an era of payment reform, you’ll want to consider how value-based ACOs might affect your rehab therapy practice. Here’s what you need to know:

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Payment Model

CMS pays ACOs based on a combination of “the familiar Medicare fee-for-service reimbursements and bonuses based on cost savings.” Providers can choose one of the two following payment structures:

  1. Providers share in up to 50% of savings.
  2. Providers share in up to 60% of savings, but if the ACO’s costs rise, providers also share in losses.

The second payment option is dependent on quality performance, for which CMS has established four determining factors (first-year ACOs must fully and accurately report on all four factors):

  1. Quality standards on patient experience
  2. Care coordination and patient safety
  3. Preventative health
  4. At-risk populations

Then, CMS determines an ACO’s eligibility for savings and losses according to an assigned Medicare FFS cost benchmark for the ACO’s patient population. These figures are updated every year and account for patient characteristics, geographic location, and other cost variables. For more information on the methodology CMS uses to determine shared savings and losses, go here.

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Patient Base

Because ACOs must have a minimum of 15,000 patients—including at least 5,000 Medicare beneficiaries—joining an ACO could open up your clinic to a whole new world of patients. Plus, ACOs ensure that patients receive the right care at the right time, thus encouraging faster referrals to specialists like you. More patients plus faster referrals equals a deeper and wider revenue stream for your clinic.

But keep in mind that patient participation is voluntary. If you join an ACO, CMS requires you to notify your patients of your ACO affiliation and disclose that you’re “eligible for additional Medicare payments for improving the quality and coordination of care the beneficiary receives while reducing overall costs or [that you] may be financially responsible to Medicare for failing to provide efficient, cost-effective care.” You also must notify patients that their claims data may be shared with your ACO, at which point patients have the opportunity to opt out of this form of data sharing.

Bare Necessities

The goal of an ACO is “to optimize quality and outcomes of care; ensure patient engagement and satisfaction of care; and measure efficiency, typically as a per-member, per month cost of health care services.” How? ACOs obviously promote accountability and coordinated care, but the third key feature of this type of plan is that it encourages investment in infrastructure and redesigned care processes. Even though language requiring ACO participants to implement electronic records systems didn’t make it into the Final Rule, ACO providers are still encouraged to “develop a robust EHR infrastructure” (however, CMS offers no incentive to do so). To that end, the use of electronic record-keeping technology remains a quality measure and is weighted “twice that of any other measure for scoring purposes and for determining compliance with quality performance requirements for domains.”

Clearly, it’s crucial that all ACO participants are able to prove provider value and communicate seamlessly with all of their colleagues across the spectrum of care. Implementing an EMR to track outcomes may not be required, but it might just be impossible to successfully participate in an ACO without one.


By 2016, the US Department of Health and Human Services plans to tie 30% of Medicare payments to alternative payment models, including ACOs. Though it’s uncertain whether this particular payment model will become the future of payment reform, it’s certainly a big part of the conversation. Physical therapists have a deeply important role in health care, and that means they also have an important role in the ACO. PTs are already pros at demonstrating outcomes and getting paid based on quality, not quantity. But by creating an environment in which PTs work closely with other healthcare professionals—and clearly demonstrate their value while doing so—ACOs may help therapists earn a bigger piece of the pay-for-performance pie.

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