PT Classroom - An Introduction to Accountable Care Organizations ׀ by Chad Novasic, PT


Chad Novasic is the President and CEO of Alliant Physical Therapy Group. He is a 1988 graduate of Marquette University. His focus has been in the field of outpatient orthopedic rehabilitation and injury prevention. Chad has been an independent Physical Therapist since 1989. He is proud to be active in the community having served as President of the Wisconsin Independent Physical Therapists, and on the Board of the Racine Founders Rotary and the Wisconsin Physical Therapy Association. Over the years, Chad's passion for physical therapy and helping others has complimented his capacity to help fellow physical therapists open and run successful private physical therapy practices. He can be reached at, or through the Alliant Physical Therapy Group Website.

An Introduction to Accountable Care Organizations (ACO 's)

Physical therapists are beginning to hear more about Accountable Care Organizations (ACO’s). However, many physical therapists probably don’t know what they are or how they would affect them. And some physical therapists may not even of heard of ACO’s.

The purpose of this article is to serve a brief primer to introduce physical therapists to ACO’s and gain some understanding about how they will affect their practice. The information presented was acquired from the American Physical Therapy Association Health Care Advocacy section. The original documents can be found at

ACO’s have been a hot topic on the health care administrative front. Reams of information can be found through social networks like LinkedIn, and on many healthcare management web sites and blogs. Unless you are a legislative geek, you may have missed many of these articles or clicked delete when the topic came up. Well it is time to pay attention!


On March 31, 2011, the Centers for Medicare and Medicaid Services (CMS) released the proposed rule which would implement a provision of the Affordable Care Act which mandates coordination of care for Medicare beneficiaries through Accountable Care Organizations (ACO). The goal of ACO's is to promote overall better quality health care and to lower growth of health care costs by creating incentives for physicians, health care providers, hospitals and long-term facilities to work together and meet delineated performance standards on quality of care. The ACO providers will distribute the shared savings derived from the coordinated care. Patient and provider participation in the ACO is voluntary.

ACO’s are a result of a section in the Health Care reform act of 2009 that required the Secretary of HHS to establish a Shared Savings Program by January 1, 2012. The Medicare Shared Savings program is a Medicare delivery model that is aimed at 1) better care for individuals; 2) better health for populations; and 3) lower growth in expenditures. This is referred to as the three part aim.

Highlights of the Proposed Rule from the APTA
ACO Definition
• Group of health care providers accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to the organization
• Three Part Aim: 1) better care for individuals; 2) better health for populations; and 3) lower growth in expenditures
• Must meet specified quality performance standards to receive a share of any savings if the actual per capita expenditures of their assigned Medicare beneficiaries are a sufficient percentage below benchmark amounts set by CMS (ACOs must be operational by January 2012)

ACO Proposed Structure
• ACO must have a formal and legal structure that allows the ACO to receive and distribute payments for shared savings
• ACO will undergo a formal CMS application and approval process
• ACO may be a corporation, partnership, LLC, foundation, or any other entity permitted by State law
• ACO governance structure should allow for appropriate proportionate control for ACO participants, giving each ACO participant a voice in the decision making process
• Governing body must have representatives from Medicare FFS beneficiaries and each ACO provider/ participant
• Allows for partnering with private entities but ACO participants must have at least 75 percent control of the ACO’s governing body
• ACO must develop and implement evidence-based medical practice or clinical guidelines and processes for delivering care based on three part aim
• ACO providers/suppliers and participants must commit to a three-year contract (CMS lays out remedial actions for removing participants for non-compliance)
• 5000 yearly patient threshold requirement
• Participation purely voluntary for providers and patients
• ACOs must notify patients that they are a part of an ACO and that health information will be shared among ACO providers and participants

Eligible Providers
• There are two types of health care providers/suppliers who can participate in the ACO: o ACO professionals (hospitals and physicians) in group practice arrangements, networks of individual practices of ACO professionals, partnerships or joint venture arrangements between hospitals and ACO professionals, and hospitals employing ACO professionals, and critical access hospitals (CAHs).
o ACO participants – ACO professionals could contract and participate in ACOs but could not form ACOs on own (PTs in private practice, physical therapy groups, Rehab Agencies, SNFs, HHAs)

• ACO identified through TIN (may or may not be Medicare enrolled entities)
• ACO participants must be Medicare enrolled (ACO will report a list of NPIs)

Proposed Quality and Monitoring
• Formation of a physician-directed quality assurance and process improvement committee that would oversee an ongoing quality assurance and improvement program that would be accountable for meeting performance and compliance standards
• CMS will conduct site visits and will require patient surveys, and quarterly and annual reports focused on five domains:

o Patient/caregiver care experiences;
o Care coordination;
o Patient safety;
o Preventive health; and
o At-risk population/frail elderly health

• 65 measures for use in the calculation of the ACO Quality Performance Standard
• Quality standard based on a measure scale with a minimum attainment level
• For the first year of the three year period - quality performance standard at the reporting level
• Proposed quality measures aligned with PQRS, EHR Incentive Program, and Hospital Inpatient Quality Reporting Program
• ACO providers/suppliers and participants who are also eligible professionals under PQRS may earn PQRS incentives as a group practice under the Shared Savings Program

Proposed Shared Savings
• ACOs paid under current Medicare FFS payment
• Shared savings payments directly to the ACO as identified by its TIN
• CMS would develop a benchmark for each ACO to assess performance
• Benchmark is an estimate of total Medicare FFS Parts A and B costs for ACO patient population if provided absent ACO
• Benchmark factors in patient characteristics, geographic location, etc
• Benchmark updated each year of the three-year period
• CMS proposes minimum savings rate based on percentage of the benchmark that the ACO must exceed
• 25% of ACO shared savings payments will be withheld to ensure pay back of any losses incurred to CMS
• ACOs must opt into one of two risk-sharing models, which will determine the percentage of savings that ACOs are eligible to receive: o One-Sided Risk Model—Savings are shared for the first two years and then in the third year savings and losses are shared (50% of the savings are shared)
o Two-Sided Risk Model—Savings and losses are shared for all three years (60% of the savings are shared)”

The APTA and PPS are preparing comments to make sure Physical Therapists interests are protected. These comments are due by June 6th. As you can see, according to the above language, Physical Therapists are not excluded from participation, however they are not necessarily included either.

It would appear that it is in the best interest of Physical Therapists to stay on top of current legislative activities. There are constant changes to health care reform, and the APTA is an excellent resource for information for you.

Stay tuned, there will be more to follow.


Other Physical Therapy Private Practice related articles by Chad
- Starting a Private Physical Therapy Practice
- Basic Equipment for Starting a Private Physical Therapy Practice


Last revised: April 12, 2011
by Chad Novasic, PT

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