During the development of the proposed rule for the Medicare Shared Savings Program, some health care providers expressed concern about not having enough capital to invest in infrastructure and staff in order to qualify as a Medicare ACO. The Advance Payment ACO addresses this concern, and is meant to help smaller ACOs that don’t have the available capital to participate in the Shared Savings Program.

As with the Medicare Shared Savings Program, organizations in the Advance Payment ACO are rewarded for lowering growth in health care costs while meeting performance standards on the quality of care. As with any type of Medicare ACO, provider participation is voluntary, and Medicare patients can seek treatment from any provider they wish.

According to the CMS Advance Payment Fact Sheet, a Medicare ACO participating in the Advance Payment program receives three types of payments:

1. Upfront, fixed payment: Each ACO receives a fixed payment.
2. Upfront, variable payment: Each ACO receives a payment based on the number of its prospectively assigned Medicare patients.
3. Monthly payment of varying amount depending on the ACO’s size: Each ACO receives a monthly payment based on the number of its prospectively assigned Medicare patients.

The structure of these payments addresses both the fixed and variable costs associated with forming a Medicare ACO. If the ACO does not generate sufficient savings to repay the advance payments, the CMS will continue to offset shared savings in subsequent performance years, or pursue recouping the advance payments wherever appropriate.

The Advance Payment ACO Model targets two types of organizations participating in the Shared Savings Program, as defined by the CMS:

1. ACOs that do not include inpatient facilities and have less than $50 million in total annual revenue
   
2. ACOs in which the only inpatient facilities are critical access hospitals and/or Medicare low-volume rural hospitals, and have less than $80 million in total annual revenue.

If an ACO is co-owned by a health plan, it is ineligible for the Advance Payment model, regardless of whether they fall into one of the above categories.¹