Medicare Reg on ACOs Use of Profits Will Fail

June 2, 2011, Fairfax, VA—Americans for Limited Government today warned that a new regulation being issued by the Centers for Medicare and Medicaid Services (CMS) would dictate how Accountable Care Organizations (ACOs) use their profits.

ALG President Bill Wilson said the regulators “want the right to tell a private medical provider what they can and cannot do with their own money.”

“If this doesn’t show the authoritarian, socialist inclinations of the Obama Administration and its health care takeover law, nothing will,” he declared.

“CMS is shooting itself in the foot here. It is trying to get doctors to switch from a [fee-for-services] FFS system, where the providers choose how their fees are spent, to the Shared Savings Program, where a portion of that money has to be spent according to ideals set out by government bureaucrats,” ALG’s John Vinci wrote on

“Most people, given the choice, would choose not to have restraints on how they spend their money,” Vinci explained.

The proposed regulation on the Medicare Shared Savings Program for ACOs would regulate the distributions from shared savings by requiring the ACO to determine ahead of time how the funds will be used. “The Centers for Medicare & Medicaid Services (CMS) seems disappointed that it can’t control how the distributions from shared savings will be used,” Vinci wrote.

Vinci said the regulation went beyond even the intent of the law: “The purpose of the Shared Savings Program was not to direct health providers on how to spend their earnings, but to correct CMS’s distorted Medicare fee-for-services (FFS) system.”

He explained, “What makes the FFS’s financial incentives improper is not that doctors can spend the fees they earn on anything they choose. FFS creates improper financial incentives because it encourages inefficiency.”

An earlier attempt to implement ACOs from 2005 through 2010 resulted in failure of 60 percent of institutions involved in the experiment to even qualify for the shared savings, according to the Washington Post, raising questions about whether ACOs can even control the costs of Medicare as ObamaCare proponents promised.

As noted by the story, “recent studies have shown, when a medical group becomes an ACO, the financial investments it must make in record-keeping and other changes have been higher than the government has predicted, causing it to lose money for at least the first few years.”

According to the regulation, start-up costs for new ACOs would be $1.8 million in the first year, but according to the American Hospital Association, that is wildly off. The real costs, says AHA, will be anywhere from $11.6 million to $26.1 million for the first year — per ACO.

ALG President Bill Wilson said the regulation must not be implemented, “Instead of incentivizing providers to provide additional services to obtain additional fees under the FFS system, now CMS’ brilliant plan is to provide bonuses when less services are provided. That’s rationing, a scheme provided for under ObamaCare, and underscores why the entire legislation must be eliminated.”

Interview Availability: Please contact Rebekah Rast at (703) 383-0880 or at to arrange an interview with ALG President Bill Wilson.