On March 31st the Centers for Medicare and Medicaid Services (“CMS”) released its proposed rule to establish the Medicare Shared Savings Program (the “Shared Savings Program”). The rule will be published in the Federal Register in the next few days. CMS will accept comments on the proposed rule for a period of 60 days after publication in the Federal Register, and will respond to comments in a final rule to be issued later this year. At the heart of the Shared Savings Program is the development of Accountable Care Organizations (“ACOs”) to bring together providers and suppliers in an effort to coordinate care for Medicare fee-for-service (“FFS”) beneficiaries. To participate in the Shared Savings Program, ACOs must submit an application, and if approved, enter into a three year agreement with CMS to be accountable for the quality, cost and overall care of at least 5,000 traditional FFS Medicare beneficiaries who may be assigned to it. The Shared Savings Program will begin operating on January 1, 2012.

• Notably, federally qualified health centers (“FQHCs”), rural health centers (“RHCs”), skilled nursing facilities (“SNFs”), nursing homes, long-term care hospitals (“LTCHs”) and certain CAHs, among others, are not specifically designated as eligible participants in the Shared Savings Program. While these entities may not independently form an ACO, they and other Medicare enrolled providers and suppliers are permitted to participate in ACOs with one or more of the ACO eligible participants. CMS has not addressed what role, if any, parent organizations of multiple hospital systems may play in the ACO structure. In addition, Medicare providers that participate in other Medicare programs that include shared savings may not also participate in the Shared Savings Program as an ACO. Finally, primary care physicians may only participate in one ACO.