Accountable Care Organization (ACO) Bond - CMS – Medicare Shared Savings Program in All States
Table of Contents
Brief Summary
An ACO moving into two-sided risk has to show CMS it can repay shared losses before the agreement period starts. A surety bond does that without locking cash in escrow or tying up a bank credit line, and CMS publishes its own bond template, so a bond written on that form usually clears review faster.
Under 42 CFR 425.204(f), an Accountable Care Organization in a two-sided model of the Medicare Shared Savings Program must post a repayment mechanism, and a surety bond from a company on the Treasury's List of Certified Companies is one of three accepted forms. CMS sets the amount, which for BASIC and ENHANCED track ACOs is the lesser of 0.5 percent of assigned beneficiary Parts An and B spending or 1 percent of ACO participant Parts An and B revenue. CMS is the sole obligee.
We can help with all All States bonds!
How to Apply for an Accountable Care Organization (ACO) Bond:
- Confirm the ACO is entering, or moving into, a two-sided level: BASIC Levels C to E, ENHANCED, or Track 2.
- Build the draft bond in ACO-MS with the Repayment Mechanism Generator, using the CMS Appendix C surety bond template.
- Send the draft to a surety on the Treasury's List of Certified Companies, with no amount filled in yet.
- Submit the draft in ACO-MS during the application or change request window and answer any deficiency notices.
- Finalize the penal sum at no less than the final amount CMS releases with Phase 1 RFI-2.
- Submit the executed bond in ACO-MS with the surety's notarized power of attorney or electronic seal.
Detailed Information About the All States Accountable Care Organization (ACO) Bond:
The amount comes from CMS, not from a price list
There is no flat bond amount for an ACO. Under 42 CFR 425.204(f)(4)(ii), a BASIC or ENHANCED track ACO must carry the lesser of two figures. The first is one half of one percent of total per capita Medicare Parts An and B fee for service expenditures for its assigned beneficiaries. The second is one percent of the total Parts An and B fee for service revenue of its ACO participants. Both use the most recent calendar year with 12 months of data. A legacy Track 2 ACO carries at least 1 percent of assigned beneficiary expenditures instead.
CMS posts an estimate during the first request for information round of the application cycle and releases the final amount with the second round. The final figure is built from the participant list as it stands at the end of the first round, so participants you want left out of the calculation have to be removed by then. CMS recalculates the amount each later performance year, and if the new figure tops the existing bond by $1,000,000 or more, the ACO gets 90 days from written notice to raise it.
Who has to post it
Only ACOs taking on downside risk. That means Levels C, D and E of the BASIC track, the ENHANCED track and Track 2. An ACO in Level An or B of the BASIC track does not need a repayment mechanism until the performance year it elects, or is automatically moved, into a two-sided level. It must show an adequate mechanism before that year begins.
What the bond has to say
CMS publishes a surety bond template as Appendix C of its Repayment Mechanism Arrangements Guidance. Bonds that depart from the template take longer to review. The template names CMS, 7500 Security Boulevard, Mail Stop C5-15-12, Baltimore, MD 21244, as sole obligee and the ACO legal entity name from ACO-MS as principal. DBA names are not allowed unless the legal entity name in ACO-MS includes them. The surety agrees to pay shared losses within 30 days of written notice from CMS and not to contest the amount owed. The bond may not say the surety's aggregate liability is noncumulative.
How long it runs
The bond must stay in force for the whole time the ACO is in a two-sided model plus 12 months after the agreement period ends. It can cover that full span up front, or cover at least the first two two-sided performance years with automatic 12 month extensions each year. If CMS draws on it, the ACO must replenish it within 90 days. Escrow and a letter of credit are the other two options, and an ACO may combine them with a bond.
Eligibility and Requirements for an All States Accountable Care Organization (ACO) Bond:
- Surety listed on the U.S. Treasury's List of Certified (Surety Bond) Companies.
- Centers for Medicare & Medicaid Services named as sole obligee at the Baltimore Mail Stop C5-15-12 address.
- ACO legal entity name exactly as shown in ACO-MS.
- Penal sum at least equal to the CMS calculated repayment mechanism amount.
- Term covering two-sided participation plus 12 months, or two years with automatic annual extensions.
- Bond fees paid by the ACO, never out of the penal sum.
All States Accountable Care Organization (ACO) Bond FAQs:
No. Under 42 CFR 425.204(f)(3)(iii), a Level An or B ACO shows its repayment mechanism before the first performance year in which it elects or is automatically moved into a two-sided level.
CMS calculates it. For BASIC and ENHANCED track ACOs it is the lesser of 0.5 percent of assigned beneficiary Parts An and B spending or 1 percent of ACO participant Parts An and B revenue. CMS gives an estimate in Phase 1 RFI-1 and the final amount in Phase 1 RFI-2.
Yes. CMS recalculates it each performance year. If the new amount exceeds your bond by $1,000,000 or more, you have 90 days from written notice to increase it.
Yes, through a rider that references the original bond number, extends the term to cover the new agreement period plus 12 months and brings the amount up to the CMS figure for the new period.
No. If shared losses exceed the bond, the ACO pays the balance from other funds.
