The Obama administration on Thursday bowed to health industry concerns about its plans for Medicare accountable care organizations, making it easier for doctors and hospitals to participate in the program designed to lower medical costs.

Physician and hospital groups applauded the changes in the final ACO rule announced by officials at the Centers for Medicare and Medicaid Services. The administration is betting the new design will entice scores of health care providers to form into an untested health care model next year.

“We have been able to fine tune and improve the rules for a range of stakeholders, providers and patients,” said Dr. Donald Berwick, the CMS administrator, in a conference call with reporters.

ACOs are a key provision in the health law to slow rising health costs while delivering high-quality care to Medicare beneficiaries. They are designed to change the incentives that influence how doctors and hospitals operate.

Today, most hospitals and doctors get paid more by delivering more, not necessarily better, care. ACOs will reward providers for holding down costs and meeting certain quality measures, such as reducing hospital readmissions or emergency room visits. In many ways, ACOs aim to replicate the much touted models of care at the Mayo Clinic in Rochester, Minn., and the Geisinger Health System in Pennsylvania, where hospitals and doctors coordinate their efforts within the same organization.

The ACO provision’s inclusion in the 2010 health law sparked a frenzied race by providers to join in as quickly as possible. But when the proposed regulation for the program was announced in March, excitement fizzled. George Roman, senior director of health policy at the American Medical Group Association, which represents nearly 400 large provider organizations, said Thursday’s changes are “music to my ears. … We asked for almost all of these things.”

He said there’s likely to be more interest among AMGA members now than in March, when the group said more than 90 percent of its members would not participate under that rule.

The administration made several concessions to the health industry including:

–Providers will be able to participate in an ACO and share in savings with Medicare without risk of losing money. ACOs will be able to start sharing in the savings earlier rather than letting Medicare retain it all initially.

–The number of quality measures that ACOs will have to meet to qualify for performance bonuses was reduced from 65 to 33.

–The ACOs will also be told when they form which Medicare beneficiaries are likely to be part of their system. Under the earlier rule, ACOs would not know which patients were in the ACO until their contract ended.

–Community health centers and rural health clinics will be allowed to lead ACOs. They were left out of the prior proposal.

CMS also relaxed the timetable for the launch of the ACOs with groups allowed to apply throughout 2012.

To entice providers, CMS said it will give physician-owned and rural providers early access to some of the expected savings — $170 million — so that they can use the cash to start ACOs.

“We are very pleased at the number of significant changes in rules. … they have made the program look more attractive,” said Linda Fishman, senior vice president of the American Hospital Association. “But it remains to be seen how many hospitals will find these changes to be motivation enough to enter the program.”

Melinda Hatton, general counsel for the association, said while the ACO model is the future of health care, the legal challenges to the health law have made hospitals skittish about jumping in. “The uncertainty isn’t useful for moving the field ahead,” she said.

Michael Millenson, president of Health Quality Advisors LLC, compared CMS’ rule on ACOs to a poker game. The initial proposed rule, he said, was “too complicated, the money wasn’t very good and the cost to enter the game was way too high. What they’ve done in the final rule is they’ve simplified the rules, they’ve sweetened the pot and they’ve opened up a few new chairs.”

Also Thursday, the Justice Department and Federal Trade Commission released their final policy statement on ACOs and antitrust issues. The new policy eliminated the mandatory review for a new ACO, a decision applauded by the American Medical Association. But CMS encouraged provider groups to voluntarily seek a Justice Department opinion. The policy also puts the responsibility for gathering market share data on the government, rather than the providers, says David Balto, an antitrust attorney and a senior fellow a the Center for American Progress, a progressive Washington think tank.

Nonetheless, health insurers said they are still worried that groups of hospitals and doctors that form an ACO will gain too much clout and that will allow them to drive up prices to private insurers.

“We remain concerned about the trend of provider consolidation that drives up medical prices and results in additional cost-shifting to families and employers with private coverage,” the trade group, America’s Health Insurance Plans, said in a statement. “Doing away with the mandatory review process raises concerns that provider market power may not be scrutinized sufficiently, potentially increasing health care costs for consumers and employers.”

The administration has modest goals for the program initially.

Regulators estimate that between 50 and 270 ACOs would be formed in the next three years, affecting the care of 2 million of the 47 million Medicare beneficiaries.

Nonetheless, Jeff Ruggiero, a lawyer at Arnold & Porter and general counsel to the Queens County Medical Society in New York, says that “it’s still going to be arduous for providers to be part of this program, in the timeline provided.” And while he’s hopeful about the new rule, he said, the delay caused by the disappointing proposed rule in March, “did worse than waste time. It really stymied the development of ACOs.” It will now take time for the momentum to build again.

Here’s how it would work for beneficiaries: They will be assigned to an ACO based on who their doctor is. If a patient’s doctor is part of an ACO, that patient is automatically included, although the beneficiaries can choose to not be included by opting to keep their records outside the ACO system.

Unlike beneficiaries in Medicare HMOs, patients in ACOs are free to visit any health care provider, just as they are in the traditional Medicare program.

Actuaries for CMS anticipate that the program could save Medicare $940 million over four years — a drop in the bucket compared to the $2 trillion Medicare anticipates spending during this period. ACO proponents, however, hope that the new organizations would proliferate and be expanded both for Medicare beneficiaries and privately insured patients.

“Accountable Care Organizations can represent a major step forward in transforming Medicare … so it can help assure high quality seamless and less costly care,” said Berwick. “This is not just about Medicare, ACOs can be a step forward for the whole health system.”

Blair Childs, senior vice president at Premier, an alliance that has 77 integrated health systems that are interested in forming ACOs, said the new rule is going to have a substantial impact on the private market as well.

“The biggest impediment historically is that the old Medicare (fee-for-service) program caused people to stay in the old world” of payments, he said. “No one wanted to make the leap when all of the incentives pulled you in the other directions.” Now, the Medicare program will be aligned with where the private market was already heading, he said.