Final Rule Creates Pathways to Success for the Medicare Shared Savings Program

On December 21, 2018, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that sets a new direction for the Medicare Shared Savings Program (Shared Savings Program). Referred to as “Pathways to Success,” this new direction for the Shared Savings Program redesigns the participation options available under the program to encourage Accountable Care Organizations (ACOs) to transition to performance based risk more quickly and, for eligible ACOs, incrementally, to increase savings for the Trust Funds. The policies also include changes to address the additional tools and flexibilities for ACOs established by the Bipartisan Budget Act of 2018 (BBA of 2018), specifically in the areas of new beneficiary incentives, telehealth services, and choice of beneficiary assignment methodology. We note that this final rule also finalizes the program’s policy for extreme and uncontrollable circumstances for performance year 2017, initially established with an interim final rule with comment period in December 2017.

In connection with the program redesign, CMS will offer an application cycle for a one-time new agreement period start date of July 1, 2019. This avoids an interruption in participation by ACOs with a participation agreement ending on December 31, 2018, that elected to extend their current agreement period for an additional 6-month performance year and apply for a new agreement period beginning on July 1, 2019. The July 1, 2019 start date also provides new and currently participating ACOs time to review new policies, make business and investment decisions, and complete and submit a Shared Savings Program application for the agreement period beginning on July 1, 2019, under the BASIC or ENHANCED track. New and existing ACOs interested in applying to the new BASIC or ENHANCED track must complete the non-binding Notice of Intent to Apply (NOIA), which will be available from January 2, 2019, through January 18, 2019. The application submission due dates will be posted on the Shared Savings Program website in the coming days. See the Application Types & Process webpage for eligibility requirements, key timelines, and detailed instructions on the submission process.

CMS will resume the usual annual application cycle for agreement periods starting on January 1, 2020, and in subsequent years.

This fact sheet summarizes the major changes that are included in the Pathways to Success final rule. Additionally, earlier this year, CMS finalized certain changes to the Shared Savings Program as part of the Calendar Year 2019 Physician Fee Schedule final rule (herein referred to as the November 2018 final rule, 83 FR 59452), in order to ensure continuity of participation, finalize time-sensitive program policy changes for currently participating ACOs, and streamline the ACO core quality measure set to reduce burden and encourage better outcomes. These final policies included the availability of an optional 6-month extension for ACOs whose agreement periods would otherwise expire on December 31, 2018; the methodology for determining financial and quality performance for this 6-month performance year from January 1, 2019, through June 30, 2019; a reduction in the Shared Savings Program core quality measure set by eight measures and a new Certified EHR Technology (CEHRT) threshold criterion to determine ACOs’ eligibility for program participation in order to promote interoperability among ACO providers/suppliers; refinements to the voluntary alignment process, as authorized under the Bipartisan Budget Act of 2018, to allow beneficiaries greater flexibility in selecting their primary care clinician, nurse practitioner, physician assistant, clinical nurse specialist and in the use of that selection for purposes of assigning the beneficiary to an ACO if the clinician they align with is participating in an ACO; policies to address the impact of extreme and uncontrollable circumstances on ACOs for performance year 2018 and subsequent years; and revisions to the definition of primary care services used in beneficiary assignment to incorporate advance care planning codes, administration of health risk assessment service codes, and codes for annual depression screening, alcohol misuse screening and alcohol misuse counseling.

Currently, Shared Savings Program ACOs serve more than 10.5 million Medicare fee-for-service (FFS) beneficiaries. ACOs are an important tool for moving CMS’s payment systems away from paying for volume and towards paying for value and outcomes, as ACOs are held accountable for the total cost of care and quality outcomes for the assigned beneficiary patient population they serve. ACOs receive a share of any savings they generate if they meet quality performance and program participation requirements, and ACOs participating in a two-sided model must also pay CMS back if spending exceeds the benchmark. ACOs facilitate coordination and cooperation among health care providers to improve the quality of care for Medicare FFS beneficiaries and reduce the rate of growth in expenditures under Medicare Parts A and B.

Prior to the redesign of the Shared Savings Program, the program included three Tracks. The vast majority of Shared Savings Program ACOs have chosen to enter and maximize the allowed time under Track 1, the one-sided, shared savings-only model, under which eligible ACOs receive a share of any savings under their benchmark but are not required to pay back a share of spending over the benchmark. Some Track 1 ACOs are increasing Medicare spending (and therefore generating losses) while having access to waivers of certain federal requirements in connection with their participation in the program.

Overall, the ACOs in the prior two‑sided models (Track 2 and Track 3), under which eligible ACOs share in a larger portion of any savings under their benchmark but are required to share losses if spending exceeds the benchmark, have shown savings to the Medicare program and are improving quality. Further, we have observed that low revenue ACOs (which are typically composed of physician practices and rural hospitals) outperform high revenue ACOs (typically ACOs that include hospitals). However, participation in performance-based risk Tracks remains modest, and some low revenue ACOs lack a pathway to transition from a one-sided model to more modest levels of performance-based risk that recognize they typically have less control over the Medicare FFS expenditures for their assigned beneficiaries.

Our early experience with the Medicare Track 1+ ACO Model, a time-limited Center for Medicare and Medicaid Innovation (Innovation Center) model which began on January 1, 2018, demonstrates that the availability of a lower-risk, two-sided model is an effective way for more ACOs to rapidly progress ACOs to performance-based risk. The redesign of the Shared Savings Program builds on what we have learned from Track 1+ and puts the program on a path towards achieving a more measurable move to value, demonstrating savings to the Medicare program, and promoting a competitive and accountable marketplace.

Promoting accountability by accelerating the move to two-sided risk while promoting competition by encouraging participation by low revenue ACOs

New BASIC and ENHANCED Tracks and 5-Year Agreement Periods
This final rule redesigns the program’s participation options to offer, for agreement periods beginning on July 1, 2019 and in subsequent years, two tracks that eligible ACOs would enter into for an agreement period of not less than 5 years:

(1) BASIC track, which would allow eligible ACOs to begin under a one-sided model and incrementally phase-in higher levels of risk that, at the highest level, would qualify as an Advanced Alternative Payment Model (APM) under the Quality Payment Program, and

(2) ENHANCED track, based on the program’s existing Track 3, which provides additional tools and flexibility for ACOs that take on the highest level of risk and potential reward. Appendix A summarizes the characteristics of the participation options.

In response to commenters’ suggestions, the policies we are finalizing include modifications to our proposal in order to allow all ACOs participating in the BASIC track’s glide path the opportunity for greater potential reward through relatively higher shared savings rates based on quality performance: up to 40 percent for one-sided models (Levels A and B) and up to 50 percent for all two-sided models (Levels, C, D, and E).

We are streamlining the program by discontinuing Track 1 and Track 2 and the deferred renewal option. Further, the Innovation Center is discontinuing future application cycles for the Track 1+ Model. With the participation options and program flexibilities available under the program redesign, we believe it would be redundant and unnecessarily complex to continue offering Track 2 or the Track 1+ ACO Model.

The BASIC track’s glide path offers an incremental approach to transitioning eligible ACOs to higher levels of risk and potential reward. The glide path includes 5 levels: a one-sided model available only for the first two years to most eligible ACOs (ACOs identified as having previously participated in the program under Track 1 would be restricted to a single year under a one-sided model, but new, low revenue ACOs that are not identified as re-entering ACOs would be allowed up to three years under a one-sided model); and three levels of progressively higher risk in years 3 through 5 of the agreement period.

Under Levels A and B of the glide path, an ACO’s maximum shared savings rate under a one-sided model will be 40 percent based on quality performance, applicable to first dollar shared savings after the ACO meets the minimum savings rate. Under Levels C, D, and E of the glide path, an ACO can earn up to a maximum 50 percent sharing rate under a two-sided model, based on quality performance. The glide path concludes with a maximum level of risk that qualifies as an Advanced APM for purposes of the Quality Payment Program.

ACOs in the BASIC track glide path generally will be automatically advanced at the start of each performance year along the progression of risk/reward levels or could elect to move more quickly to a higher level of risk/reward, over the course of their agreement period. While the typical agreement period will be 5 years in duration, with 12-month performance years based on calendar years, ACOs entering an agreement period beginning on July 1, 2019, would participate in a first performance year of 6 months for the period from July 2019 – December 2019 plus 5 additional years in their first agreement period. For ACOs entering the BASIC track’s glide path for an agreement period beginning on July 1, 2019, the first automatic advancement occur at the start of performance year 2021. Additionally, a new, low revenue ACO in the glide path that is not identified as a re-entering ACO will be permitted to choose to remain at Level B for an additional year, in exchange for agreeing to progress immediately to Level E at the start of the fourth performance year (or fifth, in the case of an agreement period starting on July 1, 2019).

The eligibility criteria for the BASIC track and ENHANCED track recognize differences in ACO participants’ Medicare FFS revenue and the experience of the ACO and its ACO participants with performance-based risk Medicare ACO initiatives. We will determine whether an ACO is a low revenue ACO versus a high revenue ACO, and whether an ACO is experienced or inexperienced with performance-based risk Medicare ACO initiatives. Based on stakeholder feedback, we have increased the threshold for low revenue ACOs to include ACOs with ACO participants’ total Medicare Parts A and B FFS revenue of less than 35 percent of the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries to capture additional ACOs, especially those that include clinics or smaller institutional providers, including rural ACOs. Ultimately, all ACOs are expected to transition to the ENHANCED track under the redesigned program. Low revenue ACOs are allowed additional time under lower-risk options within the BASIC track, while ACOs identified as high revenue are required to transition to the ENHANCED track more quickly.

Low revenue ACOs and high revenue ACOs determined to be inexperienced with performance-based Medicare ACO initiatives may enter an agreement period under the BASIC track’s glide path. In response to commenters’ suggestions, we are also finalizing an option for new low revenue ACOs not identified as re-entering ACOs (and therefore inexperienced with performance-based risk Medicare ACO initiatives) to participate for up to 3 years (or 3.5 years in the case of ACOs entering an agreement period beginning on July 1, 2019) under a one-sided model of the BASIC track’s glide path before transitioning to Level E (the highest level of risk and potential reward under the BASIC track). Under this participation option, the ACO would enter the glide path at Level A and automatically advance to Level B. Prior to the automatic advancement of the ACO to Level C, an eligible ACO may elect to remain in Level B for another performance year, and then be automatically advanced to Level E for the remaining two years of its agreement period.

Low revenue ACOs identified as experienced with performance-based risk Medicare ACO initiatives, such as ACOs identified as having previously participated in the program under Track 2, Track 3 or the Track 1+ Model, are restricted to participating in either the BASIC track’s highest level of risk and reward or the ENHANCED track. ACOs identified as low revenue can participate in the BASIC track for up to two agreement periods. For instance, a low revenue ACO that participates in the BASIC track’s glide path could renew under the BASIC track, at the highest level of risk and reward, for a second agreement period.

High revenue ACOs determined to be inexperienced with performance-based risk Medicare ACO initiatives would be limited to no more than a single agreement period under the BASIC track. High revenue ACOs determined to be experienced with performance-based risk Medicare ACO initiatives would be restricted to participating in the ENHANCED track.

In response to commenters’ suggestions, we are also finalizing a limited exception that will allow high revenue ACOs that transitioned to the Track 1+ Model within their current agreement period (therefore ACOs with a first or second agreement period start date in 2016 or 2017 that entered the Track 1+ Model in 2018), the option to renew for one agreement period under Level E of the BASIC track, beginning on July 1, 2019 or January 1, 2020, respectively, even though such ACOs will qualify as experienced with performance-based risk Medicare ACO initiatives based on their participation in the Track 1+ Model.

July 1, 2019 Start Date Allows ACOs to Prepare
In order to facilitate ACOs’ transition to the new BASIC track or ENHANCED track, we are finalizing a special one-time July 1, 2019 agreement period start date in lieu of a January 1, 2019 agreement period start date. As facilitated by the finalization of the 6-month extension period in the November 2018 final rule, 90 percent of eligible ACOs with participation agreements that would otherwise end on December 31, 2018, have elected to extend their agreement period by a 6-month performance year from January 1, 2019, to June 30, 2019. In this final rule, we are finalizing the methodology for determining financial and quality performance for the 6-month performance year from July 1, 2019, through December 31, 2019. We are also finalizing changes to the program’s regulations to remove the “sit out” period after termination, which includes the flexibility for ACOs currently in a 3-year agreement period to voluntarily terminate their existing participation agreement, effective June 30, 2019, and enter a new agreement period starting on July 1, 2019, under either the BASIC track (if eligible) or the ENHANCED track. We will reconcile these ACOs’ performance for the first half of 2019 (if applicable), and second half of 2019 for ACOs entering agreements beginning on July 1, 2019, separately by considering financial and quality performance on a calendar year basis, and then pro-rating savings and losses to reflect participation for one-half of the year.

Updates to Repayment Mechanism Requirements for Two-sided Model ACOs
The final rule includes modifications to the proposed repayment mechanism arrangement requirements for ACOs in performance-based risk tracks to reduce burden. In response to commenters’ suggestions, both BASIC and ENHANCED track ACOs may have a lower repayment mechanism amount that is based on a percentage of ACO participants’ Medicare Part A and B revenue. We are finalizing our proposal to annually recalculate the amount that must be guaranteed by the repayment mechanism based on ACO participant list changes, but we are increasing the threshold that must be satisfied before CMS will require the ACO to increase its repayment mechanism amount. Under the final rule, an ACO will not have to increase the amount of its repayment mechanism unless the difference between the recalculated repayment mechanism amounts exceeds the existing repayment mechanism amount by at least 50% or $1,000,000. We are reducing the period of time after the end of the agreement period that the repayment mechanism must be in effect from 24 months to 12 months, and we are permitting all ACOs to establish repayment mechanisms for a shorter duration as long as the arrangement provides for automatic annual renewal. We are finalizing our proposal to permit renewing ACOs to maintain a single, existing repayment mechanism arrangement to support its ability to repay shared losses in the new agreement period. We are also establishing new requirements regarding the issuing institutions for a repayment mechanism arrangement.

Ensuring rigorous benchmarking by using regional benchmarks for all agreement periods
For each performance year, an ACO’s spending is compared to its benchmark to determine if the ACO receives shared savings from CMS or owes shared losses to CMS. We are finalizing revisions to the program’s benchmarking methodology, which incorporates differing amounts of ACO historical experience and regional performance depending on the ACO’s agreement period. The redesign of the program will provide for more accurate benchmarks for ACOs. These benchmarks will protect the Trust Funds by ensuring that ACOs do not unduly benefit from any one aspect of the benchmark calculations, while also helping to ensure the program continues to remain attractive to ACOs, especially those caring for the most complex and highest risk patients who could benefit from high-quality, coordinated care from an ACO.

The revised benchmarking methodology incorporates factors based on regional FFS expenditures in establishing the ACO’s historical benchmark beginning with the ACO’s first agreement period, rather than applying this approach starting in the ACO’s second or subsequent agreement period. More generally, the revised methodology will mitigate the effects of excessive positive or negative regional adjustments used to establish and reset the benchmark by: (1) reducing the maximum weight used in calculating the regional adjustment from 70 percent to 50 percent, and (2) capping the regional adjustment amount using a flat dollar amount equal to 5 percent of national Medicare FFS per capita expenditures. In response to commenters’ feedback, the policies we are finalizing include modifications to our original proposal to reduce the initial weight applied to the regional adjustment for ACOs with historical expenditures above their regional service area to 15 percent and to slow the phase-in of a higher weight for such ACOs. The finalized approach also allows for modest risk score growth of up to positive 3 percent over the length of the agreement period, replacing the methodology for annually risk adjusting the benchmark for newly assigned and continuously assigned populations of beneficiaries. However, we are not finalizing the negative 3 percent limit on risk score decreases.

In calculating the regional trend and update factors, we are finalizing our proposal to use a blend of regional and national growth rates based on Medicare FFS expenditures with increasing weight placed on the national component of the blend as the ACO’s penetration in its regional service area increases. This approach is expected to result in more favorable trend factors for ACOs with high penetration in a regional service area with lower spending growth compared to the nation and less favorable trend factors for ACOs with high penetration in a regional service area with higher spending growth compared to the nation. This approach is expected to have little impact on ACOs with low to medium penetration in their regional service area.

Use of factors based on regional FFS expenditures in establishing the benchmark starting in an ACO’s first agreement period will allow the benchmark to be a more accurate representation of the ACO’s costs in relation to its localized market (regional service area), and should strengthen the incentives of the program to drive meaningful change by ACOs. Further, allowing agreement periods of at least 5 years, as opposed to 3-year agreement periods, should provide greater predictability for benchmarks by reducing the frequency of benchmark rebasing, and therefore provide greater opportunity for ACOs to achieve savings against these benchmarks. In combination, we believe these policies will protect the Trust Funds and provide more accurate and predictable benchmarks, while creating incentives for ACOs to transition to performance-based risk.

Ensure program integrity by reducing opportunities for gaming
We are finalizing a combination of policies to strengthen the integrity of the program: using past participation in performance-based risk Medicare ACO initiatives by the ACO legal entity and by its ACO participants to determine available participation options; monitoring for financial performance and permitting termination of ACOs with multiple years of poor financial performance; modifying application review criteria to permit CMS to consider the ACO’s financial performance and failure to meet quality performance standards in multiple years of the previous agreement period; and holding terminated ACOs in two-sided models accountable for pro-rated shared losses. ACOs that voluntarily terminate their participation would be accountable for pro-rated shared losses if they terminate after June 30 of a 12-month performance year. We would hold involuntarily terminated ACOs accountable for pro-rated shared losses incurred during the portion of the performance year prior to their termination.

Promote regulatory flexibility to allow ACOs to innovate

Annual Choice of Assignment Methodology: To implement a provision of the BBA of 2018 to provide ACOs with greater choice of beneficiary assignment methodology, BASIC and ENHANCED track ACOs will have the flexibility to elect prospective assignment or preliminary prospective assignment with retrospective reconciliation prior to the start of each agreement period, and to change that selection for each subsequent performance year of the agreement period.

Expand Use of Telehealth for Practitioners in ACOs in Performance-Based Risk Arrangements: To support ACOs’ coordination of care across settings, we finalized regulations which govern the use of telehealth services by physicians and practitioners in certain ACOs under performance-based risk, consistent with the requirements of the BBA of 2018. Under this approach, beginning in January 1, 2020, eligible physicians and practitioners in applicable ACOs in performance-based risk tracks will receive payment for telehealth services furnished to prospectively assigned beneficiaries even if the otherwise applicable geographic limitations are not met, including when the beneficiary’s home is the originating site. This policy applies to ACOs participating in the BASIC track (under a two-sided model) and ENHANCED track (including current Track 3 ACOs), when the ACO elects prospective assignment, as well as ACOs in the Track 1+ Model.

Expand Skilled Nursing Facility (SNF) 3-Day Rule Waiver Eligibility: ACOs in performance-based risk within the BASIC track’s glide path or under the ENHANCED track will be eligible to apply for a SNF 3-day rule waiver, regardless of their choice of prospective assignment or preliminary prospective assignment with retrospective reconciliation, to support ACO efforts to increase quality and decrease costs. We also amended the existing SNF 3-day rule waiver to allow critical access hospitals and other small, rural hospitals operating under a swing bed agreement to be eligible to partner with eligible ACOs as SNF affiliates for purposes of the SNF 3-day rule waiver.

Promoting beneficiary engagement by incentivizing beneficiaries to achieve and maintain good health

Beneficiary Incentive Programs: To encourage patient engagement, ACOs under certain two-sided models will have the opportunity to apply to operate a beneficiary incentive program. Consistent with the BBA of 2018, an ACO approved to operate a beneficiary incentive program will provide an incentive payment of up to $20 to an assigned beneficiary for each qualifying primary care service that the beneficiary receives from certain ACO professionals, or from a Federally Qualified Health Center or Rural Health Clinic. Further, we clarify that under the program’s existing regulations, we consider vouchers (certificates that can be used only for particular goods or services, including certain gift cards that are in the nature of a voucher), to be “in-kind items or services” that may be provided to beneficiaries so long as the voucher meets all other program requirements. For example, the items and services accessible through use of the voucher must have a reasonable connection to the beneficiary’s medical care and be preventive care items or services or advance a clinical goal for the beneficiary, including adherence to a treatment or drug regime, adherence to a follow-up care plan, or management of a chronic disease or condition.

Beneficiary Notification: To further empower beneficiary choice, we are finalizing requirements to strengthen beneficiary notifications. An ACO must ensure that Medicare FFS beneficiaries are notified about all of the following: (1) its ACO providers/suppliers are participating in the Shared Savings Program; (2) the beneficiary’s opportunity to decline claims data sharing; and (3) the beneficiary’s ability to, and the process by which, he or she may identify or change identification of the individual he or she designated as their primary clinician for purposes of voluntary alignment. In addition, an ACO that operates a beneficiary incentive program must ensure that its assigned FFS beneficiaries are notified of the availability of the beneficiary incentive program. ACOs or their ACO participants must provide such notifications prior to or at a beneficiary’s first primary care service visit of each performance year. To mitigate the burden of these additional notifications, we are developing template notices for ACOs and ACO participants to use.

Supplementing Claims-based Assignment with Beneficiary Opt-in: We also sought comment on an alternative beneficiary assignment methodology to make the assignment methodology more patient-centered, and strengthen the engagement of beneficiaries in their health care, under which we would allow ACOs to elect an “opt-in” methodology. Under this approach, a beneficiary would be assigned to an ACO if the beneficiary “opted-in” to the ACO. A hybrid approach was also discussed that would supplement the “opt in” approach with a modified claims-based assignment approach that would focus on the most complex patients, such as high risk patients or those receiving care for chronic conditions. We appreciate the commenters’ feedback on these alternatives and we will consider these comments to help inform the development of any future opt-in based assignment methodology.

Coordination of pharmacy care for ACO beneficiaries
Lastly, in the final rule we discuss comments received in response to our request for input on how Medicare ACOs and the sponsors of stand-alone Part D prescription drug plans (Part D sponsors) could be encouraged to collaborate so as to improve the coordination of pharmacy care for Medicare FFS beneficiaries.

Please visit the Federal Register website and the CMS website for more information.

See Appendix Table on Press Release.