On December 31, 2018, the Centers for Medicare and Medicaid Services (CMS) published a Final Rule that redesigns the Medicare Shared Savings Program (MSSP). The rule implementing this redesign, titled “Pathways to Success,” requires Accountable Care Organizations (ACOs) participating in the MSSP to transition more quickly to two-sided models wherein ACOs are eligible to receive shared savings but are also responsible for shared losses. Prior to the changes contained in the Final Rule, ACOs were able to participate in the MSSP for a longer period under one-sided models in which they are eligible for shared savings but are not at risk for losses. CMS originally proposed the MSSP program changes in August 2018 and now adopts most of them in the Final Rule, but with some modifications to address concerns raised in comments received on the proposed rule. 

In describing its rationale for the program redesign, CMS explains that it analyzed MSSP data since the program’s inception in 2012 and concluded that ACOs improve quality and lower costs when they participate in two-sided models. CMS acknowledges in the Final Rule that implementing the Pathways to Success rule may discourage new ACO participation, but notes that two-sided models have greater potential to promote accountability for patient populations, encourage investment in redesigned care processes, and induce more meaningful systematic change in healthcare delivery.

The major features of the Final Rule are summarized below.

New BASIC and ENHANCED Participation Tracks

CMS replaces the MSSP’s existing Tracks 1, 1+, 2, and 3 with two new tracks, “BASIC” and “ENHANCED.” The BASIC track replaces Tracks 1, 1+, and 2, while the ENHANCED track replaces Track 3. The BASIC track contains five participation “levels” and offers ACOs a “glide path” to progress from the one-sided models to models with higher risk and reward during the MSSP’s new five-year agreement period. The ENHANCED track is a two-sided model for ACOs to take on the highest level of risk and reward. Generally, CMS advances the ACOs in the BASIC track each year to the next level, and expects all ACOs to eventually participate in the ENHANCED track.

Each level within the BASIC and ENHANCED tracks contains a different shared savings and shared loss rate. CMS originally proposed BASIC track sharing rates of 25 percent for Levels A and B, 30 percent for Level C, 40 percent for Level D, and 50 percent for Level E. However, in the Final Rule, CMS selects higher shared savings rates of 40 percent for Levels A and B, and 50 percent for Levels C, D and E.  CMS finalizes the original proposed loss sharing rates of 30 percent for Levels C, D and E. CMS also finalizes its original proposal of the ENHANCED track’s shared savings rate of 75 percent and shared loss rate of 40 to 75 percent.

An ACO’s options for selecting between the BASIC and ENHANCED tracks – and levels within those tracks – are determined by the ACO’s size (measured in revenue) and experience level. CMS originally proposed to define “low revenue ACO” to mean an ACO whose total Medicare fee-for-service revenue is less than 25 percent of its total Medicare fee-for-service expenditures for the most recent calendar year. In the Final Rule, CMS increased this threshold to 35 percent to capture additional ACOs into the definition of low revenue ACOs, such as rural providers, smaller providers or clinics. CMS limits an ACO’s participation in each track to a certain number of years depending on the ACO’s revenue and experience levels.  

• Low revenue and inexperienced ACOs may participate in a one-sided model under the BASIC track for up to three performance years. (If these ACOs start an agreement period on July 1, 2019, they may participate in a one-sided model under the BASIC track for up to four performance years.)

• Low revenue and experienced ACOs may participate only in Level E of the BASIC track or in the ENHANCED track.

• High revenue and inexperienced ACOs may participate in the BASIC track for no more than a single agreement period.

• High revenue and experienced ACOs may participate only in the ENHANCED track. (There is a limited exception for high revenue Track 1+ ACOs to renew MSSP participation for one agreement period under Level E of the BASIC track.)

CMS further limits all low revenue ACOs to participating in the BASIC track for no more than two agreement periods, and requires ACOs that renew for a second agreement period in the BASIC track to progress on the glide path and participate at Level E, “the highest level of risk and reward” within the BASIC track, for the second agreement period.

Application Timeline and Agreement Term 

ACOs may indicate their interest to apply for the BASIC or ENHANCED track through the non-binding Notice of Intent to Apply (NOIA), which is available from January 2, 2019, through January 18, 2019.  The final MSSP application submission deadline for the agreement period start date of July 1, 2019 is February 22, 2019. CMS will resume the usual annual application cycle for agreement periods starting on January 1, 2020, and each January 1 thereafter.

ACOs with participation agreements ending on December 31, 2018, had the option to extend their current participation agreement for an additional six months before applying for a new participation agreement commencing July 1, 2019. ACOs with an existing participation agreement ending in 2019 may terminate their existing participation agreement and enter a new agreement to commence as early as July 1, 2019.

Agreement periods will be five years, except that ACOs beginning a new agreement on July 1, 2019, will have an initial agreement period for five years and six months.

Beneficiary Assignment Methodologies

Under the Final Rule, ACOs in either the BASIC or the ENHANCED track would be able to select their beneficiary assignment methodology from either the preliminary prospective assignment with retrospective reconciliation methodology, or the prospective assignment methodology. Beneficiaries assigned to an ACO remain free to seek services wherever they choose and are also able to select any ACO professional (regardless of specialty) during the voluntary alignment process.

Repayment Mechanism Rules

CMS is also finalizing the rules surrounding the repayment mechanisms required for ACOs participating in two-sided models. Such rules include shortening the duration of the repayment mechanism and limiting the repayment mechanism amount to a predetermined fee-for-service expenditure or revenue amount. In particular, CMS originally proposed a repayment mechanism amount for the ENHANCED track of at least 1 percent of the ACO’s total per capita Medicare fee-for-service expenditures. In the Final Rule, however, CMS finalizes the repayment mechanism amount for BASIC and ENHANCED track ACOs as the lesser of 1 percent of the ACO’s total per capita Medicare fee-for-service expenditures, or 2 percent of the ACO’s total Medicare fee-for-service revenue.   

Change in Benchmarking Methodology

Shared savings and losses under the MSSP are determined by comparing actual Medicare expenditures for an ACO’s attributed beneficiaries against a financial benchmark. In the Final Rule, CMS finalized revisions to the benchmarking methodology to incorporate differing amounts of ACO historical experience and regional performance, depending on the ACO’s agreement period and beneficiary population. In particular, CMS originally proposed to adjust the historical benchmark for an ACO by 25 percent if that ACO had higher fee-for-service expenditures than those of its regional service area. However, in the Final Rule, CMS decreases this adjustment percentage to 15 percent. CMS’s policy intent is to prevent ACOs from unduly benefiting from any one aspect of the benchmark calculations, while also ensuring that the MSSP continues to remain attractive to ACOs – including those that care for the most complex and highest risk patients.

Reducing Opportunities for Gaming

Several changes in the Final Rule are intended to eliminate perceived opportunities for "gaming" of the MSSP. These include:

• ACOs that voluntarily terminate participation in two-sided models after June 30 of the applicable performance year will be liable for a pro-rated amount of any shared losses for the year. Furthermore, CMS will hold involuntarily terminated ACOs accountable for pro-rated shared losses incurred during the portion of the performance year prior to termination.

• As part of evaluating an ACO’s future MSSP application, CMS will consider the ACO’s financial performance and failure to meet quality performance standards during multiple years of the previous agreement period. CMS will also identify each applying ACO’s track participation options at the time of its application to the MSSP and determine whether the ACO is a re-entering ACO (e.g., determine the ACO’s experience level). In evaluating an ACO’s enrollment options, CMS will also now consider the composition of the ACO’s beneficiaries to determine if the applicant is effectively the same as a terminated ACO.

Beneficiary Engagement

CMS permits, but does not require, ACOs in two-sided models to establish beneficiary incentive programs that pay beneficiaries up to $20 for each qualifying primary care service received from certain ACO professionals or received from a Federally Qualified Health Center or Rural Health Clinic. Additionally, CMS permits ACOs to distribute vouchers to beneficiaries for items and services reasonably connected to the beneficiaries’ care.

Expansion of the SNF Three-Day Rule Waiver

ACOs in all two-sided models are now eligible to apply for a SNF three-day rule waiver, regardless of their choice of prospective assignment or preliminary prospective assignment with retrospective reconciliation. CMS in the Final Rule also amended the existing rule to allow critical access hospitals and other small, rural hospitals operating under a swing bed agreement to affiliate with eligible ACOs for purposes of applying for the SNF three-day rule waiver.

Promoting Interoperability

CMS in the Final Rule aims to promote interoperability among ACO providers and suppliers by adding a new certified health record technology (CEHRT) threshold criterion to determine the ACOs’ eligibility for MSSP participation, and by retiring the current MSSP quality measure on the percentage of eligible clinicians using CEHRT. (CMS in a previous final rule also requires that the percentage of eligible clinicians participating in an ACO who use CEHRT meets or exceeds certain levels in order for the ACO to participate in the MSSP.)

Expanding Telehealth Services

Beginning January 1, 2020, eligible physicians and practitioners in applicable ACOs participating in two-sided tracks will receive payment for telehealth services furnished to prospectively assigned beneficiaries even if otherwise applicable geographic limitations are not met, including when the beneficiary’s home is the originating site.

Impact on Merit-Based Incentive Payment System (MIPS) Participation

Level E of the BASIC track and the ENHANCED track qualify as Advanced Alternative Payment Models (APMs), and therefore eligible clinicians participating in ACOs in these tracks are eligible for Advanced APM incentive bonuses and are excluded from MIPS reporting and payment adjustments. Eligible clinicians participating in ACOs in other tracks must participate in MIPS.