On June 6, 2016, CMS issued a final rule (Final Rule) establishing a phased approach for incorporating regional FFS expenditures into calculations for resetting, adjusting, and updating Accountable Care Organizations’ (ACOs’) rebased historical benchmarks for ACOs that continue their participation in the Medicare Shared Savings Program (MSSP) after an initial three-year agreement period.  CMS believes that, as a result of the changes in the Final Rule, the methodology for determining the rebased historical benchmark will reflect an ACO’s performance in relation to other providers in the same regional market, rather than just evaluating the ACO against its own prior performance. The integration of regional factors into calculating ACO benchmarks will begin for second or subsequent agreement periods beginning in 2017. 

For the first agreement period, CMS will continue to establish an ACO’s historical benchmark based on the Parts A and B FFS expenditures for beneficiaries who would have been assigned to the ACO in each of the three years prior to the start of the ACO’s agreement period.  However, the Final Rule revises the methodology for national FFS calculations to use assignable Medicare FFS beneficiaries, rather than all FFS beneficiaries.  This methodology will be applied to (1) all ACOs with agreement periods beginning in 2017 and subsequent years, and (2) to ACOs with 2014, 2015, and 2016 agreement start dates that are in the middle of an agreement period. 

For second or subsequent agreement periods, CMS is revising its approach for resetting (or rebasing) an ACO’s benchmark for these periods beginning on or after January 1, 2017.  Among other changes, CMS will:

• Replace the national trend factor with regional trend factors for establishing the ACO’s rebased historical benchmark and remove the adjustment to explicitly account for savings generated under the ACO’s prior agreement period; 
• Make an adjustment when establishing the ACO’s rebased historical benchmark to reflect a percentage of the difference between the regional FFS expenditures in the ACO’s regional service area and the ACO’s historical expenditures;
• Annually update the rebased benchmark to account for changes in regional FFS spending, replacing the current update, which is based solely on the absolute amount of projected growth in national FFS spending; and
• Adjust an ACO’s rebased historical benchmark prior to the start of the performance year, including re-determining the regional adjustment, to account for changes in the ACO’s certified ACO Participant List during the agreement period.

Additionally, the Final Rule adds a participation option to encourage ACOs to transition to performance-based risk arrangements and also develops timeframes and other criteria for reopening shared savings or shared losses under the program.  Pursuant to the Final Rule, re-openings for good cause will be limited to four years.  Re-openings for fraud or similar fault can occur at any time.

In response to the Final Rule, some ACO stakeholders have indicated that, while they support aspects of the Final Rule, additional modifications to benchmarking methodologies are needed.  For example, the National Association of ACOs (NAACOS) continues to urge CMS to exclude ACO beneficiaries from the regional reference population for benchmark calculations.  

To view the Final Rule, click here.  To view CMS’s fact sheet, click here.

Reporter, Isabella E. Wood, Atlanta, + 1 404 572 3527, iwood@kslaw.com.