United States: CMS Restructures Medicare Shared Savings Program To Encourage Transition To Performance-Based Risk

The Centers for Medicare & Medicaid Services (CMS) has finalized a major restructuring of the Medicare Shared Savings Program, dubbed "Pathways to Success." According to CMS, the program changes "are designed to increase savings for the Trust Funds and mitigate losses, reduce gaming opportunities, and promote regulatory flexibility and free-market principles." Most notably, CMS is accelerating the schedule for accountable care organizations (ACOs) to transition to two-sided risk models, under which the ACO is accountable for repaying shared losses in addition to qualifying for shared savings bonus payments.

By way of background, the Shared Savings Program is intended to encourage physicians, hospitals, and certain other types of providers and suppliers to form ACOs to provide cost-effective, coordinated care to Medicare beneficiaries. The ACO agrees to be accountable for the quality and cost of the assigned Medicare fee-for-service beneficiary population. The program has different "tracks" with varying frameworks for sharing savings or liability for losses depending on how spending compares to a benchmark.

Under the final rule, a participating ACO must select one of the following two tracks:

  • The BASIC track, which allows eligible ACOs to participate under a one-sided model for a maximum of two years (except for certain new, "low revenue" ACOs that would be allowed to participate in a one-sided model for an additional year). Risk will be incrementally phased in over the agreement period using a "glide path" approach. At the highest level of risk, this track would qualify as an Advanced Alternative Payment Model (APM) under the Quality Payment Program.
  • The ENHANCED track, which allows ACOs to immediately take on the highest level of risk and potential reward. The ENHANCED track qualifies as an Advanced APM.

A detailed CMS comparison of the BASIC and ENHANCED tracks is available here.

The final rule extends the Shared Savings Program agreement period from three years to five years. To give ACOs more time to prepare for these changes, the first participation period under the new rule begins July 1, 2019. New and existing ACOs interested in applying to participate for the July 1, 2019 agreement period must complete the non-binding Notice of Intent to Apply by January 18, 2019.

CMS adopted numerous other Shared Savings Program changes, including: revised benchmarking methodology and repayment mechanism arrangement requirements; expanded availability of the skilled nursing facility 3-day rule waiver; and program integrity provisions to strengthen evaluation of ACO applications and address financial obligations for terminated ACOs. The final rule also implements statutory provisions that promote telehealth services; allow ACOs to elect prospective beneficiary assignment or preliminary prospective assignment with retrospective reconciliation; and permit ACOs to give incentive payments of up to $20 to assigned beneficiaries who receive qualifying primary care services from certain ACO professionals in certain circumstances.

CMS estimates that the final rule will save $2.9 billion over 10 years, up from the projected savings of $2.24 billion under the proposed rule. CMS attributes the higher savings estimate to final policies that are intended to encourage participation in the Shared Savings Program (including higher shared savings rates in certain years of the BASIC track, reduced weights on regional adjustments to benchmarks for ACOs with per capita spending above their region, and the new framework for certain low-revenue ACOs), along with CMS's decision not to finalize a proposed -3% cap on risk score changes. CMS expects the final rule to reduce the number of ACOs participating in the Shared Savings Program by approximately 36 by 2028, compared with a projection of 109 fewer ACOs under the proposed rule.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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