United States: A Look Inside CMS' New Medicare Shared Savings Program

This article by partner  Michael Lampert and associates Cara Dermody Wesley Dodd and  Whitney Wadman was published by  Law360 on January 14, 2019.

On Dec. 21, 2018, the Centers for Medicare & Medicaid Services issued a final rule1 establishing the "Pathways to Success" program, which overhauls the Medicare shared savings program, or MSSP, for accountable care organizations. The changes primarily involve provisions for new beneficiary incentives, coverage of telehealth services and choice of beneficiary assignment methodology. The principal changes from the proposed rule announced in August, are adjustments to the proposed shared savings cap for a participation option and the proposed definition of low- and high-revenue ACOs.

In addition to the changes contained in the final rule, in November CMS finalized certain changes to the MSSP as part of its calendar year 2019 Physician Fee Schedule final rule.2 Those changes originally had been introduced in the proposed rule and include: (1) a new certified electronic health record technology, or CEHRT, threshold criterion to determine an ACO's eligibility for program participation to promote interoperability among ACO providers and suppliers; (2) refinements to the voluntary alignment process, allowing beneficiaries to select an ACO professional, regardless of specialty, as a primary care clinician; (3) policies intended to address extreme and uncontrollable circumstances experienced by ACOs (e.g., natural disasters) for performance year 2018 and subsequent years; and (4) revisions to the primary care services definition used in beneficiary assignment.

The Original ACO Program

CMS launched the MSSP, created by the Affordable Care Act, in 2012. Currently, 561 ACOs participate in the program, serving over 10.5 million Medicare beneficiaries. The MSSP is designed to hold ACOs accountable for the total cost of care and quality outcomes. ACOs that reduce Medicare expenditures below a set benchmark while meeting quality requirements are eligible to receive additional reimbursement in the form of a percentage of the cost savings achieved.

Prior to the new changes, the MSSP had three participation tracks. Track 1, a one-sided shared savings track, allowed ACOs to receive additional reimbursement of up to 50 percent of savings under the benchmark, with no requirement to share in the costs should spending exceed the benchmark. The vast majority of MSSP ACOs (82 percent) participated in track 1. ACOs participating in tracks 2 and 3, the two-sided shared savings/shared losses tracks, were eligible to receive a greater percentage of program savings, but also had to bear downside risk, sharing losses with CMS if their spending was above the benchmark.

Though their results are disputed, some studies indicated that the previous MSSP failed to reduce federal government spending and in fact led to increased spending of over $380 million. However, the two-sided models (tracks 2 and 3) did reduce federal spending by $60 million over five years — though those savings were overshadowed by program losses generated in the more popular track 1. Through the redesigned program, CMS seeks to increase savings for the Medicare program by increasing the number of ACOs participating in two-sided risk tracks.

Redesign of the Program

Changes to the Risk Model

The final rule implements the proposed revisions to the MSSP's participation tracks and mandatory advancement to greater levels of two-sided risk. Under the final rule, tracks 1, 2 and 3 will be replaced with two "glide paths." The table at the end of this article summarizes the key characteristics of the paths.


Under the final rule, the BASIC glide path will replace tracks 1 and 2 and limit the amount of time ACOs may participate in a one-sided risk model. On the BASIC path, eligible ACOs will initially participate in a one-sided model, with a maximum amount of potential shared savings (shared savings cap) of 40 percent, a reduction from track 1's shared savings cap of 50 percent but an increase from the proposed 25 percent cap, and would incrementally assume downside risk, which would increase over time.

The BASIC glide path, like the ENHANCED glide path described below, achieves this incremental phase-in through the use of four levels. Under the levels, ACOs become eligible for both increased shared savings caps and amounts of shared downside risk.

ACOs new to the program would be permitted two years in a one-sided risk level (one year at level A and one year at level B). Programs identified as low-revenue ACOs and inexperienced with performance-based risk Medicare ACO initiatives may stay in a one-sided risk level for an additional program year. ACOs that previously participated in track 1 would be ineligible to enter the program at level A, thereby limiting them to just one year of participation in a one-sided risk level (level B). Levels A and B will be similar and will be the only two levels without any downside risk. Regardless of the level in which an ACO begins, ACOs advance through further levels, climbing one level each year (or more, if they wish), and assume additional risk with each level.

ACOs would begin to bear two-sided risk and thereby to share in losses at level C, assuming risk for 30 percent of higher-than-benchmark costs, not to exceed 2 percent of ACO participant revenue, and capped at 1 percent of the updated benchmark. By level E, ACOs' shared savings cap would reach 50 percent, and shared losses would reach 30 percent of higher-than-benchmark costs, subject to a calculated cap. Participation at level E qualifies as participation in an advanced alternative payment model under the Quality Payment Program. Providers participating in an advanced alternative payment model are eligible to receive additional incentive payments from CMS and are exempt from participation in merit-based incentive payment system, or MIPS, reporting requirements and potential downward payment adjustments.


Under the final rule, the ENHANCED glide path will replace the current MSSP ACO track 3, which it largely mirrors. As with track 3, ACOs participating in the ENHANCED path will have a shared savings cap of 75 percent and will shoulder responsibility for between 40 and 75 percent of higher-than-benchmark costs.

The final rule indicates that CMS also will offer ACOs participating in the BASIC path under two-sided risk (levels C, D and E) and ENHANCED path additional tools and regulatory flexibility, including, among others, broadened use of telehealth and waiver of the three-day skilled nursing facility admission rule, as described below.


Eligibility to participate in each path varies, and depends on an ACO's prior participation and level of experience, and whether the ACO is classified as a high-revenue or low-revenue ACO.

Under the final rule, ACOs less experienced with performance-based Medicare initiatives are eligible to enter an agreement period under the BASIC path.

Experienced ACOs, including those identified as previously participating in track 2 or track 3, will be eligible to participate in only the ENHANCED path, or the BASIC path's level E if the ACO qualifies as a low-revenue ACO.

Low-revenue ACOs, defined as ACOs that receive less than 35 percent (increased from 25 percent in the proposed rule) of their total Medicare fee-for-service expenditures from the ACO's assigned beneficiaries, may participate in the BASIC path for up to two agreement periods. These low-revenue ACOs are typically smaller physician practices, rural providers or other providers working in underserved markets.

High-revenue ACOs, those with total Medicare FFS revenue for assigned beneficiaries greater than 35 percent, would be required to transition to the ENHANCED path more quickly and would be permitted, at most, a single agreement period on the BASIC path.

When considering the level in which to participate (or whether to participate at all), both current and prospective ACOs will want to consider carefully their financial and operational readiness for the various percentages of downside and upside risk for each level, summarized in the chart below — in addition to more general factors, including the strategy that they intend to employ to avoid downward adjustments under the Medicare Access and CHIP Reauthorization Act (e.g., through participation in an advanced alternative payment model such as a BASIC path level E or ENHANCED path ACO), and the relative benefits of participation in the revised MSSP versus a more targeted focus, such as the Bundled Payments for Care Improvement Advanced, or BPCI-A, Initiative.

The final rule also includes modifications to the repayment mechanism requirements, to reduce the burden on ACOs in performance-based risk tracks. Under the current MSSP, ACOs accepting performance-based risk must establish a repayment mechanism to assure CMS that they can repay losses for which they may be liable. Under Pathways to Success, certain ACOs participating in the BASIC path in levels C, D or E would have a lower required repayment mechanism amount, to reflect the BASIC path's potentially lower levels of loss liability. Additionally, the final rule permits ACOs renewing their participation in the MSSP to maintain a single, existing repayment arrangement, to streamline the repayment of shared losses during the transition period to the new glide paths.

Updates to the Benchmarking Methodology

The final rule also refines certain parts of the MSSP benchmarking methodology, a complex calculation incorporating each ACO's risk-adjusted historical expenses along with national or regional spending trends.

First, the final rule accelerates inclusion of regional factors into the benchmarking methodology within the first agreement period, allowing for an earlier and more accurate comparison of an ACO's expenses to others in its service area. Second, the extension of the agreement period from three years to five years reduces the frequency of benchmark rebasing and provides greater predictability for both ACOs and CMS. Lastly, so as not to punish or reward an ACO excessively based on its geographic location, CMS will reduce the maximum weight given to the regional adjustment from 70 percent to 50 percent and will cap the total regional adjustment at 5 percent of national Medicare FFS per capita expenditures.

As part of its updated benchmark methodology, CMS will use a blended regional and national growth rate, with the weight placed on the national component of the blend increasing as an ACO's penetration in its regional services area increases. It is CMS' expectation that this revised methodology will lead to more favorable treatment for ACOs with high penetration in their regional service area and with lower spending growth compared to the nation, and less favorable treatment for ACOs with high penetration in their regional service area with higher spending growth compared to the nation. The intent behind this policy is to encourage overall cost savings for Medicare by rewarding increased market penetration coupled with lower spending growth. CMS intends for the change in treatment of ACOs with moderate to low regional penetration to be negligible.

Greater Flexibility for ACOs

The final rule's Pathways to Success encourages ACOs to become more innovative in their coordination of care and beneficiary engagement by offering regulatory flexibility. The final rule contains three changes that have a primary focus of increasing ACO flexibility to achieve these goals.

First, physicians in ACOs participating in the ENHANCED path, or levels C, D or E of the BASIC path, will be permitted to receive payment for telehealth services, even if otherwise applicable Medicare geographic requirements for telehealth are not met.

Second, for providers participating in ACOs in the ENHANCED path, or levels C, D or E of the BASIC path, CMS will waive the rule requiring a three-day stay in an inpatient hospital, acute care hospital, or critical access hospital prior to admission to a skilled nursing facility.

Finally, the final rule will provides ACOs with greater choice of beneficiary assignment methodology. Enrolled ACOs, regardless of track, will be permitted to select prospective assignment or preliminary prospective assignment with retrospective reconciliation prior to the start of each agreement period, and will be able to change their selection for each subsequent performance year. This will provide ACOs with more flexibility to test and choose the beneficiary assignment methodology that works best with their needs, irrespective of their track or level of risk they take on.

Enhanced Beneficiary Engagement

The final rule contains several provisions aimed at improving quality and lowering costs by promoting beneficiary engagement. ACOs participating in certain two-sided risk models (the ENHANCED path or the BASIC paths levels C, D or E) will be allowed to operate a beneficiary incentive program, so long as it is approved by CMS, and to provide incentive payments of up to $20 per qualifying service to beneficiaries for receiving primary care services from certain ACO professionals or from a federally qualified health center or rural health clinic. The final rule also clarifies that under the program's existing regulations, vouchers, including vouchers redeemable for over-the-counter medication, transportation services or access to meal programs, are considered to be "in-kind items or services" that may be provided to beneficiaries if all other program requirements are met.

The final rule, however, requires ACOs to provide additional beneficiary notifications. ACOs must ensure that FFS beneficiaries are notified: (1) that ACO providers/suppliers are participating in the MSSP; (2) about their opportunity to decline claims data sharing; and (3) about their ability to, and the process by which they may, identify or change their primary clinician for purposes of voluntary alignment (an assignment methodology under which a beneficiary would be assigned to an ACO if the beneficiary "opted in," which the proposed rule sought comment on, was not included in the final rule).

The final rule offers a one-time new agreement period start date of July 1, 2019, in order to avoid an interruption in participation by ACOs with a participation agreement ending on Dec. 31, 2018. It is CMS' hope that this timing provides ACOs time to review and assess the impact of the final rule, and to determine their future participation in the MSSP, if any.

  BASIC Track's Glide Path ENHANCED
(Track 3)
Level A &
Level B
Level C Level D Level E
Shared Savings (once MSR met or exceeded) 1st dollar savings at a rate up to 40% based on quality performance; not to exceed 10% of updated benchmark 1st dollar savings at a rate of up to 50% based on quality performance, not to exceed 10% of updated benchmark 1st dollar savings at a rate of up to 50% based on quality performance, not to exceed 10% of updated benchmark 1st dollar savings at a rate of up to 50% based on quality performance, not to exceed 10% of updated benchmark No change. 1st dollar savings at a rate of up to 75% based on quality performance, not to exceed 20% of updated benchmark
Shared Losses (once MLR met or exceeded) N/A 1st dollar losses at a rate of 30%, not to exceed 2% of ACO participant revenue capped at 1% of updated benchmark 1st dollar losses at a rate of 30%, not to exceed 4% of ACO participant revenue capped at 2% of updated benchmark 1st dollar losses at a rate of 30%, not to exceed the percentage of revenue specified in the revenue-based nominal amount standard under the Quality Payment Program capped at 1 percentage point higher than the benchmark nominal risk amount (e.g., 8% of ACO participant revenue in 2019 – 2020, capped at 4% of updated benchmark) No change. 1st dollar losses at a rate of 1 minus final sharing rate, with minimum shared loss rate of 40% and maximum of 75%, not to exceed 15% of updated benchmark
Annual choice of beneficiary assignment methodology? Yes Yes Yes Yes Yes
Annual election to enter higher risk? Yes, but new low-revenue ACOs may elect an additional year under Level B if they commit to completing the remainder of their agreement under Level E. Yes No; ACO will automatically transition to Level E at the start of the next performance year, except for July 1, 2019 starters that elect to enter at Level D No; maximum level of risk/reward under the BASIC track No; highest level of risk/reward under Shared Savings Program
Advanced APM status under the Quality Payment Program? No No No Yes Yes
Beneficiary Incentive Program No Yes, ACOs may establish an approved program starting July 1, 2019, or in subsequent years Yes, ACOs may establish an approved program starting July 1, 2019, or in subsequent years Yes, ACOs may establish an approved program starting July 1, 2019, or in subsequent years Yes, ACOs may establish an approved program starting July 1, 2019, or in subsequent years
Expanded Telehealth Services N/A Yes, available to ACOs electing prospective assignment methodology for performance year 2020, and subsequent years Yes, available to ACOs electing prospective assignment methodology for performance year 2020, and subsequent years Yes, available to ACOs electing prospective assignment methodology for performance year 2020, and subsequent years Yes, available to ACOs electing prospective assignment methodology for performance year 2020, and subsequent years
3-Day SNF Rule Waiver N/A Yes, ACOs may apply to start on July 1, 2019, and in subsequent years Yes, ACOs may apply to start on July 1, 2019, and in subsequent years Yes, ACOs may apply to start on July 1, 2019, and in subsequent years Yes, ACOs may apply to start on July 1, 2019, and in subsequent years


1 https://www.govinfo.gov/content/pkg/FR-2018-12-31/pdf/2018-27981.pdf 

2 https://www.govinfo.gov/content/pkg/FR-2018-11-23/pdf/2018-24170.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions