Final Medicare Shared Savings Program Rule (CMS-1644-F)
Final rule phases in use of regional factors when resetting ACOs’ benchmarks and facilitates transition to performance-based risk
On June 6, 2016, the Centers for Medicare & Medicaid Services (CMS) issued a final rule to incorporate regional fee-for-service (FFS) expenditures into the methodology for establishing, adjusting, and updating the benchmarks of Accountable Care Organizations (ACOs) that continue their participation in the Medicare Shared Savings Program (Shared Savings Program) after an initial three-year agreement period. This final rule also adds a participation option to encourage ACOs to transition to performance-based risk arrangements and provides greater administrative finality around the program’s financial calculations. CMS is making these modifications to strengthen incentives under the program after considering comments received on issues specified in the 2016 notice of proposed rulemaking.
The final rule can be downloaded at https://www.federalregister.gov/public-inspection on the Federal Register website. The major changes to the Shared Savings Program adopted in the June 2016 final rule are summarized in this fact sheet.
The June 2016 final rule makes changes to the regulations for the Shared Savings Program that were promulgated in November 2011 and June 2015, and codified at 42 CFR Part 425. The policies adopted in this final rule are designed to strengthen incentives in order to continue broad-based program participation and improve program function and transparency.
This final rule establishes a phased approach to incorporating regional FFS expenditures into calculations for resetting, adjusting, and updating an ACO’s rebased historical benchmark in its second or subsequent agreement period beginning in 2017 and all subsequent years. See the Appendix for an overview of the program’s benchmarking methodology, by agreement period, including changes being made through this final rule.
First agreement period benchmarking methodology
We 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. As part of this approach, we apply factors calculated based on national FFS expenditures, including: truncate an assigned beneficiary’s total annual Parts A and B FFS per capita expenditures at the 99th percentile for national Medicare FFS expenditures; use national trend factors to restate benchmark year (BY) expenditures for BY1 and BY2 in terms of BY3 expenditures; and annually update the benchmark based on the projected absolute amount of growth in national per capita expenditures for Parts A and B services under the original FFS program.
The June 2016 final rule revises the methodology for national FFS calculations to use assignable Medicare FFS beneficiaries (a subset of the broader FFS population) instead of all FFS beneficiaries. Assignable Medicare FFS beneficiaries are identified based on the 12-month period corresponding to the calendar year for which the calculation is being made. This revised methodology will apply to all ACOs with agreement periods beginning in 2017 and subsequent years. We will also apply this approach to ACOs with 2014, 2015 and 2016 agreement start dates that are in the middle of an agreement period. We will adjust the benchmarks for these ACOs at the start of the 2017 performance year and in subsequent years of the current agreement period so that the benchmarks established for these ACOs will reflect the methodology used in expenditure calculations for the performance year.
CMS adjusts an ACO’s historical benchmark on an annual basis based on changes the ACO makes to its list of ACO participants, identified by Taxpayer Identification Numbers (TINs). We will continue to make this adjustment by revising beneficiary assignment for the historical benchmark period to reflect the influence of the ACO Participant List changes. At this time, we are not finalizing our proposal to replace the current approach for calculating adjusted historical benchmarks for ACOs that make ACO Participant List changes with a new program-wide approach that would determine this adjustment using an expenditure ratio based on a single reference year. In response to commenters’ suggestions, we anticipate conducting additional analysis and revisiting this proposal in future notice and comment rulemaking.
Second or subsequent agreement period benchmarking methodology
In the final rule, we are revising the approach for resetting (or rebasing) an ACO’s benchmark for a second or subsequent agreement period beginning on or after January 1, 2017. We will apply the following changes:
- 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. We will use a phased approach to transition to a higher weight in calculating the regional adjustment. In response to commenters’ suggestions, for those ACOs determined to have spending higher than their region, we are finalizing an approach that will apply a lower weight in calculating the regional adjustment the first and second time that their benchmark is rebased under the revised rebasing methodology:
- For higher spending ACOs, the weight placed on the regional adjustment will be reduced to 25 percent (compared to 35 percent for other ACOs) in the first agreement period in which the regional adjustment is applied, and 50 percent (compared to 70 percent for other ACOs) in the second agreement period in which the adjustment is applied.
- Ultimately a weight of 70 percent will be applied in calculating the regional adjustment for all ACOs beginning no later than the third agreement period in which the ACO’s benchmark is rebased using the revised methodology.
- 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.
- Adjust an ACO’s rebased historical benchmark prior to the start of the performance year, including redetermining the regional adjustment, to account for changes in the ACO’s certified ACO Participant List during the agreement period. During the first and second agreement periods under the revised rebasing methodology, we will also redetermine whether the ACO has higher spending compared to its region, and therefore whether the applicable lower weight should be used in calculating the regional adjustment.
An ACO’s regional service area will include any county where one or more assigned beneficiaries reside. We will use county level data to determine regional FFS expenditures for the assignable beneficiary population in the ACO’s regional service area, applying this approach consistently across the following populations of beneficiaries identified by Medicare enrollment type: end stage renal disease (ESRD), disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible beneficiaries. This is a modification from our proposal to calculate expenditures for the ESRD population at the state level and apply this value to each county within the State. This modification responds to concerns raised by some commenters about the proposed approach and support for calculating ESRD expenditures at the county level. We will also weight county-level FFS expenditures by the proportion of the ACO’s assigned beneficiaries in the county, and by Medicare enrollment type.
As a result of these changes, the methodology for determining the ACO’s 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 past performance. We believe this approach will improve the program’s incentives for ACOs by recognizing an ACO’s efficiency relative to its region and limiting the link between an ACO’s performance and its future benchmarks. Further, the phased approach to increasing the weight used to calculate the regional adjustment will incrementally lower benchmarks for ACOs determined to have higher spending than their region over the course of multiple agreement periods, affording these ACOs time to adapt to the revised methodology. The approach we are adopting will also ensure that during the phase-in we always apply the most advantageous weight in calculating the adjustment for each performance year within an agreement period according to whether the ACO’s historical spending based on its most recent certified ACO Participant List is relatively higher or lower compared to spending in its regional service area.
The timing of applicability of the revised methodology will avoid disruption for ACOs that entered their second agreement period beginning in 2016. For ACOs that started in the program in 2012 and 2013 that have renewed their participation for a second agreement period beginning in 2016, we are finalizing our proposal to apply this revised methodology for the first time in calculating the rebased historical benchmark for their third agreement period (beginning in 2019). For these ACOs’ second agreement period (2016 – 2018), we continue to apply the benchmark rebasing methodology established with the June 2015 final rule, including equally weighting the ACO’s historical benchmark years and applying an adjustment for savings generated under the ACO’s first agreement period.
Annual data files
We plan to release annual data files containing county-level expenditure and risk score data to support our goal of transparency in program calculations and to allow ACOs and other stakeholders to model impacts. Additionally, we plan to make public ACO-specific, aggregate data on counties of residence of the ACO’s assigned population for each performance year so the public at large has a better understanding of the reach of ACOs in various counties and regions across the country.
Facilitating Transition to Performance-Based Risk
Currently, an ACO enters a three-year agreement period for a particular participation track, either under the one-sided shared savings model (Track One) or a two-sided shared savings / shared losses model (Track Two or Track Three) and remains under that track for the duration of the agreement period. ACOs may enter either the one-sided or a two-sided model for their first agreement period. Eligible ACOs that participated under the one-sided model for their first agreement period may apply to continue in Track One for a second agreement period, or apply to a two-sided model.
We are finalizing an additional option for ACOs participating under Track One to apply to renew for a second agreement period under a two-sided model (Track Two or Track Three). If the ACO’s renewal request is approved, the ACO may request that its initial participation agreement under Track One be extended for an additional year (that is, the ACO would enter a fourth performance year under Track One). As a result of this deferral, we will also defer rebasing the ACO’s benchmark for one year. At the end of this fourth performance year under Track One, the ACO will transition to the selected performance-based risk track for a three-year agreement period. This option will become available beginning with the 2017 application cycle. More information on the application cycle is available through the Shared Savings Program’s website.
We are committed to facilitating entry and continued participation in the Shared Savings Program by ACOs with varying levels of experience with accountable care models and differing degrees of readiness to take on performance-based risk, and to encourage transition of ACOs to performance-based risk tracks.
Administrative Finality of Financial Reconciliation Calculations
Previously, the Shared Savings Program regulations did not include any definition of the timeframes or other criteria for reopening a determination of the amount of shared savings due to the ACO or the amount of shared losses owed by the ACO if it were determined as a result of any inspection, evaluation, or audit that there had been an error in the calculation.
In the final rule, we are defining timeframes and other criteria for reopening of a determination of ACO shared savings or shared losses to correct financial reconciliation calculations, including: limiting re-openings to not later than four years after the date of the notification to the ACO of the initial determination of shared savings or shared losses for the performance year for good cause; and reserving the right to reopen a payment determination, at any time in the case of fraud or similar fault.
View the press release at: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-06-06.html
Shared Savings Program “How to Apply” Webpage: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Application.html
Appendix: Characteristics of Benchmarking Approaches by Agreement Period
|Source of Methodology||Agreement Period||Historical Benchmark Trend Factors (trend BY1, BY2 to BY3)||Adjustment to the Historical Benchmark for Regional FFS Expenditures (percentage applied in calculating adjustment)||Adjustment to the Historical Benchmark for Savings in Prior Agreement Period?||Adjustment to the Historical Benchmark for ACO Participant List Changes||Adjustment to the Historical Benchmark for Health Status and Demographic Factors of Performance Year Assigned Beneficiaries||Update to the Historical Benchmark for Growth in FFS Spending|
|November 2011 final rule||First||National||No||No||Calculated using benchmark year assignment based on the ACO’s certified ACO Participant List for the performance year||Newly assigned beneficiaries adjusted using CMS-HCC model; continuously assigned beneficiaries adjusted using demographic factors alone unless CMS-HCC risk scores result in a lower risk score||National|
|As modified by June 2015 final rule||Second (beginning 2016)||National||No||Yes||Same as methodology for first agreement period||Same as methodology for first agreement period||National|
|As modified by this final rule: Rebasing Methodology for second or subsequent agreement periods beginning 2017 and subsequent years||Second (third for 2012/2013 starters)||Regional||Yes (35 percent, or 25 percent if ACO is determined to have higher spending compared to its region)||No||Same as methodology for first agreement period; regional adjustment redetermined based on ACO’s certified ACO Participant List for the performance year||No change||Regional|
|Third (fourth for 2012/2013 starters)||Regional||Yes (70 percent unless the Secretary determines a lower weight should be applied, as specified through future rulemaking, or 50 percent if ACO is determined to have higher spending compared to its region)||No||Same as methodology for second agreement period beginning 2017 and subsequent years||No change||Regional|
|Fourth and subsequent (fifth and subsequent for 2012/2013 starters)||Regional||Yes (70 percent unless the Secretary determines a lower weight should be applied, as specified through future rulemaking)||No||Same as methodology for second agreement period beginning 2017 and subsequent years||No change||Regional|