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CMS Finalizes “Pathways to Success,” an Overhaul of Medicare’s National ACO Program

CMS Finalizes “Pathways to Success,” an Overhaul of Medicare’s National ACO Program
Transformation drives ACOs towards greater savings while providing new flexibilities

Today, the Centers for Medicare & Medicaid Services (CMS) issued a final rule that dramatically redesigns and sets a new direction for the Medicare Accountable Care Organizations or “ACOs.” ACOs are groups of healthcare providers that take responsibility for the total cost and quality of care for their patients, and in exchange they can receive a portion of the savings they achieve. To ensure the ACO program delivers the most value, Pathways to Success is designed to advance five goals: Accountability, Competition, Engagement, Integrity, and Quality. 

The Medicare Shared Savings program (MSSP) launched in 2012 and currently over 10.4 million beneficiaries in Fee-for-Service Medicare (of the 38 million total Fee-for-Service beneficiaries) receive care from providers participating in a Medicare ACO. Most Medicare ACOs currently do not face financial consequences when costs increase, but Pathways to Success will change this. Having more Accountable Care Organizations take on real risk, while offering them the incentives and flexibility they need to coordinate care and innovate, is an important step forward in how Medicare pays for value. Data on ACO performance shows that over time ACOs taking accountability for costs perform better than those that do not. As a result of today’s changes, the projected savings to Medicare total $2.9 billion over ten years.

“Pathways to Success is a bold step towards quality healthcare at a lower cost through competition and beneficiary engagement,” said CMS Administrator Seema Verma. “The rule strikes a balance between encouraging participation in the ACO program and advancing the transition to value, ultimately protecting taxpayers and patients. Medicare can no longer afford to support programs with weak incentives that do not deliver value. As we structure new payment arrangements, the impact on the overall market will be top of mind.”  

The national program for ACOs in Medicare has been in operation for six years, and over time CMS has learned from these experiences. Building on this experience, Pathways to Success overhauls the current program to put true accountability in Accountable Care Organizations and promote program-wide savings for Medicare’s ACOs.

Pathways to Success implements bold changes including:

  • Accountability and Competition: The final rule reduces the amount of time that an ACO can remain in the program without taking accountability for healthcare spending from six years to two years for new ACOs and three years for new “low revenue” (physician-led) ACOs, including some rural ACOs. The rule also strengthens incentives by providing higher shared savings rates as ACOs transition and accept greater levels of risk. 
  • Quality: To increase flexibility for ACOs taking on risk, Pathways to Success expands access to high-quality telehealth services that are convenient for patients, including telehealth services provided at a patient’s place of residence.
  • Beneficiary Engagement: Pathways to Success promotes beneficiary engagement and improved health outcomes by allowing ACOs to offer new incentive payments to beneficiaries for taking steps to achieve good health, such as obtaining primary care services and necessary follow-up care. In addition, this rule requires ACOs to provide beneficiaries with a written explanation in person or via email or patient portal of what it means to be in an ACO to put patients in the driver seat.
  • Integrity: This rule establishes rigorous benchmarks by incorporating factors from regional Medicare spending to establish an ACO’s benchmark during all agreement periods, providing a more accurate point of comparison for evaluating ACO performance. In addition, ACOs that terminate their participation will be accountable for prorated shared losses. 

In addition to the larger program in Medicare for ACOs that today’s rule will impact, CMS is releasing the financial and quality results for the second performance year of the Next Generation ACO Model. The Next Generation model requires participants to assume the highest level of risk out of all CMS ACO programs, and in exchange for this level of risk, Next Generation ACOs receive greater regulatory flexibility. The Next Generation ACO Model actuarial results show that net savings to the Medicare Trust Funds from the model in 2017 were more than $164 million across 44 ACOs. The Model is also showing strong performance on quality metrics.

In connection with the Medicare Shared Savings Program redesign, CMS will offer an application cycle for a special one-time new ACO agreement period start date of July 1, 2019. Ninety percent of eligible ACOs with participation agreements expiring on December 31, 2018 have elected to extend their agreement for six months, so they have the option to renew their agreement under the new policies and continue to participate in the program uninterrupted. The Notice of Intent to Apply will be available January 2, 2019 through January 18, 2019. The application submission due dates will be posted on the Medicare Shared Savings Program website in the coming days. See the Application Types & Process webpage for eligibility requirements, key timelines, and detailed instructions on the submission process. 

For more information regarding Medicare Shared Savings Program Notice of Final Rulemaking (CMS-1701-F2), “Accountable Care Organizations‑‑Pathways to Success,” please visit and You can also refer to a blog by Administrator Seema Verma here:


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