CMS Issues Final Rule for Medicare Shared Savings Program

by Carly Eisenberg Hoinacki, Robin Fisk, and Christopher Raphaely (from the offices of Nixon Peabody, Fisk Law Office PC, and Cozen O’Connor, respectively)

The Centers for Medicare & Medicaid Services (CMS) released a Final Rule on June 4 addressing changes to the Medicare Shared Savings Program. CMS made these modifications to the proposed regulations after considering comments received from the December 8, 2014 Notice of Proposed Rulemaking (NPRM). The majority of the Final Rule goes into effect August 3, with certain provisions being effective November 1 and another on January 1.

ACO Eligibility and Governance/Leadership Requirements

The new rule makes several modifications with respect to the following requirements for accountable care organizations (ACOs), ACO participants, and ACO providers/suppliers: eligibility; ACO participant agreements; identification and reporting requirements; governance; and leadership and management. A number of these changes codified existing ACO sub-regulatory guidance from CMS. Some key provisions include the following:

  • ACOs must now submit an executed ACO participant agreement for each ACO participant at the time of its initial application, participation agreement renewal, and when adding to its list of ACO participants.
  • CMS now has discretion regarding whether to impose any remedial measures to terminate an ACO for failure to satisfy the minimum assigned beneficiary threshold during a performance year.
  • The new rule establishes requirements and processes for maintaining, updating, and submitting the required ACO participant and ACO provider/supplier lists.
  • Absent unusual circumstances, CMS will not make adjustments during the performance year to an ACO’s assignment, historical benchmark, or quality and financial performance metrics based on modifications to an ACO participant list.
  • An ACO may request that CMS consider, for purposes of beneficiary assignment and establishing the ACO’s benchmark, claims billed by Medicare-enrolled entities’ tax ID numbers that have been acquired through sale or merger by an ACO participant.
  • The new rule incorporates the statutory requirement that an ACO have a “mechanism for shared governance” among ACO participants.
  • The new rule explicitly prohibits an ACO provider/supplier from serving as the Medicare beneficiary representative on the governing body of an ACO.
  • The new rule provides additional flexibility regarding the qualifications of an ACO medical director and eliminates the provision permitting an ACO to request consideration to enter the Medicare Shared Savings Program without satisfying certain requirements regarding operations and clinical management.
  • The new rule establishes a process for the transition of Pioneer ACOs into the Medicare Shared Savings Program.

Establishing and Maintaining the Participation Agreement

The new rule establishes procedures for the renewal of the participation agreement of an ACO and clarifies that, in general, an ACO is subject to all regulatory changes that become effective during the three-year agreement period.

Sharing of Aggregate Reports and Beneficiary Identifiable Claims Data

CMS will include additional beneficiaries and data in the reports it shares with ACOs and has changed the process by which Medicare beneficiaries may opt out of claims data sharing:

  • More Beneficiaries Included in Aggregate Reports and Claims Data:
    • CMS will now include each beneficiary who has a primary care visit with an ACO in the aggregate reports and claims data it shares with Track 1 and 2 ACOs even if the beneficiary is not preliminarily assigned to the ACO.
    • CMS will only share aggregate reports and claims data of those beneficiaries who are prospectively assigned to Track 3 ACOs with Track 3 ACOs.
  • Additional Data to be Shared:
    • CMS will begin including the following information regarding preliminarily/ prospectively assigned beneficiaries in the aggregate data reports provided to ACOs in all three Tracks: enrollment status, heath status information, and utilization rates and related expenditure information.
  • Streamlined Opt-Out Process:
    • CMS will no longer require ACOs to provide opt-out notices to beneficiaries prior to requesting individually identifiable claims data on such beneficiaries.
    • Beneficiaries may only opt out through CMS directly (1-800-MEDICARE) and will no longer have the option to opt out by notifying the ACO.

Beneficiary Assignment

CMS made numerous adjustments to its beneficiary assignment process for performance years 2016 and thereafter. The highlights are as follows:

  • Transitional and chronic care management codes will be included in primary care services used for beneficiary assignment.
  • Claims for primary care services provided by non-physician practitioners (e.g., nurse practitioners) will be included in “Step 1” of the assignment process, placing greater importance on these practitioners’ services in the assignment methodology.
  • Certain physician specialists such as gastroenterologists and interventional cardiologists will be excluded from the assignment process.

Shared Savings and Losses

Track 1: Consistent with the NPRM, CMS agreed to allow ACOs that have completed one contract under Track 1 and are compliant with the quality and other participation requirements to continue in Track 1 for a second contract period. ACOs remaining in Track 1 for a second contract period are subject to the same Minimum Savings Rate (MSR) and 50% maximum sharing rate.

Track 2: Beginning January 1, ACOs choosing Track 2 may choose at the time of application to set their MSR/Minimum Loss Rate (MLR) symmetrically at 0% or in increments of 0.5% ranging between 0.5% and 2% or by varying the MSR/MLR according to their patient population using the existing scale for the one-sided model. Once selected, the ACO may not change the MSR/MLR during the agreement term.

Track 3: The eligibility transparency and data sharing requirements, quality performance standards, and monitoring rules for Track 3 are based on the rules for Tracks 1 and 2:

  • Beneficiaries will be prospectively assigned to Track 3 ACOs using the same method (42 CFR 425.402(b)) as Tracks 1 and 2; however, there will be no retrospective reassignment, except to quarterly remove ineligible beneficiaries (e.g. beneficiary enrolls in a Medicare Part C plan). A beneficiary prospectively assigned to a Track 3 ACO will not be reassigned even if they receive the majority of services from another ACO.
  • Depending on its quality performance, a Track 3 ACO can share up to 75% of savings—not to exceed 20% of its benchmark, and 75% of losses—not to exceed 15% of its benchmark. Track 3 ACOs with high-quality performance could reduce the shared loss to 40%.
  • Track 3 ACOs have the same options for selecting MSR/MLR as Track 2 ACOs.
  • Effective January 1, 2017, Track 3 ACOs may apply to admit beneficiaries into a skilled nursing facility (SNF) for otherwise-covered services without satisfying the prerequisite three-day inpatient hospital stay. The SNF must have an overall quality rating of three or more stars and have entered into a “SNF Affiliate Agreement” with the ACO. Guidance on the application process will be forthcoming.

The benchmarking method will be revised for ACOs entering their second and subsequent contract periods to equally weight all three benchmarking years and to reflect the ACO’s average per capita shared savings during the first contract period. Weighting of benchmarking years for initial contracts will continue unchanged. Future rulemaking will address incorporating regional cost trends into rebased benchmarks.

The Final Rule replaces the current annual repayment mechanisms with a single mechanism for the contract period and allows any combination of escrowed funds, surety bonds, and line of credit. The Final Rule incorporated tables comparing the different tracks at 80 Fed. Reg. 32692 at 32811-12.

Additional Program Requirements and Beneficiary Protections

The new rule makes several changes related to program integrity and transparency, such as public reporting, terminations, and reconsideration review. Specifically, the new rule requires that each ACO maintain a dedicated webpage on which the ACO must publicly report certain information using a template specified by CMS. Such information includes: a list of the ACO’s key clinical and administrative leaders; the types of ACO participants or combinations of ACO participants that form the ACO; the ACO’s performance on all quality measures; and shared savings and losses information (e.g., amount of any payment of shared savings received by the ACO or shared losses owed to CMS).


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