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CMS Issues Final Rule on MSSP ACOs

June 7, 2016
by Rajiv Leventhal
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The Centers for Medicare & Medicaid Services (CMS) released a final rule on Monday June 6 that aims to improve how Medicare pays accountable care organizations (ACOs) in the Medicare Shared Savings Program (MSSP) for delivering better patient care.

Medicare bases ACOs’ payments on a variety of factors, including whether the organization can deliver high quality care at a reasonable cost. The final rule should help more ACOs successfully participate in the Medicare Shared Savings Program by improving the shared savings payment methodology and providing a new participation option for certain accountable care organizations to move to the more advanced tracks of the program, according to CMS officials in a press release announcement on Monday.

According to CMS, the final rule changes how Medicare pays ACOs by basing one of the payment factors on whether the organization is able to deliver high quality care at a lower cost compared to other providers in their region. This change recognizes that health cost trends vary in communities across the country and will give ACOs more opportunities to be successful. In addition, the rule provides a smoother and quicker transition to the more advanced tracks for certain ACOs by allowing an extra year under their first agreement before the organization takes on financial risk, CMS officials attest.

"Today’s changes will encourage more physicians to improve patient care by joining accountable care organizations, while also refining how the program measures success, so that current participants are better rewarded for quality,” CMS Acting Administrator Andy Slavitt said in a statement. “These new flexibilities are based on significant input from participants and will help physicians prepare for the new Quality Payment Program, part of bipartisan legislation Congress passed last year repealing the failed Sustainable Growth Rate.”

Specifically, in the final rule, CMS is 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. The agency will apply the following changes, according to its fact sheet on the final rule:

  • 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 fee-for-service (FFS) expenditures in the ACO’s regional service area and the ACO’s historical expenditures. Here, CMS will use a phased-in 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, CMS is 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 re-determining 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, CMS will also re-determine 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.
  • 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,” CMS said in its fact sheet.

What’s more, 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.