This is the fifth post in Health Care Law Today’s series on the final rule.

The final Medicare Shared Savings Program (“MSSP”) rule released on June 4, 2015, contains a number of modifications to the financial arrangement contained in the existing regulations. The modifications are designed to encourage ACOs to participate or continue participating in the MSSP and to help ensure the sustainability of the MSSP. Critics had raised issues with a number of provisions of the MSSP that they believed would make participation in the MSSP undesirable over time, and the final rule addresses a number of these criticisms. While the long-term sustainability of the MSSP may still be a question, it appears that the modifications will lead to continued participation and growth in the MSSP for the next several years as the U.S. health care system moves increasingly to a payment system based on value.

Among the more significant changes to the financial model contained in the final rule are:

  • Participating ACOs may participate in a second 3-year agreement under Track 1, without taking any downside risk. This change is likely the most significant modification that will encourage continued participation in the MSSP. The decision to allow an additional term in Track 1 was driven in large part by CMS’ conclusion that participating ACOs are risk adverse and many currently lack the infrastructure and readiness to manage and assume increased performance risk. CMS noted that only five ACOs have accepted downside risk in the MSSP to date.
  • Rules to address renewals of agreements previously terminated during their first Agreement Period. Under this modification an ACO whose agreement was terminated during the first three-year period and reapplies will be treated as being in its first agreement period if the termination was prior to the half-way point of the three-year period; if the termination was after the half-way point, its renewal will be treated as its second and final three-year period in Track 1.
  • The final rule describes how CMS will evaluate an ACO’s proposed renewal. CMS will evaluate a proposed renewal based on the following factors:
    • whether the ACO satisfies criteria for operating under the selected risk model
    • the ACO’s history of compliance with MSSP requirements
    • whether the ACO has shown it meets eligibility and other requirements of the MSSP
    • whether the ACO met quality performance standards during at least one of the first two years in the prior agreement period
    • whether a Track 2 ACO has repaid losses it generated
    • the results of a program integrity survey

No other financial criteria are included in the evaluation criteria.

  • The final rule maintains the ability of an ACO in Track 1 to share up to 50% of the payable savings. The proposed rule had suggested modifying and lowering the share of savings in which a Track 1 ACO could share, as a way to encourage movement to Track 2 where the ACO takes downside risk. CMS elected not to make such modification.
  • The final rule modifies the determination of Maximum Sharing Rate (MSR) and Maximum Loss Rate (MLR) for a Track 2 ACO in its second three-year agreement period. Under the final rule, a participating Track 2 ACO may elect one option for setting its MSR and MLR in a three-year renewal period from among the following:
    • remove the MSR/MLR completely (so the ACO shares in savings and losses from the first dollar)
    • select a symmetrical MSR/MLR in a 0.5 percent increment between 0.5-2.0 percent
    • implement a MSR/MLR that varies based on the size of the ACO’s assigned population established in the one-sided model

Once selected, an ACO must live by such option throughout its three-year Track 2 agreement period. CMS concluded that an ACO participating in Track 2 is in the best position to decide this aspect of its risk model and the modification affords such ACOs the flexibility to select a symmetrical MSR/MLR from the options CMS views as acceptable.

  • The final rule establishes a Track 3 option. CMS proposed a Track 3 model to encourage ACOs to take on increasing financial risk in order to motivate even greater improvements in care and to reduce barriers for ACOs to take more risk. The Track 3 model maintains the eligibility requirements, quality performance standards, data sharing requirements, monitoring rules and transparency requirements of Track 2. Track 3 differs from Track 2 in that it contains a prospective beneficiary assignment methodology, adopts the revised MSR/MLR options for an ACO that it has adopted for Track 2, and utilizes a different financial model than Track 2. The final rule for Track 3:
    • Utilizes a prospective beneficiary assignment. The prospective beneficiary assignment assigns beneficiaries initially using the same method for assignment as utilized for Track 1 and Track 2. But, once a beneficiary is assigned, he or she remains assigned to the Track 3 ACO throughout the three-year agreement period, with the sole exception that if a beneficiary is no longer eligible to be assigned to an ACO (e.g., he or she elects to participate in a Medicare Advantage plan) he/she will no longer be attributed to the ACO. This exclusion will be performed on a quarterly basis. As such, even if an assigned beneficiary receives a plurality of his or her services from another ACO, such beneficiary will remain assigned to the Track 3 ACO. Further, no additions are made to the beneficiaries assigned to the Track 3 ACO over the three-year term.
    • Utilizes the same method to calculating the historical cost benchmark as is utilized in Track 2.
    • Utilizes a two-sided risk option whereby an ACO shares up to 75% (depending on quality performance) of the recognized savings over the selected MSR and accepts risk for up to 75% (depending on quality performance) of losses above the selected MSR. The final rule adopts for Track 3 a payment limit of 20% for shared savings of the cost benchmark and a downside recoupment limit of 15% of the cost benchmark.
    • Utilizes the same MSR/MLR that the final rule has adopted for Track 2 ACOs described above, which gives an ACO the option to elect from a series of choices for a symmetrical MSR and MLR.
  • The final rule provides for different rebasing standards in the cost benchmark in subsequent agreement periods. The new cost benchmark rebasing utilizes the following factors:
    • weighting each historical benchmark year for an ACO equally
    • adapting the benchmark to reflect the average per capita amount of savings earned by the ACO in the first agreement period

CMS views the rebasing of the cost benchmark as important to ensure the MSSP continues to meet its goals over the long-run. Without modifications, basing the new benchmark solely on the ACO’s historical costs would mean an ACO’s success in reducing costs would lead to a reduced cost benchmark over time which will become increasingly difficult to meet. The modifications CMS has adopted in the final rule take steps to improve this issue. CMS also has indicated it will propose a further modification later on to blend the cost benchmark using not just an ACO’s historic costs but also regional cost trends. CMS intends to issue this further rule in the next several months to be effective starting in 2017 or later.

The final rule’s revisions to the financial model do make participation both in Track 1, where there is no downside risk, and the other Tracks, where there is downside risk, more attractive. For the short term, the MSSP will likely be utilized by ACOs to test their readiness for value-based reimbursement without taking downside risk. It remains to be seen whether the revisions will be sufficient to provide continued incentives and payments for ACOs to continue their participation over the longer term.