On December 1, 2014, the Department of Health and Human Services Centers for Medicare and Medicaid Services (“CMS”) issued a proposed rule that included numerous changes for accountable care organizations (“ACOs”) participating in the Medicare Shared Savings Program (“MSSP”) in light of the experience CMS gained during the first two years of the program. The proposed rule includes an extension of the timeframe for which ACOs can maintain one-sided risk and addressed some of the practical operational matters such as beneficiary assignment and adding and removing providers and suppliers during the performance year.

Extending Participation in Track 1

The proposal that received the most coverage out of the more than 400 page proposed rule gives ACOs the option to renew their participation in the MSSP under the one-sided performance risk model for an additional three-year agreement period. This option is not available to ACOs participating in the two-sided performance risk model.

The current model allows ACOs to choose between a one-sided and two-sided risk model. Track 1 allows ACOs to share in the savings generated, but does not require them to repay any losses. In contrast, Track 2 allows ACOs to receive a greater percentage of shared savings, but requires them to share responsibility for losses as well. Currently, ACOs can elect to participate in Track 1 only for their initial three-year agreement period. After the initial period, the ACO must transition to Track 2 or drop out of the MSSP altogether. In discussing the proposal to allow ACOs to continue in Track 1, CMS stated that “we continue to believe, as discussed in the November 2011 final rule (76 FR 67907), that payment models where ACOs bear a degree of financial risk have the potential to induce more meaningful systematic change in providers’ and suppliers’ behavior.” However, CMS noted that some ACOs currently are risk averse and lack the infrastructure and readiness to be successful in Track 2. In order to encourage ACOs to progress along the “on-ramp to performance-based risk,” ACOs that elect to remain in Track 1 for an additional year will share in a lower percentage of savings. Under the proposed rule, ACOs are limited to two agreement periods under Track 1. To be eligible for the additional agreement period in Track 1, ACOs must meet certain requirements regarding quality and losses.

Encouraging Greater Risk-Sharing

In addition to extending the period for participation in Track 1, the proposed rule includes provisions encouraging ACOs to take on greater performance risk. For example, the proposed rule creates the new “Track 3,” which allows for ACOS to share in a higher percentage of shared savings and losses, and includes prospective beneficiary assignment (meaning the list of assigned beneficiaries is set at the start of the performance year and does not change during the performance year) to help these ACOs manage the increased risk. The proposed rule also modifies Track 2 to make the minimum savings and loss rates variable, rather than a flat two percent, to make Track 2 more attractive to ACOs. CMS also sought comments on waiving certain Fee for Service (“FFS”) payment rules to encourage participation in the two-sided risk model, such as the SNF 3-day rule and Medicare telehealth originating site requirements.

Data Sharing and Beneficiary Opt-Out

The proposed rule also includes changes to claims data sharing and beneficiary opt-out processes. CMS was concerned about ACOs’ ability to coordinate and manage care in the absence of information about services delivered outside of the ACO, and with feedback it received from ACOs about the current procedures for beneficiaries to opt out of sharing claims data. Under the proposed rule, a beneficiary can decline claims data sharing by contacting 1-800-MEDICARE, instead of the ACO mailing notifications and the beneficiary signing and returning forms to the ACO. In addition, CMS will notify all FFS beneficiaries about the opportunity to decline claims data sharing with ACOs through CMS materials, such as the Medicare & You Handbook. ACOs must continue to notify beneficiaries in writing at the point of care using signs with required template language that their providers and suppliers are participating in the MSSP, and the template language will be revised to inform beneficiaries that the ACO may request access to their claims data from CMS and provide beneficiaries with information and instructions about their opportunity to decline this data sharing. None of these proposed changes will affect the approximately two percent of beneficiaries that have already opted out of claims data sharing.

ACO Financial Benchmarks

CMS also sought comments regarding the revision of its methodology for establishing, updating, and resetting ACO financial benchmarks used to determine shared savings and losses. It described potential approaches that may better reflect an ACO’s performance in comparison to its regional and local market, such as using regional FFS expenditures or regional FFS cost data to set and update the benchmarks. CMS also sought comment on changes to calculations related to the benchmark (such as risk adjustment, comparison group definitions, and adjustments for ACO composition changes), and requested suggestions for alternative approaches not listed.

Participation Agreement Renewal

CMS recognized that the regulations established procedures for applying to participate in the MSSP for an initial three-year agreement period, but were largely silent with respect to procedures for ACOs that complete the initial agreement period to reapply for a subsequent three-year agreement period. In light of this, CMS proposed a procedure for ACOs to renew their participation agreements for a subsequent agreement period, instead of submitting a new or condensed application. Under the proposed rule, an ACO can request renewal of its participation agreement prior to its expiration in a form and manner and by the deadline specified by CMS in guidance.

Beneficiary Assignment

CMS also proposed changes to the beneficiary assignment process, such as specifying certain criteria for beneficiaries to be eligible to be assigned to an ACO. In addition, CMS modified the two-step assignment process to exclude certain physician specialties whose services are not likely to be indicative of primary care services, and included nurse practitioners, physician assistants, and clinical nurse specialists in the first step of the assignment process to account for the primary care services provided by these professionals.

Operational Changes

The proposed rule includes additional changes to the MSSP, although some of the changes are based on guidance previously issued by CMS. For example, CMS clarified the process for adding and removing ACO participants and ACO provider/suppliers during the performance year and the impact of these changes on benchmark calculations and program participation. The proposed rule also changes several eligibility requirements for ACOs, such as revising definitions, specifying certain requirements for participation agreements between the ACO and its ACO participants or ACO providers/suppliers, and including a condensed application process for certain Pioneer ACOs transitioning into the MSSP two-sided risk model.

Overall Impact and the Future of the MSSP

There are more than 330 ACOs participating in the MSSP, covering almost 5 million Medicare beneficiaries and more than 125,000 Medicare-enrolled practitioners across 47 states and D.C. and Puerto Rico. For the 220 ACOs with 2012 and 2013 agreement start dates, 58 ACOs generated shared savings during their first performance year, holding spending $705 million below their targets and earning shared savings payments of more than $315 million. CMS reported net savings to Medicare close to $383 million. An additional 60 ACOs reduced health care costs compared to their benchmark, but did not meet the minimum savings threshold to qualify for shared savings.

The proposed rule demonstrates CMS’s commitment to the MSSP and its willingness to provide flexibility to providers in order for them to take on greater responsibility for risk-sharing. As CMS stated in the proposed rule, “This program is a key component of the Medicare delivery system reform initiatives included in the Affordable Care Act and is a new approach to the delivery of health care.” Stakeholders should continue to participate in the dialogue with CMS to help ensure the success of this program.

CMS is requesting comments on the proposed rule, with the comment period ending on February 6, 2015.