As discussed in our August 16, 2018 blog post, CMS Proposes Massive Changes to ACO Program – Pushing Providers to Accept Downside Risk, on August 9, 2018, the Centers for Medicare & Medicaid Services (“CMS”) published a proposed rule referred to as “Pathways to Success” (the “Proposed Rule”) to redesign the Medicare Shared Savings Program (“MSSP” ). As proposed, the redesign would require Accountable Care Organizations (“ACOs”) to accept downside risk or shared losses sooner than was originally scheduled under the then-current MSSP.

On December 21, 2018, CMS issued the final rule (the “Final Rule”) for the redesign of the MSSP. Most aspects of the Proposed Rule were implemented in the Final Rule, including, for example, the changes to the MSSP tracks. Under the new program (“New MSSP”), the new BASIC and ENHANCED glide tracks replace Tracks 1+, 2, and 3 of the original MSSP. The BASIC track allows eligible ACOs to begin under a one-sided risk model and incrementally phase-in higher levels of risk. The BASIC track has 5 levels of risk, including two levels of one-sided risk, Levels A and B, and three levels of two-sided risk, Levels C, D, and E, with Level E being the highest level of risk. Participating ACOs would only be able to avoid downside risk for 1, 2, or 3 years depending on whether the ACO had previously participated in the MSSP under Track 1 and whether the ACO qualifies as a low revenue ACO. The ENHANCED track mirrors the MSSP’s existing Track 3 by having participating ACOs share up to 75% of the savings and between 40% and 75% of the downside risk.[1]

As promulgated in the Final Rule and as described in CMS’s summary thereof,[2] the New MSSP includes the following:

  • Greater Savings for One-Sided Risk Models. All ACOs participating in the BASIC track have the opportunity to share in greater savings based on their quality performance. ACOs participating in the one-sided models, Levels A and B, can share up to 40% of the savings while ACOs participating in the two-sided models, Levels C, D, and E, can share up to 50% of the savings.
  • Qualification as a Low Revenue ACO. CMS increased the qualification threshold for low revenue ACOs from 25% to 35% so that ACOs with participants that have a total Medicare Parts A and B fee-for-service (“FFS”) revenue of less than 35% of the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries qualify as low revenue ACOs. ACOs with participants that have a total Medicare Parts A and B FFS revenue of more than 35% are considered high revenue ACOs.
  • Additional Year of One-Sided Risk for New Low Revenue ACOs. CMS is finalizing an option for low revenue ACOs who did not previously participate in the MSSP to participate in the one-sided model of the BASIC track for up to 3 years (3.5 years in the case of ACOs with an agreement period beginning on July 1, 2019) before transitioning to Level E, which is the highest level of risk and reward under the BASIC track. Under this option, the ACO would enter at Level A and automatically advance to Level B. Instead of advancing to Level C, the ACO can elect to remain at Level B for another year and then advance to Level E for the remaining 2 years of the 5-year contract.
  • High Revenue ACO Participation in BASIC Track Level E. Under the New MSSP, there is now a limited exception to the rule that high revenue ACOs that previously participated in the MSSP can only participate in the ENHANCED track. High revenue ACOs that transitioned to Track 1+ within their current agreement period (i.e. ACOs with an agreement period start date in 2016 or 2017 that entered Track 1+ in 2018) have the option to renew for one agreement period under BASIC track Level E.
  • Repayment Mechanism for Two-Sided Risk. ACOs accepting downside risk for the BASIC and ENHANCED tracks will have a repayment mechanism amount that is based on a percentage of ACO participants’ Medicare Part A and Part B revenue. Under the New MSSP, ACOs will not have to increase their repayment mechanism amount unless the difference between the recalculated repayment mechanism amount is greater than the existing recalculated repayment mechanism amount by at least 50% or $1,000,000. In addition, under the New MSSP, the amount of time that the repayment mechanism must be in effect after the agreement period ends has been adjusted from 24 months to 12 months. Moreover, in those cases in which an ACO’s MSSP agreement includes auto-renewal provisions, the New MSSP allows the ACO to use an even shorter post-agreement repayment mechanism period.
  • Benchmarking Methodology. The Proposed Rule revised the benchmarking methodology to include factors based on regional FFS expenditures in order to establish the ACO’s historical benchmark in its first agreement period. The Final Rule decreases the initial weight of this regional adjustment from 25% to 15% in the case of ACOs with historical expenditures above their regional service area. Moreover, the Final Rule permits for modest risk score growth of up to positive 3% over the agreement period, but does not finalize the proposed cap of negative 3% on risk score decreases.