CMS Issues Final Rule to ACOs: It’s Time to Take a Risk

January 9, 2019 Alerts and Newsletters

Just before the holidays, the Centers for Medicare & Medicaid Services ("CMS") issued a final rule ("Final Rule") that will overhaul the Medicare Shared Savings Program ("MSSP"). As of January 2018, the MSSP included 561 participating accountable care organizations ("ACOs") across the nation, managing the care for approximately 10.5 million Medicare fee-for-service beneficiaries. [1] The Final Rule, among other things, redesigns the participation tracks available to ACOs, provides additional flexibility for ACOs, and encourages greater beneficiary engagement. Most notably, CMS is pushing ACOs to assume downside financial risk sooner than has historically been required and ultimately expects to see almost $3 billion in savings from these significant regulatory changes over the next 10 years. [2] The Final Rule takes effect on February 14, 2019, and generally affects performance periods beginning July 1, 2019 or later. Below, we outline some of the key provisions in the Final Rule.

Restructured Participation Tracks

The Final Rule replaces the traditional three tracks in the MSSP model with two tracks: BASIC and ENHANCED. The BASIC track offers one-sided model ACOs the right to gradually bear higher increments of risk and reap greater potential rewards within one agreement period. The BASIC track is divided into five different levels: Levels A through E. Levels A and B of the BASIC track are one-sided models with the lowest percentage of shared savings (up to 40 percent shared savings) whereas Level E of the BASIC track is a two-sided model with the highest level (within the BASIC track) of shared savings and risk (up to 50 percent shared savings and up to 30 percent loss sharing). ACOs in the BASIC track are automatically advanced through the five levels over the course of the agreement period.

The ENHANCED track is based on the existing Track 3 and provides ACOs the highest level of risk and potential reward (up to 75 percent shared savings and up to 75 percent of loss sharing, with the loss sharing percentage being dependent on the shared savings percentage among other factors).

The Final Rule generally replaces the current three-year agreement period with a five-year agreement period. The first agreement period for the new BASIC and ENHANCED tracks has a July 1, 2019 start date. ACOs that begin participating on July 1, 2019 will have an agreement period of five years and six months, with an initial six-month performance period from July 1, 2019 to December 31, 2019.

Increased Flexibility for ACOs

The Final Rule provides additional flexibility to ACOs by expanding the applicability of the "SNF 3-day rule waiver," which waives the requirement that a beneficiary have a 3-day inpatient hospital stay prior to admission to a skilled nursing facility ("SNF") in order for the SNF services to be covered by Medicare. The Final Rule expands eligibility under the SNF 3-day rule waiver by including ACOs participating in a two-sided model under preliminary prospective assignment with retrospective reconciliation. In addition, the Final Rule allows providers furnishing SNF services under a swing bed arrangement to partner with ACOs to provide SNF services in accordance with the waiver.

The Final Rule also expands Medicare coverage of telehealth services furnished by certain ACOs. Specifically, on or after January 1, 2020, practitioners billing through an ACO participant that is part of an "applicable ACO" may receive payment for otherwise covered telehealth services provided when the beneficiary is in his or her home and regardless of the geographic location of the beneficiary. An "applicable ACO" is an ACO participating in a two-sided model with prospective assignment.

Beneficiary Engagement

The Final Rule seeks to encourage beneficiary engagement by expanding available incentives that ACOs may offer to beneficiaries. Under the current MSSP regulations, ACOs are limited to providing incentives that consist of in-kind items and services that meet certain requirements. The Final Rule allows an ACO participating in a two-sided model to pay certain monetary incentives to beneficiaries who receive a "qualifying service." To meet the definition of "qualifying service," a service must be a primary care service (as defined by MSSP regulations) that is delivered by certain providers, such as an ACO professional with a primary care designation.

Under the Final Rule, an ACO seeking to implement a beneficiary incentive program must receive approval from CMS and must comply with numerous requirements and safeguards (for example, each incentive payment cannot exceed $20; payments must be made in traceable cash equivalents, such as checks or debit cards; incentive payments must be made in the same amount to each eligible beneficiary; and the ACO must comply with various record keeping requirements).

In addition to permitting beneficiary incentive programs, the Final Rule also seeks to encourage beneficiary engagement by strengthening beneficiary notification requirements that require beneficiaries to be notified of a provider's participation in the MSSP among other things. While current MSSP regulations require that ACO participants notify beneficiaries by posting signs in their facilities and making written notices available upon request, the Final Rule requires that each ACO ensure that each beneficiary receive a standardized written notice prior to or at the first primary care visit of the performance year.

Benchmarking Methodology

CMS continues to refine the program's benchmarking methodology in the Final Rule, effective for performance periods on or after July 1, 2019. The changes include using regional expenditures to establish, adjust, and update the benchmark in the first agreement period, reducing the risk that regional adjustments will unduly influence the benchmark to an excessive degree, using a blend of regional and national expenditure growth rates to update the benchmark, and using growth in prospective CMS Hierarchical Condition Category (HCC) risk scores to adjust the benchmark.

Verrill Dana will continue to analyze the Final Rule and related guidance as it is released. For assistance with questions regarding the Final Rule or the upcoming application cycle, please reach out to Andrew Rusczek, Sarah Trautz, or your regular Verrill Dana attorney.

[1]Centers for Medicare & Medicaid Services. (2018, January). Medicare Shared Savings Program Fast Facts. Retrieved from

[2]Verma, S. (2018, December 21). "Pathways to Success," an Overhaul of Medicare's ACO Program. Retrieved from

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