CMS makes sweeping changes to accountable care organizations program in final rule Last Updated: July 21, 2014
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The Centers for Medicare & Medicaid Services (CMS), along with several other federal agencies, today issued the long-awaited final regulations for the Medicare Shared Savings Program (MSSP), which govern the creation of accountable care organizations (ACOs).

CMS has made critical and far-reaching changes to its initial ACO proposal released in March that align the ACO program more closely with Premier’s recommendations. In its June 2 response to the proposed rule, Premier called for major revisions to remove the impediments that could derail ACO development and to structure the program to attract participants and maximize success.

Highlights of the final rule include:

  • Two payment models within the ACO program from the start, including an option that does not involve downside risk during the initial three-year agreement period
  • A limited shared savings split of up to 50 percent in the one-sided model and up to 60 percent in the two-sided model, but share on first dollar for all ACOs in both models after meeting the minimum savings rate
  • Elimination of CMS’ proposal to withhold 25 percent of the shared savings to account for potential losses
  • Adoption of 33 individual measures of quality performance – down from the proposed 65 measures – that will be used to determine if an ACO qualifies for shared savings; as in the proposed rule, performance standards for the first year are met by satisfactory reporting

CMS will start accepting applications from prospective ACOs shortly after January 1, 2012. CMS will provide for two application periods for the first year of the MSSP whereby they will accept applications for an April 1, 2012 or July 1, 2012 start date. All ACOs that start in 2012 will have agreement periods that terminate at the end of 2015.

The final rule will be published in the November 2 Federal Register. Premier will be holding an Advisor Live webinar and providing a detailed summary of the final rule in the coming days.
The key provisions of the final rule are summarized below.

ACO professionals and beneficiaries

Beneficiary assignment: CMS finalized its proposal to assign beneficiaries to ACOs retrospectively at the end of the performance period, but provide ACOs with preliminary or prospective assignment information at the start of the performance period (which will be updated quarterly) and annually thereafter. In this two-step process, CMS will assign beneficiaries to an ACO if they received a plurality of the primary care services from primary care physicians within that ACO. If a beneficiary has not had a primary care service furnished by any primary care physician, the beneficiary is assigned to an ACO based on a plurality of primary care services from physicians and non-physician practitioners within the ACO.

Beneficiary notification and opt-out: CMS finalized its proposal to require ACOs to notify beneficiaries at the time they seek services that the provider is participating in an ACO. Beneficiaries who do not wish to receive care from their primary care physician enrolled in an ACO can seek care from another physician outside the ACO. Contrary to Premier recommendations, CMS also finalized its proposal to allow beneficiaries to opt out of having their data shared, while allowing the beneficiary to continue to receive care from the ACO provider. Premier had counseled CMS to structure an opt-out option that prevents both data-sharing and attribution of that beneficiary to an ACO, while allowing them to continue seeking care from their usual providers.

EHR requirements: CMS has opted to waive its initial requirement that at least 50 percent of all primary care physicians in the ACO must be considered meaningful users of electronic health records (EHR) in order to participate in the program. As Premier stated in comments to CMS, existing penalties associated with an inability to meet meaningful use requirements should provide appropriate incentive on its own.

Financial structure

ACO payment models: In response to Premier’s recommendations and other public input, CMS is implementing both a one-side model that has shared savings only – with no risk – for the term of an ACOs’ first agreement, as well as a two-sided model in which the ACO must share in both the savings and losses for the entire term of their agreement. An ACO can only participate in the one-sided model for on agreement period and, if they wish to continue, must transition to a two-sided model.

Shared savings: Despite Premier and other provider groups advocating for a higher shared savings split with providers, CMS has maintained limited shared savings with providers. CMS will share up to 50 percent of the savings for the one-sided model and up to 60 percent in the two-sided model. However, in a positive development, ACOs will share first-dollar savings in both models once the minimum savings rate has been achieved.

Minimum savings rate: CMS is also maintaining that ACOs must first meet quality standards and a minimum savings rate prior to being able to share in the savings, which is a 2 percent threshold for large providers and a 3.9 percent threshold for small providers for the one-sided model and a flat 2 percent threshold for the two-sided model. As noted above, after reaching the minimum savings requirement, all ACOs will share in first dollar savings.

Withhold of shared savings: CMS was persuaded by comments recommending elimination of the 25 percent withhold of the shared savings to cover possible losses and has reversed this proposal in the final rule. Instead, CMS is finalizing the requirement for ACOs to establish a self-executing repayment mechanism, under which ACOs could elect an annual withhold on savings as part of their repayment mechanism.

Payment adjustments for Indirect Medical Education (IME)/disproportionate hospital share (DSH) payments: At the prompting of Premier and others in the provider community, CMS reversed its proposal to include DSH and IME in the benchmark, national growth rate and the expenditures calculations. These payments are made to account for higher program costs that are outside of the services provided to ACO beneficiaries, such as teaching residents or higher proportions of uncompensated care. CMS shared the concerns that inclusion of these payments could incent ACOs to avoid certain providers such as teaching hospitals.

Legal issues

Legal waivers: CMS and the Office of the Inspector (OIG), in a separate interim final rule, finalized waivers to protect ACO participants from prosecution under the anti-kickback statute, the physician self-referral/Stark Law and the civil monetary penalty law. In addition to the waivers initially proposed covering division of shared savings payments and other financial arrangements among ACOs, ACO participants and ACO provider/suppliers, the agencies added three new and significant waivers, mirroring ideas strongly advocated by Premier in its comments to the proposed waivers:

  1. A one-time ACO pre-participation waiver, covering all items and services used to create or develop an ACO that are provided by an ACO, ACO participants or ACO provider/suppliers (with some exclusions) within a year preceding the ACO’s target date for participation in the MSSP.
  2. A broad waiver covering any arrangement of an ACO, ACO participant or ACO provider/supplier (or any combination of such parties) which is documented and reasonably related to the purposes of the MSSP.
  3. A broad waiver for in-kind items or services provided by an ACO to Medicare beneficiaries for free or below fair market value, if there is a reasonable connection between the items and services and the medical care of the beneficiary, and the items or services relate to preventative care, advance adherence to a treatment, drug regime or management of a chronic disease or condition.

Anti-trust safety zone: The Federal Trade Commission (FTC) and Department of Justice (DOJ) issued a final policy statement on ACO-related antitrust issues that largely mirrors the proposed policy statement, with a few key modifications. As advocated by Premier, the guidance now applies to collaborations formed prior to March 23, 2010 and, in keeping with changes to the MSSP, it no longer requires mandatory antitrust review for certain ACOs. However, CMS will provide aggregate claims data regarding allowed charges and fee-for-service payments all for ACOs accepted into the MSSP, so that the FTC and DOJ can monitor antitrust compliance.

Standards/measures issues

Quality measures: The final rule adopts 33 individual measures of quality performance – down from the proposed 65 – that will be used to determine if an ACO qualifies for shared savings. In year one of the program, ACOs are required to report full and accurate data for those measures, but not meet any specific performance target. For subsequent performance periods, ACOs will also be expected to exceed certain minimum performance levels for selected ACO performance measure then in use. For year two, 25 of the measures will pertain to pay for performance, and in year three, 32 measures will. One measure, functional status as reported by the beneficiary, will be reported only. The 33 measures rely on a mixture of survey data, payer claims data and clinical data from providers to be submitted through a web-based tool provided by CMS. CMS will pay for and administer the requisite surveys for Year 2 and 3 (first two years of measurement) and thereafter it will be the ACO’s responsibility.

Data sharing: As proposed, CMS will make available aggregate Medicare Parts A, B and D data quarterly and, in response to a formal request from an ACO, will provide beneficiary-level claims data as frequently as on a monthly basis. ACOs must have a data user agreement (DUA) set up prior to obtaining beneficiary-level data. CMS will also provide quarterly reports and although not defined, it appears that report set is an expanded set from the set described in the draft rules.


Governance: The final rule maintains the requirement that an ACO must maintain an identifiable governing body, and includes definition of functions and maintains the requirement that ACO participants must constitute at least 75 percent control. CMS is no longer requiring that each ACO participant have a representative on the governing body, but CMS is continuing to require beneficiary representation. In cases where the ACO does not meet the 75 percent standard or the required beneficiary representation, it must describe in its application why it seeks to differ and how the ACO will involve participants and/or beneficiaries in governance.