Fact Sheets

Proposed Changes to the Medicare Shared Savings Program Regulations

Proposed Changes to the Medicare Shared Savings Program Regulations

On January 28, 2016 the Centers for Medicare & Medicaid Services (CMS) issued a proposed rule that would update the methodology used to calculate the benchmarks of Accountable Care Organizations (ACOs) that continue their participation in the Medicare Shared Savings Program (Shared Savings Program) after an initial three-year agreement period. This proposed rule expands upon issues discussed in the June 2015 Shared Savings Program final rule, in which CMS committed to engaging in additional rulemaking around modifications to the Shared Savings Program’s methodology for resetting benchmarks.

The proposed changes are focused on incorporating regional fee-for-service (FFS) expenditures into the methodology for establishing, adjusting, and updating an ACO’s historical benchmark for its second or subsequent agreement period. CMS has also proposed further modifications to streamline the methodology used for adjusting the ACO’s benchmark for composition changes, encourage ACOs to transition to performance-based risk arrangements, and to provide greater administrative finality around the program’s financial calculations.

The June 2015 final rule adopted policies designed to facilitate continued participation by ACOs in the program beyond their first agreement period, encourage ACOs to take on performance-based risk (for instance by adding a new performance-based risk track), as well as to codify existing guidance, reduce administrative burden, and improve program function and transparency.

This fact sheet summarizes the major proposed changes that are included in this proposed rule for the Shared Savings Program. There will be a 60-day public comment period on this proposed rule. CMS encourages all interested members of the public, including ACOs, providers, suppliers, and Medicare beneficiaries to submit comments so that CMS can consider them as it develops the final rule on the program. The 60-day comment period closes on March 28, 2016. Comments can be submitted at: http://www.regulations.gov/.

BACKGROUND

The Medicare Shared Savings Program now includes 434 ACOs serving more than 7.7 million Medicare beneficiaries nationally. 

Current Benchmarking Methodology

Background: ACO performance is currently measured using a multi-step process that evaluates an ACO’s effectiveness in lowering expenditures for a group of assigned beneficiaries against a benchmark reflective of the ACO’s historical costs. The current Shared Savings Program regulations outline an approach for establishing an ACO’s historical benchmark and annually adjusting and updating this benchmark.

• At the beginning of the ACO’s first three-year agreement period, CMS sets an average per capita historical benchmark. This benchmark is based on the Parts A and B FFS expenditures for beneficiaries who would have been assigned to the ACO in each of the three years prior to the start of the ACO’s agreement period. The first two benchmark years are risk adjusted and trended forward to the third benchmark year by growth rates calculated based on national Medicare Parts A and B expenditures. For ACOs in their first agreement period, the benchmark years are now weighted as follows: benchmark year one weighted at 10 percent, benchmark year two weighted at 30 percent, and benchmark year three weighted at 60 percent.  Following the changes to the methodology for resetting the benchmark in subsequent agreement periods, made in the June 2015 final rule, ACOs entering a second or subsequent agreement period will have benchmark years weighted equally. CMS will also make an adjustment to reflect the average per capita amount of savings generated by the ACO in its prior agreement period, reflecting the ACO’s financial and quality performance as well as the size of its assigned patient population during that prior agreement period.
• CMS adjusts the ACO’s historical benchmark on an annual basis for changes during the performance period in the health status and demographic factors of the ACO’s assigned beneficiaries.
• CMS updates the ACO’s benchmark on an annual basis based on the projected absolute amount of growth in national per capita expenditures for Parts A and B services under the original FFS program.

CMS adjusts an ACO’s historical benchmark on an annual basis based on finalized changes the ACO makes to its list of ACO participants, identified by Taxpayer Identification Numbers (TINs). In making this adjustment, the historical benchmark period remains constant, but beneficiary assignment is revised to reflect the influence of the ACO participant list changes.

See the Appendix for an overview of the proposed changes to the program’s benchmarking methodology.

Proposals for establishing, adjusting, and updating ACO rebased historical benchmarks 

We propose the following changes, to be applied in resetting an ACO’s benchmark for a second or subsequent agreement period beginning on or after January 1, 2017:

• Replace the national trend factor with regional trend factors for establishing the ACO’s rebased historical benchmark, and remove the adjustment to explicitly account for savings generated under the ACO’s prior agreement period.  
• Make an adjustment when establishing the ACO’s rebased historical benchmark, to reflect a percentage of the difference between the regional FFS expenditures in the ACO’s regional service area and the ACO’s historical expenditures. A higher percentage will be used in calculating this adjustment to the ACO’s rebased historical benchmark for the ACO’s third agreement period and all subsequent agreement periods.
• Annually, update the rebased benchmark to account for changes in regional FFS spending, replacing the current update, which is based solely on the absolute amount of projected growth in national FFS spending.

We propose to define an ACO’s regional service area to include any county where one or more assigned beneficiary resides and to weight county-level FFS costs by the proportion of the ACO’s assigned beneficiaries in the county. We are also proposing a program-wide change, to use all beneficiaries eligible for ACO assignment instead of all FFS beneficiaries as the basis for program calculations using regional and national FFS expenditures.

Through these proposed changes to the methodology for determining the ACO’s rebased historical benchmark, CMS is seeking to reflect an ACO’s performance against providers in the same market, rather than just evaluating the ACO against its own past performance. We believe this proposal will improve the program’s incentives for ACOs by recognizing an ACO’s efficiency relative to its region and limiting the link between an ACO’s performance and its future benchmarks.   

Proposals to adjust benchmarks for changes in ACO participant composition

We propose program-wide application of a streamlined approach to adjusting an ACO’s historical benchmark at the start of each performance year for changes in its ACO participant TIN composition finalized before the start of that year. We would adjust an ACO’s historical benchmark for changes in participant composition using an expenditure ratio calculated for a single year that accounts for differences in the ACO’s assigned population determined based on its prior and current participant composition. This proposed approach replaces the current approach requiring recalculation of an ACO’s three-year average per capita historical benchmark if the ACO changes its ACO participant TIN composition during the prior performance year. This proposed change, if finalized, is anticipated to provide administrative ease in calculating the adjustment and to be highly correlated with calculations using the current methodology.

Data for modeling impacts of proposed changes

In response to requests from ACOs and other stakeholders for data to allow for modeling of proposed changes to the rebasing methodology, CMS has made new data files available through the Shared Savings Program’s website (link under Statutes/Regulations/Guidance webpage): average per capita county-level FFS spending and risk scores for three historical years; and ACO-specific data, on the total number of assigned beneficiaries residing in each county where at least one percent of the ACO’s assigned beneficiaries reside, for three historical years. These data can be used in combination with publicly available ACO financial performance data for Performance Year One and Performance Year 2014 of the Shared Savings Program available through Data.CMS.gov.

Facilitating Transition to Performance-Based Risk

In order for the Shared Savings Program to be effective and sustainable over the long term, we believe we need to further strengthen our efforts to transition the Shared Savings Program to a two-sided performance-based risk program in which ACOs share in both savings and losses. Currently, an ACO enters a three-year agreement period for a particular participation track, either under the one-sided shared savings model (Track One) or a two-sided shared savings / shared losses model (Track Two or Track Three) and remains under that track for the duration of the agreement period. ACOs may enter either the one-sided or a two-sided model for their first agreement period. Eligible ACOs that participated under the one-sided model for their first agreement period may apply to continue in Track One for a second agreement period, or apply to a two-sided model.

We are proposing to provide an additional option for ACOs participating under Track One to apply to renew for a second agreement period under a two-sided model (Track Two or Track Three). If the ACO’s renewal request is approved, the ACO’s initial participation agreement under Track One would be extended for an additional year (that is, the ACO would enter a fourth performance year under Track One). As a result of this deferral, we would also defer rebasing the ACO’s benchmark for one year. At the end of this fourth performance year under Track One, the ACO would transition to the selected performance-based risk track for a three-year agreement period.

Administrative Finality of Financial Reconciliation Calculations

The Shared Savings Program regulations address limited circumstances under which CMS may reopen a determination of the amount of shared savings due to the ACO or the amount of shared losses owed by the ACO resulting from an error determined through an inspection, evaluation or audit.

We propose to further define timeframes and other criteria for reopening of a determination of ACO shared savings or shared losses to correct financial reconciliation calculations, including: (1) Limiting re-openings to not later than four years after the date of the notification to the ACO of the initial determination of shared savings or shared losses for the performance year for good cause; (2) Reserving the right to reopen a payment determination, at any time in the case of fraud or similar fault.

Additional Resources

For a link to the press release, click here: https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-01-28-2.html

Shared Savings Program Statutes/Regulations/Guidance Webpage: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Statutes-Regulations-Guidance.html

Shared Savings Program Accountable Care Organization Public Use Files for performance year reconciliation: https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/SSPACO/Overview.html (with links to interactive datasets for 2014 and 2013 data available through data.CMS.gov)

APPENDIX:  CHARACTERISTICS OF CURRENT AND PROPOSED BENCHMARKING APPROACHES

* Proposed adjustment to the historical benchmark for ACO Participant List changes using an expenditure ratio would be a program-wide change applicable to all ACOs including ACOs in their first agreement period. As part of the proposed rebasing methodology, the regional adjustment to the ACO’s rebased historical benchmark would be recalculated based on the new ACO Participant List.