CMS Proposes Changes to the Medicare Shared Savings Program: Here’s What You Should Know

Dean Stephens
February 2, 2016

On Thursday, January 28, the Centers for Medicare & Medicaid Services (CMS) announced a proposed rule aimed at improving the Medicare Shared Savings Program. The rule would strengthen the long-term incentives for Accountable Care Organizations (ACOs) to continue improving the care they provide to Medicare beneficiaries.

“Medicare payments are an important catalyst to improving care delivery, spending our resources smarter and keeping people healthy,” said Andy Slavitt, acting administrator for CMS. “This proposal allows ACOs in all parts of the country to be successful by recognizing both their achievements and improvements in how they provide care. This should have the effect of growing the number of ACOs, and making ACOs and the coordinated care they provide to patients, more of a standard in all parts of the country.”

According to the CMS Fact Sheet, the Medicare Shared Savings Program currently includes 434 ACOs serving more than 7.7 million Medicare beneficiaries nationally. The proposed rule will update the methodology used to measure the performance of ACOs that continue their participation in the Medicare Shared Savings Program after an initial three-year agreement period. It also contains proposals for further simplifying how CMS makes adjustments to ACO benchmarks when participant composition changes, for supporting ACOs in making the shift to performance-based risk, and further defines the administration of some financial regulations.

Here’s a breakdown of the proposed changes:

Establishing, Adjusting, and Updating ACO Rebased Historical Benchmarks 

  • To provide a greater incentive for continued ACO participation and improvement, CMS is proposing to modify the process for resetting the benchmarks used to determine ACO performance for ACOs renewing their participation agreements for a second or subsequent agreement period.
  • The proposed methodology sets and updates rebased benchmarks using regional rather than national spending growth trends.
  • The adjustment will reflect a percentage of the difference between the ACO’s regional fee-for-service spending and the ACO’s historical spending. CMS states that it will use a higher percentage when calculating this adjustment to the rebased historical benchmark for the ACO’s third agreement period and all subsequent agreement periods.
  • Under the new rule, the ACO’s regional service area will be defined to include any county where one or more assigned beneficiaries resides.
  • Program-wide, rather than using all fee-for-service beneficiaries, the proposal calls for using all beneficiaries eligible for ACO assignment as the basis for program calculations using regional and national fee-for-service expenditures.
  • To account for changes in regional fee-for-service spending, the ACO’s rebased benchmark will be updated annually rather than the current update, which is based entirely on the absolute amount of projected growth in national fee-for-service expenditures.
  • The proposed rule would be implemented using a phased-in approach to ensure ACOs have time to prepare for benchmarks that include regional expenditures.

 Adjusting Benchmarks for Changes in ACO Participant Composition

The rule would streamline how the ACO’s historical benchmark is adjusted when its composition changes. Currently, a change to the ACO’s composition requires a recalculation using the ACO’s three-year average per capita historical benchmark. The new proposal calls for the adjustment to be made using an expenditure ratio calculated for a single year that accounts for differences in the ACO’s assigned population.

Facilitating the Transition to Performance-Based Risk

CMS believes the long-term success of the Shared Savings Program rests on successfully transitioning it to a two-sided performance-based risk program. To strengthen these efforts, CMS wants to provide an additional participation option that allows ACOs to apply for a renewed agreement under their existing first agreement. In other words, the eligible ACO would enter its fourth year under Track One, while deferring for one year its entrance into the performance-based risk track.

Administrative Finality of Financial Reconciliation Calculations

The proposal would limit re-openings of a determination of ACO shared savings or shared loss for good cause to not more than four years from the date the ACO was notified. In the case of fraud or similar fault, CMS will have the right to reopen a payment determination at any time.

The proposed rule is open for a 60-day comment period that closes on March 28. You can read the rule in its entirety here.

Dean Stephens is the CEO of Talix.
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