A Look Inside CMS' New Medicare Shared Savings Program

This article by partner Michael Lampert and associates Cara Dermody, Wesley Dodd and Whitney Wadman was published by Law360 on January 14, 2019.

On Dec. 21, 2018, the Centers for Medicare & Medicaid Services issued a final rule1 establishing the "Pathways to Success" program, which overhauls the Medicare shared savings program, or MSSP, for accountable care organizations. The changes primarily involve provisions for new beneficiary incentives, coverage of telehealth services and choice of beneficiary assignment methodology. The principal changes from the proposed rule announced in August, are adjustments to the proposed shared savings cap for a participation option and the proposed definition of low- and high-revenue ACOs.

In addition to the changes contained in the final rule, in November CMS finalized certain changes to the MSSP as part of its calendar year 2019 Physician Fee Schedule final rule.2 Those changes originally had been introduced in the proposed rule and include: (1) a new certified electronic health record technology, or CEHRT, threshold criterion to determine an ACO's eligibility for program participation to promote interoperability among ACO providers and suppliers; (2) refinements to the voluntary alignment process, allowing beneficiaries to select an ACO professional, regardless of specialty, as a primary care clinician; (3) policies intended to address extreme and uncontrollable circumstances experienced by ACOs (e.g., natural disasters) for performance year 2018 and subsequent years; and (4) revisions to the primary care services definition used in beneficiary assignment.

The Original ACO Program

CMS launched the MSSP, created by the Affordable Care Act, in 2012. Currently, 561 ACOs participate in the program, serving over 10.5 million Medicare beneficiaries. The MSSP is designed to hold ACOs accountable for the total cost of care and quality outcomes. ACOs that reduce Medicare expenditures below a set benchmark while meeting quality requirements are eligible to receive additional reimbursement in the form of a percentage of the cost savings achieved.

Prior to the new changes, the MSSP had three participation tracks. Track 1, a one-sided shared savings track, allowed ACOs to receive additional reimbursement of up to 50 percent of savings under the benchmark, with no requirement to share in the costs should spending exceed the benchmark. The vast majority of MSSP ACOs (82 percent) participated in track 1. ACOs participating in tracks 2 and 3, the two-sided shared savings/shared losses tracks, were eligible to receive a greater percentage of program savings, but also had to bear downside risk, sharing losses with CMS if their spending was above the benchmark.

Though their results are disputed, some studies indicated that the previous MSSP failed to reduce federal government spending and in fact led to increased spending of over $380 million. However, the two-sided models (tracks 2 and 3) did reduce federal spending by $60 million over five years — though those savings were overshadowed by program losses generated in the more popular track 1. Through the redesigned program, CMS seeks to increase savings for the Medicare program by increasing the number of ACOs participating in two-sided risk tracks.

Redesign of the Program

Changes to the Risk Model

The final rule implements the proposed revisions to the MSSP's participation tracks and mandatory advancement to greater levels of two-sided risk. Under the final rule, tracks 1, 2 and 3 will be replaced with two "glide paths." The table at the end of this article summarizes the key characteristics of the paths.

BASIC Path

Under the final rule, the BASIC glide path will replace tracks 1 and 2 and limit the amount of time ACOs may participate in a one-sided risk model. On the BASIC path...

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