The Centers for Medicare & Medicaid Services (“CMS”) issued a final rule (the “Final Rule”) for accountable care organizations (“ACOs”) participating in the Medicare Shared Savings Program (“MSSP”) on June 6, 2016. In the Final Rule, CMS reflects its continuing efforts to modify alternative payment programs to make them more workable while also moving toward the goal of having 50% of Medicare payments paid through alternative payment programs by 2018.

In issuing the Final Rule, CMS aims to strengthen incentives under the MSSP by (1) refining the MSSP benchmarking methodology; (2) establishing additional options for ACOs to enter performance-based risk arrangements; and (3) addressing policies for reopening of payment determinations to make corrections after financial calculations have been performed and ACO shared savings and shared losses for a performance year have been determined.

The key provisions of the Final Rule are as follows:

  1. Benchmarking Methodology: In the Final Rule, CMS modifies the approach for resetting/rebasing an ACO’s benchmark for a second or subsequent agreement periods beginning on or after January 1, 2017. CMS replaces the national trend factor with regional trend factors for establishing the ACO’s rebased historical benchmark. The Final Rule also provides for an adjustment when establishing the ACO’s rebased historical benchmark to reflect a percentage of the difference between the regional fee-for-service (“FFS”) expenditures in the ACO’s regional service area and the ACO’s historical expenditures. Comparing hospitals against regional cost standards is an approach CMS is utilizing in other alternative payment programs, including the Comprehensive Joint Replacement bundled payment program. Finally, CMS will update the rebased benchmark on an annual basis to account for changes in regional FFS spending and will account for changes in the ACO’s Participant List prior to the start of the performance year when adjusting an ACO’s rebased historical benchmark.
  2. Additional Options for Performance-Based Risk Arrangements: ACOs are able to enter either the one-sided or two-sided model for the first agreement period. Eligible ACOs participating under the one-sided model for the first agreement period may apply to continue under such model or may apply to a two-sided model for the second agreement period. In the Final Rule, CMS provides an additional option for ACOs participating under the one-sided model to apply to renew for a second agreement period under a two-sided model. If approved, the ACO may request that its initial participation agreement under the one-sided model be extended for an additional year, in which case the ACO would enter into a fourth performance year under the one-sided model. At the end of the fourth performance year, the ACO will then transition to the two-sided model.
  3. Reopening Payment Determinations: As a result of the Final Rule CMS may reopen a payment determination for good cause no more than four years after the date the ACO is notified of the initial determination. “Good cause” may be established when (1) there is new material evidence that was not available or known at the time of the payment determination, which may result in a different conclusion; or (2) the evidence that was considered in making the payment determination clearly shows that an obvious error was made at the time of the payment determination. CMS can also reopen a payment determination at any time in the case of fraud or similar fault.

Through the Final Rule, CMS continues to modify the MSSP to make it more workable while still encouraging providers to move toward taking downside risk.