This is the third article in our series on the new “Pathways” rules for Accountable Care Organizations.  Our first two articles in the series can be found here.

The Centers for Medicare and Medicaid Services (CMS) issued its anticipated final rule revising the Medicare Shared Savings Program to improve cost savings and quality.

With the changes in the final rule, the revamped program, called “Pathways to Success,” is projected to save Medicare $2.9 billion over 10 years—that’s $0.7 billion more than projected in the proposed rule issued August 9, 2018.

CMS released the final rule on December 21, 2018, and restated the agency’s goal of driving more Medicare Accountable Care Organizations (ACOs) more quickly into risk-sharing arrangements.  As of that date, according to CMS, fewer than a third of the 38 million beneficiaries in fee-for-service Medicare received care from providers participating in a Medicare ACO, and most of the participating ACOs were in arrangements with upside risk only (i.e., ACOs most share in savings but do not share in losses, called “downside risk”).

CMS has previously pointed to data showing Medicare ACOs with both upside and downside risk perform better than Medicare ACOs sharing in upside risk only.  For 2016, Medicare’s Next Generation ACOs produced savings of $62 million and maintained quality of care, according to a CMS report issued August 27, 2018.  For 2017, the savings among Next Generation ACOs totaled $164 million, according to CMS data released with the new rule.  Next Generation ACOs accept the highest levels of upside and downside risk of any Medicare ACO.

With the final rule, CMS:

  • Replaced Track 1 and Track 2 of the Shared Savings Program with a new BASIC Track featuring the same risk level as Track 1+, which was created in January 2018 to add the lowest level of downside risk to the original, no-downside-risk Track 1. Track 1+ was designed to ease more ACOs into downside-risk arrangements.
  • Increased shared savings rates for ACOs in the incremental BASIC Track glide path toward increased risk sharing. The rate for ACOs with upside-only risk is 40 percent of shared savings, while ACOs with two-sided risk (upside and downside risk) share at a rate of up to 50 percent under the new rule.
  • Retained Track 3 with a new name, ENHANCED Track, continuing the opportunity for ACOs to earn the greatest share of savings and bear the greatest share of losses for expenses exceeding targets.
  • Limited to two years the length of time most new ACOs are permitted to take upside-risk only, a reduction from six years previously. There are exceptions based on ACO revenue and experience with Medicare performance-based risk programming.
  • Established eligibility criteria for the BASIC and ENHANCED risk-sharing tracks, based on Medicare fee-for-service revenue and ACO experience with Medicare performance-based risk initiatives. CMS increased the threshold for determining low-revenue ACOs to capture smaller providers into the ACO program, which are allowed more time on the BASIC track.  The new rule defines the options and limits determining the appropriate risk-sharing tracks for new and renewing ACOs.
  • Expanded the length of ACO agreements from three years to a minimum of five years.
  • Revised the methodology for setting the ACO benchmarks that determine whether ACO performance warrants the sharing of gains or losses, with the intent of making more accurate determinations.
  • Modified the requirements for repayment mechanism arrangements to reduce the burden on risk-sharing ACOs.
  • Gave two-sided risk ACOs (ACOs accepting both upside and downside risk):
    • Greater flexibility in choosing how Medicare beneficiaries are assigned.
    • The ability to make incentive payments of up to $20 to beneficiaries for each qualifying primary care service received from ACO providers, federally qualified health centers or rural health clinics.
    • The ability to receive payment for a broader array of telehealth services.
  • Finalized ACO requirements for notifying Medicare fee-for-service beneficiaries of participating providers, incentive programs and options such as declining data sharing and changing primary clinicians.
  • Specified ACO eligibility for a waiver of the three-day inpatient hospital stay requirement before Medicare-covered, post-hospital, extended-care skilled nursing facility service.

Also in the final rule, CMS confirmed the one-time, July 1, 2019, start date for new ACO agreements under Pathways to Success.  Existing ACOs whose agreements with CMS were to expire at the end of 2018 had the option of receiving a six-month extension.  According to CMS, 90% of eligible ACOs extended their agreements six months and will be able to renew their contracts — or not – including the options for creating a “MACRA safety net” if your organization chooses to conclude its participation in a Medicare ACO, under the new program rules.  CMS established a Notice of Intent to Apply period of January 2, 2019, through January 18, 2019.

For more information on Medicare’s transition to value-based health care financing and what the new Pathways to Success regulations mean for your organization, and to stay abreast of developments in health care policymaking, please subscribe to receive Husch Blackwell news and insights.  For information on the implications of health care policy developments, please contact a member of the Husch Blackwell Health Law Team.