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New Rules for ACOs in the Medicare Shared Savings Program

CMS issued a final rule, published in the Federal Register on Friday, June 10, 2016, updating how the performance of ACOs participating in the Medicare Shared Savings Program (MSSP) is measured and compensated.  This rule is part of an ongoing effort to move Medicare away from a model that pays for each service provided towards a system that rewards physicians for coordinating with each other to improve quality of patient care and outcomes while reducing cost.  CMS views ACOs as a major part of this transition, and according to its press release, believes that the current updates should help more ACOs successfully participate in the MSSP by “improving the shared savings payment methodology and providing a new participation option for certain ACOs to move to the more advanced tracks of the program.”  The major changes relate to three areas:

1. Benchmarking Methodology

As we anticipated, the final rule changes how ACOs are paid by basing one payment factor on whether the ACO is able to deliver high-quality care at a lower cost compared to other providers in its region.   CMS accomplishes this by establishing a phased-in approach to incorporate regional fee-for-service expenditures into calculations for resetting, adjusting, and updating an ACO’s benchmarks.  This change recognizes that health care costs vary among different regions of the country.  Specific details on how this approach will be operationalized can be found in the final rule’s fact sheet.

2. Transition to Performance-Based Risk

The final rule establishes a “smoother and quicker” transition to more advanced tracks (with financial risk to the ACO) for certain ACOs by allowing an extra year in their first participation agreement before the ACO takes on financial risk. CMS believes that this change will promote the entry of more ACOs in the MSSP and encourage those already participating to transition to a more advanced-based risk track.

3. Financial Reconciliation Calculations

CMS also defines timeframes and other criteria for reopening a determination of ACO shared savings or shared losses to correct financial reconciliation calculations. Reopening is limited to “good cause” and may occur no 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.  However, CMS may reopen at any time in the case of fraud.

Impact on ACOs

The goal of these updates is to increase participation in the MSSP through the addition of new ACOs, while encouraging the progression of existing ACOs to performance-based risk tracks. In general, these changes should enable more accurate calculations of shared savings and shared losses by including regional data as a factor in benchmarking.  No longer will rural ACOs be compared to the same benchmarks as ACOs in higher-cost urban areas, for example.  These “incentives” could lead to increased participation in the MSSP and will likely add to the accelerating tide of the transition toward value-based Medicare payments.  At the very least, the incentives will remove a common reason – or perhaps excuse – for not participating in the MSSP or for not progressing to a more advanced track.

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume VI, Number 167


About this Author

Bridgette A. Keller, health system administration LAWYER, Mintz

Bridgette applies her experience in health system administration and ethics in health care to her health law practice. Bridgette advises health care providers, ACOs, health plans, PBMs, and laboratories on a variety of regulatory, fraud and abuse, and business planning matters.

With a background in health care operations, Bridgette is able to provide clients with practical insight that includes a focus on the business implications of health care enforcement defense activities, internal investigations, regulatory compliance, and fraud and abuse...

M. Daria Niewenhous, Health Care Tech Attorney, Mintz Levin, HIPAA Lawyer

Daria’s multifaceted health care practice serves the full range of provider entities. She draws on her own in-house counsel experience to help clients attain compliant, efficient operations while navigating industry and regulatory roadblocks. Her concrete, practical guidance helps clients manage risks and compete in the face of remarkable cost pressures.

Daria's practice ranges from transactional matters to general counsel services. She has extensive experience with the merger and acquisition of hospitals, long-term care facilities, clinics, assisted living facilities, home health and hospice programs, group practices, substance use disorder facilities, and other provider entities. She guides clients through the regulatory aspects of capital projects and other strategic initiatives. Active in health care reform matters, Daria works with clients on clinical integration and affiliation, ACOs, and similar arrangements. In addition, Daria provides experienced counsel in areas of contracting, patient care/risk management matters, privacy and security of patient information (HIPAA), and addressing adverse events, including internal investigations and crisis management.

After beginning her legal career at Mintz, she served as Vice President of Legal Services at Lahey Clinic, Burlington, Massachusetts. While at Lahey, she provided comprehensive general counsel services, advising physician leaders and management on all aspects of the Lahey delivery system, which includes a tertiary care teaching hospital, outpatient primary care and specialty clinics, and a community group practice network.

Stephen M. Weiner Healthcare Attorney Mintz Law Firm
Member, Founding Chair: Health Law Practice

Steve has an outstanding reputation in the arena of health care strategic affiliations, mergers, and acquisitions. He has led initiatives involving mergers of nonprofit providers, including community hospitals and academic center-based systems; acquisitions of nonprofits by for-profit companies, including private equity firms; joint ventures and partnerships among for-profit and nonprofit entities; and strategic realignments within academic medical systems among medical schools, academic medical centers and faculty practice plans. Steve has also facilitated the...