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“Pathways to Success” Update: CMS Issues Final Rule on Changes to the ACO Program

As discussed in our August 16, 2018 blog post, CMS Proposes Massive Changes to ACO Program – Pushing Providers to Accept Downside Risk, on August 9, 2018, the Centers for Medicare & Medicaid Services (“CMS”) published a proposed rule referred to as “Pathways to Success” (the “Proposed Rule”) to redesign the Medicare Shared Savings Program (“MSSP” ). As proposed, the redesign would require Accountable Care Organizations (“ACOs”) to accept downside risk or shared losses sooner than was originally scheduled under the then-current MSSP.

On December 21, 2018, CMS issued the final rule (the “Final Rule”) for the redesign of the MSSP. Most aspects of the Proposed Rule were implemented in the Final Rule, including, for example, the changes to the MSSP tracks. Under the new program (“New MSSP”), the new BASIC and ENHANCED glide tracks replace Tracks 1+, 2, and 3 of the original MSSP. The BASIC track allows eligible ACOs to begin under a one-sided risk model and incrementally phase-in higher levels of risk. The BASIC track has 5 levels of risk, including two levels of one-sided risk, Levels A and B, and three levels of two-sided risk, Levels C, D, and E, with Level E being the highest level of risk. Participating ACOs would only be able to avoid downside risk for 1, 2, or 3 years depending on whether the ACO had previously participated in the MSSP under Track 1 and whether the ACO qualifies as a low revenue ACO. The ENHANCED track mirrors the MSSP’s existing Track 3 by having participating ACOs share up to 75% of the savings and between 40% and 75% of the downside risk.[1]

In response to the public comments submitted in response to the Proposed Rule, CMS has made modifications to the Proposed Rule which are now part of the New MSSP. As promulgated in the Final Rule and as described in CMS’s summary thereof,[2] the New MSSP includes the following:

  • Greater Savings for One-Sided Risk Models. All ACOs participating in the BASIC track have the opportunity to share in greater savings based on their quality performance. ACOs participating in the one-sided models, Levels A and B, can share up to 40% of the savings while ACOs participating in the two-sided models, Levels C, D, and E, can share up to 50% of the savings.
  • Qualification as a Low Revenue ACO. CMS increased the qualification threshold for low revenue ACOs from 25% to 35% so that ACOs with participants that have a total Medicare Parts A and B fee-for-service (“FFS”) revenue of less than 35% of the total Medicare Parts A and B FFS expenditures for the ACO’s assigned beneficiaries qualify as low revenue ACOs. ACOs with participants that have a total Medicare Parts A and B FFS revenue of more than 35% are considered high revenue ACOs.
  • Additional Year of One-Sided Risk for New Low Revenue ACOs. CMS is finalizing an option for low revenue ACOs who did not previously participate in the MSSP to participate in the one-sided model of the BASIC track for up to 3 years (3.5 years in the case of ACOs with an agreement period beginning on July 1, 2019) before transitioning to Level E, which is the highest level of risk and reward under the BASIC track. Under this option, the ACO would enter at Level A and automatically advance to Level B. Instead of advancing to Level C, the ACO can elect to remain at Level B for another year and then advance to Level E for the remaining 2 years of the 5-year contract.
  • High Revenue ACO Participation in BASIC Track Level E. Under the New MSSP, there is now a limited exception to the rule that high revenue ACOs that previously participated in the MSSP can only participate in the ENHANCED track. High revenue ACOs that transitioned to Track 1+ within their current agreement period (i.e. ACOs with an agreement period start date in 2016 or 2017 that entered Track 1+ in 2018) have the option to renew for one agreement period under BASIC track Level E.
  • Repayment Mechanism for Two-Sided Risk. ACOs accepting downside risk for the BASIC and ENHANCED tracks will have a repayment mechanism amount that is based on a percentage of ACO participants’ Medicare Part A and Part B revenue. Under the New MSSP, ACOs will not have to increase their repayment mechanism amount unless the difference between the recalculated repayment mechanism amount is greater than the existing recalculated repayment mechanism amount by at least 50% or $1,000,000. In addition, under the NEW MSSP, the amount of time that the repayment mechanism must be in effect after the agreement period ends has been adjusted from 24 months to 12 months. Moreover, in those cases in which an ACO’s MSSP agreement includes auto-renewal provisions, the New MSSP allows the ACO to use an even shorter post-agreement repayment mechanism period.
  • Benchmarking Methodology. The Proposed Rule revised the benchmarking methodology to include factors based on regional FFS expenditures in order to establish the ACO’s historical benchmark in its first agreement period. The Final Rule decreases the initial weight of this regional adjustment from 25% to 15% in the case of ACOs with historical expenditures above their regional service area. Moreover, the Final Rule permits for modest risk score growth of up to positive 3% over the agreement period, but does not finalize the proposed cap of negative 3% on risk score decreases.

[1] Centers for Medicare & Medicaid Services, “Final Rule Creates Pathways to Success for the Medicare Shared Savings Program,” (Dec. 21, 2018)

[2] Id.

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.


About this Author

Kenneth Yood Healthcare Attorney SheppardMullin

Ken is a partner in the Corporate practice group in the firm's Los Angeles office. Chambers USAranks him highly for Healthcare, where he was commended for his "broad-based ability in the regulatory area." Clients appreciate that "his explanations are clear, and he understands the business side of things," notes Chambers 2016.

Areas of Practice

Ken represents a wide range of healthcare providers and healthcare companies, including specialty and general acute hospitals (including local district, nonprofit and...


Patrick Callaghan is an associate in the Corporate Practice Group in the firm's Century City office.

Areas of Practice 

Patrick advises health care corporations on mergers and acquisitions, joint ventures, and other corporate transactions. His clients include nonprofit and for-profit health systems, academic medical centers, community hospitals, and post-acute and sub-acute providers such as home health and hospice providers, therapy providers, behavioral health providers, and senior living facilities.

Patrick also provides regulatory guidance to hospital, health system and physician clients on a wide range of regulatory matters such as physician contracting, Stark Law and the Anti-Kickback Statute (AKS) compliance, corporate practice of medicine compliance, licensure and accreditation, and Medicare and Medicaid enrollment. In addition, he assists clients with identifying and addressing physician compensation arrangements that potentially implicate the Stark law, including self-disclosure of such arrangements to the Department of Justice (DOJ), the Office of the Inspector General (OIG), and Centers for Medicare & Medicaid Services (CMS).

Previously, Patrick was an associate in the health care department in the Chicago office of a large corporate law firm. While in law school, he was a member of the Journal of International Law and Business.

Melissa Gertler, Sheppard Mullin Law Firm, Corporate Law Attorney, Century City

Melissa Gertler is an associate in the Corporate Practice Group in the firm's Century City office.