In its Final Rule for the 2025 Medicare Physician Fee Schedule, CMS announced changes to the Medicare Shared Savings Program (the Program) targeted at incentivizing providers to both enroll and stay in the Program. The Final Rule provisions reward Accountable Care Organizations (ACOs) with a strong track record of savings with up-front payments and makes it easier for prospective organizations—particularly those in underserved communities—to qualify for the Program, which has seen a decline in new ACOs over the past half decade.
On the other hand, CMS is controlling for recent variables which it believes may skew the Program’s benchmark used in calculating the amounts that an ACO has actually saved Medicare, specifically giving it broader authority to account for suspicious billing activity and government settlements. Other provisions of the Final Rule address modifications intended to harmonize quality reporting and extend incentives to transition to digital quality measure reporting.
Background of the Shared Savings Program
The Medicare Shared Savings Program, added as part of the Affordable Care Act in a push toward a more value-based healthcare system, incentivizes providers to reduce costs and to improve quality for Medicare beneficiaries by allowing an ACO organized by participating providers and suppliers to share in Medicare program savings. These savings are calculated based on care delivered to the beneficiaries attributed to the ACO (provided that quality standards were still met).
In 2023, CMS reported that approximately sixty-nine percent of ACOs participating in the Program received performance payments, totaling $3.08 billion. Nonetheless, and though the gross savings rate continues to increase for ACOs actually participating in the Program, the total number of ACOs has steadily decreased since 2018. While also making changes in the benchmark to address emerging issues, the thrust of CMS’s recent updates is to drive growth in Program participation. In addition, to achieve the agency’s goal of having all traditional Medicare beneficiaries in a care relationship with providers who are accountable for cost and quality by 2030, the most recent rules are intended to grow Program participation in rural and underserved areas, as well as promote health equity.
Medicare Shared Savings Program Changes in the 2025 Final Rule
Prepaid Shared Savings
To encourage CMS’s highest performing ACOs with a history of earning shared savings to maintain participation in the Program, CMS is effectively allowing ACOs to borrow against their estimated savings, implementing a system for paying ACOs up-front on the condition that they participate for the entire year and make up for those payments with realized savings (as opposed to being paid out at the end of the year). Under the new § 425.640, ACOs will be required to spend at least half of the prepaid savings amount on direct services for beneficiaries not otherwise payable under traditional Medicare, while the other half can be spent on staffing and infrastructure. The ACO will be required to submit to CMS a spending plan for the prepaid shared savings. The Final Rule further sets out some prohibited uses for prepaid shared savings, which specifically include management company or parent company profit, performance bonuses, cash or cash equivalents to patients, or activities unrelated to ACO operations.
If an ACO is unable to make up for the prepayments with realized savings against the benchmark, they will be required to directly repay CMS or stay in the Program for another year so that CMS can recoup those amounts. For all intents and purposes, these changes could be characterized as a “buy now, pay later” approach to the Program, which CMS hopes will both reward its most effective ACOs while keeping them locked into the Program.
Health Equity Benchmark Adjustment and Minimum Assigned Beneficiaries
Presumably because the vast majority of ACOs are located in higher-income areas and populated cities, CMS is targeting a market of providers that care for underserved communities to bolster the Program’s enrollment. To do so, it is making upward adjustments to the benchmark to favor prospective ACOs that provide care to underserved communities, making it easier for those providers to come in below their benchmark when calculating shared savings.
Through the Health Equity Benchmark Adjustment (HEBA), CMS will provide an option for making upward adjustments to an ACO’s benchmark if more than 15% of its beneficiaries are enrolled in the Medicare Part D low-income subsidy or are jointly eligible for both Medicare and Medicaid (which is down from CMS’s original proposal of 20% in the proposed rulemaking—indicating a strong push to secure the HEBA’s efficacy). This would be most beneficial for ACOs whose HEBA adjustment would be greater than their positive regional adjustment or prior savings adjustment, which are the other two options for an upward adjustment in the benchmark. CMS hopes that the HEBA, operating (in CMS’ own words) “synergistically” with the prepaid savings option, will catalyze ACO enrollment.
In a similar vein and in an effort to further entice this market of prospective ACOs, CMS is adjusting eligibility requirements to encourage participation from more rural areas. It is both ending a policy where ACOs must maintain at least 5,000 assigned beneficiaries to continue in the Program and enlarging the definition of “primary care services” used to calculate the number of an ACO’s assigned beneficiaries—a metric which it sees as a barrier to enrollment for these providers.
Alternative Payment Model Performance Pathway Plus Quality Measure Set
CMS is adopting the Alternative Payment Model Performance Pathway Plus (APP Plus) quality measure set for making sure that ACOs participating in the Program are not achieving savings at the cost of care for beneficiaries. CMS purports this adoption will further the goals of the “Universal Foundation” measure set to harmonize the criteria used by CMS in other programs, such as the Medicaid Core Sets, the Marketplace Quality Rating System, and Medicare Advantage and Part D Star Ratings. The goal for the Universal Foundation is to make it easier for providers potentially subject to one or more of these programs to have a uniform set of standards. The specific measures used by the APP Plus system will start off as a set of six and phase in over four years, increasing to a total of eleven.
A primary focus is on electronic quality control measures (eCQMs), as CMS is providing ACOs with incentives for early adoption. CMS commentary notes that ACOs have been slow to adopt digital quality measure reporting, often due to challenges presented by multiple participating practices having different EHRs. To allow ACOs more time and flexibility in transitioning to digital reporting, CMS is allowing the use of MIPS CQMs as a collection type for reporting the APP Plus quality measure set in 2025 and 2026. In addition, to promote the transition to eCQMs, CMS is extending the Program’s preexisting eCQM reporting incentive through 2025 and on, which allows an ACO to qualify for maximum shared savings and avoid maximum shared losses by meeting certain criteria:
- Reporting all eCQMs in the APP Plus quality measure set for the performance year and meeting the data completeness requirements;
- Achieving a quality performance score at or above the 10th percentile of the benchmark on at least one of the four outcome measures in the APP Plus set; and
- Achieving a quality performance score at or above the 40th percentile of the benchmark on at least one of the remaining measures in the APP Plus set.
Other Modifications to the Benchmark and Program Calculations
In addition to the structural changes, CMS is making other notable adjustments to criteria relevant to a provider’s benchmark calculation. Following up from a September 27, 2024 rule on Significant, Anomalous, and Highly Suspect (SAHS) billing activity relating to unusual catheter billing, CMS is taking another step to protect the benchmark and other Program calculations against outliers. CMS is adopting a permanent policy to exclude SAHS, as necessary, from use in historic benchmarks, performance year expenditures and other Program calculations (including shared savings), rather than need to go through rulemaking as it did with the catheter issue. Similarly, CMS will begin taking into account improper payments beyond the traditional three-month runout period when calculating an ACO’s benchmark and other Program calculations.
For these purposes, an improper payment includes amounts (less penalties and damages) associated with a demanded overpayment determination, amounts identified in settlement agreements (such as a False Claims Act or Anti-Kickback Statute settlement), or judgments involving conduct by individuals or entities performing functions or services related to an ACO’s activities. The Final Rule addresses reopening of shared savings determinations by CMS to adjust for improper payments and contemplates that CMS will issue guidance regarding the process for ACOs to request reopening.
Summary
The changes in the Final Rule for the Program take direct aim at bolstering ACO enrollment, both by retaining high-performing savers with up-front payments and making the Program more approachable for providers who care for underserved communities. Time will tell if these measures to encourage participation in the Program will actually result in increased participation, and whether the upcoming administration change will adopt different strategies for furthering the value-based healthcare system.
A display copy of the Final Rule is available here and CMS’s press release regarding the Final Rule is available here.
