On August 17, 2018, the Centers for Medicare & Medicaid Services (“CMS”) officially published a proposed rule (“Proposed Rule”) in the Federal Register that would significantly alter the Medicare Shared Savings Program (“MSSP”). CMS is seeking to overhaul the MSSP due in part to the fact that, according to CMS, about 82% of the accountable care organizations (“ACOs”) participating in the MSSP do not bear risk, and those ACOs have generally increased Medicare spending as compared to their cost benchmarks. The new direction for the MSSP under the Proposed Rule, which CMS refers to as “Pathways to Success,” would, among other things, redesign the participation options available to ACOs, modify the MSSP benchmark methodology, and increase flexibility for ACOs. Below is a summary of some of the Proposed Rule’s major provisions.

Participation Tracks

Probably the most significant change to the MSSP under the Proposed Rule is the accelerated transition to a two-sided risk model for all ACOs.

The MSSP currently offers ACOs three “Tracks,” with each Track offering ACOs varying levels of risk and reward. ACOs participating in Track 1 experience no risk because they share only in their savings and not their losses, although there are limits to the length of time an ACO can participate in Track 1. This sort of arrangement—where only CMS bears risk and not the ACO—is referred to as a “one-sided” risk model. In contrast, ACOs participating in Tracks 2 and 3 can realize a greater percentage of their savings as compared to Track 1, but they also risk losses if their costs exceed their benchmarks. This latter arrangement is referred to as a “two-sided” risk model, because both CMS and the ACO bear risk. The vast majority of ACOs—82% in 2018—participate in Track 1.

The Proposed Rule seeks to accelerate ACOs’ transition to a two-sided risk model by discontinuing the three Tracks and replacing them with a BASIC and ENHANCED track. Under the BASIC track, eligible ACOs would begin participating under a one-sided risk model for a maximum, in most cases, of two years, after which point the ACOs’ levels of risk would increase annually. The ENHANCED track would be based on the MSSP’s current Track 3 and would provide eligible ACOs with additional tools and flexibility for taking on the highest levels of risk and potential reward.

Application Periods

Under the Proposed Rule, CMS would not offer an application cycle in 2018 for new agreement periods beginning on January 1, 2019. Instead, CMS would offer an application cycle for a one-time new agreement period starting on July 1, 2019. ACOs with a participation agreement ending on December 31, 2018 would have the opportunity to extend their contracts another six months and apply for a new agreement starting on July 1, 2019.

Benchmarking Methodology

The Proposed Rule would alter the calculation for ACO benchmarks to improve their accuracy and predictability. By changing the regional trend and update factors, CMS seeks to produce more favorable trend factors for ACOs with high penetration regionally and lower spending growth as compared to the nation, and less favorable trend factors for ACOs with high penetration regionally and higher spending growth as compared to the nation. CMS would do this by increasing the weight of the national component of the blend of regional and national growth rates as an ACO’s regional service area penetration increases. ACOs with low or moderate penetration regionally should see little effect from the changes to the regional trend and update factors.

Program Integrity

The Proposed Rule would implement a number of policies to strengthen the integrity of the MSSP and reduce gaming, including policies to evaluate prior participation by the ACO legal entity and its ACO participants in the MSSP (or similar programs) in the determination of MSSP participation options; more closely monitor the financial performance of ACOs and permit termination of poorly performing ACOs; and assess losses against ACOs that terminate in two-sided tracks.

Increased Flexibility

The Proposed Rule includes regulatory changes that seek to promote ACO innovation and care coordination. For example, ACOs would have greater choice of beneficiary assignment. Additionally, certain physicians and practitioners would have increased opportunities to receive payments for telehealth services, even where certain geographic limitations are not met. And the eligibility criteria for using the skilled nursing facility (SNF) 3-day rule would be expanded.

Beneficiary Engagement

The Proposed Rule seeks to promote increased beneficiary engagement by, among other changes, permitting ACOs to establish beneficiary incentive programs, strengthening requirements regarding beneficiary notifications to foster beneficiary choice, and permitting beneficiaries to designate physicians (regardless of specialty), nurse practitioners, physician assistants, or clinical nurse specialists as their primary clinician responsible for coordinating their overall care.