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Vol. 80 Tuesday,No. 110 June 9, 2015

Part III

Department of Health and Human Services

Centers for Medicare & Medicaid Services

42 CFR Part 425Medicare Program; Medicare Shared Savings Program: Accountable CareOrganizations; Final Rule

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32692 Federal Register / Vol. 80, No. 110/ Tuesday, June 9, 2015 / Rules and Regulations

DEPARTMENT OF HEALTH ANDHUMAN SERVICES

Centers for Medicare & MedicaidServices

42 CFR Part 425

[CMS–1461–F]

RIN 0938–AS06

Medicare Program; Medicare SharedSavings Program: Accountable CareOrganizations

AGENCY: Centers for Medicare &Medicaid Services (CMS), HHS.

ACTION: Final rule.

SUMMARY: This final rule addresseschanges to the Medicare Shared SavingsProgram including provisions relating tothe payment of Accountable CareOrganizations participating in the

Medicare Shared Savings Program.Under the Medicare Shared SavingsProgram, providers of services andsuppliers that participate in anAccountable Care Organizationscontinue to receive traditional Medicarefee-for-service payments under Parts Aand B, but the Accountable CareOrganizations may be eligible to receive

a shared savings payment if it meetsspecified quality and savingsrequirements.

DATES: Effective Dates: With theexception of the amendments to§§ 425.312, 425.704, and 425.708, theprovisions of this final rule are effectiveon August 3, 2015. The amendments to§ 425.312 and § 425.708 are effectiveNovember 1, 2015. The amendments to§ 425.704 are effective January 1, 2016.

Applicability Dates: In theSUPPLEMENTARY INFORMATION section ofthis final rule, we provide a table (Table

1) that lists key changes in this final rulethat have an applicability date otherthan the effective date of this final rule.

FOR FURTHER INFORMATION CONTACT: Dr.Terri Postma or Elizabeth November,410–786–8084, Email address: [email protected] .

SUPPLEMENTARY INFORMATION:

Table 1 lists key changes that have anapplicability date or effective date otherthan 60 days after the date ofpublication of this final rule. Byindicating a provision is applicable to aperformance year (PY) or agreementperiod, activities related toimplementation of the policy mayprecede the start of the performanceyear (in the case of an upcoming year)or agreement period or follow theconclusion of the performance year (inthe case of a past year) or the agreementperiod.

TABLE 1—APPLICABILITY AND EFFECTIVE DATES OF SELECT PROVISIONS OF THE FINAL RULE Preamble

section Section title/descriptionEffective

date Applicability date

II.B.1 ............ Agreement Requirements (§425.116(a) and (b)) ......................................... .................... PY 2017 and subsequent perform-ance years.

II.D.2 ............ Provision of Aggregate and Beneficiary Identifiable Data(§ 425.702(c)(1)(ii)).

.................... PY 2016 and subsequent perform-ance years.

II.D.3 ............ Claims Data Sharing (§425.704) .................................................................. 1/1/2016II.D.3 ............ Beneficiary Opportunity to Decline Claims Data Sharing (§425.312 and

§ 425.708).11/1/2015

II.E.3 ............ Definitions of Primary Care Physician and Primary Care Services(§425.20).


II.E.4 ............ Consideration of Physician Specialties and Non-Physician Practitioners inthe Assignment Process (§ 425.402(b)).


II.F.2 ............ Modifications to the Track 2 Financial Model (§425.606(b)(1)(ii)) ................ .................... Agreement periods starting on or

after January 1, 2016.II.F.7 ............ Waivers of payment rules or other Medicare requirements (§425.612) ....... .................... PY 2017 and subsequent perform-ance years.

Table of Contents

To assist readers in referencing sectionscontained in this preamble, we are providinga table of contents.

I. Executive Summary and BackgroundA. Executive Summary1. Purpose2. Summary of the Major Provisions3. Summary of Costs and BenefitsB. Background1. General Background

2. Statutory Basis for the Medicare SharedSavings Program

3. Overview of the Medicare SharedSavings Program

II. Provisions of the Proposed Regulationsand Analysis of Responses to PublicComments

A. Definitions1. Proposed Definitions2. Proposed Revisions to Existing

DefinitionsB. ACO Eligibility Requirements1. Agreement Requirementsa. Overview

b. Proposed Revisions

2. Sufficient Number of Primary CareProviders and Beneficiaries

a. Overview b. Proposed Revisions3. Identification and Required Reporting of

ACO Participants and ACO Providers/Suppliers

a. Overview b. Proposed Revisions(1) Certified List of ACO Participants and

ACO Providers/Suppliers(2) Managing Changes to ACO Participants

(3) Managing Changes to ACO Providers/Suppliers

(4) Update of Medicare EnrollmentInformation

4. Significant Changes to an ACOa. Overview

b. Proposed Revisions5. Consideration of Claims Billed by

Merged/Acquired Medicare-EnrolledEntities

a. Overview b. Proposed Revisions6. Legal Structure and Governancea. Legal Entity and Governing Body(1) Overview

(2) Proposed Revisions b. Fiduciary Duties of Governing Body

Members(1) Overview(2) Proposed Revisionsc. Composition of the Governing Body(1) Overview(2) Proposed Revisions7. Leadership and Management Structurea. Overview

b. Proposed Revisions8. Required Process To Coordinate Care

a. Overview b. Accelerating Health Information

Exchangec. Proposed Revisions9. Transition of Pioneer ACOs Into the

Shared Savings Programa. Overview

b. Proposed RevisionsC. Establishing and Maintaining the

Participation Agreement With theSecretary

1. Background2. Application Deadlinesa. Overview



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32693Federal Register / Vol. 80, No. 110/ Tuesday, June 9, 2015 / Rules and Regulations

3. Renewal of Participation Agreementsa. Overview

b. Proposed Revisions4. Changes to Program Requirements

During the 3-Year Agreementa. Overview

b. Proposed RevisionsD. Provision of Aggregate and Beneficiary

Identifiable Data1. Background

2. Aggregate Data Reports and LimitedIdentifiable Dataa. Overview

b. Proposed Revisions3. Claims Data Sharing and Beneficiary

Opportunity To Decline Claims DataSharing

a. Overview b. Proposed RevisionsE. Assignment of Medicare FFS

Beneficiaries1. Background2. Basic Criteria for a Beneficiary To Be

Assigned to an ACO3. Definition of Primary Care Servicesa. Overview


4. Consideration of Physician Specialtiesand Non-Physician Practitioners in theAssignment Process

a. Overview b. Proposed Revisions(1) Including Primary Care Services

Furnished by Non-PhysicianPractitioners in Step 1

(2) Excluding Services Provided by CertainPhysician Specialties From Step 2

(3) Other Assignment MethodologyConsiderations

5. Assignment of Beneficiaries to ACOsThat Include FQHCs, RHCs, CAHs, orETA Hospitals

a. Assignment of Beneficiaries to ACOsThat Include FQHCs and RHCs

(1) Overview(2) Proposed Revisions

b. Assignment of Beneficiaries to ACOsThat Include CAHs

c. Assignment of Beneficiaries to ACOsThat Include ETA Hospitals

6. Applicability Date for Changes to theAssignment Algorithm

F. Shared Savings and Losses1. Background2. Modifications to the Existing Payment

Tracksa. Overview

b. Transition From the One-Sided to Two-Sided Model

(1) Second Agreement Period for Track 1ACOs

(2) Eligibility Criteria for Continued

Participation in Track 1(3) Maximum Sharing Rate for ACOs in a

Second Agreement Period Under Track 1(4) Eligibility for Continued Participation

in Track 1 by Previously TerminatedACOs

c. Modifications to the Track 2 FinancialModel

3. Creating Options for ACOs ThatParticipate in Risk-Based Arrangements

a. Overview b. Assignment of Beneficiaries Under Track

3(1) Prospective Versus Retrospective

Assignment

(2) Exclusion Criteria for ProspectivelyAssigned Beneficiaries

(3) Timing of Prospective Assignment(4) Interactions Between Prospective and

Retrospective Assignment Modelsc. Determining Benchmark and

Performance Year Expenditures UnderTrack 3

d. Risk Adjusting the Updated Benchmarkfor Track 3 ACOs

e. Final Sharing/Loss Rate andPerformance Payment/Loss RecoupmentLimit Under Track 3

f. Minimum Savings Rate and MinimumLoss Rate in Track 3

g. Monitoring for Gaming and Avoidance ofAt-Risk Beneficiaries

4. Modifications to Repayment MechanismRequirements

a. Overview b. Amount and Duration of the Repayment

Mechanismc. Permissible Repayment Mechanisms5. Methodology for Establishing, Updating,

and Resetting the Benchmarka. Overview

b. Modifications to the Rebasing

Methodology(1) Equally Weighting the ThreeBenchmark Years

(2) Accounting for Shared SavingsPayments When Resetting theBenchmark

c. Use of Regional Factors in Establishing,Updating and Resetting Benchmarks

6. Technical Adjustments to theBenchmark and Performance YearExpenditures

7. Ways To Encourage ACO Participationin Performance-Based RiskArrangements

a. Payment Requirements and OtherProgram Requirements That May NeedTo Be Waived in Order To Carry Out the

Shared Savings Program(1) SNF 3-Day Rule(2) Billing and Payment for Telehealth

Services(3) Homebound Requirement Under the

Home Health Benefit(4) Waivers for Referrals to Post-Acute Care

Settings(5) Solicitation of Comment on Specific

Waiver Options b. Other Options for Improving the

Transition to Two-Sided Performance-Based Risk Arrangements.

(1) Beneficiary Attestation(2) Solicitation of Comment on a Step-Wise

Progression for ACOs To Take onPerformance Based Risk

G. Additional Program Requirements andBeneficiary Protections

1. Background2. Public Reporting and Transparencya. Overview

b. Proposed Revisions3. Terminating Program Participationa. Overview

b. Proposed Revisions(1) Grounds for Termination(2) Close-Out Procedures and Payment

Consequences of Early Termination4. Reconsideration Review Processa. Overview


5 Monitoring ACO Compliance WithQuality Performance Standards

III. Collection of Information RequirementsIV. Regulatory Impact Analysis

A. Statement of NeedB. Overall ImpactC. Anticipated Effects1. Effects on the Medicare Programa. Assumptions and Uncertainties

b. Detailed Stochastic Modeling Results

c. Further Considerations2. Effects on Beneficiaries3. Effect on Providers and Suppliers4. Effect on Small Entities5. Effect on Small Rural Hospitals6. Unfunded MandatesD. Alternatives ConsideredE. Accounting Statement and TableF. Conclusion

Regulations Text

Acronyms

ACO Accountable Care OrganizationCAHs Critical Access HospitalsCCM Chronic Care ManagementCEHRT Certified Electronic Health Record

TechnologyCG–CAHPS Clinician and Group Consumer

Assessment of Health Providers andSystems

CHIP Children’s Health Insurance ProgramCMP Civil Monetary PenaltiesCMS Centers for Medicare & Medicaid

ServicesCNM Certified Nurse MidwifeCMS–HCC CMS Hierarchal Condition

CategoryCPT [Physicians] Current Procedural

Terminology (CPT codes, descriptions andother data only are copyright 2013American Medical Association. All rightsreserved.)

CWF Common Working FileDHHS Department of Health and Human

ServicesDOJ Department of JusticeDSH Disproportionate Share HospitalDUA Data Use AgreementEHR Electronic Health RecordESRD End Stage Renal DiseaseETA Electing Teaching AmendmentFFS Fee-for-serviceFQHCs Federally Qualified Health CentersFTC Federal Trade CommissionGPCI Geographic Practice Cost IndexGPRO Group Practice Reporting OptionHCC Hierarchal Condition CategoryHCPCS Healthcare Common Procedure

Coding SystemHICN Health Insurance Claim NumberHIPAA Health Insurance Portability and

Accountability Act of 1996 (Pub. L. 104–191)

HVBP Hospital Value-based PurchasingIPA Independent Practice AssociationIPPS Inpatient Prospective Payment SystemIRS Internal Revenue ServiceMA Medicare AdvantageMedPAC Medicare Payment Advisory

CommissionMLR Minimum Loss RateMSP Medicare Secondary PayerMSR Minimum Savings RateMU Meaningful UseNCQA National Committee for Quality

Assurance



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NP Nurse PractitionerNPI National Provider IdentifierNQF National Quality ForumOIG Office of Inspector GeneralPA Physician AssistantPACE Program of All Inclusive Care for the

ElderlyPECOS Provider Enrollment, Chain, and

Ownership SystemPFS Physician Fee Schedule

PGP Physician Group PracticePHI Protected Health InformationPPS Prospective Payment SystemPQRS Physician Quality Reporting SystemPRA Paperwork Reduction ActPSA Primary Service AreasPY Performance yearRHCs Rural Health ClinicsRIA Regulatory Impact AnalysisSNFs Skilled Nursing FacilitiesSSA Social Security ActSSN Social Security NumberTIN Taxpayer Identification NumberVM Value Modifier

CPT (Current Procedural Terminology)Copyright Notice

Throughout this final rule, we useCPT codes and descriptions to refer toa variety of services. We note that CPTcodes and descriptions are copyright2013 American Medical Association. AllRights Reserved. CPT is a registeredtrademark of the American MedicalAssociation (AMA). Applicable FederalAcquisition Regulations (FARs) andDefense Federal Acquisition Regulations(DFARs) apply.

I. Executive Summary and Background

A. Executive Summary

1. Purpose

Section 1899 of the Social SecurityAct (the Act) established the MedicareShared Savings Program (SharedSavings Program), which promotesaccountability for a patient population,fosters coordination of items andservices under parts A and B, andencourages investment in infrastructureand redesigned care processes for highquality and efficient health care servicedelivery. On December 8, 2014, aproposed rule entitled ‘‘MedicareShared Savings Program: AccountableCare Organization’’ appeared in the

Federal Register (79 FR 72760)(December 2014 proposed rule). Thefinal rule entitled ‘‘Medicare Program;Medicare Shared Savings Program:Accountable Care Organizations,’’which appeared in the Federal Registeron November 2, 2011 (76 FR 67802)(November 2011 final rule) establishedthe original regulations implementingShared Savings Program. In theDecember 2014 proposed rule, weproposed to make revisions to some keypolicies adopted in the November 2011final rule (76 FR 67802) to incorporate

in our regulations certain guidance thatwe have issued since the SharedSavings Program was established, and toadd new policies to support programcompliance and growth.

Our intent in this rulemaking is tomake refinements to the Shared SavingsProgram, to encourage continued andenhanced stakeholder participation, to

reduce administrative burden for ACOswhile facilitating their efforts toimprove care outcomes, and to maintainexcellence in program operations while

bolstering program integrity.

2. Summary of the Major Provisions

The policies adopted in this final rulecodify existing guidance, reduceadministrative burden and improveprogram function and transparency inthe following areas: (1) Data-sharingrequirements; (2) eligibility and otherrequirements related to ACOparticipants and ACO providers/suppliers including clarification ofdefinitions, ACO participant and ACOprovider/supplier agreementrequirements, identification andreporting of ACO participants and ACOproviders/suppliers, includingmanaging changes to the list of ACOparticipants and ACO providers/suppliers; (3) clarifications and updatesto application requirements; (4)eligibility requirements related to theACO’s number of beneficiaries, requiredprocesses for coordinating care, theACO’s legal structure and governing

body, and its leadership andmanagement structure; (5) the

assignment methodology; (6)methodology for determining ACOfinancial performance; (7) issues relatedto program integrity and transparencysuch as public reporting, terminations,and reconsideration review. To achievethese goals, we proposed and aremaking the following majormodifications to our current programrules:

• Clarifying and codifying currentguidance related to ACO participantagreements and issues related to theACO participant and ACO provider/supplier lists. For example, we are

finalizing rules for modifying the ACOparticipant list and requirements relatedto specific language that must appear inthe ACO participant agreements.

• Adding a process for an ACO torenew its 3-year participation agreementfor an additional agreement period.Specifically, we articulate rules forrenewing the 3 year agreement,including factors that CMS will use todetermine whether an ACO may renewits 3-year agreement, such as the ACO’shistory of compliance with programrules.

• Adding, clarifying, and revising the beneficiary assignment algorithm,including the following:

++ Updating the CPT codes that will be considered to be primary careservices. Specifically, we are finalizinga policy that includes TCM codes (CPTcodes 99495 and 99496) and the CCMcode (CPT code 99490) in the definition

of primary care services.++ Modifying the treatment of claims

submitted by certain physicianspecialties, NP, PAs, and CNSs in theassignment algorithm. Specifically, weare finalizing a policy that would useprimary care services furnished byprimary care physicians, NPs, PAs, andCNSs under step 1 of the assignmentprocess, after having identified

beneficiaries who received at least oneprimary care service by a physician inthe ACO. Additionally, we are finalizinga policy that would exclude certainservices provided by certain physician

specialties from step 2 of the assignmentprocess.++ Clarifying how primary care

services furnished in federally qualifiedhealth centers (FQHCs) and rural healthclinics (RHCs) are considered in theassignment process.

• Expanding the kinds of beneficiary-identifiable data that will be madeavailable to ACOs in various reportsunder the Shared Savings Program aswell as simplifying the process for

beneficiaries to decline claims datasharing to reduce burden and confusion.

• Adding or changing policies toencourage greater ACO participation in

risk-based models by—++ Offering the opportunity for ACOs

to continue participating under a one-sided participation agreement after theirfirst 3-year agreement. Specifically, weare finalizing a policy that would permitACOs to participate in an additionalagreement period under one-sided riskwith the same sharing rate (50 percent)as was available to them under the firstagreement period; and

++ Modifying the existing two-sidedperformance-based risk track (Track 2).Specifically, under Track 2, an ACOwill have the choice of several

symmetrical MSR/MLR options that willapply for the duration of its 3-yearagreement period.

++ Offering an alternativeperformance-based risk model referredto as Track 3. Specifically, we arefinalizing the option for ACOs toparticipate under a two-sided riskmodel that would incorporate a highersharing rate (75 percent), prospectiveassignment of beneficiaries, and theopportunity to apply for a programmaticwaiver of the 3-day SNF rule in orderto permit payment for otherwise-



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covered SNF services when aprospectively assigned beneficiary isadmitted to a SNF without a prior 3-dayinpatient stay. ACOs in this track willalso have the choice of severalsymmetrical MSR/MLR options that willapply for the duration of their 3-yearagreement period.

In addition, in the December 2014

proposed rule we sought comment on anumber of options that we had beenconsidering in order to encourage ACOsto take on two-sided performance-basedrisk under the Shared Savings Program.Based on public comments, we arefinalizing the following:

• Resetting the benchmark in asecond or subsequent agreement period

by integrating previous financialperformance and equally weighting

benchmarks for subsequent agreementperiods; and

• The use of programmatic waiverauthority to improve participation inTrack 3 by offering regulatory relieffrom requirements related to the SNF 3-day stay rule.

• We intend to address othermodifications to program rules in futurerulemaking in the near term to improveACO willingness to take onperformance-based risk including:Modifying the assignment methodologyto hold ACOs accountable for

beneficiaries that have designated ACOpractitioners as being responsible fortheir care; waiving the geographicrequirement for use of telehealthservices; and modifying themethodology for resetting benchmarks

by incorporating regional trends andcosts.

3. Summary of Costs and Benefits

As detailed in Table 10 in section IV.of this final rule, by including thechanges detailed in this final rule, thetotal aggregate median impact wouldincrease to $780 million in net federalsavings for CYs 2016 through 2018.Such median estimated federal savingsare $240 million greater than the $540million median net savings estimated at

baseline absent the changes adopted inthis final rule. A key driver of the

anticipated increase in net savings isimproved ACO participation levels in asecond agreement period. We estimatethat at least 90 percent of eligible ACOswill renew their participation in theShared Savings Program whenpresented with the new options,primarily under Track 1 and, to a lesserextent, under Track 3. This expansion inthe number of ACOs willing to continuetheir participation in the program isestimated to result in additionalimprovements in care efficiency of amagnitude significantly greater than the

reduced shared loss receipts estimatedat baseline and the added sharedsavings payments flowing from a highersharing rate in Track 3 and continuedone-sided sharing available in Track 1,with all three tracks operating undergenerally more favorable rebasingparameters including equal base yearweighting and adding a portion of

savings from the prior agreement periodto the baseline.

In addition, at the anticipated meanparticipation rate of ACOs in the SharedSavings Program, participating ACOsmay experience an estimated aggregateaverage start-up investment and ongoingoperating cost of $822 million for CYs2016 through 2018. Lastly, we estimatean aggregate median impact of $1,130million in shared savings payments toparticipating ACOs in the SharedSavings Program for CYs 2016 through2018. The 10th and 90th percentiles ofthe estimate distribution, for the same

time period, yield shared savingspayments to ACOs of $960 million and$1,310 million, respectively. Therefore,the total median ACO shared savingspayments of $1,130 million during CYs2016 through 2018, net of a median $30million shared losses, coupled with theaggregate average start-up investmentand ongoing operating cost of $822million yields a net private benefit of$278 million.

B. Background

1. General Background

On March 23, 2010, the Patient

Protection and Affordable Care Act(Pub. L. 111–148) was enacted, followed

by enactment of the Health Care andEducation Reconciliation Act of 2010(Pub. L. 111–152) on March 30, 2010,which amended certain provisions ofPub. L. 111–148. Collectively known asthe Affordable Care Act, these publiclaws include a number of provisionsdesigned to improve the quality ofMedicare services, support innovationand the establishment of new paymentmodels, better align Medicare paymentswith provider costs, strengthenMedicare program integrity, and put

Medicare on a firmer financial footing.2. Statutory Basis for the MedicareShared Savings Program

Section 3022 of the Affordable CareAct amended Title XVIII of the Act (42U.S.C. 1395 et seq.) by adding newsection 1899 to the Act to establish aShared Savings Program. This programis a key component of the Medicaredelivery system reform initiativesincluded in the Affordable Care Act andis a new approach to the delivery ofhealth care.

3. Overview of the Medicare SharedSavings Program

The purpose of the Shared SavingsProgram is to promote accountability fora population of Medicare beneficiaries,improve the coordination of FFS itemsand services, encourage investment ininfrastructure and redesigned care

processes for high quality and efficientservice delivery, and promote highervalue care. ACOs that successfully meetquality and savings requirements sharea percentage of the achieved savingswith Medicare. Under the SharedSavings Program, ACOs share in savingsonly if they meet both the qualityperformance standards and generateshareable savings. Consistent with thepurpose of the Shared Savings Program,we focused on developing policiesaimed at achieving the three-part aimconsisting of: (1) Better care forindividuals; (2) better health forpopulations; and (3) lower growth in

expenditures.We viewed the November 2011 final

rule as a starting point for the program,and because of the scope and scale ofthe program and our limited experiencewith shared savings initiatives underFFS Medicare, we built a great deal offlexibility into the program rules. Weanticipated that subsequent rulemakingfor the Shared Savings Program would

be informed by lessons learned from ourexperience with the program as well asfrom testing through the Pioneer ACOModel and other initiatives conducted

by the Center for Medicare and

Medicaid Innovation (CMS InnovationCenter) under section 1115A of the Act.

Over 400 organizations are nowparticipating in the Shared SavingsProgram. We are gratified by stakeholderinterest in this program. As evidenced

by the high degree of interest inparticipation in the Shared SavingsProgram, we believe that the policiesadopted in the November 2011 final ruleare generally well-accepted. However,in light of additional experience wehave gained during the first few years ofthe Shared Savings Program, weidentified several policy areas for

revision in the December 2014 proposedrule (79 FR 72760).

II. Provisions of the Proposed Rule andthe Analysis of and Responses to PublicComments

We received a total of 275 timelycomments on the December 8, 2014proposed rule (79 FR 72760).Stakeholders offered comments thataddressed both high level issues relatedto the goals of the Shared SavingsProgram as well as our specificproposals and request for comment. We



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extend our deep appreciation to thepublic for their interest in the programand the many thoughtful comments thatwere made to our proposed policies. Insome instances, the public commentsoffered were outside the scope of theproposed rule (for example, suggestedrevisions to the physician fee scheduleor comments regarding the delivery of

specific health care services under otherMedicare payment systems). Thesecomments will not be addressed in thisfinal rule, but we have shared them withthe appropriate subject matter experts inCMS. Summaries of the publiccomments that are within the scope ofthis rule and our responses to thosecomments are set forth in the varioussections of this final rule under theappropriate headings. In theintroduction to section II of this finalrule, we address several globalcomments related to the Shared SavingsProgram. The remainder of this section

of the final rule is organized to give anoverview of each issue and the relevantproposals, to summarize and respond topublic comments on the proposals, andto describe our final policy decisions

based upon our review of the publiccomments received.

Comment: Several commentersdiscussed the future of the SharedSavings Program and its sustainabilityover the long term. Some commentersrequested that CMS articulate a clearplan for the future of the program.Others recommended that CMS engagestakeholders in a dialogue on how CMSintends to design a sustainable

Accountable Care Organization (ACO)model that would permit continuedparticipation by ACOs. While somecommenters were supportive of andlooked at the proposed rule as a good

beginning in the dialogue on how toimprove the sustainability of theprogram, other commenters suggestedthat the proposed rule did not go farenough to correct what they describedas the program’s misguided designelements.

Several commenters offered opinionsor suggestions about theinterrelationship of the Shared Savings

Program and other Medicare programsand models such as MedicareAdvantage, the Pioneer ACO Model, the

bundled payment model, and others.Some commenters advocated for speedyincorporation of alternative paymentmodels under section 1899(i) of theAct’s authority while others suggestedthat CMS engage in additionaldiscussion with stakeholders and testing

before implementing such changes intothe Shared Savings Program in order toensure protection of the Trust Fund and

beneficiaries.

Commenters suggested that CMScontinue to consider alignment withother Medicare initiatives and paymentmodels, and to coordinate withcommercial payers to alignrequirements for multi-payer ACOs. Inparticular, some commenters explainedthe need for CMS to ensure a levelplaying field and align the requirements

that apply to ACOs and MedicareAdvantage plans, particularly withrespect to the following:

• Availability of programmaticwaivers (and more generally regulatoryflexibility).

• Benchmarks (particularly benchmarks based on regional costs).

• Risk adjustment.• Financial reserve requirements• Quality standards.• Beneficiary satisfaction.• Beneficiary choice.Commenters expressed concern that

misalignment between the Shared

Savings Program, other Medicareprograms, and commercial programscould have unintended effects onhealthcare market dynamics and for thecare of beneficiaries.

Response: In 2011, Medicare madealmost no payments to providersthrough alternative payment models,

but today such payments representapproximately 20 percent of Medicarepayments. Earlier this year, theSecretary announced the ambitious goalof tying 30 percent of Medicare FFSpayments to quality and value by 2016and by 2018 making 50 percent of

payments through alternative paymentmodels, such as the Shared SavingsProgram, created by the Affordable CareAct (http://www.hhs.gov/news/press/ 2015pres/03/20150325b.html ). Withover 400 ACOs serving over 7 million

beneficiaries, the Shared SavingsProgram plays an important role inmeeting the Secretary’s recentlyarticulated goal.

As stated during the 2011 rulemakingprocess, we continue to believe that theShared Savings Program should providean entry point for all willingorganizations who wish to move in adirection of providing value-drivenhealthcare. We are also interested inencouraging these organizations toprogress to greater performance-basedrisk to drive quality improvement andefficiency in care delivery. For thisreason, we established both a sharedsavings only (one-sided) model and ashared savings/losses (two-sided)model. This structure provides apathway for organizations toincreasingly take on performance-basedrisk. In this final rule, we build on theseprinciples and are finalizing a set of

policies that we believe aligns with andwill advance the Secretary’s goals.

Taken together, the commentsilluminate overarching issues whichrequire a balance of competing factorsand the specific interests of manydifferent stakeholders. We agree withstakeholders that the Shared SavingsProgram must be structured in a way

that that balances various stakeholderinterests in a way that both encouragesnew and continued providerparticipation in the program andprotects beneficiaries with original FFSMedicare and the Medicare TrustFunds. We believe that many designelements discussed in the proposed rulehold promise and deserve continuedconsideration. We note that many ofthese suggestions raised by stakeholdersare already in the planning stage or

being tested in various CMS InnovationCenter models, such as the PioneerModel and the Next Generation ACO

Model (announced on March 10, 2015).Testing these designs in variouspayment models through the CMSInnovation Center is important becauseit will permit us to make adjustments asneeded to ensure that the models workfor providers and protect beneficiariesand the Trust Funds. CMS InnovationCenter testing will also permit atransparent and fulsome articulation ofthe design elements in futurerulemaking that allows for sufficientpublic notice and comment prior to

broader implementation in the SharedSavings Program. We fully intend toraise many of the design elements

suggested by commenters in futurerulemaking as the program matures.

We also continue to believe in theimportance of maintaining distinctions

between the accountable care model inthe Shared Savings Program andmanaged care, such as MedicareAdvantage. In the November 2011 finalrule (76 FR 67805), we stated that theShared Savings Program is not amanaged care program like the MedicareAdvantage program. Medicare FFS

beneficiaries retain all rights and benefits under traditional Medicare.Medicare FFS beneficiaries retain the

right to see any physician of theirchoosing, and they do not enroll in theShared Savings Program. Unlikemanaged care settings, the assignment of

beneficiaries to a Shared SavingsProgram ACO does not mean that

beneficiaries must receive care onlyfrom ACO providers/suppliers, nor doesit mean that beneficiaries must enroll inthe ACO or the Shared Savings Program.The Shared Savings Program is also nota capitated model; providers andsuppliers continue to bill and receiveFFS payments rather than receiving


http://www.hhs.gov/news/press/2015pres/03/20150325b.htmlhttp://www.hhs.gov/news/press/2015pres/03/20150325b.htmlhttp://www.hhs.gov/news/press/2015pres/03/20150325b.htmlhttp://www.hhs.gov/news/press/2015pres/03/20150325b.htmlhttp://www.hhs.gov/news/press/2015pres/03/20150325b.html


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1March 25, 2015 HHS press release. http:// www.hhs.gov/news/press/2015pres/03/ 20150325b.html.

lump sum payments based upon thenumber of assigned beneficiaries. TheShared Savings Program is designed toenhance patient-centered care. Forexample, it encourages physicians,through the eligibility requirements (forexample, the care processes required at§ 425.112), to include their patients indecision-making about their health care.

While we frequently relied on ourexperience in other Medicare programs,including Medicare Advantage, to helpdevelop program requirements anddesign elements for the Shared SavingsProgram, many Shared Savings Programrequirements deviate from those in theother programs precisely because theintent of this program is not to recreateor replace Medicare Advantage.

Finally, we appreciate commenters’concerns that misalignment inincentives across Medicare initiativeshas the potential to create unintendedconsequences for healthcare market

dynamics (for example, betweenMedicare FFS and Medicare Advantage)and for the care of beneficiaries. We

believe these concerns underscore theneed to take a measured approach toimplementing changes into the SharedSavings Program. We also appreciatecommenters’ enthusiasm for multipayerACOs, including recommendations forgreater alignment between Medicare andprivate sector initiatives. We areinterested in engaging private sectorleaders to build on the success of theShared Savings Program and otheralternative payment models to makevalue-driven care scalable outside of

Medicare’s purview. To accomplishthis, the Secretary recently announcedthe creation of a Health Care PaymentLearning and Action Network. Throughthe Learning and Action Network, HHSwill work with private payers,employers, consumers, providers, statesand state Medicaid programs, and otherpartners to expand alternative paymentmodels through their own aligned work.As articulated by the Secretary, thepublic and private sectors have acommon interest in building a healthcare system that delivers better care,spends health care dollars more wisely,

and results in healthier people.1

Beginning with the November 2011 finalrule, we have sought to align with otherCMS and private sector initiatives,

beginning with our selection of qualitymeasures. As the program evolves, welook forward to learning from theLearning and Action Network as well asvarious CMS Innovation Centerinitiatives that are planning or already

testing multipayer concepts and weintend to revisit this issue in futurerulemaking.

Comment: Many commenters weresupportive of both the Shared SavingsProgram and our proposals in theDecember 2014 proposed rule. However,many commenters expressed generalconcerns related to the financial model

as currently designed, stating that theShared Savings Program places toomuch risk and burden on providers withtoo little opportunity for reward in theform of shared savings. Commentersencouraged CMS to modify the SharedSavings Program rules, particularly in amanner that would increase thefinancial opportunities for ACOs andattract more participants, which wouldsustain and improve long termparticipation. A few commenterssuggested that CMS act quickly inimproving the program’s financialmodels, absent which existing ACOs

may decide that the financial risksoutweigh the benefits and choose towithdraw from the program.

Commenters offered a variety ofspecific suggestions for improving thefinancial sustainability of the program,many of which are related to ourproposals and request for comment andare addressed in section II.F. of thisfinal rule. Some commentersrecommended that CMS combinevarious design elements, stating thatsuch changes would be key toencouraging ongoing participation inthe program and driving meaningfulchange by ACOs. Some commenters

offered specific suggestions forimproving provider or ACOparticipation. For example, somecommenters recommended that CMSprovide up-front funding, consider theeffect of seasonal commuter

beneficiaries (‘‘snowbirds’’) on anACO’s performance cost calculations,permit providers to participate in morethan one Medicare initiative involvingshared savings, or permit certain groups(such as rural ACOs) to participate inTrack 1 indefinitely or create a specialrural-only track.

Several commenters suggested that

the program incorporate more explicitfinancial incentives for higher qualityperformance (for example, modifyingthe ACO’s Minimum Savings Rate(MSR), while others requested retentionof the current approach but suggestedthat CMS offer an even higher sharingrate to ACOs demonstrating highquality. Others recommended rewardinghigh quality organizations regardless oftheir financial performance.

Response: We believe the changes tothe Shared Savings Program tracks andother design elements that recognize an

ACO’s efforts finalized in section II.F. ofthis final rule address commenters’requests for improvements to theprogram’s tracks and programsustainability overall. As explained indetail in section II.F., this final rulecreates additional opportunities forACOs to be financially rewarded fortheir achievement of the three-part aim,

including the following:• A second agreement period under

the one-sided model for eligible Track 1ACOs, with the opportunity to achievea maximum sharing rate of 50 percent.

• Greater flexibility in choice of MSR/Minimum Loss Rate (MLR) under a two-sided model; and the chance for greaterreward (in relation to greater risk) underthe newly established Track 3.

Additionally, we are finalizingpolicies related to resetting ACO

benchmarks, including equal weightingthe benchmark years, and accounting forshared savings generated under theprior agreement period. The revisions tothe methodology for resetting the

benchmark are expected to slow the rateat which the benchmark decreases incomparison to rebasing under theprogram’s current methodology. Finally,we note that many ACOs that arecurrently participating in the programhave had access to up-front fundingthrough the CMS Innovation CenterAdvance Payment Model. The CMSInnovation Center is currently offeringadditional qualified ACOs theopportunity to apply for up-frontfunding through the ACO InvestmentModel. We believe these changes, taken

together, will improve the opportunityfor ACOs to realize rewards under theprogram.

We intend to continue to update andrevise the Shared Savings Program overtime as we gain experience and gaininsights from testing that is ongoing inthe CMS Innovation Center. Inparticular, as discussed in more detailin section II.F. of this final rule, basedon the comments we received in theproposed rule and our own continuedanalysis, we believe that in order toencourage ACOs to achieve andmaintain savings, it is important to

move quickly to a benchmarkingmethodology that sets and updates ACO benchmarks largely on the basis oftrends in regional FFS costs, rather thanACO’s historical costs. For this reasonwe intend to propose and seek commenton a new benchmarking methodologylater this summer. We anticipate thatthe revised benchmark rebasingmethodology incorporating the ACO’shistorical costs and regional FFS costsand trends would apply to ACOs

beginning new agreement periods in2017 or later. ACOs beginning a new


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agreement period in 2016 would convertto the revised methodology at the startof their third agreement period in 2019.

Comment: Several commentersexpressed concern regarding the timingof the finalization of program rules inrelation to the ability of an ACO orapplicant to adjust to them, or theimpact that may have on the willingness

of organizations to take on greaterperformance-based risk. Commenterswere particularly concerned that ACOswith agreement periods ending in 2015would not have an adequate amount oftime to understand the implications ofthe final regulations (particularly ifmoving to two-sided risk) before havingto seek renewal of their agreementsduring the summer of 2015.

Response: We are aware of the timingconcerns expressed by stakeholders andstrive to give ACOs ample time to makedecisions that are in the best interest oftheir patients, providers andorganization. Therefore, we intend toimplement final policies with thesetiming considerations in mind. Most ofthe policies will take effect for the 2016performance year; for example, ourassignment methodology changes.However, we will defer implementationof some policies, recognizing that ACOsmay need more time to come intocompliance with the requirements. Forexample, we believe that modifyingagreements with ACO participants andACO providers/suppliers to complywith the requirements of new §425.116may take time. Accordingly, we will notrequire ACOs to comply with

§ 425.116(a) and (b) until the 2017performance year in the case of ACOparticipants and ACO providers/suppliers that have already agreed toparticipate in the Shared SavingsProgram. Similarly, we will not requireorganizations that are applying orrenewing for a January 1, 2016 start dateto submit agreements with the updatedlanguage as part of the 2016 applicationand renewal process which occurs thesummer and fall of 2015. However, wewill expect and require that ACOparticipant agreements submitted forour review for purposes of adding new

ACO participants to the ACO’s list ofACO participants for performance years2017 and subsequent years will complywith the new rules. For example, if anACO submits a request to add an ACOparticipant to its ACO participant Listfor the 2017 performance year during2016, the ACO participant agreementmust meet the requirements establishedin this final rule. Similarly, because ofthe operational complexity of the SNF3-day rule waiver, we will deferimplementation of that policy to noearlier than the 2017 performance year.

We intend to develop and updateguidance and operational documents asthe new policies become effective.

Comment: Several commenterssuggested ways for the Shared SavingsProgram to increase or ensure

beneficiary engagement. For example,commenters suggested permitting ACOsto financially reward beneficiaries for

choosing low cost options or healthy behaviors, allowing ACOs to removenon-engaged beneficiaries by permittingthe ACO to dismiss ‘‘non-compliant’’

beneficiaries, allowing ACOs moreflexibility to interact with their

beneficiary population to generate amore patient-centric program, andexcluding certain vulnerable patientpopulations from ACO costs until ACOsdevelop a better track record of treatingthese patients.

Several commenters made commentsrelated to Medicare beneficiaries andtheir interaction with the ACO. Acommenter stated that one of the majorchallenges for ACOs is ‘‘getting

beneficiaries to understand that they area part of an ACO’’ and that they areencouraged to receive all of their healthcare from ACO participatingprofessionals and suppliers. Thecommenter suggested that CMS developeducational documents/resources forassigned beneficiaries that clearlyoutline the advantages and benefits ofobtaining health care from theirassigned ACO. On the other hand, a fewother commenters expressed concernsthat the Shared Savings Programregulations do not reinforce the concept

that beneficiaries can get care outsidethe ACO. A few commenters requestedthat CMS perform various forms ofmonitoring activities to ensure thatACOs are providing open access to all

beneficiaries. Commenters requestedthat we strictly monitor both referralpatterns and any avoidance activities inorder that all beneficiaries have accessto quality care.

Response: We recognize that beneficiary engagement is an importantelement in the ACO’s ability to meet itsgoal of improving quality and reducingcosts. For this reason, the statute and

our program rules require ACOs todevelop a process to promote patientengagement. We believe patientengagement works best at the point ofcare and the development of the patient-doctor relationship. Several ACOs thatachieved first year success in theprogram have observed that patientengagement improves when engagedproviders improve patient care.However, we will continue to considerhow CMS can best support ACO effortswhile ensuring beneficiary and TrustFunds protections.

Additionally, as noted in this sectionand by some commenters, the SharedSavings Program is not a managed careprogram. Medicare FFS beneficiaries inthe Shared Savings Program retain allrights and benefits under traditionalMedicare. Medicare FFS beneficiariesretain the right to see any physician oftheir choosing, and they do not enroll in

the Shared Savings Program. Unlike amanaged care program, the assignmentof beneficiaries to a Shared SavingsProgram ACO does not mean that

beneficiaries must receive care onlyfrom ACO providers/suppliers, nor doesit mean that beneficiaries must enroll inthe ACO or the Shared Savings Program.Therefore, we develop patient materialswith the assistance of the ombudsman’soffice (for example, the Medicare andYou Handbook, required ACOnotifications, fact sheets) that state therights and freedoms of beneficiariesunder traditional FFS Medicare. We do

not agree that it is appropriate for ACOsor CMS to require beneficiaries toreceive all of their care from ACOparticipating professionals andsuppliers. Rather, it is a programrequirement that the ACO develop aprocess to promote care coordinationacross and among providers andsuppliers both inside and outside theACO.

Finally, although beneficiaries thatreceive services from ACO professionalscontinue to retain the freedom to choosetheir providers, CMS monitors ACOs forprohibited behaviors such as avoidanceof at-risk beneficiaries. Several other

protections are in place, including aprohibition on beneficiary inducementsand on certain required referrals andcost shifting §425.304. Moreover,providers and suppliers that seek toparticipate in an ACO undergoscreening for program integrity historyand may be denied participation in theShared Savings Program based on theresults.

Comment: Many commenters wereconcerned with what they identified aseither a lack of communication fromCMS on specific questions or an overalllack of information about the program.

Comments requested that CMS provide both general and detailed programmaticinformation. Others commentersrecommended that the best practicesthat have resulted in shared savings beshared with ACOs and that CMSprovide a detailed account of bestpractices that have been observed byACOs that generated savings.

Response: We believe that programtransparency is important. For thisreason, many of the current and newlyfinalized policies in this rule aredesigned to promote transparency for



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beneficiaries and providers. Forexample, we have updated our publicreporting requirements, codified andupdated our requirements for ACOparticipant agreements, clarifiednumerous policies, and posted qualityand financial information about ACOson our Web site and Physician Compare(http://www.medicare.gov/

physiciancompare/aco/search.html ). There are many other methods we useto answer questions and assist ACOsparticipating in the program, includingthe following:

• Each ACO has a designated CMSCoordinator that develops an ongoingrelationship with the ACO and is adirect resource to help ACOs navigateprogram requirements and deadlines.

• Operational guidance documentsand FAQs that are available to ACOs onthe ACO portal.

• Weekly newsletters with importantinformation including deadline

reminders.• A dedicated CMS Web page(https://www.cms.gov/ sharedsavingsprogram/ ) with programinformation, timelines, FAQs.

• A dedicated email box for ACOs tosubmit questions for subject matterexperts to address.

• Frequent webinars that providedetailed information on programoperations and methodologies, theopportunity to speak with CMS staff,and peer-to-peer learning sessions. Werecognize that in spite of these efforts,there may be additional opportunities toimprove program transparency.

Therefore, we thank the commenters fortheir suggestions and will continue tolook for ways we can engage with ACOs.

We also note that we invite all ACOsto participate in learning best practicesthrough ACO Learning Systemactivities. The ACO Learning Systemwas developed to provide ACOs withpeer-to-peer learning opportunities thatare in the form of in-person learningsessions and regularly scheduledwebinars. This forum provides a uniquemechanism for ACOs to share theirchallenges and successes with otherACOs. Summaries and slides from past

sessions are available to participatingACOs through the ACO portal.

A. Definitions

In the November 2011 final rule (76FR 67802), we adopted definitions ofkey terms for purposes of the SharedSavings Program at § 425.20. Theseterms are used throughout this finalrule. We encourage readers to reviewthese definitions. Based on ourexperiences thus far with the SharedSavings Program and inquiries wereceived regarding the defined terms,

we proposed some additions to thedefinitions and a few revisions to theexisting definitions.

1. Proposed Definitions

We proposed to add several newterms to the definitions in §425.20.First, we proposed to add a definition of‘‘participation agreement.’’ Specifically,we proposed to define the term to meanthe written agreement required under§ 425.208(a) between the ACO and CMSthat, along with the regulations at part425, governs the ACO’s participation inthe Shared Savings Program. We furtherproposed to make conforming changesthroughout part 425, replacingreferences to an ACO’s agreement withCMS with the defined term‘‘participation agreement.’’ In addition,we proposed to make a conformingchange in §425.204(c)(1)(i) to removethe incorrect reference to ‘‘participationagreements’’ and replace it with ‘‘ACOparticipant agreements.’’

We proposed to add the relateddefinition of ‘‘ACO participantagreement.’’ Specifically, we proposedto define ‘‘ACO participant agreement’’to mean the written agreement betweenan ACO and an ACO participantrequired at §425.116 in which the ACOparticipant agrees to participate in, andcomply with, the requirements of theShared Savings Program.

As discussed in section II.F. of theproposed rule, we proposed to add adefinition for ‘‘assignment window,’’ to

mean the 12-month period used toassign beneficiaries to an ACO. Thisdefinition was added to accommodatethe 12 month period used to assign

beneficiaries to Track 1 and 2 ACOs based on a calendar year as well as theoff-set 12 month period used to assign

beneficiaries prospectively to an ACO inTrack 3.

Comment: Many commenters weresupportive of the addition of definitionsfor ‘‘participation agreement’’ and ‘‘ACOparticipant agreement.’’ Severalcommenters explicitly stated support forthe proposal to define an ‘‘assignment

window’’.Response: We appreciate stakeholder

support for incorporating newdefinitions in to the Shared SavingsProgram.

FINAL ACTION: We are finalizing thenew definitions of ‘‘participationagreement’’, ‘‘ACO participantagreement’’, and ‘‘assignment window’’as proposed in § 425.20. We believethese definitions will facilitatetransparency and a better understandingof the program rules.

2. Proposed Revisions to ExistingDefinitions

We proposed several revisions toexisting definitions. First, we proposedto revise the definition of ‘‘ACOparticipant’’ to clarify that an ACOparticipant is an ‘‘entity’’ identified bya Medicare-enrolled TIN. Additionally,we proposed to correct a grammaticalerror by revising the definition toindicate that one or more ACOparticipants ‘‘compose,’’ rather than‘‘comprise’’ an ACO. We noted that arelated grammatical error would becorrected at § 425.204(c)(1)(iv). Theseproposed changes to the definition of‘‘ACO participant’’ were not intended toalter the way the Shared SavingsProgram currently operates.

We proposed to revise the definitionof ‘‘ACO professional’’ to remove therequirement that an ACO professional

be an ACO provider/supplier. We alsoproposed to revise the definition of

‘‘ACO professional’’ to indicate that anACO professional is an individual who

bills for items or services he or shefurnishes to Medicare fee-for-service

beneficiaries under a Medicare billingnumber assigned to the TIN of an ACOparticipant in accordance with Medicareregulations. We proposed thesemodifications because there may beACO professionals who furnishedservices billed through an ACOparticipant’s TIN in the benchmarkingyears but are no longer affiliated withthe ACO participant and therefore arenot furnishing services billed through

the TIN of the ACO participant duringthe performance years. These proposedchanges to the definition of ‘‘ACOprofessional’’ are not intended to alterthe way the Shared Savings Programcurrently operates.

We proposed to modify the definitionof ‘‘ACO provider/supplier’’ to clarifythat an individual or entity is an ACOprovider/supplier only when it isenrolled in the Medicare program, billsfor items and services furnished toMedicare FFS beneficiaries during theagreement period under a Medicare

billing number assigned to the TIN of anACO participant, and is included on thelist of ACO providers/suppliers that isrequired under the proposed regulationat § 425.118. We stated our belief that anindividual or entity should beconsidered an ACO provider/supplier ifhe or she previously (for example,during the benchmarking years)reassigned the right to receive Medicarepayment to a prospective ACOparticipant, but is not participating inthe activities of the ACO during theACO’s agreement period by furnishingcare to Medicare FFS beneficiaries that


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is billed through the TIN of an ACOparticipant. The proposed modificationwas intended to clarify that a provideror supplier must bill for items orservices furnished to Medicare FFS

beneficiaries through the TIN of an ACOparticipant during the ACO’s agreementperiod in order to be an ACO provider/supplier.

We proposed to modify the definitionof ‘‘assignment’’ to mean the operationalprocess by which CMS determineswhether a beneficiary has chosen toreceive a sufficient level of the requisiteprimary care services from ‘‘ACOprofessionals.’’ In the proposed rule, weexplained that that for purposes ofdefining assignment, we stated our

belief that it is more appropriate to usethe term ‘‘ACO professional,’’ ratherthan the term ‘‘ACO provider/supplier,’’

because a physician or otherpractitioner can only be an ACOprovider/supplier if he or she bills for

items and services through the TIN of anACO participant during the ACO’sagreement period and is included on thelist of ACO providers/suppliers requiredunder our regulations. However, theremay be an ACO professional whofurnishes services billed through anACO participant’s TIN in theperformance or benchmarking years butis either not listed on the ACOproviders/suppliers list or is no longer

billing through the ACO participant’sTIN during the performance years andtherefore cannot be considered an ACOprovider/supplier.

In the interests of clarity, we therefore

proposed to modify the definition ofassignment to reflect that ourassignment methodology takes intoaccount claims for primary care servicesfurnished by ACO professionals, notsolely claims for primary care servicesfurnished by physicians in the ACO.This revision would ensure consistencywith program operations and alignmentwith the definition of ‘‘ACOprofessional’’ since it is the aggregationof the ACO professionals’ claims thatimpacts assignment. We stated that theproposed modification to the definitionof ‘‘assignment’’ would more accurately

reflect the use of claims for primary careservices furnished by ACO professionalsthat are submitted through an ACOparticipant’s TIN in determining

beneficiary assignment in the ACO’s benchmark and performance years.Additionally, we proposed to makeconforming changes as necessary to theregulations governing the assignmentmethodology in part 425 subpart E, torevise the references to ‘‘ACO provider/supplier’’ to read ‘‘ACO professional.’’

We proposed a technical revision tothe definition of ‘‘hospital’’ for purposes

of the Shared Savings Program. Section1899(h)(2) of the Act provides that, forpurposes of the Shared SavingsProgram, the term ‘‘hospital’’ means asubsection (d) hospital as defined insection 1886(d)(1)(B) of the Act. In theNovember 2011 final rule (76 FR 67812),we finalized a definition of ‘‘hospital’’that included only acute care hospitals

paid under the hospital inpatientprospective payment system (IPPS).Under this definition, Maryland acutecare hospitals would not be consideredto be ‘‘hospitals’’ for purposes of theShared Savings Program because theyare subject to a waiver from theMedicare payment methodologies underwhich they would otherwise be paid.We proposed to clarify that a Marylandacute care hospital is a ‘‘hospital’’ forpurposes of the Shared SavingsProgram. Specifically, we proposed torevise the definition of ‘‘hospital’’ forpurposes of the Shared Savings Program

to mean a hospital as defined in section1886(d)(1)(B) of the Act. The proposedregulation is consistent with both thestatutory definition of ‘‘hospital’’ forpurposes of the Shared Savings Programin section 1899(h)(2) of the Act and theposition we have taken in other contextsin referring to subsection (d) hospitals.

We proposed to modify the definitionof ‘‘primary care services.’’ We refer thereader to section II.E.3. of this final rulefor a more detailed discussion of theproposed revision to this definition,which is relevant to the assignment ofa Medicare beneficiary to an ACO, aswell as responses to comments received

on this proposal.As discussed in greater detail in

section II.F. of the proposed rule, weproposed revisions to the definitions of‘‘continuously assigned beneficiary’’and ‘‘newly assigned beneficiary.’’These definitions relate to riskadjustment for the assigned populationand required minor modification toaccommodate the newly proposed Track3. Specifically, we proposed to replacethe reference in these definitions to‘‘most recent prior calendar year’’ witha reference to ‘‘the assignment windowfor the most recent prior benchmark or

performance year.’’ Thus, for Track 3the reference period for determiningwhether a beneficiary is newly orcontinuously assigned would be themost recent prior prospectiveassignment window (the off-set 12months) before the assignment windowfor the current performance year and thereference period for determiningwhether a Track 1 or 2 beneficiary isnewly or continuously assigned wouldcontinue to be the most recent priorassignment window (the most recentcalendar year).

Finally, in connection with ourdiscussion of the applicability of certainchanges that are made to programrequirements during the agreementperiod, we proposed revisions to thedefinition of ‘‘agreement period.’’Readers should refer to section II.C.4. ofthis final rule for a discussion of theproposed changes to the definition as

well as the responses to commentsreceived on the proposal.

Comment: Many commentersexpressed general support formodifications to the definitions. Severalcommenters expressed support for ourproposed revision to the definition of‘‘ACO participant’’ but suggested thatCMS clarify that some ACO participantscould be individual providers billingunder his or her own Social SecurityNumber, rather than the TIN of an ACOparticipant. A few commentersexpressed support for our proposal tomodify the definition of ‘‘hospital,’’

stating that this modification will resultin clarity for Maryland acute carefacility participation in the SharedSavings Program and provide an equalopportunity for all hospitals to formACOs. A commenter expressed concernthat the definitions of ‘‘ACOprofessional, ACO participant and ACOprovider/supplier’’ would ‘‘restructurethe intended roles of providers withinACOs’’ and encouraged CMS to developdefinitions that would be inclusiverather than exclusive to ‘‘protect theinclusive intent of the legislation whichrecognizes NPs as ACO professionals.’’

Response: We appreciate the

comments we received in favor of ourproposals to modify certain definitions.We believe these modifications willimprove program transparency andunderstanding of program rules andrespond to stakeholder inquiries. We

believe the definitions support and lendtransparency to the program rules, areconsistent with statutory language, andinclusive of Medicare enrolledproviders and suppliers that furnishservices to Medicare FFS beneficiaries.We are unclear what the commenter isreferring to regarding the ‘‘inclusiveintent’’ of the statute and believe we

have developed definitions that areconsistent with the statutory language.Our definition of an ACO participantincludes Medicare enrolled billing TINsthrough which one or more ACOproviders/suppliers bill Medicare. Assuch, ACOs may include the TIN of solopractitioners on its list of ACOparticipants because Social SecurityNumbers (SSNs) and EmployerIdentification Numbers (EINs) are typesof Taxpayer Identification Numbers.Furthermore, we agree with commentersthat aligning the program definition of



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hospital with the statutory definitionwill permit Maryland hospitals to forman ACO under our program rules,although we note that current programrules permit such hospitals to be anACO participant along with other ACOparticipants that have joined to form anACO.

FINAL ACTION: We are finalizing the

proposed modifications to thedefinitions of ACO participant, ACOprofessional, ACO provider/supplier,assignment, hospital, and newlyassigned beneficiary and continuouslyassigned beneficiary, along withnecessary conforming changes. We referthe reader to sections II.C. and II.E. ofthis final rule for a review of comments,responses, and final actions regardingthe definitions of ‘‘agreement period’’and ‘‘primary care services.’’

B. ACO Eligibility Requirements

1. Agreement Requirements

a. OverviewSection 1899(b)(2)(B) of the Act

requires participating ACOs to ‘‘enterinto an agreement with the Secretary toparticipate in the program for not lessthan a 3-year period.’’ If the ACO isapproved for participation in the SharedSavings Program, an executive who hasthe ability to legally bind the ACO mustsign and submit a participationagreement to CMS (§425.208(a)(1)).Under the participation agreement withCMS, the ACO agrees to comply withthe regulations governing the SharedSavings Program (§ 425.208(a)(2)). In

addition, the ACO must require its ACOparticipants, ACO providers/suppliers,and other individuals or entitiesperforming functions or services relatedto the ACO’s activities agree to complywith the Shared Savings Programregulations and all other applicable lawsand regulations (§425.208(b) and§ 425.210(b)) and to commit to theparticipation agreement (§ 425.306(a)).The ACO must provide a copy of itsparticipation agreement with CMS to allACO participants, ACO providers/suppliers, and other individuals andentities involved in ACO governance

(§ 425.210(a)). As part of its application,we currently require each ACO tosubmit a sample of the agreement itexecutes with each of its ACOparticipants (the ‘‘ACO participantagreement’’). Also, as part of itsapplication and when requesting theaddition of new ACO participants, werequire an ACO to submit evidence thatit has a signed written agreement witheach of its ACO participants. (Seeguidance on our Web site at http:// www.cms.gov/Medicare/Medicare-Fee-

for-Service-Payment/

sharedsavingsprogram/Downloads/ Memo _Additional _Guidance _on _ACO _Participants.pdf ). An ACO’s applicationto participate in the Shared SavingsProgram and any subsequent request toadd new ACO participants will not beapproved if the ACO does not have anagreement in place with each of its ACOparticipants in which each ACO

participant agrees to participate in theShared Savings Program and to complywith the requirements of the SharedSavings Program.

In our review of applications toparticipate in the Shared SavingsProgram, we received many ACOparticipant agreements that were notproperly executed, were not betweenthe correct parties, lacked the requiredprovisions, contained incorrectinformation, or failed to comply with§ 425.304(c) relating to the prohibitionon certain required referrals and costshifting. When we identified such

agreements, ACOs experiencedprocessing delays, and in some cases,we were unable to approve the ACOapplicant and its ACO participant or

both to participate in the SharedSavings Program. Consequently, weissued guidance for ACO applicants inwhich we stated the required elementsfor ACO participant agreements andstrongly recommended that ACOsemploy good contracting practices toensure that each of their ACOparticipant agreements met ourrequirements (see http://www.cms.gov/ Medicare/Medicare-Fee-for-Service- Payment/sharedsavingsprogram/

Downloads/Tips-ACO-Developing- Participant-Agreements.pdf ).

The ACO participant agreements arenecessary for purposes of programtransparency and to ensure an ACO’scompliance with program requirements.Moreover, many important programoperations (including calculation ofshared savings, assignment of

beneficiaries, and financial benchmarking) use claims and otherinformation that are submitted to CMS

by the ACO participant. Our guidanceclarifies that ACO participantagreements and any agreements with

ACO providers/suppliers must containthe following:• An explicit requirement that the

ACO participant or the ACO provider/supplier will comply with therequirements and conditions of theShared Savings Program (part 425),including, but not limited to, thosespecified in the participation agreementwith CMS.

• A description of the ACOparticipants’ and ACO providers’/suppliers’ rights and obligations in andrepresentation by the ACO.

• A description of how theopportunity to get shared savings orother financial arrangements willencourage ACO participants and ACOproviders/suppliers to follow the qualityassurance and improvement programand evidence-based clinical guidelines.

• Remedial measures that will applyto ACO participants and ACO

providers/suppliers who do not complywith the requirements of theiragreements with the ACO.

Our guidance also requires that theACO participant agreements be madedirectly between the ACO and the ACOparticipant. We believe it is importantthat the parties entering into theagreement have a direct legalrelationship to ensure that therequirements of the agreement are fullyand directly enforceable by the ACO,including the ability of the ACO toterminate an agreement with an ACOparticipant that is not complying withthe requirements of the Shared SavingsProgram. Therefore, we believe a directcontractual relationship is important.Additionally, a direct contractualrelationship ensures that the ACOparticipant may, if necessary, terminatethe agreement with the ACO accordingto the terms of the agreement withoutinterrupting other contracts oragreements with third parties.Therefore, the ACO and the ACOparticipant must be the only parties toan ACO participant agreement; theagreements may not include a thirdparty to the agreement. For example, theagreement may not be between the ACO

and another entity, such as anindependent practice association (IPA)or management company that in turnhas an agreement with one or more ACOparticipants. Similarly, ACOs shouldnot use existing contracts betweenACOs and ACO participants thatinclude third parties.

We recognize that contractualagreements do exist between entities(for example, contracts that permitorganizations like IPAs to negotiatecontracts with health care payers on

behalf of individual practitioners).However, because it is important to

ensure that there is a direct contractualrelationship between the ACO and theACO participant evidenced by a writtenagreement, and because ACOparticipants continue to bill and receivepayments as usual under the MedicareFFS rules (that is, there is no negotiationfor payment under the program) we

believe that typical IPA contracts areinappropriate and unnecessary forpurposes of participation in the SharedSavings Program. An ACO and ACOparticipant may use a contract unrelatedto the Shared Savings Program as an


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ACO participant agreement only when itis between the two parties and isamended to satisfy the requirements forACO participant agreements under theShared Savings Program.

It is the ACO’s responsibility to makesure that each ACO participantagreement identifies the parties enteringinto the agreement using their correct

legal names, specifies the term of theagreement, and is signed by both partiesto the agreement. We validate the legalnames of the parties based oninformation the ACO submitted in itsapplication and the legal name of theentity associated with the ACOparticipant’s TIN in the ProviderEnrollment Chain & Ownership System(PECOS). We reject an ACO participantagreement if the party names do notmatch our records. It may be necessaryfor the ACO to execute a new oramended ACO participant agreement.

Although the ACO participant mustensure that each of its ACO providers/suppliers (as identified by a NationalProvider Identifier (NPI)) has agreed toparticipate in the ACO and will complywith program rules, the ACO has theultimate responsibility for ensuring thatall the ACO providers/suppliers that billthrough the TIN of the ACO participanthave also agreed to participate in theShared Savings Program and complywith our program regulations. The ACOmay ensure this by directly contractingwith each ACO provider/supplier (NPI)or by contractually requiring the ACOparticipant to ensure that all ACOproviders/suppliers that bill through its

TIN have agreed to participate in, andcomply with the requirements of, theShared Saving Program. If the ACOchooses to contract directly with theACO providers/suppliers, theagreements must meet the samerequirements as the agreements withACO participants. We emphasize thateven if an ACO chooses to contractdirectly with the ACO providers/suppliers (NPIs), it must still have therequired ACO participant agreement. Inother words, the ACO must be able toproduce valid written agreements foreach ACO participant and each ACO

provider/supplier. Furthermore, sincewe use TINs (and not merely some ofthe NPIs that make up the entityidentified by a TIN) as the basis foridentifying ACO participants, and weuse all claims submitted under an ACOparticipant’s TIN for financialcalculations and beneficiary assignment,an ACO may not include an entity as anACO participant unless all Medicareenrolled providers and suppliers billingunder that entity’s TIN have agreed toparticipate in the ACO as ACOproviders/suppliers.

We proposed to codify much of ourguidance regarding the content of theACO participant and ACO provider/supplier agreements.


First, we proposed to add new§ 425.116 to set forth the requirementsfor agreements between an ACO and an

ACO participant or ACO provider/supplier. We stated our belief that thenew provision would promote a bettergeneral understanding of the SharedSavings Program and transparency forACO participants and ACO providers/suppliers. It was our intent to providerequirements that would facilitate andenhance the relationships betweenACOs and ACO participants, and reduceuncertainties and misunderstandingsleading to rejection of ACO participantagreements during application review.Specifically, we proposed to require thatACO participant agreements satisfy the

following criteria:• The ACO and the ACO participantare the only parties to the agreement.

• The agreement must be signed on behalf of the ACO and the ACOparticipant by individuals who areauthorized to bind the ACO and theACO participant, respectively.

• The agreement must expresslyrequire the ACO participant to agree,and to ensure that each ACO provider/supplier billing through the TIN of theACO participant agrees, to participate inthe Shared Savings Program and tocomply with the requirements of theShared Savings Program and all other

applicable laws and regulations(including, but not limited to, thosespecified at § 425.208(b)).

• The agreement must set forth theACO participant’s rights and obligationsin, and representation by, the ACO,including without limitation, the qualityreporting requirements set forth inSubpart F, the beneficiary notificationrequirements set forth at § 425.312, andhow participation in the Shared SavingsProgram affects the ability of the ACOparticipant and its ACO providers/suppliers to participate in otherMedicare demonstration projects or

programs that involve shared savings.• The agreement must describe howthe opportunity to receive sharedsavings or other financial arrangementswill encourage the ACO participant toadhere to the quality assurance andimprovement program and evidence-

based medicine guidelines established by the ACO.

• The agreement must require theACO participant to update enrollmentinformation with its MedicareAdministrative Contractor using thePECOS, including the addition and

deletion of ACO professionals billingthrough the TIN of the ACO participant,on a timely basis in accordance withMedicare program requirements. Theagreement must also require ACOparticipants to notify the ACO within 30days after any addition or deletion of anACO provider/supplier.

• The agreement must permit the

ACO to take remedial action against theACO participant, and must require theACO participant to take remedial actionagainst its ACO providers/suppliers,including imposition of a correctiveaction plan, denial of shared savingspayments (that is, the ability of the ACOparticipant or ACO provider/supplier toreceive a distribution of the ACO’sshared savings) and termination of theACO participant agreement, to addressnon-compliance with the requirementsof the Shared Savings Program andother program integrity issues,including those identified by CMS.

• The term of the agreement must befor at least 1 performance year and mustarticulate potential consequences forearly termination from the ACO.

• The agreement must requirecompletion of a close-out process uponthe termination or expiration of theACO’s participation agreement thatrequires the ACO participant to furnishdata necessary to complete the annualassessment of the ACO’s quality of careand addresses other relevant matters.

Although we proposed that the termof an ACO participant agreement be forat least 1 performance year, we statedthat we did not intend to prohibit early

termination of the agreement. Werecognized that there may be legitimatereasons to terminate an ACO participantagreement. However, because carecoordination and quality improvementrequires commitment from ACOparticipants, we stated our belief that aminimum requirement of 1 year wouldimprove the likelihood of success in theShared Savings Program. We also statedthat we were considering whether andhow ACO participant agreementsshould encourage participation tocontinue for subsequent performanceyears. We sought comment on this issue.

In the case of an ACO that chooses tocontract directly with its ACOproviders/suppliers, we proposedvirtually identical requirements for itsagreements with ACO providers/suppliers. We noted that, unlikeagreements between the ACO and anACO participant, agreements with ACOproviders/suppliers would not berequired to be for a term of at least 1year, because we did not want toimpede individual practitioners fromactivities such as retirement,reassignment of billing rights, or



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changing employers. In the case of ACOproviders/suppliers that do not contractdirectly with the ACO, we consideredrequiring each ACO to ensure that itsACO participants contract with orotherwise arrange for the services of itsACO providers/suppliers on the same orsimilar terms as those required forcontracts made directly between the

ACO and ACO providers/suppliers.In addition, we proposed to add at

§ 425.204(c)(6) a requirement that, aspart of the application process and uponrequest thereafter, the ACO must submitdocuments demonstrating that its ACOparticipants, ACO providers/suppliers,and other individuals or entitiesperforming functions or services relatedto ACO activities are required to complywith the requirements of the SharedSavings Program. In the case of ACOparticipants, we proposed that theevidence to be submitted must,consistent with our past guidance,

include sample form agreementstogether with the first and last(signature) page of each form agreementthat has been fully executed by theparties to the agreement. However, weproposed to reserve the right to requestall pages of an executed ACOparticipant agreement to confirm that itconforms to the sample form agreementsubmitted by the ACO. In addition, weproposed at § 425.116(c

Documents

Medicare ACOs Final Rule June 2015.pdf