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CMS finalizes rule forcing ACOs to take on more risk

Agency also releases results of Next Generation, the ACO that takes on the most risk for Medicare payments.

Susan Morse, Managing Editor

The Centers for Medicare and Medicaid Services has issued the final rule for the overhaul of accountable care organization payments.

To remain an ACO, these healthcare organizations will be required to take on financial risk sooner. The rule governs the Medicare Shared Savings Program, which accounts for 561 ACOs.

The expected savings to Medicare are $2.9 billion over ten years.

It ends the six years ACOs can remain in an upside-only risk model.

Under the new rule called Pathways to Success, lower revenue or physician-led ACOs can remain in no-risk programs for three years; new ACOs for two years and existing ACOs get just one year.

Then all must take accountability for healthcare spending.

CMS has set the shared savings rate at 40 percent for ACOs not assuming risk for healthcare costs and 50 percent for ACOs at all levels of risk. This is to strengthen the "on-ramp" to the program while rewarding ACOs that take on greater risk with higher shared savings rates, said CMS Administrator Seema Verma.

Smaller, physician-led or "low revenue" ACOs – many of which are in rural areas – have shown greater success in controlling costs than hospital-led ACOs, Verma said.

Most Medicare ACOs do not currently face financial consequences when costs increase, but a review of the data on ACO performance shows that over time those ACOs that take accountability for costs perform better than those that do not, she said.

Also, Verma said, "We have heard that establishing a physician-led ACO can provide practices with a means of remaining independent from consolidated hospital systems." 

ACOs also have new obligations to patients. The rule requires them  to provide beneficiaries with a written notice in person or electronically through email or a patient portal, that they are participating in a new approach to care delivery, and it must also explain what participating in an ACO means for their care.

Finally, to ensure financial benchmarking, CMS is incorporating regional spending factors in establishing an ACO's target spending during all agreement periods, providing a more accurate point of comparison for evaluating ACO performance. These changes to the benchmarking process also promote greater alignment between the ACO program and Medicare Advantage, Verma said.


When CMS announced the overhaul to the Medicare ACO program in August, the fear was that many of the organizations would decline to continue participating.

CMS said Friday it was encouraged that 90 percent of eligible ACOs with participation agreements expiring on December 31 elected to extend their agreements for six months.

ACOs serve a large number of Medicare beneficiaries – over 10.4 million individuals are in fee-for-service Medicare ACOs out of the 38 million total FFS beneficiaries.

The program for ACOs in Medicare has been in operation for six years. Its aim is to make the lofty goal of moving to value-based care a reality.

In exchange for ACOs taking on the accountability for total cost and quality of care, they receive a portion of the savings they achieve as long as they meet quality standards.


Today's rule increases flexibility for telehealth services provided at a patient's place of residence.
CMS issues waivers to ACOs of specific fraud and abuse laws to provide the regulatory relief needed to innovate, including waivers of provisions of the Stark Law and the federal anti-kickback statute.

The rule also allows risk-based ACOs to offer new incentive payments to beneficiaries for taking steps to achieve good health such as obtaining primary care services and necessary follow-up care.


In connection with the program redesign and to ensure providers have time to review and assess the new options, CMS is offering an ACO application cycle for a special one-time new agreement period start date of July 1, 2019.

This will help those ACOs with participation agreements expiring on December 31, which extended their agreements for six months, the option to renew under the new policies and continue to participate in the program uninterrupted.


CMS has also released the financial and quality results for the second performance year of the Next Generation ACO, the most at-risk model.

The Next Generation model test provides ACOs with additional flexibilities in exchange for their greater level of risk-sharing. Some Next Gens agree to pay back 100 percent of "shared losses," the costs in excess of their predetermined spending benchmark.

The Next Generation ACO Model actuarial results show that net savings to the Medicare Trust Funds from the model in 2017 were more than $164 million across 44 ACOs. The model is also showing strong performance on quality metrics, CMS said.

The National Association of ACOs said it was pleased with most aspects of the rule.

Clif Gaus, chief executive of NAACOS said, "We strongly support CMS's decision not to reduce shared savings rates to as low as 25 percent. CMS' final rule sets the savings rates at either 40 or 50 percent, and we look forward to working with CMS to monitor any impact that this decreased rate may have for new ACOs wanting to join the program."

A survey of NAACOS members after the proposed rule was released found reduced shared-savings rates for no- and low-risk ACOs was the most troubling aspect of CMS's proposed changes, the organization said.

NAACOS is urgings the Center for Medicare and Medicaid Innovation  to move forward with developing and releasing more details on an advanced ACO model that will replace the Next Gen Model when that expires in 2020.

Twitter: @SusanJMorse
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