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CMS Releases Final Rule Modifying MSSP


Email Alert

June 20, 2016

By Richard Church, Limo Cherian, and Steven Pine*

On June 10, the Centers for Medicare & Medicaid Services (CMS) finalized a rule amending the Medicare Shared Savings Program (MSSP) to ease financial burdens on participating Accountable Care Organizations (ACOs) and to incentivize renewed participation in the MSSP.1 The final rule incentivizes ACO participation by changing the way CMS recalculates an ACO’s target expense benchmark and by offering ACOs increased flexibility when transitioning between MSSP tracks. In addition, the rule clarifies when CMS may re-open shared savings and shared loss claims.

Changes to Calculation of ACO Benchmarks

Beginning in 2017, CMS will consider regional Medicare expenditures and the health of an ACO’s assigned population when recalculating benchmarks for the second and subsequent agreement periods. CMS also plans to explore using regional factors to adjust an ACO’s initial benchmark for its first agreement period; however, any such change will be addressed in future rulemaking.

Adjustments Based on Regional Expenditures

CMS will factor in average fee-for-service Medicare expenditures within each ACO’s regional service area when recalculating an ACO’s benchmark. To do this, CMS will develop county-by-county average expenditures based on the total cost of services to all ACO-assignable (or assigned) beneficiaries in each county. Then, each time an ACO’s benchmark is recalculated, CMS will base a certain percentage of the ACO’s total benchmark on the regional average, based on the following matrix:

% of Benchmark Based on Regional Average


ACO Expenses Above Regional Average

ACO Expenses Below Regional Average

First Benchmark Recalculation



Second Benchmark Recalculation



Subsequent Benchmark Recalculations



Regional Risk Adjustments

Starting in 2017, CMS also will risk-adjust an ACO’s recalculated benchmark based on the health status of its assigned population relative to all ACO-assignable beneficiaries in the regional service area. CMS will base the adjustment on the Hierarchical Condition Category risk scores of the regional assignable population as compared to the risk level of the ACO’s assigned beneficiaries. This adjustment is consistent with the proposed rule and intended to incentivize ACOs to serve sicker beneficiaries.

Truncating and Trending Expenditures

Under current rules, CMS uses the entire population of Medicare beneficiaries to perform truncation and trending calculations when computing an ACO’s benchmark expenditures. CMS has expressed concern that these calculations may be skewed by the inclusions of beneficiaries not eligible for ACO assignment. Thus, starting in 2017, CMS will perform these truncating and trending calculations based only on ACO-assignable Medicare beneficiaries.

Adjustments for Changes in ACO Participant Composition

CMS also considered in the proposed rule creating a mechanism by which an ACO’s benchmark would be readjusted based on changes in the composition of an ACO’s participating providers. However, commenters expressed concerns that CMS did not provide enough information or time for stakeholders to perform their own analysis of this proposal. Thus, CMS elected not to finalize this proposal. However, CMS noted it will revisit this proposal in future rulemaking.

Flexibility When Transitioning to a Risk-Based MSSP Track

Also starting in 2017, CMS finalized its proposal to allow a Track 1 ACO that wishes to enter into a risk-based Track 2 or Track 3 model to defer recalculation of its benchmark and continue in Track 1 for a fourth year before entering its second agreement period. After the fourth year has passed, CMS will recalculate the ACO’s benchmark, and the ACO will transition to a risk-based model for the second agreement period. This option is meant to assist ACOs that need an additional year before transitioning to a risk-based model.

Revised Policies for Reopening and Correcting Initial Payment Determinations

Finally, CMS finalized its authority to reopen and revise an earlier MSSP payment at any time in the case of fraud or similar fault (as defined in 42 C.F.R. § 405.902), or within four years of when an ACO is notified of the initial determination of shared savings or loss if there is other good cause. CMS declined to define “good cause,” but indicates good cause may be established: (1) where there is new, previously unavailable evidence indicating that an error was made; or (2) if evidence considered by CMS while making a payment decision is later found to have clearly been relied upon in error. CMS acknowledged that this rule may create financial uncertainty for ACOs, but moved forward with the proposal nonetheless. CMS noted that it will address criteria for when an error becomes material enough to warrant reopening in future sub-regulatory guidance.

*We would like to thank Richard P. Church (K&L Gates LLP, Morrisville, NC), Limo T. Cherian (K&L Gates LLP, Chicago, IL), and Steven G. Pine (K&L Gates LLP, Morrisville, NC) for authoring this email alert.

1 CMS, MSSP; ACO—Revised Benchmark Rebasing Methodology, Final Rule, 81 Fed. Reg. 37,950 (June 10, 2016). The proposed rule was published on February 3, 2016 at 81 Fed. Reg. 5,824.

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