Title 42—Public Health--Volume 1
PART 425—MEDICARE SHARED SAVINGS PROGRAM
§ 425.611   Adjustments to Shared Savings Program calculations to address the COVID-19 pandemic.
(a) General. This section describes adjustments CMS makes to Shared Savings Program calculations to address the impact of the COVID-19 pandemic.
(b) Episodes of care for treatment of COVID-19. (1) CMS identifies an episode of care for treatment of COVID-19 based on either of the following:
(i) Discharges for inpatient services eligible for the 20 percent adjustment under section 1886(d)(4)(C) of the Act.
(ii) Discharges for acute care inpatient services for treatment of COVID-19 from facilities that are not paid under the inpatient prospective payment system, such as CAHs, when the date of discharge occurs within the Public Health Emergency as defined in § 400.200 of this chapter.
(2) CMS defines the episode of care as starting in the month in which the inpatient stay begins as identified by the admission date, all months during the inpatient stay, and the month following the end of the inpatient stay as indicated by the discharge date.
(c) Applicability of adjustments. Notwithstanding any other provision in this part, CMS adjusts the following Shared Savings Program calculations to exclude all Parts A and B fee-for-service payment amounts for a beneficiary's episode of care for treatment of COVID-19 as described in paragraph (b) of this section:
(1) Calculation of Medicare Parts A and B fee-for-service expenditures for an ACO's assigned beneficiaries for all purposes including the following: Establishing, adjusting, updating, and resetting the ACO's historical benchmark and determining performance year expenditures.
(2) Calculation of fee-for-service expenditures for assignable beneficiaries as used in determining county-level fee-for-service expenditures and national Medicare fee-for-service expenditures, including the following calculations:
(i) Determining average county fee-for-service expenditures based on expenditures for the assignable population of beneficiaries in each county in the ACO's regional service area according to §§ 425.601(c), 425.603(e), and 425.654(a) for purposes of calculating the ACO's regional fee-for-service expenditures.
(ii) Determining the 99th percentile of national Medicare fee-for-service expenditures for assignable beneficiaries for purposes of the following:
(A) Truncating assigned beneficiary expenditures used in calculating benchmark expenditures under §§ 425.601(a)(4), 425.602(a)(4), 425.603(c)(4), and 425.652(a)(4), and performance year expenditures under §§ 425.604(a)(4), 425.605(a)(3), 425.606(a)(4), and 425.610(a)(4).
(B) Truncating expenditures for assignable beneficiaries in each county for purposes of determining county fee-for-service expenditures according to §§ 425.601(c)(3), 425.603(e)(3), and 425.654(a)(3).
(iii) Determining national per capita expenditures for Parts A and B services under the original Medicare fee-for-service program for assignable beneficiaries for purposes of capping the regional adjustment to the ACO's historical benchmark according to §§ 425.601(a)(8)(ii)(C) and 425.656(c)(3), and capping the prior savings adjustment according to § 425.658(c)(1)(ii).
(iv) Determining the flat dollar equivalent of the projected absolute amount of growth in national per capita expenditures for Parts A and B services under the original Medicare fee-for-service program for assignable beneficiaries, for purposes of updating the ACO's historical benchmark according to § 425.602(b)(2).
(v) Determining national growth rates that are used as part of the blended growth rates used to trend forward BY1 and BY2 expenditures to BY3 according to §§ 425.601(a)(5)(ii) and 425.652(a)(5)(ii) and as part of the blended growth rates used to trend the benchmark and update the benchmark according to §§ 425.601(b)(2) and 425.652(b)(2)(i).
(3) Calculation of Medicare Parts A and B fee-for-service revenue of ACO participants for purposes of calculating the ACO's loss recoupment limit under the BASIC track as specified in § 425.605(d).
(4) Calculation of total Medicare Parts A and B fee-for-service revenue of ACO participants and total Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries for purposes of identifying whether an ACO is a high revenue ACO or low revenue ACO, as defined under § 425.20, determining an ACO's eligibility for participation options according to § 425.600(d), and determining an ACO's eligibility to receive advance investment payments according to § 425.630.
(5) Calculation or recalculation of the amount of the ACO's repayment mechanism arrangement according to § 425.204(f)(4).
§ 425.612   Waivers of payment rules or other Medicare requirements.
(a) General. CMS may waive certain payment rules or other Medicare requirements as determined necessary to carry out the Shared Savings Program under this part.
(1) SNF 3-day rule. For performance year 2017 and subsequent performance years, CMS waives the requirement in section 1861(i) of the Act for a 3-day inpatient hospital stay prior to a Medicare-covered post-hospital extended care service for eligible beneficiaries assigned to ACOs participating in a two-sided model and as provided in paragraph (a)(1)(iv) of this section during a grace period for beneficiaries excluded from prospective assignment to an ACO in a two-sided model, who receive otherwise covered post-hospital extended care services furnished by an eligible SNF that has entered into a written agreement to partner with the ACO for purposes of this waiver. Eligible SNFs include providers furnishing SNF services under swing bed agreements. All other provisions of the statute and regulations regarding Medicare Part A post-hospital extended care services continue to apply. ACOs identified under paragraph (a)(1)(vi) of this section may request to use the SNF 3-day rule waiver for performance years beginning on July 1, 2019, and in subsequent years.
(i) ACOs must submit to CMS supplemental application information sufficient to demonstrate the ACO has the capacity to identify and manage beneficiaries who would be either directly admitted to a SNF or admitted to a SNF after an inpatient hospitalization of fewer than 3-days in the form and manner specified by CMS. Application materials include but are not limited to, the following:
(A) An attestation that it has established and will make available to CMS upon request the following narratives describing how the ACO plans to implement the waiver:
( 1 ) A communication plan between the ACO and its SNF affiliates.
( 2 ) A care management plan for beneficiaries admitted to a SNF affiliate.
( 3 ) A beneficiary evaluation and admission plan approved by the ACO medical director and the healthcare professional responsible for the ACO's quality improvement and assurance processes under § 425.112.
(B) A list of SNFs with whom the ACO will partner along with executed written SNF affiliate agreements between the ACO and each listed SNF.
(ii) In order to be eligible to receive covered SNF services under the waiver, a beneficiary must meet the following requirements:
(A) In the case of a beneficiary who is assigned to an ACO that has selected preliminary prospective assignment with retrospective reconciliation under § 425.400(a)(2), the beneficiary must appear on the list of preliminarily prospectively assigned beneficiaries at the beginning of the performance year or on the first, second, or third quarterly preliminary prospective assignment list for the performance year in which they are admitted to the eligible SNF, and the SNF services must be provided after the beneficiary first appeared on the preliminary prospective assignment list for the performance year.
(B) In the case of a beneficiary who is assigned to an ACO that has selected prospective assignment under § 425.400(a)(3), the beneficiary must be prospectively assigned to the ACO for the performance year in which they are admitted to the eligible SNF.
(C) Does not reside in a SNF or other long-term care setting.
(D) Is medically stable.
(E) Does not require inpatient or further inpatient hospital evaluation or treatment.
(F) Have certain and confirmed diagnoses.
(G) Have an identified skilled nursing or rehabilitation need that cannot be provided as an outpatient.
(H) Have been evaluated and approved for admission to the SNF within 3 days prior to the SNF admission by an ACO provider/supplier who is a physician, consistent with the ACO's beneficiary evaluation and admission plan.
(iii) SNFs eligible to partner and enter into written agreements with ACOs for purposes of this waiver must do the following:
(A) Providers eligible to be included in the CMS 5-star Quality Rating System must have and maintain an overall rating of 3 or higher.
(B) Sign a SNF affiliate agreement with the ACO that includes elements determined by CMS including but not limited to the following:
( 1 ) Agreement to comply with the requirements and conditions of this part, including but not limited to those specified in the participation agreement with CMS.
( 2 ) Effective dates of the SNF affiliate agreement.
( 3 ) Agreement to implement and comply with the ACO's beneficiary evaluation and admission plan and the care management plan.
( 4 ) Agreement to validate the eligibility of a beneficiary to receive covered SNF services in accordance with the waiver prior to admission.
( 5 ) Remedial processes and penalties that will apply for non-compliance.
(iv) For a beneficiary who was included on the ACO's prospective assignment list or preliminary prospective assignment list at the beginning of the performance year or on the first, second, or third quarterly preliminary prospective assignment list for the performance year, for an ACO for which a waiver of the SNF 3-day rule has been approved under paragraph (a)(1) of this section, but who was subsequently removed from the assignment list for the performance year, CMS makes payment for SNF services furnished to the beneficiary by a SNF affiliate if the following conditions are met:
(A)( 1 ) The beneficiary was prospectively assigned to an ACO that selected prospective assignment under § 425.400(a)(3) at the beginning of the applicable performance year, but was excluded in the most recent quarterly update to the assignment list under § 425.401(b), and the beneficiary was admitted to a SNF affiliate within 90 days following the date that CMS delivered the quarterly exclusion list to the ACO; or
( 2 ) The beneficiary was identified as preliminarily prospectively assigned to an ACO that has selected preliminary prospective assignment with retrospective reconciliation under § 425.400(a)(2) in the report provided under § 425.702(c)(1)(ii)(A) at the beginning of the performance year or for the first, second, or third quarter of the performance year, the SNF services were provided after the beneficiary first appeared on the preliminary prospective assignment list for the performance year, and the beneficiary meets the criteria to be assigned to an ACO under § 425.401(a)(1) and (2).
(B) But for the beneficiary's removal from the ACO's assignment list, CMS would have made payment to the SNF affiliate for such services under the waiver under paragraph (a)(1) of this section.
(v) The following beneficiary protections apply when a beneficiary receives SNF services without a prior 3-day inpatient hospital stay from a SNF affiliate that intended to provide services under a SNF 3-day rule waiver under paragraph (a)(1) of this section, the SNF affiliate services were non-covered only because the SNF affiliate stay was not preceded by a qualifying hospital stay under section 1861(i) of the Act, and in the case of a beneficiary where the ACO selected one of the following:
(A) Prospective assignment under § 425.400(a)(3), the beneficiary was not prospectively assigned to the ACO for the performance year in which they received the SNF services, or was prospectively assigned but was later excluded and the 90-day grace period, described in paragraph (a)(1)(iv)(A) of this section, has lapsed.
(B) Preliminary prospective assignment with retrospective reconciliation under § 425.400(a)(2), the beneficiary was not identified as preliminarily prospectively assigned to the ACO for the performance year in the report provided under § 425.702(c)(1)(ii)(A) at the beginning of the performance year or for the first, second, or third quarter of the performance year before the SNF services were provided to the beneficiary.
(C) A SNF is presumed to intend to provide services pursuant to the SNF 3-day rule waiver under paragraph (a)(1) of this section if the SNF submitting the claim is a SNF affiliate of an ACO for which such a waiver has been approved.
(D) CMS makes no payments for SNF services to a SNF affiliate of an ACO for which a waiver of the SNF 3-day rule has been approved when the SNF affiliate admits a FFS beneficiary who was not prospectively or preliminarily prospectively assigned to the ACO prior to the SNF admission or was prospectively assigned but was later excluded and the 90-day grace period under paragraph (a)(1)(iv)(A) of this section has lapsed.
(E) In the event that CMS makes no payment for SNF services furnished by a SNF affiliate as a result of paragraph (a)(1)(v)(D) of this section and the only reason the claim was non-covered is due to the lack of a qualifying inpatient stay, the following beneficiary protections will apply:
( 1 ) The SNF must not charge the beneficiary for the expenses incurred for such services; and
( 2 ) The SNF must return to the beneficiary any monies collected for such services; and
( 3 ) The ACO may be required to submit a corrective action plan under § 425.216(b) for CMS approval. If after being given an opportunity to act upon the corrective action plan the ACO fails to come into compliance with the requirements of paragraph (a)(1), approval for the SNF 3-day rule waiver under this section will be terminated as provided under paragraph (d) of this section.
(vi) The following ACOs may request to use the SNF 3-day rule waiver:
(A) An ACO participating in performance-based risk within the BASIC track under § 425.605.
(B) An ACO participating in the ENHANCED track under § 425.610.
(2) [Reserved]
(b) Review and determination of request to use waivers. (1) In order to obtain a determination regarding whether the ACO may use waivers under this section, an ACO must submit a waiver request to CMS in the form and manner and by a deadline specified by CMS.
(2) An ACO executive who has the authority to legally bind the ACO must certify to the best of his or her knowledge, information, and belief that the information contained in the waiver request submitted under paragraph (b)(1) of this section is accurate, complete, and truthful.
(3) CMS evaluates an ACO's waiver request to determine whether it satisfies the requirements of this part and approves or denies waiver requests accordingly. Waiver requests are approved or denied on the basis of the following:
(i) Information contained in and submitted with the waiver request by a deadline specified by CMS.
(ii) Supplemental information submitted by a deadline specified by CMS in response to a CMS request for information.
(iii) Screening of the ACO, ACO participants, ACO providers/suppliers, and other individuals or entities providing services to Medicare beneficiaries in accordance with the terms of the waiver.
(iv) Other information available to CMS.
(4) CMS may deny a waiver request if an ACO fails to submit requested information by the deadlines established by CMS.
(c) Effective and termination date of waivers. (1) Waivers are effective upon CMS notification of approval for the waiver or the start date of the participation agreement, whichever is later.
(2) Waivers do not extend beyond the end of the participation agreement.
(3) If CMS terminates the participation agreement under § 425.218, the waiver ends on the date specified by CMS in the termination notice.
(4) If the ACO terminates the participation agreement, the waiver ends on the effective date of termination as specified in the written notification required under § 425.220.
(d) Monitoring and termination of waivers. (1) ACOs with approved waivers are required to post their use of the waiver as part of public reporting under § 425.308.
(2) CMS monitors and audits the use of such waivers in accordance with § 425.316.
(3) CMS reserves the right to deny or revoke a waiver if an ACO, its ACO participants, ACO providers/suppliers or other individuals or entities providing services to Medicare beneficiaries are not in compliance with the requirements of this part or if any of the following occur:
(i) The waiver is not used as described in the ACO's waiver request under paragraph (b)(1) of this section.
(ii) The ACO does not successfully meet the quality reporting standard under subpart F of this part.
(iii) CMS identifies a program integrity issue affecting the ACO's use of the waiver.
(4) CMS reserves the right to take compliance action, including termination, against an ACO for noncompliance with program rules, including misuse of a waiver under this section, as specified at §§ 425.216 and 425.218.
(e) Other rules governing use of waivers. (1) Waivers under this section do not protect financial or other arrangements between or among ACOs, ACO participants, ACO providers/suppliers, or other individual or entities providing services to Medicare beneficiaries from liability under the fraud and abuse laws or any other applicable laws.
(2) Waivers under this section do not protect any person or entity from liability for any violation of law or regulation for any conduct other than the conduct permitted by a waiver under paragraph (a) of this section.
(3) ACOs must ensure compliance with all claims submission requirements, except those expressly waived under paragraph (a) of this section.
(f) Waiver for payment for telehealth services. For performance year 2020 and subsequent performance years, CMS waives the originating site requirements in section 1834(m)(4)(C)(i) and (ii) of the Act and makes payment for telehealth services furnished to a beneficiary, if the following conditions are met:
(1) The beneficiary was prospectively assigned to an ACO that is an applicable ACO for purposes of § 425.613 at the beginning of the applicable performance year, but the beneficiary was excluded in the most recent quarterly update to the prospective assignment list under § 425.401(b).
(2) The telehealth services are provided by a physician or practitioner billing under the TIN of an ACO participant in the ACO within 90 days following the date CMS delivers the quarterly exclusion list to the ACO.
(3) But for the beneficiary's exclusion from the ACO's prospective assignment list, CMS would have made payment to the ACO participant for such services under § 425.613.
§ 425.613   Telehealth services.
(a) General. Payment is available for otherwise covered telehealth services furnished on or after January 1, 2020, by a physician or other practitioner billing through the TIN of an ACO participant in an applicable ACO, without regard to the geographic requirements under section 1834(m)(4)(C)(i) of the Act, in accordance with the requirements of this section.
(1) For purposes of this section:
(i) An applicable ACO is an ACO that is participating under a two-sided model under § 425.600 and has elected prospective assignment under § 425.400(a)(3) for the performance year.
(ii) The home of the beneficiary is treated as an originating site under section 1834(m)(4)(C)(ii) of the Act.
(2) For payment to be made under this section, the following requirements must be met:
(i) The beneficiary is prospectively assigned to the ACO for the performance year in which the beneficiary received the telehealth service.
(ii) The physician or practitioner who furnishes the telehealth service must bill under the TIN of an ACO participant that is included on the certified ACO participant list under § 425.118 for the performance year in which the service is rendered.
(iii) The originating site must comply with applicable State licensing requirements.
(iv) When the originating site is the beneficiary's home, the telehealth services must not be inappropriate to furnish in the home setting. Services that are typically furnished in an inpatient setting may not be furnished as a telehealth service when the originating site is the beneficiary's home.
(v) CMS does not pay a facility fee when the originating site is the beneficiary's home.
(b) Beneficiary protections. (1) When a beneficiary who is not prospectively assigned to an applicable ACO or in a 90-day grace period under § 425.612(f) receives a telehealth service from a physician or practitioner billing through the TIN of an ACO participant participating in an applicable ACO, CMS makes no payment for the telehealth service to the ACO participant.
(2) In the event that CMS makes no payment for a telehealth service furnished by a physician or practitioner billing through the TIN of an ACO participant, and the only reason the claim was non-covered is because the beneficiary is not prospectively assigned to the ACO or in the 90-day grace period under § 425.612(f), all of the following beneficiary protections apply:
(i) The ACO participant must not charge the beneficiary for the expenses incurred for such service.
(ii) The ACO participant must return to the beneficiary any monies collected for such service.
(iii) The ACO may be required to submit a corrective action plan under § 425.216(b) for CMS approval. If the ACO is required to submit a corrective action plan and, after being given an opportunity to act upon the corrective action plan, the ACO fails to implement the corrective action plan or demonstrate improved performance upon completion of the corrective action plan, CMS may terminate the participation agreement as specified under § 425.216(b)(2).
(c) Termination date for purposes of payment for telehealth services. (1) Payment for telehealth services under paragraph (a) of this section does not extend beyond the end of the applicable ACO's participation agreement.
(2) If CMS terminates the participation agreement under § 425.218, payment for telehealth services under paragraph (a) of this section is not made with respect to telehealth services furnished beginning on the date specified by CMS in the termination notice.
(3) If the ACO terminates the participation agreement, payment for telehealth services under paragraph (a) of this section is not made with respect to telehealth services furnished beginning on the effective date of termination as specified in the written notification required under § 425.220.
(d) Monitoring of telehealth services. (1) CMS monitors and audits the use of telehealth services by the ACO and its ACO participants and ACO providers/suppliers, in accordance with § 425.316.
(2) CMS reserves the right to take compliance action, up to and including termination of the participation agreement, as specified in §§ 425.216 and 425.218, with respect to an applicable ACO for non-compliance with program requirements, including inappropriate use of telehealth services.
§§ 425.614-425.629   [Reserved]
§ 425.630   Option to receive advance investment payments.
(a) Purpose. Advance investment payments are intended to encourage low-revenue ACOs that are inexperienced with risk to participate in the Shared Savings Program and to provide additional resources to such ACOs in order to support care improvement for underserved beneficiaries.
(b) Eligibility. An ACO is eligible to receive advance investment payments as specified in this section if CMS determines that all of the following criteria are met:
(1) The ACO is not a renewing or a re-entering ACO.
(2) CMS has determined that the ACO is eligible to participate in the Shared Savings Program.
(3) The ACO is inexperienced with performance-based risk Medicare ACO initiatives during its first 2 performance years and participates in the BASIC track's glide path as follows:
(i) For performance year 1, the ACO must participate in Level A of the BASIC track's glide path.
(ii) For performance year 2, the ACO may participate in Level A of the BASIC track's glide path (in accordance with § 425.600(a)(4)(i)(C)( 3 )) or Level B.
(iii) For performance years 3 through 5, the ACO may participate in Level A of the BASIC track's glide path (in accordance with § 425.600(a)(4)(i)(C)( 3 )), or Levels B through E.
(4) The ACO is a low revenue ACO.
(c) Application procedure. To obtain a determination regarding whether an ACO may receive advance investment payments, the ACO must submit to CMS complete supplemental information as part of its application to participate in the Shared Savings Program (filed pursuant to § 425.202) in the form and manner and by a deadline specified by CMS.
(d) Application contents and review. (1) General. An ACO must submit to CMS supplemental application information sufficient for CMS to determine whether the ACO is eligible to receive advance investment payments. In addition, the ACO must submit a proposed spend plan as part of the supplemental application information.
(2) Spend plan. The spend plan must:
(i) Describe how the ACO will spend its advance investment payments during the agreement period to build care coordination capabilities (including coordination with community-based organizations, as appropriate), address specific health disparities, and meet other criteria under this section.
(ii) Identify the categories of goods and services that will be purchased with advance investment payment funds (including any allowable uses under paragraph (e) of this section), the dollar amounts to be spent on the various categories, and such other information as may be specified by CMS.
(iii) State that the ACO has established a separate designated account for the deposit and expenditure of all advance investment payments in accordance with paragraph (e)(4) of this section.
(3) CMS review. CMS will review the supplemental application information to determine whether an ACO meets the eligibility criteria and other requirements for advance investment payments and will approve or deny the advance investment payment application accordingly. CMS may review an ACO's spend plan at any time and require the ACO to modify its spend plan to comply with the requirements of this paragraph (d) and paragraph (e) of this section.
(e) Use and management of advance investment payments —(1) Allowable uses. An ACO must use an advance investment payment to improve the quality and efficiency of items and services furnished to beneficiaries by investing in increased staffing, health care infrastructure, and the provision of accountable care for underserved beneficiaries, which may include addressing social determinants of health. Expenditures of advance investment payments must comply with the beneficiary incentive provision at § 425.304, paragraph (e)(2) of this section, and all other applicable laws and regulations.
(2) Prohibited uses. Advance investment payments may not be used for any expense other than allowable uses under paragraph (e)(1) of this section. In the case of an ACO participating in Level E of the BASIC track, the repayment of any shared losses incurred as specified in a written notice in accordance with § 425.605(e)(2).
(3) Duration for spending payments. An ACO may spend an advance investment payment over its entire agreement period. An ACO must repay to CMS any unspent funds remaining at the end of the ACO's agreement period, except if the ACO terminated its current participation agreement under § 425.220 at the end of performance year 2 or later and immediately enters a new agreement period to continue its participation in the Shared Savings Program, the ACO must spend its advance investment payments within 5 performance years of when it first received advance investment payments and repay to CMS any unspent funds remaining at the end of that fifth performance year.
(4) Segregation of advance investment payments. An ACO must segregate advance investment payments from all other revenues by establishing and maintaining a separate account into which all advance investment payments will be deposited immediately and from which all disbursements of such funds are made only for allowable uses in accordance with this paragraph.
(f) Payment methodology. An ACO receives two types of advance investment payments: a one-time payment of $250,000 and quarterly payments calculated pursuant to the methodology defined in paragraph (f)(2) of this section. CMS notifies in writing each ACO of its determination of the amount of advance investment payment and the notice will inform the ACO of its right to request reconsideration review in accordance with the procedures specified in subpart I of this part. If CMS does not make any advance investment payment, the notice will specify the reason(s) why and inform the ACO of its right to request reconsideration review in accordance with the procedures specified in subpart I of this part.
(1) Frequency of payments. An ACO will receive the one-time payment at the beginning of Performance Year 1 of the ACO's agreement period. An ACO will receive quarterly payments each quarter for the first two performance years of the ACO's agreement period. An ACO may receive no more than eight quarterly payments.
(2) Quarterly payment amount calculation methodology. CMS does all of the following in determining the quarterly payment amount prior to the start of the quarter.
(i) Determines the ACO's assigned beneficiary population. The assigned beneficiaries used in determining the quarterly payment amount are the beneficiaries most recently assigned to the ACO under § 425.400(a)(2) (for an ACO under preliminary prospective assignment with retrospective reconciliation) or § 425.400(a)(3) (for an ACO under prospective assignment), based on the certified ACO participant list for the relevant performance year.
(ii) Assigns each beneficiary a risk factors-based score. For each beneficiary in the assigned population identified in paragraph (f)(2)(i) of this section, CMS applies the following requirements in assigning a risk factors-based score:
(A) The risk factors-based score will be set to 100 if the beneficiary is enrolled in the Medicare Part D LIS or is dually eligible for Medicare and Medicaid.
(B) The risk factors-based score will be set to the Area Deprivation Index national percentile rank matched to the beneficiary's mailing address if the beneficiary is not enrolled in the LIS or is not dually eligible for Medicare and Medicaid and sufficient data is available to match the beneficiary to an Area Deprivation Index national percentile rank.
(C) The risk factors-based score will be set to 50 if the beneficiary is not enrolled in the LIS or is not dually eligible for Medicare and Medicaid and sufficient data is not available to match the beneficiary to an Area Deprivation Index national percentile rank.
(iii) Determines a beneficiary's payment amount. For each beneficiary in the assigned population identified in paragraph (f)(2)(i) of this section, CMS determines the payment amount that corresponds to the beneficiary's risk factors-based score determined in paragraph (f)(2)(ii) of this section. The beneficiary payment amount is as follows:
Table 1 to Paragraph ( f )(2)( iii )
(iv) Calculates the ACO's quarterly payment amount. The ACO's quarterly payment amount is the sum of the beneficiary payment amounts corresponding to each assigned beneficiary's risk factors-based score, specified in paragraph (f)(2)(iii) of this section, capped at 10,000 beneficiaries. If the ACO has more than 10,000 assigned beneficiaries according to paragraph (f)(2)(i) of this section, CMS will calculate the quarterly payment amount based on the 10,000 assigned beneficiaries with the highest risk factors-based scores determined according to paragraph (f)(2)(ii) of this section.
(g) Recoupment and recovery of advance investment payments, and notice of bankruptcy. (1) CMS will recoup advance investment payments made to an ACO from any shared savings the ACO earns until CMS has recouped in full the amount of advance investment payments made to the ACO. For both renewing and re-entering ACOs, CMS will carry forward any remaining balance owed to subsequent performance year(s) in which the ACO achieves shared savings, including in any performance year(s) in a subsequent agreement period.
(2) If the amount of shared savings earned by the ACO is revised upward by CMS for any reason, CMS will reduce the redetermined amount of shared savings by the amount of advance investment payments made to the ACO as of the date of the redetermination. If the amount of shared savings earned by the ACO is revised downward by CMS for any reason, the ACO will not receive a refund of any portion of the advance investment payments previously recouped or otherwise repaid.
(3) Except as provided for in paragraphs (g)(4) through (6) of this section and § 425.316(e)(3), for each performance year, CMS will not recover an amount of advance investment payments greater than the shared savings earned by an ACO in that performance year.
(4) If an ACO terminates its participation agreement during the agreement period in which it received an advance investment payment, the ACO must repay all advance investment payments it received, unless the ACO terminated its current participation agreement under § 425.220 at the end of performance year 2 or later during the agreement period in which it received advance investment payments and immediately enters a new agreement period to continue its participation in the program. CMS will provide written notification to the ACO of the amount due and the ACO must pay such amount no later than 90 days after the receipt of such notification.
(5) If an ACO notifies CMS that it no longer wants to participate in the advance investment payment option but does want to continue its participation in the Shared Savings Program, the ACO must repay all outstanding advance investment payments it received. CMS will provide written notice to the ACO of the amount due and the ACO must pay such amount no later than 90 days after the receipt of such notification.
(6) If CMS terminates the participation agreement of an ACO that has an outstanding balance of advance investment payments owed to CMS, the ACO must repay any outstanding advance investment payments it received. CMS will provide written notification to the ACO of the amount due and the ACO must pay such amount no later than 90 days after the receipt of such notification.
(7) In the event of bankruptcy—
(i) If an ACO has filed a bankruptcy petition, whether voluntary or involuntary, the ACO must provide written notice of the bankruptcy to CMS and to the U.S. Attorney's Office in the district where the bankruptcy was filed, unless final payment for the agreement period has been made by either CMS or the ACO and all administrative or judicial review proceedings relating to any payments under the Shared Savings Program have been fully and finally resolved.
(ii) The notice of bankruptcy must be sent by certified mail no later than 5 days after the petition has been filed and must contain a copy of the filed bankruptcy petition (including its docket number). The notice to CMS must be addressed to the CMS Office of Financial Management at 7500 Security Boulevard, Mailstop C3-01-24, Baltimore, MD 21244 or such other address as may be specified on the CMS website for purposes of receiving such notices.
(h) Termination of advance investment payments —(1) General. Except as provided in paragraph (h)(2) of this section, CMS may terminate an ACO's advance investment payments if the ACO—
(i) Fails to comply with the requirements of this section;
(ii) Meets any of the grounds for ACO termination set forth in § 425.218(b);
(iii) Voluntarily terminates its participation agreement in accordance with § 425.220(a); or
(iv) Voluntarily terminates payments of advance investment payments but continues its participation in the Shared Savings Program.
(2) Eligibility sanction. CMS will terminate an ACO's advance investment payments in accordance with § 425.316(e) if the ACO no longer meets the eligibility requirements specified in paragraphs (b)(3) and (b)(4) of this section.
(3) No pre-termination actions. CMS may immediately terminate an ACO's advance investment payments without taking any of the pre-termination actions set forth in § 425.216.
(i) Reporting information on advance investment payments. The ACO must report information on its receipt of and use of advance investment payments, as follows:
(1) The ACO must publicly report information about the ACO's use of advance investment payments for each performance year, in accordance with § 425.308(b)(8).
(2) In a form and manner and by a deadline specified by CMS, the ACO must report to CMS the same information it is required to publicly report under § 425.308(b)(8).
§§ 425.631-425.639   [Reserved]
§ 425.640   Option to receive prepaid shared savings.
(a) Purpose. Prepaid shared savings provide an additional cash flow option to ACOs with a history of earning shared savings that will encourage their investment in activities that reduce costs for the Medicare program and beneficiaries and improve the quality of care provided to their assigned beneficiaries.
(b) Eligibility. An ACO is eligible to receive prepaid shared savings in an agreement period as specified in this section if CMS determines that all of the following criteria are met:
(1) The ACO meets either of the following conditions:
(i) The ACO is a renewing ACO as defined under § 425.20 entering an agreement period beginning on January 1, 2026, or in subsequent years.
(ii) The ACO was a renewing ACO as defined under § 425.20 entering an agreement period beginning on January 1, 2025, and applied to receive prepaid shared savings in accordance with paragraph (c)(2) of this section starting with the performance year beginning on January 1, 2026.
(2) The ACO must have received a shared savings payment for the most recent performance year that:
(i) Occurred prior to the agreement period for which the ACO has applied to receive prepaid shared savings; and
(ii) CMS has conducted financial reconciliation.
(3) The ACO must have a positive prior savings adjustment for the agreement period for which the ACO has applied to receive prepaid shared savings as calculated pursuant to § 425.658.
(4) The ACO does not have any outstanding shared losses or advance investment payments that have not yet been repaid to CMS after reconciliation for the most recent performance year for which CMS completed financial reconciliation.
(5) If the ACO received prepaid shared savings in the current agreement period or a prior agreement period, the ACO must have fully repaid the amount of prepaid shared savings received through the most recent performance year for which CMS has completed financial reconciliation.
(6) The ACO is participating in Levels C through E of the BASIC track or the ENHANCED track during the agreement period in which it would receive prepaid shared savings.
(7) The ACO has in place an adequate repayment mechanism in accordance with § 425.204(f) that can be used to recoup outstanding prepaid shared savings.
(8) During the agreement period immediately preceding the agreement period in which the ACO would receive prepaid shared savings, the ACO:
(i) Met the quality performance standard as specified under § 425.512; and
(ii) Has not been determined by CMS to have avoided at-risk beneficiaries as specified under § 425.316(b)(2).
(c) Application procedure. (1) For an ACO renewing to enter an agreement period beginning on January 1, 2026, or in subsequent years, to obtain a determination regarding whether the ACO may receive prepaid shared savings, the ACO must submit to CMS a complete supplemental application with its application to renew for a new agreement period in the Shared Savings Program (submitted pursuant to § 425.224) in the form and manner and by a deadline specified by CMS.
(2) For an ACO that renewed to enter an agreement period beginning on January 1, 2025, to obtain a determination regarding whether the ACO may receive prepaid shared savings, the ACO must submit to CMS a complete supplemental application for prepaid shared savings prior to the start of the performance year beginning on January 1, 2026, in the form and manner and by a deadline specified by CMS.
(d) Application contents and review —(1) General. An ACO must submit to CMS supplemental application information sufficient for CMS to determine whether the ACO is eligible to receive prepaid shared savings. In addition, the ACO must submit a proposed spend plan as part of the supplemental application information.
(2) Spend plan. The ACO's spend plan must:
(i) Describe how an ACO receiving prepaid shared savings will spend the payments during the first performance year in which it will receive prepaid shared savings. The spend plan must be updated annually for each performance year of the agreement period during which the ACO receives prepaid shared savings.
(ii) Identify the categories of items and services that will be purchased and investments that will be made in the ACO with prepaid shared savings (consistent with the allowable uses under paragraph (e) of this section), the dollar amounts to be spent on such categories, information about which groups of beneficiaries the ACO expects to receive direct beneficiary services that will be purchased with prepaid shared savings, how direct beneficiary services will be distributed to beneficiaries and how such services support the care of beneficiaries, descriptions of the investments that will be made in the ACO with prepaid shared savings, and such other information as may be specified by CMS.
(iii) Include an attestation that the ACO will not discriminate on the basis of race, color, religion, sex, national origin, disability, or age with respect to their use of prepaid shared savings.
(iv) Include the ACO's communication strategy for notifying CMS and any impacted beneficiaries if an ACO will no longer be providing any direct beneficiary services that had previously been provided by the ACO using prepaid shared savings.
(3) CMS review. CMS will review the supplemental application information to determine whether an ACO meets the eligibility criteria and other requirements necessary to receive prepaid shared savings and will approve or deny the ACO's prepaid shared savings application accordingly. CMS may review an ACO's spend plan at any time and require the ACO to modify its spend plan to comply with the requirements of this paragraph (d) and paragraph (e) of this section.
(e) Use and management of prepaid shared savings —(1) Allowable uses. An ACO must use prepaid shared savings to improve the quality and efficiency of items and services furnished to beneficiaries by investing in staffing, healthcare infrastructure, and direct beneficiary services. Expenditures of prepaid shared savings must comply with paragraph (e)(2) of this section, the beneficiary incentive provision at § 425.304(a), (b), and (d), and all other applicable laws and regulations.
(i) An ACO may spend up to 50 percent of its estimated annual prepaid shared savings on staffing and healthcare infrastructure in each performance year.
(ii) An ACO may spend up to 100 percent, but not less than 50 percent, of its estimated annual prepaid shared savings on direct beneficiary services in each performance year.
(2) Prohibited uses. An ACO may not use prepaid shared savings for any expense other than those allowed under paragraph (e)(1) of this section. Prohibited uses include the following—
(i) Management company or parent company profit;
(ii) Performance bonuses;
(iii) Provision of medical services covered by Medicare;
(iv) Cash or cash equivalent payments to patients;
(v) Items or activities unrelated to ACO operations or care of beneficiaries; and
(vi) In the case of an ACO participating in Levels C through E of the BASIC track or the ENHANCED track, the repayment of any shared losses incurred as specified in a written notice in accordance with § 425.605(e)(2) or § 425.610(h)(2), respectively.
(3) Duration for spending payments. An ACO must spend all prepaid shared savings in the agreement period in which they are received. An ACO must repay to CMS any unspent funds remaining at the end of each agreement period. Any unspent funds received for a performance year must be reallocated in the spend plan for the ACO's next performance year. When reallocated in the spend plan for the next performance year, the total unspent funds in each category must be reallocated within their originally indicated category specified in accordance with paragraph (d)(2) of this section. If an ACO fails to spend a majority of the prepaid shared savings they receive in a performance year, CMS may withhold future quarterly payments until the ACO spends the funding they have already received and reports this spending to CMS through an updated spend plan.
(f) Payment & payment methodology. An ACO determined eligible pursuant to paragraph (b) of this section receives quarterly prepaid shared savings payments equal to the maximum quarterly payment amount calculated pursuant to the methodology specified in paragraphs (f)(2) through (4) of this section unless the ACO elects to receive a lesser amount pursuant to paragraph (f)(6) of this section. CMS notifies in writing each ACO of its determination of the amount of prepaid shared savings and the notice will inform the ACO of its right to request reconsideration review in accordance with the procedures specified in subpart I of this part. If CMS does not make any prepaid shared savings payment, the notice will specify the reason(s) why and inform the ACO of its right to request reconsideration review in accordance with the procedures specified in subpart I.
(1) Frequency of payments. (i) An eligible ACO entering an agreement period beginning on January 1, 2026, or in subsequent years will receive quarterly prepaid shared savings payments for the entirety of the ACO's agreement period unless the payment is withheld or terminated pursuant to paragraph (h) of this section.
(ii) An eligible ACO participating in an agreement period beginning on January 1, 2025, will receive quarterly prepaid shared savings payments starting with the performance year beginning on January 1, 2026, and for the remainder of its agreement period, unless the payment is withheld or terminated pursuant to paragraph (h) of this section. The ACO will not receive additional or catch-up payments for performance year 2025.
(iii) If an ACO's quarterly payment is withheld or terminated pursuant to paragraph (h) of this section, the ACO will not receive additional or catch-up payments if quarterly prepaid shared savings payments are later resumed.
(2) Calculating the prepaid shared savings multiplier. (i) Calculate total per capita savings or losses for each performance year that constitutes BY1 and BY2 of the agreement period in which the ACO receives prepaid shared savings. Per capita savings or losses will be set to zero for a performance year if the ACO was not reconciled for the performance year.
(ii) Take the simple average of the per capita savings or losses calculated in paragraph (f)(2)(i) of this section, including values of zero, if applicable.
(iii) Apply a proration factor to account for any upward growth in the ACO's assigned population in BY1 and BY2 of the agreement period in which the ACO receives prepaid shared savings as compared to the size of the assigned population when the ACO was reconciled for the corresponding performance years in its prior agreement period.
(iv) Adjust the pro-rated average per capita amount computed in paragraph (f)(2)(iii) of this section by multiplying by 50 percent.
(v) The prepaid shared savings multiplier is the lesser of the following:
(A) Two-thirds of the pro-rated, adjusted average per capita amount computed in paragraph (f)(2)(iv) of this section.
(B) 5 percent of national per capita expenditures for Parts A and B services under the original Medicare fee-for-service program in BY2 for assignable beneficiaries identified for the 12-month calendar year corresponding to BY2 using data from the CMS Office of the Actuary and expressed as a single value by taking a person-year weighted average of the Medicare enrollment type-specific values.
(3) Recalculation of the prepaid shared savings multiplier during an agreement period. For the first performance year during the term of the agreement period in which the ACO receives prepaid shared savings, the ACO's prepaid shared savings multiplier is recalculated for changes in per capita shared savings or losses for the performance years used in the calculation of the prepaid shared savings multiplier as a result of issuance of a revised initial determination under § 425.315. For the second and each subsequent performance year during the term of the agreement period in which the ACO receives prepaid shared savings, the ACO's prepaid shared savings multiplier is recalculated for the following, as applicable: For the addition and removal of ACO participants or ACO providers/suppliers in accordance with § 425.118(b), for a change to the ACO's beneficiary assignment methodology selection under § 425.226(a)(1), for a change to the beneficiary assignment methodology specified in subpart E of this part, and for changes in per capita shared savings or losses for the performance years used in the calculation of the prepaid shared savings multiplier as a result of issuance of a revised initial determination under § 425.315. To recalculate the prepaid shared savings multiplier, CMS does the following:
(i) Takes into account changes to the ACO's savings or losses for a performance year for either of the 2 years that constitute BY1 and BY2 of the agreement period for which the ACO receives prepaid shared savings under paragraph (f)(2)(i) of this section, including values of zero, if applicable, as a result of issuance of a revised initial determination under § 425.315, when calculating the simple average of the per capita savings or losses calculated in paragraph (f)(2)(ii) of this section.
(ii) Redetermines the proration factor used in calculating the prepaid shared savings multiplier under paragraph (f)(2)(iii) of this section to account for changes in the ACO's assigned beneficiary population in the benchmark years of the ACO's agreement period in which the ACO receives prepaid shared savings due to the addition and removal of ACO participants or ACO providers/suppliers in accordance with § 425.118(b), a change to the ACO's beneficiary assignment methodology selection under § 425.226(a)(1), or changes to the beneficiary assignment methodology under subpart E of this part.
(4) Calculating the maximum quarterly payment amount. For each quarter for each performance year, the maximum quarterly prepaid shared savings amount is equal to the product of one-fourth of the prepaid shared savings multiplier calculated in paragraph (f)(2)(v) of this section or recalculated according to paragraph (f)(3) of this section and the ACO's performance year assigned beneficiary person years calculated from the ACO's most recent assignment list.
(5) Estimated annual payment amount calculation methodology. For the purposes of determining the amount of prepaid shared savings permitted to be allocated to the uses specified in paragraph (e) of this section during each performance year, the estimated annual prepaid shared savings amount can be calculated by multiplying the first quarterly payment amount the ACO receives in each performance year by four. If an ACO's maximum quarterly payments decrease over the performance year, the ACO will not be subject to compliance action solely because it spent more than 50 percent of the actual annual amount of prepaid shared savings it received during that PY on staffing and healthcare infrastructure, as long as it did not spend more than 50 percent of the originally estimated annual maximum prepaid shared savings amount on staffing and healthcare infrastructure.
(6) ACO selection of quarterly payment amount. An ACO may request a smaller quarterly payment amount from CMS in a form and manner and by a deadline specified by CMS.
(g) Recoupment and recovery of prepaid shared savings; notice of bankruptcy. (1) CMS will recoup prepaid shared savings made to an ACO from any shared savings the ACO earns until CMS has recouped in full the amount of prepaid shared savings made to the ACO. CMS will carry forward any remaining balance owed to subsequent performance year(s) in which the ACO achieves shared savings.
(2) If the amount of shared savings earned by the ACO is revised upward by CMS for any reason, CMS will reduce the redetermined amount of shared savings by the amount of prepaid shared savings made to the ACO as of the date of the redetermination. If the amount of shared savings earned by the ACO is revised downward by CMS for any reason, the ACO will not receive a refund of any portion of the prepaid shared savings previously recouped or otherwise repaid, and any prepaid shared savings that are now outstanding due to the revision in earned shared savings must be repaid to CMS upon request.
(3) If an ACO has an outstanding balance of prepaid shared savings after the calculation of shared savings or losses for the final performance year of an agreement period in which an ACO receives prepaid shared savings, the ACO must repay any outstanding amount of prepaid shared savings it received in full upon request from CMS. CMS will provide written notification to the ACO of the amount due and the ACO must pay such amount no later than 90 days after the receipt of notification. If the ACO fails to repay any outstanding amount of prepaid shared savings within 90 days of that written notification, CMS will recoup any outstanding balance of prepaid shared savings from the ACO's repayment mechanism established under § 425.204(f). CMS may also recover any outstanding amount of prepaid shared savings owed by recouping from any future shared savings the ACO may be eligible to receive in a subsequent agreement period.
(4) Except as provided in paragraph (g)(4)(ii) of this section, if an ACO or CMS terminates the ACOs participation agreement during the agreement period in which it received prepaid shared savings, the ACO must repay all outstanding prepaid shared savings it received in full upon request from CMS.
(i) CMS will provide written notification to the ACO of the amount due and the ACO must pay such amount no later than 90 days after the receipt of notification. If the ACO fails to repay within 90 days, CMS will recoup any outstanding balance from the ACO's repayment mechanism established under § 425.204(f).
(ii) If the ACO terminates its current participation agreement under § 425.220 and immediately enters a new agreement period to continue its participation in the program, CMS may recover the amount owed by recouping from any future shared savings the ACO may be eligible to receive in subsequent agreement periods.
(5)(i) If an ACO has filed a bankruptcy petition, whether voluntary or involuntary, the ACO must provide written notice of the bankruptcy to CMS and to the U.S. Attorney's Office in the district where the bankruptcy was filed, unless final payment for the agreement period has been made by either CMS or the ACO and all administrative or judicial review proceedings relating to any payments under the Shared Savings Program have been fully and finally resolved.
(ii) The notice of bankruptcy must be sent by certified mail no later than 5 days after the petition has been filed and must contain a copy of the filed bankruptcy petition (including its docket number). The notice to CMS must be addressed to the CMS Office of Financial Management at 7500 Security Boulevard, Mailstop C3-01-24, Baltimore, MD 21244 or such other address as may be specified on the CMS website for purposes of receiving such notices.
(h) Withholding or termination of prepaid shared savings —(1) General. Except as provided in paragraph (h)(2) of this section, CMS may withhold or terminate an ACO's prepaid shared savings during an agreement period if—
(i) The ACO fails to comply with the requirements of this section;
(ii) The ACO meets any of the grounds for ACO termination set forth in § 425.218(b);
(iii) The ACO fails to earn sufficient shared savings in a performance year to repay the prepaid shared savings they received during that performance year;
(iv) CMS determines that the ACO is not expected to earn shared savings in a performance year during the agreement period in which the ACO received prepaid shared savings based on a rolling 12-month window of beneficiary claims data or year to date beneficiary claims data;
(v) The ACO falls below 5,000 assigned beneficiaries;
(vi) The ACO fails to spend the majority of prepaid shared savings they receive in a performance year; or
(vii) The ACO requests that CMS withhold a future quarterly prepaid shared savings payment.
(2) Eligibility sanction. CMS must terminate an ACO's prepaid shared savings if—
(i) The ACO fails to maintain an adequate repayment mechanism in accordance with § 425.204(f); or
(ii) The ACO fails to meet the quality performance standard as specified under § 425.512 or is subject to a pre-termination action after CMS determined the ACO avoided at-risk beneficiaries as specified under §  425.316(b)(2).
(3) No additional payments. If CMS withholds or terminates a quarterly payment pursuant to this paragraph (h), the ACO will not receive additional or catch-up payments if quarterly payments of prepaid shared savings are later resumed.
(4) No pre-termination actions. CMS may immediately terminate an ACO's prepaid shared savings under paragraphs (h)(1) and (2) of this section without taking any of the pre-termination actions set forth in § 425.216.
(i) Reporting information on prepaid shared savings. The ACO must report information on its receipt of and use of prepaid shared savings, as follows:
(1) The ACO must publicly report information about the ACO's use of prepaid shared savings for each performance year, in accordance with § 425.308(b)(10).
(2) In a form and manner and by a deadline specified by CMS, the ACO must report to CMS the same information it is required to publicly report under § 425.308(b)(10).
§§ 425.641-425.649   [Reserved]
§ 425.650   Benchmarking methodology.
(a) Scope and purpose. The methodology by which CMS establishes, adjusts, updates and resets an ACO's historical benchmark is described within this subpart G. The benchmarking methodology for agreement periods beginning before January 1, 2024, is specified in §§ 425.601, 425.602, 425.603, and 425.659. The benchmarking methodology for agreement periods beginning on or after January 1, 2024, is specified in §§ 425.652 through 425.662.
(b) [Reserved]
§ 425.652   Establishing, adjusting, and updating the benchmark for agreement periods beginning on January 1, 2024, and in subsequent years.
(a) Computing per capita Medicare Part A and Part B benchmark expenditures for an ACO's first agreement period. For agreement periods beginning on January 1, 2024, and in subsequent years, in computing an ACO's historical benchmark for its first agreement period under the Shared Savings Program, CMS determines the per capita Parts A and B fee-for-service expenditures for beneficiaries that would have been assigned to the ACO in any of the 3 most recent years prior to the start of the agreement period using the ACO participant TINs identified before the start of the agreement period as required under § 425.118(a) and the beneficiary assignment methodology selected by the ACO for the first performance year of the agreement period as required under § 425.400(a)(4)(ii). CMS does all of the following:
(1) Calculates the payment amounts included in Parts A and B fee-for-service claims using a 3-month claims run out with a completion factor.
(i) This calculation excludes indirect medical education (IME) and disproportionate share hospital (DSH) payments, and the supplemental payment for IHS/Tribal hospitals and Puerto Rico hospitals.
(ii) This calculation includes individually beneficiary identifiable final payments made under a demonstration, pilot or time limited program.
(2) Makes separate expenditure calculations for each of the following populations of beneficiaries: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries and aged/non-dual eligible Medicare and Medicaid beneficiaries.
(3) Adjusts expenditures for changes in severity and case mix using prospective HCC risk scores.
(4) Truncates an assigned beneficiary's total annual Parts A and B fee-for-service per capita expenditures at the 99th percentile of national Medicare fee-for-service expenditures for assignable beneficiaries identified for the 12-month calendar year corresponding to each benchmark year in order to minimize variation from catastrophically large claims.
(5) Trends forward expenditures for each benchmark year (BY1 and BY2) to the third benchmark year (BY3) dollars using a blend of national and regional growth rates.
(i) To trend forward the benchmark, CMS makes separate calculations for expenditure categories for each of the following populations of beneficiaries:
(A) ESRD.
(B) Disabled.
(C) Aged/dual eligible Medicare and Medicaid beneficiaries.
(D) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(ii) National growth rates are computed using CMS Office of the Actuary national Medicare expenditure data for each of the years making up the historical benchmark for assignable beneficiaries identified for the 12-month calendar year corresponding to each benchmark year.
(iii) Regional growth rates are computed using expenditures for the ACO's regional service area for each of the years making up the historical benchmark as follows:
(A) Determine the counties included in the ACO's regional service area based on the ACO's assigned beneficiary population for the relevant benchmark year.
(B) Determine the ACO's regional expenditures as specified under § 425.654 of this section.
(iv) The national and regional growth rates are blended together by taking a weighted average of the two. The weight applied to the—
(A) National growth rate is calculated as the share of assignable beneficiaries in the ACO's regional service area for BY3 that are assigned to the ACO in BY3, as calculated in paragraph (a)(5)(v) of this section; and
(B) Regional growth rate is equal to 1 minus the weight applied to the national growth rate.
(v) CMS calculates the share of assignable beneficiaries in the ACO's regional service area that are assigned to the ACO by doing all of the following:
(A) Calculating the county-level share of assignable beneficiaries that are assigned to the ACO for each county in the ACO's regional service area. The assignable population of beneficiaries is identified for BY3 using the assignment window or expanded window for assignment that is consistent with the beneficiary assignment methodology selected by the ACO for the performance year according to § 425.400(a)(4)(ii).
(B) Weighting the county-level shares according to the ACO's proportion of assigned beneficiaries in the county, determined by the number of the ACO's assigned beneficiaries residing in the county in relation to the ACO's total number of assigned beneficiaries.
(C) Aggregating the weighted county-level shares for all counties in the ACO's regional service area.
(6) Restates BY1 and BY2 trended and risk adjusted expenditures using BY3 proportions of ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries and aged/non-dual eligible Medicare and Medicaid beneficiaries.
(7) Weights each year of the benchmark for an ACO's initial agreement period using the following percentages:
(i) BY3 at 60 percent.
(ii) BY2 at 30 percent.
(iii) BY1 at 10 percent.
(8) Adjusts the historical benchmark, if applicable:
(i) For agreement periods beginning on January 1, 2024, except as provided in paragraph (a)(8)(i)(C) of this section, CMS adjusts the historical benchmark based on the ACO's regional service area expenditures (as specified under § 425.656), or for savings generated by the ACO, if any, in the 3 most recent years prior to the start of the agreement period (as specified under § 425.658). CMS does all of the following to determine the adjustment, if any, applied to the historical benchmark:
(A) Computes the regional adjustment in accordance with § 425.656 and the prior savings adjustment in accordance with § 425.658.
(B) If an ACO is not eligible to receive a prior savings adjustment under § 425.658(b)(3)(i), and the regional adjustment, expressed as a single value as described in § 425.656(d), is positive, the ACO will receive an adjustment to its benchmark equal to the positive regional adjustment amount. The adjustment will be calculated as described in § 425.656(c) and applied separately to the following populations of beneficiaries: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries.
(C) If an ACO is not eligible to receive a prior savings adjustment under § 425.658(b)(3)(i), and the regional adjustment, expressed as a single value as described in § 425.656(d), is negative or zero, the ACO will not receive an adjustment to its benchmark.
(D) If an ACO is eligible to receive a prior savings adjustment and the regional adjustment, expressed as a single value as described in § 425.656(d), is positive, the ACO will receive an adjustment to its benchmark equal to the higher of the following:
( 1 ) The positive regional adjustment amount. The adjustment will be calculated as described in § 425.656(c) and applied separately to the following populations of beneficiaries: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries.
( 2 ) The prior savings adjustment. The adjustment will be calculated as described in § 425.658(c) and applied as a flat dollar amount to the following populations of beneficiaries: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries.
(E) If an ACO is eligible to receive a prior savings adjustment and the regional adjustment, expressed as a single value as described in § 425.656(d), is negative or zero, the ACO will receive an adjustment to its benchmark equal to the prior savings adjustment. The adjustment will be calculated as described in § 425.658(c) and applied as a flat dollar amount to the following populations of beneficiaries: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries.
(ii) For agreement periods beginning on January 1, 2025, and in subsequent years, except as provided in paragraph (a)(8)(ii)(B)( 2 ) of this section, CMS adjusts the historical benchmark based on the ACO's regional service area expenditures (as specified under § 425.656), for savings generated by the ACO, if any, in the 3 most recent years prior to the start of the agreement period (as specified under § 425.658), or to account for the ACO serving higher proportions of underserved beneficiaries (as specified in § 425.662). CMS does all of the following to determine the adjustment, if any, applied to the historical benchmark:
(A) Computes the regional adjustment in accordance with § 425.656, the prior savings adjustment in accordance with § 425.658, and the health equity benchmark adjustment (HEBA) in accordance with § 425.662.
(B) Compares the regional adjustment, expressed as a single value as described in § 425.656(d), the per capita prior savings adjustment determined in § 425.658(c), if any, and the HEBA determined in § 425.662(b), if any, to determine the adjustment applied to the historical benchmark.
( 1 ) The ACO will receive the highest of the positive adjustments for which it is eligible. The adjustment will be calculated as described in § 425.656(c), § 425.658(c), or § 425.662(b), respectively, and applied separately to the following populations of beneficiaries: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries.
( 2 ) If an ACO is not eligible to receive a prior savings adjustment under § 425.658(b)(3)(i) or the HEBA under § 425.662(b)(3), and the regional adjustment, expressed as a single value as described in § 425.656(d), is negative or zero, the ACO will not receive an adjustment to its benchmark.
(9) For the first performance year during the term of the agreement period, the ACO's benchmark is adjusted for the following, as applicable: For changes in values used in benchmark calculations in accordance with § 425.316(b)(2)(ii)(B) or (C) due to compliance action to address avoidance of at-risk beneficiaries or as a result of issuance of a revised initial determination under § 425.315, and for changes in values used in benchmark calculations as a result of the performance year being affected by significant, anomalous, and highly suspect billing under § 425.672. For the second and each subsequent performance year during the term of the agreement period, the ACO's benchmark is adjusted for the following, as applicable: For the addition and removal of ACO participants or ACO providers/suppliers in accordance with § 425.118(b), for a change to the ACO's beneficiary assignment methodology selection under § 425.226(a)(1), for a change to the beneficiary assignment methodology specified in subpart E of this part, for a change in the CMS-HCC risk adjustment methodology used to calculate prospective HCC risk scores under § 425.659, for changes in values used in benchmark calculations in accordance with § 425.316(b)(2)(ii)(B) or (C) due to compliance action to address avoidance of at-risk beneficiaries or as a result of issuance of a revised initial determination under § 425.315, and for changes in values used in benchmark calculations as a result of the performance year being affected by significant, anomalous, and highly suspect billing under § 425.672. To adjust the benchmark, CMS does the following:
(i) Takes into account the expenditures of beneficiaries who would have been assigned to the ACO in any of the 3 most recent years prior to the start of the agreement period.
(ii) Redetermines the regional adjustment amount under § 425.656 according to the ACO's assigned beneficiaries for BY3, and based on the assignable population of beneficiaries identified for BY3 using the assignment window or expanded window for assignment that is consistent with the beneficiary assignment methodology selected by the ACO for the performance year according to § 425.400(a)(4)(ii).
(iii) Redetermines the offset factor used in determining the negative regional adjustment amount under § 425.656(c)(4) and (5).
(iv) Redetermines the proration factor used in calculating the prior savings adjustment under § 425.658(b)(3)(ii) to account for changes in the ACO's assigned beneficiary population in the benchmark years of the ACO's current agreement period due to the addition and removal of ACO participants or ACO providers/suppliers in accordance with § 425.118(b), a change to the ACO's beneficiary assignment methodology selection under § 425.226(a)(1), or changes to the beneficiary assignment methodology under subpart E of this part.
(v) Redetermines the HEBA scaler used in calculating the HEBA under § 425.662(b)(2) to account for changes in the ACO's regional adjustment or prior savings adjustment in accordance with paragraphs (a)(9)(ii) through (iv) of this section.
(vi) In accordance with paragraph (a)(8) of this section, CMS redetermines the adjustment to the historical benchmark based on the redetermined regional adjustment (as specified under § 425.656), the prior savings adjustment (as specified under § 425.658), or the HEBA (as specified under § 425.662) if applicable.
(vii) Redetermines factors based on prospective HCC risk scores calculated for benchmark years by calculating the prospective HCC risk scores using the CMS-HCC risk adjustment methodology that applies for the calendar year corresponding to the applicable performance year in accordance with § 425.659(b)(1).
(viii) Recalculates benchmark year expenditures to account for the impact of improper payments, for the benchmark year corresponding to a performance year for which CMS issued a revised initial determination under § 425.315. In recalculating expenditures for the benchmark year, CMS applies the calculation methodology applied in recalculating expenditures for the corresponding performance year in accordance with § 425.674.
(ix) Recalculates expenditures used in Shared Savings Program benchmark calculations under this section, and as applicable under §§ 425.654 through 425.662, to exclude the same HCPCS or CPT codes identified as displaying significant, anomalous, and highly suspect billing patterns in calculation of performance year expenditures, in accordance with § 425.672.
(10) The historical benchmark is further adjusted at the time of reconciliation for a performance year to account for changes in severity and case mix of the ACO's assigned beneficiary population as described under §§ 425.605(a) and 425.610(a).
(b) Updating the benchmark. For all agreement periods beginning on January 1, 2024, and in subsequent years, CMS updates the historical benchmark annually for each year of the agreement period using a three-way blend calculated as a weighted average of a two-way blend of national and regional growth rates determined after the end of each performance year and a fixed projected growth rate determined at the beginning of the ACO's agreement period called the Accountable Care Prospective Trend (ACPT).
(1) To update the benchmark, CMS makes separate calculations for expenditure categories for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(2) CMS computes the two-way blend of national and regional growth rates as follows:
(i) Computes national growth rates using CMS Office of the Actuary national Medicare expenditure data for BY3 and the performance year for assignable beneficiaries identified for the 12-month calendar year corresponding to each year.
(ii) Computes regional growth rates using expenditures for the ACO's regional service area for BY3 and the performance year, computed as follows:
(A) Determine the counties included in the ACO's regional service area based on the ACO's assigned beneficiary population for the year.
(B) Determine the ACO's regional expenditures as specified under § 425.654.
(C) Multiply the growth rate calculated in this paragraph (b)(2)(ii) by a regional risk score growth cap adjustment factor computed as described in § 425.655.
(iii) The national and regional growth rates are blended together by taking a weighted average of the two. The weight applied to the—
(A) National growth rate is calculated as the share of assignable beneficiaries in the ACO's regional service area that are assigned to the ACO for the applicable performance year as specified in paragraph (b)(2)(iv) of this section; and
(B) Regional growth rate is equal to 1 minus the weight applied to the national growth rate.
(iv) CMS calculates the share of assignable beneficiaries in the ACO's regional service area that are assigned to the ACO by doing all of the following:
(A) Calculating the county-level share of assignable beneficiaries that are assigned to the ACO for each county in the ACO's regional service area. The assignable population of beneficiaries is identified for the performance year using the assignment window or expanded window for assignment that is consistent with the beneficiary assignment methodology selected by the ACO for the performance year according to § 425.400(a)(4)(ii).
(B) Weighting the county-level shares according to the ACO's proportion of assigned beneficiaries in the county, determined by the number of the ACO's assigned beneficiaries residing in the county in relation to the ACO's total number of assigned beneficiaries.
(C) Aggregating the weighted county-level shares for all counties in the ACO's regional service area.
(3) CMS computes the ACPT as described in § 425.660.
(4) The two-way blend computed under paragraph (b)(2) of this section and the ACPT are blended together by taking a weighted average of the two.
(i) Absent unforeseen circumstances, the weight applied to the components of the blend is as follows—
(A) Two-way blend is equal to two-thirds; and
(B) ACPT is equal to one-third.
(ii) CMS has sole discretion to determine whether an unforeseen circumstance exists that warrants a reduction to the weight of the ACPT and the reduced weight that will apply to the ACPT.
(5) If an ACO's average per capita Medicare expenditures for the performance year are above its updated benchmark for the year determined as described in paragraph (b)(4) of this section by at least the MLR or negative MSR established for the ACO, CMS will compute a recalculated updated benchmark using the two-way blend described in paragraph (b)(2) of this section.
(i) If the ACO's average per capita Medicare expenditures for the performance year are above the recalculated updated benchmark by a smaller amount than the amount by which they are above the updated benchmark determined as described in paragraph (b)(4) of this section, CMS will use the recalculated updated benchmark to determine the following:
(A) The ACO's responsibility for sharing losses with the Medicare program for ACOs in two-sided models as described under §§ 425.605 and 425.610.
(B) The ACO's financial performance for purposes of monitoring ACO financial performance as described under § 425.316(d).
(ii) If the ACO's average per capita Medicare expenditures for the performance year are below the recalculated updated benchmark, the ACO will neither be responsible for sharing losses with the Medicare program nor eligible for sharing in savings.
(c) Resetting the benchmark. (1) An ACO's benchmark is reset at the start of each subsequent agreement period.
(2) For second or subsequent agreements periods beginning on January 1, 2024, and in subsequent years, CMS establishes, adjusts, and updates the rebased historical benchmark in accordance with paragraphs (a) and (b) of this section except that rather than weighting each year of the benchmark using the percentages provided in paragraph (a)(7) of this section, each benchmark year is weighted equally.
§ 425.654   Calculating county expenditures and regional expenditures.
(a) Calculating county expenditures. For agreement periods beginning on January 1, 2024, and in subsequent years, CMS does all of the following to determine risk adjusted county fee-for-service expenditures for use in calculating the ACO's regional fee-for-service expenditures:
(1)(i) Determines average county fee-for-service expenditures based on expenditures for the assignable population of beneficiaries in each county in the ACO's regional service area. The assignable population of beneficiaries is identified for the relevant benchmark or performance year using the assignment window or expanded window for assignment that is consistent with the beneficiary assignment methodology selected by the ACO for the performance year according to § 425.400(a)(4)(ii).
(ii) Makes separate expenditure calculations for each of the following populations of beneficiaries:
(A) ESRD.
(B) Disabled.
(C) Aged/dual eligible Medicare and Medicaid beneficiaries.
(D) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(2) Calculates assignable beneficiary expenditures using the payment amounts included in Parts A and B fee-for-service claims with dates of service in the 12-month calendar year for the relevant benchmark or performance year, using a 3-month claims run out with a completion factor. The calculation—
(i) Excludes IME and DSH payments, and the supplemental payment for IHS/Tribal hospitals and Puerto Rico hospitals; and
(ii) Considers individually beneficiary identifiable final payments made under a demonstration, pilot or time limited program.
(3) Truncates a beneficiary's total annual Parts A and B fee-for-service per capita expenditures at the 99th percentile of national Medicare fee-for-service expenditures for assignable beneficiaries identified for the 12-month calendar year that corresponds to the relevant benchmark or performance year, in order to minimize variation from catastrophically large claims.
(4) Adjusts fee-for-service expenditures for severity and case mix of assignable beneficiaries in the county using prospective HCC risk scores. The calculation is made according to the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(b) Calculating regional expenditures. For all agreement periods beginning on January 1, 2024, and in subsequent years, CMS calculates an ACO's risk adjusted regional expenditures by:
(1) Weighting the risk adjusted county-level fee-for-service expenditures determined under paragraph (a) of this section according to the ACO's proportion of assigned beneficiaries in the county, determined by the number of the ACO's assigned beneficiaries in the applicable population (according to Medicare enrollment type) residing in the county in relation to the ACO's total number of assigned beneficiaries in the applicable population (according to Medicare enrollment type) for the relevant benchmark or performance year for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(2) Aggregating the values determined under paragraph (b)(1) of this section for each population of beneficiaries (according to Medicare enrollment type) across all counties within the ACO's regional service area.
§ 425.655   Calculating the regional risk score growth cap adjustment factor.
(a) General. This section describes the methodology for calculating the regional risk score growth cap adjustment factor that will be applied to the regional growth rate component of the three-way blend used to update the historical benchmark as described in § 425.652(b) for agreement periods beginning on January 1, 2024, and in subsequent years.
(b) Calculating county risk scores. CMS does all of the following to determine county prospective HCC and demographic risk scores for use in calculating the ACO's regional risk scores:
(1) Determines average county prospective HCC and demographic risk scores for the assignable population of beneficiaries in each county in the ACO's regional service area. The assignable population of beneficiaries is identified for the relevant benchmark or performance year using the assignment window or expanded window for assignment that is consistent with the beneficiary assignment methodology selected by the ACO for the performance year according to § 425.400(a)(4)(ii).
(2) Makes separate risk score calculations for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(c) Calculating regional risk scores. CMS calculates an ACO's regional prospective HCC and demographic risk scores by:
(1) Weighting the county-level risk scores determined under paragraph (b) of this section according to the ACO's proportion of assigned beneficiaries in the county, determined by the number of the ACO's assigned beneficiaries in the applicable population (according to Medicare enrollment type) residing in the county in relation to the ACO's total number of assigned beneficiaries in the applicable population (according to Medicare enrollment type) for the relevant benchmark or performance year for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(2) Aggregating the values determined under paragraph (c)(1) of this section for each population of beneficiaries (according to Medicare enrollment type) across all counties within the ACO's regional service area.
(d) Determining aggregate growth in regional risk scores. CMS determines aggregate growth in regional prospective HCC and demographic risk scores by:
(1) Determining growth in regional prospective HCC and demographic risk scores determined in paragraph (c) of this section (expressed as a ratio of the performance year regional risk score to the BY3 regional risk score) for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(2) Determines the aggregate growth in regional risk scores by calculating a weighted average of the growth in regional prospective HCC risk scores or demographic risk scores, as applicable, across the populations described in paragraph (d)(1) of this section. When calculating the weighted average growth in prospective HCC risk scores or demographic risk scores, as applicable, the weight applied to the growth in risk scores for each Medicare enrollment type is equal to the product of the ACO's historical benchmark expenditures, adjusted in accordance with § 425.652(a)(8), for that enrollment type and the ACO's performance year assigned beneficiary person years for that enrollment type.
(e) Determining the cap on regional risk score growth. CMS determines the cap on regional prospective HCC risk score growth by:
(1) Computing the sum of the aggregate growth in regional demographic risk scores as determined in paragraph (d)(2) of this section and 3 percentage points.
(2) Calculating the ACO's aggregate market share by calculating the weighted average of the share of assignable beneficiaries in the ACO's regional service area that are assigned to the ACO for the performance year as determined in § 425.652(b)(2)(iv) across the populations described in § 425.652(b)(1). In calculating this weighted average, the weight applied to the share for each Medicare enrollment type is equal to the ACO's performance year assigned beneficiary person years for that enrollment type.
(3) Adding to the sum computed in paragraph (e)(1) of this section an amount equal to the product of:
(i) The ACO's aggregate market share as determined in paragraph (e)(2) of this section.
(ii) The difference between the aggregate growth in regional prospective HCC risk scores as determined in paragraph (d)(2) of this section and the sum determined in paragraph (e)(1) of this section. This difference is subject to a floor of zero.
(f) Determining the regional risk score growth cap adjustment factor. CMS determines the regional risk score growth cap adjustment factor for each Medicare enrollment type to be applied in calculating the regional growth rate described in § 425.652(b) by comparing the aggregate growth in regional prospective HCC risk scores determined in paragraph (d)(2) of this section and, if applicable, the growth in regional prospective HCC risk scores for individual Medicare enrollment types as determined in paragraph (d)(1) of this section with the cap determined in paragraph (e) of this section.
(1) If the aggregate growth in regional prospective HCC risk scores determined in paragraph (d)(2) of this section does not exceed the cap on regional risk score growth determined in paragraph (e) of this section, CMS will set the regional risk score growth cap adjustment factor equal to 1 for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(2) If the aggregate growth in regional prospective HCC risk scores determined in paragraph (d)(2) of this section exceeds the cap determined in paragraph (e) of this section, CMS will compare the growth in regional prospective HCC risk scores for each Medicare enrollment type as determined in paragraph (d)(1) of this section with the cap on regional risk score growth determined in paragraph (e) of this section.
(i) If the growth in regional prospective HCC risk scores for the enrollment type determined in paragraph (d)(1) of this section does not exceed the cap on regional risk score growth determined in paragraph (e) of this section, CMS will set the regional risk score growth cap adjustment factor for that enrollment type equal to 1.
(ii) If the growth in regional prospective HCC risk scores determined in paragraph (d)(1) for the enrollment type exceeds the cap on regional risk score growth determined in paragraph (e) of this section, CMS will set the regional risk score growth cap adjustment factor for that enrollment type equal to the growth in regional prospective HCC risk scores for the enrollment type determined in paragraph (d)(1) of this section divided by the cap on regional risk score growth determined in paragraph (e) of this section.
§ 425.656   Calculating the regional adjustment to the historical benchmark.
(a) General. This section describes the methodology for calculating the regional adjustment to the historical benchmark based on the ACO's regional service area expenditures, making separate calculations for the following populations of beneficiaries: ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries. This section applies to regional adjustment calculations for agreement periods beginning on January 1, 2024, and in subsequent years.
(b) Calculation of an average per capita expenditure amount for the ACO's regional service area. To compute an average per capita expenditure amount for the ACO's regional service area, CMS does all of the following:
(1) Determines the counties included in the ACO's regional service area based on the ACO's BY3 assigned beneficiary population.
(2) Determines the ACO's regional expenditures as specified under § 425.654 for BY3.
(3) Adjusts for differences in severity and case mix between the ACO's assigned beneficiary population for BY3 and the assignable population of beneficiaries for the ACO's regional service area for BY3. The assignable population of beneficiaries is identified for BY3 using the assignment window or expanded window for assignment that is consistent with the beneficiary assignment methodology selected by the ACO for the performance year according to § 425.400(a)(4)(ii).
(c) Calculation of the adjustment. To calculate the adjustment, CMS does all of the following:
(1) Determines the difference between the average per capita amount of expenditures for the ACO's regional service area as specified under paragraph (b)(1) of this section and the average per capita amount of the ACO's historical benchmark determined under § 425.652(a)(1) through (7) and (c)(2), for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(2) Applies a percentage, as determined in paragraph (e) of this section.
(3) Caps the per capita dollar amount for each Medicare enrollment type (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, aged/non-dual eligible Medicare and Medicaid beneficiaries) calculated under paragraph (c)(2) of this section at a dollar amount equal to a percentage of national per capita expenditures for Parts A and B services under the original Medicare fee-for-service program in BY3 for assignable beneficiaries in that enrollment type identified for the 12-month calendar year corresponding to BY3 using data from the CMS Office of the Actuary. The cap is applied as follows:
(i) For positive adjustments, the per capita dollar amount for a Medicare enrollment type is capped at 5 percent of the national per capita expenditure amount for the enrollment type for BY3.
(ii) For negative adjustments, the per capita dollar amount for a Medicare enrollment type is capped at negative 1.5 percent of the national per capita expenditure amount for the enrollment type for BY3.
(4) For negative adjustments, CMS will multiply the regional adjustments calculated in paragraphs (c)(2) or (3) of this section by 1 minus an offset factor equal to the sum of the following—
(i) Proportion of the ACO's BY3 assigned beneficiaries that are dually eligible for Medicare and Medicaid; and
(ii) The difference between the ACO's weighted average prospective HCC risk score for BY3 taken across the four Medicare enrollment types and 1. When calculating the weighted average prospective HCC risk score, the weight applied to the prospective HCC risk score for BY3 for each Medicare enrollment type is equal to the product of the BY3 per capita expenditures for that enrollment type and the BY3 person years for that enrollment type.
(5) The offset factor described in paragraph (c)(4) of this section is subject to a minimum value of zero (representing no offset to the negative regional adjustment) and a maximum value of 1 (representing a full offset to the negative regional adjustment).
(d) Expression of the regional adjustment as a single value. (1) CMS expresses the regional adjustment as a single value by taking a person-year weighted average of the Medicare enrollment type-specific regional adjustment values determined in paragraph (c) of this section.
(2) CMS uses the regional adjustment expressed as a single value for purposes of determining the adjustment, if any, that will be applied to the benchmark in accordance with § 425.652(a)(8).
(e) Phase-in of weights used in regional adjustment calculation. (1) The first time that an ACO's benchmark is adjusted based on the ACO's regional service area expenditures, CMS calculates the regional adjustment as follows:
(i) Using 35 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's initial or rebased historical benchmark, if the ACO is determined to have lower spending than the ACO's regional service area.
(ii) Using 15 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's initial or rebased historical benchmark, if the ACO is determined to have higher spending than the ACO's regional service area.
(2) The second time that an ACO's benchmark is adjusted based on the ACO's regional service area expenditures, CMS calculates the regional adjustment as follows:
(i) Using 50 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark if the ACO is determined to have lower spending than the ACO's regional service area.
(ii) Using 25 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark if the ACO is determined to have higher spending than the ACO's regional service area.
(3) The third time that an ACO's benchmark is adjusted based on the ACO's regional service area expenditures, CMS calculates the regional adjustment as follows:
(i) Using 50 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark if the ACO is determined to have lower spending than the ACO's regional service area.
(ii) Using 35 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark if the ACO is determined to have higher spending than the ACO's regional service area.
(4) The fourth or subsequent time that an ACO's benchmark is adjusted based on the ACO's regional service area expenditures, CMS calculates the regional adjustment to the historical benchmark using 50 percent of the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's rebased historical benchmark.
(5) To determine if an ACO has lower or higher spending compared to the ACO's regional service area, CMS does the following:
(i) Multiplies the difference between the average per capita amount of expenditures for the ACO's regional service area and the average per capita amount of the ACO's historical benchmark for each population of beneficiaries (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, aged/non-dual eligible Medicare and Medicaid beneficiaries) as calculated under paragraph (c)(1) of this section by the applicable proportion of the ACO's assigned beneficiary population (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, aged/non-dual eligible Medicare and Medicaid beneficiaries) for BY3 of the historical benchmark.
(ii) Sums the amounts determined in paragraph (e)(5)(i) of this section across the populations of beneficiaries (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, aged/non-dual eligible Medicare and Medicaid beneficiaries).
(iii) If the resulting sum is a net positive value, the ACO is considered to have lower spending compared to the ACO's regional service area. If the resulting sum is a net negative value, the ACO is considered to have higher spending compared to the ACO's regional service area.
(iv) If during the term of the agreement period CMS adjusts the ACO's benchmark, as specified in § 425.652(a)(9), CMS redetermines whether the ACO is considered to have lower spending or higher spending compared to the ACO's regional service area for purposes of determining the percentage in paragraphs (e)(1) through (3) of this section used in calculating the regional adjustment.
(f) Special rules for determining the weights used in the regional adjustment calculation for a re-entering ACO. For a re-entering ACO whose prior agreement period benchmark was calculated according to § 425.603(c), CMS determines the weight used in the regional adjustment calculation described in paragraphs (b) through (e) of this section by considering the agreement period the ACO is entering into according to § 425.600(f) in combination with either of the following—
(1) The weight previously applied to calculate the regional adjustment to the ACO's benchmark under § 425.603(c)(9) in its most recent prior agreement period; or
(2) For a new ACO identified as a re-entering ACO, CMS considers the weight previously applied to calculate the regional adjustment to the benchmark under § 425.603(c)(9) in its most recent prior agreement period of the ACO in which the majority of the new ACO's participants were participating previously.
§ 425.658   Calculating the prior savings adjustment to the historical benchmark.
(a) General. For agreement periods beginning on January 1, 2024, and in subsequent years, CMS calculates an adjustment to the historical benchmark to account for savings generated in the 3 years prior to the start of the ACO's current agreement period for renewing or re-entering ACOs that were reconciled for one or more performance years in the Shared Savings Program during this period.
(b) Calculate average per capita savings amount. (1) Calculate total per capita savings or losses for each performance year during the 3 years prior to the start of the ACO's current agreement period. CMS applies the following requirements in determining the amount of per capita savings or losses for each performance year:
(i) Per capita savings or losses will be set to zero for a performance year if the ACO was not reconciled for the performance year.
(ii) If an ACO generated savings for a performance year but was not eligible to receive a shared savings payment for that year due to noncompliance with the requirements of this part, per capita savings for that year will be set to zero.
(iii) For a new ACO identified as re-entering ACO, per capita savings or losses will be determined based on the per capita savings or losses of the ACO in which the majority of the ACO's ACO participants were participating.
(2) Take the simple average of the per capita savings or losses calculated in paragraph (b)(1) of this section, including values of zero, if applicable.
(3) Determine the ACO's eligibility for the prior savings adjustment as follows:
(i) If the average per capita amount computed in paragraph (b)(2) of this section is less than or equal to zero, the ACO is not eligible to receive an adjustment for prior savings.
(ii) If the average per capita amount computed in paragraph (b)(2) of this section is positive, apply a proration factor to account for any upward growth in the ACO's assigned population in the benchmark years of the ACO's current agreement period as compared to the size of the assigned population when the ACO was reconciled for the corresponding performance years in its prior agreement period.
(c) Calculate the per capita prior savings adjustment. (1) If an ACO is eligible for the prior savings adjustment as determined in paragraph (b)(3) of this section, the prior savings adjustment will equal the lesser of the following:
(i) 50 percent of the pro-rated average per capita amount computed in paragraph (b)(3)(ii) of this section.
(ii) 5 percent of national per capita expenditures for Parts A and B services under the original Medicare fee-for-service program in BY3 for assignable beneficiaries identified for the 12-month calendar year corresponding to BY3 using data from the CMS Office of the Actuary and expressed as a single value by taking a person-year weighted average of the Medicare enrollment type-specific values.
(2) [Reserved]
(d) Applicability of the prior savings adjustment. CMS compares the per capita prior savings adjustment determined in paragraph (c)(1) of this section with the regional adjustment, expressed as a single value as described in § 425.656(d), and the HEBA as determined in § 425.662(b), if any, to determine the adjustment, if any, that will be applied to the ACO's benchmark in accordance with § 425.652(a)(8).
(e) Recalculation of the prior savings adjustment during an agreement period. (1) The ACO's prior savings adjustment is recalculated for changes to the ACO's savings or losses for a performance year used in the prior savings adjustment calculation in accordance with § 425.316(b)(2)(ii)(B) or (C) due to compliance action to address avoidance of at-risk beneficiaries or as a result of issuance of a revised initial determination under § 425.315.
(2) For a new ACO identified as a re-entering ACO, the prior savings adjustment is recalculated for changes to savings or losses for a performance year used in the prior savings adjustment calculation, if the savings or losses of the ACO in which the majority of the new ACO's participants were participating change in accordance with § 425.316(b)(2)(ii)(B) or (C) due to compliance action to address avoidance of at-risk beneficiaries or as a result of issuance of a revised initial determination under § 425.315.
§ 425.659   Calculating risk scores used in Shared Savings Program benchmark calculations.
(a) General. CMS accounts for differences in severity and case mix of the ACO's assigned beneficiaries and assignable beneficiaries (as defined under § 425.20) in calculations used in establishing, adjusting, and updating the ACO's historical benchmark.
(b) Prospective Hierarchical Condition Category (HCC) risk score calculation. In determining Medicare FFS beneficiary prospective HCC risk scores for a performance year and each benchmark year of the ACO's agreement period, CMS does the following:
(1) CMS specifies the CMS-HCC risk adjustment methodology used to calculate prospective HCC risk scores for Medicare FFS beneficiaries (as defined under § 425.20) for use in Shared Savings Program calculations as follows:
(i) In calculating risk scores for Medicare FFS beneficiaries for a performance year, CMS applies the CMS-HCC risk adjustment methodology applicable for the corresponding calendar year.
(ii) For agreement periods beginning before January 1, 2024, CMS applies the CMS-HCC risk adjustment methodology for the calendar year corresponding to the benchmark year in calculating risk scores for Medicare FFS beneficiaries for each benchmark year of the agreement period.
(iii) For agreement periods beginning on January 1, 2024, and in subsequent years, CMS applies the CMS-HCC risk adjustment methodology for the calendar year corresponding to the performance year, as specified under paragraph (b)(1)(i) of this section, in calculating risk scores for Medicare FFS beneficiaries for each benchmark year of the agreement period.
(2) CMS does the following to calculate the prospective HCC risk scores identified in paragraph (b)(1) of this section for a benchmark or performance year:
(i) Removes the Medicare Advantage coding intensity adjustment, if applicable.
(ii) Renormalizes prospective HCC risk scores by Medicare enrollment type (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries) based on the national assignable FFS population for the relevant benchmark or performance year.
(iii) Calculates the average prospective HCC risk score by Medicare enrollment type (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries).
§ 425.660   Accountable Care Prospective Trend (ACPT).
(a) General. For agreement periods beginning on January 1, 2024, and in subsequent years, CMS incorporates a fixed projected growth rate determined at the beginning of the ACO's agreement period called the Accountable Care Prospective Trend (ACPT) into the blended update factor described in § 425.652(b) when updating an ACO's benchmark for each performance year of the agreement period.
(b) Determination of ACPT. An ACPT is a flat dollar amount calculated using one or more annualized growth rates based on national fee-for-service Medicare expenditures projected by the CMS Office of the Actuary. In determining the ACPT for an enrollment type for each performance year, CMS does all of the following:
(1) Projects per capita growth in Parts A and B fee-for-service expenditures for benchmark year 3 (BY3) and each performance year of the ACO's agreement period. The calculation—
(i) Excludes IME and DSH payments, and the supplemental payment for IHS/Tribal hospitals and Puerto Rico hospitals; and
(ii) Makes separate expenditure calculations for each of the following populations of beneficiaries:
(A) ESRD.
(B) Aged/Disabled.
(2) Calculates one or more annualized growth rates for the population of beneficiaries described in paragraph (b)(1)(ii)(A) of this section (the ESRD ACPT) and one or more annualized growth rates for the population of beneficiaries described in paragraph (b)(1)(ii)(B) of this section (the Aged/Disabled ACPT). These annualized growth rates will remain fixed over the ACO's agreement period. The annualized growth rate is an annual rate of growth in projected expenditures during the ACO's 5-year agreement period relative to BY3, calculated as follows—
(i) Using a uniform annualized projected rate of growth over each of the 5 performance years of the 5-year agreement period; or
(ii) If annualization as specified in paragraph (b)(2)(i) of this section is determined not to reasonably fit the anticipated growth curve, CMS will apply an alternative annualization technique using two or more annualized growth rates reflecting the projected rates of growth during the 5 performance years comprising the 5-year agreement period.
(3) For each performance year, multiplies the applicable annualized growth rate described in paragraph (b)(2) of this section by BY3 truncated national per capita fee-for-service Medicare expenditures for assignable beneficiaries for each Medicare enrollment type (ESRD, disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries) identified for the 12-month calendar year corresponding to BY3 to express the annualized growth rate as a flat dollar amount as follows:
(i) The ESRD ACPT is used for the ESRD population.
(ii) The Aged/Disabled ACPT is used for the following populations: disabled, aged/dual eligible Medicare and Medicaid beneficiaries, and aged/non-dual eligible Medicare and Medicaid beneficiaries.
(4) Adjusts the flat dollar amounts described in paragraph (b)(3) of this section for each performance year for differences in severity and case mix between the ACO's BY3 assigned beneficiary population and the national assignable FFS population for each Medicare enrollment type identified for the 12-month calendar year corresponding to BY3.
(5) Divides the risk adjusted flat dollar amounts described in paragraph (b)(4) of this section by the ACO's historical benchmark expenditures described in § 425.652(a) for each Medicare enrollment type to calculate the percent increase to be included in the blended update factor described in § 425.652(b)(4).
§ 425.661   [Reserved]
§ 425.662   Calculating the health equity adjustment to the historical benchmark.
(a) General. For agreement periods beginning on January 1, 2025, and in subsequent years, CMS calculates a health equity adjustment to the historical benchmark (HEBA) to account for ACOs serving higher proportions of underserved beneficiaries.
(b) Calculation of the health equity benchmark adjustment. To calculate the adjustment described in paragraph (a) of this section, CMS does all of the following:
(1) Calculates the weighted average of the ACO's third benchmark year (BY3) national per capita expenditure amounts across the following populations of beneficiaries, where the weights are the ACO's BY3 proportion of assigned beneficiaries for that enrollment type:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(2) Calculates the HEBA scaler as the difference between 5 percent of the national per capita expenditure amount, expressed as single value as calculated in paragraph (b)(1) of this section, and the higher of: the regional adjustment, expressed as a single value as described in § 425.656(d); the per capita prior savings adjustment determined in § 425.658(c); or no adjustment, in the case where the regional adjustment is negative and the ACO is not eligible for the prior savings adjustment under § 425.658(b)(3)(i).
(3) Determines the ACO's eligibility for the HEBA based on the proportion of the ACO's assigned beneficiaries for the performance year who are enrolled in the Medicare Part D low-income subsidy (LIS) or dually eligible for Medicare and Medicaid. An ACO is only eligible for the HEBA if this proportion is greater than or equal to 15 percent. An ACO with a proportion less than 15 percent is ineligible to receive a HEBA.
(4) Calculates the HEBA. If the ACO is eligible for the HEBA as determined in paragraph (b)(3) of this section, the HEBA is equal to the product of the HEBA scaler calculated in paragraph (b)(2) of this section and the proportion of the ACO's assigned beneficiaries for the performance year who are enrolled in the Medicare Part D LIS or dually eligible for Medicare and Medicaid.
(c) Applicability of the HEBA. CMS compares the HEBA determined in paragraph (b)(4) of this section with the regional adjustment, expressed as a single value as described in § 425.656(d), and the per capita prior savings adjustment determined in § 425.658(c), if any, to determine the adjustment, if any, that will be applied to the ACO's benchmark in accordance with § 425.652(a)(8)(ii).
§ 425.663-425.669   [Reserved]
§ 425.670   Adjustments to mitigate the impact of significant, anomalous, and highly suspect billing activity on Shared Savings Program financial calculations involving calendar year 2023.
(a) General. This section describes adjustments CMS makes to Shared Savings Program calculations to mitigate the impact of significant, anomalous, and highly suspect billing activity occurring in calendar year 2023.
(b) Significant, anomalous, and highly suspect billing activity for a HCPCS or CPT code impacting Shared Savings Program calculations. CMS has determined that the billing of the following HCPCS codes represents significant, anomalous, and highly suspect billing activity for calendar year 2023 that warrants adjustment—
(1) A4352 (Intermittent urinary catheter; Coude (curved) tip, with or without coating (Teflon, silicone, silicone elastomeric, or hydrophilic, etc.), each); and
(2) A4353 (Intermittent urinary catheter, with insertion supplies).
(c) Applicability of adjustments to performance year and benchmark year calculations. Notwithstanding any other provision in this part, CMS adjusts the following Shared Savings Program calculations, as applicable, to exclude all Medicare Parts A and B fee-for-service payment amounts on DMEPOS claims (claim types 72 and 82) associated with a HCPCS code specified in paragraph (b) of this section for the period specified in paragraph (d) of this section:
(1) Calculation of Medicare Parts A and B fee-for-service expenditures for an ACO's assigned beneficiaries for all purposes including the following: Establishing, adjusting, updating, and resetting the ACO's historical benchmark and determining performance year expenditures.
(2) Calculation of fee-for-service expenditures for assignable beneficiaries as used in determining county-level fee-for-service expenditures and national Medicare fee-for-service expenditures, including the following calculations:
(i) Determining average county fee-for-service expenditures based on expenditures for the assignable population of beneficiaries in each county in the ACO's regional service area according to §§ 425.601(c) and 425.654(a) for purposes of calculating the ACO's regional fee-for-service expenditures.
(ii) Determining the 99th percentile of national Medicare fee-for-service expenditures for assignable beneficiaries for purposes of the following:
(A) Truncating assigned beneficiary expenditures used in calculating benchmark expenditures under § 425.652(a)(4), and performance year expenditures under §§ 425.605(a)(3) and 425.610(a)(4).
(B) Truncating expenditures for assignable beneficiaries in each county for purposes of determining county fee-for-service expenditures according to §§ 425.601(c)(3) and 425.654(a)(3).
(C) Truncating expenditures for assignable beneficiaries for purposes of determining truncated national per capita fee-for service expenditures for purposes of calculating the ACPT according to § 425.660(b)(3).
(iii) Determining truncated national per capita fee-for-service Medicare expenditures for assignable beneficiaries for purposes of calculating the ACPT according to § 425.660(b)(3).
(iv) Determining national per capita expenditures for Parts A and B services under the original Medicare fee-for-service program for assignable beneficiaries for purposes of capping the regional adjustment to the ACO's historical benchmark according to § 425.656(c)(3) and capping the prior savings adjustment according to § 425.658(c)(1)(ii).
(v) Determining national growth rates that are used as part of the blended growth rates used to trend forward BY1 and BY2 expenditures to BY3 according to § 425.652(a)(5)(ii) and as part of the blended growth rates used to update the benchmark according to §§ 425.601(b)(2) and 425.652(b)(2)(i).
(3) Calculation of Medicare Parts A and B fee-for-service revenue of ACO participants for purposes of calculating the ACO's loss recoupment limit under the BASIC track as specified in § 425.605(d).
(4) Calculation of total Medicare Parts A and B fee-for-service revenue of ACO participants and total Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries for purposes of identifying whether an ACO is a high revenue ACO or low revenue ACO, as defined under § 425.20, and determining an ACO's eligibility to receive advance investment payments according to § 425.630.
(5) Calculation or recalculation of the amount of the ACO's repayment mechanism arrangement according to § 425.204(f)(4).
(d) Period of adjustment. CMS adjusts the Shared Savings Program calculations specified in paragraph (c) of this section for significant, anomalous, and highly suspect billing activity identified pursuant to paragraph (b) of this section for calendar year 2023, when calendar year 2023 is either a performance year or a benchmark year.
(e) Adjustments for growth rates used in calculating the ACPT. In addition to adjustments described in paragraph (c) of this section, CMS makes adjustments for payments associated with a HCPCS code specified in paragraph (b) of this section for BY3 in projecting per capita growth in Parts A and B fee-for-service expenditures, according to § 425.660(b)(1), for purposes of calculating the ACPT for agreement periods beginning on January 1, 2024.
§ 425.672   Adjustments to mitigate the impact of significant, anomalous, and highly suspect billing activity on Shared Savings Program financial calculations involving calendar year 2024 or subsequent calendar years.
(a) General. This section describes adjustments CMS may make to Shared Savings Program calculations to mitigate the impact of significant, anomalous, and highly suspect billing activity occurring in calendar year 2024 or subsequent calendar years.
(b) Significant, anomalous, and highly suspect billing activity for a HCPCS or CPT code impacting Shared Savings Program calculations. CMS, at its sole discretion, may determine that the billing of one or more specified HCPCS or CPT codes represents significant, anomalous, and highly suspect billing activity for a calendar year that warrants adjustment to calculations made under this part.
(c) Applicability of adjustments to performance year and benchmark year calculations. Notwithstanding any other provision in this part, CMS adjusts the following Shared Savings Program calculations, as applicable, to exclude all Medicare Parts A and B fee-for-service payment amounts on claims for the specified claim types associated with a HCPCS or CPT code identified pursuant to paragraph (b) of this section for the periods identified in paragraph (d) of this section:
(1) Calculation of Medicare Parts A and B fee-for-service expenditures for an ACO's assigned beneficiaries for all purposes including the following: Establishing, adjusting, updating, and resetting the ACO's historical benchmark and determining performance year expenditures.
(2) Calculation of fee-for-service expenditures for assignable beneficiaries as used in determining county-level fee-for-service expenditures and national Medicare fee-for-service expenditures, including the following calculations:
(i) Determining average county fee-for-service expenditures based on expenditures for the assignable population of beneficiaries in each county in the ACO's regional service area according to §§ 425.601(c) and 425.654(a) for purposes of calculating the ACO's regional fee-for-service expenditures.
(ii) Determining the 99th percentile of national Medicare fee-for-service expenditures for assignable beneficiaries for purposes of the following:
(A) Truncating assigned beneficiary expenditures used in calculating benchmark expenditures under §§ 425.601(a)(4) and 425.652(a)(4), and performance year expenditures under §§ 425.605(a)(3) and 425.610(a)(4).
(B) Truncating expenditures for assignable beneficiaries in each county for purposes of determining county fee-for-service expenditures according to §§ 425.601(c)(3) and 425.654(a)(3).
(C) Truncating expenditures for assignable beneficiaries for purposes of determining truncated national per capita fee-for service expenditures for purposes of calculating the ACPT according to § 425.660(b)(3).
(iii) Determining truncated national per capita fee-for-service Medicare expenditures for assignable beneficiaries for purposes of calculating the ACPT according to § 425.660(b)(3).
(iv) Determining national per capita expenditures for Parts A and B services under the original Medicare fee-for-service program for assignable beneficiaries for purposes of capping the regional adjustment to the ACO's historical benchmark according to §§ 425.601(a)(8)(ii)(C) and 425.656(c)(3), capping the prior savings adjustment according to § 425.658(c)(1)(ii), capping the prepaid shared savings multiplier according to § 425.640(f)(2)(v), and calculating the HEBA scaler according to § 425.662(b)(2).
(v) Determining national growth rates that are used as part of the blended growth rates used to trend forward BY1 and BY2 expenditures to BY3 according to §§ 425.601(a)(5)(ii) and 425.652(a)(5)(ii) and as part of the blended growth rates used to update the benchmark according to §§ 425.601(b)(2) and 425.652(b)(2)(i).
(3) Calculation of Medicare Parts A and B fee-for-service revenue of ACO participants for purposes of calculating the ACO's loss recoupment limit under the BASIC track as specified in § 425.605(d).
(4) Calculation of total Medicare Parts A and B fee-for-service revenue of ACO participants and total Medicare Parts A and B fee-for-service expenditures for the ACO's assigned beneficiaries for purposes of identifying whether an ACO is a high revenue ACO or low revenue ACO, as defined under § 425.20, determining an ACO's eligibility to receive advance investment payments according to § 425.630, and determining whether an ACO qualifies for a shared savings payment under § 425.605(h).
(5) Calculation or recalculation of the amount of the ACO's repayment mechanism arrangement according to § 425.204(f)(4).
(d) Periods of adjustment. CMS adjusts the Shared Savings Program calculations identified in paragraph (c) of this section for significant, anomalous, and highly suspect billing activity identified for calendar year 2024 or subsequent calendar years as follows:
(1) The calendar year for which the significant, anomalous, and highly suspect billing activity was identified pursuant to paragraph (b) of this section, when it is either a performance year or a benchmark year.
(2) The 3 most recent years prior to the start of the ACO's agreement period used in establishing the historical benchmark, when such a benchmark is used to reconcile the ACO for a performance year adjusted in accordance with paragraph (d)(1) of this section.
(e) Adjustments for growth rates used in calculating the ACPT. In addition to adjustments described in paragraph (c) of this section, CMS makes adjustments for payments associated with a HCPCS or CPT code identified pursuant to paragraph (b) of this section for any calendar year corresponding to BY3 in projecting per capita growth in Parts A and B fee-for-service expenditures, according to § 425.660(b)(1), for purposes of calculating the ACPT for agreement periods beginning on January 1, 2024, and in subsequent years.
§ 425.674   Accounting for the impact of improper payments on Shared Savings Program financial calculations.
(a) General rule. Upon the reopening of an initial determination pursuant to § 425.315(a)(4), CMS will use the methodology specified in this section to account for the impact of improper payments when:
(1) Determining savings or losses for the relevant performance year in accordance with § 425.315 in order to issue a revised initial determination.
(2) Adjusting the benchmark by recalculating benchmark year expenditures under §§ 425.601(a)(9)(iii) and 425.652(a)(9)(viii) in the event that CMS recalculates a payment determination and issues a revised initial determination for the corresponding performance year in a prior agreement period, in accordance with paragraph (a)(1) of this section.
(b) Improper payment. For the purpose of this section, improper payment includes:
(1) An amount associated with a demanded overpayment determination.
(2) An amount identified in a settlement agreement or judgment, pursuant to conduct by individuals or entities performing functions or services related to an ACO's activities, less any penalties or damages.
(c) Accounting for improper payments. To adjust Medicare Parts A and B fee-for-service expenditures for improper payments CMS does the following:
(1) Identify each Shared Savings Program expenditure calculation for a performance year or benchmark year, as calculated according to the standard methodology described in this subpart and expressed as a per capita dollar amount, that will be adjusted for the impact of improper payments.
(2) Determine each specific population of Medicare fee-for-service beneficiaries used to calculate the expenditure amount identified in paragraph (c)(1) of this section. The populations relevant for a specific expenditure calculation may include:
(i) The population of beneficiaries assigned to the ACO for calculating the ACO's performance year or benchmark year expenditures.
(ii) The population of assignable beneficiaries in each county in the ACO's regional service area for calculating county-level expenditures.
(iii) The national population of assignable beneficiaries for calculating national assignable expenditures.
(iv) The national population of Medicare fee-for-service beneficiaries for calculating national expenditures.
(3) Determine the per capita amount of improper payments for the performance year or benchmark year included in the per capita Medicare Parts A and B fee-for-service expenditure amount for a population identified in paragraph (c)(2) of this section in accordance with paragraph (d) of this section for all providers or suppliers with identified improper payments.
(4) Subtract the per capita amount determined in paragraph (c)(3) of this section from the expenditure calculation identified in paragraph (c)(1) of this section for the population identified in paragraph (c)(2) of this section for each of the following populations of beneficiaries:
(i) ESRD.
(ii) Disabled.
(iii) Aged/dual eligible Medicare and Medicaid beneficiaries.
(iv) Aged/non-dual eligible Medicare and Medicaid beneficiaries.
(5) If applicable, CMS will do the following to adjust regional expenditures for improper payments:
(i) Adjust county-level fee-for-service expenditures determined under paragraph (c)(4) of this section, for each county in the ACO's regional service area, for severity and case mix of assignable beneficiaries in the county using prospective HCC risk scores. This calculation is made for each of the populations of beneficiaries identified in paragraphs (c)(4)(i) through (iv) of this section.
(ii) Weight the risk adjusted county-level fee-for-service expenditures determined under paragraph (c)(5)(i) of this section according to the ACO's proportion of assigned beneficiaries in the county, determined in accordance with § 425.601(d)(1), § 425.603(f)(1), or § 425.654(b)(1), as applicable, for each of the populations of beneficiaries identified in paragraphs (c)(4)(i) through (iv) of this section.
(iii) Aggregate the values determined in paragraph (c)(5)(ii) of this section for each of the populations of beneficiaries identified in paragraphs (c)(4)(i) through (iv) of this section across all counties within the ACO's regional service area.
(d) Determining the per capita amount of improper payments. CMS may use one or more of the following approaches to determine the per capita amount that will be used to adjust expenditure calculations identified in paragraph (c)(1) of this section:
(1) Calculate aggregate improper payments attributable to a population identified in paragraph (c)(2) of this section for each provider or supplier that had improper payments.
(i) For improper payments associated with specific claims, CMS will do the following:
(A) For improper payments to a provider or supplier that correspond to payment amounts on claims or line items that were used in a Shared Savings Program calculation identified in paragraph (c)(1) of this section, and subsequently adjusted after the 3-month claims run out period, CMS will sum the improper payment amounts across all such claims or line items with dates of service during the period used to calculate performance year or benchmark year expenditures for the population identified in paragraph (c)(2) of this section.
(B) In the event CMS determines it is necessary to account for the impact of improper payments on Shared Savings Program financial calculations by adjusting the payment amounts for a specific HCPCS or CPT code billed by the provider or supplier for the population identified in paragraph (c)(2) of this section, CMS will do the following—
( 1 ) Identify the applicable claims or line items with dates of service during the period used to calculate performance year or benchmark year expenditures processed before the end of the applicable 3-month claims run out period;
( 2 ) Sum the claim or line item payment amounts, on the claims or line items identified in paragraph (d)(1)(i)(B)( 1 ) of this section; and
( 3 ) If applicable, multiply the sum calculated in paragraph (d)(1)(i)(B)( 2 ) of this section by a scaling factor to compute the payment differential between the HCPCS or CPT code that was improperly billed and a CMS-identified alternate code.
(ii) For aggregate improper payment amounts that are not linked to specific claims or line items, CMS will calculate the amount attributable to the population identified in paragraph (c)(2) of this section by applying a proration factor to the aggregate improper payment amount identified for that provider or supplier. CMS calculates the proration factor as follows:
(A) The denominator of the proration factor is total Medicare Parts A and B claim or line item payment amounts to the provider or supplier for all fee-for-service beneficiaries on claims of specified claim types for the time period associated with the aggregate improper payment amount identified for the provider or supplier that were made before the end of the applicable 3-month claims run out period.
(B) The numerator of the proration factor is the portion of the total from the denominator, in paragraph (d)(1)(ii)(A) of this section, that CMS determines is attributable to the population identified in paragraph (c)(2) of this section with dates of service during the period used to calculate expenditures for the applicable performance year or benchmark year.
(2) Sum the amounts calculated pursuant to paragraph (d)(1) of this section attributable to a population identified in paragraph (c)(2) of this section across all providers or suppliers that had identified improper payments.
(3) Take the lesser of the following two values—
(i) The sum from paragraph (d)(2) of this section; or
(ii) Total Medicare Parts A and B claim or line item payment amounts to all providers or suppliers that had improper payments for the population identified in paragraph (c)(2) of this section on claims of specified claim types with dates of service within the performance year or benchmark year made before the end of the applicable 3-month claims run out period.
(4) Express the lesser-of amount from paragraph (d)(3) of this section as a per capita value by dividing by the total beneficiary person years in the population identified in paragraph (c)(2) of this section for the applicable performance year or the benchmark year.
§ 425.700   General rules.
(a) CMS shares aggregate reports with the ACO.
(b) CMS shares beneficiary identifiable data with ACOs on the condition that the ACO, its ACO participants, ACO providers/suppliers, and other individuals or entities performing functions or services related to the ACO's activities observe all relevant statutory and regulatory provisions regarding the appropriate use of data and the confidentiality and privacy of individually identifiable health information and comply with the terms of the data use agreement described in this subpart.
(c) The ACO must not limit or restrict appropriate sharing of medical record data with providers and suppliers both within and outside the ACO in accordance with applicable law.
§ 425.702   Aggregate reports.
CMS shares aggregate reports with ACOs as follows:
(a) Aggregate reports are shared at the start of the agreement period based on beneficiary claims data used to calculate the benchmark, and each quarter thereafter during the agreement period.
(b) These aggregate reports include, when available, the following information, deidentified in accordance with 45 CFR 164.514(b):
(1) Aggregated metrics on the assigned beneficiary population.
(2) Utilization and expenditure data at the start of the agreement period based on historical beneficiaries used to calculate the benchmark.
(c)(1)(i) For performance years 2012 through 2015, at the beginning of the agreement period, during each quarter (and in conjunction with the annual reconciliation), and at the beginning of each performance year, CMS, upon the ACO's request for the data for purposes of population-based activities relating to improving health or reducing growth in health care costs, process development, case management, and care coordination, will provide the ACO with information regarding preliminarily prospectively assigned beneficiaries whose data was used to generate the aggregate data reports under paragraphs (a) and (b) of this section. The information includes the following:
(A) Beneficiary name.
(B) Date of birth.
(C) HICN.
(D) Sex.
(ii) For performance year 2016 and subsequent performance years, at the beginning of the agreement period, during each quarter (and in conjunction with the annual reconciliation), and at the beginning of each performance year, CMS, upon the ACO's request for the data for purposes of population-based activities relating to improving health or reducing growth in health care costs, protocol development, case management, and care coordination, provides the ACO with information about its fee-for-service population.
(A) For an ACO participating under preliminary prospective assignment with retrospective reconciliation as specified under § 425.400(a)(2), the following information is made available regarding preliminarily prospectively assigned beneficiaries and beneficiaries that received a primary care service during the previous 12 months from one of the ACO participants that submits claims for primary care services used to determine the ACO's assigned population under subpart E of this part:
( 1 ) Beneficiary name.
( 2 ) Date of birth.
( 3 ) Beneficiary identifier.
( 4 ) Sex.
(B) For an ACO participating under preliminary prospective assignment with retrospective reconciliation as specified under § 425.400(a)(2), information in the following categories, which represents the minimum data necessary for ACOs to conduct health care operations work, is made available regarding preliminarily prospectively assigned beneficiaries:
( 1 ) Demographic data such as enrollment status.
( 2 ) Health status information such as risk profile and chronic condition subgroup.
( 3 ) Utilization rates of Medicare services such as the use of evaluation and management, hospital, emergency, and post-acute services, including the dates and place of service.
( 4 ) Expenditure information related to utilization of services.
(C) The information under paragraphs (c)(1)(ii)(A) and (B) of this section is made available to ACOs participating under prospective assignment as specified under § 425.400(a)(3), but is limited to the ACO's prospectively assigned beneficiaries.
(iii) For performance year 2024 and subsequent performance years, CMS, upon the ACO's request for the data for purposes of population-based activities relating to improving health or reducing growth in health care costs, protocol development, case management, and care coordination, provides the ACO with information about its fee-for-service population.
(A) The following information is made available to ACOs regarding beneficiaries eligible for Medicare CQMs as defined at § 425.20:
( 1 ) Beneficiary name.
( 2 ) Date of birth.
( 3 ) Beneficiary identifier.
( 4 ) Sex.
(B) Information in the following categories, which represents the minimum data necessary for ACOs to conduct health care operations work, is made available to ACOs regarding beneficiaries eligible for Medicare CQMs as defined at § 425.20:
( 1 ) Demographic data such as enrollment status.
( 2 ) Health status information such as risk profile and chronic condition subgroup.
( 3 ) Utilization rates of Medicare services such as the use of evaluation and management, hospital, emergency, and post-acute services, including the dates and place of service.
(2) In its request for these data, the ACO must certify that it is seeking the following information:
(i) As a HIPAA-covered entity, and the request reflects the minimum data necessary for the ACO to conduct its own health care operations work that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501.
(ii) As the business associate of its ACO participants and ACO providers/suppliers, who are HIPAA-covered entities, and the request reflects the minimum data necessary for the ACO to conduct health care operations work that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501 on behalf of those participants.
(iii) As an organized health care arrangement (as defined at 45 CFR 160.103), and the request reflects the minimum data necessary for the ACO to conduct health care operations work that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501 on behalf of the organized health care arrangement.
(d) For an ACO eligible to be reconciled under § 425.609(b), CMS shares with the ACO quarterly aggregate reports as provided in paragraphs (b) and (c)(1)(ii) of this section for CY 2019.
§ 425.704   Beneficiary-identifiable claims data.
Subject to providing the beneficiary with the opportunity to decline data sharing as described in this § 425.708, and subject to having a valid DUA in place, CMS, upon the ACO's request for the data for purposes of evaluating the performance of its ACO participants or its ACO providers/suppliers, conducting quality assessment and improvement activities, and conducting population-based activities relating to improved health, will provide the ACO with beneficiary identifiable claims data for preliminarily prospectively and prospectively assigned beneficiaries and other beneficiaries who receive primary care services from an ACO participant that submits claims for primary care services used to determine the ACO's assigned population under subpart E of this part during the performance year.
(a) If an ACO wishes to receive beneficiary identifiable claims data, it must sign a DUA and it must submit a formal request for data. ACOs may access requested data as often as once per month.
(b) The ACO must certify that it is requesting claims data about any of the following:
(1) Its own patients, as a HIPAA-covered entity, and the request reflects the minimum data necessary for the ACO to conduct its own health care operations work that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501.
(2) The patients of its HIPAA-covered entity ACO participants or its ACO providers/suppliers as the business associate of these HIPAA covered entities, and the request reflects the minimum data necessary for the ACO to conduct health care operations work that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501 on behalf of those participants.
(3) The patients of the organized health care arrangement (as defined at 45 CFR 160.103) in which the ACO is participating with its ACO participants and ACO providers/suppliers, and the request reflects the minimum data necessary for the ACO to conduct health care operations work that falls within the first or second paragraph of the definition of health care operations at 45 CFR 164.501 on behalf of the organized health care arrangement.
(c) The use of identifiers and claims data will be limited to developing processes and engaging in appropriate activities related to coordinating care and improving the quality and efficiency of care that are applied uniformly to all Medicare beneficiaries with primary care services at the ACO, and that these data will not be used to reduce, limit or restrict care for specific beneficiaries.
(d) To ensure that beneficiaries have a meaningful opportunity to decline having their claims data shared with the ACO, the ACO may only request claims data about a beneficiary if—
(1) For an ACO participating under—
(i) Preliminary prospective assignment with retrospective reconciliation as specified under § 425.400(a)(2), the beneficiary's name appears on the preliminary prospective assignment list provided to the ACO at the beginning of the performance year, during each quarter (and in conjunction with the annual reconciliation) or the beneficiary has received a primary care service from an ACO participant upon whom assignment is based (under subpart E of this part) during the most recent 12-month period; or
(ii) Prospective assignment as specified under § 425.400(a)(3), the beneficiary's name appears on the prospective assignment list provided to the ACO at the beginning of the performance year.
(2) The beneficiary has been notified in compliance with § 425.708 that the ACO has requested access to beneficiary identifiable claims data in order to improve the quality of care that is furnished to the beneficiary and, where applicable, coordinate care offered to the beneficiary; and
(3) The beneficiary did not exercise the opportunity to decline having his/her claims data shared with the ACO as provided in § 425.708.
(e) At the ACO's request, CMS continues to provide ACOs with updates to the requested beneficiary identifiable claims data, subject to beneficiary's opportunity to decline data sharing under § 425.708.
(f) If an ACO requests beneficiary identifiable information, compliance with the terms of the data use agreement described in § 425.710 is a condition of an ACO's participation in the Shared Savings Program.
§ 425.706   Minimum necessary data.
(a) ACOs must limit their identifiable data requests to the minimum necessary to accomplish a permitted use of the data. The minimum necessary Parts A and B data elements may include but are not limited to the following data elements:
(1) Beneficiary ID.
(2) Procedure code.
(3) Gender.
(4) Diagnosis code.
(5) Claim ID.
(6) The from and through dates of service.
(7) The provider or supplier ID.
(8) The claim payment type.
(9) Date of birth and death, if applicable.
(10) TIN.
(11) NPI.
(b) The minimum necessary Part D data elements may include but are not limited to the following data elements:
(1) Beneficiary ID.
(2) Prescriber ID.
(3) Drug service date.
(4) Drug product service ID.
(5) Quantity dispensed.
(6) Days supplied.
(7) Brand name.
(8) Generic name.
(9) Drug strength.
(10) TIN.
(11) NPI.
(12) Indication if on formulary.
(13) Gross drug cost.
§ 425.708   Beneficiaries may decline claims data sharing.
(a) Beneficiaries must receive notification about the Shared Savings Program and the opportunity to decline claims data sharing and instructions on how to inform CMS directly of their preference.
(1) FFS beneficiaries are notified about the opportunity to decline claims data sharing through CMS materials such as the Medicare & You Handbook and through the notifications required under § 425.312.
(2) The notifications provided under § 425.312 must state that the ACO may have requested beneficiary identifiable claims data about the beneficiary for purposes of its care coordination and quality improvement work, and inform the beneficiary how to decline having his or her claims information shared with the ACO in the form and manner specified by CMS.
(3) Beneficiary requests to decline claims data sharing will remain in effect unless and until a beneficiary subsequently contacts CMS to amend that request to permit claims data sharing with ACOs.
(b) The opportunity to decline having claims data shared with an ACO under paragraph (a) of this section does not apply to the information that CMS provides to ACOs under § 425.702(c).
(c) In accordance with 42 U.S.C. 290dd-2 and the implementing regulations at 42 CFR part 2, CMS does not share beneficiary identifiable claims data relating to the diagnosis and treatment of alcohol and substance abuse without the explicit written consent of the beneficiary.
(d) The provisions of this section relate only to the sharing of Medicare claims data between the Medicare program and the ACO under the Shared Savings Program and are in no way intended to impede existing or future data sharing under other authorities.
§ 425.710   Data use agreement.
(a)(1) Before receiving any beneficiary identifiable data, ACOs must enter into a DUA with CMS. Under the DUA, the ACO must comply with the limitations on use and disclosure that are imposed by HIPAA, the applicable DUA, and the statutory and regulatory requirements of the Shared Savings Program.
(2) If the ACO misuses or discloses data in a manner that violates any applicable statutory or regulatory requirements or that is otherwise non-compliant with the provisions of the DUA, it will no longer be eligible to receive data under subpart H of this part, may be terminated from the Shared Savings Program under § 425.218, and may be subject to additional sanctions and penalties available under the law.
(b) [Reserved]
§ 425.800   Preclusion of administrative and judicial review.
(a) There is no reconsideration, appeal, or other administrative or judicial review of the following determinations under this part:
(1) The specification of quality and performance standards under §§ 425.500, 425.502, 425.510, and 425.512.
(2) The assessment of the quality of care furnished by an ACO under the performance standards established in § 425.502 or § 425.512, as applicable.
(3) The assignment of Medicare fee-for-service beneficiaries under Subpart E of this part.
(4) The initial determination or revised initial determination of whether an ACO is eligible for shared savings, and the amount of such shared savings, including the initial determination or revised initial determination of the estimated average per capita Medicare expenditures under the ACO for Medicare fee-for-service beneficiaries assigned to the ACO and the average benchmark for the ACO in accordance with section 1899(d) of the Act, as implemented under §§ 425.601, 425.602, 425.603, 425.604, 425.605, 425.606, 425.610, and 425.652.
(5) The percent of shared savings specified by the Secretary and the limit on the total amount of shared savings established under §§ 425.604, 425.605, 425.606, and 425.610.
(6) The termination of an ACO for failure to meet the quality performance standards established under § 425.502 or § 425.512, as applicable.
(7) The termination of a beneficiary incentive program established under § 425.304(c).
(b) [Reserved]
§ 425.802   Request for review.
(a) An ACO may appeal an initial determination that is not prohibited from administrative or judicial review under § 425.800 by requesting a reconsideration review by a CMS reconsideration official.
(1) An ACO that wants to request reconsideration review by a CMS reconsideration official must submit a written request by an authorized official for receipt by CMS within 15 days of the notice of the initial determination.
(i) If the 15th day is a weekend or a Federal holiday, then the timeframe is extended until the end of the next business day.
(ii) Failure to submit a request for reconsideration within 15 days will result in denial of the request for reconsideration.
(2) The reconsideration review must be held on the record (review of submitted documentation).
(b) An ACO that requests a reconsideration review for termination will remain operational throughout the review process.
§ 425.804   Reconsideration review process.
(a) Acknowledgement of reconsideration review request. The reconsideration official sends an acknowledgement of the reconsideration review request to the ACO and CMS that includes the following:
(1) Review procedures.
(2) Procedures for submission of evidence including format and timelines.
(3) A briefing schedule that permits each party to submit only one written brief, including any evidence, for consideration by the reconsideration official in support of the party's position. The submission of any additional briefs or supplemental evidence will be at the sole discretion of the reconsideration official.
(b) Burden of proof, standard of proof, and standards of review. The burden of proof is on the ACO to demonstrate to the reconsideration official with convincing evidence that the initial determination is not consistent with the requirements of this part or applicable statutory authority.
(c) Reconsideration official. The reconsideration official is an independent CMS official who did not participate in the initial determination that is being reviewed.
(d) Evidence. (1) The reconsideration official's review will be based only on evidence submitted by the reconsideration official's requested deadline, unless otherwise requested by the reconsideration official.
(2) Documentation submitted for the record as evidence cannot be documentation that was not previously submitted to CMS by the applicable deadline and in the requested format.
(3) All evidence submitted by the ACO and CMS, in preparation for the reconsideration review will be shared with the other party to the hearing.
(e) The reconsideration official will notify CMS and the ACO of his or her recommendation.
§ 425.806   On-the-record review of reconsideration official's recommendation by independent CMS official.
(a)(1) If CMS or the ACO disagrees with the recommendation of the reconsideration official, it may request an on the record review of the initial determination and recommendation by an independent CMS official who was not involved in the initial determination or the reconsideration review process.
(2) In order to request an on-the-record review, CMS or the ACO must submit an explanation of why it disagrees with the recommendation by the timeframe and in the format indicated in the reconsideration official's recommendation letter.
(b) The on-the-record review process is based only on evidence presented during the reconsideration review.
(c) The independent CMS official considers the recommendation of the reconsideration official and makes a final agency determination.
§ 425.808   Effect of independent CMS official's decision.
(a) The decision of the independent CMS official is final and binding.
(b) The reconsideration review process under this subpart must not be construed to negate, diminish, or otherwise alter the applicability of existing laws, rules, and regulations or determinations made by other government agencies.
§ 425.810   Effective date of decision.
(a) If the initial determination denying an ACO's application to participate in the Shared Savings Program is upheld, the application will remain denied based on the effective date of the original notice of denial.
(b) If the initial determination to terminate an agreement with an ACO is upheld, the decision to terminate the agreement is effective as of the date indicated in the initial notice of termination.
(c) If the initial determination to terminate an ACO is reversed, the ACO is reinstated into the Shared Savings Program, retroactively back to the original date of termination.