67816 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 425 

[CMS–1701–F2 and CMS–1702–F] 

RINs 0938–AT45 and 0938–AT51 

Medicare Program; Medicare Shared 

Savings Program; Accountable Care 

Organizations—Pathways to Success 

and Extreme and Uncontrollable 

Circumstances Policies for 

Performance Year 2017 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rules. 

SUMMARY: Under the Medicare Shared 

Savings Program (Shared Savings 

Program), providers of services and 

suppliers that participate in an 

Accountable Care Organization (ACO) 

continue to receive traditional Medicare 

fee-for-service (FFS) payments under 

Parts A and B, but the ACO may be 

eligible to receive a shared savings 

payment if it meets specified quality 

and savings requirements. The policies 

included in this final rule provide a new 

direction for the Shared Savings 

Program by establishing pathways to 

success through redesigning the 

participation options available under 

the program to encourage ACOs to 

transition to two-sided models (in 

which they may share in savings and are 

accountable for repaying shared losses). 

These policies are designed to increase 

savings for the Trust Funds and mitigate 

losses, reduce gaming opportunities, 

and promote regulatory flexibility and 

free-market principles. This final rule 

also provides new tools to support 

coordination of care across settings and 

strengthen beneficiary engagement; and 

ensure rigorous benchmarking. 

In this final rule, we also respond to 

public comments we received on the 

extreme and uncontrollable 

circumstances policies for the Shared 

Savings Program that were used to 

assess the quality and financial 

performance of ACOs that were subject 

to extreme and uncontrollable events, 

such as Hurricanes Harvey, Irma, and 

Maria, and the California wildfires, in 

performance year 2017, including the 

applicable quality data reporting period 

for performance year 2017. 

DATES: Effective Date: This rule is 

effective February 14, 2019. 

Applicability Dates: In the 

SUPPLEMENTARY INFORMATION section of 

this final rule, we provide a table (Table 

1) which lists key changes in this final 

rule that have an applicability date 

other than the effective date of this final 

rule. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth November, (410) 786–8084 or 

via email at aco@cms.hhs.gov. 

SUPPLEMENTARY INFORMATION: Table 1 

lists key changes that have an 

applicability date other than 60 days 

after the date of publication of this final 

rule. By indicating that a provision is 

applicable to a performance year (PY) or 

agreement period, activities related to 

implementation of the policy may 

precede the start of the performance 

year or agreement period. 

BILLING CODE 4120–01–P 


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TABLE 1-APPLICABILITY DATES OF SELECT PROVISIONS OF 

THE FINAL RULE 

Preamble Section Section Titleffiescription Applicability Date 

II.A.2. Availability of an additional Agreement periods starting on or after July 

participation option under a I, 2019. 

new BASIC track (including 

glide path) under an 

agreement period of at least 5 

years; 

Availability of Track 3 as the 

ENHANCED track under an 

agreement period of at least 5 

years. 

II.A.2. Discontinuing Track I and No longer available for applicants for 

Track 2. agreement periods starting in 2019 and 

subsequent years. 

II.A.2. Discontinuing deferred No longer available for renewal applicants 

renewal option. for agreement periods starting in 20 19 and 

subsequent years. 

ll.A.4.b. Permitting annual election of Performance year beginning on July 1, 

differing levels of risk and 2019, and subsequent years for eligible 

potential reward within the A COs. 

BASIC track's glide path. 

II.A.4.c. Permitting annual election of Performance year beginning on July 1, 

beneficiary assigmnent 2019, and subsequent years. 

methodology for ACOs in 

BASIC track or ENHANCED 

track. 

II.A.5.c. Evaluation criteria for Agreement periods starting on or after July 

determining participation 1, 2019. 

options based on ACO 

participants' Medicare FFS 

revenue, ACO legal entity and 

ACO participant experience 

with performance-based risk 

Medicare ACO initiatives, 

and prior performance (if 

applicabl~). 

II.A.5.d.(2). Monitoring for fmancial Performance year beginning on July I, 

performance. 2019, and subsequent years. 

II.A.6.b.(2). Timing of election of Agreement periods starting on or after July 

MSR/MI.R. 1, 2019. 

TT.A.6.b.(3). ModifYing the MSRIMLR to Performance year beginning on July 1, 

address small population 2019, and subsequent years. 

sizes. 

TT.A.6.c.(2). Annual recalculation of Agreement periods starting on or after July 

repayment mechanism 1,2019. 

amounts. 
67818 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 

BILLING CODE 4120–01–C 

Table of Contents 

I. Executive Summary and Background 

A. Executive Summary 

1. Purpose 

2. Summary of the Major Provisions 

3. Summary of Costs and Benefits 

B. Statutory and Regulatory Background 

II. Provisions of the August 2018 Proposed 

Rule and Analysis of and Responses to 

Public Comments 

A. Redesigning Participation Options To 

Facilitate Transition to PerformanceBased Risk 

1. Background on Shared Savings Program 

Participation Options 

2. Modified Participation Options Under 

5-Year Agreement Periods 

3. Creating a BASIC Track With Glide Path 

to Performance-Based Risk 

4. Permitting Annual Participation 

Elections 

5. Determining Participation Options Based 

on Medicare FFS Revenue and Prior 

Participation 

6. Requirements for ACO Participation in 

Two-Sided Models 

7. Participation Options for Agreement 

Periods Beginning in 2019 

B. Fee-for-Service Benefit Enhancements 

1. Background 

2. Proposed Revisions 

C. Providing Tools To Strengthen 

Beneficiary Engagement 

1. Background on Beneficiary Engagement 

2. Beneficiary Incentives 

3. Empowering Beneficiary Choice 

D. Benchmarking Methodology 

Refinements 

1. Background 

2. Risk Adjustment Methodology for 

Adjusting Historical Benchmark Each 

Performance Year 

3. Use of Regional Factors When 

Establishing and Resetting ACOs’ 

Benchmarks 

4. Technical Changes To Incorporate 

References to Benchmark Rebasing 

Policies 

E. Updating Program Policies 

1. Overview 

2. Coordination of Pharmacy Care for ACO 

Beneficiaries 

F. Applicability of Final Policies to Track 

1+ Model ACOs 

1. Background 

2. Unavailability of Application Cycles for 

Entry Into the Track 1+ Model in 2019 

and 2020 

3. Applicability of Final Policies to Track 

1+ Model ACOs Through Revised 

Program Regulations or Revisions to 

Track 1+ Model Participation 

Agreements 

III. Provisions of the December 2017 Interim 

Final Rule With Comment Period and 

Analysis of and Response to Public 

Comments 

A. Background 


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B. Shared Savings Program Extreme and 

Uncontrollable Circumstances Policies 

for Performance Year 2017 

1. Determination of Quality Performance 

Scores for ACOs in Affected Areas 

2. Mitigating Shared Losses for ACOs 

Participating in a Performance-Based 

Risk Track 

IV. Collection of Information Requirements 

V. Regulatory Impact Analysis 

A. Statement of Need 

B. Overall Impact 

1. Medicare Program; Medicare Shared 

Savings Program; Accountable Care 

Organizations—Pathways to Success 

(CMS–1701–F2) 

2. Medicare Program; Medicare Shared 

Savings Program; Accountable Care 

Organizations—Extreme and 

Uncontrollable Circumstances Policies 

(CMS–1701–F) 

C. Anticipated Effects 

1. Effects on the Medicare Program 

2. Effects on Beneficiaries 

3. Effects on Providers and Suppliers 

4. Effect on Small Entities 

5. Effect on Small Rural Hospitals 

6. Unfunded Mandates 

7. Regulatory Review Cost Estimation 

8. Other Impacts on Regulatory Burden 

D. Alternatives Considered 

E. Compliance With Requirements of 

Section 1899(i)(3)(B) of the Act 

F. Accounting Statement and Table 

G. Regulatory Reform Analysis Under 

Executive Order 13771 

H. Conclusion 

VI. Effective Date Exception 

Regulation Text 

I. Executive Summary and Background 

A. Executive Summary 

1. Purpose 

In August 2018 we issued a proposed 

rule, titled ‘‘Medicare Program; 

Medicare Shared Savings Program; 

Accountable Care Organizations— 

Pathways to Success’’ (hereinafter 

referred to as the ‘‘August 2018 

proposed rule’’), which appeared in the 

Federal Register on August 17, 2018 (83 

FR 41786). On November 1, 2018, we 

issued a final rule, titled ‘‘Medicare 

Program; Revisions to Payment Policies 

Under the Physician Fee Schedule and 

Other Revisions to Part B for CY 2019; 

Medicare Shared Savings Program 

Requirements; Quality Payment 

Program; Medicaid Promoting 

Interoperability Program; Quality 

Payment Program—Extreme and 

Uncontrollable Circumstance Policy for 

the 2019 MIPS Payment Year; 

Provisions From the Medicare Shared 

Savings Program—Accountable Care 

Organizations—Pathways to Success; 

and Expanding the Use of Telehealth 

Services for the Treatment of Opioid 

Use Disorder Under the Substance UseDisorder Prevention That Promotes 

Opioid Recovery and Treatment 

(SUPPORT) for Patients and 

Communities Act’’ (hereinafter referred 

to as the ‘‘November 2018 final rule’’), 

that appeared in the Federal Register on 

November 23, 2018 (83 FR 59452). In 

the November 2018 final rule, we 

finalized certain policies from the 

August 2018 proposed rule in order to 

ensure continuity of participation, and 

finalize time-sensitive program policy 

changes for currently participating 

ACOs. We also finalized provisions to 

streamline the ACO core quality 

measure set to reduce burden and 

encourage better outcomes, which we 

proposed in the proposed rule for the 

CY 2019 PFS, entitled Medicare 

Program; Revisions to Payment Policies 

Under the Physician Fee Schedule and 

Other Revisions to Part B for CY 2019; 

Medicare Shared Savings Program 

Requirements; Quality Payment 

Program; and Medicaid Promoting 

Interoperability Program; Proposed Rule 

(83 FR 35704). This final rule addresses 

the remaining policies from the August 

2018 proposed rule that were not 

addressed in the November 2018 final 

rule. 

Since the Medicare Shared Savings 

Program (Shared Savings Program) was 

established in 2012, CMS has continued 

to monitor and evaluate program results 

to look for additional ways to streamline 

program operations, reduce burden, and 

facilitate transition to risk that promote 

a competitive and accountable 

marketplace, while improving the 

quality of care for Medicare 

beneficiaries. This final rule makes 

changes to the regulations for the 

Shared Savings Program that were 

promulgated through rulemaking 

between 2011 and 2017, and are 

codified in 42 CFR part 425. The 

changes in this final rule are based on 

the additional program experience we 

have gained and on lessons learned 

from testing of Medicare ACO initiatives 

by the Center for Medicare and 

Medicaid Innovation (Innovation 

Center). As we implement these 

changes, we will continue to monitor 

the program’s ability to reduce 

healthcare spending and improve care 

quality, including whether the program 

provides beneficiaries with the value 

and choice demonstrated by other 

Medicare options such as Medicare 

Advantage (MA), and will use the 

results of this monitoring to inform 

future development of the program. This 

rule also finalizes changes to address 

new requirements of the Bipartisan 

Budget Act of 2018 (Pub. L. 115–123) 

(herein referred to as the Bipartisan 

Budget Act). 

In December 2017, we issued an 

interim final rule with comment period, 

titled ‘‘Medicare Shared Savings 

Program: Extreme and Uncontrollable 

Circumstances Policies for Performance 

Year 2017’’ (hereinafter referred to as 

the ‘‘December 2017 interim final rule 

with comment period’’), which 

appeared in the Federal Register on 

December 26, 2017 (82 FR 60912). The 

December 2017 interim final rule with 

comment period established policies for 

assessing the financial and quality 

performance of Shared Savings Program 

ACOs that were affected by extreme and 

uncontrollable circumstances during 

performance year 2017, including the 

applicable quality reporting period for 

performance year 2017. This final rule 

includes an analysis of and responses to 

comments received on the December 

2017 interim final rule with comment 

period. 

Section 1899 of the Social Security 

Act (the Act) established the Medicare 

Shared Savings Program, which 

promotes accountability for a patient 

population, fosters coordination of 

items and services under Medicare Parts 

A and B, encourages investment in 

infrastructure and redesigned care 

processes for high quality and efficient 

health care service delivery, and 

promotes higher value care. The Shared 

Savings Program is a voluntary program 

that encourages groups of doctors, 

hospitals, and other health care 

providers to come together as an ACO 

to lower growth in expenditures and 

improve quality. An ACO agrees to be 

held accountable for the quality, cost, 

and experience of care of an assigned 

Medicare FFS beneficiary population. 

ACOs that successfully meet quality and 

savings requirements share a percentage 

of the achieved savings with Medicare. 

Shared Savings Program ACOs are an 

important innovation for moving CMS’ 

payment systems away from paying for 

volume and towards paying for value 

and outcomes because ACOs are held 

accountable for spending in relation to 

a historical benchmark and for quality 

performance, including performance on 

outcome and patient experience 

measures. The program began in 2012, 

and as of January 2018, 561 ACOs were 

participating in the program and serving 

over 10.5 million Medicare FFS 

beneficiaries. (See the Medicare Shared 

Savings Program website at https://

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/sharedsavings

program/ for information about the 

program, the program’s statutory 

authority, regulations and guidance, the 

program’s application process, 

participating ACOs, and program 

performance data.) 

The Shared Savings Program 

currently includes three financial 

models that allow ACOs to select an 


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1See, for example, Medicare Shared Savings 

Program Fast Facts (January 2018), available at 

https://www.cms.gov/Medicare/Medicare-Fee-forService-Payment/sharedsavingsprogram/ 

Downloads/SSP-2018-Fast-Facts.pdf. 

arrangement that makes the most sense 

for their organization. The vast majority 

of Shared Savings Program ACOs, 82 

percent in 2018,1 have chosen to enter 

and maximize the allowed time under a 

one-sided, shared savings-only model 

(Track 1), under which eligible ACOs 

receive a share of any savings under 

their benchmark, but are not required to 

pay back a share of spending over the 

benchmark. In comparison, there is 

relatively low participation in the 

program’s two-sided, shared savings and 

shared losses models, under which 

eligible ACOs share in a larger portion 

of any savings under their benchmark, 

but are required to share losses if 

spending exceeds the benchmark. 

Participation in Track 2 (introduced at 

the start of the program in 2012) has 

slowly declined in recent years, 

particularly following the availability of 

Track 3 (beginning in 2016), although 

participation in Track 3, the program’s 

highest-risk track, remains modest. 

Recently, the Innovation Center 

designed an additional option available 

to eligible Track 1 ACOs, referred to as 

the Track 1+ Model, to facilitate ACOs’ 

transition to performance-based risk. 

The Track 1+ Model is a time-limited 

model that began on January 1, 2018, 

and is based on Shared Savings Program 

Track 1, but tests a payment design that 

incorporates more limited downside 

risk, as compared to Track 2 and Track 

3. Our early experience with the design 

of the Track 1+ Model demonstrates that 

the availability of a lower-risk, twosided model is an effective way to 

encourage Track 1 ACOs (including 

ACOs within a current agreement 

period, initial program entrants, and 

renewing ACOs) to progress more 

rapidly to performance-based risk. Fiftyfive ACOs entered into Track 1+ Model 

agreements effective on January 1, 2018, 

the first time the model was offered. 

These ACOs represent our largest cohort 

of performance-based risk ACOs to date. 

ACOs in two-sided models have 

shown significant savings to the 

Medicare program while advancing the 

quality of care furnished to FFS 

beneficiaries; but, the majority of ACOs 

have yet to assume any performancebased risk although they have the ability 

to benefit from waivers of certain federal 

requirements in connection with their 

participation in the Shared Savings 

Program. Even more concerning is the 

finding that for performance years 

beginning in 2012 through 2016, onesided model ACOs, which are not 

accountable for sharing in losses, 

actually increased Medicare spending 

relative to their benchmarks under the 

program’s financial methodology. 

Further, the presence of an ‘‘upsideonly’’ track may be encouraging 

consolidation in the marketplace, 

reducing competition and choice for 

Medicare FFS beneficiaries. While we 

understand that systems need time to 

adjust, Medicare cannot afford to 

continue with models that are not 

producing desired results. 

Our results to date have shown that 

ACOs in two-sided models perform 

better over time than one-sided model 

ACOs, low revenue ACOs, which are 

typically physician-led, perform better 

than high revenue ACOs, which often 

include hospitals, and the longer ACOs 

are in the program the better they do at 

achieving the program goals of lowering 

growth in expenditures and improving 

quality. For example, in performance 

year 2016, about 68 percent of Shared 

Savings Program ACOs in two-sided 

models (15 of 22 ACOs) shared savings 

compared to 29 percent of Track 1 

ACOs; 41 percent of low revenue ACOs 

shared savings compared to 23 percent 

of high revenue ACOs; and 42 percent 

of April and July 2012 starters shared 

savings, compared to 36 percent of 2013 

and 2014 starters, 26 percent of 2015 

starters, and 18 percent of 2016 starters. 

Shortly after the August 2018 proposed 

rule was announced, CMS made 

publicly available performance year 

2017 results that showed similarities to 

2016. In performance year 2017, 51 

percent of Shared Savings Program 

ACOs in two-sided models (20 of 39 

ACOs) shared savings compared to 33 

percent of Track 1 ACOs; 44 percent of 

low revenue ACOs shared savings 

compared to 28 percent of high revenue 

ACOs; and 51 percent of April and July 

2012 starters shared savings, compared 

to 43 percent of 2013 and 2014 starters, 

28 percent of 2015 and 2016 starters, 

and 21 percent of 2017 starters. 

In the August 2018 proposed rule, we 

explained our belief that additional 

policy changes to the Shared Savings 

Program and its financial models are 

required to support the move to value, 

achieve savings for the Medicare 

program, and promote a competitive 

and accountable healthcare 

marketplace. Accordingly, we proposed 

to redesign the Shared Savings Program 

to provide pathways to success in the 

future through a combination of policy 

changes, informed by the following 

guiding principles: 

• Accountability—Increase savings for the 

Medicare Trust Funds, mitigate losses by 

accelerating the move to two-sided risk by 

ACOs, and ensure rigorous benchmarking. 

• Competition—Promote free-market 

principles by encouraging the development 

of physician-only and rural ACOs in order to 

provide a pathway for physicians to stay 

independent, thereby preserving beneficiary 

choice. 

• Engagement—Promote regulatory 

flexibility to allow ACOs to innovate and be 

successful in coordinating care, improving 

quality, and engaging with and incentivizing 

beneficiaries to achieve and maintain good 

health. 

• Integrity—Reduce opportunities for 

gaming. 

• Quality—Improve quality of care for 

patients with an emphasis on promoting 

interoperability and the sharing of healthcare 

data between providers, focusing on 

meaningful quality measures, and combatting 

opioid addiction. 

In the August 2018 proposed rule, we 

explained that the need for a new 

approach or pathway to transition Track 

1 ACOs to performance-based risk is 

particularly relevant at this time, given 

the current stage of participation for the 

initial entrants to the Shared Savings 

Program under the program’s current 

design. The program’s initial entrants 

are nearing the end of the time allowed 

under Track 1 (a maximum of two, 3- 

year agreement periods). Among the 

program’s initial entrants (ACOs that 

first entered the program in 2012 and 

2013), there are 82 ACOs that would be 

required to renew their participation 

agreements to enter a third agreement 

period beginning in 2019, and they face 

transitioning from a one-sided model to 

a two-sided model with significant 

levels of risk that some are not prepared 

to accept. Another 114 ACOs that have 

renewed for a second agreement period 

under a one-sided model, including 59 

ACOs that started in 2014 and 55 ACOs 

that started in 2015, will face a similar 

transition to a two-sided model with 

significant levels of risk in 2020 and 

2021, respectively. The transition to 

performance-based risk remains a 

pressing concern for ACOs, as 

evidenced by a recent survey of the 82 

ACOs that would be required to move 

to a two-sided payment model in their 

third agreement period beginning in 

2019. The survey results, based on a 43 

percent response rate, indicate that 

these Track 1 ACOs are reluctant to 

move to two-sided risk under the 

current design of the program. See 

National Association of ACOs, Press 

Release (May 2018), available at https:// 

www.naacos.com/press-release-may-2- 

2018. 

In the August 2018 proposed rule, we 

explained our belief that the long term 

success and sustainability of the Shared 

Savings Program is affected by a 

combination of key program factors: The 

savings and losses potential of the 


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program established through the design 

of the program’s tracks; the 

methodology for setting and resetting 

the benchmark, which is the basis for 

determining shared savings and shared 

losses; the length of the agreement 

period, which determines the amount of 

time an ACO remains under a financial 

model; and the frequency of benchmark 

rebasing. In the proposed rule, we 

carefully considered each of these 

factors and proposed a framework that 

we believed, on balance, would create 

sufficient incentives for participation in 

a voluntary program, while also 

achieving program goals to increase 

quality of care for Medicare 

beneficiaries and reduce expenditure 

growth to protect the Trust Funds. 

In order to achieve these program 

goals and preserve the long term success 

and sustainability of the program, we 

explained the need to create a pathway 

for ACOs to more rapidly transition to 

performance-based risk. ACOs and other 

program stakeholders have urged CMS 

to smooth the transition to risk by 

providing more time to gain experience 

with risk and more incremental levels of 

risk. Through the proposed program 

redesign, we aimed to create a pathway 

for success that facilitates ACOs’ 

transition to performance-based risk 

more quickly and makes this transition 

smooth by phasing-in risk more 

gradually. Through the creation of a 

new BASIC track, we proposed to allow 

ACOs to gain experience with more 

modest levels of performance-based risk 

on their way to accepting greater levels 

of performance-based risk over time (as 

the proposed BASIC track’s maximum 

level of risk is similar to that of the 

Track 1+ Model, and substantially less 

than the proposed ENHANCED track). 

As stakeholders have suggested, we 

proposed to provide flexibility to allow 

ACOs that are ready to accelerate their 

move to higher risk within agreement 

periods, and enable such ACOs to 

participate in Advanced APMs for 

purposes of the Quality Payment 

Program. We proposed to streamline the 

program and simplify the participation 

options by retiring Track 1 and Track 2. 

We proposed to retain Track 3, which 

we would rename as the ENHANCED 

track, to encourage ACOs that are able 

to accept higher levels of potential risk 

and reward to drive the most significant 

systematic change in providers’ and 

suppliers’ behavior. We proposed to 

further strengthen the program by 

establishing policies to deter gaming by 

limiting more experienced ACOs to 

higher-risk participation options; more 

rigorously screening for good standing 

among ACOs seeking to renew their 

participation in the program or re-enter 

the program after termination or 

expiration of their previous agreement; 

identifying ACOs re-forming under new 

legal entities as re-entering ACOs if 

greater than 50 percent of their ACO 

participants have recent prior 

participation in the same ACO in order 

to hold these ACOs accountable for their 

ACO participants’ experience with the 

program; and holding ACOs in twosided models accountable for partialyear losses if either the ACO or CMS 

terminates the agreement before the end 

of the performance year. 

Under the proposed redesign of the 

program, our policies would recognize 

the relationship between the ACO’s 

degree of control over total Medicare 

Parts A and B FFS expenditures for its 

assigned beneficiaries and its readiness 

to accept higher or lower degrees of 

performance-based risk. Comparisons of 

ACO participants’ total Medicare Parts 

A and B FFS revenue to a factor based 

on total Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries would be used in 

determining the maximum amount of 

losses (loss sharing limit) under the 

BASIC track, the estimated amount of 

repayment mechanism arrangements for 

BASIC track ACOs (required for ACOs 

entering or continuing their 

participation in a two-sided model to 

assure CMS of the ACO’s ability to 

repay shared losses), and in determining 

participation options for ACOs. Using 

revenue-based loss sharing limits and 

repayment mechanism amounts for 

eligible BASIC track ACOs would help 

to ensure that low revenue ACOs have 

a meaningful pathway to participate in 

a two-sided model that may be more 

consistent with their capacity to assume 

risk. By basing participation options on 

the ACO’s degree of control over total 

Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries, low revenue ACOs, which 

tend to be smaller and have less capital, 

would be able to continue in the 

program longer under lower levels of 

risk; whereas high revenue ACOs, 

which tend to include institutional 

providers and are typically larger and 

better capitalized, would be required to 

move more quickly to higher levels of 

performance-based risk in the 

ENHANCED track, because they should 

be able to exert more influence, 

direction, and coordination over the full 

continuum of care. By requiring high 

revenue ACOs to enter higher levels of 

performance-based risk under the 

ENHANCED track after no more than 

one agreement period under the BASIC 

track, we aimed to drive more 

meaningful systematic change in these 

ACOs, which have greater potential to 

control their assigned beneficiaries’ 

Medicare Parts A and B FFS 

expenditures by coordinating care 

across care settings, and thus to achieve 

significant change in spending. Further, 

allowing low revenue ACOs a longer 

period of participation under the lower 

level of performance-based risk in the 

BASIC track, while challenging high 

revenue ACOs to more quickly move to 

higher levels of performance-based risk, 

could give rise to more innovative 

arrangements for lowering growth in 

expenditures and improving quality, 

particularly among low revenue ACOs 

that tend to be composed of 

independent physician practices. 

The program’s benchmarking 

methodology, a complex calculation 

that incorporates the ACO’s riskadjusted historical expenditures and 

reflects either national or regional 

spending trends, is a central feature of 

the program’s financial models. We 

proposed to continue to refine the 

benchmarking approach based on our 

experience using factors based on 

regional FFS expenditures in resetting 

the benchmark in an ACO’s second or 

subsequent agreement period, and to 

address ACOs’ persistent concerns over 

the risk adjustment methodology. 

Through the proposed redesign of the 

program, we would provide for more 

accurate benchmarks for ACOs that are 

protective of the Trust Funds by 

ensuring that ACOs do not unduly 

benefit from any one aspect of the 

benchmark calculations, while also 

helping to ensure the program continues 

to remain attractive to ACOs, especially 

those caring for the most complex and 

highest risk patients who could benefit 

from high-quality, coordinated care 

from an ACO. 

We proposed to accelerate the use of 

factors based on regional FFS 

expenditures in establishing the 

benchmark by applying this 

methodology in setting an ACO’s 

benchmark beginning with its first 

agreement period. This would allow the 

benchmark to be a more accurate 

representation of the ACO’s costs in 

relation to its localized market (or 

regional service area), and could 

strengthen the incentives of the program 

to drive meaningful change by ACOs. 

Further, allowing agreement periods of 

at least 5 years, as opposed to the 

current 3-year agreement periods, would 

provide greater predictability for 

benchmarks by reducing the frequency 

of benchmark rebasing, and therefore 

provide greater opportunity for ACOs to 

achieve savings against these 

benchmarks. In combination, these 


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policies would protect the Trust Funds, 

provide more accurate and predictable 

benchmarks, and reduce selection costs, 

while creating incentives for ACOs to 

transition to performance-based risk. 

The existing regional adjustment 

under § 425.603(c) can provide overly 

inflated benchmarks for ACOs that are 

relatively low spending compared to 

their region, while ACOs with higher 

spending compared to their region may 

find little value in remaining in the 

program when faced with a significantly 

reduced benchmark. To address this 

dynamic, we proposed to reduce the 

maximum weight used in calculating 

the regional adjustment, and cap the 

adjustment amount for all agreement 

periods, so as not to excessively reward 

or punish an ACO based on where the 

ACO is located. This would make the 

benchmark more achievable for ACOs 

that care for medically complex patients 

and are high spending compared to their 

region, thereby encouraging their 

continued participation, while at the 

same time preventing windfall shared 

savings payments for ACOs that have 

relatively low spending levels relative to 

their region. 

We also sought to provide more 

sustainable trend factors for ACOs with 

high penetration in markets with lower 

spending growth compared to the 

nation, and less favorable trend factors 

for ACOs with high penetration in 

markets with higher spending growth 

compared to the nation. This approach 

would have little impact on ACOs with 

relatively low to medium penetration in 

counties in their regional service area. 

ACOs and other program stakeholders 

have continued to express concerns that 

the program’s methodology for risk 

adjusting the benchmark for each 

performance year does not adequately 

account for changes in acuity and health 

status of patients over time. We 

proposed to modify the current 

approach to risk adjustment to allow 

changes in health status to be more fully 

recognized during the agreement period, 

providing further incentives for 

continued participation by ACOs faced 

with higher spending due to the 

changing health status of their 

population. 

ACOs and other program stakeholders 

have urged CMS to allow additional 

flexibility of program and payment 

policies to enable ACOs to engage 

beneficiaries and provide the care for 

beneficiaries in the most appropriate 

care setting. It is also critical that 

patients have the tools to be more 

engaged with their doctors in order to 

play a more active role in their care 

coordination and the quality of care 

they receive, and that ACOs empower 

and incentivize beneficiaries to achieve 

good health. The Bipartisan Budget Act 

allows for certain new flexibilities for 

Shared Savings Program ACOs to 

support these aims, including new 

beneficiary incentive programs, 

telehealth services furnished in 

accordance with section 1899(l) of the 

Act, and a choice of beneficiary 

assignment methodology. We proposed 

to establish policies in accordance with 

the new law in these areas. For example, 

in accordance with section 

1899(m)(1)(A) of the Act (as added by 

section 50341 of the Bipartisan Budget 

Act), we would allow certain ACOs 

under two-sided risk to establish CMSapproved beneficiary incentive 

programs, through which an ACO 

would provide incentive payments to 

assigned beneficiaries who receive 

qualifying primary care services. We 

proposed to establish policies to govern 

telehealth services furnished in 

accordance with 1899(l) of the Act by 

physicians and practitioners in eligible 

two-sided model ACOs. We also 

proposed to allow broader access to the 

program’s existing SNF 3-day rule 

waiver for ACOs under performancebased risk. 

Lastly, we sought comment on how 

Medicare ACOs and the sponsors of 

stand-alone Part D prescription drug 

plans (PDPs) could be encouraged to 

collaborate in order to improve the 

coordination of pharmacy care for 

Medicare FFS beneficiaries. 

2. Summary of the Major Provisions 

This final rule restructures the 

participation options for ACOs applying 

to participate in the program in 2019 by 

discontinuing Track 1 (one-sided shared 

savings-only model), and Track 2 (twosided shared savings and shared losses 

model) while maintaining Track 3 

(renamed the ENHANCED track) and 

offering a new BASIC track. Under the 

approach we are adopting in this final 

rule, the program’s two tracks are: (1) A 

BASIC track, offering a glide path from 

a one-sided model for eligible ACOs to 

progressively higher increments of risk 

and potential reward within a single 

agreement period; and (2) an 

ENHANCED track based on the existing 

Track 3 (two-sided model), for ACOs 

that take on the highest level of risk and 

potential reward. As part of this 

approach we are replacing the current 3- 

year agreement period structure with an 

agreement period of at least 5 years, 

allowing eligible BASIC track ACOs 

greater flexibility to select their level of 

risk within an agreement period in the 

glide path, and allowing all BASIC track 

and ENHANCED track ACOs the 

flexibility to change their selection of 

beneficiary assignment methodology 

prior to the start of each performance 

year, consistent with the requirement 

under the Bipartisan Budget Act to 

provide ACOs with a choice of 

prospective assignment. We are 

finalizing Level A and B of the BASIC 

track as one-sided models with a 

maximum shared savings rate of 40 

percent, not to exceed 10 percent of 

updated benchmark; Level C of the 

BASIC track with a maximum shared 

savings rate of 50 percent not to exceed 

10 percent of updated benchmark, and 

loss sharing rate of 30 percent, not to 

exceed 2 percent of ACO participant 

revenue capped at 1 percent of updated 

benchmark; Level D of the BASIC track 

with a maximum shared savings rate of 

50 percent, not to exceed 10 percent of 

updated benchmark, and loss sharing 

rate of 30 percent, not to exceed 4 

percent of ACO participant revenue 

capped at 2 percent of updated 

benchmark; Level E of the BASIC track 

with a maximum shared savings rate of 

50 percent, not to exceed 10 percent of 

updated benchmark, and loss sharing 

rate of 30 percent, not to exceed the 

percentage of revenue specified in the 

revenue-based nominal amount 

standard under the Quality Payment 

Program (for example, 8 percent in 

2019–2020), capped at the amount that 

is 1 percentage point higher than the 

percentage of the updated benchmark 

specified in the expenditure-based 

nominal amount standard under the 

Quality Payment Program (for example, 

4 percent in 2019–2020); and the 

ENHANCED track with a maximum 

shared savings rate of 75 percent, not to 

exceed 20 percent of updated 

benchmark, and loss sharing rate 

determined based on the inverse of the 

final sharing rate, but not less than 40 

percent (that is, between 40–75 percent), 

not to exceed 15 percent of updated 

benchmark. Additionally, new, low 

revenue ACOs will have the option to 

participate under one-sided risk for 3 

years and in exchange will be required 

to move to Level E of the BASIC track 

for the final 2 years of their 5-year 

agreement period. 

To provide ACOs time to consider the 

new participation options and prepare 

for program changes, make investments 

and other business decisions about 

participation, obtain buy-in from their 

governing bodies and executives, and to 

complete and submit a Shared Savings 

Program application for a performance 

year beginning in 2019, we will offer a 

July 1, 2019 start date for the first 

agreement period under the new 

participation options. This midyear start 

in 2019 will also allow both new 


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applicants and ACOs currently 

participating in the program an 

opportunity to make any changes to the 

structure and composition of their ACO 

as may be necessary to comply with the 

new program requirements for the 

ACO’s preferred participation option. 

ACOs entering a new agreement period 

on July 1, 2019, will have the 

opportunity to participate in the 

program under an agreement period 

spanning 5 years and 6 months, with a 

6-month first performance year. 

We are finalizing modifications to the 

repayment mechanism arrangement 

requirements, which help ensure that an 

ACO can repay losses for which it may 

be liable. Our modifications include: (1) 

Adding a provision to align repayment 

mechanism requirements across all 

ACOs in two-sided models under the 

BASIC track and ENHANCED track to 

allow a repayment mechanism equal to 

2 percent of the ACO participants’ total 

Medicare Parts A and B FFS revenue up 

to 1 percent of total per capita Medicare 

Parts A and B FFS expenditures for the 

ACO’s assigned beneficiaries; (2) adding 

a provision to permit recalculation of 

the estimated amount of the repayment 

mechanism each performance year to 

account for changes in ACO participant 

composition; (3) specifying the required 

duration of repayment mechanism 

arrangements and the options available 

to ACOs for fulfilling this requirement; 

(4) adding a provision to allow a 

renewing ACO the flexibility to 

maintain a single, existing repayment 

mechanism arrangement to support its 

ability to repay shared losses in the new 

agreement period so long as the term of 

the arrangement is extended and the 

repayment mechanism amount is 

modified to cover any increase to the 

repayment mechanism amount during 

the new agreement period; and (5) 

establishing requirements regarding the 

issuing institutions for a repayment 

mechanism arrangement. 

This final rule establishes regulations 

in accordance with the Bipartisan 

Budget Act on coverage for telehealth 

services furnished on or after January 1, 

2020, by physicians and other 

practitioners participating in an ACO 

under performance-based risk that has 

selected prospective assignment. This 

policy allows for payment for telehealth 

services furnished to prospectively 

assigned beneficiaries receiving 

telehealth services in non-rural areas, 

and allow beneficiaries to receive 

certain telehealth services at their home, 

to support care coordination across 

settings. The final rule also provides for 

limited waivers of the originating site 

and geographic requirements to allow 

for payment for otherwise covered 

telehealth services provided to 

beneficiaries who are no longer 

prospectively assigned to an applicable 

ACO (and therefore no longer eligible 

for payment for these services under 

section 1899(l) of the Act) during a 90- 

day grace period. In addition, ACO 

participants are prohibited, under 

certain circumstances, from charging 

beneficiaries for telehealth services, 

where CMS does not pay for those 

telehealth services under section 1899(l) 

of the Act solely because the beneficiary 

was never prospectively assigned to the 

applicable ACO or was prospectively 

assigned, but the 90-day grace period 

has lapsed. 

We are finalizing the policy to allow 

eligible ACOs under performance-based 

risk under either prospective 

assignment or preliminary prospective 

assignment with retrospective 

reconciliation to use the program’s 

existing SNF 3-day rule waiver. We also 

are amending the existing SNF 3-day 

rule waiver to allow critical access 

hospitals (CAHs) and other small, rural 

hospitals operating under a swing bed 

agreement to be eligible to partner with 

eligible ACOs as SNF affiliates for 

purposes of the SNF 3-day rule waiver. 

We are finalizing policies to expand 

the role of choice and incentives in 

engaging beneficiaries in their health 

care. First, we are establishing 

regulations in accordance with section 

1899(m)(1)(A) of the Act, as added by 

section 50341 of the Bipartisan Budget 

Act, to permit ACOs under certain twosided models to operate CMS-approved 

beneficiary incentive programs. The 

beneficiary incentive programs will 

encourage beneficiaries assigned to 

certain ACOs to obtain medically 

necessary primary care services while 

requiring such ACOs to comply with 

program integrity and other 

requirements, as the Secretary 

determines necessary. Any ACO that 

operates a CMS-approved beneficiary 

incentive program will be required to 

ensure that certain information about its 

beneficiary incentive program is made 

available to CMS and the public on its 

public reporting web page. Second, to 

empower beneficiary choice and further 

program transparency, we are revising 

policies related to beneficiary 

notifications. For example, we are 

requiring that ACOs notify Medicare 

FFS beneficiaries about voluntary 

alignment in the written notifications 

they must provide to beneficiaries. An 

ACO or its ACO participants will be 

required to provide each beneficiary 

with such notification prior to or at the 

beneficiary’s first primary care visit of 

each performance year. In addition, 

such information must be posted in an 

ACO participant’s facility and available 

upon request (as currently required). 

Additionally, any ACO that operates a 

beneficiary incentive program must also 

notify its beneficiaries of the availability 

of the program. 

We are finalizing new policies for 

determining the participation options 

for ACOs based on the degree to which 

ACOs control total Medicare Parts A 

and B FFS expenditures for their 

assigned beneficiaries (low revenue 

ACO versus high revenue ACO), and the 

experience of the ACO’s legal entity and 

ACO participants with the Shared 

Savings Program and performance-based 

risk Medicare ACO initiatives. 

We also are revising the criteria for 

evaluating the eligibility of ACOs 

seeking to renew their participation in 

the program for a subsequent agreement 

period and ACOs applying to re-enter 

the program after termination or 

expiration of the ACO’s previous 

agreement, based on the ACO’s prior 

participation in the Shared Savings 

Program. We also will identify new 

ACOs as re-entering ACOs if greater 

than 50 percent of their ACO 

participants have recent prior 

participation in the same ACO in order 

to hold these ACO accountable for their 

ACO participants’ experience with the 

program. We will use the same criteria 

to review applications from renewing 

and re-entering ACOs to more 

consistently consider ACOs’ prior 

experience in the Shared Savings 

Program. We will also modify existing 

review criteria, such as the ACO’s 

history of meeting the quality 

performance standard and the ACO’s 

timely repayment of shared losses to 

ensure applicability to ACOs with an 

agreement period that is not less than 5 

years. We will also strengthen the 

program’s requirements for monitoring 

ACOs within an agreement period for 

poor financial performance to ensure 

that ACOs with poor financial 

performance are not allowed to continue 

their participation in the program, or to 

re-enter the program without addressing 

the deficiencies that resulted in 

termination. 

We are updating program policies 

related to termination of ACOs’ 

participation in the program. We are 

reducing the amount of notice an ACO 

must provide CMS of its decision to 

voluntarily terminate. We also address 

the timing of an ACO’s re-entry into the 

program after termination. Specifically, 

we are modifying current requirements 

that prevent an ACO from terminating 

its participation agreement and quickly 

re-entering the program to allow the 

flexibility for an ACO in a current 3-year 

agreement period to terminate its 


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participation agreement and 

immediately enter a new agreement 

period of not less than 5 years under 

one of the redesigned participation 

options. We are also finalizing policies 

that will prevent ACOs from taking 

advantage of this flexibility to avoid 

transitioning to risk by repeatedly 

participating in the BASIC track’s glide 

path for a short time, terminating, and 

then entering a one-sided model in a 

future agreement period under the 

BASIC track. Specifically, we will 

restrict eligibility for the BASIC track’s 

glide path to ACOs inexperienced with 

performance-based risk Medicare ACO 

initiatives, and we define performancebased risk Medicare ACO initiative to 

include all levels of the BASIC track’s 

glide path. We also will differentiate 

between initial entrants (ACOs entering 

the program for the first time), ‘‘reentering ACOs’’ (ACOs re-entering after 

a break in participation following 

termination or expiration of a prior 

participation agreement, and new ACOs 

identified as re-entering ACOs because 

greater than 50 percent of their ACO 

participants have recent prior 

participation in the same ACO), and 

‘‘renewing ACOs’’ (ACOs that 

participate continuously in the program, 

without interruption, including ACOs 

that choose to renew early by 

terminating their current agreement and 

immediately entering a new agreement 

period). This differentiation is relevant 

for determining the agreement period 

the ACO is entering for purposes of 

applying policies that phase-in over 

time (benchmarking methodology and 

quality performance standards) and for 

determining whether an ACO can 

extend the use of its existing repayment 

mechanism when it enters a new 

agreement period. 

Further, we will impose payment 

consequences for early termination by 

holding ACOs in two-sided models 

liable for pro-rated shared losses. This 

approach will apply to ACOs that 

voluntarily terminate their participation 

more than midway through a 12-month 

performance year and all ACOs that are 

involuntarily terminated by CMS. ACOs 

will continue to be ineligible to share in 

savings for a performance year if the 

effective date of their termination from 

the program is prior to the last calendar 

day of the performance year; however, 

we will allow an exception for ACOs 

that are participating in the program as 

of January 1, 2019, that terminate their 

agreement with an effective date of June 

30, 2019, and enter a new agreement 

period under the BASIC track or 

ENHANCED track beginning July 1, 

2019. Under this exception, an ACO 

would be eligible for pro-rated shared 

savings or liable for pro-rated shared 

losses. In these cases, we will perform 

separate reconciliations to determine 

shared savings and shared losses for the 

ACO’s first 6 months of participation in 

2019 and for the ACO’s 6-month 

performance year from July 1, 2019, to 

December 31, 2019, under the 

subsequent participation agreement. 

To strengthen ACO financial 

incentives for continued program 

participation and improve the 

sustainability of the program, we are 

finalizing changes to the methodology 

for establishing, adjusting, updating and 

resetting benchmarks for agreement 

periods beginning on July 1, 2019, and 

in subsequent years, to include the 

following: 

• Application of factors based on regional 

FFS expenditures to establish, adjust, and 

update the ACO’s benchmark beginning in an 

ACO’s first agreement period, to move 

benchmarks away from being based solely on 

the ACO’s historical costs and allow them to 

better reflect costs in the ACO’s region. 

• Mitigating the risk that an excessive 

positive or negative regional adjustment will 

be used to establish and reset the benchmark 

by— 

++ Reducing the maximum weight used in 

calculating the regional adjustment from 70 

percent to 50 percent; 

++ Modifying the phase in schedule for 

applying increased weights in calculating the 

regional adjustment for ACOs with spending 

above their region; and 

++ Capping the amount of the adjustment 

based on a percentage of national FFS 

expenditures. 

• Calculating growth rates used in trending 

expenditures to establish the benchmark and 

in updating the benchmark each performance 

year as a blend of regional and national 

expenditure growth rates with increasing 

weight placed on the national component of 

the blend as the ACO’s penetration in its 

region increases. 

• Better accounting for certain health 

status changes by using full CMSHierarchical Condition Category (HCC) risk 

scores to adjust the benchmark each 

performance year, although restricting the 

upward effects of these adjustments to 

positive 3 percent over the agreement period. 

We also discuss comments received in 

response to our request for comment on 

approaches for encouraging Medicare 

ACOs to collaborate with the sponsors 

of stand-alone Part D PDPs (Part D 

sponsors) to improve the coordination 

of pharmacy care for Medicare FFS 

beneficiaries to reduce the risk of 

adverse events and improve medication 

adherence. In particular, we sought 

comment to understand how Medicare 

ACOs, and specifically Shared Savings 

Program ACOs, and Part D sponsors 

could work together and be encouraged 

to improve the coordination of 

pharmacy care for Medicare FFS 

beneficiaries to achieve better health 

outcomes, what clinical and pharmacy 

data may be necessary to support 

improved coordination of pharmacy 

care for Medicare FFS beneficiaries, and 

approaches to structuring financial 

arrangements to reward ACOs and Part 

D sponsors for improved health 

outcomes and lower growth in 

expenditures for Medicare FFS 

beneficiaries. 

Lastly, in the December 2017 interim 

final rule with comment period we 

established policies for assessing the 

financial and quality performance of 

Shared Savings Program ACOs that were 

affected by extreme and uncontrollable 

circumstances during performance year 

2017, including the applicable quality 

reporting period for performance year 

2017. These policies were used to assess 

quality and financial performance 

during performance year 2017 for ACOs 

subject to extreme and uncontrollable 

events, such as Hurricanes Harvey, 

Irma, and Maria, and the California 

wildfires, during performance year 

2017, including the applicable quality 

data reporting period for the 

performance year. In this final rule, we 

provide an analysis of and responses to 

the public comments we received in 

response to the December 2017 interim 

final rule with comment period. 

3. Summary of Costs and Benefits 

As detailed in section V. of this final 

rule, the faster transition from one-sided 

model agreements to performance-based 

risk arrangements, tempered by the 

option for eligible ACOs of a gentler 

exposure to downside risk calculated as 

a percentage of ACO participants’ total 

Medicare Parts A and B FFS revenue 

and capped at a percentage of the ACO’s 

benchmark, can affect broader 

participation in performance-based risk 

in the Shared Savings Program and 

reduce overall claims costs. A second 

key driver of estimated net savings is 

the reduction in shared savings 

payments from the limitation on the 

amount of the regional adjustment to the 

ACO’s historical benchmark. Such 

reduction in overall shared savings 

payments is projected to result despite 

the benefit of higher net adjustments 

expected for a larger number of ACOs 

from the use of a simpler HCC risk 

adjustment methodology, the blending 

of national and regional expenditure 

growth rates for certain benchmark 

calculations, and longer (at least 5 years, 

instead of 3-year) agreement periods 

that allow ACOs a longer horizon from 

which to benefit from efficiency gains 

before benchmark rebasing. Overall, the 

decreases in claims costs and shared 


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2See for example, Medicare Program; Revisions 

to Payment Policies under the Physician Fee 

Schedule, Clinical Laboratory Fee Schedule & Other 

Revisions to Part B for CY 2014; Final Rule (78 FR 

74230, Dec. 10, 2013). Medicare Program; Revisions 

to Payment Policies under the Physician Fee 

Schedule, Clinical Laboratory Fee Schedule & Other 

Revisions to Part B for CY 2015; Final Rule (79 FR 

67548, Nov. 13, 2014). Medicare Program; Revisions 

to Payment Policies under the Physician Fee 

Schedule, Clinical Laboratory Fee Schedule & Other 

Revisions to Part B for CY 2016; Final Rule (80 FR 

70886, Nov. 16, 2015). Medicare Program; Revisions 

to Payment Policies under the Physician Fee 

Schedule, Clinical Laboratory Fee Schedule & Other 

Revisions to Part B for CY 2017; Final Rule (81 FR 

80170, Nov. 15, 2016). Medicare Program; Revisions 

to Payment Policies under the Physician Fee 

Schedule, Clinical Laboratory Fee Schedule & Other 

Revisions to Part B for CY 2018; Final Rule (82 FR 

52976, Nov. 15, 2017). Medicare Program; Revisions 

to Payment Policies Under the Physician Fee 

Schedule and Other Revisions to Part B for CY 

2019; Medicare Shared Savings Program 

Requirements; Quality Payment Program; Medicaid 

Promoting Interoperability Program; Quality 

Payment Program—Extreme and Uncontrollable 

Circumstance Policy for the 2019 MIPS Payment 

Year; Provisions From the Medicare Shared Savings 

Program—Accountable Care Organizations— 

Pathways to Success; and Expanding the Use of 

Telehealth Services for the Treatment of Opioid Use 

Disorder Under the Substance Use-Disorder 

Prevention That Promotes Opioid Recovery and 

Treatment (SUPPORT) for Patients and 

Communities Act’’ (83 FR 59452, Nov. 23, 2018). 

saving payments to ACOs are projected 

to result in $2.9 billion in federal 

savings over 10 years. 

B. Statutory and Regulatory Background 

On March 23, 2010, the Patient 

Protection and Affordable Care Act 

(Pub. L. 111–148) was enacted, followed 

by enactment of the Health Care and 

Education Reconciliation Act of 2010 

(Pub. L. 111–152) on March 30, 2010, 

which amended certain provisions of 

Public Law 111–148. 

Section 3022 of the Affordable Care 

Act amended Title XVIII of the Act (42 

U.S.C. 1395 et seq.) by adding section 

1899 to the Act to establish the Shared 

Savings Program to facilitate 

coordination and cooperation among 

health care providers to improve the 

quality of care for Medicare FFS 

beneficiaries and reduce the rate of 

growth in expenditures under Medicare 

Parts A and B. See 42 U.S.C. 1395jjj. 

The final rule establishing the Shared 

Savings Program appeared in the 

November 2, 2011 Federal Register 

(Medicare Program; Medicare Shared 

Savings Program: Accountable Care 

Organizations; Final Rule (76 FR 67802) 

(hereinafter referred to as the 

‘‘November 2011 final rule’’)). We 

viewed this final rule as a starting point 

for the program, and because of the 

scope and scale of the program and our 

limited experience with shared savings 

initiatives under FFS Medicare, we built 

a great deal of flexibility into the 

program rules. 

Through subsequent rulemaking, we 

have revisited and amended Shared 

Savings Program policies in light of the 

additional experience we gained during 

the initial years of program 

implementation as well as from testing 

through the Pioneer ACO Model, the 

Next Generation ACO Model, and other 

initiatives conducted by the Center for 

Medicare and Medicaid Innovation 

(Innovation Center) under section 

1115A of the Act. A major update to the 

program rules appeared in the June 9, 

2015 Federal Register (Medicare 

Program; Medicare Shared Savings 

Program: Accountable Care 

Organizations; Final Rule (80 FR 32692) 

(hereinafter referred to as the ‘‘June 

2015 final rule’’)). A final rule 

addressing changes related to the 

program’s financial benchmark 

methodology appeared in the June 10, 

2016 Federal Register (Medicare 

Program; Medicare Shared Savings 

Program; Accountable Care 

Organizations—Revised Benchmark 

Rebasing Methodology, Facilitating 

Transition to Performance-Based Risk, 

and Administrative Finality of Financial 

Calculations (81 FR 37950) (hereinafter 

referred to as the ‘‘June 2016 final 

rule’’)). We have also made use of the 

annual CY Physician Fee Schedule 

(PFS) rules to address updates to the 

Shared Savings Program quality 

measures, scoring, and quality 

performance standard, the program’s 

beneficiary assignment methodology 

and certain other issues.2

Policies applicable to Shared Savings 

Program ACOs have continued to evolve 

based on changes in the law. The 

Medicare Access and CHIP 

Reauthorization Act of 2015 (MACRA) 

established the Quality Payment 

Program (Pub. L. 114–10). In the CY 

2017 Quality Payment Program final 

rule with comment period (81 FR 

77008), CMS established regulations for 

the Merit-Based Incentive Payment 

System (MIPS) and Advanced 

Alternative Payment Models (APMs) 

and related policies applicable to 

eligible clinicians who participate in the 

Shared Savings Program. 

The requirements for assignment of 

Medicare FFS beneficiaries to ACOs 

participating under the program were 

amended by the 21st Century Cures Act 

(Pub. L. 114–255). Accordingly, we 

revised the program’s regulations in the 

CY 2018 PFS final rule to reflect these 

new requirements. 

On February 9, 2018, the Bipartisan 

Budget Act of 2018 was enacted (Pub. L. 

115–123), amending section 1899 of the 

Act to provide for the following: 

Expanded use of telehealth services by 

physicians or practitioners participating 

in an applicable ACO to a prospectively 

assigned beneficiary, greater flexibility 

in the assignment of Medicare FFS 

beneficiaries to ACOs by allowing ACOs 

in tracks under retrospective beneficiary 

assignment a choice of prospective 

assignment for the agreement period, 

permitting Medicare FFS beneficiaries 

to voluntarily identify an ACO 

professional as their primary care 

provider and requiring that such 

beneficiaries be notified of the ability to 

make and change such identification, 

and mandating that any such voluntary 

identification will supersede claimsbased assignment, and allowing ACOs 

under certain two-sided models to 

establish CMS-approved beneficiary 

incentive programs. 

In the November 2018 final rule, we 

finalized a subset of the provisions 

proposed in the August 2018 proposed 

rule and the CY 2019 PFS proposed rule 

as follows: 

• Offering existing ACOs whose 

participation agreements expire on December 

31, 2018, the opportunity to elect a voluntary 

6-month extension of their current agreement 

period, and the methodology for determining 

financial and quality performance for the 6- 

month performance year from January 1, 

2019, through June 30, 2019. 

• Allowing beneficiaries greater flexibility 

in selecting their primary care provider and 

in the use of that selection for purposes of 

assigning the beneficiary to an ACO, if the 

clinician they align with is participating in 

an ACO, as provided for in the Bipartisan 

Budget Act. 

• Revising the definition of primary care 

services used in beneficiary assignment. 

• Providing relief for ACOs and their 

clinicians impacted by extreme and 

uncontrollable circumstances in performance 

year 2018 and subsequent years. 

• Reducing the Shared Savings Program 

core quality measure set by eight measures; 

and promoting interoperability among ACO 

providers/suppliers by adding a new CEHRT 

threshold criterion to determine ACOs’ 

eligibility for program participation and 

retiring the current Shared Savings Program 

quality measure on the percentage of eligible 

clinicians using CEHRT. 

II. Provisions of the August 2018 

Proposed Rule and Analysis of and 

Responses to Public Comments 

In the August 17, 2018 Federal 

Register (83 FR 41786), we published a 

proposed rule titled ‘‘Medicare Program; 

Medicare Shared Savings Program; 

Accountable Care Organizations— 

Pathways to Success’’. The proposed 

rule would provide a new direction for 

the Shared Savings Program by 

establishing pathways to success 

through redesigning the participation 

options available under the program to 

encourage ACOs to transition to twosided models (in which they may share 


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in savings and are accountable for 

repaying shared losses). These policies 

are designed to increase savings for the 

Trust Funds and mitigate losses, reduce 

gaming opportunities, and promote 

regulatory flexibility and free-market 

principles. The rule would also provide 

new tools to support coordination of 

care across settings and strengthen 

beneficiary engagement; ensure rigorous 

benchmarking; promote interoperable 

electronic health record technology 

among ACO providers/suppliers; and 

improve information sharing on opioid 

use to combat opioid addiction. 

We received 469 timely pieces of 

correspondence in response to the 

proposed rule. Stakeholders offered 

comments that addressed both high 

level issues related to the Shared 

Savings Program as well as our specific 

proposals and requests for comments. 

We extend our deep appreciation to the 

public for their interest in the program 

and the many comments that were made 

in response to our proposed policies. In 

some instances, the public comments 

offered were outside the scope of the 

proposed rule and will not be addressed 

in this final rule. 

As summarized in section I.B of this 

final rule, in the November 2018 final 

rule, we addressed a subset of changes 

to the Shared Savings Program proposed 

in the August 2018 proposed rule. In the 

following sections of this final rule, we 

summarize and respond to public 

comments on the following proposed 

policies and discuss our final policies 

after taking into consideration the 

public comments we received on the 

August 2018 proposed rule. 

A. Redesigning Participation Options To 

Facilitate Transition to PerformanceBased Risk 

In this section, we discuss a series of 

interrelated proposals around transition 

to risk, including: (1) Length of time an 

ACO may remain under a one-sided 

model; (2) the levels of risk and reward 

under the program’s participation 

options; (3) the duration of the ACO’s 

agreement period; and (4) the degree of 

flexibility ACOs have to choose their 

beneficiary assignment methodology 

and also to select their level of risk 

within an agreement period. 

1. Background on Shared Savings 

Program Participation Options 

In this section, we review the 

statutory and regulatory background for 

the program’s participation options by 

track and the length of the ACO’s 

agreement period for participation in 

the program, and also provide an 

overview of current ACO participation 

in the program for performance year 

2018. 

a. Background on Development of Track 

1, Track 2 and Track 3 

Section 1899(d) of the Act establishes 

the general requirements for shared 

savings payments to participating ACOs. 

Specifically, section 1899(d)(1)(A) of the 

Act specifies that providers of services 

and suppliers participating in an ACO 

will continue to receive payments under 

the original Medicare FFS program 

under Parts A and B in the same manner 

as would otherwise be made, and that 

an ACO is eligible to receive payment 

for a portion of savings generated for 

Medicare provided that the ACO meets 

both the quality performance standards 

established by the Secretary and 

achieves savings against its historical 

benchmark based on average per capita 

Medicare FFS expenditures during the 3 

years preceding the start of the 

agreement period. Additionally, section 

1899(i) of the Act authorizes the 

Secretary to use other payment models 

rather than the one-sided model 

described in section 1899(d) of the Act, 

as long as the Secretary determines that 

the other payment model will improve 

the quality and efficiency of items and 

services furnished to Medicare 

beneficiaries without additional 

program expenditures. 

In the November 2011 final rule 

establishing the Shared Savings Program 

(76 FR 67909), we created two tracks 

from which ACOs could choose to 

participate: The one-sided model (Track 

1) that is based on the statutory payment 

methodology under section 1899(d) of 

the Act, and a two-sided model (Track 

2) that is also based on the payment 

methodology under section 1899(d) of 

the Act, but incorporates performancebased risk using the authority under 

section 1899(i)(3) of the Act to use other 

payment models. Under the one-sided 

model, ACOs can qualify to share in 

savings but are not responsible for 

losses. Under a two-sided model, ACOs 

can qualify to share in savings with an 

increased sharing rate, but must also 

take on risk for sharing in losses. ACOs 

entering the program or renewing their 

agreement may elect to enter a twosided model. Once an ACO has elected 

to participate under a two-sided model, 

the ACO cannot go into Track 1 for 

subsequent agreement periods (see 

§ 425.600). 

In the initial rulemaking for the 

program, we considered several 

approaches to designing the program’s 

participation options, principally: (1) 

Base the program on a two-sided model, 

thereby requiring all participants to 

accept risk from the first program year; 

(2) allow applicants to choose between 

program tracks, either a one-sided 

model or two-sided model, for the 

duration of the agreement; or (3) allow 

a choice of tracks, but require ACOs 

electing the one-sided model to 

transition to the two-sided model during 

their initial agreement period (see, for 

example, 76 FR 19618). We proposed a 

design for Track 1 whereby ACOs would 

enter a 3-year agreement period under 

the one-sided model and would 

automatically transition to the twosided model (under Track 2) in the third 

year of their initial agreement period. 

Thereafter, those ACOs that wished to 

continue participating in the Shared 

Savings Program would only have the 

option of participating under 

performance-based risk (see 76 FR 

19618). We explained that this approach 

would have the advantage of providing 

an entry point for organizations with 

less experience with risk models, such 

as some physician-driven organizations 

or smaller ACOs, to gain experience 

with population management before 

transitioning to a risk-based model 

while also providing an opportunity for 

more experienced ACOs that are ready 

to share in losses to enter a sharing 

arrangement that provides the potential 

for greater reward in exchange for 

assuming greater potential 

responsibility. A few commenters 

favored this proposed approach, 

indicating the importance of 

performance-based risk in the health 

care delivery system transformation 

necessary to achieve the program’s aims 

and for ‘‘good stewardship’’ of Medicare 

Trust Fund dollars. However, most 

commenters expressed concerns about 

requiring ACOs to quickly accept 

performance-based risk. Therefore, we 

finalized a policy where an ACO could 

remain under the one-sided model for 

the duration of its first agreement period 

(see 76 FR 67904 through 67909). 

In earlier rulemaking, we explained 

that offering multiple tracks with 

differing degrees of risk across the 

Shared Savings Program tracks would 

create an ‘‘on-ramp’’ for the program to 

attract both providers and suppliers that 

are new to value-based purchasing, as 

well as more experienced entities that 

are ready to share performance-based 

risk. We stated that a one-sided model 

would have the potential to attract a 

large number of participants to the 

program and introduce value-based 

purchasing broadly to providers and 

suppliers, many of whom may never 

have participated in a value-based 

purchasing initiative before (see, for 

example, 76 FR 67904 through 67909). 

Another reason we included the 

option for a one-sided track with no 


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3See 79 FR 72805 (discussing proposal to reduce 

the sharing rate by 10 percentage points for ACOs 

in a second agreement period under Track 1 to 

make staying in the one-sided model less attractive 

than moving forward along the risk continuum); 80 

FR 32766 (In response to our proposal in the 

December 2014 proposed rule to offer a 40 percent 

sharing rate to ACOs that remained in Track 1 for 

a second agreement period, several commenters 

recommended dropping the sharing rate under the 

one-sided model even further to encourage ACOs to 

more quickly accept performance-based risk, for 

example to 20 percent, 25 percent or 30 percent 

under the second agreement period, or making a 5 

percentage point reduction for each year under the 

second agreement period). 

4See Pioneer ACO Model website, https://

innovation.cms.gov/initiatives/Pioneer-aco-model/ 

(the Pioneer ACO Model ‘‘was designed for health 

care organizations and providers that were already 

experienced in coordinating care for patients across 

care settings’’); see also CMS Press Release, New 

Participants Join Several CMS Alternative Payment 

Models (January 18, 2017), available at https://

www.cms.gov/Newsroom/MediaReleaseDatabase/ 

Press-releases/2017-Press-releases-items/2017-01- 

18.html (the ‘‘Next Generation ACO Model was 

designed to test whether strong financial incentives 

for ACOs can improve health outcomes and reduce 

expenditures for Medicare fee-for-service 

beneficiaries. Provider groups in this model assume 

higher levels of financial risk and reward than are 

available under the Shared Savings Program.’’). 

downside risk was that this model 

would be accessible to and attract small, 

rural, safety net, and/or physician-only 

ACOs (see 80 FR 32759). Commenters 

identified groups that may be especially 

challenged by the upfront costs of ACO 

formation and operations, including: 

Private primary care practitioners, small 

to medium sized physician practices, 

small ACOs, safety net providers (that 

is, Rural Health Clinics (RHCs), CAHs, 

Federally Qualified Health Centers 

(FQHCs), community-funded safety net 

clinics), and other rural providers (that 

is, Method II CAHs, rural prospective 

payment system hospitals designated as 

rural referral centers, sole community 

hospitals, Medicare dependent 

hospitals, or rural primary care 

providers) (see 76 FR 67834 through 

67835). Further, commenters also 

indicated that ACOs that are composed 

of small- and medium-sized physician 

practices, loosely formed physician 

networks, safety net providers, and 

small and/or rural ACOs would be 

encouraged to participate in the 

program based on the availability of a 

one-sided model (see, for example, 76 

FR 67906). Commenters also expressed 

concerns about requiring ACOs that may 

lack experience with care management 

or managing performance-based risk to 

quickly transition to performance-based 

risk. Some commenters suggested that 

small, rural and physician-only ACOs 

be exempt from downside risk (see, for 

example, 76 FR 67906). 

In establishing the program’s initial 

two track approach, we acknowledged 

that ACOs new to the accountable care 

model—and particularly small, rural, 

safety net, and physician-only ACOs— 

would benefit from additional time 

under the one-sided model before being 

required to accept risk (76 FR 67907). 

However, we also noted that although a 

one-sided model could provide 

incentives for participants to improve 

quality, it might not be sufficient 

incentive for participants to improve the 

efficiency and cost of health care 

delivery (76 FR 67904 and 80 FR 

32759). We explained that payment 

models where ACOs bear a degree of 

financial risk have the potential to 

induce more meaningful systematic 

change in providers’ and suppliers’ 

behavior (see, for example, 76 FR 

67907). We also explained that 

performance-based risk options could 

have the advantage of providing more 

experienced ACOs an opportunity to 

enter a sharing arrangement with the 

potential for greater reward in exchange 

for assuming greater potential 

responsibility (see, for example, 76 FR 

67907). 

We note that in earlier rulemaking we 

have used several terms to refer to 

participation options in the Shared 

Savings Program under which an ACO 

is potentially liable to share in losses 

with Medicare. In the initial rulemaking 

for the program, we defined ‘‘two-sided 

model’’ to mean a model under which 

the ACO may share savings with the 

Medicare program, if it meets the 

requirements for doing so, and is also 

liable for sharing any losses incurred 

(§ 425.20). We have also used the term 

‘‘performance-based risk’’ to refer to the 

type of risk an ACO participating in a 

two-sided model undertakes. As we 

explained in the November 2011 final 

rule (76 FR 67945), in a two-sided 

model under the Shared Savings 

Program, the Medicare program retains 

the insurance risk and responsibility for 

paying claims for the services furnished 

to Medicare beneficiaries. It is only 

shared savings payments (and shared 

losses in a two-sided model) that will be 

contingent upon ACO performance. The 

agreement to share risk against the 

benchmark would be solely between the 

Medicare program and the ACO. As a 

result, we have tended to use the terms 

‘‘two-sided model’’ and ‘‘performancebased risk’’ interchangeably, 

considering them to be synonymous 

when describing payment models 

offered under the Shared Savings 

Program and Medicare ACO initiatives 

more broadly. 

In the June 2015 final rule, we 

modified the existing policies to allow 

eligible Track 1 ACOs to renew for a 

second agreement period under the onesided model, and to require that they 

enter a performance-based risk track in 

order to remain in the program for a 

third or subsequent agreement period. 

We explained the rationale for these 

policies in the prior rulemaking and we 

refer readers to the December 2014 

proposed rule and June 2015 final rule 

for more detailed discussion. (See, for 

example, 79 FR 72804, and 80 FR 32760 

through 32761.) In developing these 

policies, we considered, but did not 

finalize, approaches to make Track 1 

less attractive for continued 

participation, in order to support 

progression to risk, including offering a 

reduced sharing rate to ACOs remaining 

under the one-sided model for a second 

agreement period.3 We also modified 

the two-sided performance-based risk 

track (Track 2) and began to offer an 

alternative two-sided performancebased risk track (Track 3) for agreement 

periods beginning on or after January 1, 

2016 (80 FR 32771 through 32781). 

Compared to Track 2, which uses the 

same preliminary prospective 

beneficiary assignment methodology 

with retrospective reconciliation as 

Track 1, Track 3 includes prospective 

beneficiary assignment and a higher 

sharing rate for shared savings as well 

as the potential for greater liability for 

shared losses. Further, we established a 

SNF 3-day rule waiver (discussed 

further in section II.B.2.a. of this final 

rule), for use by eligible Track 3 ACOs. 

The Innovation Center has tested 

progressively higher levels of risk for 

more experienced ACOs through the 

Pioneer ACO Model (concluded 

December 31, 2016) and the Next 

Generation ACO Model (ongoing).4

Lessons learned from the Pioneer ACO 

Model were important considerations in 

the development of Track 3, which 

incorporates several features of the 

Pioneer ACO Model, including 

prospective beneficiary assignment, 

higher levels of risk and reward 

(compared to Track 2), and the 

availability of a SNF-3-day rule waiver. 

Since Track 3 was introduced as a 

participation option under the Shared 

Savings Program, we have seen a 

growing interest, with 16 Track 3 ACOs 

completing PY 2016 and 38 Track 3 

ACOs participating in PY 2018. The 

continued increase in the number of 

ACOs participating in Track 3, a higher 

proportion of which have achieved 

shared savings compared to Track 1 

ACOs, suggests that the track offers a 

pathway to improve care for 

beneficiaries at a level of risk and 

reward sufficient to induce ACOs to 

improve their financial performance. 


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5See, for example, 80 FR 32761 (summarizing 

comments suggesting a combination of factors could 

make the program more attractive and encourage 

ACOs to transition to risk, such as: The level of risk 

and reward offered under the program’s financial 

models, tools to enable ACOs to more effectively 

control and manage their patient populations, 

opportunity for ACOs to gain experience with the 

program under the one-sided model under the same 

rules that would be applied under a two-sided 

model, including the assignment methodology, 

allowing ACOs to move to two-sided risk within an 

agreement period, and allowing for longer 

agreement periods). 

6See discussion in section II.A.1.a of this final 

rule. See also 81 FR 37996 (summarizing comments 

suggesting that if a Track 1 ACO is uncertain about 

its ability to successfully manage financial risk, the 

ACO would more likely simply choose to continue 

under Track 1 for a second agreement period.) 

For example, for performance year 2016, 

about 56 percent of Track 3 ACOs (9 of 

16 ACOs) achieved shared savings 

compared to 29 percent of Track 1 ACOs 

(119 of 410 ACOs). See 2016 Shared 

Savings Program Accountable Care 

Organization Public Use File, available 

at https://www.cms.gov/ResearchStatistics-Data-and-Systems/ 

Downloadable-Public-Use-Files/ 

SSPACO/index.html. 

Further, the Innovation Center has 

tested two models for providing upfront funding to eligible small, rural, or 

physician-only Shared Savings Program 

ACOs. Initially, CMS offered the 

Advance Payment ACO Model, 

beginning in 2012 and concluding 

December 31, 2015. See https://

innovation.cms.gov/initiatives/ 

Advance-Payment-ACO-Model/. The 

ACO Investment Model (AIM), which 

began in 2015, builds on the experience 

with the Advance Payment ACO Model. 

The AIM is ongoing, with 45 

participating ACOs. See https://

innovation.cms.gov/initiatives/ACOInvestment-Model/. 

In the June 2016 final rule, to further 

encourage ACOs to transition to 

performance-based risk, we finalized a 

participation option for eligible Track 1 

ACOs to defer by one year their entrance 

into a second agreement period under a 

two-sided model (Track 2 or Track 3) by 

extending their first agreement period 

under Track 1 for a fourth performance 

year (§ 425.200(e); 81 FR 37994 through 

37997). Under this deferred renewal 

option, we defer resetting the 

benchmark as specified at § 425.603 

until the beginning of the ACO’s second 

agreement period. This participation 

option became available to ACOs 

seeking to enter their second agreement 

period beginning in 2017 and in 

subsequent years. However, only a small 

number of ACOs have made use of this 

option. 

In prior rulemaking for the Shared 

Savings Program, we have indicated that 

we would continue to evaluate the 

appropriateness and effectiveness of our 

incentives to encourage ACOs to 

transition to a performance-based risk 

track and, as necessary, might revisit 

alternative participation options 

through future notice and comment 

rulemaking (81 FR 37995 through 

37996). We stated that it is timely to 

reconsider the participation options 

available under the program in light of 

the financial and quality results for the 

first four performance years under the 

program, participation trends by ACOs, 

and feedback from ACOs and other 

program stakeholders’ about factors that 

encourage transition to risk. Therefore, 

we issued the August 2018 proposed 

rule. 

b. Background on Factors Affecting 

Transition to Performance-Based Risk 

Based on comments submitted by 

ACOs and other program stakeholders 

in response to earlier rulemaking and 

our experience with implementing the 

Shared Savings Program, a combination 

of factors affect ACOs’ transition to 

performance-based risk.5 These factors 

include the following: 

(1) Length of time allowed under a 

one-sided model and availability of 

options to transition from a one-sided 

model to a two-sided model within an 

ACO’s agreement period. (Discussed in 

detail within this section. See also 

discussion of related background in 

section II.A.1.a. of this final rule.) 

(2) An ACO’s level of experience with 

the accountable care model and the 

Shared Savings Program.6

(3) Choice of methodology used to 

assign beneficiaries to ACOs, which 

determines the beneficiary population 

for which the ACO is accountable for 

both the quality and cost of care. 

(Background on choice of assignment 

methodology is discussed within this 

section; see also section II.A.4. of this 

final rule.) Specifically, the assignment 

methodology is used to determine the 

populations that are the basis for 

determining the ACO’s historical 

benchmark and the population assigned 

to the ACO each performance year, 

which is the basis for determining 

whether the ACO will share in savings 

or losses for that performance year. 

(4) Availability of program and 

payment flexibilities to ACOs 

participating under performance-based 

risk to support beneficiary engagement 

and the ACO’s care coordination 

activities (see discussion in sections 

II.B. and II.C. of this final rule). 

(5) Financial burden on ACOs in 

meeting program requirements to enter 

into two-sided models, specifically the 

requirement to establish an adequate 

repayment mechanism (see discussion 

in section II.A.6.c. of this final rule). 

(6) Value proposition of the program’s 

financial model under one-sided and 

two-sided models. 

The value proposition of the 

program’s financial models raises a 

number of key considerations that 

pertain to an ACO’s transition to risk. 

One consideration is the level of 

potential reward under the one-sided 

model in relation to the levels of 

potential risk and reward under a twosided model. A second consideration is 

the availability of asymmetrical levels of 

risk and reward, such as in the Medicare 

ACO Track 1+ Model (Track 1+ Model), 

where, for certain eligible ACOs, the 

level of risk is determined based on a 

percentage of ACO participants’ total 

Medicare Parts A and B FFS revenue, 

not to exceed a percentage of the ACO’s 

benchmark (determined based on 

historical expenditures for its assigned 

population). A third consideration is the 

interactions between the ACO’s 

participation in a two-sided model of 

the Shared Savings Program and 

incentives available under other CMS 

value-based payment initiatives; in 

particular, eligible clinicians 

participating in an ACO under a twosided model of the Shared Savings 

Program may qualify to receive an APM 

incentive payment under the Quality 

Payment Program for sufficient 

participation in an Advanced APM. 

Lastly, the value proposition of the 

program is informed by the 

methodology for setting and resetting 

the benchmark, which is the basis for 

determining shared savings and shared 

losses, and the length of agreement 

period, which determines the amount of 

time an ACO remains under a financial 

model and the frequency of benchmark 

rebasing. See discussion in sections II.D. 

(benchmarking) and II.A.1.c. (length of 

agreement period) of this final rule. 

Currently, the design of the program 

locks in the ACO’s choice of financial 

model, which also determines the 

applicable beneficiary assignment 

methodology, for the duration of the 

ACO’s 3-year agreement period. For an 

ACO’s initial or subsequent agreement 

period in the Shared Savings Program, 

an ACO applies to participate in a 

particular financial model (or ‘‘track’’) 

of the program as specified under 

§ 425.600(a). If the ACO’s application is 

accepted, the ACO must remain under 

that financial model for the duration of 

its 3-year agreement period. Beneficiary 

assignment and the level of 

performance-based risk (if applicable) 

are determined consistently for all 

ACOs participating in a particular track. 

Under Track 1 and Track 2, we assign 


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7See, for example, 76 FR 67864 (summarizing 

comments suggesting allowing ACOs a choice of 

prospective or retrospective assignment); 80 FR 

32772 through 32774 (In response to our proposal 

to use a prospective assignment methodology in 

Track 3, many commenters generally encouraged 

CMS to extend the option for prospective 

assignment beyond Track 3 to Track 1 and Track 

2. Other commenters saw the value in retaining 

both assignment methodologies, and encouraged 

CMS to allow all ACOs, regardless of track, a choice 

of prospective or retrospective assignment. Several 

commenters suggested CMS allow ACOs a choice of 

retrospective or prospective assignment annually, 

within the ACO’s 3-year agreement period). 

8See, for example, 76 FR 67907 through 67909 

(discussing comments suggesting ACOs be allowed 

3, 4, 5, or 6 years under Track 1 prior to 

transitioning to a performance-based risk track). 

9See Merit-Based Incentive Payment System 

(MIPS) and Alternative Payment Model (APM) 

Incentive under the Physician Fee Schedule, and 

Criteria for Physician-Focused Payment Models 

final rule with comment period, 81 FR 77008 (Nov. 

4, 2016), herein referred to as the CY 2017 Quality 

Payment Program final rule with comment period. 

10See CY 2017 Quality Payment Program final 

rule with comment period for summary of 

comments and responses. Individual comments are 

available at https://www.regulations.gov, search on 

file code CMS–5517–P, docket ID CMS–2016–0060 

(https://www.regulations.gov/docketBrowser?rpp=

25&so=DESC&sb=commentDue

Date&po=0&dct=PS&D=CMS-2016-0060). See for 

example, Letter from Clif Gaus, NAACOS to 

Andrew Slavitt, Acting Administrator, Centers for 

Medicare & Medicaid Services, regarding CMS– 

5517–P (June 27, 2016); Letter from Tonya K. Wells, 

Trinity Health to Slavitt regarding CMS–5517–P 

(June 27, 2016); Letter from Joseph Bisordi, M.D., 

Ochsner Health System to Slavitt regarding CMS– 

5517–P (June 27, 2016); Letter from Kevin Bogari, 

Lancaster General Health Community Care 

Collaborative to Slavitt regarding CMS–5517–P 

(June 27, 2016). 

11See 81 FR 77421 (describing comments 

suggesting CMS adopt a Track 1.5 and also 

suggesting that Track 1 ACOs should be permitted 

to move into this suggested Track 1.5 before the end 

of their current agreement period). 

beneficiaries using preliminary 

prospective assignment with 

retrospective reconciliation 

(§ 425.400(a)(2)). Under Track 3, we 

prospectively assign beneficiaries 

(§ 425.400(a)(3)). 

As described in earlier rulemaking, 

commenters have urged that we offer 

greater flexibility for ACOs in their 

choice of assignment methodology.7 In 

the June 2015 final rule, we 

acknowledged there is additional 

complexity and administrative burden 

to implementing an approach under 

which ACOs in any track may choose 

either prospective assignment or 

preliminary prospective assignment 

with retrospective reconciliation, with 

an opportunity to switch their selection 

on an annual basis. At that time, we 

declined to implement prospective 

assignment in Track 1 and Track 2, and 

we also declined to give ACOs in Track 

3 a choice of either prospective 

assignment or preliminary prospective 

assignment with retrospective 

reconciliation. Further, we explained 

that implementing prospective 

assignment only in a two-sided model 

track may encourage Track 1 ACOs that 

prefer this assignment methodology, 

and the other features of Track 3, to 

more quickly transition to performancebased risk (80 FR 32773). 

We also have considered alternative 

approaches to allow ACOs greater 

flexibility in the timing of their 

transition to performance-based risk, 

including within an ACO’s agreement 

period. For example, as described in 

earlier rulemaking, commenters 

suggested approaches that would allow 

less than two 3-year agreement periods 

under Track 1.8 Some commenters 

recommended that CMS allow ACOs to 

‘‘move up’’ the risk tracks (that is, move 

from Track 1 to Track 2 or Track 3, or 

move from Track 2 to Track 3) between 

performance years without being 

required to wait for the start of a new 

agreement period, to provide more 

flexibility for ACOs prepared to accept 

performance-based risk, or a higher 

level of performance-based risk. These 

commenters suggested that allowing an 

ACO to accept varying degrees of risk 

within an agreement period would 

position the ACO to best balance its 

exposure to and tolerance for financial 

risk and would create a true glide path 

for participating healthcare providers 

(81 FR 37995 through 37996). 

Transition to performance-based risk 

has taken on greater significance with 

the introduction of the Quality Payment 

Program. Under the CY 2017 Quality 

Payment Program final rule with 

comment period,9 ACO initiatives that 

require ACOs to bear risk for monetary 

losses of more than a nominal amount, 

and that meet additional criteria, can 

qualify as Advanced APMs beginning in 

performance year 2017. Eligible 

clinicians who sufficiently participate 

in Advanced APMs such that they are 

Qualifying APM Participants (QPs) for a 

performance year receive APM 

Incentive Payments in the 

corresponding payment year between 

2019 through 2024, and then higher fee 

schedule updates starting in 2026. Track 

2 and Track 3 of the Shared Savings 

Program, and the Track 1+ Model, are 

currently Advanced APMs under the 

Quality Payment Program. 

ACOs and other program stakeholders 

continue to express a variety of 

concerns about the transition to risk 

under Track 2 and Track 3. For 

example, as described in the CY 2017 

Quality Payment Program final rule 

with comment period (see, for example, 

81 FR 77421 through 77422), 

commenters suggested a new Shared 

Savings Program track as a meaningful 

middle path between Track 1 and Track 

2 (‘‘Track 1.5’’), that meets the 

Advanced APM generally applicable 

nominal amount standard, to create an 

option for ACOs with relatively low 

revenue or small numbers of 

participating eligible clinicians to 

participate in an Advanced APM 

without accepting the higher degrees of 

risk involved in Track 2 and Track 3. 

Commenters suggested this track would 

be a viable on-ramp for ACOs to assume 

greater amounts of risk in the future. 

Commenters’ suggestions for Track 1.5 

included prospective beneficiary 

assignment, asymmetric levels of risk 

and reward, and payment rule waivers, 

such as the SNF 3-day rule waiver 

available to ACOs participating in 

Shared Savings Program Track 3.10

Another key component of commenters’ 

suggestions was to allow Track 1 ACOs 

to transition to Track 1.5 within their 

current agreement periods.11 These 

commenters’ suggestions were 

considered in developing the Track 1+ 

Model, which began on January 1, 2018. 

This Model, which is being tested by the 

Innovation Center, includes a two-sided 

payment model that incorporates the 

upside of Track 1 with more limited 

downside risk than is currently present 

in Track 2 or Track 3 of the Shared 

Savings Program. The Track 1+ Model is 

currently an Advanced APM under the 

Quality Payment Program. 

The Track 1+ Model is designed to 

encourage ACOs, especially those made 

up of small physician practices, to 

advance to performance-based risk. 

ACOs that include hospitals, including 

small rural hospitals, are also allowed to 

participate. See CMS Fact Sheet, New 

Accountable Care Organization Model 

Opportunity: Medicare ACO Track 1+ 

Model, Updated July 2017 (herein Track 

1+ Model Fact Sheet), available at 

https://www.cms.gov/Medicare/ 

Medicare-Fee-for-Service-Payment/ 

sharedsavingsprogram/Downloads/ 

New-Accountable-Care-OrganizationModel-Opportunity-Fact-Sheet.pdf. In 

performance year 2018, 55 ACOs began 

in the Track 1+ Model, demonstrating 

strong interest in this financial model 

design. The availability of the Track 1+ 

Model increased the number of ACOs 

participating under a two-sided risk 

model in connection with their 

participation in the Shared Savings 

Program to approximately 18 percent, 

with approximately 22.7 percent of 

assigned beneficiaries receiving care 

through an ACO in a two-sided model. 

Of the 55 Track 1+ Model ACOs, based 

on the ACOs’ self-reported composition: 

58.2 percent attested to the presence of 


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12See 80 FR 32763. See also 80 FR 32761 

(discussing several commenters’ recommendation 

to move to 5 or 6 year agreements for ACOs and 

the suggestion that ACOs have the opportunity to 

move to a performance-based risk model during 

their first agreement period, for example, after their 

first 3 years under the one-sided model. A 

commenter suggested encouraging ACOs to 

transition to two-sided risk by offering lower loss 

sharing rates for ACOs that move from Track 1 to 

the two-sided model during the course of an 

agreement period, and phasing-in loss sharing rates 

for these ACOs (for example, 15 percent in year 1, 

30 percent in year 2, 60 percent in year 3). Another 

commenter suggested that CMS allow all ACOs 

(regardless of track) the option to increase their 

level of risk annually during the agreement period.) 

13See Performance Year 2018 Medicare Shared 

Savings Program Accountable Care Organizations 

available at Data.CMS.gov, https://data.cms.gov/ 

Special-Programs-Initiatives-Medicare-SharedSaving/Performance-Year-2018-Medicare-SharedSavings-Prog/28n4-k8qs/data. 

an ownership or operational interest by 

an inpatient prospective payment 

system (IPPS) hospital, cancer center or 

rural hospital with more than 100 beds 

among their ACO participants, and 

therefore these ACOs were under a 

benchmark-based loss sharing limit; and 

41.8 percent attested to the absence of 

such ownership or operational interests 

by these institutional providers among 

their ACO participants (likely ACOs 

composed of independent physician 

practices and/or ACOs that include 

small rural hospitals), which qualified 

these ACOs for generally lower levels of 

risk under the Track 1+ Model’s 

revenue-based loss sharing limit. 

c. Background on Length of Agreement 

Period 

Section 1899(b)(2)(B) of the Act 

requires participating ACOs to enter 

into an agreement with CMS to 

participate in the program for not less 

than a 3-year period referred to as the 

agreement period. Further, section 

1899(d)(1)(B)(ii) of the Act requires us to 

reset the benchmark at the start of each 

agreement period. In initial rulemaking 

for the program, we limited 

participation agreements to 3-year 

periods (see 76 FR 19544, and 76 FR 

67807). We have considered the length 

of the ACO’s agreement period in the 

context of the amount of time an ACO 

may remain in a one-sided model and 

also the frequency with which we reset 

(or rebase) the ACO’s historical 

benchmark. For example, in the June 

2015 final rule, we discussed 

commenters’ suggestions that we extend 

the agreement period from the current 3 

years to a 5-year agreement period, for 

all tracks, including not only the initial 

agreement period, but all subsequent 

agreement periods.12 These commenters 

explained that extending the length of 

the agreement period would make the 

program more attractive by increasing 

program stability and providing ACOs 

with the necessary time to achieve the 

desired quality and financial outcomes. 

We declined to adopt these suggestions, 

believing at that time it was more 

appropriate to maintain a 3-year 

agreement period to provide continuity 

with the initial design of the program. 

At that time we did not find it necessary 

to extend agreement periods past 3 years 

to address the renewal of initial program 

entrants, particularly in light of the 

policies we finalized in the June 2015 

final rule allowing Track 1 ACOs to 

apply to continue under the one-sided 

model for a second 3-year agreement 

period and modifying the benchmark 

rebasing methodology. However, we 

explained that longer agreement periods 

could increase the likelihood that ACOs 

would build on the success or continue 

the failure of their current agreement 

period. For this reason we noted that 

rebasing every 3 years, at the start of 

each 3-year agreement period, is 

important to protect both the Trust 

Funds and ACOs. See 80 FR 32763. See 

also 81 FR 37957 (noting commenters’ 

suggestions that we eliminate rebasing 

or reducing the frequency of rebasing). 

d. Background on Shared Savings 

Program Participation 

There remains a high degree of 

interest in participation in the Shared 

Savings Program. Although most ACOs 

continue to participate in the program’s 

one-sided model (Track 1), ACOs have 

demonstrated significant interest in the 

Track 1+ Model. Table 2 summarizes 

the total number of ACOs that are 

participating in the Shared Savings 

Program, including those also 

participating in the Track 1+ Model, for 

performance year 2018 with the total 

number of assigned beneficiaries by 

track.13 Of the 561 ACOs participating 

in the program as of January 1, 2018, 55 

were in the Track 1+ Model, 8 were in 

Track 2, 38 were in Track 3, and 460 

were in Track 1. As of performance year 

2018, there are over 20,000 ACO 

participant Taxpayer Identification 

Numbers (TINs) that include 377,515 

clinicians (physicians, physician 

assistants, nurse practitioners and 

clinical nurse specialists) some of whom 

are in small and solo practices. About 

half of ACOs are provider networks, and 

66 ACOs include rural providers. See 

Medicare Shared Savings Program Fast 

Facts (January 2018) available at https:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/sharedsavings

program/Downloads/SSP-2018-FastFacts.pdf. 

Based on the program’s existing 

requirements, ACOs can participate in 

Track 1 for a maximum of two 

agreement periods. There are a growing 

number of ACOs that have entered into 

their second agreement period, and, 

starting in 2019, many that will begin a 

third agreement period and will be 

required to enter a risk-based track. 

The progression by some ACOs to 

performance-based risk within the 

Shared Savings Program remains 

relatively slow, with approximately 82 

percent of ACOs participating in Track 

1 in 2018, 43 percent (196 of 460) of 

which are within a second agreement 

period in Track 1. 


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However, the recent addition of the 

Track 1+ Model provided a significant 

boost in Shared Savings Program ACOs 

taking on performance-based risk, with 

over half of the 101 ACOs participating 

in the Shared Savings Program and 

taking on performance-based risk opting 

for the Track 1+ Model in 2018. The 

lower level of risk offered under the 

Track 1+ Model has been positively 

received by the industry and provided 

a pathway to risk for many ACOs. 

2. Modified Participation Options Under 

5-Year Agreement Periods 

As described in the August 2018 

proposed rule (83 FR 41797 through 

41801), in developing the proposed 

policies described in this section, we 

considered a number of factors related 

to the program’s current participation 

options in light of the program’s 

financial results and stakeholders’ 

feedback on program design, including 

the following. 

First, we considered the program’s 

existing policy allowing ACOs up to 6 

years of participation in a one-sided 

model. We have found that the policy 

has shown limited success in 

encouraging ACOs to advance to 

performance-based risk. By the fifth year 

of implementing the program, only 

about 18 percent of the program’s 

participating ACOs are under a twosided model, over half of which are 

participating in the Track 1+ Model (see 

Table 2). 

As discussed in detail in the August 

2018 proposed rule (see 83 FR 41916 

through 41918), our experience with the 

program indicates that ACOs in twosided models generally perform better 

than ACOs that participate under a onesided model. For example, for 

performance year 2016, about 68 

percent of Shared Savings Program 

ACOs in two-sided models (15 of 22 

ACOs) shared savings compared to 29 

percent of Track 1 ACOs. For 

performance year 2015, prior to the first 

year of Track 3, one of the three 

remaining Track 2 ACOs shared savings, 

while about 30 percent of Track 1 ACOs 

(118 of 389 ACOs) shared savings. For 

performance year 2014, two of the three 

remaining Track 2 ACOs shared savings 

while about 25 percent of Track 1 ACOs 

(84 of 330 ACOs) shared savings. In the 

program’s first year, concluding 

December 31, 2013, 40 percent of Track 

2 ACOs (2 of 5 ACOs) compared to 23 

percent of Track 1 ACOs (50 of 215 

ACOs) shared savings. See Shared 

Savings Program Accountable Care 

Organization Public Use Files, available 

at https://www.cms.gov/ResearchStatistics-Data-and-Systems/ 

Downloadable-Public-Use-Files/ 

SSPACO/index.html. These 

observations, in combination with 

participation trends that show most 

ACOs prefer to remain in Track 1 for a 

second 3-year agreement period, 

suggests that a requirement for ACOs to 

more rapidly transition to performancebased risk could be effective in creating 

incentives for ACOs to more quickly 

meet the program’s goals. 

The program’s current design lacks a 

sufficiently incremental progression to 

performance-based risk, the need for 

which is evidenced by robust 

participation in the new Track 1+ 

Model. A significant issue that 

contributes to some ACOs’ reluctance to 

participate in Track 2 or Track 3 is that 

the magnitude of potential losses is very 

high compared to the ACO’s degree of 

control over the total Medicare Parts A 

and B FFS expenditures for the ACO’s 

assigned beneficiaries, particularly 

when its ACO participants have 

relatively low total Medicare Parts A 

and B FFS revenue. We are encouraged 

by the interest in the Track 1+ Model as 

indicated by the 55 Shared Savings 

Program ACOs participating in the 

Model for the performance year 

beginning on January 1, 2018; the largest 

group of Shared Savings Program ACOs 

to enter into performance-based risk for 

a given performance year to date. Based 

on the number of ACOs participating in 

the Track 1+ Model for performance 

year 2018, a lower risk option appears 

to be important for Track 1 ACOs with 

experience in the program seeking to 

transition to performance-based risk, as 

well as ACOs seeking to enter an initial 

agreement period in the program under 

a lower risk model. 

Interest in the Track 1+ Model 

suggests that the opportunity to 

participate in an Advanced APM while 

accepting more moderate levels of risk 

(compared to Track 2 and Track 3) is an 

important financial model design for 

ACOs. Allowing more manageable 

levels of risk within the Shared Savings 

Program is an important pathway for 

helping organizations to gain experience 

with managing risk as well as 

participating in Advanced APMs under 

the Quality Payment Program. The high 

uptake we have observed with the Track 

1+ Model also suggests that the current 

design of Track 1 may be unnecessarily 

generous since the Track 1+ Model has 

the same level of upside as Track 1 but 

under which ACOs must also assume 

performance-based risk. 

Second, under the program’s current 

design, CMS lacks adequate tools to 

properly address ACOs with patterns of 

negative financial performance. Track 1 

ACOs are not liable for repaying any 

portion of their losses to CMS, and 

therefore may have potentially weaker 

incentives to improve quality and 

reduce growth in FFS expenditures 

within the accountable care model. 

These ACOs may take advantage of the 

potential benefits of continued program 

participation (including the receipt of 

program data and the opportunity to 

enter into certain contracting 

arrangements with ACO participants 

and ACO providers/suppliers in 

connection with their participation in 

the Shared Savings Program), without 

providing a meaningful benefit to the 

Medicare program. ACOs under twosided models may similarly benefit from 

program participation and seek to 

continue their participation despite 

owing shared losses. 

Third, differences in performance of 

ACOs indicate a pattern where low 

revenue ACOs outperformed high 

revenue ACOs. As discussed in the 

August 2018 proposed rule (see 83 FR 

41916 through 41918), we have 

observed a pattern of performance, 

across tracks and performance years, 

where low revenue ACOs show better 

average results compared to high 

revenue ACOs. We explained that high 

revenue ACOs, which typically include 

hospitals, have a greater opportunity to 

control assigned beneficiaries’ total 

Medicare Parts A and B FFS 

expenditures, as they coordinate a larger 

portion of the assigned beneficiaries’ 

care across care settings, and have the 

potential to perform better than what 

has been demonstrated in performance 

trends from 2012 through 2016. We 

concluded that the trends in 

performance by high revenue ACOs in 

relation to their expected capacity to 

control growth in expenditures are 

indications that these ACOs’ 

performance would improve through 

greater incentives, principally a 

requirement to take on higher levels of 

performance-based risk, and thus drive 

change in FFS utilization for their 

Medicare FFS populations. This 

conclusion is further supported by our 

initial experience with the Track 1+ 

Model, for which our preliminary 

findings support the conclusion that the 

degree of control an ACO has over 

expenditures for its assigned 

beneficiaries is an indication of the level 

of performance-based risk an ACO is 

prepared to accept and manage, where 

control is determined by the 

relationship between ACO participants’ 

total Medicare Parts A and B FFS 

revenue and the total Medicare Parts A 

and B FFS expenditures for the ACO’s 

assigned beneficiaries. Our experience 

with the Track 1+ Model has also shown 

that ACO participants’ total Medicare 


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Parts A and B FFS revenue as a 

percentage of the total Medicare Parts A 

and B FFS expenditures of the assigned 

beneficiaries can serve as a proxy for 

ACO composition (that is, whether the 

ACO includes one or more institutional 

providers as an ACO participant, and 

therefore is likely to control a greater 

share of Medicare Parts A and B FFS 

expenditures and to have greater ability 

to coordinate care across settings for its 

assigned beneficiaries). 

Fourth, permitting choice of level of 

risk and assignment methodology 

within an ACO’s agreement period 

would create redundancy in some 

participation options, and eliminating 

this redundancy would allow CMS to 

streamline the number of tracks offered 

while allowing ACOs greater flexibility 

to design their participation to meet the 

needs of their organizations. ACOs and 

stakeholders have indicated a strong 

preference for maintaining an option to 

select preliminary prospective 

assignment with retrospective 

reconciliation as an alternative to 

prospective assignment for ACOs under 

performance-based risk within the 

Shared Savings Program. We considered 

what would occur if we retained Track 

2 in addition to the ENHANCED track 

and offered a choice of prospective 

assignment and preliminary prospective 

assignment (see section II.A.4.c. of this 

final rule) for both tracks. We stated that 

ACOs prepared to accept higher levels 

of benchmark-based risk would be more 

likely to enter the ENHANCED track 

(which allows the greatest risk and 

potential reward). This is suggested by 

participation statistics, where 8 ACOs 

are participating in Track 2 compared to 

the 38 ACOs participating in Track 3 as 

of January 1, 2018. We noted that for 

agreement periods beginning in 2018, 

only 2 ACOs entered Track 2, both of 

which had deferred renewal in 2017, 

while 4 ACOs entered Track 3 (for their 

first or second agreement period). ACOs 

may be continuing to pick Track 2 

because of the preliminary prospective 

assignment methodology, and we would 

expect participation in Track 2 to 

decline further if we finalize the 

proposal to allow a choice of assignment 

methodology in the ENHANCED track, 

since we would expect ACOs ready for 

higher risk (that is, a level of risk that 

is higher than the highest level of risk 

and potential reward under the 

proposed BASIC track) to prefer the 

ENHANCED track over Track 2. 

Fifth, longer agreement periods could 

improve program incentives and 

support ACOs’ transition into 

performance-based risk when coupled 

with changes to improve the accuracy of 

the program’s benchmarking 

methodology. Extending agreement 

periods for more than 3 years could 

provide more certainty over benchmarks 

and in turn give ACOs a greater chance 

to succeed in the program by allowing 

them more time to understand their 

performance, gain experience and 

implement redesigned care processes 

before rebasing of the ACO’s historical 

benchmark. Shared Savings Program 

results show that ACOs tend to perform 

better the longer they remain in the 

program. Further, under longer 

agreement periods, historical 

benchmarks would become more 

predictable, since the benchmark would 

continue to be based on the 

expenditures for beneficiaries who 

would have been assigned to the ACO 

in the 3 most recent years prior to the 

start of the ACO’s agreement period (see 

§§ 425.602(a) and 425.603(c)) and the 

benchmark would be risk adjusted and 

updated each performance year relative 

to benchmark year 3. However, a 

number of factors can affect the amount 

of the benchmark, and therefore its 

predictability, during the agreement 

period regardless of whether the 

agreement period spans 3 or 5 years, 

including: Adjustments to the 

benchmark during the ACO’s agreement 

period resulting from changes in the 

ACO’s certified ACO participant list and 

regulatory changes to the assignment 

methodology; as well as variation in the 

benchmark value that occurs each 

performance year as a result of annual 

risk adjustment to the ACO’s benchmark 

(§§ 425.602(a)(9) and 425.603(c)(10)) 

and annual benchmark updates 

(§§ 425.602(b) and 425.603(d)). We 

explained that the proposed approach to 

incorporating factors based on regional 

FFS expenditures in establishing, 

adjusting and updating the benchmark 

beginning with the ACO’s first 

agreement period (discussed in section 

II.D. of this final rule) would result in 

more accurate benchmarks. This 

improved accuracy of benchmarks 

would mitigate the impact of the more 

generous updated benchmarks that 

could result in the later years of longer 

agreement periods. 

In summary, taking these factors into 

consideration, we proposed to redesign 

the program’s participation options by 

discontinuing Track 1, Track 2 and the 

deferred renewal option, and instead 

offering two tracks that eligible ACOs 

would enter into for an agreement 

period of at least 5 years: (1) BASIC 

track, which would include an option 

for eligible ACOs to begin participation 

under a one-sided model and 

incrementally phase-in risk (calculated 

based on ACO participant revenue and 

capped at a percentage of the ACO’s 

updated benchmark) and potential 

reward over the course of a single 

agreement period, an approach referred 

to as a glide path; and (2) ENHANCED 

track, based on the program’s existing 

Track 3, for ACOs that take on the 

highest level of risk and potential 

reward. 

We proposed to require ACOs to enter 

one of two tracks for agreement periods 

beginning on July 1, 2019, and in 

subsequent years (as described in 

section II.A.7. of this final rule): Either 

the ENHANCED track, which would be 

based on Track 3 as currently designed 

and implemented under § 425.610, or 

the new BASIC track, which would offer 

eligible ACOs a glide path from a onesided model to incrementally higher 

performance-based risk. (We referred to 

this participation option for eligible 

ACOs entering the BASIC track as the 

BASIC track’s glide path, or simply the 

glide path.) 

We proposed to add a new provision 

to the Shared Savings Program 

regulations at § 425.605 to establish the 

requirements for this BASIC track. The 

BASIC track would offer lower levels of 

risk compared to the levels of risk 

currently offered in Track 2 and Track 

3, and the same maximum level of risk 

as offered under the Track 1+ Model. 

Compared to the design of Track 1, this 

glide path approach, which requires 

assumption of gently increasing levels 

of risk and potential reward beginning 

no later than an ACO’s fourth 

performance year under the BASIC track 

for agreement periods starting on July 1, 

2019 or third performance year under 

the BASIC track for agreement periods 

starting in 2020 and all subsequent 

years, could provide stronger incentives 

for ACOs to improve their performance. 

For agreement periods beginning on 

July 1, 2019, and in subsequent years, 

we proposed to modify the regulations 

at §§ 425.600 and 425.610 to designate 

Track 3 as the ENHANCED track. We 

proposed that all references to the 

ENHANCED track in the program’s 

regulations would be deemed to include 

Track 3. We explained that we intend 

references to the ENHANCED track to 

apply to Track 3 ACOs, unless 

otherwise noted. 

We explained that as part of the 

redesign of the program’s participation 

options, it is timely to provide the 

program’s tracks with more descriptive 

and meaningful names. ‘‘Enhanced’’ is 

indicative of the increased levels of risk 

and potential reward available to ACOs 

under the current design of Track 3, the 

new tools and flexibilities available to 

performance-based risk ACOs, and the 

relative incentives for ACOs under this 


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financial model designed to improve the 

quality of care for their assigned 

beneficiaries (for example, through the 

availability of the highest sharing rates 

based on quality performance under the 

program) and their potential to drive 

towards reduced costs for Medicare FFS 

beneficiaries and therefore increased 

savings for the Medicare Trust Funds. In 

contrast, ‘‘basic’’ suggests a foundational 

level, which is reflected in the 

opportunity under the BASIC track to 

provide a starting point for ACOs on a 

pathway to success from a one-sided 

shared savings model to two-sided risk. 

We proposed that for agreement 

periods beginning on July 1, 2019, the 

length of the agreement would be 5 

years and 6 months. For agreement 

periods beginning on January 1, 2020, 

and in subsequent years, the length of 

the agreement would be 5 years. 

In the November 2018 final rule (83 

FR 59946) we finalized a revision to the 

definition of ‘‘agreement period’’ to 

broadly mean the term of the 

participation agreement. For 

consistency, we also revised the heading 

in § 425.200(b) from ‘‘term of the 

participation agreement’’ to ‘‘agreement 

period,’’ based on the modification to 

the definition of ‘‘agreement period’’ in 

§ 425.20. 

In the August 2018 proposed rule (83 

FR 41799), we proposed to specify the 

term of participation agreements 

beginning on July 1, 2019 and in 

subsequent years in revisions to 

§ 425.200, which currently specifies the 

term of the participation agreement for 

each agreement start date since the 

beginning of the program. 

In the August 2018 proposed rule (83 

FR 41800), we also proposed to revise 

§ 425.502(e)(4)(v), specifying calculation 

of the quality improvement reward as 

part of determining the ACO’s quality 

score, which includes language based 

on 3-year agreement periods. Through 

these revisions, we would specify that 

the comparison for performance in the 

first year of the new agreement period 

would be the last year in the previous 

agreement period, rather than the third 

year of the previous agreement period. 

The regulation on renewal of 

participation agreements (§ 425.224(b)) 

includes criteria regarding an ACO’s 

quality performance and repayment of 

shared losses that focus on specific 

years in the ACO’s prior 3-year 

agreement period. We discussed 

proposals to revise these evaluation 

criteria to be more relevant to assessing 

prior participation of ACOs under an 

agreement period of at least 5 years, 

among other factors (83 FR 41823 

through 41825). 

For ACOs entering agreement periods 

beginning on July 1, 2019, and in 

subsequent years, we proposed to allow 

ACOs annually to elect the beneficiary 

assignment methodology (preliminary 

prospective assignment with 

retrospective reconciliation, or 

prospective assignment) to apply for 

each remaining performance year within 

their agreement period. See discussion 

in section II.A.4.c. of this final rule. 

For ACOs entering agreement periods 

beginning on July 1, 2019, and in 

subsequent years, we proposed to allow 

eligible ACOs in the BASIC track’s glide 

path the option to elect entry into a 

higher level of risk and potential reward 

under the BASIC track for each 

performance year within their 

agreement period. See the discussion in 

section II.A.4.b. of this final rule. 

We proposed to discontinue Track 1 

as a participation option for the reasons 

described elsewhere in this section. We 

proposed to amend § 425.600 to limit 

availability of Track 1 to agreement 

periods beginning before July 1, 2019. 

We proposed to discontinue Track 2 

as a participation option. We proposed 

to amend § 425.600 to limit availability 

of Track 2 to agreement periods 

beginning before July 1, 2019. We based 

these proposals on the following 

considerations. 

For one, the proposal to allow ACOs 

to select their assignment methodology 

(section II.A.4.c. of this final rule) and 

the availability of the proposed BASIC 

track with relatively low levels of risk 

compared to the ENHANCED track 

would ensure the continued availability 

of a participation option with moderate 

levels of risk and potential reward in 

combination with the optional 

availability of the preliminary 

prospective beneficiary assignment in 

the absence of Track 2. We explained 

that maintaining Track 2 as a 

participation option between the lower 

risk of the proposed BASIC track and 

the higher risk of the ENHANCED track 

would create redundancy in 

participation options, while removing 

Track 2 would offer an opportunity to 

streamline the tracks offered. 

Although Track 2 was the initial twosided model of the Shared Savings 

Program, the statistics on Shared 

Savings Program participation by track 

(and in the Track 1+ Model) 

summarized in Table 2 show few ACOs 

entering and completing their risk 

bearing agreement period under Track 2 

in recent years, and suggest that ACOs 

prefer either a lower level of risk and 

potential reward under the Track 1+ 

Model or a higher level of risk and 

potential reward under Track 3 than the 

Track 2 level of risk and potential 

reward. 

Further, under the proposed 

modifications to the regulations (see 

section II.A.5.c. of this final rule), Track 

2 ACOs prepared to take on higher risk 

would have the option to elect to enter 

the ENHANCED track by completing 

their agreement period in Track 2 and 

applying to renew for a subsequent 

agreement period under the 

ENHANCED track or by voluntarily 

terminating their current 3-year 

agreement and entering a new 

agreement period under the 

ENHANCED track, without waiting until 

the expiration of their current 3-year 

agreement period. Certain Track 2 ACOs 

that may not be prepared for the higher 

level of risk under the ENHANCED track 

could instead elect to enter the 

proposed BASIC track at the highest 

level of risk and potential reward, under 

the same circumstances. 

We proposed to discontinue the 

policy that allows Track 1 ACOs in their 

first agreement period to defer renewal 

for a second agreement period in a twosided model by 1 year, to remain in 

their current agreement period for a 

fourth performance year, and to also 

defer benchmark rebasing. We proposed 

to amend § 425.200(e) to discontinue the 

deferred renewal option, so that it 

would be available to only those Track 

1 ACOs that began a first agreement 

period in 2014 or 2015 and have already 

renewed their participation agreement 

under the deferred renewal option, and 

therefore this option would not be 

available to Track 1 ACOs seeking to 

renew for a second agreement period 

beginning on July 1, 2019, or in 

subsequent years. We proposed to 

amend § 425.200(b)(3) to specify that the 

extension of a first agreement period in 

Track 1 under the deferred renewal 

option is available only for ACOs that 

began a first agreement period in 2014 

or 2015 and therefore deferred renewal 

in 2017 or 2018 (respectively). We 

considered the following issues in 

developing this proposal. 

For one, continued availability of this 

option is inconsistent with our 

proposed redesign of the program, 

which encourages rapid transition to 

performance-based risk and requires 

ACOs on the BASIC track’s glide path to 

enter performance-based risk within 

their first agreement period under the 

BASIC track. 

Deferral of benchmark rebasing was 

likely a factor in some ACOs’ decisions 

to defer renewal, particularly for ACOs 

concerned about the effects of the 

rebasing methodology on their 

benchmark. Under the proposal to 

extend the length of agreement periods 


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from 3 years to not less than 5 years, 

benchmark rebasing would be delayed 

by 2 years (relative to a 3-year 

agreement), rather than 1 year, as 

provided under the current deferred 

renewal policy. 

Eliminating the deferred renewal 

option would streamline the program’s 

participation options and operations. 

Very few ACOs have elected the 

deferred renewal participation option, 

with only 8 ACOs that began 

participating in the program in either 

2014 or 2015 renewing their Shared 

Savings Program agreement under this 

option to defer entry into a second 

agreement period under performancebased risk until 2018 or 2019, 

respectively. We stated that the very low 

uptake of this option demonstrates that 

it is not effective at facilitating ACOs’ 

transition to performance-based risk. 

The proposed timing of applicability 

would prevent ACOs from electing to 

defer renewal in 2019 for a second 

agreement period beginning in 2020. 

Further, as discussed in section 

II.A.5.c. of this final rule, we proposed 

to discontinue the ‘‘sit-out’’ period 

under § 425.222(a), which is crossreferenced in the regulation at 

§ 425.200(e) establishing the deferred 

renewal option. Under the proposed 

modifications to § 425.222(a), ACOs that 

have already been approved to defer 

renewal until 2019 under this 

participation option (ACOs with 2015 

start dates in the Shared Savings 

Program that deferred entering a second 

agreement period under two-sided risk 

until January 1, 2019), would have the 

option of terminating their participation 

agreement for their second agreement 

period under Track 2 or Track 3 and 

applying to enter the BASIC track at the 

highest level of risk and potential 

reward (Level E), or the ENHANCED 

track, for a new agreement period. 

We proposed to modify the Shared 

Savings Program participation options 

to offer a new performance-based risk 

track using the Secretary’s authority 

under section 1899(i)(3) of the Act. In 

the August 2018 proposed rule, we 

explained use of our authority under 

section 1899(i)(3) of the Act (83 FR 

41801). In order to add the BASIC track, 

we must determine that it will improve 

the quality and efficiency of items and 

services furnished to Medicare 

beneficiaries, without additional 

program expenditures. Consistent with 

our earlier discussions of the use of this 

authority to establish the current twosided models in the Shared Savings 

Program (see 76 FR 67904 and 80 FR 

32771), we explained that the BASIC 

track would provide an additional 

opportunity for organizations to enter a 

risk-sharing arrangement and accept 

greater responsibility for beneficiary 

care. We explained that the proposed 

restructuring of participation options, 

more generally, would help ACOs 

transition to performance-based risk 

more quickly than under the program’s 

current design. Under the proposed 

program redesign we would eliminate 

Track 1 (under which a one-sided model 

currently is available for up to 6 years), 

offering instead a glide path with up to 

2 performance years under a one-sided 

model (three, for ACOs that enter the 

glide path on July 1, 2019), followed by 

the incremental phase-in of risk and 

increasing potential for reward over the 

remaining 3 performance years of the 

agreement period. We proposed that 

ACOs that previously participated in 

Track 1, or new ACOs identified as reentering ACOs because more than 50 

percent of their ACO participants have 

recent prior experience in a Track 1 

ACO, entering the BASIC track’s glide 

path would be eligible for a single 

performance year under a one-sided 

model (two, for ACOs that enter the 

glide path on July 1, 2019). We 

proposed a one-time exception to be 

specified in revisions to § 425.600, 

under which the automatic 

advancement policy would not apply to 

the second performance year for an ACO 

entering the BASIC track’s glide path for 

an agreement period beginning on July 

1, 2019. For performance year 2020, the 

ACO may remain in the same level of 

the BASIC track’s glide path that it 

entered for the performance year 

beginning on July 1, 2019 (6-month 

period). The ACO would be 

automatically advanced to the next level 

of the BASIC track’s glide path at the 

start of performance year 2021 and all 

subsequent performance years of the 

agreement period, unless the ACO elects 

to advance to a higher level of risk and 

potential reward under the glide path 

more quickly, as proposed in section 

II.A.4.b. of this final rule. The glide path 

concludes with the ACO entering a level 

of potential reward that is the same as 

is currently available under Track 1, 

with a level of risk that is similar to the 

lesser of either the revenue-based or 

benchmark-based loss sharing limit 

under the Track 1+ Model. 

Further, we realized that a significant 

incentive for ACOs to transition more 

quickly to the highest level of risk and 

reward under the BASIC track would be 

the opportunity to participate in an 

Advanced APM for purposes of the 

Quality Payment Program. Under the 

BASIC track’s Level E, an ACO’s eligible 

clinicians would have the opportunity 

to receive APM Incentive Payments and 

ultimately higher fee schedule updates 

starting in 2026, in the payment year 

corresponding to each performance year 

in which they attain QP status. 

We explained in the Regulatory 

Impact Analysis section of the proposed 

rule (83 FR 41927) that the proposed 

BASIC track is expected to increase 

participation in performance-based risk 

by ACOs that may not otherwise take on 

the higher exposure to risk required in 

the ENHANCED track (or in the current 

Track 2). Such added participation in 

performance-based risk is expected to 

include a significant number of low 

revenue ACOs, including physician-led 

ACOs. These ACOs have shown stronger 

performance in the first years of the 

program despite mainly opting to 

participate in Track 1. Furthermore, the 

option for BASIC track ACOs to progress 

gradually toward risk within a single 

agreement period or accelerate more 

quickly to the BASIC track’s Level E is 

expected to further expand eventual 

participation in performance-based risk 

by ACOs that would otherwise hesitate 

to immediately transition to this level of 

risk because of uncertainty related to 

benchmark rebasing. 

Therefore, adding the BASIC track as 

a participation option under the Shared 

Savings Program would not likely result 

in an increase in spending beyond the 

expenditures that would otherwise 

occur under the statutory payment 

methodology in section 1899(d). 

Further, we expected that adding the 

BASIC track would continue to lead to 

improvement in the quality of care 

furnished to Medicare FFS beneficiaries 

because participating ACOs would have 

an incentive to perform well on the 

quality measures in order to maximize 

the shared savings they may receive and 

minimize any shared losses they must 

pay. 

The proposed rule included other 

policy proposals that require that we 

reassess the policies adopted under the 

authority of section 1899(i)(3) of the Act 

to ensure that they comply with the 

requirements under section 1899(i)(3)(B) 

of the Act. As described in the August 

2018 proposed rule (83 FR 41927), the 

elimination of Track 2 as an on-going 

participation option, the addition of the 

BASIC track, the benchmarking changes 

(see section II.D. of this final rule), and 

the proposal to determine shared 

savings and shared losses for the 6- 

month performance years starting on 

January 1, 2019, and July 1, 2019, using 

expenditures for the entire CY 2019 and 

then pro-rating these amounts to reflect 

the shorter performance year (see 

section II.A.7. of this final rule, as well 

as the November 2018 final rule), 

require the use of our authority under 


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section 1899(i) of the Act. These 

proposed changes to our payment 

methodology would not be expected to 

result in a situation in which all policies 

adopted under the authority of section 

1899(i) of the Act, when taken together, 

result in more spending under the 

program than would have resulted 

under the statutory payment 

methodology in section 1899(d) of the 

Act. We noted that we would continue 

to reexamine this projection in the 

future to ensure that the requirement 

under section 1899(i)(3)(B) of the Act 

that an alternative payment model not 

result in additional program 

expenditures continues to be satisfied. 

In the event that we later determine that 

the payment model established under 

section 1899(i)(3) of the Act no longer 

meets this requirement, we would 

undertake additional notice and 

comment rulemaking to make 

adjustments to the payment model to 

assure continued compliance with the 

statutory requirements. 

As discussed in the Regulatory Impact 

Analysis section of this final rule (see 

section V), we believe the BASIC track 

meets the requirements for use of our 

authority under section 1899(i)(3) of the 

Act. The considerations we previously 

described, as included in the August 

2018 proposed rule and the November 

2018 final rule (83 FR 59949), were 

relevant in making this determination. 

Specifically, we do not believe that the 

BASIC track, as finalized in this section 

of this final rule, will result in an 

increase in spending beyond the 

expenditures that would otherwise 

occur under the statutory payment 

methodology in section 1899(d), and 

adding the BASIC track would continue 

to lead to improvement in the quality of 

care furnished to Medicare FFS 

beneficiaries. 

Comment: We received feedback from 

several commenters that favored the 

proposed Shared Savings Program two 

track redesign and the incremental 

transition to two-sided risk, including 

effectively consolidating Track 1 and 

the Track 1+ Model into the single 

BASIC track and the preservation of 

Track 3 in the ENHANCED track. 

Generally, commenters supported the 

overall framework and supported CMS’ 

proposal to pursue a tiered approach to 

introducing downside financial risk for 

ACOs. One commenter in support of the 

proposal noted that the renamed tracks 

are ‘‘more descriptive’’ than the current 

ones and applauded the permanent 

inclusion of the Track 1+ Model 

(described as Level E of the BASIC 

track). One commenter stated that the 

approach would strike an appropriate 

balance between encouraging the 

transition to performance-based risk 

while not creating an undue burden on 

clinicians and ACOs as they make this 

transition. Another commenter believed 

that the new transition from one-sided 

to two-sided risk within the BASIC track 

would reward participants for providing 

beneficiaries with good care while 

holding ACOs accountable for potential 

losses. Another commenter believed 

that the proposed rule would provide an 

opportunity to make changes to the 

Medicare program that advance highquality, affordable, and value-based care 

to improve patient outcomes and reduce 

costs. 

One commenter strongly supported 

and shared CMS’ goal of strengthening 

the Shared Savings Program to make it 

successful for patients, providers, and 

Medicare over the long-term so that 

Medicare beneficiaries can benefit from 

the advantage of high-quality, costefficient, and highly coordinated care. 

Another commenter urged CMS to 

continue providing a variety of ways to 

participate in the Shared Savings 

Program, including different tracks and 

levels of risk. The commenter stated that 

each organization is unique and will 

follow its own path to gain experience 

in redesigning care processes, learning 

where to appropriately direct resources 

so that its patients can receive patientcentered, team-based, and integrated 

healthcare, while at the same time, 

providing system savings to programs, 

patients and healthcare professionals. 

However, many commenters 

disagreed with the more aggressive 

transition of ACOs to performancebased risk under the proposed program 

redesign. Some commenters cautioned 

that although the requirement that all 

ACOs undertake two-sided risk at some 

point during their participation 

agreement may improve the 

performance of the ACOs that continue 

to participate in the Shared Savings 

Program, it may also reduce ACO 

participation in the program. Several 

commenters expressed concern that the 

change in program requirements may 

cause ACOs to end their participation 

with the Shared Savings Program and 

create a barrier to entry for ACOs to join 

the program. 

One commenter recommended that 

CMS carefully monitor Shared Savings 

Program participation and change 

course if participation falls 

precipitously. Several commenters 

expressed concern that the rapid 

assumption of significant levels of risk 

by ACOs would discourage new 

participants and impede current ACOs’ 

ability to make patient-centered 

infrastructure investments that are 

necessary for successful participation. 

Another commenter believed that 

reducing the amount of time permitted 

in upside only programs is ill advised 

and jeopardizes ACOs’ continued 

participation. 

Response: We appreciate the support 

of some commenters favoring the 

Shared Savings Program redesign and 

the more rapid transition from onesided to two-sided risk. We continue to 

believe that the proposed policies for 

the new BASIC track and the 

ENHANCED track generally strike an 

appropriate balance between risk and 

reward, appropriately distinguish 

available participation options by ACO 

and ACO participant characteristics, 

and will be effective in creating 

incentives for better coordinating care 

and assisting ACOs with the transition 

to risk. We continue to believe that 

models under which ACOs bear a 

degree of financial risk hold greater 

potential than one-sided models to 

induce more meaningful systematic 

change, promote accountability for a 

patient population and coordination of 

patient medical care, and encourage 

investment in redesigned care 

processes. 

In response to commenters’ concerns 

about the potential impact of the 

proposed redesign on program 

participation, we note the discussion in 

the Regulatory Impact Analysis (section 

V of this final rule), where we describe 

that potentially fewer new ACOs may 

enter the program, although ACOs 

within current agreement periods may 

be more likely to continue their 

participation. However, in general, we 

believe that the benefits associated with 

making the BASIC track’s glide path 

available to eligible ACOs, including the 

incremental increase in risk and reward, 

outweigh the risk of reduced ACO 

participation. With respect to the 

concerns about reduced ACO 

participation in the program, the 

potential effects of the proposed policies 

regarding the required transition to a 

two-sided model on participation 

decisions must be viewed together with 

other proposed program design 

elements that factor into participation 

decisions, including the methodology 

used to set and reset the ACO’s 

historical benchmark; the approach 

used to calculate the ACO’s shared 

savings and/or shared losses; the level 

of performance-based risk for ACOs; 

availability of the SNF 3-Day Rule 

Waiver, expanded coverage of telehealth 

services under section 1899(l) of the Act 

and Beneficiary Incentive Program; and 

the choice of methodologies for 

assigning beneficiaries to the ACO. 

Further, we believe that offering a 

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sided model through progressive levels 

of increasing risk and potential reward 

is responsive to commenters’ requests 

for additional program options for 

ACOs, including those less experienced 

with performance-based risk in an 

accountable care model. We believe that 

the addition of the new BASIC track, 

including a glide path with multiple 

levels of risk and potential reward, will 

help ACOs inexperienced with 

performance-based risk Medicare ACO 

initiatives to match their infrastructure 

and organizational readiness to an 

available participation option to support 

their achievement of the program’s goals 

of better care for individuals, better 

health for populations, and lower 

growth in Medicare Parts A and B 

expenditures. 

Further, as described elsewhere in 

this final rule, in response to 

commenters’ suggestions, we are 

finalizing several modifications to our 

proposals to further smooth ACOs’ 

transitions to performance-based risk. 

For example, as described in section 

II.A.5.c. of this final rule, we are 

finalizing a policy modification to allow 

additional flexibility for new ACO legal 

entities that qualify as low revenue 

ACOs and inexperienced with 

performance-based risk Medicare ACO 

initiatives, to participate for up to 3 

performance years under a one-sided 

model (4 performance years in the case 

of ACOs entering an agreement period 

beginning on July 1, 2019) of the BASIC 

track’s glide path before transitioning to 

Level E (the highest level of risk and 

potential reward under the BASIC 

track). We believe that this option may 

address some commenters’ concerns. 

For instance, this option could be an 

attractive alternative to new ACOs that 

are inexperienced with the Shared 

Savings Program, by providing an 

additional year for the ACO to earn 

shared savings payments and make 

patient-centered infrastructure 

investments that would support their 

successful participation under a twosided model. Additionally, as described 

in section II.A.6.c. of this final rule, we 

are finalizing modifications to the 

approach for determining repayment 

mechanism arrangement amounts to 

potentially reduce the burden of these 

arrangements for both lower-revenue 

and higher-revenue ACOs participating 

in the ENHANCED track. 

We will continue to monitor program 

participation and consider further 

refinements to the program’s 

participation options as we gain 

experience with implementing the 

redesigned program. 

Comment: As we summarize and 

respond to elsewhere in this section of 

this final rule, some commenters 

expressed concerns about the high level 

of risk under the ENHANCED track, and 

suggested that CMS allow for additional 

participation options that would smooth 

the transition from level of risk and 

potential reward within Level E of the 

BASIC track to the ENHANCED track. 

Some of these comments included 

suggestions for alternative designs of the 

ENHANCED track. Several commenters 

offered suggestions for how to modify 

the design of the financial model of, or 

participation options under, the 

ENHANCED track. A few commenters 

suggested that CMS should increase the 

shared savings rate to 80 percent for 

each performance year under the 

ENHANCED track (the same as the Next 

Generation ACO Model) and increase 

the performance payment limits over 

the agreement period. 

Response: We continue to believe it is 

important to maintain a participation 

option with the level of risk and 

potential reward as currently available 

under Track 3, proposed to be the 

ENHANCED track under the redesign of 

the program’s participation options. We 

believe that the opportunity for greater 

shared savings as compared to Level E 

of the BASIC track will encourage ACOs 

to undertake greater performance-based 

risk under the ENHANCED track, as 

well as provide a suitable participation 

option for ACOs more experienced with 

the accountable care model. 

Further, the design of the ENHANCED 

track offers symmetrical levels of risk 

and reward. To maintain this overall 

design, to increase the level of reward 

for the ENHANCED track (as suggested 

by one commenter), we would likewise 

need to consider increasing the level of 

risk as well. In light of commenters’ 

concerns about the level of risk in the 

design of this track, we are concerned 

about changing the design of the 

ENHANCED track to include even 

higher levels of risk and potential 

reward. 

Comment: Several commenters 

recommended that the ENHANCED 

track should include a revenue-based 

loss sharing limit. One commenter 

recommended that CMS should 

incorporate a revenue-based loss sharing 

limit into the ENHANCED track, similar 

to the BASIC track design. A few 

commenters suggested that CMS apply a 

loss sharing limit that is the lesser of 20 

percent of the ACO participant’s 

revenue or 10 percent of updated 

benchmark for the ENHANCED track. 

Response: We decline at this time to 

adopt the commenters’ suggestion to 

include an opportunity for ENHANCED 

track ACOs to qualify for a revenuebased loss sharing limit. The loss 

sharing limit under the ENHANCED 

track will remain 15 percent of the 

ACO’s updated benchmark. We 

continue to believe that ACOs 

participating under higher levels of risk 

and reward can drive more meaningful 

systematic change in the behavior of 

providers and suppliers towards 

meeting the program’s goals. As we 

describe elsewhere in this final rule, we 

continue to believe that all ACOs should 

transition to the level of risk and reward 

under the ENHANCED track. Therefore, 

we do not believe it is necessary to 

decrease the overall downside risk in 

the ENHANCED track or develop a 

financial model within the ENHANCED 

track, similar to the design of the twosided models of the BASIC track. Thus, 

we decline to apply the revenue-based 

loss sharing limit to the ENHANCED 

track, which would potentially provide 

a relatively lower level of risk and 

weaken the incentives of the track’s 

financial model. We note that, as 

discussed in section II.A.6.c. of this 

final rule, we are modifying the 

methodology for calculating repayment 

mechanism amounts for ENHANCED 

track ACOs, so that lower-revenue ACOs 

may be eligible for potentially lower 

repayment mechanism amounts under a 

revenue-based calculation. We believe 

this approach may assist ACOs by 

potentially reducing the financial 

burden of setting aside capital to 

establish a repayment mechanism before 

transitioning to greater risk under the 

ENHANCED track. 

Comment: Some commenters 

supported the consideration of allowing 

a participation option that would 

provide a gentler transition from the 

level of risk and potential reward under 

the BASIC track’s Level E and the level 

of risk and potential reward under the 

ENHANCED track, which we described 

and sought comment on in section 

II.A.5.b. of the August 2018 proposed 

rule (83 FR 41818). Several commenters 

expressed concern about the steep 

increase in risk between the BASIC 

track’s Level E and the ENHANCED 

track. Several commenters called 

attention to the difference between the 

maximum amount of loss liability under 

the BASIC track’s Level E (4 percent of 

the ACO’s updated historical 

benchmark) and the ENHANCED track 

(15 percent of the ACO’s updated 

historical benchmark). Several 

commenters indicated the likelihood of 

decreasing participation from low 

revenue ACOs if they are required to 

take on the level of two-sided risk in the 

ENHANCED track. One commenter 

stated that this significant increase in 

risk may present a barrier to successful 


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participation by smaller and less 

experienced ACOs. One commenter, 

concerned about the increase in risk 

between Level E of the BASIC track and 

the ENHANCED track, indicated that 

differences in exposure to loss liability 

and the repayment mechanism 

requirements between these tracks are 

unbalanced. One commenter, comparing 

the ENHANCED track to the Pioneer 

ACO model, cautioned CMS that we 

should expect attrition from the 

ENHANCED track based on the Pioneer 

ACO model experience. 

Several commenters suggested 

alternatives to ease the transition into 

risk from BASIC Level E to the 

ENHANCED track. Commenters 

suggested alternative participation 

options to create a series of gradual 

increases in both risk and reward, rather 

than a few inflection points to 

significantly different levels of risk. For 

example, creating a glide path to the 

highest risk level within the 

ENHANCED track or offer an additional 

track to help bridge the gap between the 

BASIC track and ENHANCED track that 

offers more options for gradual risk 

increases between Level E of the BASIC 

track and the ENHANCED track. 

Commenters’ specific suggestions 

included the following: 

• Establishing a glide path from Level E of 

the BASIC track to the ENHANCED track 

based on the design of Track 2. One 

commenter suggested that CMS create a 

‘‘BASIC Level E+’’ alternative that mimics 

the maximum shared savings and loss rates 

of the current Track 2. It would have an up 

to 60 percent maximum shared savings rate 

and a loss sharing rate that is not less than 

40 percent but would not exceed 60 percent 

and would qualify as an Advanced APM. 

• Installing Track 2 as a three year glide 

path for all ACO entities within the 

ENHANCED track. 

• Creating a voluntary intermediate track 

with a loss sharing limit of 8 percent of the 

ACO’s updated benchmark and shared 

savings rate of 65 percent. 

• Phasing-in the loss sharing limits within 

the ENHANCED track incrementally. One 

commenter suggested that the loss sharing 

limits be phased-in at 7 percent of 

benchmark in year 1, 10 percent in year 2, 

and then 15 percent in years 3, 4, and 5. 

Another commenter suggested a slower 

phase-in of the loss sharing limit, with a 

more incremental increase in the percentage 

each performance year. 

One commenter encouraged CMS to 

continue to assess the ability of low 

revenue ACOs to assume higher levels 

of downside risk. According to the 

commenter, CMS should also evaluate 

the success rates of low revenue ACOs 

that move to the ENHANCED track and 

monitor the number of ACOs that return 

to the BASIC track, particularly due to 

inability to assume higher levels of risk. 

Response: We continue to believe that 

the transition to risk from Level E of the 

BASIC track to the ENHANCED track 

best supports achieving our goal of 

driving more meaningful systematic 

change in providers’ and suppliers’ 

behavior towards achieving the 

program’s goals. Allowing more 

manageable levels of risk within the 

BASIC track’s glide path within the 

Shared Savings Program is an important 

pathway for helping organizations gain 

experience with managing risk as well 

as participating in Advanced APMs 

under the Quality Payment Program. We 

also recognize that it may be more 

difficult for low revenue ACOs to 

transition to higher levels of risk and 

potential reward and are therefore 

allowing eligible low revenue ACOs the 

opportunity to participate in the BASIC 

track for up to two agreement periods 

before advancing to the ENHANCED 

track (as discussed in section II.A.5.b.(2) 

of this final rule). As discussed in 

section II.A.6.c of this final rule, we are 

modifying our approach to determining 

the amount of the repayment 

mechanism for ENHANCED track ACOs, 

to allow for potentially lower estimated 

amounts for lower-revenue ACOs, to 

support their transition to the 

ENHANCED track. Although the 

financial model of the ENHANCED track 

will remain the same as the design of 

Track 3, the modified repayment 

mechanism arrangement estimation 

approach may reduce the financial 

burden on ACOs of establishing these 

arrangements, for example in setting 

aside capital, when transitioning to 

greater risk. 

One purpose of the proposed redesign 

is to streamline participation options 

under the Shared Savings Program. At 

this time, and considering the factors we 

described in this response as well as 

previous comment responses in this 

section, we decline to establish 

additional participation options that 

would include a bridge or intermediate 

track between Level E of the BASIC 

track and the ENHANCED track. 

Specifically, we decline the suggestion 

to modify the design of the ENHANCED 

track at this time to more closely 

resemble the design of Track 2, with a 

phase-in of the loss sharing limits over 

a single agreement period (as suggested 

by one commenter). As explained 

elsewhere in this final rule we are 

finalizing our proposal to discontinue 

Track 2, in part reflective of the reduced 

rates of participation in this track, and 

the availability of the BASIC track with 

relatively lower levels of risk and 

reward that, for ACOs eligible for the 

glide path, gradually increase over the 

term of the agreement period. 

As suggested by the commenter, we 

agree with the need to continue to 

monitor the redesigned participation 

options, including with respect to low 

revenue ACOs that move to the 

ENHANCED track as well as 

performance by high revenue ACOs 

under the ENHANCED track. We note 

that as described in section II.A.5.c of 

this final rule, we are finalizing a policy 

to monitor ACOs for composition 

changes during their agreement period 

that would affect their participation 

options. 

Comment: Many commenters opposed 

the proposal to discontinue Track 1 or 

an equivalent option that would allow 

for ACOs to participate for an entire 

agreement period, or up to 6 

performance years (to match the two 3- 

year agreement periods that are 

currently allowed), under a one-sided 

model. Many of these commenters 

believed that the current Track 1 is the 

only viable opportunity for rural ACOs 

to participate in a Medicare value-based 

payment model. The comments stated 

that although there are other options for 

health care providers to work together to 

address the cost and quality of care, 

collaborating in a Shared Savings 

Program ACO remains the most viable 

option for ACO participants, specifically 

independent rural healthcare 

organizations. One commenter stated 

that as a non-profit, low revenue ACO, 

they may be forced out of the Shared 

Savings Program because they lack the 

capital required for the repayment 

mechanism. Another commenter 

strongly opposed the elimination of 

Track 1 and urged its retention for 

physician-led organizations. The 

commenter proposed that if CMS chose 

to retain Track 1, it would recommend 

modifications to increase net savings for 

Medicare, such as terminating ACOs 

that have not achieved savings over 

several years, reducing shared savings 

payments for ACOs that fail to meet 

quality performance standards, or 

allowing ACOs to be accountable only 

for the spending they control versus the 

total cost of care. 

A few commenters asserted that CMS 

does not have authority under section 

1899(i) of the Act to discontinue Track 

1 and replace it with the BASIC track. 

These commenters noted that section 

1899(i)(2)(B) of the Act says that 

‘‘payments to an ACO for items and 

services . . . for beneficiaries for a year 

. . . shall be established in a manner 

that does not result in spending more 

for such ACO for such beneficiaries than 

would otherwise be expended for such 

ACO for such beneficiaries for such year 


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if the model were not implemented.’’ As 

a result, the commenters contend that 

the statute is not referring to a measure 

of overall program spending, but to the 

change in spending for each individual 

ACO. 

Further, these commenters noted that 

the current Track 1 model meets the 

statutory requirements for determining 

shared savings payments under section 

1899(d) of the Act. Section 1899(i) of the 

Act permits CMS to use partial 

capitation or other payment models 

instead of the shared savings approach 

under section 1899(d). However, one of 

the requirements for both of these other 

payment models is that spending cannot 

be more for such an ACO than would 

otherwise be expended for such ACO if 

the model were not implemented. In the 

proposed BASIC track and ENHANCED 

track, if Medicare spending exceeds an 

ACO’s benchmark, the ACO would be 

required to repay a portion of the 

difference but not the full amount. 

Because the ACO would not be required 

to repay the full increase, these 

commenters assert that Medicare would 

spend more for that ACO than it would 

otherwise have spent and, as a result, 

the two-sided payment model under the 

proposed BASIC track and ENHANCED 

track does not satisfy the statutory 

requirement in section 1899(i) of the 

Act. 

Response: After evaluating 

commenters’ concerns related to 

discontinuing Track 1, and as further 

detailed in section II.A.5 of this final 

rule, we are modifying our proposals 

and are finalizing an approach that 

would allow new legal entities that are 

low revenue ACOs and inexperienced 

with performance-based risk Medicare 

ACO initiatives the option to elect an 

additional year in a one-sided model of 

the BASIC track’s glide path, for a total 

of 3 performance years in a one-sided 

model (or 4 performance years in the 

case of ACOs entering an agreement 

period beginning on July 1, 2019). The 

ACO would enter the glide path at Level 

A, and automatically advance to Level 

B. Prior to the automatic advancement 

of the ACO to Level C, an eligible ACO 

may elect to remain in Level B for 

another performance year, and then be 

automatically advanced to Level E for 

the remaining two years. As we discuss 

in section II.A.3 of this final rule, we are 

also modifying our proposals regarding 

the design of the BASIC track’s glide 

path in order to increase the final shared 

savings rate to 40 percent for one-sided 

levels (Levels A and B) and allow for a 

50 percent shared savings rate for twosided levels (Levels C, D, and E) to 

further incentivize ACOs to move to risk 

while also providing the opportunity for 

ACOs to share in a greater percentage of 

savings to support their ongoing 

operating costs. 

We believe this approach will allow 

for a smoother progression to two-sided 

risk within the BASIC track’s glide path, 

particularly for new legal entities that 

are low revenue ACOs and 

inexperienced with the Shared Savings 

Program and other Medicare ACO 

initiatives. We also note that, under the 

policies we are adopting in this final 

rule, eligible ACOs will have the 

opportunity to participate for up to 3 

performance years (or 4 performance 

years in the case of ACOs entering an 

agreement period beginning on July 1, 

2019) under a one-sided model of 

approximately the same design as is 

currently offered in Track 1. This 

approach allows an ACO to benefit from 

the stability and predictability of their 

benchmark when moving to two-sided 

risk within the same agreement period. 

However, we disagree with 

commenters on the need to allow ACOs 

to continue under a one-sided model for 

longer periods of time. For example, 

allowing ACOs to continue under a onesided model for up to 6 performance 

years (as with the program’s current 

design). We believe that such an 

approach would, at best, maintain the 

status quo of the program, and therefore 

continue a pattern where ACOs are 

allowed to remain under the one-sided 

model without strong incentives to 

become accountable for the cost and 

quality of care for their assigned 

populations. 

Finally, we disagree with the 

commenters’ assertions that CMS does 

not have authority to discontinue Track 

1 and replace it with the BASIC track, 

which includes a glide path beginning 

with a one-sided model that offers the 

opportunity to earn shared savings 

determined under section 1899(d) of the 

Act. Section 1899(i)(3) of the Act 

authorizes the Secretary to use other 

payment models rather than the onesided model described in section 

1899(d) of the Act, as long as the 

Secretary determines that the other 

payment model will improve the quality 

and efficiency of items and services 

furnished to Medicare beneficiaries 

without additional program 

expenditures. As we described in the 

August 2018 proposed rule and restate 

in this final rule, we believe that the 

requirements for use of our authority 

under section 1899(i)(3) are met with 

respect to establishing the new BASIC 

track, as well as the other policies we 

proposed and are finalizing that require 

use of this authority. In particular, we 

note that the Regulatory Impact 

Analysis in Section V of this final rule 

includes a description of the 

comparison that was conducted 

between the projected impact of the 

payment methodology that incorporates 

all program elements implemented 

using our authority under section 

1899(i)(3) of the Act, versus a 

hypothetical baseline payment 

methodology that excludes the elements 

that require section 1899(i)(3) authority. 

As detailed in that section, the analysis 

estimates approximately $4 billion 

greater average net program savings 

under the alternative payment model 

that includes all policies that require the 

authority of section 1899(i)(3) of the Act 

than would be expected under the 

hypothetical baseline in total over the 

2019 to 2028 projection period. The 

alternative payment model, as finalized 

in this rule, is projected to result in 

greater savings via a combination of 

reduced Medicare Parts A and B FFS 

expenditures and reduced net payments 

to ACOs. 

Comment: Some commenters agreed 

with discontinuing the deferred renewal 

option for Track 1 ACOs that is 

available under the current regulations. 

However, most commenters disagreed 

with CMS’ decision to discontinue the 

current policy to allow Track 1 ACOs in 

their first agreement period to defer 

renewal for a second agreement period 

prior to taking on risk in a two-sided 

model. 

Response: As we previously 

explained, very few ACOs have elected 

the deferred renewal participation 

option, and we have concluded that the 

deferred renewal policy has shown 

limited success in encouraging ACOs to 

advance to performance-based risk. As 

we explained in the proposed rule, and 

reiterated in this section of this final 

rule, we continue to believe that the 

deferred renewal option would be 

inconsistent with our proposed redesign 

of the program that would transition 

ACOs from a one-sided model to twosided models within one agreement 

period under the BASIC track’s glide 

path. Further, extending the length of 

the agreement period from 3 years to 5 

years, as we are finalizing in this final 

rule, creates another redundancy with 

the deferred renewal option which 

allows ACOs to defer benchmark 

rebasing by 1 year. We are finalizing as 

proposed our policy to discontinue the 

availability of the deferred renewal 

option for Track 1 ACOs applying to 

enter a second agreement period in the 

Shared Savings Program under a twosided model. 

Comment: Generally, most 

commenters favored the proposal to 

move from three to five year agreement 

periods. Most commenters believed that 


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the five year agreement periods would 

be beneficial due to the amount of time 

it takes for ACOs to operationalize 

changes to support improved 

performance in the program. Other 

commenters stated that the change 

would advance greater predictability for 

providers and health systems that are 

making investments and other system 

changes to support participation. One 

commenter noted that a three year 

agreement period has been insufficient 

in terms of enabling participants to 

implement reforms to care delivery and 

workflow. Many other commenters 

agreed and believed that the five year 

agreement periods would help with 

program predictability and increase 

stability. A few commenters stated that 

historical benchmarks would become 

more predictable, since the benchmark 

would continue to be based on the 

expenditures for beneficiaries who 

would have been assigned to the ACO 

in the three most recent years prior to 

the start of the ACO’s agreement period. 

Other commenters believed that the 

longer agreement periods would provide 

a meaningful length of time to measure 

ACO successes and challenges. Further, 

one of the commenters contended that 

as the Shared Savings Program matures, 

it will be important to evaluate and 

measure ACO performance and the 5- 

year agreement period will allow for a 

more robust evaluation of financial 

performance. 

However, some commenters disagreed 

with the change in the length of the 

agreement period. Several commenters 

asserted that the greatest factor 

undermining stability within the Shared 

Savings Program is CMS’ changes to 

policy repeatedly within and between 

agreement periods, and these 

commenters expressed that moving to a 

5-year agreement period would expose 

participants to extra potential change 

within a single agreement period. One 

of these commenters stated that this 

kind of instability can only be mitigated 

via shorter agreement periods. Another 

commenter stated that it would support 

the change from three- to five-years if 

CMS minimized year-over-year policy 

changes. One commenter stated that 

ACOs who began participating in the 

Shared Savings Program in 2012/2013 

were either sheltered from 

consequences or put at a significant 

disadvantage. The commenter stated 

that early adopters were put at a 

competitive disadvantage when the 

regional benchmarking formulas were 

introduced for later entrants, and cited 

the uncertainty inherent in the potential 

for future changes in the regulatory 

landscape. The commenter further 

contended that these ACOs also had the 

ability to remain under one-sided risk 

for an extended period of time, which 

the commenter believed sheltered these 

ACOs from consequences of two-sided 

risk. The commenter proposed that CMS 

either shorten the agreement period or 

provide for annual updates and 

renewals, similar to the Medicare 

Advantage regulations. Another 

commenter stated that, although they 

accept CMS’ decision to extend the 

agreement period from three to five 

years to promote stability, the 

commenter was also critical of the fact 

that CMS regularly changes, rewrites, or 

clarifies the Shared Savings Program 

rules, creating instability in the 

program. 

Other commenters urged CMS to 

reconsider the change to a 5-year 

agreement period due to their concern 

that the length of the agreement period 

in relation to CMS’ proposed risk ratio 

cap is too long to properly reflect 

changes in the attributes of the assigned 

beneficiary population. Another 

commenter was concerned about 

procuring a repayment mechanism for 

the 5-year agreement period plus the 

additional 24 month tail period. 

Specifically, the commenter contended 

that the extended duration of the 

participation agreement might limit the 

availability of the surety bond as a 

repayment mechanism option. 

Finally, several commenters 

recommended that CMS extend the 

agreement period to 7 years. Once 

commenter was concerned that the 

proposed rule, with its new and shorter 

transition to shared losses, could lead to 

even greater pressure on providers to 

respond to the program’s financial 

incentives to reduce spending on 

services. The commenter further 

contended that these pressures, in turn, 

may lead to greater risk that patient 

access to greater innovations and 

technologies will be compromised, 

especially when these are more 

expensive than the standard of care 

embedded in benchmarks. 

Response: We appreciate the general 

support for moving from three to five 

year agreement periods. During previous 

rulemaking in 2011, we received a large 

number of comments surrounding the 

length of the agreement period that 

specifically requested that it be 

extended to five years. As part of 

reevaluating the program requirements, 

we believe that it may benefit ACOs to 

extend the 3-year agreement period to 

five years so they will have more 

predictable benchmarks and therefore a 

greater opportunity for return on 

investment through achieving shared 

savings with the longer agreement 

period. We also believe that extending 

the agreement period to five years 

allows ACOs to gradually transition to 

risk and establish an operational 

structure to support quality reporting 

and other Shared Savings Program 

requirements, and provides adequate 

time for data evaluation during the early 

part of the agreement period. Further, 

we recognize that the longer the 

agreement period, the greater an ACO’s 

chance to build on the success or 

continue the failure of its current 

agreement. CMS’ PY 2016 results show 

that ACOs produce a higher level of net 

savings and more optimal financial 

performance results the longer they 

have been in the Shared Savings 

Program and with additional 

participation experience (83 FR 41917). 

We also understand commenters’ 

concern that CMS policy may evolve 

during the five year agreement period. 

However, we will continue to evaluate 

the effectiveness of Shared Savings 

Program policies and make adjustments, 

as necessary, to further promote 

accountability for a patient population, 

foster the coordination of Medicare 

Parts A and B items and services, and 

encourage high quality and efficient 

service delivery. 

We reviewed quality and financial 

results to date in developing these 

policy proposals to refine the program. 

We continue to review ACO quality and 

financial results to ensure that the 

program is providing as much value as 

possible, is responsive to stakeholders’ 

feedback, and is meeting its objectives 

of improving care coordination for 

beneficiaries and lowering growth in 

Medicare expenditures. We also make 

available, to researchers and other 

external parties, public use files and 

research identifiable files with program 

data, to promote program transparency 

and to allow researchers and others to 

evaluate and comment on program 

results. 

We appreciate the comments related 

to the proposed symmetrical 3 percent 

cap on CMS–HCC risk scores in relation 

to the proposal for 5-year agreement 

periods. In developing our proposed 

policies, we considered alternate levels 

for the cap or allowing full CMS–HCC 

risk adjustment with no cap at all. 

However, we were concerned that a 

lower cap would not offer ACOs enough 

protection against greater health status 

changes relative to our current 

approach. At the same time, we were 

concerned that adopting a higher cap, or 

allowing for full, uncapped risk 

adjustment would not provide sufficient 

protection against potential coding 

initiatives. Our choice of 3 percent as 

the preferred level for the cap was 


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influenced by program experience as 

described in more detail in section 

II.D.2.b of the August 2018 proposed 

rule. 

We appreciate the concerns raised 

regarding the availability of repayment 

mechanism arrangements and, in 

particular, the availability of surety 

bonds. As we explain in section II.A.6 

of this final rule, based on our 

experience, we believe ACOs will be 

able to work with financial institutions 

to establish the required arrangement to 

cover the full 5-year agreement period 

and tail period plus the 12-month tail 

period we are finalizing. However, as 

described in section II.A.6 of this final 

rule, we are also permitting ACOs to 

satisfy the repayment mechanism 

duration requirement by establishing a 

repayment mechanism that has a term 

that covers at least the first two 

performance years that an ACO is 

participating under a two-sided model 

and provides for automatic, annual 12 

month extensions of the repayment 

mechanism such that the repayment 

mechanism will eventually remain in 

effect for the duration of the agreement 

period plus 12 months following the 

conclusion of the agreement period. We 

believe that these changes will reduce 

the burden of establishing a repayment 

mechanism that satisfies the duration 

requirement. We will monitor the use of 

repayment mechanisms and may revisit 

the issue in future rulemaking if we 

determine that the ability of an ACO to 

establish an adequate repayment 

mechanism that meets the duration 

requirement is constrained by the 

availability or cost of repayment 

mechanism options. Furthermore, we 

note that nothing in our program rules 

prohibits an ACO from establishing 

multiple repayment mechanisms, as 

long as the total of the repayment 

mechanisms meets the repayment 

mechanism amount provided by CMS. 

Finally, we appreciate the suggestion 

for a 7-year agreement period but due to 

potential financial and administrative 

burdens on ACOs, including procuring 

a repayment mechanism for a longer 

period of time, we are declining to 

extend the agreement period to that 

span at this time. 

Comment: One commenter suggested 

that current ACOs participating in Track 

3 should be provided reward options for 

undertaking risk such as the ability to 

participate in the BASIC track, 

extension of their current agreement 

period, and reduction of the new 

agreement period to three years for the 

first renewal period under the new 

participation options for current Track 3 

ACOs. 

Response: We decline the 

commenter’s suggestions to allow 

current Track 3 ACOs the option to 

choose alternative participation options, 

including participation under an initial 

3-year agreement period rather than a 5- 

year agreement period under the 

ENHANCED track. As described 

elsewhere in this section of this final 

rule, we are finalizing an approach to 

require all ACOs entering agreement 

periods beginning July 1, 2019 and 

subsequent years to participate under 

agreement periods of at least 5 years. We 

note that, in the November 2018 final 

rule, we finalized a policy which allows 

all ACOs whose agreement periods 

expire on December 31, 2018 to elect a 

voluntary 6-month extension of their 

current agreement period, which 

includes current Track 3 ACOs with 

participation agreements expiring on 

that date. In addition, we note that 

eligible low revenue ACOs that are 

determined to be experienced with 

performance-based risk Medicare ACO 

initiatives may participate for an 

agreement period under Level E of the 

BASIC track, including such qualifying 

ACOs that currently are participating 

under Track 3. As described in section 

II.A.5. of this final rule, low revenue 

ACOs may participate in the BASIC 

track for up to two agreement periods, 

which are not required to be sequential. 

For example, this would allow low 

revenue ACOs that transition to the 

ENHANCED track after a single 

agreement period under the BASIC track 

the opportunity to return to the BASIC 

track if the ENHANCED track initially 

proves to involve too high a level of 

performance-based risk. 

Comment: One commenter sought 

clarification as to the interaction 

between the Bundled Payments for Care 

Improvement Advanced (BPCI 

Advanced) model and the proposed 

redesigned Shared Savings Program 

participation options. Specifically, the 

commenter stated that given its 

financial and operational investment 

that they recently made to participate in 

the BPCI Advanced model, providers 

need to understand explicitly how CMS 

intends to handle the interaction of the 

two programs as the commenter makes 

its business decision regarding 

participation in the Shared Savings 

Program for the next agreement period. 

Response: Entities may concurrently 

participate in BPCI Advanced and the 

Shared Savings Program. The 

interactions between the Shared Savings 

Program assigned beneficiaries and 

episodes that are initiated under the 

BPCI Advanced model are governed by 

the model participation agreement. The 

current BPCI Advanced participation 

agreement addresses financial 

reconciliation and indicates that clinical 

episodes may not be initiated for 

beneficiaries assigned to a Shared 

Savings Program ACO in Track 3, but 

can be initiated for beneficiaries 

assigned to a Shared Savings Program 

ACO in Track 1, the Track 1+ Model or 

Track 2. We will continue to work with 

our colleagues in the Innovation Center 

to address interactions between models 

and Shared Savings Program ACOs, 

including the interaction between BPCI 

Advanced and the BASIC track and 

ENHANCED track, and provide such 

information in future guidance. We 

work to align and create synergies 

between the Shared Savings Program 

and the payment and service delivery 

models tested by the Innovation Center. 

We have policies in place to take into 

account overlap between the Shared 

Savings Program and Innovation Center 

models, which are designed to test new 

payment and service delivery models to 

reduce expenditures and preserve or 

enhance quality of care, whenever 

possible. We continue to monitor these 

policies and make refinements as we 

gain experience and lessons learned 

from these interactions. When new 

models are announced, we encourage 

ACOs and their leaders to engage in 

dialogue with the Innovation Center and 

Shared Savings Program staff to inform 

their decision-making regarding the 

participation options. 

Comment: Several commenters 

suggested CMS consider how to align 

the design parameters across Medicare 

ACO initiatives in redesigning the 

Shared Savings Program. One 

commenter explained that inconsistency 

across different Medicare ACO 

initiatives presents challenges for 

organizations that want to progress from 

one initiative to the next, as well for 

organizations that have participants in 

different Medicare ACO models at the 

same time. Another commenter 

specifically suggested that CMS 

continue to identify areas such as with 

beneficiary attribution and payment 

methodologies to create consistency 

across different Medicare ACO 

initiatives and even more broadly across 

CMS’ delivery system reform portfolio. 

One commenter specifically suggested 

that CMS incorporate several elements 

of the Next Generation ACO Model into 

the Shared Savings Program such as the 

choice of allowing participation by TINs 

or NPIs (as opposed to Shared Savings 

Program’s current requirement for 

participation by all NPIs enrolled in an 

ACO participant TIN), infrastructure 

payments, prepayment of shared savings 

and primary capitation, which were 


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suggestions echoed by other 

commenters. 

Response: We appreciate commenters’ 

support for and interest in CMS’ 

Medicare ACO initiatives, more 

generally. We note that the Innovation 

Center’s time-limited Medicare ACO 

models, including the Next Generation 

ACO Model, are designed to test 

alternative payment and service 

delivery models. Lessons learned from 

these initiatives may be used to inform 

the development of future policies 

under the Shared Savings Program, 

which is a permanent program 

established under the authority of 

section 1899 of the Act. We also believe 

the alternative designs of these ACO 

models provide important pathways for 

ACOs to select to participate under a 

Medicare ACO model that may be more 

in line with their organizational 

preferences and experience with the 

accountable care model or the needs of 

the populations they serve. CMS 

provides education and outreach to 

explain the designs of ACO models, and 

requirements for participation in these 

initiatives, to support ACOs’ 

compliance with initiative requirements 

and their success in achieving the goals 

of these initiatives. Some changes 

suggested by commenters were not 

contemplated in the August 2018 

proposed rule. We decline to undertake 

these additional policy modifications at 

this time. Specifically, we decline to 

redefine ACO participants to allow 

participation by some but not all NPIs 

that have reassigned their billing rights 

to a TIN, allow for infrastructure 

payments or prepayment of shared 

savings as part of the national program, 

or to create a capitated payment model. 

Comment: Several commenters 

encouraged CMS to take steps towards 

aligning the Shared Savings Program 

with Medicare Advantage as part of the 

redesign of the Shared Savings Program. 

One commenter stated that Medicare 

Advantage plans are rewarded with 

higher benchmarks for higher quality, 

which puts Shared Savings Program 

ACOs at a financial disadvantage. Other 

commenters suggested that CMS 

incorporate into the Shared Savings 

Program aspects of Medicare Advantage 

such as utilization management and 

more extensive beneficiary incentive 

payments (such as under the Innovation 

Center’s Medicare Advantage ValueBased Insurance Design model). One 

commenter suggested that Shared 

Savings Program ACOs need to be more 

clearly defined as an alternative to both 

traditional FFS Medicare and Medicare 

Advantage. Another commenter 

suggested that there may not be a need 

for the Shared Savings Program in light 

of the availability of Medicare 

Advantage and other value-based 

payment initiatives such as the 

Innovation Center’s Comprehensive 

Primary Care Plus (CPC+) Model. 

Response: Elsewhere in this final rule, 

we discuss commenters’ specific 

suggestions for bringing greater 

alignment between the design of the 

Shared Savings Program and Medicare 

Advantage, such as the modifications to 

the Shared Savings Program’s 

methodology to annually risk adjust the 

historical benchmark (see section II.D of 

this final rule). In section II.C.2. of this 

final rule, we also address commenters’ 

suggestions that CMS align its proposed 

beneficiary incentive program policies 

with MA. 

Although we frequently relied on our 

experience in other Medicare programs, 

including MA, to help develop the 

original framework for the Shared 

Savings Program and will continue to 

explore opportunities to align the 

requirements of the Shared Savings 

Program and Medicare Advantage, we 

believe that the Shared Savings Program 

offers an alternative to both volumebased payments under traditional 

Medicare FFS and Medicare Advantage. 

Under the Shared Savings Program, the 

providers and suppliers that form an 

ACO agree to become accountable for 

the quality, cost, and overall care of the 

Medicare FFS beneficiaries assigned to 

the ACO. Shared Savings Program ACOs 

only share in savings if they meet both 

the quality performance standards and 

generate shareable savings. Medicare 

FFS beneficiaries assigned to Shared 

Savings Program ACOs retain all rights 

and benefits under traditional Medicare, 

including the right to see any physician 

of their choosing, and they do not enroll 

in the Shared Savings Program. 

Further, we will continue to offer the 

Shared Savings Program, as required by 

law, and decline the commenters’ 

suggestion that CMS discontinue the 

program. 

Final Action: We are finalizing our 

proposed policies to redesign the 

program’s participation options by 

discontinuing Track 1, Track 2, and the 

deferred renewal option under 

§§ 425.200(b)(3), and 425.200(e). We are 

also finalizing our policy to offer two 

tracks that eligible ACOs would enter 

into for an agreement period of at least 

5 years: 

• BASIC track, added as a new provision 

at § 425.605, which includes an option for 

eligible ACOs to begin participation under a 

one-sided model and incrementally phase-in 

risk (calculated based on ACO participant 

revenue and capped at a percentage of the 

ACO’s updated benchmark) and potential 

reward over the course of a single agreement 

period, an approach referred to as a glide 

path (as described in section II.A.3. of this 

final rule). We are finalizing our proposal in 

§ 425.600(a)(4) for eligible ACOs to elect to 

operate under the BASIC track. 

Under the BASIC track’s glide path, the 

level of risk and potential reward phases in 

over the course of the agreement period in 

the following order: 

++ Level A. The ACO operates under a 

one-sided model as described under 

§ 425.605(d)(1)(i). 

++ Level B. The ACO operates under a 

one-sided model as described under 

§ 425.605(d)(1)(ii). 

++ Level C. The ACO operates under a 

two-sided model as described under 

§ 425.605(d)(1)(iii). 

++ Level D. The ACO operates under a 

two-sided model as described under 

§ 425.605(d)(1)(iv). 

++ Level E. The ACO operates under a 

two-sided model as described under 

§ 425.605(d)(1)(v). 

• ENHANCED track as currently designed 

and implemented under §§ 425.600(a)(3), 

425.610, based on the program’s existing 

Track 3. 

Additionally, we are finalizing 

changes to § 425.200 to specify that 

ACOs will agree to participate for a 

period of not less than 5 years for 

agreement periods beginning on July 1, 

2019 and in subsequent years. Lastly, 

we are finalizing revisions to 

§ 425.502(e)(4)(v), specifying calculation 

of the quality improvement reward as 

part of determining the ACO’s quality 

score, which previously included 

language based on 3-year agreements. 

3. Creating a BASIC Track With Glide 

Path to Performance-Based Risk 

a. Overview 

We proposed that the BASIC track 

would be available as a participation 

option for agreement periods beginning 

on July 1, 2019 and in subsequent years. 

Special considerations and proposals 

with respect to the midyear start of the 

first BASIC track performance year and 

the limitation of this first performance 

year to a 6-month period are discussed 

in section II.A.7. of this final rule and, 

as needed, throughout this preamble. 

In general, we proposed to model the 

BASIC track on the current provisions 

governing Shared Savings Program 

ACOs under 42 CFR part 425, including 

the general eligibility requirements 

(subpart B), application procedures 

(subpart C), program requirements and 

beneficiary protections (subpart D), 

beneficiary assignment methodology 

(subpart E), quality performance 

standards (subpart F), data sharing 

opportunities and requirements (subpart 

H), and benchmarking methodology 

(which as discussed in section II.D. of 

this final rule, we proposed to specify 

in a new section of the regulations at 


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§ 425.601). Further, we proposed that 

the policies on reopening 

determinations of shared savings and 

shared losses to correct financial 

reconciliation calculations (§ 425.315), 

the preclusion of administrative and 

judicial review (§ 425.800), and the 

reconsideration process (subpart I) 

would apply to ACOs participating in 

the BASIC track in the same manner as 

for all other Shared Savings Program 

ACOs. Therefore, we proposed to amend 

certain existing regulations to 

incorporate references to the BASIC 

track and the proposed new regulation 

at § 425.605. This includes amendments 

to §§ 425.100, 425.315, 425.600, and 

425.800. As part of the revisions to 

§ 425.800, we proposed to clarify that 

the preclusion of administrative and 

judicial review with respect to certain 

financial calculations applies only to 

the extent that a specific calculation is 

performed in accordance with section 

1899(d) of the Act. 

As discussed in section II.A.4.c. of 

this final rule, we proposed that ACOs 

in the BASIC track would have an 

opportunity to annually elect their 

choice of beneficiary assignment 

methodology. As discussed in section 

II.B. of this final rule, we proposed to 

make the SNF 3-day rule waiver 

available to ACOs in the BASIC track 

under two-sided risk. If these ACOs 

select prospective beneficiary 

assignment, their physicians and 

practitioners billing under ACO 

participant TINs would also have the 

opportunity to provide telehealth 

services under section 1899(l) of the 

Act, starting in 2020. As described in 

section II.C. of this final rule, BASIC 

track ACOs under two-sided risk (Levels 

C, D, or E) would be allowed to apply 

for and, if approved, establish a CMSapproved beneficiary incentive program 

to provide incentive payments to 

eligible beneficiaries for qualifying 

services. 

We proposed that, unless otherwise 

indicated, all current policies that apply 

to ACOs under a two-sided model 

would apply also to ACOs participating 

under risk within the BASIC track. This 

includes the selection of a Minimum 

Savings Rate (MSR)/Minimum Loss Rate 

(MLR) consistent with the options 

available under the ENHANCED track, 

as specified in § 425.610(b)(1) (with 

related proposals discussed in section 

II.A.6.b. of this final rule), and the 

requirement to establish and maintain 

an adequate repayment mechanism 

under § 425.204(f) (with related 

proposals discussed in section II.A.6.c. 

of this final rule). ACOs participating 

under the one-sided models of the 

BASIC track’s glide path (Level A and 

Level B), would be required to select a 

MSR/MLR and establish an adequate 

repayment mechanism prior to their 

first performance year in performancebased risk. Additionally, the same 

policies regarding notification of savings 

and losses and the timing of repayment 

of any shared losses that apply to ACOs 

in the ENHANCED track (see 

§ 425.610(h)) would apply to ACOs in 

two-sided risk models under the BASIC 

track, including the requirement that an 

ACO must make payment in full to CMS 

within 90 days of receipt of notification 

of shared losses. 

As described in section II.E.4. of the 

August 2018 proposed rule, we 

proposed to extend the policies for 

addressing the impact of extreme and 

uncontrollable circumstances on ACO 

quality and financial performance, as 

established for performance year 2017 to 

performance year 2018 and subsequent 

years. We finalized this proposal in the 

November 2018 final rule (83 FR 59968 

through 59979) to ensure that relief is 

available for ACOs affected by the 

recent hurricanes in North Carolina and 

Florida and other disasters during 2018. 

In the August 2018 proposed rule, we 

proposed that these policies would also 

apply to BASIC track ACOs. Section 

425.502(f) specifies the approach to 

calculating an ACO’s quality 

performance score for all affected ACOs. 

Further, we proposed that the policies 

regarding the calculation of shared 

losses for ACOs under a two-sided risk 

model that are affected by extreme and 

uncontrollable circumstances (see 

§ 425.610(i)) would also apply to BASIC 

track ACOs under performance-based 

risk. 

Final Action: There were no 

comments directed specifically at our 

proposal to model the BASIC track on 

the current provisions governing Shared 

Savings Program ACOs under 42 CFR 

part 425, including the general 

eligibility requirements (subpart B), 

application procedures (subpart C), 

program requirements and beneficiary 

protections (subpart D), beneficiary 

assignment methodology (subpart E), 

quality performance standards (subpart 

F), data sharing opportunities and 

requirements (subpart H), and 

benchmarking methodology (subpart G). 

We are finalizing our proposals to 

model the BASIC track on the existing 

provisions governing other tracks of the 

Shared Savings Program. Elsewhere in 

this final rule we describe in detail our 

final policies for the other proposed 

revisions to the program’s regulations to 

establish the BASIC track. 

We did not receive any comments 

specifically addressing our proposal to 

extend the policies on extreme and 

uncontrollable circumstances to ACOs 

participating in the BASIC track. We are 

finalizing without modification our 

proposal to specify the policies 

regarding extreme and uncontrollable 

circumstances for the BASIC track in a 

new provision at § 425.605(f). We are 

also finalizing without modification our 

proposal to apply § 425.502(f) in 

calculating the quality performance 

score of BASIC track ACOs affected by 

extreme and uncontrollable 

circumstances. 

Additionally, we received no 

comments on our proposal to apply 

policies on reopening determinations of 

shared savings or shared losses to 

correct financial reconciliation 

calculations (§ 425.315) to ACOs in the 

BASIC track. Further, no comments 

addressed our proposal to apply the 

policies on the preclusion of 

administrative and judicial review 

(§ 425.800), and the reconsideration 

process (subpart I) to ACOs in the 

BASIC track. We are finalizing these 

policies as proposed and accordingly we 

are amending §§ 425.315, and 425.800 

to incorporate references to the new 

provision for the BASIC track at 

§ 425.605. We also received no 

comments addressing our proposal to 

revise § 425.100, which includes a 

general description of ACOs that are 

eligible to receive payments for shared 

savings or that must share losses under 

the program, to incorporate references to 

the new provision for the BASIC track 

at § 425.605, and we are finalizing the 

revisions as proposed. 

b. Phase-In of Performance-Based Risk 

in the BASIC Track 

(1) Background on Levels of Risk and 

Reward 

To qualify for shared savings, an ACO 

must have savings equal to or above its 

MSR, meet the minimum quality 

performance standards established 

under § 425.502, and otherwise 

maintain its eligibility to participate in 

the Shared Savings Program 

(§§ 425.604(a)(7), (b) and (c), 

425.606(a)(7), (b) and (c), 425.610(a)(7), 

(b) and (c)). If an ACO qualifies for 

savings by meeting or exceeding its 

MSR, then the final sharing rate (based 

on quality performance) is applied to 

the ACO’s savings on a first dollar basis, 

to determine the amount of shared 

savings up to the performance payment 

limit (§§ 425.604(d) and (e), 425.606(d) 

and (e), 425.610(d) and (e)). 

Under the current program 

regulations, an ACO that meets all of the 

requirements for receiving shared 

savings under the one-sided model can 

qualify to receive a shared savings 


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payment of up to 50 percent of all 

savings under its updated benchmark, 

as determined on the basis of its quality 

performance, not to exceed 10 percent 

of its updated benchmark. A Track 2 

ACO can potentially receive a shared 

savings payment of up to 60 percent of 

all savings under its updated 

benchmark, not to exceed 15 percent of 

its updated benchmark. A Track 3 ACO 

can potentially receive a shared savings 

payment of up to 75 percent of all 

savings under its updated benchmark, 

not to exceed 20 percent of its updated 

benchmark. The higher sharing rates 

and performance payment limits under 

Track 2 and Track 3 were established as 

incentives for ACOs to accept greater 

financial risk for their assigned 

beneficiaries in exchange for potentially 

higher financial rewards. (See 76 FR 

67929 through 67930, 67934 through 

67936; 80 FR 32778 through 32779.) 

Under the current two-sided models 

of the Shared Savings Program, an ACO 

is responsible for sharing losses with the 

Medicare program when the ACO’s 

average per capita Medicare 

expenditures for the performance year 

are above its updated benchmark costs 

for the year by at least the MLR 

established for the ACO 

(§§ 425.606(b)(3), 425.610(b)(3)). For an 

ACO that is required to share losses 

with the Medicare program for 

expenditures over its updated 

benchmark, the shared loss rate (also 

referred to as the loss sharing rate) is 

determined based on the inverse of its 

final sharing rate, but may not be less 

than 40 percent. The loss sharing rate is 

applied to an ACO’s losses on a first 

dollar basis, to determine the amount of 

shared losses up to the loss recoupment 

limit (also referred to as the loss sharing 

limit) (§§ 425.606(f) and (g), 425.610(f) 

and (g)). 

In earlier rulemaking, we discussed 

considerations related to establishing 

the loss sharing rate and loss sharing 

limit for Track 2 and Track 3. See 76 FR 

67937 (discussing shared loss rate and 

loss sharing limit for Track 2) and 80 FR 

32778 through 32779 (including 

discussion of shared loss rate and loss 

sharing limit for Track 3). Under Track 

2 and Track 3, the loss sharing rate is 

determined as 1 minus the ACO’s final 

sharing rate based on quality 

performance, up to a maximum of 60 

percent or 75 percent, respectively 

(except that the loss sharing rate may 

not be less than 40 percent for Track 3). 

This creates symmetry between the 

sharing rates for savings and losses. The 

40 percent floor on the loss sharing rate 

under both Track 2 and Track 3 ensures 

comparability in the minimum level of 

performance-based risk that ACOs 

accept under these tracks. The higher 

ceiling on the loss sharing rate under 

Track 3 reflects the greater risk Track 3 

ACOs accept in exchange for the 

possibility of greater reward compared 

to Track 2. 

Under Track 2, the limit on the 

amount of shared losses phases in over 

3 years starting at 5 percent of the 

ACO’s updated historical benchmark in 

the first performance year of 

participation in Track 2, 7.5 percent in 

year 2, and 10 percent in year 3 and any 

subsequent year. Under Track 3, the loss 

sharing limit is 15 percent of the ACO’s 

updated historical benchmark, with no 

phase-in. Losses in excess of the annual 

limit would not be shared. 

The level of risk under both Track 2 

and Track 3 exceeds the Advanced APM 

generally applicable nominal amount 

standard under § 414.1415(c)(3)(i)(B) 

(set at 3 percent of the expected 

expenditures for which an APM Entity 

is responsible under the APM). CMS has 

determined that Track 2 and Track 3 

meet the Advanced APM criteria under 

the Quality Payment Program, and are 

therefore Advanced APMs. Eligible 

clinicians that sufficiently participate in 

Advanced APMs such that they are QPs 

for a performance year receive APM 

Incentive Payments in the 

corresponding payment year between 

2019 through 2024, and then higher fee 

schedule updates starting in 2026. 

The Track 1+ Model is testing 

whether combining the upside sharing 

parameters of the popular Track 1 with 

limited downside risk sufficient for the 

model to qualify as an Advanced APM 

will encourage more ACOs to advance 

to performance-based risk. The Track 1+ 

Model has reduced risk in two main 

ways relative to Track 2 and Track 3. 

First, losses under the Track 1+ Model 

are shared at a flat 30 percent loss 

sharing rate, which is 10 percentage 

points lower than the minimum qualityadjusted loss sharing rate used in both 

Track 2 and Track 3. Second, a 

bifurcated approach is used to set the 

loss sharing limit for a Track 1+ Model 

ACO, depending on the ownership and 

operational interests of its ACO 

participants, as identified by TINs and 

CMS Certification Numbers (CCNs). 

The applicable loss sharing limit 

under the Track 1+ Model is determined 

based on whether the ACO includes an 

ACO participant (TIN/CCN) that is an 

IPPS hospital, cancer center or a rural 

hospital with more than 100 beds, or 

that is owned or operated, in whole or 

in part, by such a hospital or by an 

organization that owns or operates such 

a hospital. If at least one of these criteria 

is met, then a potentially higher level of 

performance-based risk applies, and the 

loss sharing limit is set at 4 percent of 

the ACO’s updated historical 

benchmark (described herein as the 

benchmark-based loss sharing limit). 

For the Track 1+ Model, this is a lower 

level of risk than is required under 

either Track 2 or Track 3, and greater 

than the Advanced APM generally 

applicable nominal amount standard 

under § 414.1415(c)(3)(i)(B) for 2018, 

2019 and 2020. If none of these criteria 

is met, as may be the case with some 

ACOs composed of independent 

physician practices and/or ACOs that 

include small rural hospitals, then a 

potentially lower level of performancebased risk applies, and the loss sharing 

limit is determined as a percentage of 

the total Medicare Parts A and B FFS 

revenue of the ACO participants 

(described herein as the revenue-based 

loss sharing limit). For Track 1+ Model 

ACOs under a revenue-based loss 

sharing limit, in performance years 

2018, 2019 and 2020, total liability for 

shared losses is limited to 8 percent of 

total Medicare Parts A and B FFS 

revenue of the ACO participants. If the 

loss sharing limit, as a percentage of the 

ACO participants’ total Medicare Parts 

A and B FFS revenue, exceeds the 

amount that is 4 percent of the ACO’s 

updated historical benchmark, then the 

loss sharing limit is capped and set at 

4 percent of the updated historical 

benchmark. For performance years 2018 

through 2020, this level of performancebased risk qualifies the Track 1+ Model 

as an Advanced APM under 

§ 414.1415(c)(3)(i)(A). In subsequent 

years of the Track 1+ Model, if the 

relevant percentage specified in the 

Quality Payment Program regulations 

changes, the Track 1+ Model ACO 

would be required to take on a level of 

risk consistent with the percentage 

required in § 414.1415(c)(3)(i)(A) for an 

APM to qualify as an Advanced APM. 

The loss sharing limit under this 

bifurcated structure is determined by 

CMS near the start of an ACO’s 

agreement period under the Track 1+ 

Model (based on the ACO’s application 

to the Track 1+ Model), and redetermined annually based on an 

annual certification process prior to the 

start of each performance year under the 

Track 1+ Model. The Track 1+ Model 

ACO’s loss sharing limit could be 

adjusted up or down on this basis. See 

Track 1+ Model Fact Sheet at https://

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/sharedsavings

program/Downloads/New-AccountableCare-Organization-Model-OpportunityFact-Sheet.pdf for more detail. 

Since the start of the Shared Savings 

Program, we have heard a variety of 

concerns and suggestions from ACOs 


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and other program stakeholders about 

the transition from a one-sided model to 

performance-based risk (see discussion 

in section II.A.1. of this final rule). 

Through rulemaking, we developed a 

one-sided shared savings only model 

and extended the allowable time in this 

track to support ACOs’ readiness to take 

on performance-based risk. As a result, 

the vast majority of Shared Savings 

Program ACOs have chosen to enter and 

remain in the one-sided model. Our 

early experience with the design of the 

Track 1+ Model demonstrates that the 

availability of a lower-risk, two-sided 

model is effective to encourage a large 

cohort of ACOs to rapidly progress to 

performance-based risk. 

(2) Levels of Risk and Reward in the 

BASIC Track’s Glide Path 

In general, we proposed the following 

participation options within the BASIC 

track. 

First, we proposed the BASIC track’s 

glide path as an incremental approach 

to higher levels of risk and potential 

reward. The glide path includes 5 

levels: A one-sided model available only 

for the first 2 consecutive performance 

years of a 5-year agreement period 

(Level A and B), each year of which is 

identified as a separate level; and three 

levels of progressively higher risk and 

potential reward in performance years 3 

through 5 of the agreement period 

(Level C, D, and E). ACOs would be 

automatically advanced at the start of 

each participation year along the 

progression of risk/reward levels, over 

the course of a 5-year agreement period, 

until they reach the track’s maximum 

level of risk/reward (designed to be the 

same as the level of risk and potential 

reward as under the Track 1+ Model). 

The automatic advancement policy 

would not apply to the second 

performance year for an ACO entering 

the BASIC track’s glide path for an 

agreement period beginning July 1, 

2019. Such an ACO would enter the 

BASIC track for its first performance 

year of July 1, 2019 through December 

31, 2019, at its chosen level of the glide 

path. For performance year 2020, the 

ACO may remain in the same level of 

the BASIC track’s glide path that it 

entered for the performance year (or 6- 

month performance period) beginning 

July 1, 2019. The ACO would be 

automatically advanced to the next level 

of the BASIC track’s glide path at the 

start of performance year 2021 and all 

subsequent performance years of the 

agreement period (see section II.A.7. of 

this final rule). 

We proposed that the participation 

options in the BASIC track’s glide path 

would depend on an ACO’s experience 

with the Shared Savings Program, as 

described in section II.A.5.c. of this final 

rule. ACOs eligible for the BASIC track’s 

glide path that are new to the program 

would have the flexibility to enter the 

glide path at any one of the five levels. 

However, ACOs that previously 

participated in Track 1, or a new ACO 

identified as a re-entering ACO because 

more than 50 percent of its ACO 

participants have recent prior 

experience in a Track 1 ACO, would be 

ineligible to enter the glide path at Level 

A, thereby limiting their opportunity to 

participate in a one-sided model of the 

glide path. We also proposed ACOs 

would be automatically transitioned to 

progressively higher levels of risk and 

potential reward (if higher levels are 

available) within the remaining years of 

the agreement period. We proposed to 

allow ACOs in the BASIC track’s glide 

path to more rapidly transition to higher 

levels of risk and potential reward 

within the glide path during the 

agreement period. As described in 

section II.A.4.b. of this final rule, ACOs 

in the BASIC track may annually elect 

to take on higher risk and potential 

reward within their current agreement 

period, to more rapidly progress along 

the glide path. 

Second, we proposed the BASIC 

track’s highest level of risk and potential 

reward (Level E) may be elected for any 

performance year by ACOs that enter 

the BASIC track’s glide path, but it will 

be required no later than the ACO’s fifth 

performance year of the glide path (sixth 

performance year for eligible ACOs 

starting participation in Level A of the 

BASIC track on July 1, 2019). ACOs in 

the BASIC track’s glide path that 

previously participated in Track 1, or 

new ACOs identified as re-entering 

ACOs because more than 50 percent of 

their ACO participants have recent prior 

experience in a Track 1 ACO, would be 

eligible to begin in Level B, and 

therefore would be required to 

participate in Level E no later than the 

ACO’s fourth performance year of the 

glide path (fifth performance year for 

ACOs starting participation in the 

BASIC track on July 1, 2019). The level 

of risk/reward under Level E of the 

BASIC track is also required for low 

revenue ACOs eligible to enter an 

agreement period under the BASIC track 

that are determined to be experienced 

with performance-based risk Medicare 

ACO initiatives (discussed in section 

II.A.5. of this final rule). 

We explained that designing a glide 

path to performance-based risk that 

concludes with the level of risk and 

potential reward offered under the 

Track 1+ Model balances ACOs’ interest 

in remaining under lower-risk options 

with our goal of more rapidly 

transitioning ACOs to performancebased risk. The BASIC track’s glide path 

offers a pathway through which ACOs 

inexperienced with performance-based 

risk Medicare ACO initiatives can 

participate under a one-sided model 

before entering relatively low levels of 

risk and asymmetrical potential reward 

for several years, concluding with the 

lowest level of risk and potential reward 

available under a current Medicare ACO 

initiative. As we stated in the August 

2018 proposed rule (83 FR 41804), we 

believe the opportunity for eligible 

ACOs to participate in a one-sided 

model for up to 2 years (3 performance 

years, in the case of an ACO entering at 

Level A of the BASIC track’s glide path 

on July 1, 2019) could offer new ACOs 

a chance to become experienced with 

the accountable care model and program 

requirements before taking on risk. The 

proposed approach also recognizes that 

ACOs that gained experience with the 

program’s requirements during prior 

participation under Track 1, would need 

less additional time under a one-sided 

model before making the transition to 

performance-based risk. However, we 

also stated that the glide path should 

provide strong incentives for ACOs to 

quickly move along the progression 

towards higher performance-based risk, 

and therefore preferred an approach that 

significantly limits the amount of 

potential shared savings in the onesided model years of the BASIC track’s 

glide path, while offering incrementally 

higher potential reward in relation to 

each level of higher risk. Under this 

approach ACOs would have reduced 

incentive to enter or remain in the onesided model of the BASIC track’s glide 

path if they are prepared to take on risk, 

and we would anticipate that these 

ACOs would seek to accept greater 

performance-based risk in exchange for 

the chance to earn greater reward. 

As described in detail in this section, 

we proposed a similar asymmetrical 

two-sided risk design for the BASIC 

track as is available under the Track 1+ 

Model, with key distinguishing features 

based on early lessons learned from the 

Track 1+ Model. Unless indicated 

otherwise, we proposed that savings 

would be calculated based on the same 

methodology used to determine shared 

savings under the program’s existing 

tracks (see § 425.604). The maximum 

amount of potential reward under the 

BASIC track would be the same as the 

upside of Track 1 and the Track 1+ 

Model. The methodology for 

determining shared losses would be a 

bifurcated approach similar to the 

approach used under the Track 1+ 


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Model, as discussed in more detail 

elsewhere in this section. In all years 

under performance-based risk, we 

proposed to apply asymmetrical levels 

of risk and reward, where the maximum 

potential reward would be greater than 

the maximum level of performancebased risk. 

For the BASIC track’s glide path, we 

proposed the phase-in schedule of 

levels of risk/reward by year would be 

as follows. This progression assumes an 

ACO enters the BASIC track’s glide path 

under a one-sided model for 2 years and 

follows the automatic progression of the 

glide path through each of the 5 years 

of its agreement period. 

• Level A and Level B: Eligible ACOs 

entering the BASIC track would have 

the option of being under a one-sided 

model for up to 2 consecutive 

performance years (3 consecutive 

performance years for ACOs that enter 

the BASIC track’s glide path on July 1, 

2019). As described elsewhere in this 

final rule, ACOs that previously 

participated in Track 1, or new ACOs 

identified as re-entering ACOs because 

more than 50 percent of their ACO 

participants have recent prior 

experience in a Track 1 ACO, would be 

ineligible to enter the glide path under 

Level A, although they could enter 

under Level B. Under this proposed 

one-sided model, a final sharing rate not 

to exceed 25 percent based on quality 

performance would apply to first dollar 

shared savings for ACOs that meet or 

exceed their MSR. This sharing rate is 

one-half of the maximum sharing rate of 

50 percent currently available under 

Track 1. Savings would be shared at this 

rate not to exceed 10 percent of the 

ACO’s updated benchmark, consistent 

with the current policy for Track 1. For 

subsequent years, ACOs that wished to 

continue participating in the Shared 

Savings Program would be required to 

participate under performance-based 

risk. 

• Level C risk/reward: 

++ Shared Savings: A final sharing 

rate not to exceed 30 percent based on 

quality performance would apply to first 

dollar shared savings for ACOs that 

meet or exceed their MSR, not to exceed 

10 percent of the ACO’s updated 

historical benchmark. 

++ Shared Losses: A loss sharing rate 

of 30 percent regardless of the quality 

performance of the ACO would apply to 

first dollar shared losses for ACOs with 

losses meeting or exceeding their MLR, 

not to exceed 2 percent of total 

Medicare Parts A and B FFS revenue for 

ACO participants. If the loss sharing 

limit as a percentage of total Medicare 

Parts A and B FFS revenue for ACO 

participants exceeds the amount that is 

1 percent of the ACO’s updated 

historical benchmark, then the loss 

sharing limit would be capped and set 

at 1 percent of the ACO’s updated 

historical benchmark for the applicable 

performance year. This level of risk is 

not sufficient to meet the generally 

applicable nominal amount standard for 

Advanced APMs under the Quality 

Payment Program specified in 

§ 414.1415(c)(3)(i). 

• Level D risk/reward: 

++ Shared Savings: A final sharing 

rate not to exceed 40 percent based on 

quality performance would apply to first 

dollar shared savings for ACOs that 

meet or exceed their MSR, not to exceed 

10 percent of the ACO’s updated 

historical benchmark. 

++ Shared Losses: A loss sharing rate 

of 30 percent regardless of the quality 

performance of the ACO would apply to 

first dollar shared losses for ACOs with 

losses meeting or exceeding their MLR, 

not to exceed 4 percent of total 

Medicare Parts A and B FFS revenue for 

ACO participants. If the loss sharing 

limit as a percentage of total Medicare 

Parts A and B FFS revenue for ACO 

participants exceeds the amount that is 

2 percent of the ACO’s updated 

historical benchmark, then the loss 

sharing limit would be capped and set 

at 2 percent of the ACO’s updated 

historical benchmark for the applicable 

performance year. This level of risk is 

not sufficient to meet the generally 

applicable nominal amount standard for 

Advanced APMs under the Quality 

Payment Program specified in 

§ 414.1415(c)(3)(i). 

• Level E risk/reward: The ACO 

would be under the highest level of risk 

and potential reward for this track, 

which is the same level of risk and 

potential reward being tested in the 

Track 1+ Model. Further, ACOs that are 

eligible to enter the BASIC track, but 

that are ineligible to enter the glide path 

(as discussed in section II.A.5. of this 

final rule) would enter and remain 

under Level E risk/reward for the 

duration of their BASIC track agreement 

period. 

++ Shared Savings: A final sharing 

rate not to exceed 50 percent based on 

quality performance would apply to first 

dollar shared savings for ACOs that 

meet or exceed their MSR, not to exceed 

10 percent of the ACO’s updated 

historical benchmark. This is the same 

level of potential reward currently 

available under Track 1 and the Track 

1+ Model. 

++ Shared Losses: A loss sharing rate 

of 30 percent regardless of the quality 

performance of the ACO would apply to 

first dollar shared losses for ACOs with 

losses meeting or exceeding their MLR. 

The percentage of ACO participants’ 

total Medicare Parts A and B FFS 

revenue used to determine the revenuebased loss sharing limit would be set for 

each performance year consistent with 

the generally applicable nominal 

amount standard for an Advanced APM 

under § 414.1415(c)(3)(i)(A) to allow 

eligible clinicians participating in a 

BASIC track ACO subject to this level of 

risk the opportunity to earn the APM 

incentive payment and ultimately 

higher fee schedule updates starting in 

2026, in the payment year 

corresponding to each performance year 

in which they attain QP status. For 

example, for performance years 2019 

and 2020, this would be 8 percent. 

However, if the loss sharing limit, as a 

percentage of the ACO participants’ 

total Medicare Parts A and B FFS 

revenue exceeds the expenditure-based 

nominal amount standard, as a 

percentage of the ACO’s updated 

historical benchmark, then the loss 

sharing limit would be capped at 1 

percentage point higher than the 

expenditure-based nominal amount 

standard specified under 

§ 414.1415(c)(3)(i)(B), which is 

calculated as a percentage of the ACO’s 

updated historical benchmark. For 

example, for performance years 2019 

and 2020, the expenditure-based 

nominal amount standard is 3 percent; 

therefore, the loss sharing limit for Level 

E of the BASIC track in these same years 

would be 4 percent of the ACO’s 

updated historical benchmark. The 

proposed BASIC track at Level E risk/ 

reward would meet all of the Advanced 

APM criteria and would be an 

Advanced APM. (See Table 3 and 

related notes for additional information 

and an overview of the Advanced APM 

criteria.) 

This approach initially maintains 

consistency between the level of risk 

and potential reward offered under 

Level E of the BASIC track and the 

popular Track 1+ Model. This proposed 

approach to determining the maximum 

amount of shared losses under Level E 

of the BASIC track strikes a balance 

between (1) placing ACOs under a 

higher level of risk to recognize the 

greater potential reward under this 

financial model and the additional tools 

and flexibilities available to BASIC track 

ACOs under performance-based risk and 

(2) establishing an approach to help 

ensure the maximum level of risk under 

the BASIC track remains moderate. 

Specifically, this proposed approach 

differentiates the level of risk and 

potential reward under Level E 

compared to Levels C and D of the 

BASIC track, by requiring greater risk in 


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exchange for the greatest potential 

reward under the BASIC track, while 

still offering more manageable levels of 

benchmark-based risk than currently 

offered under Track 2 (in which the loss 

sharing limit phase-in begins at 5 

percent of the ACO’s updated 

benchmark) and Track 3 (15 percent of 

the ACO’s updated benchmark). 

Further, this approach recognizes that 

eligible ACOs in Level E have the 

opportunity to earn the greatest share of 

savings under the BASIC track, and 

should therefore be accountable for a 

higher level of losses, particularly in 

light of their access to tools for care 

coordination and beneficiary 

engagement, including the ability of 

participating physicians and 

practitioners to furnish telehealth 

services in accordance with 1899(l) of 

the Act, the SNF 3-day rule waiver (as 

discussed in section II.B. of this final 

rule), and the opportunity to implement 

a CMS-approved beneficiary incentive 

program (as discussed in section II.C. of 

this final rule). 

We proposed that ACOs entering the 

BASIC track’s glide path would be 

automatically advanced along the 

progression of risk/reward levels, at the 

start of each performance year over the 

course of the agreement period (except 

at the start of performance year 2020 for 

ACOs that start in the BASIC track on 

July 1, 2019), until they reach the track’s 

maximum level of risk and potential 

reward. As discussed in section II.A.4.b. 

of this final rule, BASIC track ACOs in 

the glide path would also be permitted 

to elect to advance more quickly to 

higher levels of risk and potential 

reward within their agreement period. 

The longest possible glide path would 

be 5 performance years for eligible new 

ACOs entering the BASIC track (6 

performance years for ACOs beginning 

their participation in the BASIC track on 

July 1, 2019). The maximum allowed 

time in Levels A, B, C and D of the glide 

path would be one performance year 

(with the exception that ACOs 

beginning their participation in the 

BASIC track on July 1, 2019, would 

have the option to remain at their 

chosen level of risk and potential 

reward for their first 2 performance 

years in the BASIC track). Once the 

highest level of risk and potential 

reward is reached on the glide path 

(Level E), ACOs would be required to 

remain under the maximum level of 

risk/reward for all subsequent years of 

participation in the BASIC track, which 

includes all years of a subsequent 

agreement period under the BASIC track 

for eligible ACOs. Further, an ACO 

within the BASIC track’s glide path 

could not elect to return to lower levels 

of risk and potential reward, or to the 

one-sided model, within an agreement 

period under the glide path. 

To participate under performancebased risk in the BASIC track, an ACO 

would be required to establish a 

repayment mechanism and select a 

MSR/MLR to be applicable for the years 

of the agreement period under a twosided model (as discussed in section 

II.A.6. of this final rule). We proposed 

that an ACO that is unable to meet the 

program requirements for accepting 

performance-based risk would not be 

eligible to enter into a two-sided model 

under the BASIC track. If an ACO enters 

the BASIC track’s glide path in a onesided model and is unable to meet the 

requirements to participate under 

performance-based risk prior to being 

automatically transitioned to a 

performance year under risk, CMS 

would terminate the ACO’s agreement 

under § 425.218. For example, if an 

ACO is participating in the glide path in 

Level B and is unable to establish an 

adequate repayment mechanism before 

the start of its performance year under 

Level C, the ACO would not be 

permitted to continue its participation 

in the program. 

In section II.A.5.c. of this final rule, 

we describe our proposed requirements 

for determining an ACO’s eligibility for 

participation options in the BASIC track 

and ENHANCED track based on a 

combination of factors: ACO 

participants’ Medicare FFS revenue 

(low revenue ACOs versus high revenue 

ACOs) and the experience of the ACO 

legal entity and its ACO participants 

with performance-based risk Medicare 

ACO initiatives. Tables 7 and 8 

summarize the participation options 

available to ACOs under the BASIC 

track and ENHANCED track. As with 

current program policy, an ACO would 

apply to enter an agreement period 

under a specific track. If the ACO’s 

application is accepted, the ACO would 

remain under that track for the duration 

of its agreement period. 

We proposed to codify these policies 

in a new section of the Shared Savings 

Program regulations governing the 

BASIC track, at § 425.605. We sought 

comment on these proposals. 

Further, in section II.A.5.b.(3) of the 

August 2018 proposed rule (83 FR 

41819 through 41820), we described and 

sought comment on several approaches 

to allowing for potentially greater access 

to shared savings for low revenue ACOs 

compared to high revenue ACOs. We 

explained that low revenue ACOs 

(identified as proposed using a 

threshold of 25 percent of Medicare 

Parts A and B FFS expenditures for 

assigned beneficiaries), which may tend 

to be small, physician-only and rural 

ACOs, are likely less capitalized 

organizations and may be relatively riskaverse. These ACOs may be encouraged 

to participate and remain in the program 

under performance-based risk based on 

the availability of additional incentives, 

such as the opportunity to earn a greater 

share of savings. Therefore, we 

considered allowing for a relatively 

higher final sharing rate under the first 

four levels of the BASIC track’s glide 

path for low revenue ACOs. For 

example, rather than the proposed 

approach under which the final sharing 

rate would phase in from a maximum of 

25 percent in Level A to a maximum of 

50 percent in Level E, we could allow 

a maximum 50 percent sharing rate 

based on quality performance to be 

available at all levels within the BASIC 

track’s glide path for low revenue ACOs. 

Comment: Generally, many 

commenters understood and agreed 

with the need to introduce the BASIC 

track’s five level glide path (with the 

two year limit in a one-sided model and 

automatic advancement to incremental 

risk each of the remaining 3 years) as an 

incremental approach to higher levels of 

risk and reward. A few commenters 

appreciated CMS’ effort to simplify the 

participation options and establish a 

clear streamlined glide path to riskbearing models. They agreed that 2017 

Shared Savings Program results confirm 

that ACO performance improves with 

longer participation in the program, and 

encouraged CMS to provide accurate 

and timely reporting and carefully 

monitor these efforts to support their 

continued growth and improvement. 

Another noted that the proposed 

approach provided a clear and 

consistent pathway for participants and 

prospective enrollees to understand 

their journey to risk. One commenter 

noted that CMS’ redesign of the program 

and addition of the new BASIC track is 

an approach that factors in ACOs’ 

revenue and experience and will 

provide greater stability and 

predictability and help more health care 

providers benefit from qualifying as 

participating in Advanced APMs under 

the Quality Payment Program. One 

commenter was encouraged to see that 

through this rule, CMS is advancing 

opportunities in two-sided risk ACOs 

because it has seen firsthand the type of 

care transformation that is possible 

when organizations participate in 

performance-based risk to improve 

population health. The commenter was 

also pleased with CMS’ commitment to 

waiving and modifying certain 

burdensome program rules for 


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organizations that are engaged in 

increasing levels of financial risk. 

Another commenter generally agreed 

with CMS’ redesign proposal, noting 

that, although it may reduce the number 

of ACOs in the program, those that 

remain would be more likely to control 

expenditures for the Medicare program 

and make real efforts to improve care. 

The commenter added that the goal of 

the Shared Savings Program should be 

to create the conditions that will reward 

efficient ACOs that can create real value 

for the Medicare program, its 

beneficiaries, and the taxpayers, not to 

maximize the number of ACOs. Another 

commenter noted CMS likely moderated 

any concerns of ACOs leaving the 

program by incorporating other policy 

changes and flexibilities in the proposed 

rule, such as refining the benchmarking 

methodology, allowing for risk 

adjustment each performance year, 

adjusting patient attribution 

methodology, and establishing 

flexibility for low revenue ACOs. 

However, a majority of commenters 

were opposed to limiting the amount of 

time an ACO can participate under a 

one-sided model from six to two years 

(because, for example, it dramatically 

decreases the time in which an ACO can 

build capital reserves for a repayment 

mechanism) and provided suggestions 

for CMS to adopt a more gradual 

approach to risk. Many commenters did 

not want us to discontinue Track 1 (as 

detailed in section II.A.2 of this final 

rule) and would prefer that we provide 

for an upside-only track. Some 

commenters expressed that it makes 

sense to push hospital-led ACOs into 

risk, but stated that there is no 

compelling case that risk is necessary 

for physician-led ACOs. One 

commenter, a physician-led ACO, added 

that requiring it to automatically 

advance to performance-based risk 

would cause it to face the prospect of 

bankrupting its organization. We 

received numerous comments from 

rural ACOs to extend the allotted time 

period in which a rural ACO can 

participate in an upside-only 

arrangement in the BASIC track. Some 

of those commenters noted that certain 

ACO participants, such as FQHCs, 

RHCs, and CAHs, provide care to some 

of the most underserved communities 

and require additional time and 

investments to prepare for two-sided 

risk arrangements. 

Most commenters provided 

recommendations for CMS to extend the 

time any ACO can participate in a onesided model to three years, as opposed 

to two, stating that it takes longer than 

two participation years to implement 

meaningful changes in a healthcare 

delivery model and among healthcare 

provider and patient populations. Other 

commenters believe that the progression 

to two-sided risk is far too aggressive 

and will deter participation. These 

commenters usually suggested allowing 

for 4 or 5 performance years (or a full 

agreement period) under a one-sided 

model. Some commenters suggested that 

rural ACOs should be allowed at least 

two, 5-year agreement periods under a 

one-sided model. 

Response: We appreciate the 

comments, but we continue to believe 

that the proposed transition to twosided risk under the design of the 

BASIC track’s glide path will promote a 

competitive and accountable 

marketplace, while improving the 

quality of care for Medicare 

beneficiaries. 

We disagree with commenters’ 

suggestions to allow all ACOs or select 

ACOs (for example, based on their 

geographic location, historical cost or 

provider composition) to remain under 

the one-sided model for an extended 

time or even indefinitely. We believe 

such a policy design would, at best, 

maintain the status quo of the program, 

and therefore continue a pattern where 

ACOs are allowed to remain under the 

one-sided model for a significant 

number of years without strong 

incentives to become accountable for 

the cost and quality of care for their 

assigned populations. As described in 

the Regulatory Impact Analysis (see 

section V of this final rule), our results 

have shown that ACOs in two-sided 

models perform better over time than 

one-sided model ACOs. At the same 

time, while some ACOs have taken on 

significant downside risk and shown 

significant savings to the Medicare 

program while advancing quality, a 

majority of ACOs—while having the 

ability to benefit from waivers of certain 

federal rules and requirements—have 

yet to move to any downside risk. 

Generally, these ACOs are increasing 

Medicare spending compared to their 

benchmarks, and the presence of an 

‘‘upside-only’’ track may be encouraging 

consolidation in the marketplace, 

reducing competition and beneficiary 

choice. The combination of six years of 

upside-only risk and the ability to 

benefit from significant waivers 

available in the program may also be 

leading to the formation of one-sided 

ACOs that are not making serious efforts 

to improve quality and reduce spending, 

potentially crowding out formation of 

more effective ACOs. Thus, we continue 

to believe that Medicare FFS 

beneficiaries and the Trust Funds would 

be better protected by the progression of 

eligible ACOs from a one-sided model to 

two-sided models within the span of a 

five-year agreement period under the 

BASIC track’s glide path. 

However, we understand that this 

requirement may pose an additional 

financial burden, particularly for rural 

or physician-led ACOs, many of which 

would be considered low revenue ACOs 

under the proposed rule. We also 

continue to believe that the move to 

two-sided risk will encourage low 

revenue ACOs, typically small, rural 

and physician-only ACOs, to more 

aggressively pursue the program’s goals 

of improving quality of care, and 

lowering growth in expenditures, for 

Medicare FFS beneficiaries. Therefore, 

as discussed in greater detail in section 

II.A.5.c of this final rule, we are 

finalizing an approach that will permit 

ACO legal entities without prior 

experience in the Shared Savings 

Program that are identified as low 

revenue ACOs and inexperienced with 

performance-based risk Medicare ACO 

initiatives to stay in a one-sided model 

of the BASIC track’s glide path for an 

additional performance year. Under this 

approach eligible ACOs will have the 

opportunity to participate for up to 3 

performance years (or 4 performance 

years in the case of ACOs entering an 

agreement period beginning on July 1, 

2019) under a one-sided model of the 

BASIC track’s glide path before 

automatically advancing to Level E of 

the BASIC track for the remaining 

performance years of their agreement 

period. We believe that this option, in 

part, addresses commenters’ concerns 

and suggestions for a relatively gentler 

glide path to two-sided risk for small, 

rural and physician-only ACOs that are 

likely to qualify as low revenue ACOs, 

and supports continued participation of 

these ACOs in the Shared Savings 

Program. For instance, we believe that 

this option provides an opportunity for 

new, low revenue ACOs to become more 

experienced with the Shared Savings 

Program’s requirements and the 

accountable care model, and to 

potentially realize savings, to support 

their participation in performance-based 

risk. In light of this additional flexibility 

that we are making available for new 

legal entities that qualify as low revenue 

ACOs inexperienced with performancebased risk Medicare ACO initiatives, we 

decline to adopt any other alternatives 

suggested by commenters that would 

allow for lower risk participation 

options for rural or physician-led ACOs. 

Comment: We received numerous 

comments concerning our proposal to 

set the final sharing rate for the onesided model not to exceed 25 percent 

based on quality performance that 

applies to first dollar shared savings for 


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ACOs that meet or exceed their MSR. 

One commenter stated that although a 

25 percent sharing rate under Levels A 

and B of the BASIC track is not worth 

the ACO’s continued participation in 

the program, the commenter contended 

that it is the right thing to do in order 

to continue to innovate primary care in 

the medical community. 

Most commenters had concerns about 

reducing the shared savings rate from 50 

percent (as currently available under 

Track 1) to 25 percent for ACOs in 

Levels A and B of the BASIC track, 

asserting that doing so would deter new 

entrants from applying to the Shared 

Savings Program and undermine the 

business case to join the Shared Savings 

Program. Some contended that, due to 

the sizeable investment that ACOs make 

(for example, one ACO reportedly spent 

almost $2 million a year, on average, 

including investments made in health 

information technology, population 

health management and ACO 

administration), it is imperative that the 

opportunity for return on investment is 

realistic enough for the business model 

to be attractive, retain current ACO 

participants, and bring in new ACOs. 

One commenter stated that the 

reduction in sharing rates would result 

in challenges with provider/supplier 

buy-in, which has been crucial to the 

success of the commenter’s ACOs. The 

commenter further contended that many 

physicians value the Shared Savings 

Program’s emphasis on quality of care as 

a result of collaborative efforts across 

practices. Another commenter stated 

that the impact of increased financial 

pressure will cause ACOs to 

inappropriately focus on reducing costs 

over achieving high-quality outcomes, 

and consequently put beneficiaries’ 

access to medical care at risk. One 

commenter contended there is a low 

likelihood that a newly formed ACO 

will achieve shared savings in the early 

years of its operations. 

Some commenters noted that 

clinicians and physician-led practices 

seeking to start or join an ACO must 

make significant practice changes and 

investments to position themselves for 

success in the program. One commenter 

noted that for independent physicians, 

the potential reward for making these 

changes must be high enough to justify 

initial infrastructure costs, as well as 

ongoing investments in staff and other 

resources needed for population health 

management and that the proposed 25 

percent savings rate would deter these 

participants and ACOs from joining the 

Shared Savings Program. Some 

commenters explained a reduction in 

potential savings will greatly impact 

low revenue, physician-led ACOs, and 

could end up forcing these ACOs from 

the program. 

Most commenters proposed an 

increased maximum shared savings rate 

under Levels A and B of the BASIC 

track ranging from 40 to 80 percent, 

with a majority requesting a 50 percent 

shared savings rate. One of these 

commenters also suggested an 

incremental upwards adjustment of the 

shared savings rate up to 10 percentage 

points (from 50 percent) based on 

quality to emphasize and reward above 

average quality performance or 

improvement. Some commenters 

recommended that CMS offer a higher 

sharing rate to support ACOs, especially 

physician-led and low revenue ACOs 

with more limited capital reserves. 

Some commenters suggested that CMS 

provide higher sharing rates for all 

levels of the BASIC track’s glide path, 

for instance beginning at 50 percent 

(Level A and B), progressing to 55 

percent for Levels C and D, and reaching 

60 percent in Level E. 

We also received numerous comments 

from rural ACOs stating that rural ACOs 

lack the resources to take on risk 

(including capital reserves necessary for 

required repayment mechanisms) and 

that the proposed 25 percent final 

sharing rate under Levels A and B of the 

BASIC track is not worth the risk of 

joining the program and will drive most 

of these ACOs from the program. Many 

noted that they operate on tight budgets 

and with limited human and capital 

resources while providing care for a 

sicker and older Medicare population 

than urban providers. Thus, they assert 

that CMS should create a glide path 

specifically for rural ACOs. One 

commenter noted that rural ACOs 

predominantly made up of Critical 

Access Hospitals (CAHs) are not in a 

position to take on downside risk given 

the inherent volatility in cost-based 

reimbursement, and the proposal would 

force these rural ACOs to exit the 

Shared Savings Program, resulting in 

these ACOs no longer having access to 

useful information such as beneficiarylevel claims data and reducing the value 

of significant investments these ACOs 

have made (to date) to redesign rural 

healthcare delivery. Thus, the 

commenter asserted that CMS’ proposal 

failed to provide a viable alternative for 

APM participation for rural ACOs. 

Instead, these commenters proposed 

several alternatives for CMS to provide 

an exception specifically for rural ACOs 

to receive an increased final sharing rate 

under the BASIC track. One commenter 

was generally supportive of the 

proposed BASIC track, but proposed 

that CMS provide a no-downside risk 

option for rural providers due to their 

cost of operations. Additionally, many 

commenters requested that CMS 

develop a third Track for rural ACOs. 

Similarly, another commenter believed 

that CMS should develop a more 

gradual pathway to increased levels of 

financial risk for low revenue ACOs, 

specifically those composed of FQHCs. 

Several commenters suggested that CMS 

should consider all rural ACOs to be 

low revenue ACOs and maintain the 50 

percent shared savings rate for them 

each year under the BASIC track. 

Another commenter proposed that 

ACOs comprised solely of safety net 

providers should be allowed to 

participate in Level A of the BASIC 

track with 50 percent shared savings 

indefinitely as long as they improve 

quality and do not increase costs. 

One commenter, representing the 

perspective of a hospital-based ACO, 

explained it had grave concerns about 

allowing higher shared savings rates 

(such as 50 percent) for only low 

revenue ACOs for all years in the BASIC 

track (an approach we sought comment 

on in the August 2018 proposed rule), 

viewing this approach as giving low 

revenue ACOs a competitive advantage 

over high revenue ACOs. This 

commenter indicated that this approach 

would discourage high revenue ACOs, 

which the commenter argued are best 

situated to achieve savings for Medicare. 

Response: We appreciate the wide 

range of comments requesting or 

suggesting adjustments to specific 

policies so that an ACO could share in 

a higher level of savings than what was 

proposed for the BASIC track’s glide 

path: 25 percent sharing rate for Levels 

A and B, 30 percent sharing rate for 

Level C, 40 percent sharing rate for 

Level D, and 50 percent sharing rate for 

Level E. Initially, we decided to propose 

a 25 percent sharing rate under Levels 

A and B of the BASIC track because the 

25 percent sharing rate is one-half of the 

maximum sharing rate of 50 percent 

currently available under Track 1. As an 

ACO transitioned to performance-based 

risk, and then continued to undertake 

greater risk by advancing through the 

glide path, the sharing rate would 

incrementally increase to 50 percent 

under Level E. However, generally, we 

are persuaded by the expressed views 

that the reward-to-risk ratio for 

participating in the program as 

proposed is generally unattractive to 

ACOs, and agree with commenters that 

an alternative policy featuring more 

generous sharing rates would attract and 

sustain broader participation in the 

Shared Savings Program. We believe 

that increasing the maximum sharing 

rates will strike a better balance between 

robust participation and incentivizing 


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the move to two-sided risk. We decided 

to increase the maximum sharing rate to 

50 percent for Levels C through E of the 

BASIC track to correspond with the 

gradual increase in risk as the ACO 

advances on the glide path. We 

understand the commenters’ concerns 

that the reduction in the maximum 

sharing rate could pose a financial 

hardship for ACOs by reducing shared 

savings payments that could support 

operational costs, and thus, the policy 

could be a potential barrier to the 

formation of and continued success of 

ACOs. We agree that financial rewards 

must be sufficient to offset provider 

risks and startup-costs, particularly for 

low revenue ACOs (which tend to be 

small, rural and physician-only ACOs). 

We also agree with commenters that the 

same shared savings rates should apply 

consistently across ACOs participating 

in a particular level of the BASIC track’s 

glide path, rather than differentiating 

the shared savings rates based on the 

distinction between low revenue ACOs 

and high revenue ACOs. Therefore, we 

also decline to apply different shared 

savings rates to ACOs within the same 

Level of the BASIC track’s glide path, 

based on other factors, such as 

composition, as suggested by some 

commenters. 

Thus, we are modifying our proposal 

and finalizing higher maximum sharing 

rates for ACOs participating in the 

BASIC track as a means of encouraging 

participation in the program and 

potentially providing greater resources 

to ACOs to support their transition to 

performance-based risk. We are 

finalizing an approach to allow for a 

maximum shared savings rate of 40 

percent for Levels A and B and 50 

percent for Levels C, D, and E. 

Comment: We received a few 

comments opposing our proposal to 

automatically transition ACOs to 

progressively higher levels of risk and 

potential reward (if higher levels are 

available) within the remaining years of 

the agreement period under the BASIC 

track’s glide path. One commenter urged 

CMS to consider allowing high 

performing ACOs more than a year in 

limited risk tracks, such as Levels C and 

D of the BASIC track, and that CMS 

could outline parameters for successful 

ACOs to continue in a particular level 

prior to automatic advancing to another 

level, such as achieving shared savings 

or meeting quality goals. 

Response: As stated in the November 

2011 final rule (76 FR 19534), we 

continue to believe that the Shared 

Savings Program should provide an 

entry point for all willing organizations 

that wish to move in a direction of 

providing value-driven healthcare. We 

also continue to believe in the 

importance of encouraging ACOs to 

progress to greater performance-based 

risk to drive quality improvement and 

efficiency in care delivery. Doing 

otherwise could encourage ACOs to 

remain under a one-sided model, or 

under comparatively low levels of 

performance-based risk, without strong 

incentives to become accountable for 

the cost and quality of care for their 

assigned populations. We also note that 

some commenters (as summarized 

elsewhere in this final rule) agreed with 

CMS’ emphasis on the importance of 

two-sided risk as a driver of more 

meaningful change. For this reason, we 

decline the commenters’ suggestion to 

forgo the automatic advancement policy 

to progress eligible ACOs through the 

levels of risk and potential reward of the 

BASIC track’s glide path, or to create a 

policy where we evaluate and determine 

whether each individual ACO will be 

required to enter higher levels of 

performance-based risk. We are 

finalizing our proposed approach to 

require automatic advancement along 

the BASIC track’s glide path, although 

we note we are finalizing a modification 

to allow new legal entities that are low 

revenue ACOs and inexperienced with 

performance-based risk Medicare ACO 

initiatives the option to forgo automatic 

advancement to Level C to remain in 

Level B for an additional performance 

year, and then be automatically 

advanced to Level E. 

Comment: Generally, most 

commenters supported the design of 

Levels C and D of the BASIC track, 

stating that they would create new 

opportunities for ACOs to experiment 

with downside risk. One commenter 

believed that the creation of Levels C 

and D of the BASIC track would 

empower healthcare providers to move 

to risk and create a ladder for ACOs to 

becoming an Advanced APM. However, 

as previously summarized in this 

section of the final rule, several 

commenters expressed concern about 

the proposed 30 percent shared savings 

rate in Level C of the BASIC track and 

40 percent shared savings rate in Level 

D of the BASIC track and offered a 

variety of alternative maximum shared 

savings rates that they believed would 

incentivize ACOs to remain in the 

program and take on risk. Other 

commenters suggested additional 

changes to the design of Levels C and D. 

For example, one commenter 

recommended that Levels C and D of the 

BASIC track should include a shared 

savings rate of 80 percent balanced by 

an increase in shared risk levels to meet 

Advanced APM criteria. Another 

commenter suggested that advancement 

on the glide path should be optional, 

Levels C and D of the BASIC track could 

include a 50 percent shared savings rate, 

and if providers do not transition to 

greater risk within a set time period, the 

shared savings rate would decrease to 

25 percent savings rate or lower. 

Response: As we previously discussed 

in this section of this final rule, after 

considering the commenters’ 

suggestions for adjusting the shared 

savings rates for ACOs participating in 

Levels A through D of the BASIC track, 

we are modifying our proposal to allow 

for first dollar savings at a rate of up to 

50 percent based on quality 

performance, not to exceed 10 percent 

of updated benchmark, for all ACOs 

participating in Level C and Level D of 

the BASIC track. Therefore, we decline 

to adopt the commenters’ alternative 

suggestions. Namely, we decline to 

establish additional levels within the 

BASIC track’s glide path (other than 

Level E) that qualify as an Advanced 

APM. We believe that ACOs that are 

ready for higher levels of risk and 

reward should transition more rapidly 

to Level E of the BASIC track, or to the 

ENHANCED track, which qualify as 

Advanced APMs. Further, we decline to 

establish a policy that would allow 

ACOs to forgo the transition to higher 

levels of risk and potential reward in 

exchange for incrementally decreasing 

shared savings rates. We believe this 

could create a circumstance where 

poorly performing ACOs seek to 

continue their participation under 

relatively lower risk while taking 

advantage of other aspects of program 

participation. We believe that a policy 

to forgo the transition to higher levels of 

risk would effectively maintain the 

status quo of the program and would 

eliminate any incentive for many ACOs 

to transition to meaningful levels of 

performance-based risk. 

Comment: Many commenters 

supported the permanent inclusion of 

the Track 1+ Model equivalent, Level E 

of the BASIC track, in the Shared 

Savings Program. A commenter stated 

that it is an important option for ACOs 

assuming downside financial risk and 

allows loss sharing limits similar to 

those for Advanced APMs in the Quality 

Payment Program. A few commenters 

were concerned about the level of risk 

and shared savings rates associated with 

Level E of the BASIC track. Commenters 

recommended a variety of shared 

savings rates for Level E, ranging from 

55 to 100 percent. For example, several 

commenters proposed that CMS change 

the final shared savings rate to 60 

percent with a goal of 75 percent shared 

savings based on quality performance 


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and other program criteria. Another 

commenter recommended that CMS set 

the maximum shared savings rate at 100 

percent, particularly as the Next 

Generation ACO Model sunsets. 

Response: We thank commenters for 

their support of the proposal to offer the 

level of risk and potential reward under 

the proposed Level E of the BASIC 

track, which is the same as level of risk 

and potential reward under the popular 

Track 1+ Model and would meet all of 

the Advanced APM criteria to be an 

Advanced APM under the Quality 

Payment Program. We believe there is 

sufficient reward in Level E as 

proposed, since in addition to the 

shared savings potential of this financial 

model, an ACO’s eligible clinicians may 

be eligible for incentive payments under 

the Quality Payment Program because of 

the ACO’s participation in an Advanced 

APM. Therefore, we decline to increase 

the 50 percent shared savings rate under 

Level E of the BASIC track based on 

commenters’ suggestions. We believe 

that allowing more manageable levels of 

risk and moderate levels of potential 

reward under Level E within the Shared 

Savings Program will be an important 

pathway for helping organizations gain 

experience with performance-based risk 

while participating in Advanced APMs 

for purposes of the Quality Payment 

Program. 

Comment: Several commenters 

suggested that the level of risk 

associated with Level E of the BASIC 

track should be the nominal risk 

standard under MACRA and consistent 

with Quality Payment Program 

standards. The commenters suggested 

that CMS decrease the benchmark-based 

level of risk under Level E to be the 

expenditure-based nominal amount 

standard rather than the proposal to set 

the level of maximum losses as 1 

percentage point higher than the 

expenditure-based nominal amount 

standard. For example, to reduce the 

percentage from 4 percent of updated 

benchmark (proposed approach) to 3 

percent. One commenter stated that 

setting the benchmark-based level of 

risk at 4 percent rather than 3 percent 

would disproportionately affect ACOs 

with hospital participants and subject 

them to additional risk. A few other 

commenters noted that CMS did not 

provide a rationale for setting the 

benchmark-based loss limit at the 

nominal standard plus one percentage 

point. One commenter suggested that 

aligning the loss sharing limit with the 

MACRA standard would create 

alignment between the Quality Payment 

Program and Shared Savings Program. 

Finally, one commenter noted that, to 

enable participation and set ACOs up 

for success, CMS should rely on a 

revenue-based risk structure and that 

any expenditure-based nominal risk 

amount should be kept low to avoid 

placing physician-led and low revenue 

ACOs at a disadvantage. 

Response: After reviewing the 

commenter’s concerns, we decline to 

align the benchmark-based loss sharing 

limit for Level E with the expenditurebased nominal amount standard for 

APM models established under the 

Quality Payment Program. As we 

explained in the August 2018 proposed 

rule, our proposal maintains 

consistency between the level of risk 

and potential reward offered under 

Level E and the Track 1+ Model (83 FR 

41805). We believe the level of risk and 

potential reward proposed in Level E, 

which would provide more limited 

downside risk than is currently present 

in Tracks 2 and 3, offers ACOs the 

opportunity to participate and gain 

experience with more limited 

performance-based risk. Our experience, 

with 55 ACOs choosing to participate 

the first year the Track 1+ Model was 

available, suggests that this approach 

will encourage ACOs, especially small, 

rural and physician-only ACOs, to 

advance to performance-based risk and 

provide a viable on-ramp for ACOs to 

assume greater amounts of risk in the 

future. 

Comment: A majority of commenters 

supported CMS’ proposal to use a 

revenue-based approach to calculate 

ACO loss sharing limits and the 

proposal to cap and set the loss sharing 

limits at a percentage of an ACO’s 

updated historical benchmark. One 

commenter commended CMS for 

recognizing that ACOs differ 

significantly in their ability to accept 

financial risk and for including limits 

on downside risk based on a percentage 

of the ACO participants’ revenue, not 

just as a percentage of Medicare 

spending. 

Response: We thank commenters for 

their support of the proposal to offer a 

relatively lower level of performancebased risk under the BASIC track, 

calculated as a percentage of ACO 

participants’ total Medicare Parts A and 

B FFS revenue not to exceed an amount 

that is a percentage of the ACO’s 

updated historical benchmark. 

Comment: Some commenters 

encouraged CMS to retain use of quality 

scores in the shared loss methodology 

calculation as a part of the BASIC track. 

These commenters believe that 

improved quality for Medicare 

beneficiaries has always been a 

cornerstone of the program and should 

continue to be a vital part of both shared 

savings and shared losses calculations. 

Another commenter was concerned that 

CMS’ decision not to apply quality 

measure performance to the loss rate 

under the BASIC track sends the wrong 

message to providers about the 

importance of quality measurement and 

performance. The commenter believes 

that CMS should apply a sliding scale 

quality measure adjustment to the loss 

rate to minimize the repayment by 

ACOs that are able to achieve highquality outcomes. 

Response: We are declining to include 

quality scoring in the loss calculation 

methodology for the two-sided models 

under the BASIC track. Under the Track 

1+ Model, we established a fixed 30 

percent loss sharing rate, which is lower 

than the loss sharing rate, based on 

quality performance, under Track 2 and 

the ENHANCED track, which is at least 

40 percent. We designed the BASIC 

track’s glide path to gradually introduce 

ACOs to greater risk and reward and all 

ACOs are eventually expected to move 

to the ENHANCED track where the loss 

sharing rate will include adjustments for 

quality performance. Quality 

performance is important to the program 

and the design of the financial model is 

not meant in any way to compromise 

the goal of improving quality, which is 

integrally related to the potential upside 

in all levels of the BASIC track. We 

believe that the lower, fixed loss sharing 

rate provides a more manageable level 

of risk for ACOs transitioning to risk in 

the BASIC track. 

Final Action: After considering the 

comments we received, we are 

finalizing with modifications our 

proposal to codify policies in a new 

section of the Shared Savings Program 

regulations governing the BASIC track, 

at § 425.605. Specifically, we are 

finalizing the BASIC track’s glide path 

with five levels. For each PY starting 

after January 1, 2020, ACOs in the glide 

path will be automatically progressed to 

the next level of the glide path. ACOs 

eligible for the glide path that have not 

participated in the Shared Savings 

Program previously, and that are not 

regarded as re-entering ACOs related to 

the prior participation of their ACO 

participants, can enter the glide path at 

any Level. ACOs that previously 

participated in Track 1, or a new ACO 

identified as a re-entering ACO because 

more than 50 percent of its ACO 

participants have recent prior 

experience in a Track 1 ACO, would be 

ineligible to enter the glide path at Level 

A but would be eligible to begin in 

Level B. 

We are modifying our proposed 

maximum shared savings rates and are 

finalizing shared savings rates of 40 

percent for Levels A and B and 50 


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percent for Levels C, D, and E of the 

BASIC track. We are finalizing as 

proposed the methodology for 

determining shared losses for Levels C, 

D, and E, as follows: 

• Level C: A loss sharing rate of 30 percent 

regardless of the quality performance of the 

ACO would apply to first dollar shared losses 

for ACOs with losses meeting or exceeding 

their MLR, not to exceed 2 percent of total 

Medicare Parts A and B FFS revenue for ACO 

participants. If the loss sharing limit as a 

percentage of total Medicare Parts A and B 

FFS revenue for ACO participants exceeds 

the amount that is 1 percent of the ACO’s 

updated historical benchmark, then the loss 

sharing limit would be capped and set at 1 

percent of the ACO’s updated historical 

benchmark for the applicable performance 

year. This level of risk is not sufficient to 

meet the generally applicable nominal 

amount standard for Advanced APMs under 

the Quality Payment Program specified in 

§ 414.1415(c)(3)(i). 

• Level D: A loss sharing rate of 30 percent 

regardless of the quality performance of the 

ACO would apply to first dollar shared losses 

for ACOs with losses meeting or exceeding 

their MLR, not to exceed 4 percent of total 

Medicare Parts A and B FFS revenue for ACO 

participants. If the loss sharing limit as a 

percentage of total Medicare Parts A and B 

FFS revenue for ACO participants exceeds 

the amount that is 2 percent of the ACO’s 

updated historical benchmark, then the loss 

sharing limit would be capped and set at 2 

percent of the ACO’s updated historical 

benchmark for the applicable performance 

year. This level of risk is not sufficient to 

meet the generally applicable nominal 

amount standard for Advanced APMs under 

the Quality Payment Program specified in 

§ 414.1415(c)(3)(i). 

• Level E: A loss sharing rate of 30 percent 

regardless of the quality performance of the 

ACO would apply to first dollar shared losses 

for ACOs with losses meeting or exceeding 

their MLR. The percentage of ACO 

participants’ total Medicare Parts A and B 

FFS revenue used to determine the revenuebased loss sharing limit would be set for each 

performance year consistent with the 

generally applicable nominal amount 

standard for an Advanced APM under 

§ 414.1415(c)(3)(i)(A). The ACO’s revenuebased loss sharing limit would not exceed its 

benchmark-based loss sharing limit, but 

would be capped at that amount. 

Finally, if an ACO enters the BASIC 

track’s glide path in a one-sided model 

and is unable to meet the requirements 

to participate under performance-based 

risk prior to being automatically 

transitioned to a performance year 

under risk, CMS would terminate the 

ACO’s agreement under § 425.218. 

The financial model of the BASIC 

track is summarized in Table 3, which 

also includes a summary of the design 

of the ENHANCED track (for 

comparison). 

BILLING CODE 4120–01–P 


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TABLE 3-COMPARISON OF RISK AND REWARD UNDER BASIC TRACK 

AND ENHANCED TRACK 

BASIC Track's Glide Path ENHANCED Level A & Level Level C LevelD Track ( B (one-sided Level E (risk/reward) 

model) (risk/reward) (risk/reward) Track3) 

1st dollar savings 1st dollar savings at 1st dollar savings 1st dollar savings at a No change. 1st 

at a rate of up to a rate of up to 50% at a rate of up to rate of up to 50% dollar savings at a 

Shared Savings 40% based on based on quality 50% based on based on quality ate of up to 75% 

(once MSR met quality performance, not to quality performance, not to based on quality 

performance; not exceed 1 0% of tperformance, not exceed 1 0% of performance, not 

or exceeded) to exceed 10% of updated benchmark o exceed 10% of updated benchmark o exceed 20% of 

updated !updated updated 

benchmark [benchmark benchmark 

N/A 1st dollar losses at a 1st dollar losses at 1st dollar losses at a No change. 1st 

ate of 30%, not to a rate of 30%, not rate of 30%, not to dollar losses at a 

exceed 2% of ACO o exceed 4% of exceed the percentage ate of 1 minus 

participant revenue V\CO participant of revenue specified in fmal sharing rate 

capped at 1% of evenue capped at the revenue-based (between 40% -

updated benchmark 2% ofupdated nominal amount 75%), not to 

!benchmark standard under the exceed 15% of 

Quality Payment updated 

Program (for example, benchmark 

Shared Losses 8%ofACO 

(once MLR met participant revenue in 

2019 - 2020), capped or exceeded) at a percentage of 

updated benchmark 

that is 1 percentage 

point higher than the 

expenditure-based 

nominal amount 

standard (for example, 

4% of updated 

benchmark in 2019 -

2020) 

Annual choice Yes Yes ~es ~es Yes 

of beneficiary 

assignment 

methodology? 

(see section 

II.A.4.c. ofthis 

final rule) 

Annual election Yes Yes fNo; ACO will No; maximum level of No; highest level 

to enter higher automatically isk I reward under the of risk under 

risk? 3 (see ransition to Level aASIC track Shared Savings 

section II.A.4.b. IE at the start of the Program 

of this final rule, !next performance 

and section ~ear 
Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 67853 

14See Medicare Shared Savings Program, 

Medicare ACO Track 1+ Model, and SNF 3-Day 

Rule Waiver, 2018 Application Reference Manual, 

version #3, July 2017 (herein 2018 Application 

Reference Manual), available at https://

www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/Downloads/MSSPReference-Table.pdf (see ‘‘Appendix F. Application 

Reference Table—For Medicare ACO Track 1+ 

Model Applicants’’, including definitions for 

institutional providers and ownership and 

operational interests for the purpose of the Track 1+ 

Model). 

BILLING CODE 4120–01–C 

(3) Calculation of Loss Sharing Limit 

As described in the August 2018 

proposed rule, under the Track 1+ 

Model, either a revenue-based or a 

benchmark-based loss sharing limit is 

applied based on the Track 1+ Model 

ACO’s self-reported composition of 

ACO participants as identified by TINs 

and CCNs, and the ownership of and 

operational interests in those ACO 

participants. We noted our concerns 

about use of self-reported information 

for purposes of determining the loss 

sharing limit in the context of the 

permanent, national program. The 

purpose of capturing information on the 

types of entities that are Track 1+ Model 

ACO participants and the ownership 

and operational interests of those ACO 

participants, as reported by ACOs 

applying to or participating in the Track 

1+ Model, is to differentiate between 

those ACOs that are eligible for the 

lower level of risk potentially available 

under the revenue-based loss sharing 

limit and those that are subject to the 

benchmark-based loss sharing limit. For 

purposes of our proposal to establish the 

BASIC track in the permanent program, 

we reconsidered this method of 

identifying which ACOs are eligible for 

the revenue-based or benchmark-based 

loss sharing limits. One concern 

regarding the Track 1+ Model approach 

is the burden imposed on ACOs and 

CMS resulting from reliance on selfreported information. Under the Track 

1+ Model, ACOs must collect 

information about their ACO participant 

composition and about ownership and 

operational interests from ACO 

participants, and potentially others in 

the TINs’ and CCNs’ ownership and 

operational chains, and assess this 

information to accurately answer 

questions as required by CMS.14 These 

questions are complex and ACOs’ 

ability to respond accurately could vary. 

Self-reported information is also more 

complex for CMS to audit. As a result, 

the use of ACOs’ self-reported 

information in the permanent program 

could become burdensome for CMS to 

validate and monitor to ensure program 

integrity. 

We proposed that a simpler approach 

that achieves similar results to the use 

of self-reported information would be to 

consider the total Medicare Parts A and 

B FFS revenue of ACO participants 

(TINs and CCNs) based on claims data, 

without directly considering their 

ownership and operational interests (or 

those of related entities), based on our 


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experience with the initial application 

cycle for the Track 1+ Model. As part of 

the application cycle for the 2018 

performance year under the Track 1+ 

Model, CMS gained experience with 

calculating estimates of ACO participant 

revenue to compare with estimates of 

ACO benchmark expenditures, for 

purposes of determining the repayment 

mechanism amounts for the Track 1+ 

Model (as described in section II.A.6.c. 

of this final rule). The methodology for 

determining repayment mechanism 

amounts follows a similar bifurcated 

approach to the one used to determine 

the applicable loss sharing limit under 

the Track 1+ Model. Specifically, for 

ACOs eligible for a revenue-based loss 

sharing limit, when the specified 

percentage of estimated total Medicare 

Parts A and B FFS revenue for ACO 

participants exceeds a specified 

percentage of estimated historical 

benchmark expenditures, the 

benchmark-based methodology is 

applied to determine the ACO’s loss 

sharing limit, which serves to cap the 

revenue-based amount (see Track 1+ 

Model Fact Sheet for a brief description 

of the repayment mechanism estimation 

methodology). Based on our 

calculations of repayment mechanism 

amounts for Track 1+ Model ACOs, we 

observed a high correlation between the 

loss sharing limits determined using an 

ACO’s self-reported composition, and 

its ACO participants’ total Medicare 

Parts A and B FFS revenue. For ACOs 

that reported including an ACO 

participant that was an IPPS hospital, 

cancer center or rural hospital with 

more than 100 beds, or that was owned 

or operated by, in whole or in part, such 

a hospital or by an organization that 

owns or operates such a hospital, the 

estimated total Medicare Parts A and B 

FFS revenue for the ACO participants 

tended to exceed an estimate of the 

ACO’s historical benchmark 

expenditures for assigned beneficiaries. 

For ACOs that reported that they did not 

include an ACO participant that met 

these ownership and operational 

criteria, the estimated total Medicare 

Parts A and B FFS revenue for the ACO 

participants tended to be less than an 

estimate of the ACO’s historical 

benchmark expenditures. 

We recognized that this analysis was 

informed by the definitions for 

ownership and operational interests, 

and the definitions for IPPS hospital, 

cancer center and rural hospital with 

100 or more beds, used in the Track 1+ 

Model. However, we stated that these 

observations from the Track 1+ Model 

supported a more generalizable 

principle about the extent to which 

ACOs can control total Medicare Parts A 

and B FFS expenditures for their 

assigned beneficiaries, and therefore 

their readiness to take on lower or 

higher levels of performance-based risk. 

In the proposed rule and in this final 

rule, we use the phrases ‘‘ACO 

participants’ total Medicare Parts A and 

B FFS revenue’’ and ‘‘total Medicare 

Parts A and B FFS expenditures for the 

ACO’s assigned beneficiaries’’ in the 

discussion of certain proposed policies. 

For brevity, we sometimes use shorter 

phrases instead. For instance, we may 

refer to ACO participant Medicare FFS 

revenue, or expenditures for the ACO’s 

assigned beneficiaries. 

Based on our experience with the 

Track 1+ Model, we proposed an 

approach under which the loss sharing 

limit for BASIC track ACOs would be 

determined as a percentage of ACO 

participants’ total Medicare Parts A and 

B FFS revenue that is capped at a 

percentage of the ACO’s updated 

historical benchmark expenditures 

when the amount that is a certain 

percentage of ACO participant FFS 

revenue (depending on the BASIC track 

risk/reward level) exceeds the specified 

percentage of the ACO’s updated 

historical benchmark expenditures for 

the relevant BASIC track risk/reward 

level. Under our proposed approach, we 

would not directly consider the types of 

entities included as ACO participants or 

ownership and operational interests in 

ACO participants in determining the 

loss sharing limit that would apply to 

ACOs under Levels C, D, and E of the 

BASIC track. We stated our belief that 

ACOs whose ACO participants have 

greater total Medicare Parts A and B FFS 

revenue relative to the ACO’s 

benchmark are better financially 

prepared to move to greater levels of 

risk. Accordingly, this comparison of 

revenue to benchmark would provide a 

more accurate method for determining 

an ACO’s preparedness to take on 

additional risk than an ACO’s selfreported information regarding the 

composition of its ACO participants and 

any ownership and operational interests 

in those ACO participants. 

We explained that ACOs that include 

a hospital billing through an ACO 

participant TIN are generally more 

capable of accepting higher risk given 

their control over a generally larger 

amount of their assigned beneficiaries’ 

total Medicare Parts A and B FFS 

expenditures relative to their ACO 

participants’ total Medicare Parts A and 

B FFS revenue. As a result, our 

proposed approach would tend to place 

ACOs that include hospitals under a 

benchmark-based loss sharing limit 

because their ACO participants typically 

have higher total Medicare Parts A and 

B FFS revenue compared to the ACO’s 

benchmark. Less often, the ACO 

participants in an ACO that includes a 

hospital billing through an ACO 

participant TIN have low total Medicare 

Part A and B FFS revenue compared to 

the ACO’s benchmark. Under a claimsbased approach to determining the 

ACO’s loss sharing limit, ACOs with 

hospitals billing through ACO 

participant TINs and relatively low ACO 

participant FFS revenue would be under 

a revenue-based loss sharing limit. 

To illustrate, Table 4 compares two 

approaches to determining loss liability: 

A claims-based approach (proposed 

approach) and self-reported 

composition (approach used for the 

Track 1+ Model). The table summarizes 

information regarding ACO participant 

composition reported by the Track 1+ 

Model applicants for performance year 

2018 and identifies the percentages of 

applicants whose self-reported 

composition would have placed the 

ACO under a revenue-based loss sharing 

limit or a benchmark-based loss sharing 

limit. The table then indicates the 

outcomes of a claims-based analysis 

applied to this same cohort of 

applicants. This analysis indicates the 

proposed claims-based method 

produces a comparable result to the selfreported composition method. Further, 

this analysis suggests that under a 

claims-based method, ACOs that 

include institutional providers with 

relatively low Medicare Parts A and B 

FFS revenue would be placed under a 

revenue-based loss sharing limit, which 

may be more consistent with their 

capacity to assume risk than an 

approach that considers only the 

inclusion of certain institutional 

providers among the ACO participants 

and their providers/suppliers (TINs and 

CCNs). 


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Using ACO participant Medicare FFS 

revenue to determine the ACO’s loss 

sharing limit balances several concerns. 

For one, it allows CMS to make a 

claims-based determination about the 

ACO’s loss limit instead of depending 

on self-reported information from ACOs. 

This approach would also alleviate the 

burden on ACOs of gathering 

information from ACO participants 

about their ownership and operational 

interests and reporting that information 

to CMS, and would address CMS’ 

concerns about the complexity of 

auditing the information reported by 

ACOs. 

We proposed to establish the revenuebased loss sharing limit as the default 

for ACOs in the BASIC track and to 

phase-in the percentage of ACO 

participants’ total Medicare Parts A and 

B FFS revenue. However, if the amount 

that is the applicable percentage of ACO 

participants’ total Medicare Parts A and 

B FFS revenue exceeds the amount that 

is the applicable percentage of the 

ACO’s updated benchmark based on the 

previously described phase-in schedule, 

then the ACO’s loss sharing limit would 

be capped and set at this percentage of 

the ACO’s updated historical 

benchmark. We sought comment on this 

proposal. 

We considered issues related to the 

generally applicable nominal amount 

standard for Advanced APMs in our 

development of the revenue-based loss 

sharing limit under Level E of the 

proposed BASIC track. Under 

§ 414.1415(c)(3)(i)(A), the revenue-based 

nominal amount standard is set at 8 

percent of the average estimated total 

Medicare Parts A and B revenue of all 

providers and suppliers in a 

participating APM Entity for QP 

Performance Periods 2017, 2018, 2019, 

and 2020. We proposed that, for the 

BASIC track, the percentage of ACO 

participants’ FFS revenue used to 

determine the revenue-based loss 

sharing limit for the highest level of risk 

(Level E) would be set for each 

performance year consistent with the 

generally applicable nominal amount 

standard for an Advanced APM under 

§ 414.1415(c)(3)(i)(A), to allow eligible 

clinicians participating in a BASIC track 

ACO subject to the revenue-based loss 

sharing limit the opportunity to earn the 

Advanced APM incentive payment 

when the ACO is participating under 

Level E. For example, for performance 

years 2019 and 2020, this would be 8 

percent of ACO participants’ total 

Medicare Parts A and B FFS revenue 

that would be capped and set at 4 

percent of the updated benchmark. As a 

result, the proposed BASIC track at 

Level E risk/reward would meet all of 

the criteria and be an Advanced APM. 

Further, in the CY 2018 Quality 

Payment Program final rule with 

comment period, we revised 

§ 414.1415(c)(3)(i)(A) to more clearly 

indicate that the revenue-based nominal 

amount standard is determined as a 

percentage of the revenue of all 

providers and suppliers in the 

participating APM Entity (see 82 FR 

53836 through 53838). Under the 

Shared Savings Program, ACOs are 

composed of one or more ACO 

participant TINs, which include all 

providers and suppliers that bill 

Medicare for items and services that are 

participating in the ACO. See 

definitions at § 425.20. In accordance 

with § 425.116(a)(3), ACO participants 

must agree to ensure that each provider/ 

supplier that bills through the TIN of 

the ACO participant agrees to 

participate in the Shared Savings 

Program and comply with all applicable 

requirements. Because all providers/ 

suppliers billing through an ACO 

participant TIN must agree to 

participate in the program, for purposes 

of calculating ACO revenue under the 

nominal amount standard for Shared 

Savings Program ACOs, the FFS revenue 

of the ACO participant TINs is 

equivalent to the FFS revenue for all 

providers/suppliers participating in the 

ACO. Therefore, we intend to perform 

these revenue calculations at the ACO 

participant level. 

We proposed to calculate the loss 

sharing limit for BASIC track ACOs in 

generally the same manner that is used 

under the Track 1+ Model. However, as 

discussed elsewhere in this section, we 

would not rely on an ACO’s selfreported composition as used in the 

Track 1+ Model to determine if the ACO 

is subject to a revenue-based or 

benchmark-based loss sharing limit. 

Instead, we would calculate a revenuebased loss sharing limit for all BASIC 

track ACOs, and cap this amount as a 

percentage of the ACO’s updated 

historical benchmark. Generally, 

calculation of the loss sharing limit 

would include the following steps: 

• Determine ACO participants’ total 

Medicare FFS revenue, which includes total 

Parts A and B FFS revenue for all providers 

and suppliers that bill for items and services 

through the TIN, or a CCN enrolled in 

Medicare under the TIN, of each ACO 

participant in the ACO for the applicable 

performance year. 

• Apply the applicable percentage under 

the proposed phase-in schedule (described in 

section II.A.3.b.(2). of this final rule) to this 

total Medicare Parts A and B FFS revenue for 

ACO participants to derive the revenue-based 

loss sharing limit. 

• Use the applicable percentage of the 

ACO’s updated benchmark, instead of the 

revenue-based loss sharing limit, if the loss 

sharing limit as a percentage of total 

Medicare Parts A and B FFS revenue for ACO 

participants exceeds the amount that is the 

specified percentage of the ACO’s updated 

historical benchmark, based on the phase-in 

schedule. In that case, the loss sharing limit 

is capped and set at the applicable 

percentage of the ACO’s updated historical 

benchmark for the applicable performance 

year. 

To illustrate, Table 5 provides a 

hypothetical example of the calculation 

of the loss sharing limit for an ACO 

participating under Level E of the 

BASIC track. This example would be 

relevant, under the proposed policies, 


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for an ACO participating in Level E of 

the BASIC track for the performance 

years beginning on July 1, 2019, and 

January 1, 2020, based on the 

percentages of revenue and ACO 

benchmark expenditures specified in 

generally applicable nominal amount 

standards in the Quality Payment 

Program regulations. In this scenario, 

the ACO’s loss sharing limit would be 

set at $1,090,479 (8 percent of ACO 

participant revenue) because this 

amount is less than 4 percent of the 

ACO’s updated historical benchmark 

expenditures. If in this scenario the 

ACO’s revenue would have been greater, 

and the revenue-based loss sharing limit 

exceeded the benchmark-based loss 

sharing limit amount, the loss sharing 

limit would be capped and set at the 

benchmark-based loss sharing limit 

amount (in this example $3,736,453). 

More specifically, ACO participants’ 

total Medicare Parts A and B FFS 

revenue would be calculated as the sum 

of Medicare paid amounts on all nondenied claims associated with TINs on 

the ACO’s certified ACO participant list, 

or the CCNs enrolled under an ACO 

participant TIN as identified in the 

Provider Enrollment, Chain, and 

Ownership System (PECOS), for all 

claim types used in program 

expenditure calculations that have dates 

of service during the performance year, 

using 3 months of claims run out. ACO 

participant Medicare FFS revenue 

would not be limited to claims 

associated with the ACO’s assigned 

beneficiaries, and would instead be 

based on the claims for all Medicare 

FFS beneficiaries furnished services by 

the ACO participant. Further, in 

calculating ACO participant Medicare 

FFS revenue, we would not truncate a 

beneficiary’s total annual FFS 

expenditures or adjust to remove 

indirect medical education (IME), 

disproportionate share hospital (DSH), 

or uncompensated care payments or to 

add back in reductions made for 

sequestration. ACO participant 

Medicare FFS revenue would include 

any payment adjustments reflected in 

the claim payment amounts (for 

example, under MIPS or Hospital Value 

Based Purchasing Program) and would 

also include individually identifiable 

final payments made under a 

demonstration, pilot, or time-limited 

program, and would be determined 

using the same completion factor used 

for annual expenditure calculations. 

This approach to calculating ACO 

participant Medicare FFS revenue is 

different from our approach to 

calculating benchmark and performance 

year expenditures for assigned 

beneficiaries, which we truncate at the 

99th percentile of national Medicare 

FFS expenditures for assignable 

beneficiaries, and from which we 

exclude IME, DSH and uncompensated 

care payments (see subpart G of the 

program’s regulations). We truncate 

expenditures to minimize variation from 

catastrophically large claims. We note 

that truncation occurs based on an 

assigned beneficiary’s total annual Parts 

A and B FFS expenditures, and is not 

apportioned based on services furnished 

by ACO participant TINs. See Medicare 

Shared Savings Program, Shared 

Savings and Losses and Assignment 

Methodology Specifications (May 2018, 

version 6) available at https://

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/sharedsavings

program/program-guidance-andspecifications.html (herein Shared 

Savings and Losses and Assignment 

Methodology Specifications, version 6). 

As discussed in earlier rulemaking, we 

exclude IME, DSH and uncompensated 

care payments from ACOs’ assigned 

beneficiary expenditure calculations 

because we do not wish to incentivize 

ACOs to avoid the types of providers 

that receive these payments, and for 

other reasons described in earlier 

rulemaking (see 76 FR 67919 through 

67922, and 80 FR 32796 through 32799). 

But to accurately determine ACO 

participants’ revenue for purposes of 

determining a revenue-based loss 

sharing limit, we would include total 

revenue uncapped by truncation and to 

include IME, DSH and uncompensated 

care payments. These payments 

represent resources available to ACO 

participants to support their operations 

and offset their costs and potential 

shared losses, thereby increasing the 

ACO’s capacity to bear performancebased risk, which should be reflected in 

the ACO’s loss sharing limit. Excluding 

such payments could undercount 

revenue and also could be challenging 

to implement, particularly truncation, 

since it likely would require 

apportioning responsibility for large 

claims among the ACO participants and 

non-ACO participants from which the 

beneficiary may have received the 

services resulting in the large claims. 

Currently, for Track 2 and Track 3 

ACOs, the loss sharing limit (as a 

percentage of the ACO’s updated 

benchmark) is determined each 

performance year, at the time of 

financial reconciliation. Consistent with 

this approach, we would determine the 

loss sharing limit for BASIC track ACOs 

annually, at the time of financial 

reconciliation for each performance 

year. Further, under the existing 

policies for the Shared Savings Program, 

we adjust the historical benchmark 

annually for changes in the ACO’s 

certified ACO participant list. See 

§§ 425.602(a)(8) and 425.603(b), (c)(8). 

See also the Shared Savings and Losses 

and Assignment Methodology 

Specifications, version 6. Similarly, the 

annual determination of a BASIC track 

ACO’s loss sharing limit would reflect 

changes in ACO composition based on 

changes to the ACO’s certified ACO 

participant list. 

We proposed to codify these policies 

in a new section of the Shared Savings 

Program regulations governing the 

BASIC track, at § 425.605. We sought 

comment on these proposals. 

Comment: A few commenters had 

suggestions as to whether certain 

payments or expenditures should be 

included in an ACO’s benchmark. One 

commenter recommended that CMS 

exclude payments from the CPC+ Model 


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in their entirety from the benchmark 

and expenditures on both a 

retrospective and prospective basis. The 

commenter further recommended that 

CMS update the historical benchmark to 

remove CPC+ Model payments from the 

calculation of ACOs’ expenditures as 

non-claims based payments. Another 

commenter recommended that CMS 

exclude MIPS bonuses from the 

determination of ACO expenditures 

because MIPS bonuses are projected to 

rise in future program years, which may 

penalize ACOs in comparison to their 

historical benchmark, and result in 

lower shared savings or higher shared 

losses. The commenter questioned CMS’ 

treatment of these payments, stating that 

CMS currently excludes Advanced APM 

incentive payments from ACO 

expenditures and recommended that 

CMS do the same for MIPS 

expenditures. 

Response: First, section 1833(z)(1)(C) 

of the Act provides that incentive 

payments made to a Qualifying APM 

Participant (QP) should not be taken 

into account for purposes of 

determining actual expenditures under 

an alternative payment model and for 

purposes of determining or rebasing any 

benchmarks used under the alternative 

payment model. Thus, we will not 

include the Advanced APM incentive 

payments in calculation of the ACOs 

expenditures. Second, the total per 

capita expenditures for an ACO’s 

assigned beneficiary population reflect 

services that are furnished by ACO 

providers/suppliers and also by 

providers and suppliers outside the 

ACO. As a result, the ACO only supplies 

a fraction of the services represented in 

the total per capita expenditures for the 

ACO’s assigned beneficiaries. Therefore, 

the net effect of MIPS adjustments on 

ACO expenditures for the ACO’s 

assigned beneficiary population, would 

be variable and often small and would 

depend on the mix of adjustments 

affecting the amount of payment for 

services supplied to ACO assigned 

beneficiaries by all MIP eligible 

clinicians, not just services that were 

supplied by ACO providers/suppliers. 

Third, the Shared Savings Program 

regulations provide that individually 

beneficiary identifiable final payments 

made under a demonstration, pilot or 

time limited program will be included 

in the calculation of Medicare Part A 

and Part B expenditures for the ACO’s 

assigned beneficiary population for 

purposes of establishing the historical 

benchmark and determining 

performance year expenditures. CPC+ 

Model payments are individually 

beneficiary identifiable final payments 

made under such a model, and therefore 

are included in the ACO’s expenditures 

for purposes of establishing the 

financial benchmark and calculating 

performance year expenditures. The 

CPC+ Model payments and other nonclaims based payments typically 

represent a small amount of 

expenditures for a small number of ACO 

assigned beneficiaries, so the impact of 

final non-claims based payments on an 

ACO’s historical benchmark or 

performance year expenditures is likely 

to be minimal. 

Comment: Several commenters 

expressed concern about the approach 

to calculating revenue used in 

determining the loss sharing limits 

under the BASIC track. These 

commenters explained that CMS 

proposed to include hospital add-on 

payments such as Indirect Medical 

Education (IME), Disproportionate 

Share Hospital (DSH), and 

uncompensated care payments when 

calculating an ACO’s ACO participant 

revenue for purposes of determining the 

loss sharing limit. These commenters 

pointed out that CMS will exclude these 

payments when calculating assigned 

beneficiary expenditures for 

determining benchmark and 

performance year expenditures. These 

commenters urged CMS to exclude addon payments in determining an ACO’s 

ACO participant revenue as well, 

suggesting that the proposed approach 

could penalize ACOs with ACO 

participants that treat vulnerable 

populations, including teaching 

hospitals and those that treat the 

uninsured population. 

Response: We discuss related 

considerations in our discussion of the 

determination of whether an ACO 

qualifies as a low revenue ACO or a 

high revenue ACO in section II.A.5.b. of 

this final rule. To accurately determine 

ACO participants’ revenue for purposes 

of determining a revenue-based loss 

sharing limit, we explain that it is 

important to include total revenue 

uncapped by truncation and to include 

IME, DSH and uncompensated care 

payments. As noted earlier in this 

section and discussed in greater detail 

in section II.A.5.b, this approach to 

calculating ACO participant Medicare 

FFS revenue is different from our 

approach to calculating benchmark and 

performance year expenditures for 

assigned beneficiaries, which we 

truncate at the 99th percentile of 

national Medicare FFS expenditures for 

assignable beneficiaries, and from 

which we exclude IME, DSH and 

uncompensated care payments (see 

subpart G of the program’s regulations). 

IME, DSH, uncompensated care 

payments represent resources available 

to ACO participants to support their 

operations and offset their costs and 

potential shared losses, thereby 

increasing the ACO’s capacity to bear 

performance-based risk, which we 

believe should be reflected in the ACO’s 

loss sharing limit. Excluding such 

payments could undercount revenue 

and also could be challenging to 

implement, particularly truncation, 

since it likely would require 

apportioning responsibility for large 

claims among the ACO participants and 

non-ACO participants from which the 

beneficiary may have received the 

services resulting in the large claims. 

We therefore decline to modify our 

approach to determining ACO 

participant’s total Medicare Parts A and 

B FFS revenue to include IME, DSH and 

uncompensated care payments, or to 

cap claim payment amounts through 

truncation. 

For similar reasons, we also decline at 

this time to make other technical 

adjustments to calculations of revenue 

to exclude any other payment 

adjustments reflected in the claim 

payment amounts, such as payments 

under MIPS or the Hospital Value Based 

Purchasing Program. 

Final Action: We are finalizing the 

approach to calculating ACO 

participants’ Medicare FFS revenue 

used in the determination of the loss 

sharing limits under the BASIC track as 

proposed. 

4. Permitting Annual Participation 

Elections 

a. Overview 

Background on our consideration of 

and stakeholders’ interest in allowing 

ACOs the flexibility to elect different 

participation options within their 

current agreement period is described in 

section II.A.1. of this final rule. In the 

August 2018 proposed rule (83 FR 

41810 through 41813), we proposed 

policies to allow ACOs in the BASIC 

track’s glide path to annually elect to 

take on higher risk and to allow ACOs 

in the BASIC track and ENHANCED 

track to annually elect their choice of 

beneficiary assignment methodology 

(either preliminary prospective 

assignment with retrospective 

reconciliation or prospective 

assignment). 

b. Permitting Election of Differing 

Levels of Risk Within the BASIC Track’s 

Glide Path 

In the August 2018 proposed rule (83 

FR 41810 through 41813), we proposed 

to incorporate additional flexibility in 

participation options by allowing ACOs 


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that enter an agreement period under 

the BASIC track’s glide path an annual 

opportunity to elect to enter higher 

levels of performance-based risk within 

the BASIC track within their agreement 

period. This flexibility would be 

important for ACOs entering the glide 

path under either the one-sided model 

(Level A or Level B) or the lowest level 

of risk (Level C) that may seek to 

transition more quickly to higher levels 

of risk and potential reward. (We note 

that an ACO entering the glide path at 

Level D would be automatically 

transitioned to Level E in the following 

year, and an ACO that enters the glide 

path at Level E must remain at this level 

for the duration of its agreement period 

and any subsequent agreement period 

under the BASIC track, if eligible.) 

In developing the proposed policy, we 

considered that an ACO under 

performance-based risk has the potential 

to induce more meaningful systematic 

change in providers’ and suppliers’ 

behavior. We also considered that an 

ACO’s readiness for greater 

performance-based risk may vary 

depending on a variety of factors, 

including the ACO’s experience with 

the program (for example, in relation to 

its elected beneficiary assignment 

methodology, composition of ACO 

participants, and benchmark value) and 

its ability to coordinate care and carry 

out other interventions to improve 

quality and financial performance. 

Lastly, we considered that an ACO may 

seek to more quickly take advantage of 

the features of higher levels of risk and 

potential reward within the BASIC 

track’s glide path, including: Potential 

for greater shared savings; increased 

ability for participating physicians and 

practitioners to furnish telehealth 

services as provided under section 

1899(l) of the Act, use of a SNF 3-day 

rule waiver, and the opportunity to 

establish a CMS-approved beneficiary 

incentive program (described in sections 

II.B and II.C. of this final rule); and the 

opportunity to participate in an 

Advanced APM under the Quality 

Payment Program after progressing to 

Level E of the BASIC track’s glide path. 

We explained that restricting ACOs 

from moving from the BASIC track to 

the ENHANCED track within their 

current agreement period would protect 

the Trust Funds. This would guard 

against selective participation in a 

financial model with the highest 

potential level of reward while the ACO 

remains subject to a benchmark against 

which it is very confident of its ability 

to generate shared savings. However, 

under the proposal to eliminate the sitout period for re-entry into the program 

after termination (see discussion in 

section II.A.5.c. of this final rule), an 

ACO (such as a BASIC track ACO) may 

terminate its participation agreement 

and quickly enter a new agreement 

period under a different track, if eligible 

(such as the ENHANCED track). 

We proposed to add a new section of 

the Shared Savings Program regulations 

at § 425.226 to govern annual 

participation elections. Specifically, we 

proposed to allow an ACO in the BASIC 

track’s glide path to annually elect to 

accept higher levels of performancebased risk, available within the glide 

path, within its current agreement 

period. We proposed that the annual 

election for a change in the ACO’s level 

of risk and potential reward must be 

made in the form and manner, and 

according to the timeframe, established 

by CMS. We also proposed that an ACO 

executive who has the authority to 

legally bind the ACO must certify the 

election to enter a higher level of risk 

and potential reward within the 

agreement period. We proposed that the 

ACO must meet all applicable 

requirements for the newly selected 

level of risk, which in the case of ACOs 

transitioning from a one-sided model to 

a two-sided model include establishing 

an adequate repayment mechanism and 

electing the MSR/MLR that will apply 

for the remainder of their agreement 

period under performance-based risk. 

(See section II.A.6. of this final rule for 

a detailed discussion of these 

requirements.) We proposed that the 

ACO must elect to change its 

participation option before the start of 

the performance year in which the ACO 

wishes to begin participating under a 

higher level of risk and potential 

reward. We envisioned that the timing 

of an ACO’s election would generally 

follow the timing of the Shared Savings 

Program’s application cycle. 

The ACO’s participation in the newly 

selected level of risk and potential 

reward, if approved, would be effective 

at the start of the next performance year. 

In subsequent years, the ACO may again 

choose to elect a still higher level of risk 

and potential reward (if a higher risk/ 

reward option is available within the 

glide path). Otherwise, the automatic 

transition to higher levels of risk and 

potential reward in subsequent years 

would continue to apply to the 

remaining years of the ACO’s agreement 

period in the glide path. We also 

proposed related changes to § 425.600 to 

reflect the opportunity for ACOs in the 

BASIC track’s glide path to transition to 

higher risk and potential reward during 

an agreement period. 

For example, if an eligible ACO enters 

the glide path in year 1 at Level A (onesided model) and elects to enter Level 

D (two-sided model) for year 2, the ACO 

would automatically transition to Level 

E (highest level of risk/reward under the 

BASIC track) for year 3, and would 

remain in Level E for year 4 and year 5 

of the agreement period. We note that 

ACOs starting in the BASIC track’s glide 

path for an agreement period beginning 

on July 1, 2019, could elect to enter a 

higher level of risk/reward within the 

BASIC track in advance of the 

performance year beginning on January 

1, 2020. 

In general, we wish to clarify that the 

proposal to allow ACOs to elect to 

transition to higher levels risk and 

potential reward within an agreement 

period in the BASIC track’s glide path 

would not alter the timing of benchmark 

rebasing under the proposed new 

section of the regulations at § 425.601. 

For example, if an ACO participating in 

the BASIC track’s glide path transitions 

to a higher level of risk and potential 

reward during its agreement period, the 

ACO’s historical benchmark would not 

be rebased as a result of this change. We 

would continue to assess the ACO’s 

financial performance using the 

historical benchmark established at the 

start of the ACO’s current agreement 

period, as adjusted and updated 

consistent with the benchmarking 

methodology under the proposed new 

provision at § 425.601. 

Comment: Overall, commenters 

supported CMS’ proposal to permit an 

annual opportunity to elect to enter 

higher levels of performance-based risk, 

if available, within the BASIC track 

within an ACO’s agreement period. One 

commenter suggested this is a good 

policy for CMS because it allows CMS 

to achieve its goal of shifting more 

ACOs into higher levels of risk. The 

commenter also suggested it is a good 

policy for ACOs because it gives them 

greater flexibility. Some commenters 

proposed allowing an ACO that elected 

to advance to a higher level early to 

remain at the higher level until it 

reaches the PY when it would have 

automatically advanced to the next 

successive level, absent the ACO’s 

election to advance more quickly than 

the glide path required. A few 

commenters supported the proposal to 

allow annual election of risk and 

skipping to higher levels, but 

encouraged CMS to allow ACOs to glide 

backward and select a lower level of risk 

if they jumped ahead and their losses 

exceeded their MLR for the level they 

skipped or if the ACO found that it was 

not ready to bear risk. Commenters 

suggested this added flexibility would 

encourage ACOs to experiment with risk 

as commenters suggested that CMS 

intended. 


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Response: We appreciate the 

commenters’ suggestions related to 

options for ACOs to elect varying levels 

of risk along the glide path. As we have 

discussed in this final rule, we believe 

there are incentives for increased 

efficiency when ACOs are in a twosided risk track. Our goal continues to 

be to advance ACOs to taking on higher 

levels of risk. Our experience with the 

Track 1+ Model has shown that ACOs 

are willing to accept the amount of risk 

in Level E of the BASIC track. ACOs 

should evaluate whether they are able to 

undertake greater risk before electing to 

move to a higher level of risk and ensure 

that the ACO has the operational 

capabilities in place to assume higher 

risk. Therefore, we decline to adopt 

these suggestions and are finalizing the 

glide path that transitions ACOs to 

higher levels of risk throughout the 

agreement period. 

Comment: Several commenters 

suggested that ACOs be allowed to move 

from the BASIC track to the ENHANCED 

track within their agreement period. 

One commenter proposed that CMS 

allow ACOs to jump BASIC levels to the 

ENHANCED track without an 

application process, asserting that this 

policy would create unnecessary 

administrative burden. Another 

commenter recommended removal of 

restrictions preventing ACOs that begin 

at the BASIC track’s Level E from 

moving up to the ENHANCED track 

without an interruption to their existing 

participation agreement or the 

redetermination of benchmarks. The 

commenter explained its preference that 

all levels of gainsharing and risk 

assumption be on a single platform to 

facilitate the continuous movement to 

higher levels of risk and potential 

reward. One commenter seemed to 

suggest an alternative approach to allow 

low revenue ACOs and high revenue 

ACOs to transition from the BASIC track 

to the ENHANCED track within a single 

agreement period, and then potentially 

return to the BASIC track if they 

discovered that they were unprepared to 

take on the higher level of risk. 

Response: As noted in the preamble, 

we continue to believe it is protective of 

the Trust funds to restrict ACOs from 

moving from the BASIC track to the 

ENHANCED track within the ACO’s 

current agreement period. This would 

guard against selective participation in 

a financial model with the highest 

potential level of reward while the ACO 

remains subject to a benchmark against 

which it is very confident of its ability 

to generate savings. We decline at this 

time to accept commenters’ suggestions 

to allow the flexibility for ACOs to move 

between the levels of risk and reward 

under the ENHANCED track and the 

BASIC track within a single agreement 

period. ACOs seeking to make this 

transition could elect to terminate their 

participation agreement under the 

BASIC track and ‘‘renew early’’ to enter 

the ENHANCED (see discussion in 

section II.A.5.c of this final rule), for 

example, which would result in 

rebasing of the ACO’s historical 

benchmark. 

We did not receive any comments on 

our proposals requiring: (1) Annual 

election of the change in the ACO’s 

level of risk and potential reward in the 

form and manner, and according to the 

timeframe, established by CMS; (2) 

certification by an ACO executive who 

has the authority to legally bind the 

ACO of any election to enter a higher 

level of risk and potential reward within 

the agreement period; (3) the ACO to 

meet all applicable requirements for the 

newly selected level of risk, which in 

the case of ACOs transitioning from a 

one-sided model to a two-sided model 

include establishing an adequate 

repayment mechanism and electing the 

MSR/MLR that will apply for the 

remainder of the ACO’s agreement 

period under performance-based risk; or 

(4) the ACO to elect to change its 

participation option before the start of 

the performance year in which the ACO 

wishes to begin participating under a 

higher level of risk and potential 

reward, if available (generally following 

the timing of the Shared Savings 

Program’s application cycle). 

Final Action: After considering the 

comments concerning the annual 

election of differing levels of risk along 

the BASIC track’s glide path, we are 

finalizing the policies as proposed. 

Specifically, we are finalizing policies 

to allow an ACO in the BASIC track’s 

glide path to annually elect to accept 

higher levels of performance-based risk, 

available within the glide path, within 

its current agreement period. If an ACO 

decides to elect a higher level of 

performance-based risk during their 

agreement period, it will make the 

election in the form and manner 

specified by CMS. Additionally, we are 

finalizing the requirement that ACOs 

must meet all applicable requirements 

for the newly selected level of risk, 

which in the case of ACOs transitioning 

from a one-sided model to a two-sided 

model include establishing an adequate 

repayment mechanism and electing the 

MSR/MLR that will apply for the 

remainder of their agreement period 

under performance-based risk. 

Accordingly, we are finalizing as 

proposed the new § 425.226 and related 

changes at § 425.600. 

c. Permitting Annual Election of 

Beneficiary Assignment Methodology 

Section 1899(c)(1) of the Act, as 

amended by section 50331 of the 

Bipartisan Budget Act, provides that the 

Secretary shall determine an 

appropriate method to assign Medicare 

FFS beneficiaries to an ACO based on 

utilization of primary care services 

furnished by physicians in the ACO 

and, in the case of performance years 

beginning on or after January 1, 2019, 

services provided by a FQHC or RHC. 

The provisions of section 1899(c) of the 

Act govern beneficiary assignment 

under all tracks of the Shared Savings 

Program. Although, to date, we have 

designated which beneficiary 

assignment methodology will apply for 

each track of the Shared Savings 

Program, section 1899(c) of the Act 

(including as amended by the Bipartisan 

Budget Act) does not expressly require 

that the beneficiary assignment 

methodology be determined by track. 

Under the Shared Savings Program 

regulations, we have established two 

claims-based beneficiary assignment 

methods (prospective assignment and 

preliminary prospective assignment 

with retrospective reconciliation) that 

currently apply to different program 

tracks, as well as a non-claims based 

process for voluntary alignment 

(discussed in section II.E.2. of the 

August 2018 proposed rule) that applies 

to all program tracks and is used to 

supplement claims-based assignment. 

The regulations governing the 

assignment methodology under the 

Shared Savings Program are in 42 CFR 

part 425, subpart E. In the November 

2011 final rule, we adopted a claimsbased hybrid approach (called 

preliminary prospective assignment 

with retrospective reconciliation) for 

assigning beneficiaries to an ACO (76 

FR 67851 through 67870), which is 

currently applicable to ACOs 

participating under Track 1 or Track 2 

of the Shared Savings Program (except 

for Track 1 ACOs that are also 

participating in the Track 1+ Model for 

which we use a prospective assignment 

methodology in accordance with our 

authority under section 1115A of the 

Act). Under this approach, beneficiaries 

are preliminarily assigned to an ACO, 

based on a two-step assignment 

methodology, at the beginning of a 

performance year and quarterly 

thereafter during the performance year, 

but final beneficiary assignment is 

determined after the performance year 

based on where beneficiaries chose to 

receive the plurality of their primary 

care services during the performance 

year. Subsequently, in the June 2015 


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final rule, we implemented an option 

for ACOs to participate in a new 

performance-based risk track, Track 3 

(80 FR 32771 through 32781). Under 

Track 3, beneficiaries are prospectively 

assigned to an ACO at the beginning of 

the performance year using the same 

two-step methodology used in the 

preliminary prospective assignment 

approach, based on where the 

beneficiaries have chosen to receive the 

plurality of their primary care services 

during a 12-month assignment window 

offset from the calendar year that 

reflects the most recent 12 months for 

which data are available prior to the 

start of the performance year. The ACO 

is held accountable for beneficiaries 

who are prospectively assigned to it for 

the performance year. Under limited 

circumstances, a beneficiary may be 

excluded from the prospective 

assignment list, such as if the 

beneficiary enrolls in MA during the 

performance year or no longer lives in 

the United States or U.S. territories and 

possessions (as determined based on the 

most recent available data in our 

beneficiary records regarding residency 

at the end of the performance year). 

Finally, in the CY 2017 PFS final rule 

(81 FR 80501 through 80510), we 

augmented the claims-based beneficiary 

assignment methodology by finalizing a 

policy under which beneficiaries, 

beginning in 2017 for assignment for 

performance year 2018, may voluntarily 

align with an ACO by designating a 

‘‘primary clinician’’ (referred to as a 

‘‘main doctor’’ in the prior rulemaking) 

they believe is responsible for 

coordinating their overall care using 

MyMedicare.gov, a secure, online, 

patient portal. Notwithstanding the 

assignment methodology in 

§ 425.402(b), beneficiaries who 

designate an ACO professional whose 

services are used in assignment as 

responsible for their overall care will be 

prospectively assigned to the ACO in 

which that ACO professional 

participates, provided the beneficiary 

meets the eligibility criteria established 

at § 425.401(a) and is not excluded from 

assignment by the criteria in 

§ 425.401(b), and has had at least one 

primary care service during the 

assignment window with an ACO 

professional in the ACO who is a 

primary care physician or a physician 

with one of the primary specialty 

designations included in § 425.402(c). 

Such beneficiaries will be added 

prospectively to the ACO’s list of 

assigned beneficiaries for the 

subsequent performance year. See 

section V.B.2.b. of the November 2018 

final rule for a discussion of the new 

provisions regarding voluntary 

alignment added to section 1899(c) of 

the Act by section 50331 of the 

Bipartisan Budget Act, and our related 

proposed regulatory changes. 

Section 50331 of the Bipartisan 

Budget Act specifies that, for agreement 

periods entered into or renewed on or 

after January 1, 2020, ACOs in a track 

that provides for retrospective 

beneficiary assignment will have the 

opportunity to choose a prospective 

assignment methodology, rather than 

the retrospective assignment 

methodology, for the applicable 

agreement period. The Bipartisan 

Budget Act incorporates this 

requirement as a new provision at 

section 1899(c)(2)(A) of the Act. 

In the August 2018 proposed rule (83 

FR 41811 through 41813), we proposed 

to implement this provision of the 

Bipartisan Budget Act to provide all 

ACOs with a choice of prospective 

assignment for agreement periods 

beginning on July 1, 2019, and in 

subsequent years. We also proposed to 

incorporate additional flexibility into 

the beneficiary assignment methodology 

consistent with the Secretary’s authority 

under section 1899(c)(1) of the Act to 

determine an appropriate beneficiary 

assignment methodology. We do not 

believe that section 1899(c) of the Act, 

as amended by the Bipartisan Budget 

Act, requires that we must continue to 

specify the applicable beneficiary 

assignment methodology for each track 

of the Shared Savings Program. 

Although section 1899(c)(2)(A) of the 

Act now provides that ACOs must be 

permitted to choose prospective 

assignment for each agreement period, 

we do not believe this requirement 

limits our discretion to allow ACOs the 

additional flexibility to change 

beneficiary assignment methodologies 

more frequently during an agreement 

period. As summarized in section II.A.1. 

of this final rule and as described in 

detail in earlier rulemaking, 

commenters have urged us to allow 

greater flexibility for ACOs to select 

their assignment methodology. 

Accordingly, we proposed an approach 

that separates the choice of beneficiary 

assignment methodology from the 

choice of participation track (financial 

model), and that allows ACOs to make 

an annual election of assignment 

methodology. Such an approach would 

afford greater flexibility for ACOs to 

choose between assignment 

methodologies for each year of the 

agreement period, without regard to 

their participation track. Consistent 

with the requirements of the Bipartisan 

Budget Act, we will offer all Shared 

Savings Program ACOs the opportunity 

to select their assignment methodology 

annually, starting with agreement 

periods beginning on July 1, 2019. 

As an approach to meeting the 

requirements of the Bipartisan Budget 

Act while building on them to offer 

greater flexibility, we proposed to offer 

ACOs entering agreement periods in the 

BASIC track or ENHANCED track, 

beginning on July 1, 2019 and in 

subsequent years, the option to choose 

either prospective assignment or 

preliminary prospective assignment 

with retrospective reconciliation, prior 

to the start of their agreement period (at 

the time of application). We also 

proposed to provide an opportunity for 

ACOs to switch their selection of 

beneficiary assignment methodology on 

an annual basis. As we explained in the 

August 2018 proposed rule, under this 

approach, in addition to the 

requirement under the Bipartisan 

Budget Act that ACOs be permitted to 

change from retrospective assignment to 

prospective assignment, an ACO would 

have the added flexibility to change 

from prospective assignment to 

preliminary prospective assignment 

with retrospective reconciliation. As an 

additional flexibility that further builds 

on the Bipartisan Budget Act, ACOs 

would be allowed to retain the same 

beneficiary assignment methodology for 

an entire agreement period or to change 

the methodology annually. An 

individual ACO’s preferred choice of 

beneficiary assignment methodology 

may vary depending on the ACO’s 

experience with the two assignment 

methodologies used under the Shared 

Savings Program. Therefore, this 

proposed approach implements the 

requirements of the Bipartisan Budget 

Act and will also be responsive to 

stakeholders’ suggestions that we allow 

additional flexibility around choice of 

beneficiary assignment methodology to 

facilitate ACOs’ transition to 

performance-based risk (as discussed 

earlier in this section). Further, allowing 

this additional flexibility for choice of 

beneficiary assignment methodology 

within the proposed BASIC track and 

ENHANCED track would enable ACOs 

to select a combination of participation 

options that would overlap with certain 

features of Track 2, and thus lessen the 

need to maintain Track 2 as a separate 

participation option. Accordingly, as 

discussed in section II.A.2. of this final 

rule, we proposed to discontinue Track 

2. Finally, we believed it would be 

appropriate and reasonable to start 

offering the choice of beneficiary 

assignment to ACOs in the BASIC track 

or ENHANCED track for agreement 

periods beginning on July 1, 2019, and 


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in subsequent years, in order to align 

with the availability of these two tracks 

under the proposed redesign of the 

Shared Savings Program. 

In the August 2018 proposed rule, we 

proposed that, in addition to choosing 

the track to which it is applying, an 

ACO would choose the beneficiary 

assignment methodology at the time of 

application to enter or re-enter the 

Shared Savings Program or to renew its 

participation for another agreement 

period. If the ACO’s application is 

accepted, the ACO would remain under 

that beneficiary assignment 

methodology for the duration of its 

agreement period, unless the ACO 

chooses to change the beneficiary 

assignment methodology through the 

annual election process. We also 

proposed that the ACO must indicate its 

desire to change assignment 

methodology before the start of the 

performance year in which it wishes to 

begin participating under the alternative 

assignment methodology. The ACO’s 

selection of a different assignment 

methodology would be effective at the 

start of the next performance year, and 

for the remaining years of the agreement 

period, unless the ACO again chooses to 

change the beneficiary assignment 

methodology. For example, if an ACO 

selects preliminary prospective 

assignment with retrospective 

reconciliation at the time of its 

application to the program for an 

agreement period beginning on July 1, 

2019, this methodology would apply in 

the ACO’s first performance year (6- 

month performance year from July 1, 

2019, through December 31, 2019) and 

all subsequent performance years of its 

agreement period, unless the ACO 

selects prospective assignment in 

advance of the start of performance year 

2020, 2021, 2022, 2023, or 2024. To 

continue this example, during its first 

performance year, the ACO would have 

the option to select prospective 

assignment to be applicable beginning 

with performance year 2020. If selected, 

this assignment methodology would 

continue to apply unless the ACO again 

selects a different methodology. 

We proposed to incorporate the 

requirements governing the ACO’s 

initial selection of beneficiary 

assignment methodology and the annual 

opportunity for an ACO to notify CMS 

that it wishes to change its beneficiary 

assignment methodology within its 

current agreement period, in a new 

section of the Shared Savings Program 

regulations at § 425.226 along with the 

other annual elections described 

elsewhere in this final rule. We 

proposed that the initial selection of, 

and any annual selection for a change 

in, beneficiary assignment methodology 

must be made in the form and manner, 

and according to the timeframe, 

established by CMS. We also proposed 

that an ACO executive who has the 

authority to legally bind the ACO must 

certify the selection of beneficiary 

assignment methodology for the ACO. 

We envision that the timing of this 

opportunity for an ACO to change 

assignment methodology would 

generally follow the Shared Savings 

Program’s application cycle. For 

consistency, we also proposed to make 

conforming changes to regulations that 

currently identify assignment 

methodologies according to program 

track. Specifically, we proposed to 

revise §§ 425.400 and 425.401 

(assignment of beneficiaries), § 425.702 

(aggregate reports) and § 425.704 

(beneficiary-identifiable claims data) to 

reference either preliminary prospective 

assignment with retrospective 

reconciliation or prospective assignment 

instead of referencing the track to which 

a particular assignment methodology 

applies (currently Track 1 and Track 2, 

or Track 3, respectively). 

We clarified that this proposal would 

have no effect on the voluntary 

alignment process under § 425.402(e). 

Because beneficiaries may voluntarily 

align with an ACO through their 

designation of a ‘‘primary clinician,’’ 

and eligible beneficiaries will be 

prospectively assigned to that ACO 

regardless of the ACO’s track or claimsbased beneficiary assignment 

methodology, an ACO’s choice of 

claims-based assignment methodology 

under this proposal would not alter the 

voluntary alignment process. 

As part of the proposed approach to 

allow ACOs to elect to change their 

assignment methodology within their 

agreement period, we also proposed to 

adjust the ACO’s historical benchmark 

to reflect the ACO’s election of a 

different assignment methodology. 

Section 1899(d)(1)(B)(ii) of the Act 

addresses how ACO benchmarks are to 

be established. This provision specifies 

that the Secretary shall estimate a 

benchmark for each agreement period 

for each ACO using the most recent 

available 3 years of per beneficiary 

expenditures for Parts A and B services 

for Medicare FFS beneficiaries assigned 

to the ACO. Such benchmark shall be 

adjusted for beneficiary characteristics 

and such other factors as the Secretary 

determines appropriate. 

As we explained in earlier 

rulemaking, we currently use differing 

assignment windows to determine 

beneficiary assignment for the 

benchmark years and performance 

years, according to the ACO’s track and 

the beneficiary assignment methodology 

used under that track. The assignment 

window for ACOs under prospective 

assignment is a 12-month period off-set 

from the calendar year, while for ACOs 

under preliminary prospective 

assignment with retrospective 

reconciliation, the assignment window 

is the 12-month period based on the 

calendar year (see 80 FR 32699, and 80 

FR 32775 through 32776). However, for 

all ACOs, the claims used to determine 

the per capita expenditures for a 

benchmark or performance year are the 

claims for services furnished to assigned 

beneficiaries from January 1 through 

December 31 of the calendar year that 

corresponds to the applicable 

benchmark or performance year (see for 

example, 79 FR 72812 through 72813, 

see also 80 FR 32776 through 32777). 

We explained that this approach 

removes actuarial bias between the 

benchmarking and performance years 

for assignment and financial 

calculations, since the same method 

would be used to determine assignment 

and the financial calculations for each 

benchmark and performance year. 

Further, basing the financial 

calculations on the calendar year would 

be necessary to align with actuarial 

analyses with respect to risk score 

calculations and other data inputs based 

on national FFS expenditures used in 

program financial calculations, which 

are determined on a calendar year basis 

(79 FR 72813). To maintain symmetry 

between the benchmark and 

performance year calculations it would 

be necessary to adjust the benchmark for 

ACOs that change beneficiary 

assignment methodology within their 

current agreement period to reflect 

changes in beneficiary characteristics 

due to the change in beneficiary 

assignment methodology, as provided in 

section 1899(d)(1)(B)(ii) of the Act. For 

example, if an ACO were to elect to 

change its applicable beneficiary 

assignment methodology during its 

initial agreement period from 

preliminary prospective assignment 

with retrospective reconciliation to 

prospective assignment, we would 

adjust the ACO’s historical benchmark 

for the current agreement period to 

reflect the expenditures of beneficiaries 

that would have been assigned to the 

ACO during the benchmark period 

using the prospective assignment 

methodology, instead of the 

expenditures of the beneficiaries 

assigned under the preliminary 

prospective assignment methodology 

that were used to establish the 

benchmark at the start of the agreement 

period. Therefore, we proposed to 


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specify in the proposed new section of 

the regulations at § 425.601 that would 

govern establishing, adjusting, and 

updating the benchmark for all 

agreement periods beginning on July 1, 

2019, and in subsequent years, that we 

will adjust an ACO’s historical 

benchmark to reflect a change in the 

ACO’s beneficiary assignment 

methodology within an agreement 

period. However, any adjustment to the 

benchmark to account for a change in 

the ACO’s beneficiary assignment 

methodology would not alter the timing 

of benchmark rebasing under § 425.601; 

the historical benchmark would not be 

rebased as a result of a change in the 

ACO’s beneficiary assignment 

methodology. 

We sought comment on these 

proposals. 

Comment: Generally, commenters 

were supportive of the proposal 

implementing section 1899(c)(2)(A) of 

the Act, as added by the Bipartisan 

Budget Act, to allow all ACOs a choice 

of prospective assignment for agreement 

periods beginning on July 1, 2019, and 

in subsequent performance years. They 

also supported CMS’ proposal to 

exercise its discretion to separate the 

choice of assignment methodology from 

the choice of participation track 

(financial model) and provide ACOs 

with additional flexibility to change 

beneficiary assignment methodologies 

annually. Commenters praised these 

proposals and provided various 

rationale for their support, stating that 

the annual choice of assignment 

methodology for all ACOs: 

• Removes challenges caused by 

uncertainty of preliminary prospective 

beneficiary assignment with retrospective 

reconciliation, for ACOs that would be newly 

free to select prospective assignment. 

• Offers some much-needed stability and 

allows for the appropriate allocation of 

ACOs’ finite resources, for ACOs that would 

be newly free to select prospective 

assignment. 

• Assists ACOs in planning and designing 

care management strategies. 

• Assists ACOs that, for care-driven 

reasons, may find it difficult to adopt one 

methodology versus another. 

• Provides ACOs with more flexibility to 

manage their patient populations based on 

their unique circumstances, care model, and 

ability to taken on risk for the total cost of 

care. 

• Equals the playing field between 

different types of ACOs. 

• Serves to increase ACO entity interest 

and participation in the program. One 

commenter that generally supported the 

proposal additionally suggested that CMS 

should provide accurate and timely reporting 

(for example, year-to-year performance 

comparisons based on the selected 

assignment methodology) so ACOs can 

analyze trends and results in a timely manner 

and be in a position to make an annual 

determination. 

A few commenters offered 

alternatives to CMS’ proposal. One 

commenter encouraged CMS to develop 

an approach that offers only preliminary 

prospective assignment with 

retrospective reconciliation so providers 

can target high-risk patients for care 

management throughout the program 

period. The commenter asserted that 

this would improve accuracy at the end 

of the year because ACOs would likely 

be held accountable for the patients they 

coordinated care for during the 

performance year. One ACO commenter 

supported the annual option of 

prospective or preliminary prospective 

assignment and requested that the 

option chosen have no effect on the 

shared savings rate for ENHANCED 

track ACOs (a maximum of 75 percent). 

One commenter recommended that the 

choice of assignment only be exercised 

once during the term of the 

participation agreement to prevent 

ongoing gaming of the system by 

switching attribution models based 

upon financial arbitrage rather than 

focusing on care redesign. Finally, a 

commenter was concerned about the 

effect of late reporting on the selection 

of assignment methodology. 

Response: CMS appreciates the 

enthusiasm of the commenters and the 

overwhelming support received. In this 

final rule, and consistent with Section 

1899(c)(2)(a) of the Act, we are 

providing ACOs flexibility in their 

choice of beneficiary assignment 

methodology. We agree that timely 

reporting and data collection are crucial 

for ACOs to make an informed 

assignment selection; and under 

§ 425.702, we provide ACOs with 

aggregate quarterly reports that identify 

prospective and preliminary prospective 

assigned beneficiaries as well as 

utilization and expenditure data. Under 

§ 425.704, we provide ACOs with 

monthly claim and claim line feed files. 

We provide the aggregate reports and 

monthly claim and claim line feed files 

to provide ACOs with data to aid them 

in making informed decisions regarding 

their participation in the program. We 

believe this information will may help 

them determine the assignment 

methodology that best suits their ACO 

and ACO participants. We confirm that 

an ACO’s annual beneficiary assignment 

election has no effect on the maximum 

75 percent shared savings rate for 

ENHANCED track ACOs. We disagree 

with one of the commenter’s assertion 

that the election should only occur once 

during the contract term to prevent 

gaming by switching attribution models 

based on financial arbitrage. We believe 

the flexibility will allow ACOs to 

determine the best assignment 

methodology for their unique 

organizational structure. We do not 

believe that allowing ACOs to change 

their assignment methodology on an 

annual basis provides a gaming 

opportunity; we will continue to 

determine assignment based upon 

where beneficiaries receive the plurality 

of their primary care services and 

whether beneficiaries have designated 

an ACO professional as their primary 

clinician, responsible for their overall 

care, and hold ACOs accountable for the 

resulting assigned beneficiary 

population. Although we recognize that, 

for some ACOs, there may be some 

financial impact, since the choice of 

assignment may change the ACO’s 

historical benchmark and subsequently 

impact expenditure calculations, we 

believe that the program-wide impact 

will be minimal. Thus, we are finalizing 

as proposed the opportunity for ACOs to 

select the applicable assignment 

methodology annually. 

Comment: Several commenters sought 

clarification on CMS’ proposal and 

recommended that CMS clarify the 

following: 

• What the process will be for assignment 

and what communications would be 

involved; 

• When would the ACOs election of 

beneficiary assignment methodology occur 

and the process for the election to be made 

(would this occur during the annual 

certification process or as a separate process); 

• Is the ACO required to make an election 

every year or would they continue in the 

same methodology unless they make a 

proactive selection each year; 

• How the preliminary prospective with 

retrospective reconciliation versus 

prospective methodology would impact 

shared savings and shared losses 

calculations; 

• Whether there will be full disclosure to 

beneficiaries upon assignment to an ACO and 

expectations as to the network of providers; 

• Whether assigned beneficiaries can 

receive care outside of an ACO at any given 

time; and 

• Process for beneficiaries to opt-out of 

assignment. 

Response: CMS plans to align the 

annual selection of an assignment 

methodology (preliminary prospective 

with retrospective reconciliation or 

prospective assignment) with the 

application cycle. During this period, an 

ACO may either retain or change its 

current assignment selection that would 

become effective at the beginning of the 

next performance year. We are planning 

on automating the assignment 

methodology selection and will provide 


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further clarification in sub-regulatory 

guidance on the assignment selection 

process. As proposed, ACOs may select 

the assignment methodology that CMS 

employs for assignment of beneficiaries, 

ACOs are not required to make an 

election each year. CMS is establishing 

a system and process so that we can 

quickly and accurately execute ACOs’ 

assignment methodology changes. We 

want to emphasize that the term 

‘‘assignment’’ for purposes of the Shared 

Savings Program in no way implies any 

limits, restrictions, or diminishment of 

the rights of Medicare FFS beneficiaries 

to exercise freedom of choice in the 

physicians and other health care 

practitioners from whom they receive 

covered services, nor will the policy 

allowing ACOs to annually choose an 

assignment methodology have any effect 

on the voluntary alignment process 

under § 425.402(e). 

Concerning the impact of an ACO 

changing their assignment methodology 

during an agreement period, we note the 

program’s calculations for establishing 

historical benchmarks and performance 

year reconciliation are performed 

consistently across all ACOs 

participating in the Shared Savings 

Program. We do not modify our 

benchmark year or performance year 

calculations based upon the assignment 

methodology. 

In addition, as explained in section 

II.C.3.a, we are modifying our proposed 

revisions to the current beneficiary 

notice requirements at § 425.312 to 

require each ACO or its ACO 

participants to provide each beneficiary 

with a standardized written notice that 

explains that the ACO’s providers/ 

suppliers are participating in the Shared 

Savings Program. The ACO or its ACO 

participant would be required to 

provide this notice prior to or at the 

beneficiary’s first primary care visit of 

each performance year in the form and 

manner that we specify in subregulatory 

guidance. We anticipate that the 

template notice will explain what an 

ACO provider or supplier’s 

participation in an ACO means for the 

beneficiary’s care and that the 

beneficiary has the right to receive care 

from any provider or supplier that 

accepts Medicare. ACOs and ACO 

participants may also provide additional 

information that they have determined 

to be useful when notifying 

beneficiaries about their participation in 

an ACO, consistent with the marketing 

requirements at § 425.310. 

The Shared Savings Program 

voluntary alignment methodology 

(§ 425.402(e)) allows beneficiaries to 

designate their primary clinician on 

MyMedicare.gov. Under the revisions to 

the voluntary alignment methodology 

that were finalized in the November 

2018 final rule (83 FR 59960), if a 

beneficiary selects an ACO professional 

as their primary clinician, the 

beneficiary will be prospectively 

assigned to the ACO, unless the 

beneficiary has been aligned to an entity 

participating in a model tested or 

expanded under section 1115A of the 

Act under which claims-based 

assignment is based solely on claims for 

services other than primary care 

services and for which there has been a 

determination by the Secretary that 

waiver of the requirement in section 

1899(c)(2)(B) of the Act is necessary 

solely for purposes of testing the model. 

If a beneficiary determines that he/she 

does not want to be assigned to an ACO, 

the beneficiary may log into 

MyMedicare.gov and designate a 

clinician that is not participating in an 

ACO as their primary clinician. 

Beneficiaries assigned to an ACO 

remain free to seek services wherever 

they choose, and assignment results 

only from a beneficiary’s exercise of that 

free choice by seeking and receiving 

services from ACO participants or by 

selecting a primary clinician who is 

participating in the ACO on 

MyMedicare.gov. 

Comment: One commenter agreed 

with CMS’ proposal for all agreement 

periods beginning on July 1, 2019, and 

in subsequent performance years, to 

adjust the ACO’s historical benchmark 

to reflect a change in the ACO’s 

beneficiary assignment methodology 

within the agreement period. However, 

the commenter sought further 

clarification on how an ACO would 

determine what impacts an assignment 

methodology change would have on its 

performance. 

Response: We note that under our 

proposed approach of allowing choice 

of beneficiary assignment methodology, 

the populations used to determine 

benchmark and performance year 

assignment would vary based on the 

ACO’s assignment methodology 

selection, however the benchmark 

calculations and calculations for 

determining savings and losses would 

be the same. Additionally, we provide 

ACOs with aggregate reports (see 

§ 425.702) to help them trend their 

performance year over year. When 

looking at a similar length of time (for 

example, 12 months) ACOs can compare 

their performance from one year to the 

next. We believe there are other changes 

ACOs voluntarily make from year to 

year that may pose greater difficulty in 

terms of comparing ACO performance 

between performance years, such as 

annual changes to the ACO participant 

list. 

Final Action: After considering the 

comments concerning our proposals to 

allow ACOs to annually elect their 

beneficiary assignment methodology, 

we are finalizing the proposal as 

proposed. Specifically, we will offer 

ACOs entering agreement periods in the 

BASIC track or ENHANCED track, 

beginning July 1, 2019 and in 

subsequent years, the option to choose 

either prospective assignment or 

preliminary prospective assignment 

with retrospective reconciliation, prior 

to the start of their agreement period (at 

the time of application). We will also 

provide an opportunity for ACOs to 

switch their selection of beneficiary 

assignment methodology on an annual 

basis. We are finalizing as proposed the 

new section at § 425.226. Additionally, 

we are finalizing as proposed the 

conforming changes at §§ 425.400 and 

425.401 (assignment of beneficiaries), 

§ 425.702 (aggregate reports) and 

§ 425.704 (beneficiary-identifiable 

claims data) to reference either 

preliminary prospective assignment 

with retrospective reconciliation or 

prospective assignment instead of 

referencing the track to which a 

particular assignment methodology 

applies. 

5. Determining Participation Options 

Based on Medicare FFS Revenue and 

Prior Participation 

a. Overview 

In the August 2018 proposed rule (83 

FR 41813 through 41836), we described 

considerations related to, and proposed 

policies for, distinguishing among ACOs 

based on their degree of control over 

total Medicare Parts A and B FFS 

expenditures for their assigned 

beneficiaries by identifying low revenue 

ACOs versus high revenue ACOs, 

experience of the ACO’s legal entity and 

ACO participants with the Shared 

Savings Program and performance-based 

risk Medicare ACO initiatives, and prior 

performance in the Shared Savings 

Program. Based on operational 

experience and considerations related to 

our proposal to extend the length of an 

agreement period under the program 

from 3 to not less than 5 years for 

agreement periods beginning on July 1, 

2019 and in subsequent years, we 

identified the following programmatic 

areas for further policy development. 

First, differentiating between ACOs 

based on their degree of control over 

total Medicare Parts A and B FFS 

expenditures for their assigned 

beneficiaries would allow us to 

transition high revenue ACOs more 


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quickly to higher levels of performancebased risk under the ENHANCED track, 

rather than remaining in a lower level 

of risk under the BASIC track. We stated 

our aim to drive more meaningful 

systematic change in high revenue 

ACOs which have greater potential to 

control total Medicare Parts A and B 

FFS expenditures for their assigned 

beneficiaries and in turn the potential to 

drive significant change in spending 

and coordination of care for assigned 

beneficiaries across care settings. We 

also aimed to encourage continued 

participation by low revenue ACOs, 

which control a smaller proportion of 

total Medicare Parts A and B FFS 

expenditures for their assigned 

beneficiaries, and thus may be 

encouraged to continue participation in 

the program by having additional time 

under the BASIC track’s revenue-based 

loss sharing limits (capped at a 

percentage of benchmark) before 

transitioning to the ENHANCED track. 

Second, differentiating between ACOs 

that are experienced and inexperienced 

with performance-based risk Medicare 

ACO initiatives to determine their 

eligibility for participation options 

would allow us to prevent experienced 

ACOs from taking advantage of options 

designed for inexperienced ACOs, 

namely lower levels of performancebased risk. 

Third, it would be timely to clarify 

the differences between ACOs applying 

to renew their participation agreements 

and ACOs applying to re-enter the 

program after a break in participation, 

and to identify new ACOs as re-entering 

ACOs if greater than 50 percent of their 

ACO participants have recent prior 

participation in the same ACO in order 

to hold these ACOs accountable for their 

ACO participants’ experience with the 

program. We stated our aim to provide 

a more consistent evaluation of these 

ACOs’ prior performance in the Shared 

Savings Program at the time of 

reapplication. We also aimed to update 

policies to identify the agreement period 

an ACO is entering into for purposes of 

benchmark calculations and quality 

performance requirements that phase-in 

as the ACO gains experience in the 

program, as appropriate for renewing 

ACOs, re-entering ACOs, and new 

program entrants. 

Fourth, and lastly, we believed it 

would be appropriate to modify the 

evaluation criteria for prior quality 

performance to be relevant to ACOs’ 

participation in longer agreement 

periods and introduce a monitoring 

approach for and evaluation criterion 

related to financial performance to 

prevent underperforming ACOs from 

remaining in the program. 

b. Differentiating Between Low Revenue 

ACOs and High Revenue ACOs 

In section II.A.5.b of the August 2018 

proposed rule (83 FR 41814 through 

41820), we proposed to differentiate 

between the participation options 

available to low revenue ACOs and high 

revenue ACOs, through the following: 

(1) Proposals for defining ‘‘low revenue 

ACO’’ and ‘‘high revenue ACO’’ relative 

to a threshold of ACO participants’ total 

Medicare Parts A and B FFS revenue 

compared to total Medicare Parts A and 

B FFS expenditures for the ACO’s 

assigned beneficiaries for the same 12 

month period; and (2) proposals for 

establishing distinct participation 

options for low revenue ACOs and high 

revenue ACOs, with the availability of 

multiple agreement periods under the 

BASIC track as the primary distinction. 

We also considered approaches to allow 

greater potential for reward for low 

revenue ACOs, such as by reducing the 

MSR ACOs must meet to share in 

savings during one-sided model years of 

the BASIC track’s glide path, or 

allowing higher sharing rates based on 

quality performance during the first 4 

years in the glide path. 

In this section of this final rule we 

summarize and respond to comments on 

the proposed approach to differentiating 

between low revenue ACOs and high 

revenue ACOs. We summarize and 

respond to comments on the proposed 

MSR for ACOs in one-sided model years 

of the BASIC track’s glide path in 

section II.A.6.b of this final rule, 

including comments on our 

consideration of applying a different 

MSR to low revenue ACOs. We 

summarize and respond to comments on 

the sharing rate based on quality 

performance in the BASIC track’s glide 

path in section II.A.3. of this final rule, 

including comments on our 

consideration of applying a different 

sharing rate to low revenue ACOs. 

(1) Identifying Low Revenue ACOs and 

High Revenue ACOs 

As discussed in the August 2018 

proposed rule (83 FR 41814 through 

41817), to define low revenue ACOs and 

high revenue ACOs for purposes of 

determining ACO participation options, 

we considered the relationship between 

an ACO’s degree of control over the 

Medicare Parts A and B FFS 

expenditures for its assigned 

beneficiaries and its readiness to accept 

higher or lower degrees of performancebased risk. We explained that an ACO’s 

ability to control the expenditures of its 

assigned beneficiary population can be 

gauged by comparing the total Medicare 

Parts A and B FFS revenue of its ACO 

participants to total Medicare Parts A 

and B FFS expenditures of its assigned 

beneficiary population. Thus, high 

revenue ACOs, which typically include 

a hospital billing through an ACO 

participant TIN, are generally more 

capable of accepting higher risk, given 

their control over a generally larger 

amount of their assigned beneficiaries’ 

total Medicare Parts A and B FFS 

expenditures. In contrast, lower risk 

options could be more suitable for low 

revenue ACOs, which have control over 

a smaller amount of their assigned 

beneficiaries’ total Medicare Parts A and 

B FFS expenditures. 

In the Regulatory Impact Analysis of 

the August 2018 proposed rule (see 83 

FR 41917), we described an approach 

for differentiating low revenue ACOs 

versus high revenue ACOs that reflects 

the amount of control ACOs have over 

total Medicare Parts A and B FFS 

expenditures for their assigned 

beneficiaries. Under this analysis, an 

ACO was identified as low revenue if its 

ACO participants’ total Medicare Parts 

A and B FFS revenue for assigned 

beneficiaries was less than 10 percent of 

the ACO’s assigned beneficiary 

population’s total Medicare Parts A and 

B FFS expenditures. In contrast, an ACO 

was identified as high revenue if its 

ACO participants’ total Medicare Parts 

A and B FFS revenue for assigned 

beneficiaries was at least 10 percent of 

the ACO’s assigned beneficiary 

population’s total Medicare Parts A and 

B FFS expenditures. As further 

explained in the Regulatory Impact 

Analysis of the August 2018 proposed 

rule (83 FR 41917), nationally, 

evaluation and management spending 

accounts for about 10 percent of total 

Parts A and B per capita spending. 

Because beneficiary assignment 

principally is based on allowed charges 

for primary care services, which are 

highly correlated with evaluation and 

management spending, we concluded 

that identifying low revenue ACOs by 

applying a 10 percent limit on the ACO 

participants’ Medicare FFS revenue for 

assigned beneficiaries in relation to total 

Medicare Parts A and B expenditures for 

these beneficiaries would be likely to 

capture all ACOs that were solely 

comprised of ACO providers/suppliers 

billing for Medicare PFS services, and 

generally exclude ACOs with ACO 

providers/suppliers that bill for 

inpatient or other institutional services 

for their assigned beneficiaries. We 

considered this approach as an option 

for distinguishing between low revenue 

ACOs and high revenue ACOs. 

However, we explained our concern 

that this approach does not sufficiently 

account for ACO participants’ total 


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Medicare Parts A and B FFS revenue (as 

opposed to their revenue for assigned 

beneficiaries), and therefore could 

misrepresent the ACO’s overall risk 

bearing potential, which would diverge 

from other aspects of the proposed 

design of the BASIC track. We believed 

it would be important to consider ACO 

participants’ total Medicare Parts A and 

B FFS revenue for all FFS beneficiaries, 

not just assigned beneficiaries, as a 

factor in assessing an ACO’s readiness 

to accept performance-based risk. The 

total Medicare Parts A and B FFS 

revenue of the ACO participants could 

be indicative of whether the ACO 

participants, and therefore potentially 

the ACO, are more or less capitalized. 

For example, ACO participants with 

high levels of total Medicare Parts A and 

B FFS revenue are presumed to be better 

capitalized, and may be better 

positioned to contribute to repayment of 

any shared losses owed by the ACO. 

Further, the proposed methodologies for 

determining the loss sharing limit under 

the BASIC track (see section II.A.3. of 

the August 2018 proposed rule (83 FR 

41801 through 41810)) and the 

estimated repayment mechanism values 

for BASIC track ACOs (see section 

II.A.6.c. of the August 2018 proposed 

rule (83 FR 41840 through 41842)), 

included a comparison of a specified 

percentage of ACO participants’ total 

Medicare Parts A and B FFS revenue for 

all Medicare FFS beneficiaries to a 

percentage of the ACO’s updated 

historical benchmark expenditures for 

its assigned beneficiary population. 

Accordingly, we proposed that if ACO 

participants’ total Medicare Parts A and 

B FFS revenue exceeds a specified 

threshold of total Medicare Parts A and 

B FFS expenditures for the ACO’s 

assigned beneficiaries, the ACO would 

be considered a high revenue ACO, 

while ACOs with a percentage less than 

the threshold amount would be 

considered a low revenue ACO. In 

determining the appropriate threshold, 

we considered our claims-based 

analysis comparing estimated revenue 

and benchmark values for Track 1+ 

Model applicants (see 83 FR 41807 

through 41808). We believed setting the 

threshold at 25 percent would tend to 

categorize ACOs that include 

institutional providers as ACO 

participants or as ACO providers/ 

suppliers billing through the TIN of an 

ACO participant, as high revenue 

because their ACO participants’ total 

Medicare Parts A and B FFS revenue 

would likely significantly exceed 25 

percent of total Medicare Parts A and B 

FFS expenditures for the ACO’s 

assigned beneficiaries. Among Track 1+ 

Model ACOs that self-reported as 

eligible for the Model’s benchmarkbased loss sharing limit because of the 

presence of an ownership or operational 

interest by an IPPS hospital, cancer 

center or rural hospital with more than 

100 beds among their ACO participants, 

we compared estimated total Medicare 

Parts A and B FFS revenue for ACO 

participants to estimated total Medicare 

Parts A and B FFS expenditures for the 

ACO’s assigned beneficiaries. We found 

that self-reported composition and high 

revenue determinations made using the 

25 percent threshold were in agreement 

for 96 percent of ACOs. For two ACOs, 

the proposed approach would have 

categorized the ACOs as low revenue 

ACOs and therefore allowed for a 

potentially lower loss sharing limit than 

the self-reported method. 

We believed small, physician-only 

and rural ACOs would tend to be 

categorized as low revenue ACOs 

because their ACO participants’ total 

Medicare Parts A and B FFS revenue 

would likely be significantly less than 

total Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries. Among Track 1+ Model 

ACOs that self-reported to be eligible for 

the Model’s revenue-based loss sharing 

limit because of the absence of an 

ownership or operational interest by the 

previously described institutional 

providers among their ACO 

participants, we compared estimated 

total Medicare Parts A and B FFS 

revenue for ACO participants to 

estimated total Medicare Parts A and B 

FFS expenditures for the ACO’s 

assigned beneficiaries. We found the 

self-reported composition and low 

revenue determinations made using the 

25 percent threshold were in agreement 

for 88 percent of ACOs. The proposed 

approach would move ACOs with 

higher revenue to a higher loss sharing 

limit, while continuing to categorize 

low revenue ACOs, which are often 

composed of small physician practices, 

rural providers, and those serving 

underserved areas, as eligible for 

potentially lower loss sharing limits. 

Further, based on initial modeling with 

performance year 2016 program data, 

ACOs for which the total Medicare Parts 

A and B FFS revenue of their ACO 

participants was less than 25 percent of 

the total Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries tended to have either no or 

almost no inpatient revenue and 

generally showed stronger than average 

financial results compared to higher 

revenue ACOs. 

We believed these observations were 

generalizable and suggested our 

proposal to use ACO participants’ total 

Medicare Parts A and B FFS revenue to 

classify ACOs would serve as a proxy 

for ACO participant composition. The 

proposed approach generally would 

categorize ACOs that include hospitals, 

health systems or other providers and 

suppliers that furnish Part A services as 

ACO participants or ACO providers/ 

suppliers as high revenue ACOs, while 

categorizing ACOs with ACO 

participants and ACO providers/ 

suppliers that mostly furnish Part B 

services as low revenue ACOs. 

Accordingly, we proposed to use a 25 

percent threshold to determine low 

revenue ACOs versus high revenue 

ACOs by comparing total Medicare Parts 

A and B FFS revenue of ACO 

participants to the total Medicare Parts 

A and B FFS expenditures for the ACO’s 

assigned beneficiaries. Consistent with 

this proposal, we also proposed to add 

new definitions at § 425.20 for ‘‘low 

revenue ACO,’’ and ‘‘high revenue 

ACO.’’ 

We proposed to define ‘‘high revenue 

ACO’’ to mean an ACO whose total 

Medicare Parts A and B FFS revenue of 

its ACO participants based on revenue 

for the most recent calendar year for 

which 12 months of data are available, 

is at least 25 percent of the total 

Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries based on expenditures for 

the most recent calendar year for which 

12 months of data are available. 

We proposed to define ‘‘low revenue 

ACO’’ to mean an ACO whose total 

Medicare Parts A and B FFS revenue of 

its ACO participants based on revenue 

for the most recent calendar year for 

which 12 months of data are available, 

is less than 25 percent of the total 

Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries based on expenditures for 

the most recent calendar year for which 

12 months of data are available. 

We also considered using a lower or 

higher percentage as the threshold for 

determining low revenue ACOs and 

high revenue ACOs. Specifically, we 

considered instead setting the threshold 

for ACO participant revenue lower, for 

example at 15 percent or 20 percent of 

total Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries. However, we were 

concerned a lower threshold could 

categorize ACOs with more moderate 

revenue as high revenue ACOs, for 

example because of the presence of 

multi-specialty physician practices or 

certain rural or safety net providers 

(such as CAHs, FQHCs and RHCs). 

Categorizing these moderate revenue 

ACOs as high revenue ACOs, could 

require ACOs that have a smaller degree 


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of control over the expenditures of their 

assigned beneficiaries, and ACOs that 

are not as adequately capitalized, to 

participate in a level of performancebased risk that the ACO would not be 

prepared to manage. We also considered 

setting the threshold higher, for example 

at 30 percent. We noted our concern 

that a higher threshold could 

inappropriately categorize ACOs as low 

revenue when their ACO participants 

have substantial total Medicare Parts A 

and B FFS revenue and therefore an 

increased ability to influence 

expenditures for their assigned 

beneficiaries and also greater access to 

capital to support participation under 

higher levels of performance-based risk. 

We sought comment on these alternative 

thresholds for defining ‘‘low revenue 

ACO’’ and ‘‘high revenue ACO.’’ 

The proposed 12-month comparison 

period for determining whether an ACO 

is a low revenue ACO or high revenue 

ACO was consistent with the proposed 

12 month period for determining 

repayment mechanism amounts (as 

described in section II.A.6.c. of the 

August 2018 proposed rule (83 FR 

41840 through 41842)). We explained 

that this approach could allow us to use 

the same sources of revenue and 

expenditure data during the program’s 

annual application cycle to estimate the 

ACO’s repayment mechanism amount 

and to determine the ACO’s 

participation options according to 

whether the ACO is categorized as a low 

revenue ACO or high revenue ACO. 

Additionally, for ACOs with a 

participant agreement start date of July 

1, 2019, we also proposed to determine 

whether the ACO is a low revenue ACO 

or high revenue ACO using expenditure 

data from the most recent calendar year 

for which 12 months of data are 

available. 

We noted that under this proposed 

approach to using claims data to 

determine participation options, it 

would be difficult for ACOs to 

determine at the time of application 

submission whether they would be 

identified as a low revenue ACO or high 

revenue ACO. We explained that after 

an ACO’s application is submitted and 

before the ACO would be required to 

execute a participation agreement, we 

would determine how the ACO 

participants’ total Medicare Parts A and 

B FFS revenue for the applicable 

calendar year compare to total Medicare 

Parts A and B FFS expenditures for the 

ACO’s assigned Medicare beneficiaries 

in the same calendar year, provide 

feedback and then notify the applicant 

of our determination of its status as a 

low revenue ACO or high revenue ACO. 

We also considered using a longer 

look back period, for example, using 

multiple years of revenue and 

expenditure data to identify low 

revenue ACOs and high revenue ACOs. 

For example, instead of using a single 

year of data, we considered instead 

using 2 years of data (such as the 2 most 

recent calendar years for which 12 

months of data are available). In 

evaluating ACOs applying to enter a 

new agreement period in the Shared 

Savings Program, the 2 most recent 

calendar years for which 12 months of 

data are available would align with the 

ACOs’ first and second benchmark 

years. While this approach could allow 

us to take into account changes in the 

ACO’s composition over multiple years, 

it could also make the policy more 

complex because it could require 

determinations for each of the 2 

calendar years and procedures to decide 

how to categorize ACOs if there were 

different determinations for each year, 

for example, as a result of changes in 

ACO participants. We sought comment 

on the alternative of using multiple 

years of data in determining whether an 

ACO is a low revenue ACO or a high 

revenue ACO. 

ACO participant list changes during 

the agreement period could affect the 

categorization of ACOs, particularly for 

ACOs close to the threshold percentage. 

We considered that an ACO may change 

its composition of ACO participants 

each performance year, as well as 

experience changes in the providers/ 

suppliers billing through ACO 

participants, during the course of its 

agreement period. Any approach under 

which we would apply different 

policies to ACOs based on a 

determination of ACO participant 

revenue would need to recognize the 

potential for an ACO to add or remove 

ACO participants, and for the providers/ 

suppliers billing through ACO 

participants to change, which could 

affect whether an ACO meets the 

definition of a low revenue ACO or high 

revenue ACO. We explained our 

concern about the possibility that an 

ACO may be eligible to continue for a 

second agreement period in the BASIC 

track because of a determination that it 

is a low revenue ACO at the time of 

application, and then quickly thereafter 

seek to add higher-revenue ACO 

participants, thereby avoiding the 

requirement under our proposed 

participation options to participate 

under the ENHANCED track. 

To protect against these 

circumstances, we proposed to monitor 

low revenue ACOs experienced with 

performance-based risk Medicare ACO 

initiatives participating in the BASIC 

track, to determine if they continue to 

meet the definition of low revenue ACO. 

This is because high revenue ACOs 

experienced with performance-based 

risk Medicare ACO initiatives are 

restricted to participation in the 

ENHANCED track only. We proposed to 

monitor these low revenue ACOs for 

changes in the revenue of ACO 

participants and assigned beneficiary 

expenditures that would cause an ACO 

to be considered a high revenue ACO 

and ineligible for participation in the 

BASIC track. We are less concerned 

about the circumstance where an ACO 

inexperienced with performance-based 

risk Medicare ACO initiatives enters an 

agreement period under the BASIC track 

and becomes a high revenue ACO 

during the course of its agreement 

because inexperienced, high revenue 

ACOs are also eligible for a single 

agreement period of participation in the 

BASIC track. 

We proposed the following approach 

to ensuring continued compliance of 

ACOs with the proposed eligibility 

requirements for participation in the 

BASIC track, for an ACO that was 

accepted into the BASIC track’s Level E 

because the ACO was experienced with 

performance-based risk Medicare ACO 

initiatives and determined to be low 

revenue at the time of application. If, 

during the agreement period, the ACO 

meets the definition of a high revenue 

ACO, we proposed that the ACO would 

be permitted to complete the remainder 

of its current performance year under 

the BASIC track, but would be ineligible 

to continue participation in the BASIC 

track after the end of that performance 

year unless it takes corrective action, for 

example by changing its ACO 

participant list. We proposed to take 

compliance action, up to and including 

termination of the participation 

agreement, as specified in §§ 425.216 

and 425.218, to ensure the ACO does 

not continue in the BASIC track for 

subsequent performance years of the 

agreement period. For example, we may 

take pre-termination actions as specified 

in § 425.216, such as issuing a warning 

notice or requesting a corrective action 

plan. To remain in the BASIC track, the 

ACO would be required to remedy the 

issue. For example, if the ACO 

participants’ total Medicare Parts A and 

B FFS revenue has increased in relation 

to total Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries, the ACO could remove an 

ACO participant from its ACO 

participant list, so that the ACO can 

meet the definition of low revenue ACO. 

If corrective action is not taken, CMS 

would terminate the ACO’s 


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participation under § 425.218. We 

proposed to revise § 425.600 to include 

these requirements to account for 

changes in ACO participant revenue 

during an agreement period. 

We also considered two alternatives 

to the proposed claims-based approach 

to differentiating low revenue ACOs 

versus high revenue ACOs, which, as 

discussed, can also serve as a proxy for 

ACO participant composition. One 

alternative would be to differentiate 

ACOs based directly on ACO participant 

composition using Medicare provider 

enrollment data and certain other data. 

Under this option we could define 

‘‘physician-led ACO’’ and ‘‘hospitalbased ACO’’ based on an ACO’s 

composition of ACO participant TINs, 

including any CCNs identified as billing 

through an ACO participant TIN, as 

determined using Medicare enrollment 

data and cost report data for rural 

hospitals. A second alternative to the 

claims-based approach to distinguishing 

between ACOs based on their revenue 

would be to differentiate between ACOs 

based on the size of their assigned 

population (that is, small versus large 

ACOs). First, we considered 

differentiating between physician-led 

and hospital-based ACOs by ACO 

composition, determined based on the 

presence or absence of certain 

institutional providers as ACO 

participants. We considered an 

approach that deviates from the Track 

1+ Model design to determining ACO 

composition for the purposes of 

identifying whether the ACO is eligible 

to participate under a benchmark-based 

or a revenue-based loss sharing limit by 

using Medicare enrollment data and 

certain other data to determine ACO 

composition rather than relying on 

ACOs’ self-reported information, and by 

using a different approach to identifying 

institutional providers than applies 

under the Track 1+ Model. 

Under this alternative approach, we 

could define a hospital-based ACO as an 

ACO that includes a hospital or cancer 

center, but excluding an ACO whose 

only hospital ACO participants are rural 

hospitals. As used in this definition, a 

hospital could be defined according to 

§ 425.20. As defined under § 425.20, 

‘‘hospital’’ means a hospital as defined 

in section 1886(d)(1)(B) of the Act. A 

cancer center could be defined as a 

prospective payment system-exempt 

cancer hospital as defined under section 

1886(d)(1)(B)(v) of the Act (see CMS 

website on PPS-exempt cancer 

hospitals, available at https://

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/ 

AcuteInpatientPPS/PPS_Exc_Cancer_

Hospasp.html). Rural hospital could be 

a hospital defined according to § 425.20 

that meets both of the following 

requirements: (1) The hospital is 

classified as being in a rural area for 

purposes of the CMS area wage index 

(as determined in accordance with 

section 1886(d)(2)(d) or section 

1886(d)(8)(E) of the Act); and (2) The 

hospital reports total revenue of less 

than $30 million a year. We could 

determine total revenue based on the 

most recently available hospital 2552– 

10 cost report form or any successor 

form. In contrast, we could define 

physician-led ACO as an ACO that does 

not include a hospital or cancer center, 

except for a hospital that is a rural 

hospital (as we previously described). 

Physician-led ACOs therefore could also 

include certain hospitals that are not 

cancer centers, such as CAHs. 

Under this alternative approach to 

differentiating between ACOs we would 

identify hospitals and cancer centers in 

our Medicare provider enrollment files 

based on their Medicare enrolled TINs 

and/or CCNs. We would include any 

CCNs identified as billing through an 

ACO participant TIN, as determined 

using PECOS enrollment data and 

claims data. We believe this alternative 

approach would provide increased 

transparency to ACOs because ACOs 

could work with their ACO participants 

to identify all facilities enrolled under 

their TINs to tentatively determine the 

composition of their ACO, and thus, the 

available participation options under 

the Shared Savings Program. However, 

this alternative approach to categorizing 

ACOs deviates from the proposed 

claims-based approaches to determining 

loss sharing limits and the repayment 

mechanism estimate amounts for ACOs 

in the BASIC track using ACO 

participant Medicare FFS revenue and 

expenditures for the ACO’s assigned 

beneficiaries. 

Second, we also considered 

differentiating between ACOs based on 

the size of their assigned beneficiary 

population, as small versus large ACOs. 

Under this approach, we could 

determine an ACO’s participation 

options based on the size of its assigned 

population. We recognize that an 

approach that distinguishes between 

ACOs based on population size would 

require that we set a threshold for 

determining small versus large ACOs as 

well as to determine the assignment 

data to use in making this determination 

(such as the assignment data used in 

determining an ACO’s eligibility to 

participate in the program under the 

requirement that the ACO have at least 

5,000 assigned beneficiaries under 

§ 425.110). For instance, we considered 

whether an ACO with fewer than 10,000 

assigned beneficiaries could be defined 

as a small ACO whereas an ACO with 

10,000 or more assigned beneficiaries 

could be defined as a large ACO. 

However, we currently have low 

revenue ACOs participating in the 

program that have well over 10,000 

assigned beneficiaries, as well as high 

revenue ACOs that have fewer than 

10,000 assigned beneficiaries. We 

believed a revenue-based approach 

would be a more accurate means to 

measure the degree of control that ACOs 

have over total Medicare Parts A and B 

FFS expenditures for their assigned 

beneficiaries compared to an approach 

that only considers the size of the ACO’s 

assigned population. 

We sought comment on the proposed 

definitions of ‘‘low revenue ACO’’ and 

‘‘high revenue ACO’’. We also sought 

comment on the alternatives considered. 

Specifically, we sought comment on the 

alternative of defining hospital-based 

ACO and physician-led ACO based on 

an ACO’s composition of ACO 

participant TINs, including any CCNs 

identified as billing through an ACO 

participant TIN, as determined using 

Medicare enrollment data and cost 

report data for rural hospitals. In 

addition, we sought comment on the 

second alternative of differentiating 

between ACOs based on the size of their 

assigned population (that is, small 

versus large ACOs). 

Comment: A few commenters 

generally supported the proposed use of 

a distinction between low revenue 

ACOs and high revenue ACOs for 

determining ACO participation options. 

One commenter explained its belief that 

small ACOs in rural areas face 

challenges that large health systems do 

not. A few commenters supported the 

distinction between low and high 

revenue ACOs for determining ACO 

participation options but suggested 

alternative approaches to implementing 

this policy as further described in this 

section of this final rule. One 

commenter explained that there is 

intuitive logic in the idea that risk 

tolerance should be commensurate with 

organization size or financial 

wherewithal. 

Response: We appreciate the support 

of the commenters who generally 

favored the proposed approach and our 

related considerations. 

Comment: Many commenters 

expressed concerns about the proposed 

approach to identifying low revenue 

ACOs versus high revenue ACOs. A few 

commenters requested that CMS not 

finalize the distinction to avoid creating 

new blunt tools to define and categorize 

ACOs. Another commenter explained 

that the proposed rule states that the 


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low revenue ACO versus high revenue 

ACO distinction is intended to measure 

differences in the ability of the ACO to 

control total spending, but the 

commenter believed the discussion 

suggested that the real goal is to identify 

which ACO participants have more 

financial resources and are less likely to 

be bankrupted by repaying losses to 

CMS. 

Response: We thank commenters for 

their careful consideration of the 

proposed approach to identifying ACOs 

as low revenue ACOs versus high 

revenue ACOs, and the related 

considerations discussed in section 

II.A.5.b.(2) of this final rule for 

distinguishing participation options of 

ACOs (in part) based on this 

determination. 

We continue to believe that the total 

Medicare Parts A and B FFS revenue of 

the ACO participants could be 

indicative of whether the ACO 

participants, and therefore potentially 

the ACO, are more or less capitalized 

and thus able to accept higher levels of 

performance based risk. We also believe 

that these higher levels of performancebased risk for these organizations can 

act as a stronger catalyst for them to 

redesign care, in conjunction with the 

new tools and flexibilities for risk based 

ACOs and achieve program goals more 

quickly. For example, ACO participants 

with high levels of total Medicare Parts 

A and B FFS revenue are presumed to 

be better capitalized, and may be better 

positioned to contribute to repayment of 

any shared losses owed by the ACO. To 

this extent we agree with the commenter 

that indicated that one goal of the 

proposed approach is to place better 

capitalized ACOs under participation 

options that are commensurate with 

their ability to take on greater risk 

because they have the capacity to repay 

losses (if owed). 

We disagree with commenters’ 

suggestions that we remain neutral to 

whether an ACO has low revenue or 

high revenue in determining program 

participation options. We continue to 

believe that all ACOs should eventually 

participate under the program’s highest 

level of risk and potential reward, in the 

ENHANCED track, which could drive 

ACOs to more aggressively pursue the 

program’s goals of improving quality of 

care and lowering growth in FFS 

expenditures for their assigned 

beneficiary populations. For the reasons 

we have previously described in the 

August 2018 proposed rule and as 

restated in this final rule, we also 

continue to believe that low revenue 

ACOs should be allowed additional 

time to prepare to take on the higher 

levels of performance-based risk 

required under the ENHANCED track. 

Therefore we continue to believe it is 

necessary to distinguish participation 

options based on ACO participants’ 

Medicare FFS revenue (among other 

factors as described elsewhere in this 

final rule). 

Comment: Some commenters, 

including MedPAC, viewed favoring 

low revenue ACOs over high revenue 

ACOs (or physician-only ACOs over 

ACOs that include hospitals) as 

unnecessary. MedPAC pointed out that 

the maximum risk under two-sided 

models of the proposed BASIC track 

already accounts for the ACO 

participants’ revenue, with low revenue 

or small ACOs having relatively limited 

maximum risk in some cases compared 

to high revenue ACOs. MedPAC 

explained that the automatic transition 

to two-sided risk in the glide path will 

ensure that high revenue ACOs 

transition to performance-based risk to 

prevent them from further increasing 

spending and that low revenue ACOs 

that expect to achieve savings should be 

willing to move into Level E in the glide 

path, which has minimal risk and 

potentially greater reward. 

Response: We agree with MedPAC 

that under the BASIC track’s two-sided 

models, where we determine the 

maximum loss liability based on the 

higher of a percentage of ACO 

participants’ Medicare FFS revenue or a 

percentage of the ACO’s updated 

benchmark, high revenue ACOs will be 

at proportionally greater risk than low 

revenue ACOs. We disagree, however, 

with commenters’ suggestions that the 

same participation options and therefore 

the same progression to higher levels of 

performance-based risk should be made 

available to all ACOs. We continue to 

believe that low revenue ACOs should 

be allowed additional time to prepare to 

take on the higher levels of 

performance-based risk required under 

the ENHANCED track and that high 

revenue ACOs should be given stronger 

incentives over time to continue to 

transform care. Therefore, we continue 

to believe it is necessary to distinguish 

participation options based on ACO 

participants’ Medicare FFS revenue 

(among other factors, as described 

elsewhere in this final rule), and 

disagree with commenters who argued 

that identifying ACOs as low revenue 

ACOs versus high revenue ACOs is 

unnecessary. 

Comment: Some commenters viewed 

the distinction between low revenue 

ACOs and high revenue ACOs as 

arbitrary or unfounded. Some 

commenters did not accept CMS’ 

position that a greater level of control 

over assigned beneficiaries’ total Part A 

and Part B spending (‘‘low revenue 

ACOs’’ versus ‘‘high revenue ACOs’’) 

necessarily should lead to better 

performance or readiness to accept 

performance-based risk. Several 

commenters described the concept that 

high revenue ACOs have a higher degree 

of control over Part A and B 

expenditures and that they have more 

control over the full continuum as a 

‘‘fallacy’’ and ‘‘fundamentally flawed’’. 

MedPAC explained that physicianonly ACOs have, in effect, a larger 

incentive to reduce hospital-provided 

services than ACOs in which hospitals 

are also participating, because reduced 

expenditures for costly hospital services 

represent forgone revenue for the 

hospital. Similarly, another commenter 

explained that physician-led or 

physician-dominated ACOs, particularly 

those led or dominated by primary care 

physicians, can succeed in an ACO by 

providing more services themselves, 

and thereby enhancing their own FFS 

revenue along the way, and then cutting 

back on referrals, admissions, testing, 

and other services that result in 

expenditures and correspondingly 

involve revenues to some entity that is 

not part of the ACO. On the other hand, 

an ACO led by a hospital or created as 

part of an integrated system must cut its 

own FFS revenues at multiple levels to 

succeed. According to this commenter, 

in principle, the latter type of ACO has 

more ‘‘control’’ over total spending, but 

‘‘control’’ means intentionally cutting 

back on Medicare volumes and revenues 

within its own network of providers and 

suppliers. One commenter explained 

that the larger the organization, the 

more time and effort it takes to gain 

collaboration and navigate various 

systems, to achieve consensus and 

implement changes. One commenter 

pointed to the discussion in the 

proposed rule to suggest the opposite 

point, that the ACOs that have been 

relatively more successful so far have 

been the smaller, physician-led ACOs 

that have demonstrated strong financial 

performance despite having relatively 

less ‘‘control’’ over total Part A and Part 

B spending (83 FR 41819). 

Another commenter disagreed with 

CMS that hospitals can innately 

influence Medicare FFS costs, and 

instead expressed that only experienced 

ACO entities can exert this level of 

control because they will have already 

developed preferred post-acute care 

networks, educated them on cost and 

readmissions reduction, and included 

them as ACO participants in order to 

exert meaningful control over total 

beneficiary cost of care. 

Response: We do not believe the 

proposed approach to distinguishing 


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low revenue ACOs versus high revenue 

ACOs is arbitrary or unfounded, and it 

is informed by our early experience 

with the Track 1+ Model as a means to 

differentiate the ability of ACOs to bear 

higher degrees of performance-based 

risk. More specifically as we explained 

in the August 2018 proposed rule and 

reiterate in this final rule, our 

experience with the Track 1+ Model 

demonstrates that ACO participants’ 

Medicare FFS revenue can serve as a 

proxy for self-reported composition. In 

particular, higher Medicare FFS revenue 

among ACO participants in relation to 

the ACO’s benchmark expenditures 

tends to be indicative of the presence of 

institutional providers in the ACO. We 

continue to believe in the validity of the 

proposed approach as a means to 

identify ACOs that are likely prepared 

to participate in greater levels of risk 

after gaining experience with more 

modest levels of risk and to mitigate the 

burden on ACOs (as compared to the 

Track 1+ Model) by not requiring ACOs 

to self-report data about the ownership 

and operational interests of their ACO 

participants, which, in addition, is 

difficult for CMS to independently 

validate. 

We disagree with commenters who 

suggest that ACO providers/suppliers 

that bill for and receive payment for a 

proportionally greater amount of the 

ACO’s assigned beneficiaries’ Part A 

and B Medicare FFS expenditures and 

that have agreed to become accountable 

for the total cost and quality of care they 

provide these beneficiaries, are unable 

to effectively manage these costs in 

proportion to their control over a 

relatively larger or smaller proportion of 

assigned beneficiaries’ expenditures. 

Commenters provided examples of 

approaches ACOs may use to lower FFS 

expenditures for their assigned 

beneficiaries, such as coordinating postacute care to avoid unnecessary 

readmissions, or focusing on the 

provision of primary care services to 

avoid the need for more costly specialty 

and facility-based services. We note that 

primary care providers have a central 

role in the Shared Savings Program, for 

instance as evidenced by the use of 

primary care services provided by ACO 

participants as the basis for beneficiary 

assignment. In focusing on primary care, 

ACOs may seek to reduce avoidable 

services by and consequently payments 

to acute-care facilities (for example) 

under FFS Medicare. 

We also acknowledge that ACOs are 

composed differently and take a variety 

of organizational forms, as is permitted 

under section 1899(b)(1) of the Act and 

through the program’s regulations, at 

§ 425.102, describing the ACO 

participants or combinations of ACO 

participants eligible to form an ACO. 

Based on our observations, successful 

ACOs typically achieve lower growth in 

expenditures across all claim types. We 

also acknowledge that the ability of an 

ACO to succeed may be specific to its 

composition, governance and 

leadership, factors specific to its market 

circumstances and the populations it 

serves, as well as the ACO’s 

individualized approach to meeting the 

program’s goals. 

Further, we note the following in 

response to the commenter’s suggestion 

that there is an inconsistency between 

our belief that low revenue ACOs have 

less control over assigned beneficiaries 

expenditures, and therefore may be less 

capable of taking on higher levels of 

two-sided-risk, and our findings based 

on program performance results that 

low revenue ACOs have been relatively 

more successful so far compared to high 

revenue ACOs. The levels of risk and 

reward for each track of the Shared 

Savings Program ultimately are set 

based on the ACO’s benchmark. 

However, a comparison of the ACO’s 

benchmark-based risk and reward in 

relation to the total Medicare Parts A 

and B FFS revenue of the ACO 

participants highlights that ACOs with 

lower ACO participant total Medicare 

Parts A and B FFS revenue have the 

potential to incur both losses and 

savings that are a greater percentage of 

such revenue than ACOs that are higher 

revenue. For example, consider a low 

revenue ACO that has ACO participant 

total Medicare Parts A and B FFS 

revenue of $2,000,000 and benchmark 

expenditures of $100,000,000, so the 

total Medicare Parts A and B FFS 

revenue of the ACO participants would 

be 2 percent of the ACO’s benchmark 

expenditures. If this low-revenue ACO 

then achieved savings of 3 percent of its 

benchmark ($3,000,000), and shared at a 

rate of 50 percent, the ACO would earn 

$1,500,000 in shared savings. This 

shared savings amount would represent 

75 percent of the total Medicare Parts A 

and B FFS revenues of the ACO 

participants, providing a large incentive 

for this ACO to continue to improve the 

quality of care and control costs for 

beneficiaries. Next, consider a high 

revenue ACO that has ACO participant 

total Medicare Parts A and B FFS 

revenue of $200,000,000 but has the 

same benchmark as the low revenue 

ACO of $100,000,000. The total 

Medicare Parts A and B FFS revenue of 

the ACO participants in the ACO would 

be 200 percent of the ACO’s benchmark 

expenditures. If this high revenue ACO 

then achieved the same savings of 3 

percent of its benchmark ($3,000,000), 

and shared at a rate of 50 percent, the 

ACO would earn the same $1,500,000 in 

shared savings. This shared savings 

amount would only represent 0.75 

percent of the total Medicare Parts A 

and B FFS revenues of the ACO 

participants, providing a much smaller 

incentive for this ACO to improve care 

and control costs for beneficiaries. We 

therefore believe that identifying ACOs 

as high revenue ACOs and low revenue 

ACOs is an appropriate method to 

identify which ACOs are more likely to 

demonstrate improved performance 

under greater levels of risk and reward. 

Our historical results show that these 

relatively greater incentives (for lower 

revenue ACOs, as shown in the first 

example) may have influenced and 

supported the better performance of low 

revenue ACOs compared to high 

revenue ACOs. 

Comment: A few commenters offered 

an alternative suggestion for making 

adjustments in financial rewards and 

penalties that would directly measure 

the degree of control that ACOs have 

over total Medicare Parts A and B FFS 

expenditures for their assigned 

beneficiaries, instead of using proxies 

that the commenters viewed as 

problematic, such as the proportion of 

ACO participant revenues to 

expenditures for assigned beneficiaries. 

These commenters suggested this could 

be done by dividing services or 

spending into several categories 

reflecting the relative levels of control 

that ACO participants would be 

expected to have over services, and then 

assigning different levels of reward 

potential (and risk) to each. These 

categories could include spending for: 

Services delivered by ACO participants; 

services ordered by ACO participants; 

services resulting from potentially 

avoidable complications of services 

delivered or ordered by ACO 

participants; and all other services. 

One commenter suggested that CMS 

also distinguish between health systems 

that are for-profit and not-for-profit, 

because not-for-profit entities on 

average provide more uncompensated 

care than for-profit entities. 

Response: We prefer our proposed 

approach to distinguishing ACOs based 

on a comparison of estimated total 

Medicare Parts A and B FFS revenue for 

ACO participants to estimated total 

Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries because it is simpler, 

allows for greater transparency, and is 

easier to validate. We decline to adopt 

the alternative methodologies suggested 

by commenters. For instance, we 

decline to increase the complexity of the 


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approach to distinguishing the degree of 

control ACO participants have over 

expenditures of the ACO’s assigned 

beneficiaries by dividing services or 

spending into several categories (such as 

services delivered by ACO participants, 

services ordered by ACO participants, 

services resulting from potentially 

avoidable complications of services 

delivered or ordered by ACO 

participants, and all other services), and 

then assigning different levels of reward 

potential (and risk) to each because the 

Shared Savings Program is a populationbased model and ACOs are accountable 

for the total cost of care rather than 

more segmented expenditure 

components as currently exist under 

other parts of the Medicare FFS 

program. We also decline to adopt an 

approach that only considers the ACO’s 

tax status, or corporate structure, such 

as based on whether the ACO is forprofit, or not-for-profit, since ACOs 

must be governed by their ACO 

participants (according to 

§ 425.106(c)(3)) and the ACO legal entity 

may have a different tax or corporate 

structure than its ACO participants, and 

tax status or corporate structure is not 

indicative of an organization’s ability to 

take on risk. 

Comment: One commenter suggested 

that the proposed approach may not 

take into account recent, major changes 

to the program’s benchmarking 

methodology that could drastically alter 

the current discrepancy in performance 

between low revenue ACOs and high 

revenue ACOs. This commenter 

suggested that CMS should not rush 

with multiple major changes to the 

program simultaneously and should 

instead wait to see if adjustments to 

benchmarking, risk adjustment, and 

other design elements help to address 

other discrepancies, including the 

pattern of high revenue ACOs not 

performing as well as low revenue 

ACOs. 

Response: We disagree with the 

commenter’s suggestion that we delay 

implementing the proposed changes to 

the program’s design to allow for 

additional experience with the program. 

We believe the proposed changes, 

which were based on program results 

and our experience in implementing 

program policies and the Track 1+ 

Model, are necessary to drive Medicare 

FFS providers and suppliers towards a 

system of value-based payment instead 

of volume-based payment and that these 

policies work in combination to help 

transition health care providers more 

quickly, but still incrementally, to 

value-based care. As we explained in 

the August 2018 proposed rule (83 FR 

41787), and have reiterated in this final 

rule, while we understand that systems 

need time to adjust, Medicare cannot 

afford to continue with models that are 

not producing desired results. We also 

note that many ACOs currently 

participating in Track 1 are near the end 

of their second agreement period and 

thus have had 5 or 6 years of experience 

in the program entirely under the onesided model, and should be capable and 

ready to transition to performance-based 

risk. Further, we do not have reason to 

believe that the benchmarking changes 

that we are adopting in this final rule 

(discussed in section II.D. of this final 

rule) would necessarily lead to 

improved performance for high revenue 

ACOs versus low revenue ACOs, and 

therefore we do not anticipate that these 

changes alone would eliminate or 

reduce the differential performance 

patterns we have seen in the past. 

Comment: A few commenters 

suggested that CMS should create a 

level competitive playing field and let 

those that perform best succeed most, 

and find approaches that are not based 

on an ACO’s composition to eliminate 

poor performers. One commenter 

suggested that CMS ensure that its 

methodology rewards ACOs that do a 

better job of controlling spending 

instead of emphasizing revenue. Several 

commenters suggested (as an alternative 

to distinguishing low revenue ACOs and 

high revenue ACOs) that CMS improve 

the program’s methodology to 

accurately reward performance for 

improving quality and reducing costs, 

and offer resources and assistance to all 

ACOs. One commenter stated that the 

program should be about raising the bar 

for everyone and not disadvantaging one 

provider group over another with 

respect to their ACO participation. 

One commenter recommended that 

CMS should focus on addressing a 

smaller group of ACOs with poor 

performance rather than implementing 

the broader proposed changes to 

differentiate participation options for all 

ACOs. The commenter stated that in the 

performance year 2017 program data, 

eight ACOs with costs exceeding 

benchmarks by more than $20 million 

were responsible for $251 million of the 

losses under the Shared Savings 

Program. According to the commenter, 5 

percent of Shared Savings Program 

ACOs were responsible for 42 percent of 

the negative impact on the program. 

Response: We believe that the 

program’s design already includes 

significant financial incentives for 

ACOs, ACO participants, and ACO 

providers/suppliers, to enter the 

program and continue their 

participation in the program, as well as 

to meet the program’s goals of lowering 

growth in Medicare FFS expenditures 

and improving quality of care for their 

assigned Medicare FFS beneficiaries so 

that ACOs may share in savings with 

Medicare. We believe that the level of 

participation and interest in the 

program are evidence of the value 

healthcare providers see in forming 

ACOs and participating in the Shared 

Savings Program. 

Further, we disagree with commenters 

suggesting that participation option 

requirements should be focused on 

select, poorly performing ACOs, such as 

ACOs with proportionally large shared 

losses. We believe such an option would 

be too narrow to adequately incentivize 

the majority of ACOs, and we continue 

to believe that a broader redesign of 

program participation options is 

warranted, and greater gains in 

improving quality and reducing costs 

would be seen from our proposed 

participation options, as opposed to 

maintaining the status quo or creating 

policies targeted at only a few ACOs in 

the program. We also believe these 

revised program policies should be 

applied program-wide, to further drive 

improved performance for all 

participating ACOs. As discussed in 

section II.A.5.d of this final rule, we are 

finalizing our proposal to monitor ACO 

financial performance and to potentially 

terminate ACOs demonstrating 

significant losses (negative outside 

corridor) for two performance years. We 

believe that this policy will identify 

ACOs that are repeatedly large outliers 

in terms of financial losses, which may 

be unable to meet program goals and 

objectives. 

Comment: Several commenters 

expressed that the proposed approach 

overlooks the original intention of the 

Shared Savings Program to foster 

collaboration between providers 

(specifically between physicians and 

hospitals) and would prove detrimental 

to program goals. A few commenters 

stated that healthcare transformation 

can only successfully occur when there 

is coordination across the continuum of 

care. 

Some commenters argued that the 

proposed approach would set up a 

system that disadvantages hospitalbased ACOs and could therefore limit 

the types of innovations needed to build 

a high performing healthcare system for 

the range of communities across the 

nation. These commenters tended to 

suggest that the best way to drive high 

quality care for patients is to create 

incentives that drive all the providers in 

a system to collaborate, to innovate and 

deliver high quality, cost effective 

healthcare. 


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One commenter, discussing the 

proposal to make the Shared Savings 

Program more accessible to low revenue 

and inexperienced ACOs, suggested that 

CMS consider policies that generate 

more accessible opportunities for 

practices and organizations to begin 

moving along the path to outcome-based 

payment. The commenter cautioned that 

a narrow program that accelerates 

progress for some, but leaves many 

behind, will not meet our national 

ambitions to transform to a high-value, 

outcome-based healthcare delivery 

system. 

One commenter explained that new 

incentives to work harder through 

greater financial risk in two-sided risk 

models are also incentives to leave the 

program and revert back to FFS 

payment, a consideration echoed in 

other comments. 

Response: We believe that the 

proposed approach to redesigning the 

program’s participation options, and the 

approach as finalized in this final rule, 

will further the fulfillment of the 

program’s goals of improving quality of 

care and lowering growth in Medicare 

FFS expenditures for beneficiaries. We 

believe that rapid transition to the new 

participation options will drive more 

meaningful systematic change in ACOs, 

which have the potential to control their 

assigned beneficiaries’ Medicare Parts A 

and B FFS expenditures by coordinating 

care across care settings, and thus to 

achieve significant change in spending. 

We also believe that these policies will 

promote free-market principles which 

may lead to further innovation within 

markets and potentially greater success 

in achieving the program’s goals. The 

new tools and flexibilities afforded to 

ACOs participating under performancebased risk, such as the expanded ability 

of their clinicians to furnish covered 

telehealth services under section 1899(l) 

of the Act and to strengthen beneficiary 

engagement through new beneficiary 

incentive programs, in conjunction with 

revised benchmarking and risk 

adjustment policies, will enable these 

ACOs to be successful. 

We also note that based on our 

observations, successful ACOs typically 

achieve lower growth in expenditures 

across all claim types, and we believe 

this is a reflection of the collaborative 

relationships that exist within ACOs 

(between ACO providers/suppliers), and 

collaborations between ACOs and nonACO providers and suppliers and other 

entities. We believe that hospitals will 

remain essential ACO participants in 

many cases, and non-ACO participant 

partners in others, as they are key 

collaborators in meeting the program’s 

goals of lowering growth in Medicare 

Parts A and B FFS expenditures, and 

improving the quality of care, for the 

ACO’s assigned beneficiary population. 

The Shared Savings Program was 

established as, and remains, a voluntary 

program for providers and suppliers to 

become accountable for the quality and 

cost of care for an assigned population 

of Medicare FFS beneficiaries. We have 

aligned incentives between the Shared 

Savings Program and other CMS 

initiatives to provide beneficiaries 

value-based care. For example, program 

participation has taken on greater 

significance since the establishment of 

the Quality Payment Program. Our 

continued alignment with the Quality 

Payment Program provides a low 

burden way for clinicians to participate 

in both programs, including allowing 

eligible clinicians in ACOs that are 

participating in a track of the Shared 

Savings Program that is an Advanced 

Alternative Payment Model (APM) to 

qualify for APM incentive payments. 

We acknowledge that Medicare is only 

one payer, but effective collaborations 

between providers and suppliers are 

necessary to provide high-quality, 

value-based care across the healthcare 

system, and the APM track of the 

Quality Payment Program will account 

for participation in both Advanced 

APMs and in Other Payer Advanced 

APMs with payers other than Medicare 

through the All-Payer Combination 

Option beginning in performance year 

2019. 

Comment: One commenter explained 

that the disproportionate emphasis on 

ACOs reducing costs overshadows the 

equally important goal of quality 

improvement, which benefits patients 

and the Medicare program generally. 

Response: In response to the concern 

that the proposed redesign of the 

program is disproportionately focused 

on lowering growth in expenditures, 

and not sufficiently focused on quality 

of care, we note that improved quality 

of care for patients was one of the five 

principles guiding our proposed 

redesign of the Shared Savings Program, 

and we disagree with the commenters’ 

assertion that this goal has been 

overshadowed by a focus on lowering 

growth in expenditures. We also note 

that we recently finalized policies in the 

November 2018 final rule to make the 

quality measure set more outcome 

oriented, while also reducing reporting 

burden on ACOs and their participating 

ACO providers/suppliers. 

Comment: One commenter pointed 

out the added complexity proposed for 

determining participation options for 

ACOs under the program redesign, with 

CMS evaluating whether ACOs are new, 

renewing or re-entering, experienced or 

inexperienced with performance-based 

risk, and high revenue or low revenue. 

The commenter suggested that 

eliminating the high revenue ACO 

versus low revenue ACO distinction 

would help minimize some of the 

complexity and would remove a 

significant amount of work required by 

CMS and ACOs to model, predict, and 

determine if the ACO would be a high 

revenue ACO or a low revenue ACO. 

Some commenters opposed to the 

concept of distinguishing between 

ACOs according to the proposed low 

revenue ACO and high revenue ACO 

definitions viewed the distinction as 

confusing. 

Response: We believe that ACOs 

should be able to surmise if they are 

likely to be determined low revenue 

ACOs or high revenue ACOs, based on 

their composition. ACOs with a large 

hospital or other institutional provider 

will likely be determined to be high 

revenue ACOs. We plan to provide 

feedback to ACOs during the 

application process, and as part of 

program monitoring of low revenue 

ACOs experienced with performancebased risk Medicare ACO initiatives that 

are in an agreement period under Level 

E of the BASIC track (discussed 

elsewhere in this section of this final 

rule) regarding their status as a low 

revenue ACO or high revenue ACO. 

More generally, we anticipate providing 

information annually to ACOs within 

their agreement period, particularly as 

part of the ACO participant list change 

request review cycles, about their ACO 

participants’ Medicare FFS revenue so 

they will have information about the 

composition of their ACO and the 

Medicare FFS revenue of their ACO 

participants to support their ongoing 

participation in the program. As 

discussed in greater detail elsewhere in 

this preamble, we believe that 

considering whether an ACO is a low 

revenue ACO or high revenue ACO is an 

important and necessary policy for 

determining ACO participation options 

within the program redesign. 

Comment: A few commenters 

supported CMS’ proposed definitions 

for low revenue ACO and high revenue 

ACO. A few commenters indicated their 

preference for the proposed use of 

Medicare claims data to make the low 

revenue ACO versus high revenue ACO 

determination, rather than the 

alternative sources of data discussed in 

the proposed rule. For instance, one 

commenter explained that a claimsbased approach would provide a more 

accurate method for determining an 

ACO’s preparedness to take on 

additional risk rather than an ACO’s 

self-reported information regarding the 


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composition of its ACO participants and 

any ownership and operational interests 

in those ACO participants. Another 

commenter shared CMS’ belief that a 

revenue-based approach would be a 

more accurate means to measure the 

degree of control that ACOs have over 

total Medicare Parts A and B FFS 

expenditures for their assigned 

beneficiaries compared to approaches 

that consider the size of the ACO’s 

assigned population or the inclusion of 

a hospital or cancer center in the ACO. 

However, other commenters suggested 

a variety of alternatives. Some 

commenters suggested alternative 

approaches to identifying low revenue 

ACOs and high revenue ACOs using 

alternative sources of data instead of or 

in addition to ACO participant Medicare 

Parts A and B FFS revenue. 

More generally, some commenters 

believe the proposed approach could 

result in ACOs gaming the revenue 

determinations by manipulating their 

ACO participant lists. For instance, a 

high revenue ACO could be encouraged 

to selectively redefine its component 

TINs to meet the definition of a low 

revenue ACO, such as by restructuring 

to exclude acute care facilities. Other 

commenters suggested low revenue, or 

physician-led ACOs may avoid 

including these facilities as ACO 

participants. Several commenters 

indicated that use of FFS revenue as a 

proxy for composition could lead to 

ACOs appearing to be low revenue 

when in fact they have hospitals or 

health systems in their ownership and 

operational chain, and suggested CMS 

use other data to make these 

determinations. One commenter 

explained that the proposed approach 

could lead an ACO to split its network 

of physicians, which it considers a 

suboptimal outcome and counter to the 

organization’s long-standing 

collaborative approach. This commenter 

also noted that there are non-trivial 

costs to setting up a new physician 

network and ACO entity. 

A few commenters suggested that 

CMS apply the Track 1+ Model policy 

requiring ACO attestation regarding the 

ownership interests of and in its ACO 

participants in determining 

participation options under the Shared 

Savings Program. One commenter 

preferred the Track 1+ Model approach 

to the proposed distinction between low 

revenue ACOs and high revenue ACOs. 

Another commenter suggested we apply 

the Track 1+ Model approach in 

addition to the proposed approach to 

determining low revenue ACOs and 

high revenue ACOs. However, several 

commenters preferred CMS forgo selfreporting requirements as exist, for 

example, under the Track 1+ Model. 

One commenter suggested that CMS 

use additional data on full 

organizational structure (such as such as 

IRS filings and PECOS data) to 

determine organization-wide revenue 

for physician groups responsible for the 

bulk of the ACO’s assigned population. 

Under this alternative, the commenter 

suggested that CMS consider ACOs with 

physician groups that are part of a large 

health system, or large physician groups 

with market power (such as those that 

are very specialty-heavy or have 

substantial market share) to be high 

revenue ACOs. This commenter also 

expressed concern that the proposed 

approach to determining low revenue 

ACOs and high revenue ACOs could 

discourage partnerships between 

physician groups and hospitals through 

means other than mergers and 

acquisitions. To address this 

circumstance, the commenter suggested 

that ACOs should be regarded as low 

revenue if their ACO participant lists 

include independent physician groups 

and hospitals, to avoid disrupting these 

partnerships. This commenter argued 

that under this alternative approach, 

consolidation in provider markets 

would be discouraged because it would 

lead to more downside risk in available 

Shared Savings Program participation 

options, while partnerships or preferred 

networks that can support competition 

and do not cause commercial mark-ups 

would not be discouraged. 

However, somewhat contrary to this 

suggestion, a few commenters explained 

their belief that it is valuable for 

physician-led ACOs to be able to recruit 

and include specialty physicians to 

further redesign health care delivery. 

According to these commenters, simply 

because a physician-led ACO contracts 

with specialty practices does not ensure 

the ACO is more capable of taking on 

ENHANCED track level of risk. 

One commenter seemed to suggest we 

go further than the Track 1+ Model 

approach, which requires ACOs to 

report to CMS certain ownership and 

operational interests in ACO 

participants, by counting revenue 

received by entities that have ownership 

and operational interests in ACO 

participants and not just revenue 

received by providers and suppliers that 

bill through the TINs included on the 

ACO’s participant list. This commenter 

explained that failing to count revenue 

earned by entities with an ownership or 

operational relationship to ACO 

participants would allow many ACOs 

that are affiliated with a hospital to 

access participation options that are 

intended for physician-only ACOs 

through manipulation of their ACO 

participant list. However, seemingly 

contrary to this suggestion, another 

commenter explained that some ACOs 

have shareholders that are large hospital 

systems but own only a small portion of 

the ACO and do not provide a 

substantial amount of funding to the 

ACO. This commenter (an ACO), 

explained that it would have to close its 

doors if all income for the other entities 

with ownership interests in ACO 

participants (such as a large hospital 

system) was considered when setting 

the ACO’s amount of loss liability. 

Several commenters suggested that we 

consider ACO participant composition 

in making the low revenue ACO versus 

high revenue ACO determination. One 

commenter suggested that CMS identify 

ACOs that include hospitals as ACO 

participants, and designate those ACOs 

as ‘‘high revenue’’. Some commenters 

suggested that rural ACOs be considered 

low revenue ACOs. In particular, some 

commenters suggested rural ACOs that 

meet ACO Investment Model (AIM) 

eligibility criteria should be considered 

low revenue ACOs. 

One commenter recommended that 

CMS consider more than two revenue 

definitions or categories, suggesting that 

the proposed distinction may be too 

stark. The commenter suggested that 

CMS use multiple criteria, such as using 

self-reported composition, ACO 

composition as determined by CMS 

according to the alternative approach 

considered for distinguishing hospitalbased and physician-led ACOs, and size 

of an ACO’s assigned beneficiary 

population, in differentiating low 

revenue ACOs and high revenue ACOs. 

A few commenters stated that CMS is 

unable to truly identify whether an ACO 

is well capitalized and should not create 

distinctions based on assumptions about 

capital, indicating that CMS is unable to 

identify if an ACO is well capitalized 

through sources outside of Medicare 

revenue (such as insurer- or investorbacked ACOs). A few commenters 

explained, for example, the proposed 

approach would not capture private 

investments in ACOs, noting that 

insurers and venture capital funds have 

invested heavily in some ACOs, often 

physician-led ACOs. 

One commenter encouraged CMS to 

leverage public use data to calculate an 

ACO’s revenue in an effort to make the 

ACO’s revenue determination 

transparent, citing as an example the 

‘‘Medicare Provider Utilization and 

Payment’’ data available through 

https://data.cms.gov. 

Response: We appreciate the support 

of some commenters for CMS’ proposed 

definitions for low revenue ACO and 


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high revenue ACO, and commenters’ 

careful consideration of the options we 

considered, as well as their alternative 

suggestions. 

We note that commenters offered 

opposing positions on some of the 

suggested alternative approaches. For 

instance, comments reflect differing 

views on the approach used under the 

Track 1+ Model to determine whether 

ACOs are under a revenue-based or 

benchmark-based loss sharing limit, 

with some supporting and others 

opposing the Track 1+ Model approach. 

One commenter seemed to mistakenly 

believe that under the Track 1+ Model, 

we consider the revenue earned by 

health care providers with an ownership 

or operational interest in an ACO 

participant. However, to clarify, under 

the design of the Track 1+ Model, ACOs 

are required to collect, assess, and 

report to CMS information on the 

ownership and operational interests of 

their ACO participants, which in turn is 

used to determine the ACO’s 

participation options under the Track 

1+ Model. As we described in the 

August 2018 proposed rule, we believe 

this approach adds complexity for ACOs 

and is also more complex for CMS to 

validate and audit. As a result, we 

explained that the use of ACOs’ selfreported information in the permanent 

program could become burdensome for 

CMS to validate and monitor to ensure 

program integrity (83 FR 41807). 

Therefore, we agree with commenters 

that we should forgo use of similar selfreporting requirements in determining 

low revenue ACOs and high revenue 

ACOs under the Shared Savings 

Program. 

We continue to believe, based on our 

experience with the Track 1+ Model, 

that ACO participants’ Medicare Part A 

and B FFS revenue serves as an effective 

and accurate proxy for self-reported 

composition. Based on our experience 

with the initial application cycle for the 

Track 1+ Model, we believe a simpler 

approach that achieves similar results to 

the use of self-reported information 

would be to consider the total Medicare 

Parts A and B FFS revenue of ACO 

participants (TINs and CCNs) based on 

claims data, without directly 

considering their ownership and 

operational interests (or those of related 

entities). We believe that the use of 

Medicare Parts A and B FFS claims data 

for ACO participants provides an 

accurate estimate of their Medicare 

revenue and potential ability to cover 

losses that are proportional to their 

Medicare revenue. It also avoids 

additional burden for ACOs to collect 

and submit revenue data to CMS and for 

CMS to establish additional collection 

and validation processes. 

Further, we continue to believe that 

ACOs whose ACO participants have 

greater total Medicare Parts A and B FFS 

revenue relative to the ACO’s 

benchmark are better financially 

prepared to move to greater levels of 

risk (83 FR 41807). Accordingly, this 

comparison of revenue to benchmark 

would provide a more accurate method 

for determining an ACO’s preparedness 

to take on additional risk than an ACO’s 

self-reported information regarding the 

composition of its ACO participants and 

any ownership and operational interests 

in those ACO participants. 

Commenters also offered differing 

perspectives on use of ACO participant 

composition to determine ACO 

participation options. However, as we 

explained in the August 2018 proposed 

rule, we continue to believe that a 

claims-based approach to determining 

low revenue ACOs and high revenue 

ACOs would better align with the 

claims-based approaches to determining 

loss sharing limits (discussed in section 

II.A.3 of this final rule) and the 

repayment mechanism estimate 

amounts for ACOs (as discussed in 

section II.A.6 of this final rule) 

providing more consistent feedback and 

program transparency and reducing 

complexity from multiple but slightly 

different calculations. 

We also decline to adopt commenters’ 

alternative suggestions to use multiple 

sources of data to determine 

participation options, which could add 

further complexity to our approach. 

Some comments indicated concerns that 

under the proposed approach CMS 

would not be able to effectively identify 

well capitalized ACOs. However, we 

believe that ACO participant revenue 

coupled with establishing a repayment 

mechanism to cover potential losses 

provide sufficient assurances and 

proxies for demonstrating capitalization 

and ability to invest in care 

coordination and cover potential losses. 

We believe it would place additional 

burden on ACOs and add complexity to 

the approach to consider how well 

capitalized ACOs are through their 

composition or private investments, for 

example. We have not routinely 

required that ACOs disclose statements 

about their financial status, or the 

financial status of their ACO 

participants or ACO providers/ 

suppliers, in determining their 

eligibility to enter or continue their 

participation in the program, or a 

particular participation option in the 

program. 

Further, with respect to the comment 

suggesting that we base participation 

options on ACO organizational 

formations or provider/supplier 

relationships that the commenter 

considered beneficial to health care 

markets, we believe our approach to 

defining low revenue ACOs and high 

revenue ACOs, and to determining 

participation options based on the 

distinction between these two categories 

of ACOs, promotes innovative 

arrangements between physicians and 

hospitals while providing an alternative 

for physicians to stay independent and 

work collaboratively with other 

providers and suppliers. 

We also decline to use the publicly 

available sources of revenue data 

described by one commenter. We 

believe use of existing sources of 

program data for the revenue 

calculations will allow for greater 

consistency across the program’s 

calculations, and timely feedback to 

ACOs, including through information 

shared during the application cycle and 

through program reports. 

Lastly, we appreciate commenters’ 

concerns about the possibility that 

existing ACOs may bifurcate their ACO 

participant lists to form new ACOs that 

may satisfy the definition of a low 

revenue ACO and therefore be eligible 

to participate under potentially lower 

levels of performance-based risk. We 

note that ACOs are accountable for total 

Medicare Parts A and B FFS 

expenditures for their assigned 

beneficiaries. To the extent that ACOs 

modify their ACO participant lists to 

remove higher-revenue providers and 

suppliers, such as institutional 

providers, the ACO remains accountable 

for the total cost of care received by its 

assigned beneficiaries, including 

services received from non-ACO 

providers and suppliers. The 

requirement that ACOs agree to be 

accountable for the quality and cost of 

all care furnished to their assigned 

beneficiaries, including services 

furnished by providers and suppliers 

that are not participating in the ACO, 

reduces our concern about ACOs 

manipulating their ACO participant lists 

to take advantage of potentially lowerrisk participation options. 

As one commenter points out, there 

could be costs associated with setting 

up a new legal entity and new 

Medicare-enrolled TINs, and this could 

be a deterrent to engaging in these 

practices to avoid the intended 

applicability of program requirements. 

We also believe several other policies 

we are finalizing in this final rule will 

help protect against ACOs gaming 

determinations for program 

participation options through 

modifications to their ACO participant 


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lists, specifically: (1) The approach we 

are finalizing to monitor for changes in 

revenue that cause ACOs identified as 

low revenue, and experienced with 

performance-based risk Medicare ACO 

initiatives to become considered high 

revenue and therefore no longer be 

eligible for participation in the BASIC 

track, as described elsewhere in this 

section of this final rule; and (2) the 

approach we are finalizing to identify 

re-entering ACOs, based on the prior 

participation of their ACO participants, 

as described in section II.A.5.c. of this 

final rule, will help ensure that ACOs 

are held accountable for their ACO 

participants’ prior program experience. 

Comment: One commenter suggested 

that CMS should provide ACOs with the 

ability to select only the highest 

performing providers and suppliers by 

allowing ACOs to select their 

participants by NPI rather than solely at 

the TIN level. The commenter explained 

that this approach could help enable 

ACOs to have greater control over 

managing costs for their assigned 

beneficiaries. According to this 

commenter, under this approach to 

allowing participation by individual 

NPIs, rather than the all NPIs that 

reassigned their billings rights to the 

ACO participant TIN (as currently 

required), ACOs would have the 

flexibility to build a high performing 

network of providers who will deliver 

the most efficient and highest quality 

care. In turn, the commenter stated that 

these high performing networks would 

incentivize providers that want to join 

or remain in an ACO to focus more on 

reducing unnecessary costs and 

maintaining high quality, and 

incentivize ACOs to more closely 

evaluate providers in their network 

based on sophisticated data analytics. 

Response: In the August 2018 

proposed rule, we did not contemplate 

changes to the current definition of 

‘‘ACO participant’’ under § 425.20 

which means an entity identified by a 

Medicare-enrolled billing TIN through 

which one or more ACO providers/ 

suppliers bill Medicare, that alone or 

together with one or more other ACO 

participants compose an ACO, and that 

is included on the list of ACO 

participants that is required under 

§ 425.118. We also did not contemplate 

changes to the underlying methodology 

used to assign beneficiaries to ACOs 

based on ACO participant TINs. 

We continue to believe that ACOs 

have the potential to transform the 

quality and cost of care more broadly for 

the Medicare FFS beneficiaries who 

receive care from ACO participants. We 

believe that defining ACO participants 

to include all NPIs that have reassigned 

their billing rights to the TIN is a means 

to allowing the ACO’s redesigned care 

processes to more broadly reach all 

Medicare FFS beneficiaries that may 

receive care from ACO participants, 

including those that may not meet the 

program’s assignment criteria, and 

provides incentives for lower 

performing providers within an ACO 

participant TIN to improve. We also 

have concerns about ACOs selecting 

only the highest performing providers 

within a practice to be part of the ACO 

while less efficient and effective 

providers are not part of the ACO, 

because this structure could have 

negative implications for patients seen 

by the ACO participant and for the 

Medicare Trust Funds. Moreover, an 

approach allowing for participation by 

individual NPIs, rather than all NPIs 

that reassigned their billings rights to 

ACO participant TINs, could further 

opportunities for ACOs to game 

participation determinations by 

including only the most efficient and 

effective clinicians in the ACO, while 

less efficient and effective clinicians are 

excluded from the ACO. Therefore, we 

believe that maintaining the definition 

of ACO participant at the TIN level 

continues to be an effective approach in 

achieving the program’s goals of 

improved care, and reduced 

expenditures, for Medicare FFS 

beneficiaries more broadly. 

Comment: Some commenters 

addressed the threshold percentage to 

differentiate low revenue ACO and high 

revenue ACO, proposed at 25 percent. 

Commenters offered a variety of 

alternative suggestions for the threshold 

percentage. 

A few commenters argued that the 

proposed 25 percent threshold, and the 

alternative consideration for a 30 

percent threshold, would incorrectly 

deem moderate revenue ACOs, 

especially rural ACOs or urban ACOs 

that serve surrounding rural areas, to be 

high revenue ACOs. These commenters 

suggested that CMS either exempt rural 

ACOs from the revenue designation or 

raise the threshold for determining low 

revenue ACOs such as to 60 percent. 

One commenter explained their belief 

that rural and small providers do not fit 

squarely within the low revenue ACO 

category. The commenter asserted that a 

revenue-based distinction could 

ultimately lead to rural providers, small 

providers, and many ACOs with mixed 

FFS and cost-based revenue (including 

both urban and rural provider/ 

suppliers) being categorized as high 

revenue ACOs contrary to the intended 

purpose of the policy. 

Another commenter questioned how a 

rural ACO with 25 small rural hospitals 

would be classified under this 

approach, but did not offer details that 

would inform how this composition 

might affect ACO participants’ Medicare 

FFS Parts A and B revenue, or total 

Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries. 

One commenter recommended that 

CMS begin with a 30 percent threshold 

to account for ACOs with physician 

groups with a comparatively larger 

number of specialists as ACO 

participants, in addition to considering 

other metrics in distinguishing low 

revenue ACOs and high revenue ACOs, 

and/or develop more granular methods 

than the two proposed revenue-based 

categories to ascertain ACO risk 

tolerance. Another commenter generally 

urged CMS to establish pathways for 

specialists to meaningfully engage in the 

Shared Savings Program. 

One commenter recommended that 

CMS increase the threshold of ACO 

participant revenue as a percentage of 

benchmark from 25 percent to 40 

percent or greater for this and any future 

standards in which CMS seeks to 

distinguish small and large health 

systems. 

One commenter disagreed that the 

proposed 25 percent threshold 

corresponds to the ACO’s ability to 

control costs, since it does not account 

for a number of factors beyond the 

control of ACOs that could artificially 

inflate this number. This concern was 

reflected in other comments. For 

example, a few commenters expressed 

concern generally over the ability of 

ACOs to control costs and provide value 

in the Medicare FFS environment, 

pointing to factors including 

beneficiaries’ freedom of choice of 

providers under FFS Medicare, and the 

absence of protection from the cost of 

Part B drugs and/or new technologies, 

and CAH costs as examples. 

One commenter suggested CMS use a 

lower threshold, as a means to deter 

gaming, such as 15 percent. This 

commenter pointed to the use of a 10 

percent threshold approach as described 

in the Regulatory Impact Analysis of the 

August 2018 proposed rule (83 FR 

41917). 

Response: We agree with commenters’ 

concerns that ACOs that include small, 

rural hospitals may not be identified as 

low revenue ACOs under the proposed 

25 percent threshold, and we agree with 

commenters suggesting that the 

threshold be raised to allow additional 

ACOs with small hospitals and clinics, 

including small rural hospitals, as ACO 

participants to qualify as low revenue 

ACOs. Therefore, to help ensure more 

ACOs under these circumstances may 


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be considered low revenue ACOs, we 

believe it would be appropriate to 

increase the threshold used in 

determining low revenue ACOs and 

high revenue ACOs to 35 percent. ACOs 

with small hospitals as ACO 

participants, including small rural 

hospitals, may not control a large 

enough portion of assigned beneficiary 

expenditures or be financially prepared 

to take on greater risk. Increasing the 

threshold used to determine low 

revenue ACOs versus high revenue 

ACOs would provide these ACOs with 

the opportunity to remain under the 

BASIC track at lower levels of 

performance-based risk, for a longer 

period of time. This would allow such 

ACOs to gain experience in a lower 

level of risk in the program before being 

required to move to the ENHANCED 

track. 

Based on modeling using the most 

recently available expenditure and 

revenue data and ACO assignment data, 

we are increasing the threshold from 25 

percent to 35 percent. Modeling shows 

increasing the threshold would allow 

more ACOs with small hospitals as ACO 

participants, including small rural 

hospitals, to be considered low revenue 

ACOs, while continuing to ensure that 

ACOs with large institutional providers 

are considered high revenue ACOs. The 

increased threshold would increase the 

number of low revenue ACOs by 31 

ACOs, a 13 percent increase from the 

number of ACOs that would be included 

in the 25 percent threshold, based on 

our modeling with data used for 

performance year 2018. A 35 percent 

threshold balances concerns by 

recognizing additional ACOs with small 

institutional providers or clinics as low 

revenue ACOs, while helping to ensure 

ACOs with higher revenue continue to 

have the strongest incentives to improve 

quality of care for Medicare FFS 

beneficiaries and reduce expenditure 

growth to protect the Trust Funds. 

We decline the commenter’s 

suggestion to use a much lower 

threshold in identifying low revenue 

ACOs, such as 15 percent. The 

commenter pointed to the use of a 10 

percent threshold in distinguishing low 

revenue ACOs from high revenue ACOs 

in the August 2018 proposed rule’s 

Regulatory Impact Analysis. As we 

explained in the August 2018 proposed 

rule (83 FR 41814) and reiterated in this 

section of this final rule, under this 

analysis, an ACO was identified as low 

revenue if its ACO participants’ total 

Medicare Parts A and B FFS revenue for 

assigned beneficiaries was less than 10 

percent of the ACO’s assigned 

beneficiary population’s total Medicare 

Parts A and B FFS expenditures. We 

continue to have concerns that this 

approach does not sufficiently account 

for ACO participants’ total Medicare 

Parts A and B FFS revenue (as opposed 

to their revenue for assigned 

beneficiaries), and therefore could 

misrepresent the ACO’s overall risk 

bearing potential, which would diverge 

from other aspects of the design of the 

BASIC track as finalized (see section 

II.A.3 of this final rule). 

Comment: Several commenters 

expressed concern about the approach 

to calculating revenue used in the 

definitions of low revenue ACOs and 

high revenue ACOs. These commenters 

explain that CMS proposes to include 

hospital add-on payments such as 

Indirect Medical Education (IME), 

Disproportionate Share Hospital (DSH), 

and uncompensated care payments 

when calculating an ACO’s revenue. 

These commenters point out that CMS 

will exclude these payments when 

calculating assigned beneficiary 

expenditures for determining 

benchmark and performance year 

expenditures. These commenters urged 

CMS to exclude add-on payments in 

determining an ACO’s revenue, 

suggesting that this approach could 

penalize ACOs that treat vulnerable 

populations, including teaching 

hospitals or those that treat the 

uninsured population. 

One commenter requested that CMS 

modify the proposed approach to 

identifying high revenue ACOs to 

ensure ACOs that are appropriately 

engaging, and incentivizing hospital 

engagement, in value-based care 

delivery are not penalized for their 

success. 

Response: We discuss related 

considerations in our discussion of the 

calculation of ACO participants’ total 

Medicare Parts A and B FFS revenue for 

determining the loss sharing limits 

under the BASIC track in the August 

2018 proposed rule (83 FR 41809 

through 41810) and in section II.A.3 of 

this final rule. To accurately determine 

ACO participants’ revenue for purposes 

of determining a revenue-based loss 

sharing limit, we explain our belief that 

it is important to include total revenue 

uncapped by truncation and to include 

IME, DSH and uncompensated care 

payments. We noted that this approach 

to calculating ACO participant Medicare 

FFS revenue is different from our 

approach to calculating benchmark and 

performance year expenditures for 

assigned beneficiaries, which we 

truncate at the 99th percentile of 

national Medicare FFS expenditures for 

assignable beneficiaries, and from 

which we exclude IME, DSH and 

uncompensated care payments (see 

subpart G of the program’s regulations). 

We explained that IME, DSH, 

uncompensated care payments 

represent resources available to ACO 

participants to support their operations 

and offset their costs and potential 

shared losses, thereby increasing the 

ACO’s capacity to bear performancebased risk, which we believe should be 

reflected in the ACO’s loss sharing limit. 

Excluding such payments could 

undercount revenue and also could be 

challenging to implement, particularly 

truncation, since it likely would require 

apportioning responsibility for large 

claims among the ACO participants and 

non-ACO participants from which the 

beneficiary may have received the 

services resulting in the large claims. 

We therefore decline to modify our 

approach to determining ACO 

participant’s total Medicare Parts A and 

B FFS revenue to include IME, DSH and 

uncompensated care payments, or to 

cap claim payment amounts through 

truncation. 

For similar reasons, we also decline at 

this time to make other technical 

adjustments to calculations of revenue 

to exclude any other payment 

adjustments reflected in the claim 

payment amounts, such as payments 

under MIPS or the Hospital Value Based 

Purchasing Program. 

Comment: Several commenters 

suggested that CMS should take into 

consideration the impact of extreme and 

uncontrollable circumstances when 

determining participation options based 

on Medicare FFS revenue. 

Response: At this time, we decline to 

modify our approach to determining 

ACO participants’ total Medicare Parts 

A and B FFS revenue, and will not 

exclude Medicare Parts A and B FFS 

revenue earned during a disaster period, 

nor will we make other adjustments to 

the calculation of ACO participants’ 

Medicare Parts A and B FFS revenue to 

address extreme and uncontrollable 

circumstances because we do not have 

a reliable means for estimating what the 

ACO participants’ Medicare Parts A and 

B FFS revenues would have been in the 

absence of the event. 

We will continue to monitor the 

impact of extreme and uncontrollable 

circumstances on ACOs, particularly as 

we gain experience with the disasterrelief policies we have finalized for 

performance year 2017 and subsequent 

performance years. As part of this 

monitoring, we will consider whether 

any changes to our policy for 

determining low revenue ACOs and 

high revenue ACOs may be necessary to 

account for the effects of extreme and 

uncontrollable circumstances. Any such 


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changes would be made through notice 

and comment rulemaking. 

Comment: A few commenters 

explained that rural hospitals and 

physician practices have demonstrably 

smaller net operating profit margins 

than urban hospitals, and commenters 

suggested that the proposed approach to 

differentiating participation options 

based on ACO participants’ Medicare 

FFS revenue should consider ACO 

participants’ fixed costs and operating 

margins. 

Response: We currently do not 

consider operating costs in program 

calculations for benchmark and 

performance year expenditures since we 

determine benchmark and performance 

year expenditures based on Medicare 

Parts A and B FFS expenditures, 

according to the statutory requirements 

for the Shared Savings Program under 

section 1899(d)(1)(B) of the Act. We 

decline to consider operating costs in 

determining whether an ACO qualifies 

as a low revenue ACO or high revenue 

ACO. We believe that doing so would 

add a degree of variability and also 

unpredictably to the revenue 

calculations. We also believe it would 

be burdensome for ACOs to track 

operating costs of individual ACO 

participants, report this information to 

CMS, and for CMS to validate the data 

for use in calculations. 

Comment: One commenter requested 

that CMS provide clarification around 

the data that will be used for the ACO 

participant revenue calculations. The 

commenter noted that the proposed rule 

states that the most recently available 12 

months of data will be used, but it is 

unclear what time period that would be. 

This commenter also responded to the 

discussion in the proposed rule on 

CMS’ consideration of an alternative 

approach where we would use multiple 

years of data to make the determination 

of whether an ACO is a low revenue 

ACO or high revenue ACO. This 

commenter preferred the proposed 

approach, to have the calculations based 

on one year of data, and did not 

consider use of multiple years of data in 

the revenue determination to be 

beneficial. 

Response: We appreciate the 

commenter’s support for the proposed 

look back period in the definition of low 

revenue ACO and high revenue ACO. 

To clarify, we proposed that we would 

make the determination based on ACO 

participant Medicare Parts A and B FFS 

revenue and total Medicare Parts A and 

B FFS expenditures for the most recent 

calendar year for which 12 months of 

data are available. As an example, the 

annual application cycle for a January 

1st agreement period start date typically 

spans the Summer–Fall of the prior 

calendar year. For example, for ACOs 

applying for the agreement start date of 

January 1, 2020, we would anticipate 

the application cycle to occur during CY 

2019. Therefore, we would make the 

low revenue ACO versus high revenue 

ACO determination for ACOs applying 

for a new agreement period beginning 

January 1, 2020 based on the 12 months 

of data from January 1, 2018, through 

December 31, 2018. 

We also proposed that for ACOs 

applying for an agreement start date of 

July 1, 2019, we would determine 

whether the ACO is a low revenue ACO 

or high revenue ACO using data from 

the most recent calendar year for which 

12 months of data are available. We 

anticipate the application cycle for the 

July 1, 2019 agreement start date to 

occur in Winter–Spring of 2019. 

Therefore, for ACOs applying for the 

agreement start date of July 1, 2019, we 

would make the low revenue ACO and 

high revenue ACO determination based 

on the 12 months of data from January 

1, 2018, through December 31, 2018. 

Comment: Several commenters 

addressed CMS’ proposal to monitor 

low revenue ACOs experienced with 

performance-based risk Medicare ACO 

initiatives participating in the BASIC 

track to determine if they continue to 

meet the definition of low revenue ACO, 

and to take compliance action if the 

ACO meets the definition of a high 

revenue ACO during the agreement 

period. Under the proposed approach, 

high revenue ACOs experienced with 

performance-based risk Medicare ACO 

initiatives would be restricted to 

participation under the ENHANCED 

track. 

One commenter expressed significant 

reservations about the proposal to 

annually monitor low revenue ACOs to 

determine if, during the course of the 

performance year, the ACO became a 

high revenue ACO, and in turn 

requiring an ACO that becomes high 

revenue to move to the ENHANCED 

track. The commenter encouraged CMS 

not to finalize this approach as 

proposed. This commenter stated that 

many low revenue ACOs may be 

looking to partner with high revenue 

entities, such as IPPS hospitals, in order 

to have greater control over total 

Medicare Parts A and B FFS 

expenditures for their assigned 

beneficiaries. The commenter disagreed 

that this partnership automatically 

makes the low revenue ACO’s 

experience commensurate to that of a 

high revenue ACO, experienced with 

performance-based risk Medicare ACO 

initiatives. The commenter explained 

that entities with significant Medicare 

FFS revenues that are inexperienced 

with Medicare performance-based risk 

ACO initiatives may seek out 

experienced, low revenue ACOs to join 

as an ACO participant, to capitalize 

upon the ACO entity’s experience with 

success in performance-based risk. The 

commenter argued that an experienced, 

low revenue ACO with a newly added, 

inexperienced ACO participant, is not 

equivalent to a high revenue ACO that 

is experienced with performance-based 

risk Medicare ACO initiatives, even if 

the addition of the ACO participant 

causes the ACO to meet the proposed 

definition of a high revenue ACO, and 

therefore should not be aggressively 

accelerated to program’s maximum 

downside risk under the ENHANCED 

track. Instead, the commenter 

encouraged CMS to allow these ACOs to 

continue their BASIC track participation 

until the end of their participation 

agreement. 

One commenter described that CMS 

would have to consistently monitor to 

ensure ACO participant changes did not 

alter an ACO’s status as a low revenue 

ACO or high revenue ACO and for those 

that did, CMS would have to issue 

correction notices and require corrective 

action plans. The commenter described 

this as operationally difficult and 

creating more unnecessary complication 

and burden on both ACOs and CMS. 

A few commenters explained that an 

ACO’s qualification as a low revenue 

ACO or high revenue ACO would also 

change over time as ACO participant 

composition changes, adding more 

complexity and making long-term 

planning very difficult. These 

commenters were concerned that 

uncertainty would be further 

compounded by the timing of our 

determination of whether ACOs qualify 

as a low revenue ACO or high revenue 

ACO. 

Response: We considered 

commenters’ suggestions that we not 

require ACOs that transition from low 

revenue ACO to high revenue ACO 

status during the course of an ACO’s 

agreement period in Level E of the 

BASIC track to transition to the 

ENHANCED track. We also considered 

commenters’ concerns (described 

elsewhere in this section of this final 

rule) that the proposed approach to 

distinguishing participation options for 

low revenue ACOs and high revenue 

ACOs could result in ACOs gaming the 

revenue determinations by 

manipulating their ACO participant 

lists. We remain concerned about the 

possibility that an ACO identified as 

experienced with performance-based 

risk Medicare ACO initiatives, and 

participating in an agreement period 


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under Level E of the BASIC track 

because it is also determined to be a low 

revenue ACO at the start of its 

agreement period, could become a high 

revenue ACO during the course of its 

agreement period. We believe that 

absent a structured approach to 

monitoring and addressing changes in 

composition, ACOs entering the BASIC 

track initially appearing to be low 

revenue ACOs could dramatically 

change their composition to take 

advantage of this lower-risk 

participation option in a manner that 

the program redesign does not 

contemplate. 

At this time, we believe it would be 

appropriate to finalize the proposal to 

monitor for revenue changes in ACOs 

that entered an agreement period under 

Level E of the BASIC track because they 

are low revenue and experienced with 

performance-based risk Medicare ACO 

initiatives, for example as a result of 

changes in ACO participant 

composition. Further, under this 

approach, such an ACO that becomes 

high revenue during its agreement 

period under Level E of the BASIC track 

would be required to take corrective 

action to remedy the issue, such as 

removing an ACO participant from its 

ACO participant list, so that the ACO 

could meet the definition of low 

revenue ACO. If corrective action is not 

taken, CMS would terminate the ACO’s 

participation agreement under 

§ 425.218. 

If an ACO is required to terminate its 

participation, it may apply to enter a 

new agreement period under the 

ENHANCED track. As a consequence of 

entering a new agreement period, the 

ACO’s benchmark will be calculated 

based on the 3 most recent years prior 

to the ACO’s agreement start date, using 

the ACO participant list the ACO 

finalizes as being applicable for the new 

agreement period. 

We note that ACOs participating in 

the program may submit change 

requests in accordance with program 

procedures to indicate additions, 

updates, and deletions to their existing 

ACO participant lists. As part of the 

ACO participant change request process, 

we anticipate providing ACOs with 

information so that they are informed 

about the potential impact of ACO 

participant list changes on their 

compliance with program requirements, 

including how these changes may affect 

whether the ACO is considered a low 

revenue ACO or high revenue ACO, 

under the criteria for determining ACO 

participation options we are 

establishing with this final rule. 

Although we are finalizing the 

proposal, we do find the commenters’ 

concerns about the possible effects of 

applying this policy to be compelling. In 

particular, after further consideration, 

we believe that the low revenue ACO/ 

high revenue ACO determination could 

be affected by changes in the ACO 

participant list for the ACO, or changes 

in ACO providers/suppliers, that are 

made in the course of program 

participation, where the changes are not 

motivated by the ACO’s desire to avoid 

program requirements regarding 

participation options. For example, any 

addition or removal of an ACO 

participant, or change in ACO 

providers/suppliers, could affect the 

basis for the low revenue ACO/high 

revenue ACO determination: ACO 

participants’ total Medicare Parts A and 

B FFS revenue, and total Medicare Parts 

A and B FFS expenditures for the ACO’s 

assigned beneficiaries for the relevant 

period. In particular, ACOs close to the 

threshold percentage that are initially 

identified as low revenue ACOs could, 

during the course of their agreement 

period, become high revenue ACOs due 

to only a slight increase in ACO 

participant revenue. We note that under 

our proposed approach, which we are 

finalizing, we may be required to 

terminate ACOs from an agreement 

period in the BASIC track because of 

changes in ACO participants’ total 

Medicare Parts A and B FFS revenue, 

and/or total Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries, that result in small 

percentage changes that put the ACO 

over the threshold for the definition of 

high revenue ACO, and which could not 

be easily remedied by the ACO. 

Therefore, we plan to closely monitor 

the effects of this policy. In particular 

we plan to monitor the magnitude by 

which ACOs exceed the 35 percent 

threshold to become a high revenue 

ACO during an agreement period, and 

the ease or difficulty with which ACOs 

can remedy these circumstances to 

return to being low revenue ACOs (if 

desired by the ACO). If this policy 

results in ACOs being required to 

transition to the ENHANCED track, we 

will monitor to determine if these ACOs 

elect to renew early (to avoid a break in 

program participation), or terminate 

their participation, and if so whether 

they apply to re-enter the program later. 

We may revisit this policy in future 

rulemaking based on our lessons 

learned. 

Comment: A few commenters 

indicated that ACOs may be challenged 

to anticipate CMS’ determination of 

whether they are low revenue ACOs or 

high revenue ACOs, and will depend on 

these determinations to make business 

decisions on program participation. One 

commenter explained that ACOs may 

not have the data necessary to 

determine whether they are low revenue 

ACOs or high revenue ACOs without 

receiving additional data from CMS. A 

few commenters pointed to the need for 

CMS to provide revenue determinations 

early in the application process, so that 

ACOs know in advance what category 

they fall into. Several commenters 

suggested that CMS provide ample time 

for ACOs to make participation 

decisions based on its determination of 

whether an ACO is a low revenue ACO 

or high revenue ACO, including to 

allow ACOs to make any changes and 

execute a coordinated transition into 

their desired participation option (if a 

choice is available). 

A few commenters suggested that 

CMS provide more detailed processes 

and timelines governing its assessment 

of and determination of ACOs as low 

revenue ACOs or high revenue ACOs 

(including how it will monitor ACOs) 

which it believes will help to protect 

against the potential for ACO gaming 

whereby ACOs use creative business 

organization strategies to ensure that 

they are able to remain in the low 

revenue ACO designation. A few 

commenters urged that CMS keep the 

process simple, straightforward, and 

transparent. One commenter suggested 

that CMS announce to ACOs a date by 

which it will complete its assessment of 

all ACOs regarding their categorization 

as a low revenue ACO or high revenue 

ACO. One commenter suggested the 

following approach for a typical 

application cycle, in advance of a 

January 1 start date: CMS should 

provide an option for an ACO to file a 

request by May for a determination of 

low revenue ACO/high revenue ACO 

status with receipt of the determination 

no later than June. Thus, when the ACO 

files its application in July, the ACO 

will be fully aware of its status and to 

be ready to meet the necessary 

requirements. 

Response: We appreciate the 

commenters’ concern and we anticipate 

providing timely feedback to ACOs 

throughout program application cycles, 

on whether the ACO is likely to be 

determined to be a low revenue ACO or 

high revenue ACO (among other 

factors), in order to ensure ACOs have 

the information they need to make 

decisions about program participation 

and to take action to align with program 

requirements. We announce application 

cycle dates in advance, through the 

Shared Savings Program website, and 

through various other methods 

available, including webinars, FAQs 

and a weekly newsletter. The program’s 

application cycle typically includes 


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multiple opportunities for CMS to 

review the ACO’s application, and 

provide the applicant feedback and the 

opportunity to correct deficiencies. We 

encourage ACOs and the public to 

monitor the Shared Savings Program 

website for related announcements. 

We decline commenter’s suggestions 

to make final determination of whether 

an ACO is a low revenue ACO or high 

revenue ACO in advance of the 

application submission date. ACOs 

submit their ACO participant list as part 

of the application submission process, 

and have opportunities to make changes 

or corrections to their ACO participant 

list during the application review 

period. As a result, the determination of 

whether an ACO is a low revenue ACO 

or high revenue ACO could change. 

Final Action: After consideration of 

the public comments received, we are 

finalizing, with modifications, the 

proposed approach to identifying low 

revenue ACOs and high revenues ACOs 

for the purposes of determining ACO 

participation options in the Shared 

Savings Program. We are finalizing the 

addition of new definitions at § 425.20 

for ‘‘low revenue ACO,’’ and ‘‘high 

revenue ACO.’’ 

We define ‘‘high revenue ACO’’ to 

mean an ACO whose total Medicare 

Parts A and B FFS revenue of its ACO 

participants based on revenue for the 

most recent calendar year for which 12 

months of data are available, is at least 

35 percent of the total Medicare Parts A 

and B FFS expenditures for the ACO’s 

assigned beneficiaries based on 

expenditures for the most recent 

calendar year for which 12 months of 

data are available. 

We define ‘‘low revenue ACO’’ to 

mean an ACO whose total Medicare 

Parts A and B FFS revenue of its ACO 

participants based on revenue for the 

most recent calendar year for which 12 

months of data are available, is less than 

35 percent of the total Medicare Parts A 

and B FFS expenditures for the ACO’s 

assigned beneficiaries based on 

expenditures for the most recent 

calendar year for which 12 months of 

data are available. 

In § 425.600(e) we are finalizing our 

approach to ensuring continued 

compliance of ACOs with the eligibility 

requirements for participation in the 

BASIC track, for an ACO that is 

accepted into the BASIC track’s Level E 

because the ACO was experienced with 

performance-based risk Medicare ACO 

initiatives and determined to be low 

revenue at the time of application. If, 

during the agreement period, the ACO 

meets the definition of a high revenue 

ACO, the ACO will be permitted to 

complete the remainder of its current 

performance year under the BASIC 

track, but will be ineligible to continue 

participation in the BASIC track after 

the end of that performance year unless 

it takes corrective action, for example by 

changing its ACO participant list. We 

will take compliance action, up to and 

including termination of the 

participation agreement, as specified in 

§§ 425.216 and 425.218, to ensure the 

ACO does not continue in the BASIC 

track for subsequent performance years 

of the agreement period. For example, 

we may take pre-termination actions as 

specified in § 425.216, such as issuing a 

warning notice or requesting a 

corrective action plan. To remain in the 

BASIC track, the ACO will be required 

to remedy the issue. For example, if the 

ACO participants’ total Medicare Parts 

A and B FFS revenue has increased in 

relation to total Medicare Parts A and B 

FFS expenditures for the ACO’s 

assigned beneficiaries, the ACO could 

remove an ACO participant from its 

ACO participant list, so that the ACO 

can meet the definition of low revenue 

ACO. If corrective action is not taken, 

CMS will terminate the ACO’s 

participation under § 425.218. 

(2) Restricting ACOs’ Participation in 

the BASIC Track Prior To Transitioning 

to Participation in the ENHANCED 

Track 

As discussed in section II.A.5.c. of the 

August 2018 proposed rule (83 FR 

41820 through 41836), we proposed to 

use factors based on ACOs’ experience 

with performance-based risk to 

determine their eligibility for the BASIC 

track’s glide path, or to limit their 

participation options to either the 

highest level of risk and potential 

reward under the BASIC track (Level E) 

or the ENHANCED track. As discussed 

in section II.A.5.b.(2) of the August 2018 

proposed rule (83 FR 41817 through 

41819), we also proposed to 

differentiate between low revenue ACOs 

and high revenue ACOs with respect to 

the continued availability of the BASIC 

track as a participation option. This 

approach would allow low revenue 

ACOs, new to performance-based risk 

arrangements, additional time under the 

BASIC track’s revenue-based loss 

sharing limits, while requiring high 

revenue ACOs to more rapidly 

transition to the ENHANCED track 

under which they would assume 

relatively higher, benchmark-based risk. 

We explained our belief that all ACOs 

should ultimately transition to the 

ENHANCED track, the highest level of 

risk and potential reward under the 

program, which could drive ACOs to 

more aggressively pursue the program’s 

goals of improving quality of care and 

lowering growth in FFS expenditures 

for their assigned beneficiary 

populations. 

We considered that some low revenue 

ACOs may need additional time to 

prepare to take on the higher levels of 

performance-based risk required under 

the ENHANCED track. Low revenue 

ACOs, which could include small, 

physician-only and rural ACOs, may be 

encouraged to enter and remain in the 

program based on the availability of 

lower-risk options. For example, small, 

physician-only and rural ACOs may 

have limited experience submitting 

quality measures or managing patient 

care under two-sided risk arrangements, 

which could deter their participation in 

higher-risk options. ACOs and other 

program stakeholders have suggested 

that the relatively lower levels of risk 

available under the Track 1+ Model (an 

equivalent level of risk and potential 

reward to the payment model available 

under Level E of the BASIC track) 

encourages transition to risk by 

providing a more manageable level of 

two-sided risk for small, physician-only, 

and rural ACOs, compared to the levels 

of risk and potential reward currently 

available under Track 2 and Track 3, 

and that would be offered under the 

proposed ENHANCED track. 

We also considered that, without 

limiting high revenue ACOs to a single 

agreement period under the BASIC 

track, they could seek to remain under 

a relatively low level of performancebased risk for a longer period of time, 

and thereby curtail their incentive to 

drive more meaningful and systematic 

changes to improve quality of care and 

lower growth in FFS expenditures for 

their assigned beneficiary populations. 

Further, high revenue ACOs, whose 

composition likely includes 

institutional providers, particularly 

hospitals and health systems, are 

expected generally to have greater 

opportunity to coordinate care for 

assigned beneficiaries across care 

settings among their ACO participants 

than low revenue ACOs. One approach 

to ensure high revenue ACOs accept a 

level of risk commensurate with their 

degree of control over total Medicare 

Parts A and B FFS expenditures for their 

assigned beneficiaries, and to further 

encourage these ACOs to more 

aggressively pursue the program’s goals, 

is to require these ACOs to transition to 

higher levels of risk and potential 

reward. 

We proposed to limit high revenue 

ACOs to, at most, a single agreement 

period under the BASIC track prior to 

transitioning to participation under the 

ENHANCED track. We explained our 

belief that an approach that allows high 


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revenue ACOs that are inexperienced 

with the accountable care model the 

opportunity to become experienced 

with program participation within the 

BASIC track’s glide path prior to 

undertaking the higher levels of risk and 

potential reward in the ENHANCED 

track offers an appropriate balance 

between allowing ACOs time to become 

experienced with performance-based 

risk and protecting the Medicare Trust 

Funds. This approach recognizes that 

high revenue ACOs control a relatively 

large share of assigned beneficiaries’ 

total Medicare Parts A and B FFS 

expenditures and generally are 

positioned to coordinate care for 

beneficiaries across care settings, and is 

protective of the Medicare Trust Funds 

by requiring high revenue ACOs to more 

quickly transition to higher levels of 

performance-based risk. 

In contrast, we proposed to limit low 

revenue ACOs to, at most, two 

agreement periods under the BASIC 

track. These agreement periods would 

not be required to be sequential, which 

would allow low revenue ACOs that 

transition to the ENHANCED track after 

a single agreement period under the 

BASIC track the opportunity to return to 

the BASIC track if the ENHANCED track 

initially proves too high of risk. An 

experienced ACO may also seek to 

participate in a lower level of risk if, for 

example, it makes changes to its 

composition to include ACO providers/ 

suppliers that are less experienced with 

the accountable care model and the 

program’s requirements. Once an ACO 

has participated under the BASIC 

track’s glide path (if eligible), a 

subsequent agreement period under the 

BASIC track would be required to be at 

the highest level of risk and potential 

reward (Level E), according to the 

proposed approach to identifying ACOs 

experienced with performance-based 

Medicare ACO initiatives (see section 

II.A.5.c. of this final rule). 

Therefore, we proposed that in order 

for an ACO to be eligible to participate 

in the BASIC track for a second 

agreement period, the ACO must meet 

the requirements for participation in the 

BASIC track as described in this final 

rule (as determined based on whether 

an ACO is a low revenue ACO versus 

high revenue ACO and inexperienced 

with performance-based risk Medicare 

ACO initiatives versus experienced with 

performance-based risk Medicare ACO 

initiatives) and either of the following: 

(1) The ACO is the same legal entity as 

a current or previous ACO that 

previously entered into a participation 

agreement for participation in the 

BASIC track only one time; or (2) for a 

new ACO identified as a re-entering 

ACO because at least 50 percent of its 

ACO participants have recent prior 

participation in the same ACO, the ACO 

in which the majority of the new ACO’s 

participants were participating 

previously entered into a participation 

agreement for participation in the 

BASIC track only one time. 

Several examples illustrate this 

proposed approach. First, for an ACO 

legal entity with previous participation 

in the program, we would consider the 

ACO’s current and prior participation in 

the program. For example, if a low 

revenue ACO enters the program in the 

BASIC track’s glide path, and remains 

an eligible, low revenue ACO, it would 

be permitted to renew in Level E of the 

BASIC track for a second agreement 

period. Continuing this example, for the 

ACO to continue its participation in the 

program for a third or subsequent 

agreement period, it would need to 

renew its participation agreement under 

the ENHANCED track. As another 

example, a low revenue ACO that enters 

the program in the BASIC track’s glide 

path could participate for a second 

agreement under the ENHANCED track, 

and enter a third agreement period 

under Level E of the BASIC track before 

being required to participate in the 

ENHANCED track for its fourth and any 

subsequent agreement period. 

Second, for ACOs identified as reentering ACOs because greater than 50 

percent of their ACO participants have 

recent prior participation in the same 

ACO, we would determine the 

eligibility of the ACO to participate in 

the BASIC track based on the prior 

participation of this other entity. For 

example, if ACO A is identified as a reentering ACO because more than 50 

percent of its ACO participants 

previously participated in ACO B 

during the relevant look back period, we 

would consider ACO B’s prior 

participation in the BASIC track in 

determining the eligibility of ACO A to 

enter a new participation agreement in 

the program under the BASIC track. For 

example, if ACO B had previously 

participated in two different agreement 

periods under the BASIC track, 

regardless of whether ACO B completed 

these agreement periods, ACO A would 

be ineligible to enter the program for a 

new agreement period under the BASIC 

track and would be limited to 

participating in the ENHANCED track. 

Changing the circumstances of this 

example, if ACO B had previously 

participated under the BASIC track 

during a single agreement period, ACO 

A may be eligible to participate in the 

BASIC track under Level E, the track’s 

highest level of risk and potential 

reward, but would be ineligible to enter 

the BASIC track’s glide path because 

ACO A would have been identified as 

experienced with performance-based 

risk Medicare ACO initiatives (as 

proposed). 

We recognized that the difference in 

the level of risk and potential reward 

under the BASIC track, Level E 

compared to the payment model under 

the ENHANCED track could be 

substantial for low revenue ACOs. 

Therefore, we also considered and 

sought comment on an approach that 

would allow low revenue ACOs to 

gradually transition from the BASIC 

track’s Level E up to the level of risk 

and potential reward under the 

ENHANCED track. For example, we 

sought comment on whether it would be 

helpful to devise a glide path that would 

be available to low revenue ACOs 

entering the ENHANCED track. We also 

considered, and sought comment on, 

whether such a glide path under the 

ENHANCED track should be available to 

all ACOs. As another alternative, we 

considered allowing low revenue ACOs 

to continue to participate in the BASIC 

track under Level E for longer periods 

of time, such as a third or subsequent 

agreement period. However, we 

indicated our concern that without a 

time limitation on participation in the 

BASIC track, ACOs may not prepare to 

take on the highest level of risk that 

could drive the most meaningful change 

in providers’ and suppliers’ behavior 

toward achieving the program’s goals. 

As an alternative to the proposed 

approach for allowing low revenue 

ACOs to participate in the BASIC track 

in any two agreement periods (nonsequentially), we sought comment on an 

approach that would require 

participation in the BASIC track to 

occur over two consecutive agreement 

periods before the ACO enters the 

ENHANCED track. This approach would 

prevent low revenue ACOs that entered 

the ENHANCED track from participating 

in a subsequent agreement period under 

the BASIC track. That is, it would 

prevent an ACO from moving from a 

higher level of risk to a lower level of 

risk. However, given changes in ACO 

composition, among other potential 

factors, we indicated our belief that it is 

important to offer low revenue ACOs 

some flexibility in their choice of level 

of risk from one agreement period to the 

next. 

We proposed to specify these 

proposed requirements for low revenue 

ACOs and high revenue ACOs in 

revisions to § 425.600, along with other 

proposed requirements for determining 

participation options based on the 

experience of the ACO and its ACO 

participants, as discussed in section 


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II.A.5.c. of this final rule. We proposed 

to use our determination of whether an 

ACO is a low revenue ACO or high 

revenue ACO in combination with our 

determination of whether the ACO is 

experienced or inexperienced with 

performance-based risk (which we 

proposed to determine based on the 

experience of both the ACO legal entity 

and the ACO participant TINs with 

performance-based risk), in determining 

the participation options available to the 

ACO. We sought comment on these 

proposals. 

More generally, we noted that the 

proposed approach to redesigning the 

program’s participation options 

maintains flexibility for ACOs to elect to 

enter higher levels of risk and potential 

reward more quickly than is required 

under the proposed participation 

options. Any ACO may choose to apply 

to enter the program under or renew its 

participation in the ENHANCED track. 

Further, ACOs eligible to enter the 

BASIC track’s glide path may choose to 

enter at the highest level of risk and 

potential reward under the BASIC track 

(Level E), or advance to that level more 

quickly than is provided for under the 

automatic advancement along the glide 

path. 

Comment: A few commenters agreed 

with the proposed approach to allow 

low revenue (typically physician-led) 

ACOs up to two agreement periods 

under the BASIC, while requiring high 

revenue ACOs (the typically betterresourced, hospital-based entities) to 

move more quickly to the ENHANCED 

track. Another commenter explained 

that the required move to downside risk 

is appropriate for urban health care 

systems that have the scale and 

resources to absorb a bad year. Several 

commenters favored the proposed 

approach for requiring more rapid 

transition to higher risk by high revenue 

ACOs. A few commenters urged CMS to 

encourage more low revenue ACO 

participation, and to increase financial 

alignment with value for high revenue 

ACOs. More generally, a few 

commenters supported the overall 

framework for the proposed redesign of 

the Shared Savings Program, including 

the proposed transition from one-sided 

to two-sided models. 

Many commenters expressed 

concerns about the proposed approach 

to restricting the amount of time ACOs 

may participate in the BASIC track prior 

to participation in the ENHANCED 

track. Some commenters suggested that 

all ACOs should be allowed to remain 

in the BASIC track in Level E, or a track 

that meets the nominal risk 

requirements under the Quality 

Payment Program, finding the level of 

risk offered under the ENHANCED track 

to be unbearable. 

One commenter, MedPAC, suggested 

CMS consider allowing all ACOs to 

operate in the BASIC track for two 

agreement periods, suggesting that it has 

enough downside risk to encourage 

ACOs to control costs, and the modest 

level of risk in the model may be more 

palatable to a wider range of ACOs. 

However, we note that MedPAC also 

suggested that because the ENHANCED 

track has stronger incentives for cost 

control, an argument can be made that 

all ACOs should move to the 

ENHANCED track after one 5-year 

agreement period in the BASIC track. 

Some commenters specifically 

opposed limiting high revenue ACOs to 

one agreement period in the BASIC 

track. Given that high revenue ACOs are 

responsible for a greater share of 

healthcare spending than low revenue 

ACOs, one commenter agreed that it is 

reasonable to ask high revenue ACOs to 

assume greater levels of risk and/or at a 

faster pace than low revenue ACOs. But 

this commenter also suggested that CMS 

should also take into account that larger 

systems must invest in change across a 

much broader delivery ‘‘footprint’’ and 

so may require additional investments 

over multiple years to make 

transformative system changes, and also 

need a longer time to recoup 

investments (such as in the form of 

shared savings). This commenter 

suggested that high revenue ACOs be 

allowed to remain in Level E of the 

BASIC track for a second agreement 

period. 

Some commenters suggested 

alternatives for distinguishing ACOs: 

• One commenter suggested that instead of 

distinguishing low revenue ACOs and high 

revenue ACOs for purposes of determining 

the ACO’s participation option by track, that 

the distinction be used to determine the 

sharing rate or MSR applied to the ACO 

within the BASIC track’s glide path. This 

commenter supported the alternative 

consideration to provide low revenue ACOs 

(particularly small, rural and physician-led 

ACOs) either a lower MSR or higher shared 

savings rate. 

• One commenter suggested that CMS 

consider a combination of other program 

policies to drive ACO performance, rather 

than the proposed approach to transition 

ACOs to performance-based risk, which 

could include: (1) Dropping ACOs from the 

program if they have not achieved savings 

after several years; (2) Reducing shared 

savings payments to ACOs that incur large 

losses before generating savings; and (3) 

Allowing ACOs to take accountability for the 

specific types of spending they are capable of 

controlling, rather than total Medicare 

spending. 

• One commenter suggests that the 

potential to share in savings is a sufficient 

motivation for ACOs, as opposed to 

performance-based risk. 

• Several commenters believe that both 

CMS and other researchers have significantly 

overstated the degree to which the 

performance of hospital-based ACOs differs 

from that of physician-led ACOs. These 

commenters urged CMS not move forward 

with the proposed approach, and to instead 

seek ways to support these ACOs, rather than 

make it harder for them to achieve savings. 

Response: We appreciate commenters’ 

support for the proposed approach to 

limiting ACOs’ participation in the 

BASIC track, and requiring all ACOs to 

eventually transition to the ENHANCED 

track. Specifically, we appreciate 

commenters’ support for the proposed 

approach to limiting high revenue ACOs 

to a single agreement period in the 

BASIC track (if eligible based on a 

determination that they are 

inexperienced with performance-based 

risk Medicare ACO initiatives), while 

limiting low revenue ACOs to a 

maximum of two agreement periods in 

the BASIC track (with ACOs 

inexperienced with performance-based 

risk Medicare ACO initiatives being 

eligible to participate under a single 

agreement period in the BASIC track’s 

glide path and a single agreement period 

in Level E of the BASIC track). 

We recognize that many commenters 

expressed concern about this approach, 

although at this time we decline to 

adopt commenters’ suggestions that we 

allow some or all ACOs additional 

agreement periods under the BASIC 

track compared to the proposed 

approach, or to not require that ACOs 

ultimately transition to the ENHANCED 

track. As supported by some 

commenters, we continue to believe that 

requiring ACOs to transition to the 

ENHANCED track, with the highest 

level of risk and potential reward under 

the program, could drive ACOs to more 

aggressively pursue the program’s goals 

of improving quality of care and 

lowering growth in FFS expenditures 

for their assigned beneficiary 

populations. 

We also note that under the longer, 

5-year agreement periods we are 

finalizing in this final rule (see section 

II.A.2), the timeline for entering higher 

levels of benchmark-based risk remains 

relatively consistent with the program’s 

current requirements. Under the 

program’s current requirements, ACOs 

must transition to a two-sided model by 

the start of their third 3-year agreement 

period, allowing for not more than 6 

performance years under a one-sided 

model before being required to enter 

either Track 2 or Track 3. A gentler 

pathway between the existing Track 1 

and the levels of risk and reward under 


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the program’s current two-sided models 

has been a long standing request from 

ACOs and other program stakeholders, 

as described in section II.A.1 of this 

final rule and as reflected in some 

comments on the proposed program 

redesign. The proposed approach allows 

a gentler progression to two-sided risk, 

including a progression over a 5-year 

agreement period for all ACOs 

inexperienced with performance-based 

risk Medicare ACO initiatives, and a 

progression over two, 5-year agreement 

periods for low revenue ACOs. We note 

that this timeline is further extended for 

ACOs entering an agreement period 

beginning on July 1, 2019, since this 

mid-year start includes an additional 6- 

month performance year, resulting in an 

agreement period of 5.5 years. 

We also note also that early entrants 

into the Shared Savings Program have 

been able to participate under a onesided model for up to 6 performance 

years, and we anticipate that eligible 

ACOs will continue their participation 

in the BASIC track’s glide path to 

extend their transition to benchmarkbased risk under the ENHANCED track 

for at least another 5 years. 

We also believe the proposed 

approach offers the right combination of 

a slower transition to the ENHANCED 

track for low revenue ACOs, and more 

rapid progression for high revenue 

ACOs. We therefore decline the 

commenter’s suggestion that we require 

all ACOs to transition to the 

ENHANCED track after one 5-year 

agreement period in the BASIC track. 

We also decline to accept the 

commenters’ alternative suggestions. We 

are not adopting an approach to 

distinguish the sharing rates or the MSR 

applied to ACOs within the BASIC 

track’s glide path, as described in 

sections II.A.3 and II.A.6. of this final 

rule, since ACOs may elect their MSR 

and MLR under performance-based risk. 

Therefore we decline to use the low 

revenue ACO and high revenue ACO 

distinctions to determine the financial 

model features applied to ACOs within 

the BASIC track’s glide path. This 

approach would also not achieve our 

goal of requiring ACOs to progress to the 

ENHANCED track over time. 

Some suggested alternative 

approaches, to distinguish ACOs based 

on their financial performance, were 

beyond the scope of the proposed rule, 

such as reducing ACOs’ shared savings 

payments if they incurred large losses in 

prior years, or allowing ACOs to become 

accountable for specific types of 

spending instead of total Medicare 

spending. We believe the latter 

approach, to segment accountability for 

beneficiaries’ healthcare costs, would 

not achieve a key aim of the program, 

which is for ACOs to become 

accountable for total Medicare Parts A 

and B FFS expenditures for their 

assigned beneficiaries, and could 

reinforce existing incentives that lead to 

fragmented care. Further, we 

appreciated the suggestion that we 

remove ACOs with poor financial 

performance, which seems similar to 

our proposed approach to monitoring 

and termination for poor financial 

performance as discussed in section 

II.A.5.d of this final rule. 

We also disagree with the 

commenter’s suggestion that shared 

savings potential alone is a sufficient 

motivator for ACOs to drive the most 

meaningful systematic change in the 

healthcare system. We believe that 

greater risk with the possibility of 

greater reward under two-sided models 

is a pathway for ACOs to transform their 

care delivery by lowering growth in 

expenditures while ensuring they 

provide coordinated, high quality care 

for their Medicare FFS populations. For 

this reason we also decline commenters’ 

suggestions that we forgo the proposed 

approach and instead seek other ways to 

support high revenue ACOs’ 

achievement of the program’s goals. 

Comment: A few commenters 

explained that the challenge of being 

forced into risk is of great importance to 

ACOs of all sizes, composition, and 

ownership. Some commenters warned 

that requiring ACOs to take on high 

levels of risk before they are ready will 

result in program attrition. One 

commenter explained that regardless of 

structure, significant investments are 

needed in population health platforms 

and care process changes for ACOs to 

bear risk. Several commenters point to 

a variety of factors, other than ACO 

composition, related to an ACO’s 

readiness to take on performance-based 

risk. One commenter explained that the 

financial position and backing of a 

particular ACO as well as the ability to 

assume risk depends on a variety of 

factors, such as local market dynamics, 

culture, leadership, financial status, 

previous program success, and the 

resources required to address social 

determinants of health that influence 

care and outcomes for patients. Another 

commenter described an organization’s 

ability to bear risk as having many 

inputs, including payer mix. Another 

commenter explained that each ACO is 

unique and faces different 

circumstances that determine its ability 

to take on higher levels of risk. 

Response: As we have previously 

described in responding to comments in 

this section of this final rule, the current 

structure of the Shared Savings Program 

requires ACO’s eventual transition to 

performance-based risk while also 

affording ACOs and their provider/ 

suppliers the flexibility to redesign care 

to address the unique needs of their 

population and community. While we 

appreciate that the circumstance of each 

ACO may be unique, as commenters 

point out, we also believe that the 

program’s requirements are clear about 

the expectation that ACOs enter 

performance-based risk over the course 

of their participation in the program, 

should they choose to continue their 

participation over of multiple agreement 

periods. We believe the proposed 

approach, including a glide path within 

the BASIC track from a one-sided model 

through progressively higher levels of 

performance-based risk offers a gentler 

and more manageable approach for 

ACOs to become experienced with twosided models before undertaking more 

significant levels of risk and potential 

reward. 

Comment: Commenters described a 

variety of reasons why high revenue 

ACOs would benefit from additional 

time under lower-risk participation 

options. As echoed in other comments, 

one commenter explained that the 

proposed rule would force hospitalcentric ACOs to take on additional risk 

too quickly, when these ACOs need 

additional time to adjust their cost 

structures and change operating models. 

Another commenter described its 

concerns that, in the current 

environment, if CMS pushes to drive 

losses more quickly to hospitals, it will 

be increasingly difficult for hospital 

systems to invest dollars back into 

population health management 

activities, which is necessary for long 

term success of ACO to meet the aims 

of the Shared Savings Program. 

A few commenters explained that 

hospital-based, high revenue ACOs, face 

greater challenges in taking on 

performance-based risk because they 

tend to be less cohesive groups, which 

have invested heavily in developing the 

infrastructure in both technology 

platforms and care management to help 

their ACOs eventually succeed. 

However, another commenter 

explained that hospitals and health 

systems are best equipped to lead other 

providers in moving toward downside 

risk because they have provided—and 

continue to provide—significant 

infrastructure support related to health 

information technology, regulatory 

compliance and other administrative 

functions that are key to successful 

APM implementation. 

A few commenters explained that 

larger systems often already operate at 

greater efficiency before entering the 


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program, and as a result may often have 

less spending to trim, which is a 

commonly cited concern regarding 

historical benchmarks. Requiring 

transition to higher levels of 

performance-based risk may limit 

participation by these providers in the 

program. 

Response: We appreciate the 

commenters’ explanations of the 

challenges some high revenue ACOs 

may face in taking on performancebased risk under the proposed redesign 

of the Shared Savings Program. We are 

not persuaded, however, by the 

suggested reasons to permit high 

revenue ACOs additional time under the 

BASIC track, when we believe they have 

the capacity to drive more meaningful, 

systematic change in achieving the 

program’s goals by participating under 

higher levels of performance-based risk. 

As we have described elsewhere in 

this final rule, we have observed that 

low revenue ACOs, which include 

small, physician-only and rural ACOs, 

show better average results compared to 

high revenue ACOs, which typically 

include hospitals (see section V of this 

final rule). Given the potential for high 

revenue ACOs to lower growth in 

Medicare Parts A and B FFS 

expenditures, we believe it is critical to 

ensure they remain accountable for the 

quality of care, and expenditures, for 

their assigned beneficiaries. We believe 

that an outcome of this approach to 

program redesign may be new, 

innovative and more aggressive 

approaches to reaching the program’s 

goals of improving quality of care and 

lowering growth in Medicare FFS 

expenditures for beneficiaries. 

Regarding the commenter’s concern 

about the participation of already 

efficient high revenue ACOs, we note 

that (as described in section II.D. of this 

final rule) we are finalizing additional 

modifications to the program’s 

methodology for establishing, updating 

and adjusting the ACO’s historical 

benchmark to improve incentives and to 

increase the accuracy of the benchmark 

by incorporating regional factors in an 

ACO’s first agreement period and better 

capturing changes in beneficiary health 

status. The BASIC track’s glide path, 

coupled with longer agreement periods 

and benchmark improvements, 

including regional adjustments for 

efficiency starting in the first agreement 

period, as well as new risk adjustment 

coding intensity adjustments, should 

help ACOs transition to performancebased risk. 

Comment: Some commenters stated 

that requiring hospital-based ACOs to 

take on more risk sooner will cause 

these ACOs to cease participation, or 

discourage ACO formation. 

A few commenters expressed concern 

that the proposed approach would make 

participation more challenging for ACOs 

that would be high volume, such as 

those with hospital participants, and 

would thereby marginalize these 

participants and result in reduced 

participation by hospital-based ACOs. 

These commenters explained that this 

could lead to their departure and would 

squander the significant investments 

they have made in care coordination 

and data-sharing before they were able 

to pay off for the Medicare program and 

its beneficiaries. 

Several commenters explained that 

keeping hospitals in the Shared Savings 

Program is critical to reducing total cost 

of care. One commenter suggested the 

high revenue ACO distinction would 

discourage participation by the ACOs 

that can best coordinate acute and 

ambulatory care and are more likely to 

generate substantial savings to the 

Medicare program over the long-term. 

A few commenters stated that the 

proposed approach would disadvantage 

ACOs that treat complex patients that 

have higher expenditures, while other 

commenters indicated that the proposed 

approach would penalize high revenue 

ACOs for the size of their patient 

populations and their volume of 

services. 

Response: We believe a combination 

of the policy changes being established 

with this final rule can help ACOs 

transform care and mitigate to some 

extent commenters’ concerns around the 

populations served by high revenue 

ACOs and other challenges faced by 

these organizations. For example, as 

discussed in section II.D. of this final 

rule, the potentially smaller regional 

adjustments for ACOs caring for 

complex patients (where the ACOs’ 

expenditures may be higher than 

expenditures in the ACO’s regional 

service area) will provide more time for 

these ACOs to bring their costs in line 

with their region. In addition, these 

ACOs will benefit from the modified 

approach to risk adjustment using full 

CMS–HCC scores with a 3 percent cap 

on growth for the agreement period, 

which may more accurately capture the 

conditions of their patients and account 

for the health status changes in an 

ACO’s performance year assigned 

beneficiary population. Further, eligible 

ACOs will have new tools to support 

care coordination, such as through 

expanded coverage of telehealth 

services and a SNF 3-day rule waiver 

(see section II.B. of this final rule), and 

beneficiary engagement such as through 

the opportunity for eligible ACOs to 

implement Beneficiary Incentive 

Programs (see section II.C. of this final 

rule). Eligible clinicians in high revenue 

ACOs may also be eligible to receive QP 

status and benefit from incentive 

payments under the Quality Payment 

Program for participation in an 

Advanced APM under the ENHANCED 

track or Level E of the BASIC track (if 

eligible). High revenue ACOs (and ACOs 

more generally) could find their 

participation in a financial model that is 

an Advanced APM to be a factor to their 

advantage in attracting and retaining 

participation of ACO participants and 

ACO providers/suppliers. The longer 

agreement periods will provide more 

time for ACOs to become successful and 

transform care and benefit from their 

success, which we believe will be 

especially important to high revenue 

ACOs (including most hospital-based 

ACOs), which we expect generally will 

have more potential savings to achieve. 

We also note that while only a small 

number of ACOs have owed shared 

losses, we have observed that one high 

revenue ACO that incurred shared 

losses, which was a hospital-based 

ACO, continues to participate and work 

toward transforming care. This suggests 

that even ACOs that have incurred 

shared losses still can provide a catalyst 

for making health systems and provider 

networks more efficient and effective. 

Comment: One commenter disagreed 

with the need to push high revenue 

ACOs to accept greater amounts of risk, 

pointing to the relative newness of the 

Shared Savings Program and the other 

Medicare payment reforms that have 

occurred in recent years. According to 

this commenter, these initiatives are 

straining already limited resources in 

hospitals and making it more 

challenging to keep up with the 

extremely rapid pace of payment 

reforms being pursued by CMS. 

Response: As we explained in the 

August 2018 proposed rule, our 

proposed redesign of the Shared Savings 

Program was informed by our initial 

years of experience with the program, 

including performance results. 

However, we do not agree with the 

commenter’s suggestion that we 

potentially delay changes to further the 

achievement of the program’s goals in 

light of other payment reforms 

implemented by the agency. Hospitals 

have been at the forefront of value-based 

purchasing and we believe the 

principles and lessons learned from 

quality improvement and efficiency 

measures can help inform their success 

under larger population-based, valuebased programs. 

Comment: Some commenters urged 

CMS to allow even greater flexibility to 


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small, rural, or physician-only ACOs, 

low revenue ACOs, and ACOs that 

include safety net providers, to prepare 

for the transition to performance-based 

risk. Commenters explained that these 

ACOs face challenges in that they lack 

the financial reserves or the financial 

backing to move into performance-based 

risk. One commenter explained: Small 

and rural ACOs have achieved excellent 

clinical quality scores above national 

averages even as they beat their 

spending benchmarks, however, the 

natural year-to-year variation in 

performance and risk of paying back 

shared losses even in a single year is too 

much uncertainty for providers that live 

on the margins. Several commenters 

described the level of risk in the 

ENHANCED track as being too high for 

low revenue ACOs. One commenter 

described the distance in risk and 

downside loss between the BASIC 

track’s Level E and the ENHANCED 

track as ‘‘abysmal,’’ and undertaking 

this level of performance-based risk may 

be ‘‘financially suicidal’’ for a low 

revenue ACO. 

Response: We appreciate commenters’ 

concerns about the obstacles low 

revenue ACOs face in transitioning to 

performance-based risk given their 

potentially more limited financial 

reserves, particularly the challenges 

faced by small, rural and physician-only 

ACOs, and especially ACOs new to the 

Shared Savings Program and the 

accountable care model. We believe 

these concerns further support our 

proposed approach to providing low 

revenue ACOs additional time to 

prepare to take on the higher levels of 

performance-based risk required under 

the ENHANCED track, by allowing 

eligible low revenue ACOs up to two, 

5-year agreement periods for a total of 

10 years under the BASIC track (or 10.5 

years in the case of an ACO with an 

agreement period beginning on July 1, 

2019). 

We also believe that a combination of 

policy modifications reflected in our 

final policies within this final rule 

address commenters’ concerns and 

suggestions for a relatively gentler glide 

path to two-sided risk for small, rural 

and physician-only ACOs, and support 

continued participation of these ACOs 

in the Shared Savings Program. For one, 

as discussed in section II.A.5.b.(1) of 

this final rule, we are finalizing our 

proposed definitions of low revenue 

ACOs and high revenue ACOs with a 

modification to increase the threshold 

percentage used in making these 

determinations (from 25 percent to 35 

percent) so that more ACOs would be 

considered low revenue ACOs. Second, 

we are finalizing higher sharing rates 

under BASIC track (as described in 

section II.A.3 of this final rule) which 

we believe will allow ACOs eligible for 

shared savings access to additional 

financial resources to support their 

operational costs and their participation 

in performance-based risk (such as 

supporting these ACOs in establishing 

their repayment mechanism 

arrangements). Third, as described in 

section II.A.5.c of this final rule, we are 

finalizing a policy modification to allow 

additional flexibility for new legal 

entities, that are low revenue ACOs and 

inexperienced with performance-based 

risk Medicare ACO initiatives, to 

participate for up to 3 performance 

years (or 4 performance years in the case 

of ACOs entering an agreement period 

beginning on July 1, 2019) under a onesided model of the BASIC track’s glide 

path before transitioning to Level E (the 

highest level of risk and potential 

reward under the BASIC track). Fourth, 

and lastly, as described in section 

II.A.6.c of this final rule, we are 

modifying our proposed approach for 

determining repayment mechanism 

arrangement amounts to reduce the 

burden of these arrangements on all 

ACOs participating in the ENHANCED 

track. Under the modified approach, the 

repayment mechanism amount for such 

ACOs must be equal to the lesser of the 

following: 1 percent of the total per 

capita Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries, based on expenditures for 

the most recent calendar year for which 

12 months of data are available; or 2 

percent of the total Medicare Parts A 

and B FFS revenue of its ACO 

participants, based on revenue for the 

most recent calendar year for which 12 

months of data are available. 

We decline commenters’ suggestions 

that certain ACOs be exempt from 

transitioning to performance-based risk 

(generally) or higher levels of risk and 

potential reward. As we explain 

elsewhere in this section of this final 

rule, we believe the progression to 

performance-based risk is critical to 

driving the most meaningful change in 

providers’ and suppliers’ behavior 

toward achieving the program’s goals, 

and that participation in two-sided 

models, and ultimately the ENHANCED 

track, should be the goal for all Shared 

Savings Program ACOs. Therefore, at 

this time, we also decline to establish a 

separate track with alternative 

participation options targeted 

specifically at particular subsets of 

ACOs, including those that typically 

may be low revenue ACOs. 

Comment: A few commenters 

supported the ability of low revenue 

ACOs to transition from the BASIC track 

to the ENHANCED track after a single 

agreement period under the BASIC 

track, while retaining the opportunity to 

return to the BASIC track. One 

commenter explained its belief that this 

approach creates a ‘‘safety net’’ that will 

encourage ACOs that believe they are 

ready to bear a significant amount of 

risk to test their capabilities in the 

ENHANCED track as opposed to taking 

advantage of both agreement periods in 

the BASIC track (sequentially). 

Response: We appreciate commenters’ 

support for our proposal to allow low 

revenue ACOs to participate in the 

BASIC track in any two agreement 

periods (including non-sequentially). 

Final Action: After considering the 

comments we received, we are 

finalizing our proposed policies for 

restricting ACOs’ participation in the 

BASIC track prior to transitioning to 

participation in the ENHANCED track. 

High revenue ACOs will be limited to, 

at most, a single agreement period under 

the BASIC track prior to transitioning to 

participation under the ENHANCED 

track. Low revenue ACOs will be 

limited to, at most, two agreement 

periods for a total of 10 years under the 

BASIC track (or 10.5 years in the case 

of an ACO that participates in an 

agreement period that begins on July 1, 

2019, which spans a total of 5.5 years). 

These agreement periods do not need to 

be sequential. We are specifying these 

requirements for low revenue ACOs and 

high revenue ACOs in revisions to 

§ 425.600, along with other 

requirements we are finalizing for 

determining participation options based 

on the experience of the ACO and its 

ACO participants with performancebased risk Medicare ACO initiatives, as 

discussed in section II.A.5.c. of this 

final rule. 

c. Determining Participation Options 

Based on Prior Participation of ACO 

Legal Entity and ACO Participants 

(1) Overview 

In this section of the final rule we 

describe policies for determining ACO 

participation options based on prior 

participation of the ACO legal entity 

and ACO participants. In section II.A.5.c 

of the August 2018 proposed rule (83 FR 

41820 through 41834), we proposed 

modifications to the regulations to 

address the following: 

• Allowing flexibility for ACOs currently 

within a 3-year agreement period under the 

Shared Savings Program to transition quickly 

to a new agreement period that is not less 

than 5 years under the BASIC track or 

ENHANCED track. 

• Establishing definitions to more clearly 

differentiate ACOs applying to renew for a 

second or subsequent agreement period and 


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ACOs applying to re-enter the program after 

their previous Shared Savings Program 

participation agreement expired or was 

terminated resulting in a break in 

participation, and to identify new ACOs as 

re-entering ACOs if greater than 50 percent 

of their ACO participants have recent prior 

participation in the same ACO in order to 

hold these ACO accountable for their ACO 

participants’ experience with the program. 

• Revising the criteria for evaluating an 

ACO’s prior participation in the Shared 

Savings Program to determine the eligibility 

of ACOs seeking to renew its participation in 

the program for a subsequent agreement 

period, ACOs applying to re-enter the 

program after termination or expiration, and 

ACOs that are identified as re-entering ACOs 

based on their ACO participants’ recent 

experience with the program. 

• Establishing criteria for determining the 

participation options available to an ACO 

based on its experience with performancebased risk Medicare ACO initiatives (and that 

of its ACO participants) and on whether the 

ACO is a low revenue ACO or high revenue 

ACO. 

• Establishing policies that more clearly 

differentiate the participation options, and 

the applicability of program requirements 

that phase-in over time based on the ACO’s 

and ACO participants’ prior experience in 

the Shared Savings Program or with other 

Medicare ACO initiatives. 

We summarized the regulatory 

background for the proposed policies, 

which included multiple sections of the 

program’s regulations, as developed 

over several rulemaking cycles. 

(2) Background on Re-Entry Into the 

Program After Termination 

In the initial rulemaking for the 

program, we specified criteria for 

terminated ACOs seeking to re-enter the 

program in § 425.222 (see 76 FR 67960 

through 67961). In the June 2015 final 

rule, we revised this section to address 

eligibility for continued participation in 

Track 1 by previously terminated ACOs 

(80 FR 32767 through 32769). Currently, 

this section prohibits ACOs re-entering 

the program after termination from 

participating in the one-sided model 

beyond a second agreement period and 

from moving back to the one-sided 

model after participating in a two-sided 

model. This section also specifies that 

terminated ACOs may not re-enter the 

program until after the date on which 

their original agreement period would 

have ended if the ACO had not been 

terminated (the ‘‘sit-out’’ period). This 

policy was designed to restrict re-entry 

into the program by ACOs that 

voluntarily terminate their participation 

agreement, or have been terminated for 

failing to meet program integrity or 

other requirements (see 76 FR 67960 

and 67961). Under the current 

regulations, we only consider whether 

an ACO applying to the program is the 

same legal entity as a previously 

terminated ACO, as identified by TIN 

(see definition of ACO under § 425.20), 

for purposes of determining whether the 

appropriate ‘‘sit-out’’ period of 

§ 425.222(a) has been observed and the 

ACO’s eligibility to participate under 

the one-sided model. Section 425.222 

also provides criteria to determine the 

applicable agreement period when a 

previously terminated ACO re-enters the 

program. We explained the rationale for 

these policies in prior rulemaking and 

refer readers to the November 2011 and 

June 2015 final rules for more detailed 

discussions. 

Additionally, under § 425.204(b), the 

ACO must disclose to CMS whether the 

ACO or any of its ACO participants or 

ACO providers/suppliers have 

participated in the Shared Savings 

Program under the same or a different 

name, or are related to or have an 

affiliation with another Shared Savings 

Program ACO. The ACO must specify 

whether the related participation 

agreement is currently active or has 

been terminated. If it has been 

terminated, the ACO must specify 

whether the termination was voluntary 

or involuntary. If the ACO, ACO 

participant, or ACO provider/supplier 

was previously terminated from the 

Shared Savings Program, the ACO must 

identify the cause of termination and 

what safeguards are now in place to 

enable the ACO, ACO participant, or 

ACO provider/supplier to participate in 

the program for the full term of the 

participation agreement 

(§ 425.204(b)(3)). 

The agreement period in which an 

ACO is placed upon re-entry into the 

program has ramifications not only for 

its risk track participation options, but 

also for the benchmarking methodology 

that is applied and the quality 

performance standard against which the 

ACO will be assessed. ACOs in a second 

or subsequent agreement period receive 

a rebased benchmark as currently 

specified under § 425.603. For ACOs 

that renew for a second or subsequent 

agreement period beginning in 2017 and 

subsequent years, the rebased 

benchmark incorporates regional 

expenditure factors, including a regional 

adjustment. The weight applied in 

calculating the regional adjustment 

depends in part on the agreement period 

for which the benchmark is being 

determined (see § 425.603(c)), with 

relatively higher weights applied over 

time. Further, for an ACO’s first 

agreement period, the benchmark 

expenditures are weighted 10 percent in 

benchmark year 1, 30 percent in 

benchmark year 2, and 60 percent in 

benchmark year 3 (see § 425.602(a)(7)). 

In contrast, for an ACO’s second or 

subsequent agreement period we 

equally weight each year of the 

benchmark (§ 425.603). With respect to 

quality performance, the quality 

performance standard for ACOs in the 

first performance year of their first 

agreement period is set at the level of 

complete and accurate reporting of all 

quality measures. Pay-for-performance 

is phased in over the remaining years of 

the first agreement period, and 

continues to apply in all subsequent 

performance years (see § 425.502(a)). 

We explained our belief that the 

regulations as currently written create 

flexibilities that allow more experienced 

ACOs to take advantage of the 

opportunity to re-form and re-enter the 

program under Track 1 or to re-enter the 

program sooner or in a different 

agreement period than otherwise 

permissible. In particular, terminated 

ACOs may re-form as a different legal 

entity and apply to enter the program as 

a new organization to extend their time 

in Track 1 or enter Track 1 after 

participating in a two-sided model. 

These ACOs would effectively 

circumvent the requisite ‘‘sit-out’’ 

period (the remainder of the term of an 

ACO’s previous agreement period), 

benchmark rebasing, including the 

application of equal weights to the 

benchmark years and the higher 

weighted regional adjustment that 

applies in later agreement periods, or 

the pay-for-performance quality 

performance standard that is phased in 

over an ACO’s first agreement period in 

the program. 

(3) Background on Renewal for 

Uninterrupted Program Participation 

In the June 2015 final rule, we 

established criteria in § 425.224 

applicable to ACOs seeking to renew 

their agreements, including 

requirements for renewal application 

procedures and factors CMS uses to 

determine whether to renew a 

participation agreement (see 80 FR 

32729 through 32730). Under our 

current policies, we consider a renewing 

ACO to be an organization that 

continues its participation in the 

program for a consecutive agreement 

period, without interruption resulting 

from termination of the participation 

agreement by CMS or by the ACO (see 

§§ 425.218 and 425.220). Therefore, to 

be considered for timely renewal, an 

ACO within its third performance year 

of an agreement period is required to 

meet the application requirements, 

including submission of a renewal 

application, by the deadline specified 

by CMS, during the program’s typical 

annual application process. If the ACO’s 


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renewal application is approved by 

CMS, the ACO would have the 

opportunity to enter into a new 

participation agreement with CMS for 

the agreement period beginning on the 

first day of the next performance year 

(typically January 1 of the following 

year), and thereby to continue its 

participation in the program without 

interruption. 

In evaluating the application of a 

renewing ACO, CMS considers the 

ACO’s history of compliance with 

program requirements generally, 

whether the ACO has established that it 

is in compliance with the eligibility and 

other requirements of the Shared 

Savings Program, including the ability 

to repay shared losses, if applicable, and 

whether it has a history of meeting the 

quality performance standard in its 

previous agreement period, as well as 

whether the ACO satisfies the criteria 

for operating under the selected risk 

track, including whether the ACO has 

repaid shared losses generated during 

the prior agreement period. 

Under § 425.600(c), an ACO 

experiencing a net loss during a 

previous agreement period may reapply 

to participate under the conditions in 

§ 425.202(a), except the ACO must also 

identify in its application the cause(s) 

for the net loss and specify what 

safeguards are in place to enable the 

ACO to potentially achieve savings in 

its next agreement period. In the initial 

rulemaking establishing the Shared 

Savings Program, we proposed, but did 

not finalize, a requirement that would 

prevent an ACO from reapplying to 

participate in the Shared Savings 

Program if it previously experienced a 

net loss during its first agreement 

period. We explained that this proposed 

policy would ensure that underperforming organizations would not get 

a second chance (see 76 FR 19562, 

19623). However, we were persuaded by 

commenters’ suggestions that barring 

ACOs that demonstrate a net loss from 

continuing in the program could serve 

as a disincentive for ACO formation, 

given the anticipated high startup and 

operational costs of ACOs (see 76 FR 

67908 and 67909). We finalized the 

provision at § 425.600(c) that would 

allow for continued participation by 

ACOs despite their experience of a net 

loss. 

(4) Streamlining Regulations 

As described in the August 2018 

proposed rule (83 FR 41821 through 

41825), we proposed to modify the 

requirements for ACOs applying to 

renew their participation in the program 

(§ 425.224) and re-enter the program 

after termination (§ 425.222) or 

expiration of their participation 

agreement by both eliminating 

regulations that would restrict our 

ability to ensure that ACOs quickly 

migrate to the redesigned tracks of the 

program and strengthening our policies 

for determining the eligibility of ACOs 

to renew their participation in the 

program (to promote consecutive and 

uninterrupted participation in the 

program) or to re-enter the program after 

a break in participation. We also sought 

to establish criteria to identify as reentering ACOs new ACOs for which 

greater than 50 percent of ACO 

participants have recent prior 

participation in the same ACO, and to 

hold these ACO accountable for their 

ACO participants’ experience in the 

program. 

(a) Defining Renewing and Re-Entering 

ACOs 

We proposed to define a renewing 

ACO and an ACO re-entering after 

termination or expiration of its 

participation agreement (83 FR 41821 

through 41823). Under the program’s 

regulations, there is currently no 

definition of a renewing ACO, and 

based on our operational experience, 

this has caused some confusion among 

applicants. For example, there is 

confusion as to whether an ACO that 

has terminated from the program would 

be considered a first time applicant into 

the program or a renewing ACO. The 

definition of these terms is also 

important for identifying the agreement 

period that an ACO is applying to enter, 

which is relevant to determining the 

applicability of certain factors used in 

calculating the ACO’s benchmark that 

phase-in over the span of multiple 

agreement periods as well as the phasein of pay-for-performance under the 

program’s quality performance 

standards. We explained that having 

definitions that clearly distinguish 

renewing ACOs from ACOs that are 

applying to re-enter the program after a 

termination, or other break in 

participation will help us more easily 

differentiate between these 

organizations in our regulations and 

other programmatic material. We 

proposed to define renewing ACO and 

re-entering ACO in new definitions in 

§ 425.20. 

We proposed to define renewing ACO 

to mean an ACO that continues its 

participation in the program for a 

consecutive agreement period, without a 

break in participation, because it is 

either: (1) An ACO whose participation 

agreement expired and that immediately 

enters a new agreement period to 

continue its participation in the 

program; or (2) an ACO that terminated 

its current participation agreement 

under § 425.220 and immediately enters 

a new agreement period to continue its 

participation in the program. This 

proposed definition is consistent with 

current program policies for ACOs 

applying to timely renew their 

agreement under § 425.224 to continue 

participation following the expiration of 

their participation agreement. This 

proposed definition would include a 

new policy that would consider an ACO 

to be renewing in the circumstance 

where the ACO voluntarily terminates 

its current participation agreement and 

enters a new agreement period under 

the BASIC track or ENHANCED track, 

beginning immediately after the 

termination date of its previous 

agreement period thereby avoiding an 

interruption in participation. We would 

consider these ACOs to have effectively 

renewed their participation early. This 

part of the definition is consistent with 

the proposal to discontinue use of the 

‘‘sit-out’’ period after termination under 

§ 425.222(a). 

We considered two possible scenarios 

in which an ACO might seek to re-enter 

the program. In one case, a re-entering 

ACO would be a previously 

participating ACO, identified by a TIN 

(see definition of ACO under § 425.20), 

that applies to re-enter the program after 

its prior participation agreement expired 

without having been renewed, or after 

the ACO was terminated under 

§ 425.218 or § 425.220 and did not 

immediately enter a new agreement 

period (that is, an ACO with prior 

participation in the program that does 

not meet the proposed definition of 

renewing ACO). In this case, it is clear 

that the ACO is a previous participant 

in the program. In the other scenario, an 

entity applies under a TIN that is not 

previously associated with a Shared 

Savings Program ACO, but the entity is 

composed of ACO participants that 

previously participated together in the 

same Shared Savings Program ACO in a 

previous performance year. Under the 

current regulations, there is no 

mechanism in place to prevent a 

terminated ACO from re-forming under 

a different TIN and applying to re-enter 

the program, or for a new legal entity to 

be formed from ACO participants in a 

currently participating ACO. Doing so 

could allow an ACO to avoid 

accountability for the experience and 

prior participation of its ACO 

participants, and to avoid the 

application of policies that phase-in 

over time (the application of equal 

weights to the benchmark years and the 

higher weighted regional adjustment 

that applies in later agreement periods, 


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or the pay-for-performance quality 

performance standard that is phased in 

over an ACO’s first agreement period in 

the program). We explained our concern 

that, under the current regulations, 

Track 1 ACOs would be able to re-form 

to take advantage of the BASIC track’s 

glide path, which, as proposed, would 

allow for 2 years under a one-sided 

model for new ACOs only (2.5 

performance years in the case of an 

agreement period starting July 1, 2019). 

We therefore described our interest in 

adopting an approach to better identify 

prior participation and to specify 

participation options and program 

requirements applicable to re-entering 

ACOs. 

We proposed to define ‘‘re-entering 

ACO’’ to mean an ACO that does not 

meet the definition of a ‘‘renewing 

ACO’’ and meets either of the following 

conditions: 

(1) Is the same legal entity as an ACO, 

identified by TIN according to the 

definition of ACO in § 425.20, that 

previously participated in the program 

and is applying to participate in the 

program after a break in participation, 

because it is either: (a) An ACO whose 

participation agreement expired without 

having been renewed; or (b) an ACO 

whose participation agreement was 

terminated under § 425.218 or 

§ 425.220. 

(2) Is a new legal entity that has never 

participated in the Shared Savings 

Program and is applying to participate 

in the program and more than 50 

percent of its ACO participants were 

included on the ACO participant list 

under § 425.118, of the same ACO in 

any of the 5 most recent performance 

years prior to the agreement start date. 

We noted that a number of proposed 

policies depend on the prior 

participation of an ACO or the 

experience of its ACO participants, 

including: (1) Using the ACO’s and its 

ACO participants’ experience or 

inexperience with performance-based 

risk Medicare ACO initiatives to 

determine the participation options 

available to the ACO (proposed in 

§ 425.600(d)); (2) identifying ACOs 

experienced with Track 1 to determine 

the amount of time an ACO may 

participate under a one-sided model of 

the BASIC track’s glide path (proposed 

in § 425.600(d)); (3) determining how 

many agreement periods an ACO has 

participated under the BASIC track as 

eligible ACOs are allowed a maximum 

of two agreement periods under the 

BASIC track (proposed in § 425.600(d)); 

(4) assessing the eligibility of the ACO 

to participate in the program (proposed 

revisions to § 425.224); and (5) 

determining the applicability of 

program requirements that phase-in 

over multiple agreement periods 

(proposed in § 425.600(f)). The proposed 

revisions to the regulations to establish 

these requirements would apply directly 

to an ACO that is the same legal entity 

as a previously participating ACO. We 

also discuss throughout the preamble 

how these requirements would apply to 

new ACOs that are identified as reentering ACOs because greater than 50 

percent of their ACO participants have 

recent prior participation in the same 

ACO. 

Several examples illustrate the 

application of the proposed definition of 

re-entering ACO. For example, if ACO A 

is applying to the program for an 

agreement period beginning on July 1, 

2019, and ACO A is the same legal 

entity as an ACO whose previous 

participation agreement expired without 

having been renewed (that is, ACO A 

has the same TIN as the previously 

participating ACO) we would treat ACO 

A as the previously participating ACO, 

regardless of what share of ACO A’s 

ACO participants previously 

participated in the ACO. As another 

example, if ACO A, applying for a July 

1, 2019 start date, were a different legal 

entity (identified by a different TIN) 

from any ACO that previously 

participated in the Shared Savings 

Program, we would also treat ACO A as 

if it were an ACO that previously 

participated in the program (ACO B) if 

more than 50 percent of ACO A’s ACO 

participants participated in ACO B in 

any of the 5 most recent performance 

years (that is, performance year 2015, 

2016, 2017, 2018, or the 6-month 

performance year from January 1, 2019 

through June 30, 2019), even though 

ACO A and ACO B are not the same 

legal entity. 

We explained that looking at the 

experience of the ACO participants, in 

addition to the ACO legal entity, would 

be a more robust check on prior 

participation. It would also help to 

ensure that ACOs re-entering the 

program are treated comparably 

regardless of whether they are returning 

as the same legal entity or have reformed as a new entity. With ACOs 

allowed to make changes to their 

certified ACO participant list for each 

performance year, we have observed 

that many ACOs make changes to their 

ACO participants over time. For 

example, among ACOs that participated 

in the Shared Savings Program as the 

same legal entity in both PY 2014 and 

PY 2017, only around 60 percent of PY 

2017 ACO participants had also 

participated in the same ACO in PY 

2014, on average. For this reason, the 

ACO legal entity alone does not always 

capture the ACO’s experience in the 

program and therefore it is also 

important to look at the experience of 

ACO participants. 

We chose to propose a 5 performance 

year look back period for determining 

prior participation by ACO participants 

as it would align with the look back 

period for determining whether an ACO 

is experienced or inexperienced with 

performance-based risk Medicare ACO 

initiatives as discussed elsewhere in 

this section of this final rule. We 

clarified that the threshold for prior 

participation by ACO participants is not 

cumulative when determining whether 

an ACO is a re-entering ACO. For 

example, assume 22 percent of 

applicant ACO A’s ACO participants 

participated in ACO C in the prior 5 

performance years, 30 percent 

participated in ACO D, and the 

remaining 48 percent did not participate 

in any ACO during this period. ACO A 

would not be considered a re-entering 

ACO (assuming that ACO A is a new 

legal entity), because more than 50 

percent of its ACO participants did not 

participate in the same ACO during the 

5-year look back period. Although 

unlikely, we recognized the possibility 

that an ACO could quickly re-form 

multiple times and therefore more than 

50 percent of its ACO participants may 

have been included on the ACO 

participant list of more than one ACO in 

the 5 performance year look back 

period. In these cases, the most recent 

experience of the ACO participants in 

the new ACO would be most relevant to 

determining the applicability of policies 

to the re-entering ACO. We therefore 

proposed that the ACO in which more 

than 50 percent of the ACO participants 

most recently participated would be 

used in identifying the participation 

options available to the new ACO. 

We opted to propose a threshold of 

greater than 50 percent because it would 

identify ACOs with significant 

participant overlap and would allow us 

to more clearly identify a single, Shared 

Savings Program ACO in which at least 

the majority of ACO participants 

recently participated. We also 

considered whether to use a higher or 

lower percentage threshold. A lower 

threshold, such as 20, 30 or 40 percent, 

would further complicate the analysis 

for identifying the ACO or ACOs in 

which the ACO participants previously 

participated, and the ACO whose prior 

performance should be evaluated in 

determining the eligibility of the 

applicant ACO. On the other hand, 

using a higher percentage for the 

threshold would identify fewer ACOs 

that significantly resemble ACOs with 


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experience participating in the Shared 

Savings Program. 

We considered alternate approaches 

to identifying prior participation other 

than the overall percentage of ACO 

participants that previously participated 

in the same ACO, including using the 

percentage of ACO participants 

weighted by the paid claim amounts, 

the percentage of individual 

practitioners (NPIs) that had reassigned 

their billing rights to ACO participants, 

or the percentage of assigned 

beneficiaries the new legal entity has in 

common with the assigned beneficiaries 

of a previously participating ACO. 

While these alternative approaches have 

merit, we concluded that they would be 

less transparent to ACOs than using a 

straight percentage of TINs, as well as 

more operationally complex to compute. 

We sought comment on these 

proposed definitions and on the 

alternatives considered. 

Comment: Some commenters 

expressed concern that the distinctions 

for determining participation options, 

including evaluating whether ACOs are 

new, renewing, or re-entering, add 

complexity to the program. A few 

commenters opposed the approach to 

identifying re-entering ACOs, and 

suggested CMS forgo the policy. 

Response: We acknowledge that the 

approach to identifying re-entering 

ACOs and renewing ACOs will add 

some complexity to program policies 

and certain operational processes, such 

that it requires (for example) that we 

establish procedures to identify new 

legal entities that are re-entering ACOs 

because more than 50 percent of their 

ACO participants were included on the 

ACO participant list of the same ACO in 

any of the 5 most recent performance 

years prior to the agreement start date, 

as well as to process requests for ACOs 

seeking to renew early. However, we 

believe these definitions for ‘‘renewing 

ACO’’ and ‘‘re-entering ACO’’ are timely 

with the redesign of the program’s 

participation options and provide 

needed clarification to the program’s 

regulations, as well as an opportunity to 

more consistently evaluate eligibility for 

program participation by ACOs whose 

legal entity, or a significant portion of 

the ACO participants, has previous 

experience in the Shared Savings 

Program. 

We believe that the proposed 

definitions for renewing ACOs and reentering ACOs, and related changes to 

the program’s regulations for identifying 

participation options for these 

organizations, bolster program integrity. 

As we discussed in the August 2018 

proposed rule (see for example, 83 FR 

41822) and as we reiterated in this 

section of this final rule, we believe that 

the program’s regulations as currently 

written create flexibilities that allow 

more experienced ACOs to potentially 

re-form and re-enter the program under 

participation options they find 

advantageous, such as avoiding the 

transition to performance-based risk, or 

avoiding the application of policies that 

phase-in over time (the application of 

equal weights to the benchmark years 

and the higher weighted regional 

adjustment that applies in later 

agreement periods, or the pay-forperformance quality performance 

standard that is phased in over an 

ACO’s first agreement period in the 

program). We also explained that 

establishing definitions for ‘‘renewing 

ACO’’ and ‘‘re-entering ACO’’ will help 

us more easily differentiate between 

these organizations in our regulations 

and other programmatic material (83 FR 

41821). Further, the removal of the sitout period after termination and the 

allowance for an early renewal option 

under the definition of ‘‘renewing ACO’’ 

allows an important flexibility for ACOs 

to more readily move to new 

participation options under the program 

redesign without a break in their 

program participation. 

Comment: We received few comments 

on the proposed definition of ‘‘renewing 

ACO.’’ Several commenters specifically 

supported the proposed definition of 

renewing ACO. Several commenters 

expressed support for the early renewal 

policy. However, a few comments 

indicated some confusion over the early 

renewal policies. 

Response: We thank the commenters 

for their support of the proposed 

definition of ‘‘renewing ACO’’. We are 

finalizing this definition as proposed. 

We respond further in this section and 

in section II.A.7 of this final rule to 

those commenters who expressed 

confusion regarding the early renewal 

policy. 

Comment: One commenter stated that 

it is unclear that the opportunity to 

terminate early and begin a new 5-year 

agreement is open to all ACOs, and 

pointed out that reference is made to 

Track 2 ACOs having this opportunity 

(83 FR 41800). This commenter 

requested that CMS clarify in the final 

rule that all ACOs regardless of their 

agreement period start year are offered 

the opportunity to transition to the 

BASIC track or ENHANCED track. 

Response: To clarify, the proposed 

definition of renewing ACO, in 

combination with our proposal to 

discontinue use of the ‘‘sit-out’’ period 

after termination under § 425.222(a), 

would create the flexibility for any ACO 

within an agreement period to 

voluntarily terminate its current 

participation agreement and (if eligible) 

enter a new agreement period under the 

BASIC track or ENHANCED track, 

beginning at the start of the next 

performance year after the termination 

date of its previous agreement period, as 

early as July 1, 2019, thereby avoiding 

an interruption in participation. We 

would consider these ACOs to have 

effectively renewed their participation 

early. We note that we would assess the 

eligibility of the ACO to renew early 

under the revised evaluation criteria we 

are finalizing under amendments to 

§ 425.224 as described in section 

II.A.5.c.(5). of this final rule. 

Comment: One commenter, an 

existing ACO, expressed support for the 

early renewal option, and requested the 

opportunity to early renew as quickly as 

possible and with as little disruption as 

possible. This commenter seemed to 

favor benchmark rebasing at the start of 

the ACO’s new agreement period. The 

commenter specifically suggested that 

CMS account for non-claims based 

payments consistently across 

benchmark and performance year 

expenditures. This commenter 

recommended that CMS provide an 

exception to enable Track 2 and Track 

3 ACOs with physicians participating in 

the CPC+ Model to enter a new 

agreement period under the 

ENHANCED track as soon as is 

practicable to enable rebasing of the 

benchmark, ideally on July 1, 2019. 

Response: We are finalizing policies 

in this final rule to allow for a July 1, 

2019 agreement start date as the next 

available start date in the Shared 

Savings Program. We are also finalizing 

our proposed approach to remove the 

‘‘sit-out’’ period after termination and 

the proposed definition of ‘‘renewing 

ACO’’ to include the early renewal 

option. As we previously explained in 

responding to comments in this section 

of this final rule, early renewal would 

be an option for all ACOs within a 

current agreement period within the 

Shared Savings Program. Therefore, the 

first opportunity for ACOs to renew 

early will be available for ACOs that 

start a 12-month performance year on 

January 1, 2019. These ACOs may 

terminate their participation agreements 

with an effective date of termination of 

June 30, 2019, and enter a new 

agreement period beginning on July 1, 

2019. 

We also explained in the August 2018 

proposed rule (83 FR 41831) that early 

renewal results in rebasing of the ACO’s 

historical benchmark. In section II.D. of 

this final rule we finalize the 

methodology for establishing, adjusting 

and updating the ACO’s historical 


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benchmark for agreement periods 

beginning on July 1, 2019 and in 

subsequent years, and specify these 

policies in a new section of the 

regulations at § 425.601. We note that 

under this methodology, in calculating 

benchmark year expenditures we 

include individually beneficiary 

identifiable final payments made under 

a demonstration, pilot or time limited 

program. Similarly, under the 

methodology for calculating 

performance year expenditures, we also 

take into consideration individually 

beneficiary identifiable final payments 

made under a demonstration, pilot or 

time limited program. (See 

§ 425.605(a)(5)(ii) on the calculation of 

shared savings and losses under the 

BASIC track, § 425.610(a)(6)(ii)(B) on 

calculation of shared savings and losses 

under the ENHANCED track.) We note 

that these expenditures are included in 

the calculations for the relevant year 

they are made. 

The CPC+ Model began in 2017. Final 

CPC+ Model payments were included in 

expenditures for ACOs’ assigned 

beneficiaries for performance year and 

benchmark year 2017, and similarly will 

be included in expenditures for 

subsequent years the model is available. 

If an ACO seeks to early renew for a new 

agreement period beginning on July 1, 

2019, the historical benchmark years for 

the ACO’s new agreement period will be 

2016, 2017 and 2018. Therefore, if 

applicable, final CPC+ Model payments 

would be included in benchmark year 

expenditures for 2017 and 2018, and 

would be included in expenditures for 

each of the performance years in which 

they are made during the agreement 

period. 

Comment: A few commenters 

supported the proposed approach to 

identifying re-entering ACOs including 

the proposal to identify new legal 

entities as re-entering ACOs if more 

than 50 percent of its ACO participants 

were included on the ACO participant 

list of the same ACO in any of the 5 

most recent performance years prior to 

the agreement start date. One 

commenter supporting the proposed 

approach, recognized the opportunity 

for ACOs to reorganize or otherwise 

terminate and re-enter to secure 

participation in the Shared Savings 

Program under better terms as program 

rules or market conditions change. 

Some commenters generally supported a 

policy for determining whether an ACO 

is a re-entering ACO, but suggested 

alternative approaches. One commenter 

explained that the policy for identifying 

re-entering ACOs would be especially 

important if CMS finalized the proposed 

program redesign, as the commenter 

expected that the redesigned program 

would experience considerable churn or 

turnover in ACO participation, and the 

commenter suggested that CMS ensure 

that ACOs not be precluded from reentering the program with ACO 

participants that previously had 

participated in a different ACO. 

Several commenters suggested 

alternative approaches to identifying reentering ACOs. One commenter 

suggested that CMS weight ACO 

participant TINs by their number of 

years in the program, to ensure that 

ACO participants with limited 

experience in the Shared Savings 

Program do not tip the scales for a new 

legal entity to be identified as a reentering ACO. 

One commenter expressed concern 

that the approach could ultimately limit 

participation by ACOs that are high 

revenue and new legal entities but 

composed of previous ACO participants 

in a Track 1 ACO. The commenter 

explained the proposed approach could 

expose newly formed ACO entities to a 

more aggressive glide path and drive 

very inexperienced ACOs, particularly 

high revenue ACOs, to accept higher 

levels of risk more quickly than they are 

actually prepared to handle. The 

commenter alternatively seemed to 

recommend that CMS identify reentering ACOs based on whether both 

criteria (instead of either criterion) 

included in the proposed definition are 

met: (1) The ACO is the same legal 

entity as an ACO that previously 

participated in the program, and (2) 

more than 50 percent of its ACO 

participants were included on the ACO 

participant list of the same ACO in any 

of the 5 most recent performance years 

prior to the agreement start date. 

Some commenters suggested that 

CMS should monitor the impact of the 

policies for identifying re-entering 

ACOs and ACOs that are experienced 

with performance-based risk Medicare 

ACO initiatives, as well as to create an 

appeals process for these 

determinations. They recommended 

using a threshold of 50 percent for both 

of these determinations (rather than 

using the proposed 40 percent threshold 

for determining ACOs experienced with 

performance-based risk Medicare ACO 

initiatives) and also setting an 

additional criterion that would allow an 

ACO determined to be a re-entering 

ACO or experienced performance-based 

risk Medicare ACO initiatives to appeal 

the determination if less than 30 percent 

of the ACO participants in the ACO 

were previously part of the same legal 

entity. 

Response: We appreciate commenters’ 

support of the proposed definition of reentering ACO. In response to the 

commenter’s suggestion that ACOs not 

be precluded from re-entering the 

program with ACO participants that 

previously had participated in a 

different ACO, we note that the 

proposed definition of a re-entering 

ACO would allow us to hold ACOs 

accountable for the experience of their 

legal entity and ACO participants, and 

ensure they are participating in the 

program under participation options 

and program policies that are reflective 

of this experience. 

We decline to adopt the commenter’s 

alternative suggestion to weight ACO 

participants by their number of years in 

the program, when identifying new legal 

entities as re-entering ACOs based on 

the prior participation in the Shared 

Savings Program by their ACO 

participants. We believe this approach 

may make it more challenging for 

applicants to anticipate whether their 

composition could result in a 

determination by CMS that they are a reentering ACO. We are also concerned 

that such a weighting approach, which 

would allow ACOs to avoid being 

considered re-entering ACOs based on 

the duration of prior participation by 

ACO participants, could further 

encourage ACOs that are re-forming and 

re-entering the Shared Savings Program 

to manipulate their ACO participant 

lists to avoid accountability for their 

experience with the program. 

Under the proposed definition of a reentering ACO and under our proposals 

for determining participation options, 

which we are finalizing as discussed in 

section II.A.5.c.(5) of this final rule, new 

legal entities identified as re-entering 

ACOs that are high revenue ACOs, and 

inexperienced with performance-based 

risk Medicare ACO initiatives, would be 

eligible for participation under the 

BASIC track’s glide path. However, as 

noted by the commenter, if the reentering ACO is identified as having 

previously participated in Track 1, the 

ACO would be restricted to entering the 

glide path at Level B, therefore having 

relatively less time under a one-sided 

model compared to new legal entities 

that are eligible to enter the glide path 

at Level A. We believe that holding 

ACOs accountable for the previous 

experience of the ACO legal entity and 

its ACO participants in the Shared 

Savings Program, and Medicare ACO 

initiatives more broadly, and protecting 

the Trust Funds from ACOs that 

terminate from the program and re-enter 

the program in an effort to take 

advantage of program policies designed 

for ACOs inexperienced with 

accountable care models in FFS 

Medicare, outweigh the commenter’s 


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concern that this approach could expose 

a new legal entity to higher levels of risk 

and potential reward than the ACO can 

manage. We would identify the ACO’s 

participation options at the time of its 

application to the program, and the 

applicant would have the opportunity to 

determine whether to enter an 

agreement period in the Shared Savings 

Program under a participation option for 

which it is eligible. 

We decline to adopt an approach that 

would only recognize ACOs as reentering if they are identified as both 

the same legal entity as a former 

program participant, and if a majority of 

ACO participants previously 

participated in the same legal entity. We 

believe this approach would be too 

narrow and not identify some reentering ACOs that are the same legal 

entity as an ACO whose participation 

agreement was terminated or whose 

participation agreement expired without 

having been renewed. These ACO legal 

entities would have previous experience 

with the Shared Savings Program and 

should not be allowed to take advantage 

of policies aimed at organizations new 

to the program’s requirements or the 

accountable care model more generally. 

We believe that some commenters 

recommending modifications to the 

process for determining re-entering 

ACOs and ACOs that are experienced 

with performance-based risk may have 

had confusion around our proposed 

policies. (We respond to the 

commenters’ suggestions about the 

alternative approach to identifying 

ACOs experienced with performancebased risk Medicare ACO initiatives 

elsewhere in this section of this final 

rule.) We would like to clarify that the 

policy that we proposed, and are 

finalizing in this final rule, for 

determining new legal entities to be reentering ACOs requires that more than 

50 percent of an applicant’s ACO 

participants have participated together 

as part of the same legal entity in any 

of the 5 most recent performance years 

prior to the agreement start date. Thus, 

all ACOs determined to be a re-entering 

ACO under this policy would 

automatically exceed the commenters’ 

recommended secondary threshold of 

30 percent to trigger eligibility for an 

appeal process. By contrast, the 

approach that we have proposed and are 

finalizing for determining ACOs 

experienced with performance-based 

risk Medicare ACO initiatives requires 

that, cumulatively, at least 40 percent of 

an applicant’s ACO participants have 

participated in a performance-based risk 

Medicare ACO initiative in any of the 5 

most recent performance years prior to 

the agreement start date, and does not 

require the ACO participants to have to 

participated together in the same legal 

entity. That being said, we decline to 

adopt an approach for determining reentering ACOs such as recommended by 

the commenters that would require a 

multi-step process. That is, an initial 

determination for whether an ACO is a 

re-entering ACO, a secondary test to 

identify whether the ACO is eligible to 

request an appeal, and finally an appeal 

process for the final determination. We 

believe such an approach would add 

complexity as well as uncertainty as 

ACOs would need to request an appeal 

and await a final determination. 

Additionally, we currently have an 

established process for ACOs to request 

reconsiderations, as specified in subpart 

I of the program’s regulations. 

We also decline to adopt a lower 

percentage threshold as part of 

identifying new legal entities as reentering ACOs, for the reasons we 

previously described in the August 2018 

proposed rule and reiterated in this final 

rule. In particular, using a lower 

threshold for determining re-entering 

ACOs would further complicate the 

analysis for identifying the ACO or 

ACOs in which the ACO participants 

previously participated, and the ACO 

whose prior performance should be 

evaluated in determining the eligibility 

of the applicant ACO and for 

determining the applicability of 

program policies that phase-in over 

time. 

More generally, we agree with 

commenters suggesting that we evaluate 

and monitor the policy once 

implemented. 

Comment: One commenter supported 

a 5-year look back period in the 

definition of re-entering ACO, 

particularly in light of the proposal to 

allow for agreement periods of at least 

5 years. 

The commenter also supported the 

clarification that the 50 percent 

threshold would not be cumulative 

based on experience in any ACO over 

the past five years, but rather, based on 

50 percent or more participants most 

recently participating in the same ACO. 

The commenter agreed this would serve 

CMS’ goal of identifying ACOs with 

significant participant overlap (as 

described in the August 2018 proposed 

rule) while minimizing complexity that 

could easily arise from using other 

methods and therefore improve 

transparency. 

Response: We thank the commenters 

for their support of the proposed 5-year 

look back period in the definition of ‘‘reentering ACO’’, and support for an 

approach under which the threshold for 

prior participation by ACO participants 

is not cumulative. 

Comment: One commenter disagreed 

with the idea that ACOs would invest 

substantial upfront start-up costs and 

undergo a major organizational shift or 

undergo the burdensome process of 

dissolving and re-forming under a 

different legal entity, much less 

voluntarily subject itself to shared 

losses, simply to ‘‘game’’ the system. 

The commenter asserted that the 

number of ACOs that drop out of the 

program after sustaining losses proves 

that waivers for certain service billing 

requirements or fraud and abuse 

restrictions are not enough to warrant 

continued participation in the program 

without the prospect of earning shared 

savings. 

Response: We disagree with the 

commenter and continue to believe that 

there is clear value in program 

participation for ACOs that are not 

earning shared savings, as evidenced by 

the continued participation of ACOs 

that have not shared in the savings 

(such as ACOs that generate savings 

below their MSR), or ACOs that remain 

in the program despite generating the 

equivalent of losses, or even after 

sharing in losses. ACOs can be the 

catalyst for changing a health care 

system or provider network, and can 

provide a vehicle for transforming care 

in a community. However, we have 

concerns about the motivation of ACOs 

that continue their participation in the 

program despite poor performance. 

Under the program’s current 

requirements, ACOs may continue their 

participation in the program despite 

poor financial performance, and we 

believe that the choice of many to do so 

indicates they may be able to take 

advantage of other program features, 

such as the ability to benefit from 

waivers of certain federal requirements 

in connection with their participation in 

the Shared Savings Program, and lack a 

genuine motivation to achieve the 

program’s goals. With the more rapid 

transition to performance-based risk 

under the redesign of the program’s 

participation options we are finalizing 

in this final rule, we believe that it is 

increasingly important for program 

integrity purposes that we protect 

against ACOs seeking to game program 

participation options including by reforming and re-entering the program in 

an effort to take advantage of the BASIC 

track’s glide path. 

Final Action: After consideration of 

public comments, we are finalizing as 

proposed to define renewing ACO and 

re-entering ACO in new definitions in 

§ 425.20. 


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We are finalizing our proposal to 

define renewing ACO to mean an ACO 

that continues its participation in the 

program for a consecutive agreement 

period, without a break in participation, 

because it is either: (1) An ACO whose 

participation agreement expired and 

that immediately enters a new 

agreement period to continue its 

participation in the program; or (2) an 

ACO that terminated its current 

participation agreement under § 425.220 

and immediately enters a new 

agreement period to continue its 

participation in the program. 

We are finalizing our proposal to 

define ‘‘re-entering ACO’’ to mean an 

ACO that does not meet the definition 

of a ‘‘renewing ACO’’ and meets either 

of the following conditions: 

(1) Is the same legal entity as an ACO, 

identified by TIN according to the 

definition of ACO in § 425.20, that 

previously participated in the program 

and is applying to participate in the 

program after a break in participation, 

because it is either: (a) An ACO whose 

participation agreement expired without 

having been renewed; or (b) an ACO 

whose participation agreement was 

terminated under § 425.218 or 

§ 425.220. 

(2) Is a new legal entity that has never 

participated in the Shared Savings 

Program and is applying to participate 

in the program and more than 50 

percent of its ACO participants were 

included on the ACO participant list 

under § 425.118, of the same ACO in 

any of the 5 most recent performance 

years prior to the agreement start date. 

(b) Eligibility Requirements and 

Application Procedures for Renewing 

and Re-Entering ACOs 

In the August 2018 proposed rule (83 

FR 41823), we proposed to revise our 

regulations to clearly set forth the 

eligibility requirements and application 

procedures for renewing ACOs and reentering ACOs. Therefore, we proposed 

to revise § 425.222 to address 

limitations on the ability of re-entering 

ACOs to participate in the Shared 

Savings Program for agreement periods 

beginning before July 1, 2019. In 

addition, we proposed to revise 

§ 425.224 to address general application 

requirements and procedures for all reentering ACOs and all renewing ACOs. 

In revising § 425.222 (which consists 

of paragraphs (a) through (c)), we 

considered that removing the required 

‘‘sit-out’’ period for terminated ACOs 

under § 425.222(a) would facilitate 

transition of ACOs within current 3-year 

agreement periods to new agreements 

under the participation options in the 

proposed rule. As discussed elsewhere 

in this section, we proposed to retain 

policies similar to those under 

§ 425.222(b) for evaluating the eligibility 

of ACOs to participate in the program 

after termination. Further, instead of the 

approach used for determining 

participation options for ACOs that reenter the program after termination 

described in § 425.222(c), our proposed 

approach to making these 

determinations is described in detail in 

section II.A.5.c.(5). of this final rule. 

The ‘‘sit-out’’ period policy restricts 

the ability of ACOs in current agreement 

periods to transition to the proposed 

participation options under new 

agreements. For example, if left 

unchanged, the ‘‘sit-out’’ period would 

prevent existing, eligible Track 1 ACOs 

from quickly entering an agreement 

period under the proposed BASIC track 

and existing Track 2 ACOs from quickly 

entering a new agreement period under 

either the BASIC track at the highest 

level of risk (Level E), if available to the 

ACO, or the ENHANCED track. 

Participating under Levels C, D, or E of 

the BASIC track or under the 

ENHANCED track could allow eligible 

physicians and practitioners billing 

under ACO participant TINs in these 

ACOs to provide telehealth services 

under section 1899(l) of the Act 

(discussed in section II.B.2.b. of this 

final rule), the ACO could apply for a 

SNF 3-day rule waiver (as proposed in 

section II.B.2.a. of this final rule), and 

the ACO could elect to offer incentive 

payments to beneficiaries under a CMSapproved beneficiary incentive program 

(as proposed in section II.C.2. of this 

final rule). 

The ‘‘sit-out’’ period also applies to 

ACOs that deferred renewal in a second 

agreement period under performancebased risk as specified in 

§ 425.200(e)(2)(ii), a participation option 

we proposed to discontinue (as 

described in section II.A.2. of this final 

rule). Therefore, by eliminating the ‘‘sitout’’ period, ACOs that deferred renewal 

may more quickly transition to the 

BASIC track (Level E), if available to the 

ACO, or the ENHANCED track. An ACO 

that deferred renewal and is currently 

participating in Track 2 or Track 3 may 

terminate its current agreement to enter 

a new agreement period under the 

BASIC track (Level E), if eligible, or the 

ENHANCED track. Similarly, an ACO 

that deferred renewal and is currently 

participating in Track 1 for a fourth 

performance year may terminate its 

current agreement and the participation 

agreement for its second agreement 

period under Track 2 or Track 3 that it 

deferred for 1 year. In either case, the 

ACO may immediately apply to re-enter 

the BASIC track (Level E), if eligible, or 

the ENHANCED track without having to 

wait until the date on which the term of 

its second agreement would have 

expired if the ACO had not terminated. 

We noted that, to avoid interruption 

in program participation, an ACO that 

seeks to terminate its current agreement 

and enter a new agreement in the BASIC 

track or ENHANCED track beginning the 

next performance year should ensure 

that there is no gap in time between 

when it concludes its current agreement 

period and when it begins the new 

agreement period so that all related 

program requirements and policies 

would continue to apply. For an ACO 

that is completing a 12 month 

performance year and is applying to 

enter a new agreement period beginning 

January 1 of the following year, the 

effective termination date of its current 

agreement should be the last calendar 

day of its current performance year, to 

avoid an interruption in the ACO’s 

program participation. For instance, for 

a 2018 starter ACO applying to enter a 

new agreement beginning on January 1, 

2020, the effective termination date of 

its current agreement should be 

December 31, 2019. For an ACO that 

starts a 12-month performance year on 

January 1, 2019, that is applying to enter 

a new agreement period beginning on 

July 1, 2019 (as discussed in section 

II.A.7. of this final rule), the effective 

termination date of its current 

agreement should be June 30, 2019. 

We proposed to amend § 425.224 to 

make certain policies applicable to both 

renewing ACOs and re-entering ACOs 

and to incorporate certain other 

technical changes, as follows: 

(1) Revisions to refer to the ACO’s 

‘‘application’’ more generally, instead of 

specifically referring to a ‘‘renewal 

request,’’ so that the requirements 

would apply to both renewing ACOs 

and re-entering ACOs. 

(2) Addition of a requirement, 

consistent with the current provision at 

§ 425.222(c)(3), for ACOs previously in 

a two-sided model to reapply to 

participate in a two-sided model. We 

further proposed that a renewing or reentering ACO that was previously under 

a one-sided model of the BASIC track’s 

glide path may only reapply for 

participation in a two-sided model for 

consistency with our proposal to 

include the BASIC track within the 

definition of a performance-based risk 

Medicare ACO initiative. As proposed, 

this included a new ACO identified as 

a re-entering ACO because greater than 

50 percent of its ACO participants have 

recent prior participation in the same 

ACO that was previously under a twosided model or a one-sided model of the 


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BASIC track’s glide path (Level A or 

Level B). 

(3) Revision to § 425.224(b)(1)(iv) (as 

redesignated from § 425.224(b)(1)(iii)) to 

cross reference the requirement that an 

ACO establish an adequate repayment 

mechanism under § 425.204(f), to clarify 

our intended meaning with respect to 

the current requirement that an ACO 

demonstrate its ability to repay losses. 

(4) Modifications to the evaluation 

criteria specified in § 425.224(b) for 

determining whether an ACO is eligible 

for continued participation in the 

program in order to permit them to be 

used in evaluating both renewing ACOs 

and re-entering ACOs, to adapt some of 

these requirements to longer agreement 

periods (under the proposed approach 

allowing for agreement periods of at 

least 5 years rather than 3-year 

agreements), and to prevent ACOs with 

a history of poor performance from 

participating in the program. As 

described in detail, as follows, we 

addressed: (1) Whether the ACO has a 

history of compliance with the 

program’s quality performance standard; 

(2) whether an ACO under a two-sided 

model repaid shared losses owed to the 

program; (3) the ACO’s history of 

financial performance; and (4) whether 

the ACO has demonstrated in its 

application that it has corrected the 

deficiencies that caused it to perform 

poorly or to be terminated. 

First, we proposed modifications to 

the criterion governing our evaluation of 

whether the ACO has a history of 

compliance with the program’s quality 

performance standard. We proposed to 

revise the existing provision at 

§ 425.224(b)(1)(iv), which specifies that 

we evaluate whether the ACO met the 

quality performance standard during at 

least 1 of the first 2 years of the previous 

agreement period, to clarify that this 

criterion is used in evaluating ACOs 

that entered into a participation 

agreement for a 3-year period. We 

proposed to add criteria for evaluating 

ACOs that entered into a participation 

agreement for a period longer than 3 

years by considering whether the ACO 

was terminated under § 425.316(c)(2) for 

failing to meet the quality performance 

standard or whether the ACO failed to 

meet the quality performance standard 

for 2 or more performance years of the 

previous agreement period, regardless of 

whether the years were consecutive. 

In proposing this approach, we 

considered that the current policy is 

specified for ACOs with 3-year 

agreements. With the proposal to shift to 

agreement periods of not less than 5 

years, additional years of performance 

data would be available at the time of 

an ACO’s application to renew its 

agreement, and may also be available for 

evaluating ACOs re-entering after 

termination (depending on the timing of 

their termination) or the expiration of 

their prior agreement, as well as being 

available to evaluate new ACOs 

identified as re-entering ACOs because 

greater than 50 percent of their ACO 

participants have recent prior 

participation in the same ACO. 

Further, under the program’s 

monitoring requirements at § 425.316(c), 

ACOs with 2 consecutive years of 

failure to meet the program’s quality 

performance standard will be 

terminated. However, we noted our 

concern about a circumstance where an 

ACO that fails to meet the quality 

performance standard for multiple, nonconsecutive years may remain in the 

program by seeking to renew its 

participation for a subsequent 

agreement period, seeking to re-enter 

the program after termination or 

expiration of its prior agreement, or by 

re-forming to enter under a new legal 

entity (identified as a re-entering ACO 

based on the experience of its ACO 

participants). 

Second, we proposed to revise the 

criterion governing the evaluation of 

whether an ACO under a two-sided 

model repaid shared losses owed to the 

program that were generated during the 

first 2 years of the previous agreement 

period (§ 425.224(b)(1)(v)), to instead 

consider whether the ACO failed to 

repay shared losses in full within 90 

days in accordance with subpart G of 

the regulations for any performance year 

of the ACO’s previous agreement period. 

As described in section II.A.7. of this 

final rule, CY 2019 will include two, 6- 

month performance years. In the 

November 2018 final rule (83 FR 59942 

through 59946) we finalized the option 

for ACOs that started a first or second 

agreement period on January 1, 2016, to 

elect an extension of their agreement 

period by 6 months from January 1, 

2019 through June 30, 2019. In this final 

rule we are finalizing an agreement 

period start date of July 1, 2019, which 

includes a 6-month first performance 

year from July 1, 2019, through 

December 31, 2019. We will reconcile 

these ACOs, and ACOs that start a 12- 

month performance year on January 1, 

2019, and terminate their participation 

agreement with an effective date of 

termination of June 30, 2019, and enter 

a new agreement period beginning on 

July 1, 2019, separately for the 6-month 

periods from January 1, 2019, through 

June 30, 2019, and from July 1, 2019, 

through December 31, 2019, as 

described in section II.A.7. of this final 

rule. In evaluating this proposed 

criterion on repayment of losses, we 

would consider whether the ACO timely 

repaid any shared losses for these 6- 

month performance years, or the 6- 

month performance period for ACOs 

that elect to voluntarily terminate their 

existing participation agreement, 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019, which we will determine 

according to the methodology specified 

under a new section of the regulations 

at § 425.609. 

The current policy regarding 

repayment of shared losses is specified 

for ACOs with 3-year agreements. With 

the proposal to shift to agreement 

periods of at least 5 years, we 

considered it would be appropriate to 

broaden our evaluation of the ACO’s 

timely repayment of shared losses 

beyond the first 2 years of the ACO’s 

prior agreement period. For instance, 

without modification, this criterion 

could have little relevance when 

evaluating the eligibility of ACOs in the 

proposed BASIC track’s glide path that 

elect to participate under a one-sided 

model for their first 2 performance years 

(or 3 performance years for ACOs that 

start an agreement period in the 

proposed BASIC track’s glide path on 

July 1, 2019). 

We noted that timely repayment of 

shared losses is required under subpart 

G of the regulations (§§ 425.606(h)(3) 

and 425.610(h)(3)), and non-compliance 

with this requirement may be the basis 

for pre-termination actions or 

termination under §§ 425.216 and 

425.218. We explained that a provision 

that permits us to consider more broadly 

whether an ACO failed to timely repay 

shared losses for any performance year 

in the previous agreement period would 

be relevant to all renewing and reentering ACOs that may have unpaid 

shared losses, as well as all re-entering 

ACOs that may have been terminated for 

non-compliance with the repayment 

requirement. This includes ACOs that 

have participated under Track 2, Track 

3, and ACOs that would participate 

under the BASIC track or ENHANCED 

track for a new agreement period. For 

ACOs that have participated in twosided models authorized under section 

1115A of the Act, including the Track 

1+ Model, we also proposed to consider 

whether an ACO failed to repay shared 

losses for any performance year under 

the terms of the ACO’s participation 

agreement for such model. 

Third, we proposed to add a financial 

performance review criterion to 

§ 425.224(b) to allow us to evaluate 

whether the ACO generated losses that 

were negative outside corridor for 2 

performance years of the ACO’s 

previous agreement period. We 


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proposed to use this criterion to 

evaluate the eligibility of ACOs to enter 

agreement periods beginning on July 1, 

2019 and in subsequent years. For 

purposes of this proposal, an ACO is 

negative outside corridor when its 

benchmark minus performance year 

expenditures are less than or equal to 

the negative MSR for ACOs in a onesided model, or the MLR for ACOs in a 

two-sided model. This proposed 

approach relates to our proposal to 

monitor for financial performance as 

described in section II.A.5.d. of this 

final rule. 

Lastly, we proposed to add a review 

criterion to § 425.224(b), which would 

allow us to consider whether the ACO 

has demonstrated in its application that 

it has corrected the deficiencies that 

caused it to fail to meet the quality 

performance standard for 2 or more 

years, fail to timely repay shared losses, 

or to generate losses outside its negative 

corridor for 2 years, or any other factors 

that may have caused the ACO to be 

terminated from the Shared Savings 

Program. We proposed to require that 

the ACO also demonstrate it has 

processes in place to ensure that it will 

remain in compliance with the terms of 

the new participation agreement. 

We proposed to discontinue use of the 

requirement at § 425.600(c), under 

which an ACO with net losses during a 

previous agreement period must 

identify in its application the causes for 

the net loss and specify what safeguards 

are in place to enable it to potentially 

achieve savings in its next agreement 

period. We believe the proposed 

financial performance review criterion 

would be more effective in identifying 

ACOs with a pattern of poor financial 

performance. An approach that accounts 

for financial performance year after year 

allows ACOs to understand if their 

performance is triggering a compliance 

concern and take action to remedy their 

performance during the remainder of 

their agreement period. Further, an 

approach that only considers net losses 

across performance years may not 

identify as problematic an ACO that 

generates losses in multiple years which 

in aggregate are canceled out by a single 

year with large savings. Although 

uncommon, such a pattern of 

performance, where an ACO’s results 

change rapidly and dramatically, is 

concerning and warrants consideration 

in evaluating the ACO’s suitability to 

continue its participation in the 

program. 

This proposed requirement is similar 

to the current provision at § 425.222(b), 

which specifies that a previously 

terminated ACO must demonstrate that 

it has corrected deficiencies that caused 

it to be terminated from the program 

and has processes in place to ensure 

that it will remain in compliance with 

the terms of its new participation 

agreement. We proposed to discontinue 

use of § 425.222. We explained that 

adding a similar requirement to 

§ 425.224 would allow us to more 

consistently apply policies to renewing 

and re-entering ACOs. Further, applying 

this requirement to both re-entering and 

renewing ACOs would safeguard the 

program against organizations that have 

not met the program’s goals or complied 

with program requirements and that 

may not be qualified to participate in 

the program, and therefore this 

approach would be protective of the 

program, the Trust Funds, and Medicare 

FFS beneficiaries. 

For ACOs identified as re-entering 

ACOs because greater than 50 percent of 

their ACO participants have recent prior 

participation in the same ACO, we 

would determine the eligibility of the 

ACO to participate in the program based 

on the past performance of this other 

entity. For example, if ACO A is 

identified as a re-entering ACO because 

more than 50 percent of its ACO 

participants previously participated in 

ACO B during the relevant look back 

period, we would consider ACO B’s 

financial performance, quality 

performance, and compliance with 

other program requirements in 

determining the eligibility of ACO A to 

enter a new participation agreement in 

the program. 

Comment: We received few comments 

directly addressing the proposal to 

remove the ‘‘sit-out’’ period after 

termination. Generally, the comments 

we received were supportive of the 

proposal to modify current restrictions 

that prevent an ACO from terminating 

its participation agreement and reentering the program before the existing 

agreement period would have ended. 

Commenters explained that this ‘‘sitout’’ period is unnecessary and shuts 

healthcare providers out of participating 

in an essential CMS value-based 

program. Commenters also supported 

eliminating this restriction to allow the 

flexibility for an ACO in a current 3-year 

agreement period to terminate its 

participation agreement and then enter 

a new 5-year agreement period under 

one of the proposed redesigned 

participation options. One commenter 

explained that maintaining the sit-out 

period after termination could diminish 

participation in the program and restrict 

the ability of ACOs in current agreement 

periods to transition to the proposed 

participation options under new 

agreements. 

Response: We appreciate commenters’ 

support of the proposal to remove the 

required ‘‘sit-out’’ period for terminated 

ACOs under § 425.222(a). In particular, 

we appreciate commenters’ support of 

this approach which will facilitate 

transition of ACOs to new agreements 

under the participation options 

established in this final rule, including 

the transition of ACOs currently in 3- 

year agreement periods to new 

agreement periods of at least 5-years 

through the early renewal process 

described in section II.A.5.c.(4).(a). of 

this final rule. 

Comment: One commenter 

recommended that CMS take into 

account the impact of extreme and 

uncontrollable circumstances on ACOs 

when applying the prior participation 

criteria. 

Response: We appreciate the 

commenter’s suggestion that we take 

into account the impact of extreme and 

uncontrollable circumstances when 

evaluating the eligibility of ACOs to 

renew their participation in or re-enter 

the Shared Savings Program. We note 

that, under our proposed evaluation 

criteria, we would also consider 

whether the ACO has demonstrated in 

its application that it has corrected the 

deficiencies that caused it to perform 

poorly or to be terminated. We believe 

that this provides a means for ACOs to 

explain the particular circumstances 

that affected their results during their 

prior participation, including the impact 

of extreme and uncontrollable 

circumstances, and for CMS to consider 

this information in evaluating the 

eligibility of ACOs to renew their 

participation in or re-enter the Shared 

Savings Program. We will also continue 

to monitor the impact of extreme and 

uncontrollable circumstances on ACOs, 

particularly as we gain experience with 

the disaster-relief policies we have 

finalized for performance year 2017 and 

subsequent performance years, 

including adjusting quality performance 

scores for affected ACOs, and mitigating 

shared losses for ACOs under two-sided 

models, and will consider whether any 

changes to our eligibility criteria may be 

necessary to account for the effects of 

extreme and uncontrollable 

circumstances. Any such changes would 

be made through notice and comment 

rulemaking. 

Comment: Another commenter 

suggested we streamline the renewal 

process for ACOs that have 

demonstrated positive performance 

results, such as requiring that they 

complete a brief form with minimal 

information required. 

Response: In the CY 2018 PFS final 

rule (82 FR 53217 through 53222), we 


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modified the program’s application to 

reduce burden on all applicants. These 

changes included revisions to § 425.204 

to remove the requirements for ACOs to 

submit certain documents and 

narratives as part of its Shared Savings 

Program application. We believe these 

requirements have streamlined the 

application process. As described in 

section II.A.5.c.(5).(d) of this final rule, 

we are discontinuing use of condensed 

Shared Savings Program applications by 

former Physician Group Practice (PGP) 

demonstration sites and former Pioneer 

ACOs. We explain our belief that it is no 

longer necessary to permit these entities 

to use condensed application forms. For 

similar reasons, we therefore also 

decline to allow alternative applications 

for other categories of ACOs. 

Comment: One commenter suggested 

that CMS revisit the evaluation criterion 

for prior quality performance relevant to 

ACOs’ participation in longer agreement 

periods in future rulemaking as it 

becomes implemented and applicable to 

ACOs over time. 

Response: We appreciate the 

commenter’s suggestion to consider our 

experience with the evaluation criterion 

for poor quality performance in light of 

longer agreement periods (not less than 

5-years) finalized in this final rule. As 

with other program policies, we may 

revisit this approach based on lessons 

learned, in future rulemaking. 

Final Action: After consideration of 

public comments, we are finalizing as 

proposed to revise § 425.222 to remove 

the required ‘‘sit-out’’ period for 

terminated ACOs under § 425.222(a) to 

facilitate transition of ACOs to new 

agreements under the participation 

options established in this final rule. We 

are retaining policies similar to those 

under § 425.222(b) for evaluating the 

eligibility of ACOs to participate in the 

program after termination in 

modifications to § 425.224. Instead of 

the approach used for determining 

participation options for ACOs that reenter the program after termination 

described in § 425.222(c), we will make 

these determinations consistent with 

our final policies described in section 

II.A.5.c.(5) of this final rule. 

We received no comments directly 

addressing the proposals to revise 

§ 425.224 to make certain policies 

applicable to both renewing ACOs and 

re-entering ACOs and to incorporate 

certain other technical changes, as 

described in this section of this final 

rule. We are finalizing as proposed 

amendments to § 425.224 to include the 

following changes: 

• Revisions to refer to the ACO’s 

‘‘application’’ more generally, instead of 

specifically referring to a ‘‘renewal request,’’ 

so that the requirements would apply to both 

renewing ACOs and re-entering ACOs. 

• Addition of a requirement, consistent 

with the current provision at § 425.222(c)(3), 

for ACOs previously in a two-sided model to 

reapply to participate in a two-sided model. 

We are finalizing an approach for 

determining participation options under 

which a renewing or re-entering ACO that 

was previously under a one-sided model of 

the BASIC track’s glide path may only 

reapply for participation in a two-sided 

model for consistency with our final policy 

to include the BASIC track within the 

definition of a performance-based risk 

Medicare ACO initiative (described in 

section II.A.5.c.(5) of this final rule). This 

includes a new ACO identified as a reentering ACO because greater than 50 percent 

of its ACO participants have recent prior 

participation in the same ACO that was 

previously under a two-sided model or a onesided model of the BASIC track’s glide path 

(Level A or Level B). 

• Revision to § 425.224(b)(1)(iv) (as 

redesignated from § 425.224(b)(1)(iii)) to 

cross reference the requirement that an ACO 

establish an adequate repayment mechanism 

under § 425.204(f), to clarify our intended 

meaning with respect to the current 

requirement that an ACO demonstrate its 

ability to repay losses. 

• Modifications to the evaluation criteria 

specified in § 425.224(b) for determining 

whether an ACO is eligible for continued 

participation in the program in order to 

permit them to be used in evaluating both 

renewing ACOs and re-entering ACOs, to 

adapt some of these requirements to longer 

agreement periods (under the proposed 

approach allowing for agreement periods of 

at least 5 years rather than 3-year 

agreements), and to prevent ACOs with a 

history of poor performance from 

participating in the program. The criteria 

include: (1) Whether the ACO has a history 

of compliance with the program’s quality 

performance standard; (2) the ACO’s history 

of financial performance; (3) whether an ACO 

under a two-sided model repaid shared 

losses owed to the program; and (4) whether 

the ACO has demonstrated in its application 

that it has corrected the deficiencies that 

caused it to perform poorly or to be 

terminated. 

In light of these other final policies, 

we are also finalizing our proposal to 

discontinue use of the requirement at 

§ 425.600(c), under which an ACO with 

net losses during a previous agreement 

period must identify in its application 

the causes for the net loss and specify 

what safeguards are in place to enable 

it to potentially achieve savings in its 

next agreement period. 

(5) Proposed Evaluation Criteria for 

Determining Participation Options 

(a) Background 

As we explained in section II.A.5.c.(5) 

of the August 2018 proposed rule (83 FR 

41825 through 41834), we have a 

number of concerns about the 

vulnerability of certain program policies 

to gaming by ACOs seeking to continue 

in the program under the BASIC track’s 

glide path, as well as the need to ensure 

that an ACO’s participation options are 

commensurate with the experience of 

the organization and its ACO 

participants with the Shared Savings 

Program and other performance-based 

risk Medicare ACO initiatives. 

First, as the program matures and 

ACOs become more prevalent 

throughout the country, and as an 

increasing number of ACO participants 

become experienced in different 

Medicare ACO initiatives with differing 

levels of risk, the regulations as 

currently written create flexibilities that 

would allow more experienced ACOs to 

take advantage of the opportunity to 

participate under the proposed BASIC 

track’s glide path. 

There are many Medicare ACO 

initiatives in which organizations may 

gain experience, specifically: Shared 

Savings Program Track 1, Track 2 and 

Track 3, as well as the proposed BASIC 

track and ENHANCED track, and the 

Track 1+ Model, Pioneer ACO Model, 

Next Generation ACO Model, and the 

Comprehensive End-Stage Renal Disease 

(ESRD) Care (CEC) Model. All but 

Shared Savings Program Track 1 ACOs 

and non-Large Dialysis Organization 

(LDO) End-Stage Renal Disease Care 

Organizations (ESCOs) participating in 

the one-sided model track of the CEC 

Model participate in a degree of 

performance-based risk within an ACO’s 

agreement period in the applicable 

program or model. 

We proposed to discontinue 

application of the policies in 

§ 425.222(a). As a result of this change, 

we would allow ACOs currently 

participating in Track 1, Track 2, Track 

3, or the Track 1+ Model, to choose 

whether to finish their current 

agreement or to terminate and apply to 

immediately enter a new agreement 

period through an early renewal. We 

explained our concern that removing 

the existing safeguard under 

§ 425.222(a) without putting in place 

other policies that assess an ACO’s 

experience with performance-based risk 

would enable ACOs to participate in the 

BASIC track’s glide path in Level A and 

Level B, under a one-sided model, 

terminate, and enter a one-sided model 

of the glide path again. 

We also stated our concern that 

existing and former Track 1 ACOs 

would have the opportunity to gain 

additional time under a one-sided 

model of the BASIC track’s glide path 

before accepting performance-based 

risk. Under the current regulations, 

Track 1 ACOs are limited to two 


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agreement periods under a one-sided 

model before transitioning to a twosided model beginning with their third 

agreement period (see § 425.600(b)). 

Without some restriction, Track 1 ACOs 

that would otherwise be required to 

assume performance-based risk at the 

start of their third agreement period in 

the program could end up continuing to 

participate under a one-sided model 

(BASIC track’s Levels A and B) for 2 

additional performance years, or 3 

additional performance years in the case 

of ACOs that enter the BASIC track’s 

glide path for an agreement period of 5 

years and 6 months beginning July 1, 

2019, under the participation options as 

proposed. We explained our belief that 

the performance-based risk models 

within the BASIC track’s glide path 

would offer former Track 1 ACOs an 

opportunity to continue participation 

within the program under relatively low 

levels of two-sided risk and that these 

ACOs have sufficient experience with 

the program to begin the gradual 

transition to performance-based risk. 

Therefore some restriction would be 

needed to prevent all current and 

previously participating Track 1 ACOs 

from taking advantage of additional time 

under a one-sided model in the BASIC 

track’s glide path and instead to 

encourage their more rapid progression 

to performance-based risk. For similar 

reasons we also believed it would be 

important to prevent new ACOs 

identified as re-entering ACOs because 

greater than 50 percent of their ACO 

participants have recent prior 

participation in a Track 1 ACO from 

also taking advantage of additional time 

under a one-sided model in the BASIC 

track’s glide path. This restriction 

would help to ensure that ACOs do not 

re-form as new legal entities to 

maximize the time allowed under a onesided model. 

We also considered that currently 

§ 425.202(b) of the program’s regulations 

addresses application requirements for 

organizations that were previous 

participants in the PGP demonstration, 

which concluded in December 2012 

with the completion of the PGP 

Transition Demonstration, and the 

Pioneer ACO Model, which concluded 

in December 2016, as described 

elsewhere in this section. We proposed 

to eliminate these provisions, while at 

the same time proposing criteria for 

identifying ACOs and ACO participants 

with previous experience in Medicare 

ACO initiatives as part of a broader 

approach to determining available 

participation options for applicants. 

Second, using prior participation by 

ACO participant TINs in Medicare ACO 

initiatives along with the prior 

participation of the ACO legal entity 

would allow us to gauge the ACO’s 

experience, given the observed churn in 

ACO participants over time and our 

experience with determining eligibility 

to participate in the Track 1+ Model. 

ACOs are allowed to make changes to 

their certified ACO participant list for 

each performance year, and we have 

observed that, each year, about 80 

percent of ACOs make ACO participant 

list changes. We also considered CMS’ 

recent experience with determining the 

eligibility of ACOs to participate in the 

Track 1+ Model. The Track 1+ Model is 

designed to encourage more group 

practices, especially small practices, to 

advance to performance-based risk. As 

such, it does not allow participation by 

current or former Shared Savings 

Program Track 2 or Track 3 ACOs, 

Pioneer ACOs, or Next Generation 

ACOs. As outlined in the Track 1+ 

Model Fact Sheet, the same legal entity 

that participated in any of these 

performance-based risk ACO initiatives 

cannot participate in the Track 1+ 

Model. Furthermore, an ACO would not 

be eligible to participate in the Track 1+ 

Model if 40 percent or more of its ACO 

participants had participation 

agreements with an ACO that was 

participating in one of these 

performance-based risk ACO initiatives 

in the most recent prior performance 

year. 

Third, any approach to determining 

participation options relative to the 

experience of ACOs and ACO 

participants must also factor in the 

differentiation between low revenue 

ACOs and high revenue ACOs, as 

previously discussed in this section. 

Fourth, and lastly, we explained that 

the experience of ACOs and their ACO 

participants in Medicare ACO initiatives 

should be considered in determining 

which track (BASIC track or 

ENHANCED track) the ACO is eligible 

to enter as well as the applicability of 

policies that phase-in over time, namely 

the equal weighting of benchmark year 

expenditures, the policy of adjusting the 

benchmark based on regional FFS 

expenditures (which, for example, 

applies different weights in calculating 

the regional adjustment depending upon 

the ACO’s agreement period in the 

program) and the phase-in of pay-forperformance under the program’s 

quality performance standards. 

Although § 425.222(c) specifies 

whether a former one-sided model ACO 

can be considered to be entering its first 

or second agreement period under Track 

1 if it is re-entering the program after 

termination, the current regulations do 

not otherwise address how we should 

determine the applicable agreement 

period for a previously participating 

ACO after termination or expiration of 

its previous participation agreement. 

(b) Approach to Determining ACOs’ 

Participation Options 

In the August 2018 proposed rule we 

stated our preference for an approach 

that would help to ensure that ACOs, 

whether they are initial applicants to 

the program, renewing ACOs or reentering ACOs, would be treated 

comparably (83 FR 41826). Any 

approach should also ensure eligibility 

for participation options reflects the 

ACO’s and ACO participants’ 

experience with the program and other 

Medicare ACO initiatives and be 

transparent. Therefore, we proposed to 

identify the available participation 

options for an ACO (regardless of 

whether it is applying to enter, re-enter, 

or renew its participation in the 

program) by considering all of the 

following factors: (1) Whether the ACO 

is a low revenue ACO or a high revenue 

ACO; and (2) the level of risk with 

which the ACO or its ACO participants 

has experience based on participation in 

Medicare ACO initiatives in recent 

years. 

As a factor in determining an ACO’s 

participation options, we proposed to 

establish requirements for evaluating 

whether an ACO is inexperienced with 

performance-based risk Medicare ACO 

initiatives such that the ACO would be 

eligible to enter into an agreement 

period under the BASIC track’s glide 

path or whether the ACO is experienced 

with performance-based risk Medicare 

ACO initiatives and therefore limited to 

participating under the higher-risk 

tracks of the Shared Savings Program 

(either an agreement period under the 

maximum level of risk and potential 

reward for the BASIC track (Level E), or 

the ENHANCED track). 

To determine whether an ACO is 

inexperienced with performance-based 

risk Medicare ACO initiatives, we 

proposed that both of the following 

requirements would need to be met: (1) 

The ACO legal entity has not 

participated in any performance-based 

risk Medicare ACO initiative (for 

example, the ACO is a new legal entity 

identified as an initial applicant or the 

same legal entity as a current or 

previously participating Track 1 ACO); 

and (2) CMS determines that less than 

40 percent of the ACO’s ACO 

participants participated in a 

performance-based risk Medicare ACO 

initiative in each of the 5 most recent 

performance years prior to the 

agreement start date. 

We proposed that CMS would 

determine that an ACO is experienced 


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with performance-based risk Medicare 

ACO initiatives if either of the following 

criteria are met: (1) The ACO is the same 

legal entity as a current or previous 

participant in a performance-based risk 

Medicare ACO initiative; or (2) CMS 

determines that 40 percent or more of 

the ACO’s ACO participants 

participated in a performance-based risk 

Medicare ACO initiative in any of the 5 

most recent performance years prior to 

the agreement start date. 

We proposed to specify these 

requirements in a new provision at 

§ 425.600(d). This provision would be 

used to evaluate eligibility for specific 

participation options for any ACO that 

is applying to enter the Shared Savings 

Program for the first time or to re-enter 

after termination or expiration of its 

previous participation agreement, or any 

ACO that is renewing its participation. 

As specified in the proposed definition 

of re-entering ACO, we also proposed to 

apply the provisions at § 425.600(d) to 

new ACOs identified as re-entering 

ACOs because greater than 50 percent of 

their ACO participants have recent prior 

participation in the same ACO. Thus, 

the proposed provision at § 425.600(d) 

would also apply in determining 

eligibility for these ACOs to enter the 

BASIC track’s glide path for agreement 

periods beginning on July 1, 2019, and 

in subsequent years. Because the 40 

percent threshold that we proposed to 

use to identify ACOs as experienced or 

inexperienced with performance-based 

risk on the basis of their ACO 

participants’ prior participation in 

certain Medicare ACO initiatives is 

lower than the 50 percent threshold that 

would be used to identify new legal 

entities as re-entering ACOs based on 

the prior participation of their ACO 

participants in the same ACO, this 

proposed policy would automatically 

capture new legal entities identified as 

re-entering ACOs that have experience 

with performance-based risk based on 

the experience of their ACO 

participants. 

We also proposed to add new 

definitions at § 425.20 for ‘‘Experienced 

with performance-based risk Medicare 

ACO initiatives’’, ‘‘Inexperienced with 

performance-based risk Medicare ACO 

initiatives’’ and ‘‘Performance-based 

risk Medicare ACO initiative’’. 

We proposed to define ‘‘performancebased risk Medicare ACO initiative’’ to 

mean an initiative implemented by CMS 

that requires an ACO to participate 

under a two-sided model during its 

agreement period. We proposed this 

would include Track 2, Track 3 or the 

ENHANCED track, and the proposed 

BASIC track (including Level A through 

Level E) of the Shared Savings Program. 

We also proposed this would include 

the following Innovation Center ACO 

Models involving two-sided risk: The 

Pioneer ACO Model, Next Generation 

ACO Model, the performance-based risk 

tracks of the CEC Model (including the 

two-sided risk tracks for LDO ESCOs 

and non-LDO ESCOs), and the Track 1+ 

Model. The proposed definition also 

included such other Medicare ACO 

initiatives involving two-sided risk as 

may be specified by CMS. 

We proposed to define ‘‘experienced 

with performance-based risk Medicare 

ACO initiatives’’ to mean an ACO that 

CMS determines meets either of the 

following criteria: 

• The ACO is the same legal entity as a 

current or previous ACO that is participating 

in, or has participated in, a performancebased risk Medicare ACO initiative as 

defined under § 425.20, or that deferred its 

entry into a second Shared Savings Program 

agreement period under Track 2 or Track 3 

in accordance with § 425.200(e). 

• 40 percent or more of the ACO’s ACO 

participants participated in a performancebased risk Medicare ACO initiative as 

defined under § 425.20, or in an ACO that 

deferred its entry into a second Shared 

Savings Program agreement period under 

Track 2 or Track 3 in accordance with 

§ 425.200(e), in any of the 5 most recent 

performance years prior to the agreement 

start date. 

As we previously discussed, we 

proposed to discontinue use of the ‘‘sitout’’ period under § 425.222(a) as well 

as the related ‘‘sit-out’’ period for ACOs 

that deferred renewal under 

§ 425.200(e). Thus, we proposed to 

identify all Track 1 ACOs that deferred 

renewal as being experienced with 

performance-based risk Medicare ACO 

initiatives. This would include ACOs 

that are within a fourth and final year 

of their first agreement period under 

Track 1 because they were approved to 

defer entry into a second agreement 

period under Track 2 or Track 3, and 

ACOs that have already entered their 

second agreement period under a twosided model after a one year deferral. 

Under § 425.200(e)(2), in the event that 

a Track 1 ACO that has deferred its 

renewal terminates its participation 

agreement before the start of the first 

performance year of its second 

agreement period under a two-sided 

model, the ACO is considered to have 

terminated its participation agreement 

for its second agreement period under 

§ 425.220. In this case, when the ACO 

seeks to re-enter the program after 

termination, it would need to apply for 

a two-sided model. Our proposal to 

consider ACOs that deferred renewal to 

be experienced with performance-based 

risk Medicare ACO initiatives and 

therefore eligible for either the BASIC 

track’s Level E (if a low revenue ACO 

and certain other requirements are met) 

or the ENHANCED track, would ensure 

that ACOs that deferred renewal 

continue to be required to participate 

under a two-sided model in all future 

agreement periods under the program 

consistent with our current policy under 

§ 425.200(e)(2). 

We proposed to define 

‘‘inexperienced with performance-based 

risk Medicare ACO initiatives’’ to mean 

an ACO that CMS determines meets all 

of the following requirements: 

• The ACO is a legal entity that has not 

participated in any performance-based risk 

Medicare ACO initiative as defined under 

§ 425.20, and has not deferred its entry into 

a second Shared Savings Program agreement 

period under Track 2 or Track 3 in 

accordance with § 425.200(e); and 

• Less than 40 percent of the ACO’s ACO 

participants participated in a performancebased risk Medicare ACO initiative as 

defined under § 425.20, or in an ACO that 

deferred its entry into a second Shared 

Savings Program agreement period under 

Track 2 or Track 3 in accordance with 

§ 425.200(e), in each of the 5 most recent 

performance years prior to the agreement 

start date. 

Under our proposed approach, for an 

ACO to be eligible to enter an agreement 

period under the BASIC track’s glide 

path, less than 40 percent of its ACO 

participants can have participated in a 

performance-based risk Medicare ACO 

initiative in each of the five prior 

performance years. This proposed 

requirement was modeled after the 

threshold currently used in the Track 1+ 

Model (see Track 1+ Model Fact Sheet), 

although with a longer look back period. 

Based on experience with the Track 1+ 

Model during the 2018 application 

cycle, we did not believe that the 

proposed parameters would be 

excessively restrictive. We considered 

the following issues in developing our 

proposed approach: (1) Whether to 

consider participation of ACO 

participants in a particular ACO, or 

cumulatively across multiple ACOs, 

during the 5-year look back period; (2) 

whether to use a shorter or longer look 

back period; and (3) whether to use a 

threshold amount lower than 40 

percent. 

We proposed that in applying this 

threshold, we would not limit our 

consideration to ACO participants that 

participated in the same ACO or the 

same performance-based risk Medicare 

ACO initiative during the look back 

period. Rather, we would determine, 

cumulatively, what percentage of ACO 

participants were in any performancebased risk Medicare ACO initiative in 

each of the 5 most recent performance 

years prior to the agreement start date. 


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We provided the following illustrations 

help to clarify the use of the proposed 

threshold for determining ACO 

participants’ experience with 

performance-based risk Medicare ACO 

initiatives. 

For applicants applying to enter the 

BASIC track for an agreement period 

beginning on July 1, 2019, for example, 

we proposed that we would consider 

what percentage of the ACO participants 

participated in any of the following 

during 2019 (January–June), 2018, 2017, 

2016, and 2015: Track 2 or Track 3 of 

the Shared Savings Program, the Track 

1+ Model, the Pioneer ACO Model, the 

Next Generation ACO Model, or the 

performance-based risk tracks of the 

CEC Model. In future years (in 

determining eligibility for participation 

options for agreement periods starting in 

2020 and subsequent years), we would 

also consider prior participation in the 

BASIC track and ENHANCED track 

(which we proposed would become 

available for agreement periods 

beginning on July 1, 2019 and in 

subsequent years). 

An ACO would be ineligible for the 

BASIC track’s glide path if, for example, 

in the performance year prior to the start 

of the agreement period, 20 percent of 

its ACO participants participated in a 

Track 3 ACO and 20 percent of its ACO 

participants participated in a Next 

Generation ACO, even if the ACO did 

not meet or exceed the 40 percent 

threshold in any of the remaining 4 

performance years of the 5-year look 

back period. 

We considered a number of 

alternatives for the length of the look 

back period for determining an ACO’s 

experience or inexperience with 

performance-based risk Medicare ACO 

initiatives. For example, we considered 

using a single performance year look 

back period, as used under the Track 1+ 

Model. We also considered using a 

longer look back period, for example of 

greater than 5 performance years, or a 

shorter look back period that would be 

greater than 1 performance year, but less 

than 5 performance years, such as a 3 

performance year look back period. 

A number of considerations informed 

our proposal to use a 5 performance 

year look back period. For one, a longer 

look back period would help to guard 

against a circumstance where an ACO 

enters the BASIC track’s glide path, 

terminates its agreement after one or 2 

performance years under a one-sided 

model and seeks to enter the program 

under the one-sided model of the glide 

path. Whether or not the ACO applies 

to enter the program as the same legal 

entity or a new legal entity, the 

proposed eligibility criteria would 

identify this ACO as experienced with 

performance-based risk Medicare ACO 

initiatives if its ACO participant list 

remains relatively unchanged. Second, a 

longer look back period may reduce the 

incentive for organizations to wait out 

the period in an effort to re-form as a 

new legal entity with the same or very 

similar composition of ACO participants 

for purposes of gaming program 

policies. Third, a longer look back 

period also recognizes that new ACOs 

composed of ACO participants that were 

in performance-based risk Medicare 

ACO initiatives many years ago (for 

instance more than 5 performance years 

prior to the ACO’s agreement start date) 

may benefit from gaining experience 

with the program’s current requirements 

under the glide path, prior to 

transitioning to higher levels of risk and 

reward. Fourth, and lastly, in using the 

5 most recent performance years prior to 

the start date of an ACO’s agreement 

period, for ACOs applying to enter an 

agreement period beginning on July 1, 

2019, we proposed to consider the 

participation of ACO participants 

during the first 6 months of 2019. This 

would allow us to capture the ACO 

participants’ most recent prior 

participation in considering an ACO’s 

eligibility for participation options for 

an agreement period beginning July 1, 

2019. An alternative approach that bases 

the look back period on prior calendar 

years would overlook this partial year of 

participation in 2019. 

We also considered using a threshold 

amount lower than 40 percent. Based on 

checks performed during the 2018 

application cycle, for the average Track 

1+ Model applicant, less than 2 percent 

of ACO participants had participated 

under performance-based risk in the 

prior year. The maximum percentage 

observed was 30 percent. In light of 

these findings, we considered whether 

to propose a lower threshold for 

eligibility to participate in the BASIC 

track’s glide path. However, our goal 

was not to be overly restrictive, but 

rather to ensure that ACOs with 

significant experience with 

performance-based risk are 

appropriately placed. While we 

indicated our preference for 40 percent 

for its consistency with the Track 1+ 

Model requirement, we also sought 

comment on other numeric thresholds. 

As previously discussed in this 

section, some restriction would be 

needed to prevent all current and 

previously participating Track 1 ACOs, 

and new ACOs identified as re-entering 

ACOs because of their ACO 

participants’ prior participation in a 

Track 1 ACO, from taking advantage of 

additional time under a one-sided 

model in the BASIC track’s glide path. 

We explained that an approach that 

restricts the amount of time a former 

Track 1 ACO or a new ACO, identified 

as a re-entering ACO because of its ACO 

participants’ prior participation in a 

Track 1 ACO, may participate in the 

one-sided models of the BASIC track’s 

glide path (Level A and Level B) would 

balance several concerns. Allowing 

Track 1 ACOs and eligible re-entering 

ACOs some opportunity to continue 

participation in a one-sided model 

within the BASIC track’s glide path 

could smooth their transition to 

performance-based risk. For example, it 

would provide these ACOs a limited 

time under a one-sided model in a new 

agreement period under the BASIC 

track, during which they could gain 

experience with their rebased historical 

benchmark, and prepare for the 

requirements of participation in a twosided model (such as establishing a 

repayment mechanism arrangement). 

Limiting time in the one-sided models 

of the BASIC track’s glide path for 

former Track 1 ACOs and new ACOs 

that are identified as re-entering ACOs 

because of their ACO participants’ 

recent prior participation in the same 

Track 1 ACO would also allow these 

ACOs to progress more rapidly to 

performance-based risk, and therefore 

further encourage accomplishment of 

the program’s goals. 

After weighing these considerations, 

we proposed that ACOs that previously 

participated in Track 1 of the Shared 

Savings Program or new ACOs, for 

which the majority of their ACO 

participants previously participated in 

the same Track 1 ACO, that are eligible 

to enter the BASIC track’s glide path, 

may enter a new agreement period 

under either Level B, C, D or E. Former 

Track 1 ACOs and new ACOs identified 

as re-entering ACOs because of their 

ACO participants’ prior participation in 

a Track 1 ACO would not be eligible to 

participate under Level A of the glide 

path. Therefore, if an ACO enters the 

glide path at Level B and is 

automatically transitioned through the 

levels of the glide path, the ACO would 

participate in Level E for the final 2 

performance years of its agreement 

period. For a former Track 1 ACO or a 

new ACO identified as a re-entering 

ACO because of its ACO participants’ 

prior participation in a Track 1 ACO 

that enters an agreement period in the 

BASIC track’s glide path beginning on 

July 1, 2019, the ACO could participate 

under Level B for a 6-month 

performance year from July 1, 2019 

through December 31, 2019 and the 12 

month performance year 2020 (as 


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discussed in section II.A.7.c. of this 

final rule). A former Track 1 ACO or a 

new ACO identified as a re-entering 

ACO because of its ACO participants’ 

prior participation in a Track 1 ACO 

that begins an agreement period in the 

BASIC track’s glide path in any 

subsequent year (2020 and onward) 

could participate in Level B for 1 

performance year before advancing to a 

two-sided model within the glide path. 

We also considered a more aggressive 

approach to transitioning ACOs with 

experience in Track 1 to performancebased risk. Specifically, we considered 

whether the one-sided models of the 

BASIC track’s glide path should be 

unavailable to current or previously 

participating Track 1 ACOs and new 

ACOs identified as re-entering ACOs 

because of their ACO participants’ prior 

participation in a Track 1 ACO. Under 

this alternative, ACOs that are 

experienced with Track 1, would be 

required to enter the BASIC track’s glide 

path under performance-based risk at 

Level C, D or E. This alternative would 

more aggressively transition ACOs along 

the glide path. This approach would 

recognize that some of these ACOs may 

have already had the opportunity to 

participate under a one-sided model for 

6 performance years (or 7 performance 

years for ACOs that elect to extend their 

agreement period for the 6-month 

performance year from January 1, 2019 

through June 30, 2019), and should 

already have been taking steps to 

prepare to enter performance-based risk 

to continue their participation in the 

program under the current 

requirements, and therefore should not 

be allowed to take advantage of 

additional time under a one-sided 

model. For ACOs that have participated 

in a single agreement period in Track 1, 

an approach that requires transition to 

performance-based risk at the start of 

their next agreement period would be 

more consistent with the proposed 

redesign of participation options, under 

which ACOs would be allowed only 2 

years, or 2 years and 6 months in the 

case of July 1, 2019 starters, under the 

one-sided models of the BASIC track’s 

glide path. We sought comment on this 

alternative approach. 

We proposed to specify these 

requirements in revisions to the 

regulations under § 425.600, which 

would be applicable for determining 

participation options for agreement 

periods beginning on July 1, 2019, and 

in subsequent years. We sought 

comment on these proposals for 

determining an ACO’s participation 

options by evaluating the ACO legal 

entity’s and ACO participants’ 

experience or inexperience with 

performance-based risk Medicare ACO 

initiatives. In particular, we welcomed 

commenters’ input on our proposal to 

assess ACO participants’ experience 

with performance-based risk Medicare 

ACO initiatives using a 40 percent 

threshold, and the alternative of 

employing a threshold other than 40 

percent, for example, 30 percent. We 

welcomed comments on the proposed 5 

performance year look back period for 

determining whether an ACO is 

experienced or inexperienced with 

performance-based risk Medicare ACO 

initiatives, and our consideration of a 

shorter look back period, such as 3 

performance years. We also welcomed 

comments on our proposal to limit 

former Track 1 ACOs and new ACOs 

identified as re-entering ACOs because 

more than 50 percent of their ACO 

participants have recent prior 

experience in a Track 1 ACO to a single 

performance year under the one-sided 

models of the BASIC track’s glide path 

(two performance years, in the case of 

an ACO starting its agreement period 

under the BASIC track on July 1, 2019), 

and the alternative approach that would 

preclude such ACOs from participating 

in one-sided models of the BASIC 

track’s glide path. 

Comment: Some commenters 

supported the proposed approach to 

differentiating participation options 

based on the experience or inexperience 

of the ACO legal entity or its ACO 

participants. 

Some commenters expressed concern 

that the proposed approach to 

identifying ACOs experienced with 

performance-based risk Medicare ACO 

initiatives was too broad. One 

commenter explained that the approach 

assumes transferability of experience 

across population and geography. 

Another commenter asserts that the 

determination of experience based on 

ACO participants rather than the ACO 

legal entity puts new ACOs at a 

substantial disadvantage, particularly in 

markets where most providers have 

been in an ACO. This commenter 

believes that experience of the ACO 

participants does not necessarily equate 

to the ACO being experienced. Several 

commenters expressed concern that a 40 

percent threshold leaves a majority of 

participants who would have no prior 

experience with the accountable care 

model, and which need more time to 

familiarize themselves with program 

requirements and the type of system 

reforms inherent to participating in a 

population-based APM. 

Some commenters expressed concern 

that the distinctions for determining 

participation options, including 

between ACOs experienced with 

performance-based risk Medicare ACO 

initiatives or inexperienced with 

performance-based risk Medicare ACO 

initiatives add complexity to the 

program. Several commenters expressed 

concern that ACOs would have 

difficulty anticipating these 

determinations. One commenter 

explained that the proposed 

complexities for determining ACO 

participation options could make it hard 

for some groups to understand which 

track/level to participate in and how 

long to remain in such track/level. 

Furthermore, these complexities could 

disincentivize healthcare providers from 

participating in the Shared Savings 

Program. Several commenters 

recommended that CMS provide 

additional guidance on the different 

participation parameters and options so 

that healthcare providers have more 

information for their planning process. 

For example this commenter suggested 

that CMS provide ACOs with detailed 

descriptions of each definition used in 

determining participation options (low 

revenue ACO/high revenue ACO, and 

experienced with performance-based 

risk Medicare ACO initiatives/ 

inexperienced with performance-based 

risk Medicare ACO initiatives) well in 

advance of any decision deadline. One 

commenter recommended using a 

policy that allows ACOs to easily 

understand their options for 

participation ahead of time. One 

commenter recommended CMS clarify 

the timelines and detailed processes for 

how it will monitor, review and 

communicate to ACOs each ACO’s 

status with respect to their 

categorization. 

One commenter suggested that the 

distinction between experienced versus 

inexperienced with performance-based 

risk Medicare ACO initiatives should 

only be applied to determining whether 

and for how long an ACO entity may 

participate in a one-sided model. This 

commenter did not support ACO 

entities being required to participate in 

the ENHANCED track due to experience 

with performance-based risk Medicare 

ACO initiatives, preferring instead that 

all ACO entities be allowed to 

participate in Level E of the BASIC 

track. 

Commenters suggested a variety of 

alternative approaches including the 

following: 

• One commenter suggested that CMS 

consider the experience of both the ACO 

participant TINs and NPIs in making the 

determination whether the ACO is 

experienced with performance-based risk 

Medicare ACO initiatives. This commenter 

explained that a straight percentage of TINs 

is more straightforward, however, the 


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commenter expressed that it could be 

unnecessarily limiting to ACOs comprised of 

large, single TIN entities. This commenter 

suggested that CMS should consider allowing 

ACOs to use a calculation based on TINs or 

NPIs as appropriate for their composition. 

• One commenter suggested that CMS 

consider whether the ACO previously 

managed a majority of the same beneficiary 

population. 

• One commenter suggested that we allow 

greater flexibility in choice of participation 

options to ‘‘high performing’’ ACOs, and 

requiring ‘‘low performers’’ to either quickly 

demonstrate success or be terminated. 

• A few commenters suggested CMS 

consider an ACO to be experienced with 

performance-based risk Medicare ACO 

initiatives if the ACO completes an entire 

agreement period under a performance-based 

risk Medicare ACO initiative, explaining 

their concern about cases where an ACO 

could be considered experienced with 

performance-based risk models after only one 

year of participation in a performance-based 

risk initiative. 

• One commenter suggested that CMS 

restrict the definition of an experienced ACO 

to those with prior experience in the Shared 

Savings Program. The commenter explained 

that the rules of every individual APM are 

complex and can vary significantly from 

model to model, so the definition of an 

‘‘experienced’’ ACO in this model should be 

limited to experience in the Shared Savings 

Program. 

Response: We appreciate commenters’ 

support for the proposal to determine 

participation options for ACOs, 

including consideration of whether an 

ACO is experienced or inexperienced 

with performance-based risk Medicare 

ACO initiatives in combination with 

determining whether the ACO is a low 

revenue ACO or high revenue ACO (as 

discussed in section II.A.5.b. of this 

final rule). 

We acknowledge that the approach to 

identifying participation options for 

ACOs based on a combination of factors, 

including whether an ACO is 

experienced or inexperienced with 

performance-based risk Medicare ACO 

initiatives, and whether an ACO is low 

revenue ACO versus high revenue ACO, 

will add some complexity to program 

policies and certain operational 

processes. However, we believe these 

policies provide necessary safeguards to 

ensure that the amount of time an ACO 

is allowed under one-sided models and 

lower levels of risk in the BASIC track’s 

glide path are not susceptible to gaming 

and to ensure ACOs participate in 

financial models that are commensurate 

with their level of experience in the 

Shared Savings Program and other 

Medicare ACO initiatives. We believe it 

is important to hold ACOs and ACO 

participants accountable for their prior 

experience in which they become 

familiar with the accountable care 

models generally, as well as with the 

Shared Savings Program requirements. 

On the point raised by the commenter 

that the proposed approach assumes 

transferability of experience across 

populations and geography, we note 

there are commonalities and synergies 

between the Shared Savings Program 

and other Medicare ACO initiatives, 

which include their overall aims to 

improve quality of care and lower 

growth in expenditures for a population 

of assigned Medicare FFS beneficiaries. 

Given the similarity in the fundamental 

goals of Medicare ACO initiatives, and 

including the Shared Savings Program 

and other value-based initiatives, we 

believe there is a degree of 

transferability of experience by ACO 

participants across these initiatives and 

to ACOs from providers and suppliers 

experienced with other value-based 

payment arrangements. 

We disagree with the commenter’s 

suggestion that new legal entities are 

disadvantaged by the experience of their 

ACO participants, which under the 

proposed approach is used to determine 

ACO participation options. We believe 

ACOs make strategic decisions about 

which ACO participants to recruit to 

maximize their potential gain from 

program participation. We also note that 

under the program’s shared governance 

requirements at § 425.106(c)(3), at least 

75 percent control of the ACO’s 

governing body must be held by ACO 

participants. We believe that new legal 

entities that meet the 40 percent 

threshold for experienced with 

performance-based risk Medicare ACO 

initiatives (based on the recent prior 

experience of their ACO participants) 

will be significantly informed by their 

ACO participants’ experience. 

Considering these factors, we continue 

to believe that ACOs that include a 

significant number of ACO participants 

with recent prior experience with 

Shared Savings Program requirements, 

or similar requirements of other 

performance-based risk Medicare ACO 

initiatives, should be placed in 

participation options that are reflective 

of the sophistication of their 

organization. 

The approach to distinguishing ACOs 

based on their experience or 

inexperience with performance-based 

risk Medicare ACO initiatives is 

intended to achieve the commenter’s 

suggestion to differentiate which ACOs 

may be able to participate under a onesided model or lower levels of 

performance-based risk within the 

BASIC track’s glide path. However, as 

we explained in response to comments 

in section II.A.5.b of this final rule, we 

decline to allow ACOs to remain in 

Level E of the BASIC track indefinitely, 

and we are finalizing an approach (more 

generally) that would limit the amount 

of time ACOs may remain in the BASIC 

track prior to participating in the 

ENHANCED track. 

We decline to adopt the commenters’ 

suggestions for alternative approaches to 

distinguishing participation options 

based on the ACO’s and ACO 

participants’ level of experience with 

performance-based risk Medicare ACO 

initiatives. We believe that considering 

the prior participation of ACO 

providers/suppliers would add a level 

of complexity to the determination, and 

would also be inconsistent with our use 

of ACO participant TINs in program 

operations. Also, as we previously 

explained, ACOs’ assigned populations 

vary year to year. We therefore decline 

the commenter’s suggestion to 

determine an ACO’s experience with the 

program based on whether the ACO 

managed the same beneficiary 

population in the past. We decline to 

determine an ACO’s track of 

participation based on their prior 

financial or quality performance in the 

program, as we believe that ACOs that 

project performing well in the program 

are more likely to self-select to more 

aggressively pursue participation under 

higher levels of risk and potential 

reward. We also decline to exclude 

ACOs that did not complete an entire 

agreement period during which the 

ACO was under a performance-based 

risk Medicare ACO initiative, including 

certain terminated ACOs and ACO 

participants with a single year of 

participation, from the definition of 

experienced with performance-based 

risk Medicare ACO initiatives. We 

believe this approach would leave the 

program vulnerable to gaming through 

short-term participation, termination 

and re-entry, which we believe could be 

potentially destabilizing and disruptive 

to ACOs and healthcare markets and the 

care delivered to Medicare FFS 

beneficiaries. In particular, this would 

create a circumstance we are trying to 

protect against where ACOs could 

participate under the BASIC track’s 

glide path, terminate prior to the 

conclusion of their 5-year agreement 

period and enter a new agreement 

period under the glide path. We also 

decline to narrow the proposed 

definitions for inexperienced and 

experienced with performance-based 

risk Medicare ACO initiatives to focus 

only on participation in the Shared 

Savings Program, as we believe ACOs’ 

and ACO participants’ experience in 

other Medicare ACO initiatives 

(including models with similar 


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requirements for accountability for the 

quality and cost of care for Medicare 

FFS beneficiaries, and in some cases 

higher levels of risk and potential 

reward) should be considered. 

Further, we believe we have set forth 

clear rules on the approach we will use 

to determine participation options 

under the redesign of the Shared 

Savings Program based on a 

combination of factors. We proposed 

and are finalizing (in this final rule) 

definitions of the term ‘‘low revenue 

ACO’’ and ‘‘high revenue ACO,’’ 

‘‘inexperienced with performance-based 

risk Medicare ACO initiatives’’ and 

‘‘experienced with performance-based 

risk Medicare ACO initiatives,’’ and 

‘‘performance-based risk Medicare ACO 

initiative’’. We will consider the 

commenters’ suggestion to include 

detailed descriptions of these terms, and 

how these concepts will be used in 

determining participation options, in 

material we provide to ACOs informing 

them of our determination of the ACO’s 

status with respect to each of these 

criteria. 

As we indicated in our response to 

comments requesting timely feedback 

on CMS’ determination of low revenue 

ACO versus high revenue ACO status, in 

section II.A.5.b of this final rule, we 

note that we anticipate providing timely 

feedback to ACOs throughout program 

application cycles on whether the ACO 

is likely to be determined to be 

inexperienced with performance-based 

risk Medicare ACO initiatives or 

experienced with performance-based 

risk Medicare ACO initiatives, and a 

low revenue ACO or high revenue ACO 

(among other factors), in order to ensure 

ACOs have the information they need to 

make decisions about program 

participation and to take action to align 

with program requirements. 

Comment: One commenter suggested 

that CMS should consider some 

flexibility for ACOs identified as 

experienced with performance-based 

risk Medicare ACO initiatives with 

small assigned populations (less than 

5,000) to permit their initial 

participation to include Levels C or D of 

the BASIC track at the option of the 

ACO, rather than limiting their 

participation options to either Level E of 

the BASIC track or the ENHANCED 

track. 

Response: Section 1899(b)(2)(D) of the 

Act requires ACOs to have a minimum 

of 5,000 assigned beneficiaries in order 

to be eligible to participate in Shared 

Savings Program. Consistent with this 

requirement, the program’s regulations 

provide that ACOs with fewer than 

5,000 assigned beneficiaries are 

ineligible for program participation 

(§ 425.110(a)). As we discuss in section 

II.A.6.b.(3). of this final rule, we are 

modifying our policies on determining 

the MSR/MLR for ACOs participating in 

two-sided models that have elected a 

fixed MSR/MLR whose populations fall 

below 5,000 assigned beneficiaries for 

performance years beginning on July 1, 

2019 and in subsequent years. Under 

these final policies, we will apply a 

variable MSR/MLR based on the size of 

the ACO’s assigned population, instead 

of the fixed MSR/MLR elected by the 

ACO prior to entering performancebased risk. This will result in a 

relatively higher MSR/MLR (greater 

than 3.9 percent), and therefore a higher 

threshold for the ACO to exceed to be 

eligible for shared savings, and 

relatively higher threshold to protect the 

ACO from liability for shared losses, 

which could result from random 

variation. 

We also decline to create a lower risk 

participation option for ACOs with 

small populations, as suggested by the 

commenter. As discussed in section 

II.A.5.b of this final rule, we are 

finalizing an approach to distinguish 

participation options for ACOs (in part) 

using a claims-based approach to 

identifying low revenue ACOs versus 

high revenue ACOs as opposed to the 

alternatives we considered including 

distinguishing ACOs based on the size 

of their assigned populations. 

Comment: A few commenters 

suggested using a higher threshold for 

determining whether an ACO is 

experienced with performance-based 

risk Medicare ACO initiatives based on 

the experience of its ACO participants, 

so that more ACOs would meet the 

definition of inexperienced with 

performance-based risk Medicare ACO 

initiatives; such as a threshold of 50 

percent or 60 percent instead of 40 

percent as proposed. 

Some commenters suggested 

increasing the threshold from 40 percent 

to 50 percent to align with the threshold 

proposed in the definition of re-entering 

ACO, for identifying new ACOs 

composed of ACO participants with 

previous experience in the same Shared 

Savings Program ACO in recent years. 

One commenter explained that it is 

confusing to use different percentages 

for determining ACO participants’ 

experience with performance-based risk 

Medicare ACO initiatives (40 percent) 

and ACO participants with prior 

experience in the same Shared Savings 

Program ACO under the proposed 

definition of re-entering ACO (50 

percent). 

One commenter recommended CMS 

define an ‘‘experienced’’ ACO as one in 

which at least the majority of ACO 

participants participated in a the same 

performance-based risk Medicare ACO 

initiative, or in an ACO that deferred its 

entry into a second Shared Savings 

Program agreement period under a twosided model, in any of the five most 

recent performance years prior to the 

agreement start date. The commenter 

stated that experience and performance 

of an ACO in one location has little 

bearing on how the ACO might perform 

in another location, explaining that 

market factors contribute significantly to 

ACO performance. ACOs performing 

identically could achieve savings in one 

market but not another. 

As previously described in section 

II.A.5.c.4.(a) of this final rule, some 

commenters suggested that CMS should 

monitor the impact of the policies for 

identifying re-entering ACOs and ACOs 

that are experienced with performancebased risk Medicare ACO initiatives, as 

well as to create an appeals process for 

these determinations. They 

recommended using a threshold of 50 

percent for both of these determinations 

(rather than using the proposed 40 

percent threshold for determining ACOs 

experienced with performance-based 

risk Medicare ACO initiatives) and also 

setting an additional criterion that 

would allow an ACO determined to be 

a re-entering ACO or experienced 

performance-based risk Medicare ACO 

initiatives to appeal the determination if 

less than 30 percent of its ACO 

participants were previously part of the 

same legal entity. 

Response: We continue to believe a 

threshold of 40 percent, for assessing 

ACO participants’ experience with 

performance-based risk Medicare ACO 

initiatives is the appropriate percentage. 

For one, it is consistent with the 

percentage threshold used in 

determining whether an ACO was 

sufficiently inexperienced with 

performance-based risk to participate 

under the Track 1+ Model. Further, we 

believe that a threshold of 40 percent 

will capture ACOs significantly 

composed of ACO participants 

experienced with performance-based 

risk Medicare ACO initiatives. We 

believe increasing the threshold would 

allow experienced ACOs to participate 

under relatively lower-risk options 

when in fact their composition suggests 

their readiness for higher levels for risk 

and potential reward. Further, we 

believe it is necessary to apply a higher 

percentage in the definition of reentering ACOs, since we are identifying 

the majority (greater than 50 percent) of 

ACO participants that participated in 

the same Shared Savings Program ACO 

within the look back period (see section 

II.A.5.c.(4).(a). of this final rule). The 


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purpose of the higher percentage 

threshold in the definition of re-entering 

ACO is to identify a single ACO in 

which the majority of a new legal 

entity’s ACO participants previously 

participated in the Shared Savings 

Program, for the purposes of identifying 

the agreement period the re-entering 

ACO should be considered participating 

under for program policies that phasein over time. In contrast, the definition 

of experienced with performance-based 

risk Medicare ACO initiatives identifies 

ACOs that include a significant 

proportion of ACO participants that 

have recent prior experience in twosided risk accountable care models, as 

part of an approach for identifying 

whether the ACO is prepared to 

participate under relatively higher 

levels of performance-based risk. 

Therefore we decline the commenters’ 

suggestions to use a higher threshold in 

the definitions of inexperienced with 

performance-based risk Medicare ACO 

initiatives and experienced with 

performance-based risk Medicare ACO 

initiatives. 

We continue to prefer our proposed 

approach to consider participation of 

ACO participants cumulatively across 

multiple ACOs, rather than in a 

particular ACO, during the 5-year 

lookback period, because it would allow 

us to potentially identify more ACOs 

that may be experienced with risk 

compared to the narrower options 

suggested by the commenters. We 

therefore decline the commenters’ 

suggestion that we identify experienced 

ACOs as those in which at least the 

majority of ACO participants 

participated in the same Medicare ACO 

(which would include Innovation 

Center models). We also decline the 

commenters’ suggestion that we limit 

the determination of experienced ACOs 

based on participation of ACO 

participants in the same Shared Savings 

Program ACO (such as for consistency 

with the definition of re-entering ACO). 

We believe these approaches would 

allow some ACOs with a significant 

proportion of ACO participants 

experienced with performance-based 

risk in different Medicare ACO 

initiatives to participate under options 

that are designed for ACOs 

inexperienced with Medicare’s 

accountable care models. 

We decline to adopt the commenters’ 

recommendations to modify the process 

for initially determining ACOs that are 

experienced with performance-based 

risk Medicare ACO initiatives (as well 

as the determination of re-entering 

ACOs as previously responded to in 

section II.A.5.c.4.(a) of this final rule), to 

include an initial determination for 

whether an ACO is experienced with 

performance-based risk Medicare ACO 

initiatives, a secondary test to identify 

whether the ACO is eligible to request 

an appeal, and finally an appeal process 

for the final determination. We 

previously explained that we believe 

such an approach would add 

complexity as well as uncertainty as 

ACOs would need to request an appeal 

and await a final determination. 

Additionally, we currently have an 

established process for ACOs to request 

reconsiderations, as specified in subpart 

I of the program’s regulations. 

More generally, we agree with 

commenters suggesting that we evaluate 

and monitor the policy once 

implemented. Although we did not 

specifically address this issue in the 

discussion in the August 2018 proposed 

rule regarding monitoring for changes 

during the agreement period, we are 

concerned about the possibility that 

ACOs will enter the BASIC track’s glide 

path because they are determined to be 

inexperienced with performance-based 

risk Medicare ACO initiatives, and over 

the course of their agreement period, 

dramatically change their composition 

to take advantage of this lower-risk 

option when their new composition 

suggests that they are prepared to take 

on more significant performance-based 

risk. We intend to closely monitor ACO 

participant list change requests for this 

issue. 

Comment: One commenter suggested 

that the look back period for 

determining threshold should be 

shortened from 5 years, but did not 

indicate an alternative for how long of 

a look back period should be used by 

CMS. 

Response: We continue to believe a 

look back period of 5 performance years 

is an appropriate length to ensure we 

identify ACOs with recent prior 

experience with performance-based risk 

Medicare ACO initiatives. We described 

a number of considerations that led to 

our proposal of a 5 performance year 

look back period in the definitions of 

inexperienced with performance-based 

risk Medicare ACO initiatives and 

experienced with performance-based 

risk Medicare ACO initiatives in the 

August 2018 proposed rule (83 FR 

41828), as restated in this section of this 

final rule, including that a 5 

performance year look back period 

could reduce the incentive for 

organizations to wait out the period in 

an effort to re-form as a new legal entity 

with the same or very similar 

composition of ACO participants for 

purposes of gaming program policies. 

Comment: Some commenters 

expressed concerns about requiring 

ACOs experienced with performancebased risk to take on higher levels of 

two-sided risk under the proposed 

redesigned participation options. As 

summarized in section II.A.5.b of this 

final rule, many commenters suggested 

additional flexibility to allow high 

revenue ACOs experienced with 

performance-based risk Medicare ACO 

initiatives to continue participation 

under lower levels of risk rather than be 

limited to participation under the 

ENHANCED track. For example, 

commenters suggested that ACOs 

should be permitted to remain in the 

BASIC track’s Level E (or an equivalent 

level of risk as the Track 1+ Model) 

indefinitely without being forced to 

progress to the ENHANCED track. 

One commenter suggested that former 

Track 3 ACOs should be given the 

option to participate in the BASIC track 

as all other ACOs, among other 

flexibilities in their participation 

options, since these ACOs voluntarily 

entered the highest level of risk and 

reward in the Shared Savings Program. 

As an alternative, one commenter 

suggested that ACOs experienced with 

performance-based risk Medicare ACO 

initiatives should be allowed the option 

of entering an agreement period under 

either Level D or Level E of the BASIC 

track. This is contrary to the proposed 

approach that would limit ACOs 

experienced with performance-based 

risk Medicare ACO initiatives to either 

an agreement period under Level E of 

the BASIC track (if a low revenue ACO), 

or the ENHANCED track. 

Response: We continue to believe in 

the importance of progressing ACOs to 

the highest level of risk and potential 

reward in the program to drive the most 

meaningful change in providers’ and 

suppliers’ behavior toward achieving 

the program’s goals. Further, we 

continue to believe that it is necessary 

to establish policies to safeguard against 

experienced ACOs taking advantage of 

participation options under the BASIC 

track’s glide path intended for ACOs 

inexperienced with the accountable care 

model in Medicare. Therefore we 

continue to believe in the necessity of 

the proposed approach to require ACOs 

identified as experienced with 

performance-based risk Medicare ACO 

initiatives to participate under the 

higher levels of risk and potential 

reward that we are finalizing with this 

final rule, specifically Level E of the 

BASIC track (if eligible) or the 

ENHANCED track. 

Further we note that under the 

policies we are finalizing with this final 

rule, an ACO that is identified as a low 

revenue ACO and experienced with 

performance-based risk Medicare ACO 


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initiatives will be eligible to participate 

for up to two agreement periods in Level 

E of the BASIC track. In response to the 

commenter’s concerns, we note that this 

policy applies to low revenue ACOs 

identified as experienced with 

performance-based because of their 

prior participation in Track 3 of the 

Shared Savings Program, as it would 

also similarly apply to ACOs identified 

as experienced with performance-based 

risk Medicare ACO initiatives because 

of their participation in the other twosided models specified in the definition 

of performance-based risk Medicare 

ACO initiatives. 

Comment: Some commenters point to 

concerns related to the inclusion of the 

Track 1+ Model in the definition of 

performance-based risk Medicare ACO 

initiative. Some commenters expressed 

concern that under the proposed 

approach, high revenue ACOs that 

transitioned to the Track 1+ Model 

within their current agreement period 

would be required to renew under the 

ENHANCED track, whereas their 

counterparts that remained under Track 

1 would be eligible to enter a one-sided 

model of the BASIC track’s glide path. 

Some commenters view this approach 

as disadvantageous or unreasonable to 

ACOs that voluntarily elected to 

accelerate their transition to risk and 

switched to the Track 1+ Model. 

Commenters explained that these Track 

1+ Model ACOs would be required to 

make a significant jump from the Track 

1+ Model level of risk and reward to the 

ENHANCED track level of risk and 

reward with only minimal experience 

with in performance-based risk. 

Some commenters pointed out that 

ACOs entering the Track 1+ Model for 

their third performance year, 

performance year 2018, will not know 

the final results of this year until after 

their new agreement period begins 

under the proposed approach for a July 

1, 2019 start date. This is a significant 

concern since performance year 2018 is 

the first year of two-sided risk for these 

ACOs, which are required to continue 

participation in two-sided risk for their 

next agreement period. 

Commenters addressing this issue 

typically recommended that all current 

Track 1+ Model ACOs, independent of 

whether they are identified by CMS as 

high revenue ACOs or low revenue 

ACOs, should be permitted to continue 

their participation in the Shared Savings 

Program under Level E of the BASIC 

track for an agreement period of at least 

5 years, to gain experience with 

performance-based risk. 

One commenter, indicating confusion 

over the applicability of the proposed 

policies in determining participation 

options, asked if ACOs currently in the 

Track 1+ Model would be eligible to 

participate in the BASIC track’s glide 

path including being allowed one year 

of participation under a one-sided 

model. 

Response: We are persuaded by 

commenters’ concerns that the proposed 

policies could disrupt the progressive 

transition to risk by Track 1 ACOs that 

took an initial and important step by 

entering the Track 1+ Model within 

their current agreement period, with an 

expectation that they might be able to 

continue in a similar level of risk and 

reward for a second 3-year agreement 

period. Therefore, we are finalizing a 

limited exception to allow ACOs that 

transitioned to the Track 1+ Model 

within their current agreement period 

(therefore ACOs with a first or second 

agreement period start date in 2016 or 

2017 that entered the Track 1+ Model in 

2018), which are considered high 

revenue ACOs, a one-time option to 

renew for a consecutive agreement 

period of at least 5 years under Level E 

of the BASIC track. We are specifying 

this participation option in a provision 

of the regulations text at 

§ 425.600(d)(1)(ii)(B). We note that low 

revenue ACOs identified as experienced 

with performance-based risk Medicare 

ACO initiatives would have an 

opportunity to participate for up to two 

agreement periods under Level E of the 

BASIC track. To clarify in response to 

the commenter’s confusion, we note that 

former Track 1+ Model ACOs are 

ineligible for the BASIC track’s glide 

path because they would be identified 

as experienced with performance-based 

risk Medicare ACO initiatives. 

We do not believe it is necessary to 

extend this same exception to ACOs that 

entered or renewed for a 3-year 

agreement period under the Track 1+ 

Model with an agreement start date of 

January 1, 2018. Under the original 

design of the Track 1+ Model, we would 

have allowed entry into the model for 

an agreement period start date of 2018, 

2019 and 2020 (as discussed in section 

II.F of this final rule). ACOs would not 

have been able to renew their 

participation under the Model for a 

second 3-year agreement period 

beginning January 1, 2021. Instead, 

under the terms of the Track 1+ Model 

Participation Agreement and the current 

Shared Savings Program regulations, 

these ACOs would have had the option 

to continue their participation in the 

Shared Savings Program in an 

agreement period under either Track 2 

or Track 3. With the changes to the 

program’s participation options we are 

finalizing with this final rule, ACOs that 

entered the Track 1+ Model for first or 

second agreement period beginning on 

January 1, 2018 will have the following 

options: Low revenue ACOs would be 

eligible to participate in Level E of the 

BASIC track for up to two agreement 

periods; high revenue ACO would be 

limited to participating in the 

ENHANCED track. 

Comment: We received a few 

comments specifically addressing the 

proposal to limit an ACO eligible for the 

BASIC track’s glide path to enter under 

Level B if the ACO has previous 

participation in Track 1. Several 

commenters supported CMS’ proposal 

to allow ACOs that previously 

participated in Track 1 of the Shared 

Savings Program or new ACOs, for 

which the majority of their ACO 

participants previously participated in 

the same Track 1 ACO, that are eligible 

to enter the BASIC track’s glide path, to 

enter a new agreement period under 

either Level B, C, D or E. Several 

commenters indicated the importance of 

allowing these ACOs an opportunity to 

participate for at least one performance 

year under a one-sided model before 

transitioning to performance-based risk. 

One commenter explained that this 

approach would give ACOs with 

experience in the program but without 

experience in performance-based risk a 

reasonable amount of time in the 

redesigned program structure before 

being required to move to performancebased risk. The commenter preferred the 

proposed approach to the potentially 

more aggressive approach CMS 

considered in which ACOs with 

experience in Track 1 would be required 

to start at Level C of the BASIC track or 

higher. 

Several commenters suggested that all 

ACOs should be allowed to start at 

Level A of the BASIC track. One 

commenter stated that early adopters 

should not be penalized by forcing them 

into performance-based risk while other 

new ACO entrants are allowed to 

remain in one-sided models for several 

more years. One commenter seemed to 

suggest that the proposed approach may 

differentiate whether ACOs may enter 

Level A or Level B of the BASIC track’s 

glide path depending on the length of 

time they previously participated in 

Track 1. 

Response: We are finalizing as 

proposed the approach for glide path 

entry for former Track 1 ACOs and new 

ACOs that are identified as re-entering 

ACOs because of their ACO 

participants’ recent prior participation 

in the same Track 1 ACO. These ACOs, 

if eligible to enter the BASIC track’s 

glide path, will be restricted to a single 

year of participation under a one-sided 

model (Level B) before being 


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automatically transitioned to risk and 

reward under the glide path (except for 

ACOs with an agreement period starting 

July 1, 2019, which would be permitted 

to continue in Level B for a second 

performance year starting January 1, 

2020). We appreciate commenters’ 

support for this proposed approach 

which recognizes that ACOs with prior 

experience in Track 1 may need 

additional time under a one-sided 

model to prepare for performance-based 

risk, but are likely better prepared to 

more rapidly progress to performancebased risk because of their experience in 

the Shared Savings Program. Therefore, 

we decline the commenter’s suggestion 

that these ACOs be allowed to enter the 

BASIC track’s glide path at Level A. 

Further, we believe the comments 

reflect the need to clarify that this 

policy restricting entry into the BASIC 

track’s glide path to Level B applies 

consistently to any former Track 1 ACO 

and new ACO that is identified as a reentering ACO because of its ACO 

participants’ recent prior participation 

in the same Track 1 ACO, regardless of 

how many performance years or 

agreement periods the ACO participated 

under Track 1. 

Comment: As described and 

addressed elsewhere in our summary of 

comments in section II.A. of this final 

rule, many commenters expressed 

concerns about the pace of transitioning 

ACOs to performance-based risk under 

the proposed designed participation 

options. Some commenters specifically 

expressed concern about the design of 

the BASIC track that allows new, 

inexperienced ACOs only two 

performance years under a one-sided 

model before requiring ACOs to enter 

performance-based risk. One commenter 

explained that new ACOs need time to 

adjust to the program requirements. One 

commenter encouraged CMS to 

prioritize the entrance of new 

participants, and especially low revenue 

ACOs and ACOs inexperienced with 

performance-based risk Medicare ACO 

initiatives, into the Shared Savings 

Program as it implements the redesign 

of the participation options. 

Some commenters expressed concern 

that the proposed approach may require 

too quick of a progression to higher 

levels of performance-based risk by 

small, rural and physician-only ACOs. 

One commenter expressed concern that 

ACOs that have actually achieved 

savings but do not have the financial 

resources to go to risk would be forced 

out of the program. 

More generally, some commenters 

stated a critical component of 

performance improvement lies in the 

ACO’s ability to analyze the 

performance data being provided to the 

ACO and make targeted improvements 

based on this information. Under CMS’ 

current proposal, ACOs would have 

only one year of performance data 

before being required to move to a 

performance-based risk model. One 

commenter explained that the timing of 

benchmark notification, data receipt and 

shared savings determinations under the 

program render such a short period of 

time effectively useless to determine if 

the ACO’s care coordination and other 

redesigns are having the intended effect. 

The commenter explained further that 

ACOs do not receive a preliminary 

benchmark or historical data until after 

the performance year has begun. They 

also do not receive a final shared 

savings determination until seven or 

eight months after the conclusion of the 

performance year. As a result, the 

commenter stated, ACOs are 

functionally blind to their financial 

performance for the entire length of a 

performance year and into the following 

year, which makes it difficult for ACOs 

to determine how to invest any returns 

or how to alter their care delivery to 

achieve savings and improve quality. 

The commenter believes the proposed 

progression to performance-based risk 

within the BASIC track’s glide path 

forces ACOs to take on performancebased risk without much-needed 

information, setting many ACOs up for 

failure. 

To address these concerns, several 

commenters recommended that CMS 

allow new, inexperienced ACOs three 

performance years in a one-sided model, 

rather than two performance years, 

before requiring them to take on 

performance-based risk. 

Several commenters recommended 

that CMS allow new ACOs at least four 

performance years in a one-sided model 

to provide the ACOs with two to three 

years of performance data, to identify 

trends and opportunities for 

transformation and improvement before 

they are moved to a two-sided model. 

This commenter suggested, for example, 

CMS could implement a policy allowing 

all new ACOs to remain in Level A of 

the BASIC track for two performance 

years and Level B of the BASIC track for 

an additional two performance years 

before requiring the ACO to move to 

Level C in the fifth and final 

performance year of their 5-year 

agreement. Alternatively, commenters 

suggest that CMS could allow new 

ACOs to remain in a one-sided model 

for the duration of their first 5-year 

agreement period, and then permit the 

ACO to begin their second 5-year 

agreement period at Level C or Level D 

of the BASIC track where they would 

participate for three performance years 

and progress to Level E for the 

remaining two performance years. 

Several commenters suggesting these 

alternative approaches to allowing 

inexperienced ACOs additional time 

under a one-sided model of the BASIC 

track’s glide path recommended that 

CMS maintain the opportunity for ACOs 

to elect to more rapidly enter higher 

levels of risk and reward, as proposed 

(see section II.A.4.b. of this final rule). 

Response: We are persuaded by 

commenters that ACOs new to the 

Shared Savings Program that are 

inexperienced with performance-based 

risk Medicare ACO initiatives may need 

additional time under a one-sided 

model to gain experience with program 

participation and to prepare for the 

transition to performance-based risk. We 

believe the need for this additional time 

in a one-sided model is particularly 

acute among low revenue ACOs. As 

described in comments summarized 

elsewhere in this final rule, for example, 

small, rural and physician-only ACOs, 

which are more likely to be low revenue 

ACOs, may lack the financial reserves 

needed to support establishment of a 

repayment mechanism arrangement. 

These ACOs may be able to better 

accrue the needed financial resources 

through earned shared savings in their 

initial years of program participation (if 

they are eligible to share in these 

savings). 

Therefore we are finalizing a 

modification to our proposals to allow 

an additional participation option in the 

BASIC track’s glide path for ACO legal 

entities without prior experience in the 

Shared Savings Program (that is, new 

legal entities that are not identified as a 

re-entering ACOs) that are identified as 

low revenue ACOs. To be eligible for the 

BASIC track’s glide path, these ACOs 

would have been determined to be 

inexperienced with performance-based 

risk Medicare ACO initiatives based on 

an evaluation of their ACO legal entity 

and also ACO participants (according to 

the 40 percent threshold). We will allow 

these ACOs to participate under a onesided model for up to three performance 

years (or four performance years for 

ACOs entering an agreement period 

beginning July 1, 2019). However, in 

exchange for this additional year under 

a one-sided model, these ACOs would 

forfeit their progression along the glide 

path to Level C and Level D and 

therefore automatically advance to Level 

E for the remaining performance years 

of their agreement period. 

We note that this alternative 

participation option will not be 

available to new ACOs that are 

identified as re-entering ACOs because 


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of their ACO participants’ recent prior 

participation in the same Track 1 ACO. 

With this alternative, we are allowing 

for an additional participation option 

that more closely resembles the current 

opportunity for ACOs to participate for 

a 3-year agreement period in a one-sided 

model, and then transition to Level E of 

the BASIC track, with the level of risk 

and potential reward currently available 

under the popular Track 1+ Model. 

Therefore, we believe this policy (under 

which ACOs forgo participation in Level 

C and Level D of the BASIC track’s glide 

path) is responsive to some commenters’ 

suggestions for such alternatives, and 

also supported by our early experience 

with the Track 1+ Model. Among ACOs 

renewing for a second agreement period 

beginning January 1, 2018, we observed 

that 5 Track 1 ACOs renewed under the 

Track 1+ Model. However, as discussed 

elsewhere in this section of this final 

rule, we strongly believe that ACOs 

need to make the transition to two-sided 

risk within their 5-year agreement 

period of the BASIC track’s glide path, 

an approach which some commenters 

also supported. Nevertheless, we are 

sensitive to commenters’ concern about 

the need for ACOs to have more 

performance information before 

transitioning to higher levels of 

performance-based risk. Considering 

these factors, in combination, we 

believe it would be an attractive 

alternative that meets the objectives of 

our program’s redesign to offer the 

option for certain ACOs to elect to 

remain under a one-sided model of the 

BASIC track’s glide path for an 

additional performance year prior to 

transitioning to Level E of the BASIC 

track for the remaining years of their 

agreement period. As discussed in the 

Regulatory Impact Analysis (section V 

of this final rule), we believe this 

alternative would be protective of the 

Trust Funds because it could encourage 

program entry by the types of 

organizations that have tended to be 

higher-performing (small, physicianonly and rural ACOs), and also 

encourage these ACOs to more 

aggressively pursue the program’s goals 

by moving to higher risk (under Level E) 

faster. We note also that we are 

finalizing the option for eligible ACOs 

without previous experience in the 

Shared Savings Program to participate 

under the BASIC track’s glide path, 

where they enter at Level A and are 

automatically advanced through the 

remaining four levels of the glide path, 

concluding at Level E. Therefore, this 

will remain a participation option for 

organizations that prefer a more 

incremental progression to increasing 

levels of two-sided risk. 

In the new provision of the 

regulations at § 425.600(a)(4) we are 

specifying an exception to the policy 

that ACOs participating in the BASIC 

track’s glide path are automatically 

advanced to the next level of the glide 

path at the start of each subsequent 

performance year of the agreement 

period. This exception, applicable to an 

ACO legal entity without prior 

experience in the Shared Savings 

Program (that is, a new legal entity that 

is not identified as a re-entering ACO) 

that is identified as a low revenue ACO 

(participating in the BASIC track’s glide 

path and therefore inexperienced with 

performance-based risk Medicare ACO 

initiatives), allows for the following: (1) 

The ACO elects to enter the BASIC 

track’s glide path at Level A, and is 

automatically advanced to Level B for 

performance year 2 (or performance year 

3 in the case of ACOs entering an 

agreement period beginning on July 1, 

2019); (2) prior to the automatic 

advancement of the ACO to Level C, the 

ACO may elect to remain in Level B for 

performance year 3 (performance year 4 

in the case of ACOs entering an 

agreement period beginning on July 1, 

2019); (3) in the case of an ACO that 

elects to remain in Level B for an 

additional performance year, the ACO 

forgoes participation in Level C and 

Level D of the glide path and is 

automatically advanced to Level E at the 

start of performance year 4 (or 

performance year 5 in the case of ACOs 

entering an agreement period beginning 

on July 1, 2019). We are making certain 

modifications to § 425.600 (such as to 

incorporate section headers) for clarity. 

We are also specifying a provision 

related to this participation option in 

the regulations text at § 425.605(b)(2)(ii), 

on the timing of the ACO’s selection of 

its MSR/MLR before entering a twosided model of the BASIC track’s glide 

path. 

To determine if an ACO is eligible to 

make this election to remain in Level B 

for another performance year, we would 

re-evaluate the ACO to determine if it 

continues to meet the definition of a low 

revenue ACO and the definition of an 

ACO that is inexperienced with 

performance-based risk Medicare ACO 

initiatives. 

Further, we believe this policy, to 

allow additional flexibility for new legal 

entities, that are low revenue ACOs, and 

inexperienced with performance-based 

risk Medicare ACO initiatives, to 

participate for up to 3 performance 

years under a one-sided model of the 

BASIC track’s glide path before 

transitioning to Level E of the BASIC 

track, in combination with other final 

policies within this final rule address 

commenters’ concerns and suggestions 

for a relatively gentler glide path to twosided risk for small, rural and 

physician-only ACOs (or generally low 

revenue ACOs), and support continued 

participation of these ACOs in the 

Shared Savings Program. We 

summarized these other factors in 

section II.A.5.b.(2) of this final rule, and 

in brief these include the following: (1) 

Increasing the threshold of ACO 

participant revenue as a percentage of 

benchmark used in identifying low 

revenue ACOs; (2) allowing for higher 

sharing rates in the BASIC track’s glide 

path; and (3) modifications to the 

approach for determining repayment 

mechanism arrangement amounts to 

potentially reduce the burden of these 

arrangements on lower-revenue ACOs 

participating in the ENHANCED track. 

Under our final policies we will 

determine low revenue ACOs based on 

a higher threshold percentage, 35 

percent instead of 25 percent as 

proposed (see section II.A.5.b of this 

final rule). Therefore, a potentially 

greater number of ACOs may be eligible 

for this alternative participation option. 

We decline commenters’ suggestions 

that certain ACOs be exempt from 

transitioning to performance-based risk 

or higher levels of risk and potential 

reward. As we explain elsewhere in this 

section of this final rule, we believe the 

progression to performance-based risk is 

critical to driving the most meaningful 

change in providers’ and suppliers’ 

behavior toward achieving the 

program’s goals, and that participation 

in two-sided models, and ultimately the 

ENHANCED track, should be the goal 

for all Shared Savings Program ACOs. 

More generally we believe the 

previously described policy 

modifications will help ensure program 

entry and continued participation by 

relatively risk-averse ACOs. 

Comment: One commenter stated that 

the definition of deferred renewal as 

described in the August 2018 proposed 

rule is not sufficiently clear. The 

commenter suggested that CMS clarify 

the definition of a ‘‘deferred ACO’’ so 

that it could be easily determined by an 

ACO to avoid confusion. 

Response: As described in section 

II.A.2 of this final rule we are 

discontinuing the deferred renewal 

participation option, which was made 

available to ACOs that participated 

under Track 1 for a first agreement 

period beginning on either January 1, 

2014 or January 1, 2015. Under this 

policy, specified in § 425.200(e), at the 

time of renewal for a second agreement 

period, the ACO elected to extended its 


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initial agreement period under Track 1 

for an additional year for a total of 4 

performance years, and thereby deferred 

entering in a second agreement period 

under either Track 2 or Track 3. As we 

previously described in section II.A.2 of 

this final rule, few ACO selected the 

deferred renewal option. 

Comment: Some commenters 

addressed generally the concern about 

gaming participation options. One 

commenter stated support for CMS to 

closely monitor ‘‘gaming’’ behavior and 

to take action when specific gaming 

behavior is identified. 

One commenter explained that 

shortening the time an ACO may remain 

in a one-sided model and extending the 

agreement period to five years (which 

affects how often benchmarks are 

rebased), increases the incentives to 

participate in ‘‘gaming’’. The commenter 

suggested that certain, well-defined 

precautionary measures may be 

warranted. 

One commenter in general 

encouraged CMS to explore the ways 

bad actors may use current or new 

structures to take advantage of 

programmatic rules or beneficiaries. 

Response: We appreciate commenters’ 

concerns about the possibility that 

ACOs may attempt to game program 

requirements to yield more favorable 

participation options for their 

organization. We continue to believe 

that the combination of policies we are 

establishing with this final rule to 

ensure program integrity are protective 

of the Trust Funds, as well as protective 

of beneficiaries by ensuring ACOs are 

held accountable for their financial and 

quality performance. This includes: 

Limiting more experienced ACOs to 

higher-risk participation options; more 

rigorously screening for good standing 

among ACOs seeking to renew their 

participation in the program or re-enter 

the program after termination or 

expiration of their previous agreement; 

identifying ACOs re-forming under new 

legal entities as re-entering ACOs if 

greater than 50 percent of their ACO 

participants have recent prior 

participation in the same ACO in order 

to hold these ACO accountable for their 

ACO participants’ experience with the 

program; and holding ACOs in twosided models accountable for partialyear losses if either the ACO or CMS 

terminates the agreement before the end 

of the performance year (discussed in 

section II.A.6.d.(3) of this final rule). 

Final Action: After consideration of 

public comments, we are finalizing our 

proposal to specify requirements for 

evaluating an ACO’s eligibility for 

specific participation options for 

agreement periods beginning on July 1, 

2019, and in subsequent years, in a new 

provision at § 425.600(d), with the 

following modifications as discussed in 

this section of this final rule: (1) Allow 

the option for an ACO legal entity 

without prior experience in the Shared 

Savings Program (a new legal entity that 

is not identified as a re-entering ACO) 

that is identified as a low revenue ACO 

participating in the BASIC track’s glide 

path to elect an additional year of 

participation under a one-sided model 

in exchange for transitioning more 

rapidly to Level E for the remaining 

years of their agreement period; and (2) 

ensuring ACOs that entered the Track 

1+ Model within their current 

agreement period have the opportunity 

to renew for a subsequent agreement 

period under Level E of the BASIC 

track. 

We are finalizing our proposal to add 

new definitions at § 425.20 for 

‘‘Experienced with performance-based 

risk Medicare ACO initiatives’’, 

‘‘Inexperienced with performance-based 

risk Medicare ACO initiatives’’ and 

‘‘Performance-based risk Medicare ACO 

initiative’’ without modification. 

We define ‘‘performance-based risk 

Medicare ACO initiative’’ to mean an 

initiative implemented by CMS that 

requires an ACO to participate under a 

two-sided model during its agreement 

period. This includes Track 2, Track 3 

or the ENHANCED track, and the 

proposed BASIC track (including Level 

A through Level E) of the Shared 

Savings Program. This also included the 

following Innovation Center ACO 

Models involving two-sided risk: The 

Pioneer ACO Model, Next Generation 

ACO Model, the performance-based risk 

tracks of the CEC Model (including the 

two-sided risk tracks for LDO ESCOs 

and non-LDO ESCOs), and the Track 1+ 

Model. This definition also includes 

such other Medicare ACO initiatives 

involving two-sided risk as may be 

specified by CMS. 

We define ‘‘experienced with 

performance-based risk Medicare ACO 

initiatives’’ to mean an ACO that CMS 

determines meets either of the following 

criteria: 

(1) The ACO is the same legal entity 

as a current or previous ACO that is 

participating in, or has participated in, 

a performance-based risk Medicare ACO 

initiative as defined under 425.20, or 

that deferred its entry into a second 

Shared Savings Program agreement 

period under Track 2 or Track 3 in 

accordance with § 425.200(e). 

(2) 40 percent or more of the ACO’s 

ACO participants participated in a 

performance-based risk Medicare ACO 

initiative as defined under § 425.20, or 

in an ACO that deferred its entry into a 

second Shared Savings Program 

agreement period under Track 2 or 

Track 3 in accordance with § 425.200(e), 

in any of the 5 most recent performance 

years prior to the agreement start date. 

We define ‘‘inexperienced with 

performance-based risk Medicare ACO 

initiatives’’ to mean an ACO that CMS 

determines meets all of the following 

requirements: 

(1) The ACO is a legal entity that has 

not participated in any performancebased risk Medicare ACO initiative as 

defined under § 425.20, and has not 

deferred its entry into a second Shared 

Savings Program agreement period 

under Track 2 or Track 3 in accordance 

with § 425.200(e); and 

(2) Less than 40 percent of the ACO’s 

ACO participants participated in a 

performance-based risk Medicare ACO 

initiative as defined under § 425.20, or 

in an ACO that deferred its entry into a 

second Shared Savings Program 

agreement period under Track 2 or 

Track 3 in accordance with § 425.200(e), 

in each of the 5 most recent 

performance years prior to the 

agreement start date. 

In summary, in combination with 

determining an whether ACOs are low 

revenue ACOs versus high revenue 

ACOs as described in section II.A.5.b of 

this final rule, we are finalizing the 

addition of a new paragraph (d) under 

§ 425.600, to provide that CMS will 

identify ACOs as inexperienced or 

experienced with performance-based 

risk Medicare ACO initiatives for 

purposes of determining an ACO’s 

eligibility for certain participation 

options, as follows (with certain 

exceptions, as noted): 

• If an ACO is identified as a high revenue 

ACO, the following options would apply: 

++ If we determine the ACO is 

inexperienced with performance-based risk 

Medicare ACO initiatives, the ACO may enter 

the BASIC track’s glide path, or the 

ENHANCED track. With the exception of 

ACOs that previously participated in Track 1 

and new ACOs identified as re-entering 

ACOs because of their ACO participants’ 

prior participation in a Track 1 ACO, an ACO 

may enter the BASIC track’s glide path at any 

level (Level A through Level E). Therefore, 

eligible ACOs that are new to the program, 

identified as initial applicants and not as reentering ACOs, would have the flexibility to 

enter the glide path at any one of the five 

levels. An ACO that previously participated 

in Track 1 or a new ACO identified as a reentering ACO because more than 50 percent 

of its ACO participants have recent prior 

experience in the same Track 1 ACO may 

enter the glide path under either Level B, C, 

D or E. 

++ If we determine the ACO is 

experienced with performance-based risk 

Medicare ACO initiatives, the ACO may only 

enter the ENHANCED track. However, an 


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ACO in a first or second agreement period 

beginning in 2016 or 2017 identified as 

experienced with performance-based risk 

Medicare ACO initiatives based on 

participation in the Track 1+ Model may 

renew for a consecutive agreement period 

beginning on July 1, 2019, or January 1, 2020 

(respectively), either under Level E of the 

BASIC track, or the ENHANCED track. 

• If an ACO is identified as a low revenue 

ACO, the following options would apply: 

++ If we determine the ACO is 

inexperienced with performance-based risk 

Medicare ACO initiatives, the ACO may enter 

the BASIC track’s glide path, or the 

ENHANCED track. An ACO may enter the 

BASIC track’s glide path at any level (Level 

A through Level E). The following exceptions 

apply: 

—An ACO that previously participated in 

Track 1 or a new ACO identified as a reentering ACO because more than 50 percent 

of its ACO participants have recent prior 

experience in the same Track 1 ACO may 

enter the glide path under either Level B, C, 

D or E. 

—An eligible new legal entity (not 

identified as a re-entering ACO), identified as 

a low revenue ACO and inexperienced with 

performance-based risk Medicare ACO 

initiatives elects to enter the BASIC track’s 

glide path at Level A, and is automatically 

advanced to Level B for performance year 2 

(or performance year 3 in the case of ACOs 

entering an agreement period beginning on 

July 1, 2019). Prior to the automatic 

advancement of the ACO to Level C, the ACO 

may elect to remain in Level B for 

performance year 3 (performance year 4 in 

the case of ACOs entering an agreement 

period beginning on July 1, 2019). In the case 

of an ACO that elects to remain in Level B 

for an additional performance year, the ACO 

is automatically advanced to Level E at the 

start of performance year 4 (or performance 

year 5 in the case of ACOs entering an 

agreement period beginning on July 1, 2019). 

++ If we determine the ACO is 

experienced with performance-based risk 

Medicare ACO initiatives, the ACO may enter 

Level E of the BASIC track (highest level of 

risk and potential reward) or the ENHANCED 

track. As discussed in section II.A.5.b. of this 

final rule, low revenue ACOs are limited to 

two agreement periods of participation under 

the BASIC track. 

(c) Applicability of Policies That PhaseIn 

In the August 2018 proposed rule (83 

FR 41829 through 41832), we explained 

that we would consider an ACO’s 

experience with the program or other 

performance-based risk Medicare ACO 

initiatives in determining which 

agreement period an ACO should be 

considered to be entering for purposes 

of applying policies that phase-in over 

the course of the ACO’s first agreement 

period and subsequent agreement 

periods: (1) The weights applied to 

benchmark year expenditures (equal 

weighting in second or subsequent 

agreement periods instead of weighting 

the 3 benchmark years (BYs) at 10 

percent (BY1), 30 percent (BY2), and 60 

percent (BY3)); (2) the weights used in 

calculating the regional adjustment to 

an ACO’s historical benchmark, which 

phase in over multiple agreement 

periods; and (3) the quality performance 

standard, which phases in from 

complete and accurate reporting of all 

quality measures in the first 

performance year of an ACO’s first 

agreement period to pay-forperformance over the remaining years of 

the ACO’s first agreement period, and 

ACOs continue to be assessed on 

performance in all subsequent 

performance years under the program 

(including subsequent agreement 

periods). We noted that for purposes of 

this discussion, we considered 

agreement periods to be sequential and 

consecutive. For instance, after an ACO 

participates in its first agreement period, 

the ACO would enter a second 

agreement period, followed by a third 

agreement period, and so on. 

We proposed to specify under 

§ 425.600(f)(1) that an ACO entering the 

program for the first time (an initial 

entrant) would be considered to be 

entering a first agreement period in the 

Shared Savings Program for purposes of 

applying program requirements that 

phase-in over time, regardless of its 

experience with performance-based risk 

Medicare ACO initiatives. Under this 

approach, in determining the ACO’s 

historical benchmark, we would weight 

the benchmark year expenditures as 

follows: 10 Percent (BY1), 30 percent 

(BY2), and 60 percent (BY3). We 

explained that under the proposed 

approach to applying factors based on 

regional FFS expenditures beginning 

with an ACO’s first agreement period, 

we would apply a weight of either 25 

percent or 35 percent in determining the 

regional adjustment amount depending 

on whether the ACO is higher or lower 

spending compared to its regional 

service area. (As described in section 

II.D. of this final rule, we are modifying 

our proposed phase-in of the weights 

used in calculating the regional 

adjustment. Under the policies we are 

adopting in this final rule, we would 

apply a weight of either 15 percent or 

35 percent in determining the regional 

adjustment amount for an ACO in its 

first agreement period.) Further, under 

§ 425.502, an initial entrant would be 

required to completely and accurately 

report all quality measures to meet the 

quality performance standard (referred 

to as pay-for-reporting) in the first 

performance year of its first agreement 

period, and for subsequent years of the 

ACO’s first agreement period the payfor-performance quality performance 

standard would phase-in. 

We proposed to divide re-entering 

ACOs into three categories in order to 

determine which agreement period an 

ACO will be considered to be entering 

for purposes of applying program 

requirements that phase-in over time, 

and to specify this policy at 

§ 425.600(f)(2). For an ACO whose 

participation agreement expired without 

having been renewed, we proposed the 

ACO would re-enter the program under 

the next consecutive agreement period. 

For example, if an ACO completed its 

first agreement period and did not 

renew, upon re-entering the program, 

the ACO would participate in its second 

agreement period. 

For an ACO whose participation 

agreement was terminated under 

§ 425.218 or § 425.220, we proposed the 

ACO re-entering the program would be 

treated as if it is starting over in the 

same agreement period in which it was 

participating at the time of termination, 

beginning with the first performance 

year of the new agreement period. For 

instance, if an ACO terminated at any 

time during its second agreement 

period, the ACO would be considered 

participating in a second agreement 

period upon re-entering the program, 

beginning with the first performance 

year of their new agreement period. 

Alternatively, we considered 

determining which performance year a 

terminated ACO should re-enter within 

the new agreement period, in relation to 

the amount of time the ACO 

participated during its most recent prior 

agreement period. For example, under 

this approach, an ACO that terminated 

its participation in the program in the 

third performance year of an agreement 

period would be treated as re-entering 

the program in performance year three 

of the new agreement period. However, 

we noted that this alternative approach 

could be complicated given the 

proposed transition from 3-year 

agreements to agreement periods of at 

least 5 years. 

For a new ACO identified as a reentering ACO because greater than 50 

percent of its ACO participants have 

recent prior participation in the same 

ACO, we would consider the prior 

participation of the ACO in which the 

majority of the ACO participants in the 

new ACO were participating in order to 

determine the agreement period in 

which the new ACO would be 

considered to be entering the program. 

That is, we would determine the 

applicability of program policies to the 

new ACO based on the number of 

agreement periods the other entity 

participated in the program. If the 


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participation agreement of the other 

ACO was terminated or expired, the 

previously described rules for reentering ACOs would also apply. For 

example, if ACO A is identified as a reentering ACO because more than 50 

percent of its ACO participants 

previously participated in ACO B 

during the relevant look back period, we 

would consider ACO B’s prior 

participation in the program. For 

instance, if ACO B terminated during its 

second agreement period in the 

program, we would consider ACO A to 

be entering a second agreement period 

in the program, beginning with the first 

performance year of that agreement 

period. However, if the other ACO is 

currently participating in the program, 

the new ACO would be considered to be 

entering into the same agreement period 

in which this other ACO is currently 

participating, beginning with the first 

performance year of that agreement 

period. For example, if ACO A is 

identified as a re-entering ACO because 

more than 50 percent of its ACO 

participants previously participated in 

ACO C during the relevant look back 

period, and ACO C is actively 

participating in its third agreement 

period in the program, ACO A would be 

considered to be participating in a third 

agreement period, beginning with the 

first performance year of that agreement 

period. 

We proposed to specify at 

§ 425.600(f)(3) that renewing ACOs 

would be considered to be entering the 

next consecutive agreement period for 

purposes of applying program 

requirements that phase-in over time. 

This proposed approach would be 

consistent with current program policies 

for ACOs whose participation 

agreements expire and that immediately 

enter a new agreement period to 

continue their participation in the 

program. For example, an ACO that 

entered its first participation agreement 

on January 1, 2017, and concludes this 

participation agreement on December 

31, 2019, would renew to enter its 

second agreement period beginning on 

January 1, 2020. Further, under the 

proposed definition of ‘‘Renewing 

ACO’’, an ACO that terminates its 

current participation agreement under 

§ 425.220 and immediately enters a new 

agreement period to continue its 

participation in the program would also 

be considered to be entering the next 

consecutive agreement period. For 

example, an ACO that entered its first 

participation agreement on January 1, 

2018, and terminates its agreement 

effective June 30, 2019, to enter a new 

participation agreement beginning on 

July 1, 2019, would be considered to be 

a renewing ACO that is renewing early 

to enter its second agreement period 

beginning on July 1, 2019. This 

approach would ensure that an ACO 

that terminates from a first agreement 

period and immediately enters a new 

agreement period in the program could 

not take advantage of program 

flexibilities aimed at ACOs that are 

completely new to the Shared Savings 

Program, such as the pay-for-reporting 

quality performance standard available 

to ACOs in their first performance year 

of their first agreement period under the 

program. We would therefore apply a 

consistent approach among renewing 

ACOs by placing these ACOs in the next 

agreement period in sequential order. 

This proposed approach would 

replace the current approach to 

determining which agreement period an 

ACO would be considered to be entering 

into, for a subset of ACOs, as specified 

in the provision at § 425.222(c), which 

we proposed to discontinue using. This 

proposed approach would ensure that 

ACOs that are experienced with the 

program or with performance-based risk 

Medicare ACO initiatives are not 

participating under policies designed 

for ACOs inexperienced with the 

program’s requirements or similar 

requirements under other Medicare 

ACO initiatives, and also would help to 

preserve the intended phase-in of 

requirements over time by taking into 

account ACOs’ prior participation in the 

program. 

The proposed approach would help to 

ensure that ACOs that are new to the 

program are distinguished from 

renewing ACOs and ACOs that are reentering the program, and would also 

ensure that program requirements are 

applied in a manner that reflects ACOs’ 

prior participation in the program, 

which would limit the opportunity for 

more experienced ACOs to seek to take 

advantage of program policies. These 

policies protect against ACOs 

terminating or discontinuing their 

participation, and potentially re-forming 

as a new legal entity, simply to be able 

to apply to re-enter the program in a 

way that could allow for the 

applicability of lower weights used in 

calculating the regional adjustment to 

the benchmark or to avoid moving to 

performance-based risk more quickly on 

the BASIC track’s glide path or under 

the ENHANCED track. 

The proposed approach to 

determining ACO participation options 

and the proposal to limit access the 

BASIC track’s glide path to ACOs that 

are inexperienced with performancebased risk, in combination with the 

rebasing of ACO benchmarks at the start 

of each new agreement period, mitigated 

our concerns regarding ACO gaming. 

We explained our belief that the 

requirement that ACOs’ benchmarks are 

rebased at the start of each new 

agreement period, in combination with 

the proposed new requirements 

governing ACO participation options, 

would be sufficiently protective of the 

Trust Funds to guard against 

undesirable ACO gaming behavior. 

Under our proposed policies for 

identifying ACOs that are experienced 

with performance-based risk Medicare 

ACO initiatives, ACOs that terminate 

from the BASIC track’s glide path (for 

example) and seek to re-enter the 

program, and renewing ACOs (including 

ACOs renewing early for a new 

agreement period beginning July 1, 

2019) that are identified as experienced 

with performance-based risk Medicare 

ACO initiatives could only renew under 

Level E of the BASIC track (if an 

otherwise eligible low revenue ACO) or 

the ENHANCED track. This mitigated 

our concerns about ACOs re-forming 

and re-entering the program, or serially 

terminating and immediately 

participating again as a renewing ACO, 

since there would be consequences for 

the ACO’s ability to continue 

participation under lower-risk options 

that may help to deter these practices. 

We acknowledge that under our 

proposals regarding early renewals (that 

is, our proposal that ACOs that 

terminate their current agreement 

period and immediately enter a new 

agreement period without interruption 

qualify as renewing ACOs), it would be 

possible for ACOs to serially enter a 

participation agreement, terminate from 

it and enter a new agreement period, to 

be considered entering the next 

consecutive agreement period in order 

to more quickly take advantage of the 

higher weights used in calculating the 

regional adjustment to the benchmark. 

However, we noted that these ACOs’ 

benchmarks would be rebased, which 

would help to mitigate this concern. We 

sought comment on possible approaches 

that would prevent ACOs from taking 

advantage of participation options to 

delay or hasten the phase-in of higher 

weights used in calculating the regional 

adjustment to the historical benchmark, 

while still maintaining the flexibility for 

existing ACOs to quickly move from a 

current 3-year agreement period to a 

new agreement period under either the 

BASIC track or ENHANCED track. 

Final Action: We received no 

comments on this proposal and 

therefore are finalizing as proposed to 

specify the following policies in 

§ 425.600(f). For agreement periods 

beginning on July 1, 2019, and in 


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subsequent years, CMS determines the 

agreement period an ACO is entering for 

purposes of applying the following 

program requirements that phase-in 

over multiple agreement periods: (i) The 

quality performance standard as 

described in § 425.502(a); (ii) the weight 

used in calculating the regional 

adjustment to the ACO’s historical 

benchmark as described in § 425.601(f); 

and (iii) the use of equal weights to 

weight each benchmark year as 

specified in § 425.601(e). 

An ACO entering an initial agreement 

period is considered to be entering a 

first agreement period in the Shared 

Savings Program. A renewing ACO is 

considered to be entering the next 

consecutive agreement period in the 

Shared Savings Program. 

A re-entering ACO is considered to be 

entering a new agreement period in the 

Shared Savings Program as follows: (i) 

An ACO whose participation agreement 

expired without having been renewed 

re-enters the program under the next 

consecutive agreement period in the 

Shared Savings Program; (ii) an ACO 

whose participation agreement was 

terminated under § 425.218 or § 425.220 

re-enters the program at the start of the 

same agreement period in which it was 

participating at the time of termination 

from the Shared Savings Program, 

beginning with the first performance 

year of that agreement period; or (iii) a 

new ACO identified as a re-entering 

ACO enters the program in an 

agreement period that is determined 

based on the prior participation of the 

ACO in which the majority of the new 

ACO’s participants were participating. 

Regarding this third category of ACOs, 

if the participation agreement of the 

other ACO was terminated or expired, 

the previously described rules for reentering ACOs would also apply. 

However, if the other ACO is currently 

participating in the program, the new 

ACO would be considered to be entering 

into the same agreement period in 

which this other ACO is currently 

participating, beginning with the first 

performance year of that agreement 

period. 

As discussed in section II.D. of this 

final rule, we are maintaining a phasein for the regional adjustment weights 

for ACOs with start dates in the program 

before July 1, 2019, according to the 

structure similar to that established in 

the June 2016 final rule (for example, 

we will continue to use regional factors 

for the first time in resetting 

benchmarks for the third agreement 

period for 2012 and 2013 starters); 

however, we are making modifications 

to the weights used in these calculations 

and the length of time over which the 

maximum weight is phased in. Table 6 

includes examples of the phase-in of the 

modified regional adjustment weights 

based on agreement start date and 

applicant type (initial entrant, renewing 

ACO, or re-entering ACO). This table 

illustrates the weights that would be 

used in determining the regional 

adjustment to the ACO’s historical 

benchmark under this final rule to 

differentiate initial entrants, renewing 

ACOs (including ACOs that renew 

early), and re-entering ACOs for 

purposes of policies that phase-in over 

time. 

BILLING CODE 4120–01–P 


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TABLE 6-EXAMPLES OF PHASE-IN OF MODIFIED REGIONAL ADJUSTMENT 

WEIGHTS BASED ON AGREEMENT START DATE AND APPLICANT TYPE 

Applicant Type First time Second time Third time Fourth and 

regional regional regional subsequent 

adjustment used: adjustment used: adjustment used: ~ime regional 

35 percent or 15 50 percent or 25 50 percent or 35 adjustment 

percent (if percent (if percent (if used: 50 

spending above spending above spending above percent weight 

region) region) region) 

New entrant with Applicable to first Applicable to Applicable to Applicable to 

start date on July agreement period second agreement third agreement -fourth 

1,2019 starting on July 1, period starting in period starting in agreement 

2019 2025 2030 period starting 

n 2035 and all 

subsequent 

agreement 

periods 

Renewing ACO Applicable to Applicable to Applicable to Applicable to 

for agreement third (2012/2013) fourth fifth (2012/2013) sixth 

period starting on or second (20 16) (2012/2013) or or fourth (20 16) (2012/2013) or 

July 1, 2019, with agreement period third (2016) agreement period fifth (20 16) 

initial start date in starting on July 1, agreement period starting in 2030 agreement 

2012, 2013, or 2019 starting in 2025 period starting 

2016 n 2035 and all 

subsequent 

agreement 

periods 

Early renewal for Currently applies Applicable to Applicable to Applicable to 

agreement period to second third agreement fourth agreement -'ifth agreement 

starting on July 1, agreement period period starting on period starting in period starting 

2019, ACO with starting in 201 7 as July 1, 2019 2025 n 2030 and all 

initial start date in follows: 35 subsequent 

2014 that percent or 25 agreement 

terminates percent (if periods 

effective June 30, spending above 

2019 region) 
Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 67909 

15See Fact Sheet on Physician Group Practice 

Transition Demonstration (August 2012), available 

at https://innovation.cms.gov/Files/MigratedMedicare-Demonstration-x/PGP_TD_Fact_

Sheet.pdf. 16See Pioneer ACO Model web page, available at 

https://innovation.cms.gov/initiatives/Pioneer-acomodel/. 

BILLING CODE 4120–01–C 

(d) Condensed Shared Savings Program 

Application 

In developing the proposals to 

redesign the Shared Savings Program’s 

participation options, we also revisited 

our current policy that allows certain 

organizations with experience in 

Medicare ACO initiatives to use a 

condensed application form to apply to 

the Shared Savings Program (83 FR 

41832 through 41833). Under 

§ 425.202(b), we allow for use of a 

condensed Shared Savings Program 

application form by organizations that 

participated in the PGP demonstration. 

Former Pioneer Model ACOs may also 

use a condensed application form if 

specified criteria are met (including that 

the applicant is the same legal entity as 

the Pioneer ACO and the ACO is not 

applying to participate in the one-sided 

model). For the background on this 

policy, we refer readers to discussions 

in earlier rulemaking. (See 76 FR 67833 

through 67834, and 80 FR 32725 

through 32728.) 

The PGP demonstration ran for 5 

years from April 2005 through March 

2010, and the PGP transition 

demonstration began in January 2011 

and concluded in December 2012.15 The 

Pioneer ACO Model began in 2012 and 

concluded in December 2016.16 Many 

former PGP demonstration sites and 

Pioneer ACOs have already transitioned 

to other Medicare ACO initiatives 

including the Shared Savings Program 

and the Next Generation ACO Model. 

Accordingly, we believed would no 

longer be necessary to maintain the 

provision permitting these entities to 

use condensed application forms. First, 

since establishing this policy, we have 

modified the program’s application to 

reduce burden on all applicants. See 82 

FR 53217 through 53222. Second, our 

proposed approach for identifying ACOs 

experienced with performance-based 

risk Medicare ACO initiatives for 

purposes of determining an ACO’s 

participation options would require 

former Pioneer Model ACOs to 

participate under the higher levels of 

risk: Either the highest level of risk and 

potential reward in the BASIC track 

(Level E), or the ENHANCED track. This 

includes, for example, a former Pioneer 

ACO that applies to the Shared Savings 

Program using the same legal entity, or 

if 40 percent or more of the ACO 

participants in the ACO are determined 

to be experienced with the Pioneer ACO 

Model or other two-sided model 

Medicare ACO initiatives within the 5 

performance year look back period prior 

to the start date of the ACO’s agreement 

period in the Shared Savings Program. 

Under the proposed approach to 

determining participation options, we 


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would identify these experienced, 

former Pioneer Model ACOs entering 

the program for the first time as 

participating in a first agreement period 

for purposes of the applicability of the 

program policies that phase-in over 

time. On the other hand, if an ACO 

terminated its participation in the 

Shared Savings Program, entered the 

Next Generation ACO Model, and then 

re-enters the Shared Savings Program, 

under the proposed approach we would 

consider the ACO to be entering either: 

(1) Its next consecutive agreement 

period in the Shared Savings Program, 

if the ACO had completed an agreement 

period in the program before 

terminating its prior participation; or (2) 

the same agreement period in which it 

was participating at the time of program 

termination. We noted that commenters 

in earlier rulemaking suggested we 

apply the benchmark rebasing 

methodology that incorporates factors 

based on regional FFS expenditures to 

former Pioneer ACOs and Next 

Generation ACOs entering their first 

agreement period under the Shared 

Savings Program (see 81 FR 37990). We 

believed that our proposal to apply 

factors based on regional FFS 

expenditures to ACOs’ benchmarks in 

their first agreement periods (see 

discussion in section II.D. of this final 

rule) would address these stakeholder 

concerns. 

However, we also considered an 

alternative approach that would allow 

ACOs formerly participating in these 

Medicare ACO models to be considered 

to be entering a second agreement 

period for the purpose of applying 

policies that phase-in over time. We 

declined to propose this approach at 

this time, because ACOs entering the 

Shared Savings Program after 

participation in another Medicare ACO 

initiative may need time to gain 

experience with program’s policies. 

Therefore, we preferred the proposed 

approach that would allow ACOs new 

to the Shared Savings Program to gain 

experience with the program’s 

requirements, by entering the program 

in a first agreement period. 

Therefore, we proposed to amend 

§ 425.202(b) to discontinue the option 

for certain applicants to use a 

condensed application when applying 

to participate in the Shared Savings 

Program for agreement periods 

beginning on July 1, 2019 and in 

subsequent years. 

We sought comment on the proposals 

described in this section and the 

alternatives considered. 

Final Action: We received no 

comments on this proposal and 

therefore are finalizing as proposed to 

amend § 425.202(b) to discontinue the 

option for certain applicants to use a 

condensed application when applying 

to participate in the Shared Savings 

Program for agreement periods 

beginning on July 1, 2019 and in 

subsequent years. 

More generally, the participation 

options available to ACOs based on the 

policies finalized in this section are 

summarized in Table 7 (low revenue 

ACOs) and Table 8 (high revenue 

ACOs). 

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TABLE 7-PARTICIPATION OPTIONS FOR LOW REVENUE ACOs BASED ON 

APPLICANT TYPE AND EXPERIENCE WITH RISK 

Applicant type ACO experienced Participation Options 1 Agreement period for 

or inexperienced BASIC track's BASIC track's ENHANCED policies that phase-in 

with performance- glide path (option Level E (track's track over time 

based risk for incremental highest level of (program's (benchmarking 

Medicare ACO transition from one- risk I reward highest level of methodology and 

initiatives sided to two-sided applies to all risk I reward quality performance) 

models during performance applies to all 

agreement period) years during performance 

agreement years during 

period) agreement 

period) 

New legal entity Inexperienced Yes - glide path Yes Yes First agreement period 

Levels A through E; 

new legal entities 

(not re-entering 

ACOs) that are low 

revenue A COs may 

elect to enter in 

Level A, transition 

to Level B, and 

remain in Level B 

for an additional 

performance year 

prior to being 

automatically 

advanced to Level E 

for the remaining 

performance years 

of their agreement 

period. 

New legal entity Experienced No Yes Yes First agreement period 

Re-entering ACO Inexperienced - Yes - glide path Yes Yes Either: ( 1) the next 

former Track 1 Levels B through E consecutive agreement 

ACOsornew period if the ACO's 

A COs identified as prior agreement 

re-entering A COs expired; (2) the same 

because more than agreement period in 

50 percent of their which the ACO was 

ACO participants participating at the time 

have recent prior of termination; or (3) 

experience in a applicable agreement 

Track 1 ACO period2 for new ACO 

identified as reentering because of 

ACO participants' 

experience in the same 

ACO 
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Applicant type ACO experienced Participation Options 1 Agreement period for 

or inexperienced BASIC track's BASIC track's ENHANCED policies that phase-in 

with performance- glide path (option Level E (track's track over time 

based risk for incremental highest level of (program's (benchmarking 

Medicare ACO transition from one- risk I reward highest level of methodology and 

initiatives sided to two-sided applies to all risk I reward quality performance) 

models during performance applies to all 

agreement period) years during performance 

agreement years during 

period) agreement 

period) 

Re-entering ACO Experienced - No Yes Yes Either: (1) the next 

including former consecutive agreement 

Track 1 ACOs that period if the ACO's 

deferred renewal prior agreement 

under a two-sided expired; (2) the same 

model agreement period in 

which the ACO was 

participating at the time 

of termination; or (3) 

applicable agreement 

period2 for new ACO 

identified as reentering because of 

ACO participants' 

experience in the same 

ACO 

Renewing ACO Inexperienced- Yes - glide path Yes Yes Subsequent 

former Track 1 Levels B through E consecutive agreement 

A COs period 

Renewing ACO Experienced - No Yes Yes Subsequent 

including former consecutive agreement 

Track 1 ACOs that period 

deferred renewal 

under a two-sided 

model I Notes: Low revenue A COs may operate under the BASIC track for a maximum of two agreement penods. 

2 We consider the participation of the ACOin which a majority of the new ACO's participants were 

participating: (1) If the participation agreement of the other ACO was terminated, then the new ACO re-enters 

the program at the start of the same agreement period in which the other ACO was participating at the time of 

termination from the Shared Savings Program, beginning with the first performance year of that agreement 

period. (2) If the participation agreement of the other ACO expired without having been renewed, then the new 

ACO re-enters the program under the other A CO's next consecutive agreement period in the Shared Savings 

Program. (3) If the other ACO is currently participating in the program, the new ACO would be considered to 

be entering into the same agreement period in which this other ACO is currently participating, beginning with 

the first performance year of that agreement period. 
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TABLE 8-PARTICIPATION OPTIONS FOR HIGH REVENUE ACOs BASED ON 

APPLICANT TYPE AND EXPERIENCE WITH RISK 

Applicant type ACO experienced Participation Options 1 Agreement period for 

or inexperienced BASIC track's BASIC track's ENHANCED policies that phase-in 

with performance- glide path (option Level E (track's track over time 

based risk for incremental highest level of (program's (benchmarking 

Medicare ACO transition from one- risk I reward highest level of methodology and 

initiatives sided to two-sided applies to all risk I reward quality performance) 

models during performance applies to all 

agreement period) years during performance 

agreement period) years during 

agreement 

period) 

New legal entity Inexperienced Yes - glide path Yes Yes First agreement period 

Levels A through E 

New legal entity Experienced No No Yes First agreement period 

Re-entering ACO Inexperienced - Yes - glide path Yes Yes Either: (1) the next 

former Track 1 Levels B through E consecutive agreement 

ACOs or new period if the ACO's 

A COs identified as prior agreement 

re-entering A COs expired; (2) the same 

because more than agreement period in 

50 percent of their which the ACO was 

ACO participants participating at the 

have recent prior time of termination; or 

experience in a (3) applicable 

Track 1 ACO agreement period2 for 

new ACO identified as 

re-entering because of 

ACO participants' 

experience in the same 

ACO 

Re-entering ACO Experienced - No No Yes Either: (1) the next 

including former consecutive agreement 

Track 1 A COs that period if the ACO's 

deferred renewal prior agreement 

under a two-sided expired; (2) the same 

model agreement period in 

which the ACO was 

participating at the 

time of termination; or 

(3) applicable 

agreement period2 for 

new ACO identified as 

re-entering because of 

ACO participants' 

experience in the same 

ACO 

Renewing ACO Inexperienced - Yes - glide path Yes Yes Subsequent 

former Track 1 Levels B through E consecutive agreement 

A COs period 
67914 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 

BILLING CODE 4120–01–C 

d. Monitoring for Financial Performance 

(1) Background 

We provided background on our 

proposals for monitoring financial 

performance in section II.A.5.d.(1) of the 

August 2018 proposed rule (83 FR 

41834 through 41835). We explained 

that the program regulations at 

§ 425.316 enable us to monitor the 

performance of ACOs. In particular, 

§ 425.316 authorizes monitoring for 

performance related to two statutory 

provisions regarding ACO performance: 

Avoidance of at-risk beneficiaries 

(section 1899(d)(3) of the Act) and 

failure to meet the quality performance 

standard (section 1899(d)(4) of the Act). 

If we discover that an ACO has engaged 

in the avoidance of at-risk beneficiaries 

or has failed to meet the quality 

performance standard, we can impose 

remedial action or terminate the ACO 

(see § 425.316(b) and (c)). 

In monitoring the performance of 

ACOs, we can analyze certain financial 

data (see § 425.316(a)(2)(i)), but the 

regulations do not specifically authorize 

termination or remedial action for poor 

financial performance. Similarly, there 

are no provisions that specifically 

authorize non-renewal of a participation 

agreement for poor financial 

performance, although we had proposed 

issuing such provisions in prior rules. 

In the December 2014 proposed rule 

(79 FR 72802 through 72806), we 

proposed to allow Track 1 ACOs to 

renew their participation in the program 

for a second agreement period in Track 

1 if in at least one of the first 2 

performance years of the previous 

agreement period they did not generate 

losses in excess of their negative MSR, 

among other criteria. We refer readers to 

the June 2015 final rule for a detailed 

discussion of the proposal and related 

comments (80 FR 32764 through 32767). 

Ultimately, we did not adopt a financial 

performance criterion to determine the 

eligibility of ACOs to continue in Track 

1 in the June 2015 final rule. Although 

some commenters supported an 

approach for evaluating an ACO’s 

financial performance for determining 

its eligibility to remain in a one-sided 

model, many commenters expressed 

opposition, citing concerns that this 

approach could be premature and could 

disadvantage ACOs that need more time 

to implement their care management 

strategies, and could discourage 

participation. At the time of the June 

2015 final rule, we were persuaded by 

commenters’ concerns that application 

of the additional proposed financial 

performance criterion for continued 

participation in Track 1 was premature 

for ACOs that initially struggled to 

demonstrate cost savings in their first 

years in the program. Instead, we 

explained our belief that our authority 

to monitor ACOs (§ 425.316) allows us 

to take action to address ACOs that are 

outliers on financial performance by 

placing poorly performing ACOs on a 

special monitoring plan. Furthermore, if 

our monitoring reveals that an ACO is 

out of compliance with any of the 

requirements of the Shared Savings 

Program, we may request a corrective 

action plan and, if the required 

corrective action plan is not submitted 

or is not satisfactorily implemented, we 

may terminate the ACO’s participation 

in the program (80 FR 32765). 


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17For purposes of the August 2018 proposed rule 

and this final rule, an ACO is considered to have 

generated shared savings when its benchmark 

minus performance year expenditures are greater 

than or equal to the MSR. An ACO is ‘‘positive 

within corridor’’ when its benchmark minus 

performance year expenditures are greater than 

zero, but less than the MSR. An ACO is ‘‘negative 

within corridor’’ when its benchmark minus 

performance year expenditures are less than zero, 

but greater than the negative MSR for ACOs in a 

one-sided model or the MLR for ACOs in a twosided model. An ACO is ‘‘negative outside 

corridor’’ when its benchmark minus performance 

year expenditures are less than or equal to the 

negative MSR for ACOs in a one-sided model or the 

MLR for ACOs in a two-sided model. 

In the August 2018 proposed rule, we 

explained that based on our additional 

experience with monitoring ACO 

financial performance, the current 

regulations are insufficient to address 

recurrent poor financial performance, 

particularly for ACOs that may be 

otherwise in compliance with program 

requirements. Consequently, some 

ACOs may not have sufficient incentive 

to remain accountable for the 

expenditures of their assigned 

beneficiaries. This may leave the 

program, the Trust Funds, and Medicare 

FFS beneficiaries vulnerable to 

organizations that may be participating 

in the program for reasons other than 

meeting the program’s goals. 

As we stated in the August 2018 

proposed rule, we believe that a 

financial performance requirement is 

necessary to ensure that the program 

promotes accountability for the cost of 

the care furnished to an ACO’s assigned 

patient population, as contemplated by 

section 1899(b)(2)(A) of the Act. We 

explained that there is an inherent 

financial performance requirement that 

is embedded within the third 

component of the program’s three-part 

aim: (1) Better care for individuals; (2) 

better health for populations; and (3) 

lower growth in Medicare Parts A and 

B expenditures. Therefore, just as poor 

quality performance can subject an ACO 

to remedial action or termination, an 

ACO’s failure to lower growth in 

Medicare FFS expenditures should be 

the basis for CMS to take pretermination actions under § 425.216, 

including a request for corrective action 

by the ACO, or termination of the ACO’s 

participation agreement under 

§ 425.218. 

(2) Proposed Revisions 

We proposed to modify § 425.316 to 

add a provision for monitoring ACO 

financial performance. Specifically, we 

proposed to monitor for whether the 

expenditures for the ACO’s assigned 

beneficiary population are ‘‘negative 

outside corridor,’’ meaning that the 

expenditures for assigned beneficiaries 

exceed the ACO’s updated benchmark 

by an amount equal to or exceeding 

either the ACO’s negative MSR under a 

one-sided model, or the ACO’s MLR 

under a two-sided model.17 If the ACO 

is negative outside corridor for a 

performance year, we proposed that we 

may take any of the pre-termination 

actions set forth in § 425.216. If the ACO 

is negative outside corridor for another 

performance year of the ACO’s 

agreement period, we proposed that we 

may immediately or with advance 

notice terminate the ACO’s participation 

agreement under § 425.218. 

We proposed that financial 

performance monitoring would be 

applicable for performance years 

beginning in 2019 and subsequent years. 

Specifically, we would apply this 

proposed approach for monitoring 

financial performance results for 

performance years beginning on January 

1, 2019, and July 1, 2019, and for 

subsequent performance years. We 

explained that financial and quality 

performance results are typically made 

available to ACOs in the summer 

following the conclusion of the calendar 

year performance year. For example, we 

stated that the financial performance 

results for performance years beginning 

on January 1, 2019 and July 1, 2019, 

would likely be available for CMS 

review in the summer of 2020 and 

would be made available to ACOs when 

that review is complete. The one-sided 

model monitoring (relative to the ACO’s 

negative MSR) would apply to ACOs in 

Track 1 or the first 2 years of the BASIC 

track’s glide path, and the two-sided 

model monitoring (relative to the ACO’s 

MLR) would apply to ACOs under 

performance-based risk in the BASIC 

track (including the glide path) and the 

ENHANCED track, as well as Track 2. 

Generally, based on our experience, 

ACOs in two-sided models tend to 

terminate their participation after 

sharing in losses for a single year in 

Track 2 or Track 3. We have observed 

that a small, but not insignificant, 

number of Track 1 ACOs are negative 

outside corridor in their first 2 

performance years in the program. 

Among 194 Track 1 ACOs that renewed 

for a second agreement period under 

Track 1, 19 were negative outside 

corridor in their first 2 performance 

years in their first agreement period. 

This includes 14 of 127 Track 1 ACOs 

that started their first agreement period 

in either 2012 or 2013 and renewed for 

a second agreement period in Track 1 

beginning January 1, 2016, as well as 5 

of 67 Track 1 ACOs that started their 

first agreement period in 2014 and 

renewed for a second agreement period 

in Track 1 beginning January 1, 2017. 

Moreover, the majority of these 

organizations have thus far failed to 

achieve shared savings in subsequent 

performance years. For example, of the 

14 2012/2013 starters in Track 1 that 

were negative outside corridor for the 

first 2 consecutive performance years in 

their first agreement period, only 2 

ACOs achieved shared savings in their 

third performance year, while 10 were 

still negative outside corridor and 2 

were negative within corridor. All 14 

ACOs entered a second agreement 

period in Track 1 starting on January 1, 

2016: In performance year 2016, 5 

generated shared savings, 4 were 

positive within corridor, 4 were 

negative within corridor, and 1 was 

negative outside corridor. While some of 

these ACOs appeared to show 

improvement, this could be due to the 

rebasing of the ACOs’ historical 

benchmarks that occurred in 2016. 

Because the benchmark years for the 

second agreement period correspond to 

the performance years of the first 

agreement period, ACOs that had losses 

in their initial years are likely to receive 

a higher rebased benchmark than those 

that shared savings. We observed 

similar trends following the first 2 

performance years for ACOs that started 

their first agreement period in 2014 and 

2015. Therefore, we explained that our 

experience does not suggest that a large 

share of ACOs would be affected. 

Alternatively, we considered an 

approach under which we would 

monitor ACOs for generating any losses, 

beginning with first dollar losses, 

including monitoring for ACOs that are 

negative inside corridor and negative 

outside corridor. However, we preferred 

the proposed approach because the 

corridor (MLR threshold above the 

benchmark) protects ACOs against 

sharing losses that result from random 

variation. 

In the August 2018 proposed rule, and 

as reiterated in this final rule, we 

explained that ACOs that continue in 

the program despite poor financial 

performance may provide little benefit 

to the Medicare program while taking 

advantage of the potential benefits of 

program participation, such as receipt of 

program data and the opportunity to 

enter into certain contracting 

arrangements with ACO participants 

and ACO providers/suppliers. The 

redesign of the program includes a 

number of features that may encourage 

continued participation by poor 

performing ACOs under performancebased risk: The relatively lower levels of 

risk under the BASIC track, the 

additional features available to eligible 

ACOs under performance-based risk 


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(the opportunity for physicians and 

other practitioners participating in 

eligible two-sided model ACOs to 

furnish telehealth services under section 

1899(l) of the Act, availability of a SNF 

3-day rule waiver, and the ability to 

offer incentive payments to beneficiaries 

under a CMS-approved beneficiary 

incentive program), and the opportunity 

to participate in an Advanced APM for 

purposes of the Quality Payment 

Program. Further we explained our 

concern that ACOs may seek to obtain 

reinsurance to help offset their liability 

for shared losses as a way of enabling 

their continued program participation 

while undermining the program’s goals. 

Although we considered prohibiting 

ACOs from obtaining reinsurance to 

mitigate their performance-based risk, 

we believed that such a requirement 

could be overly restrictive and that the 

proposed financial monitoring approach 

would be effective in removing from the 

program ACOs with a history of poor 

financial performance. We sought 

comment on this issue, and on ACOs’ 

use of reinsurance, including their 

ability to obtain viable reinsurance 

products covering a Medicare FFS 

population. 

We sought comment on these 

proposals and related considerations. 

Comment: Generally, a few 

commenters supported the concept of 

removing from the program ACOs with 

poor performance results. Many 

commenters expressed concerns about 

and opposed the proposal to monitor 

ACOs for poor financial performance 

and potentially terminate ACOs with 2 

performance years of significant losses 

(negative outside corridor). 

Response: We appreciate commenters’ 

support for the need to monitor ACOs 

for patterns of poor financial 

performance and to permit CMS to 

impose remedial action and possibly 

terminate an ACO for poor financial 

performance. We summarize and 

address below the specific concerns of 

commenters who opposed our proposal. 

Comment: Some commenters 

explained that these provisions, if 

implemented, would provide CMS with 

too much discretion to terminate ACO 

participation in the program, and could 

further discourage ACOs participating 

in the Shared Savings Program as this 

would create additional uncertainty for 

participants and would also make it 

difficult to establish agreements with 

other organizations. Several commenters 

stated that the resulting loss of 

participation by ACOs could be 

disruptive to beneficiaries and 

providers. One commenter suggested 

that these disruptions would be harmful 

because termination of ACOs from the 

Shared Savings Program would limit the 

reach of ACO improvements in savings 

and quality and potentially slow 

progress in transitioning to value-based 

care. 

Response: In response to commenters’ 

concerns about our potential use of this 

new policy in an overly broad way, we 

note that we would carefully consider 

the need to terminate an ACO for poor 

financial performance given the 

potential consequences of this action for 

the Shared Savings Program, the ACO, 

its ACO participants, ACO providers/ 

suppliers and beneficiaries, among 

others. Elsewhere in this section we 

describe additional factors we may take 

into consideration in making this 

determination, which we believe is 

responsive to the specific concerns that 

commenters raised, which we describe 

elsewhere in this section. Nonetheless, 

we believe the approach we proposed, 

and are finalizing, offers CMS a means 

to address ACOs that may continue in 

the program despite poor financial 

performance and as a result may 

provide little or no benefit to the 

Medicare program while taking 

advantage of the potential benefits of 

program participation, such as the 

ability to benefit from waivers of certain 

federal rules and requirements, receipt 

of program data and the opportunity to 

enter into certain contracting 

arrangements with ACO participants 

and ACO providers/suppliers, as well as 

the opportunity for eligible clinicians in 

the ACO to qualify for incentive 

payments under the Quality Payment 

Program as QPs. This behavior is not 

protective of the Trust Funds and also 

suggests that an ACO’s approach may be 

ineffective at meeting the program’s 

goals. 

We agree that termination of an ACO’s 

participation from the Shared Savings 

Program can be potentially disruptive to 

ACO participants and ACO providers/ 

suppliers, and Medicare FFS 

beneficiaries. Under the program’s 

regulations, we require terminated 

ACOs to complete certain close-out 

procedures, as specified in § 425.221(a), 

which include requirements that may 

mitigate the effects of termination on 

ACO participants, ACO providers/ 

suppliers, and Medicare beneficiaries. 

Under the program’s regulations, we 

require terminating ACOs to implement 

close-out procedures in the form and 

manner and by a deadline specified by 

CMS related to the following: (i) 

Notifying ACO participants of 

termination; (ii) complying with the 

program’s record retention 

requirements; (iii) retention or 

destruction of CMS data according to 

federal requirements; (iv) meeting 

Shared Savings Program quality 

reporting requirements for a completed 

performance year which has 

implications for ensuring that eligible 

clinicians meet the MIPS requirements 

under the Quality Payment Program; 

and (v) directing beneficiaries to contact 

their primary care providers if, for 

example, termination of the ACO will 

result in discontinuation of certain care 

processes. 

We also note that Medicare FFS 

beneficiaries always retain their 

freedom to choose the providers and 

suppliers from which they seek care. 

The termination of an ACO would not 

prevent a beneficiary from choosing to 

continue receiving care from a provider 

or supplier that had been an ACO 

provider/supplier before the ACO’s 

termination. 

Comment: Some commenters believe 

CMS does not need to terminate ACOs 

if all are forced to move to two-sided 

risk, viewing the proposed approach as 

unnecessary. One commenter explained 

that CMS’ proposal to automatically 

advance ACOs to performance-based 

risk in the BASIC track’s glide path 

would protect against ACOs that 

generate losses remaining in the Shared 

Savings Program just to take advantage 

of waivers and other provisions. As 

those ACOs are required to take on 

increasingly more risk, they would 

incur too many losses to remain in the 

program indefinitely. Some commenters 

suggested that the requirement for ACOs 

to participate under two-sided models 

will provide ACOs with incentives to 

leave the program if they were not able 

to generate savings. More generally, one 

commenter indicated that ACOs 

performing poorly drop out of the 

program voluntarily so poor financial 

performance is self-correcting. 

Response: We agree that the 

requirement for ACOs to participate 

under two-sided models within the 

redesign of the program established in 

this final rule should drive ACOs to 

improved program performance. We 

also agree that ACOs with poor financial 

performance, including ACOs that owe 

shared losses, will tend to voluntarily 

terminate from the program based on 

our experience to date with risk tracks. 

However, as we described in the August 

2018 proposed rule (83 FR 41835 

through 41836), we remain concerned 

that some ACOs with poor financial 

performance will choose to remain in 

the program even after they have 

incurred shared losses. ACOs under 

two-sided models may find the 

advantages of continued participation 

outweigh the amount of shared losses 

owed. ACOs share in a portion of the 

losses, and lower levels of two-sided 


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risk may potentially be available to 

ACOs under the BASIC track. Poor 

performing ACOs may be encouraged to 

continue their participation because of 

the additional features available to 

eligible ACOs under performance-based 

risk, such as the opportunity for 

physicians and other practitioners 

participating in eligible two-sided 

model ACOs to furnish telehealth 

services under section 1899(l) of the 

Act, the availability of a SNF 3-day rule 

waiver, and the ability to offer incentive 

payments to beneficiaries under a CMSapproved beneficiary incentive program. 

ACOs with shared losses may also seek 

to continue their participation in Level 

E of the BASIC track or in the 

ENHANCED track to participate in an 

Advanced APM for purposes of the 

Quality Payment Program. 

Comment: As an alternative, some 

commenters suggested focusing the 

policy on ACOs with both poor 

financial performance and other 

program integrity concerns, but did not 

specifically identify the types of 

program integrity concerns that CMS 

should take into consideration. 

Response: We appreciate commenters’ 

suggestion that we consider poor 

financial performance in combination 

with other program integrity concerns 

regarding the ACO. We do not believe 

we should limit our policy only to 

ACOs that have both financial 

performance and program integrity 

issues. We believe that poor 

performance is directly reflective of the 

ACO’s ability to achieve the program’s 

goals and that an ACO with no program 

integrity issues should be removed from 

the program if it is unable or unlikely 

to achieve the cost and quality goals of 

the program. We note that the existence 

of program integrity issues may already 

constitute separate grounds for 

termination. 

Comment: As another alternative 

approach, one commenter suggested 

that CMS should consider using a 

blended evaluation process, based on 

both spend outside the corridor and 

high cost utilization. The commenter 

explained that low revenue ACOs can 

demonstrate consistent reductions in 

utilization of high spend services, such 

as in inpatient, emergency room and 

SNF utilization, yet see the costs 

associated with that utilization increase. 

Response: We note that ACOs that are 

negative outside corridor tend to have 

corresponding high utilization. ACOs 

provide a holistic approach to lowering 

growth in Medicare FFS expenditures, 

and we have observed that successful 

ACOs address spending and utilization 

across the care continuum or in a 

majority of claim types. We therefore 

decline to adjust our approach to 

monitor and terminate for poor financial 

performance in certain utilization 

categories. 

The commenter noted that its concern 

was specific to low revenue ACOs’ 

inability to control costs for inpatient, 

emergency room and SNF services. 

Elsewhere in this final rule we have 

explained our observation that low 

revenue ACOs tend to be more 

successful than high revenue ACOs in 

achieving savings, which suggests that 

the circumstances the commenter 

describes may not be a barrier to low 

revenue ACOs’ success in the program. 

We also note that during the 

performance year we provide ACOs 

with program reports with expenditure 

and utilization data which support 

ACOs’ monitoring of their financial 

performance trends, including by claims 

types, and may help ACOs respond to 

developing trends. 

Comment: One commenter suggested 

that CMS implement the financial 

monitoring proposal for performance 

years beginning before January 1, 2019. 

Specifically, the commenter noted that 

CMS could use existing performance 

data for ACOs that are currently 

participating in the program. 

Response: We decline to further 

modify our approach to adopt the 

commenter’s suggestion that we 

consider the performance of ACOs in 

current agreement periods during 

performance years prior to the 

applicability date of the policy we are 

finalizing. 

Comment: Some commenters 

suggested that CMS modify the 

proposed approach to allow ACOs 

additional years of poor performance 

before termination. The commenters 

suggested that CMS revise the policy to 

impose action after 3 or more 

performance years of poor financial 

performance. Commenters offered a 

variety of explanations for why the 

proposal does not give ACOs sufficient 

time to correct poor financial 

performance and show positive 

financial results, including the 

following. 

• Several commenters explained that 

ACOs will not have sufficient time to make 

and implement adjustments over 2 

performance years due to the timing of 

financial reconciliation. Performance data for 

the prior year is not available until the 

summer of the current performance year. One 

commenter explained that this timing poses 

challenges for ACOs to affect performance for 

the year underway. One commenter 

suggested that CMS could assist ACOs in 

achieving shared savings or in lowering costs 

by making program data and results more 

transparent and timely so that ACOs can 

actively monitor their performance in real 

time. 

• Several commenters suggested that new 

ACOs, and ACOs that modify their ACO 

participant lists during the agreement period, 

face challenges as a result of learning curves 

and a lack of experience. According to these 

commenters, ACOs should be allowed 

sufficient time to implement necessary 

population health, care management, 

provider engagement, and data strategies to 

enhance beneficiary care and contain costs. 

One commenter suggested that ACOs need at 

least three years to develop the competencies 

for success. One commenter explained its 

belief that no ACOs would want to invest the 

millions of dollars required to set up and 

operate an ACO if they could be terminated 

from the program just 24 months later. This 

commenter suggested there would be 

sufficient risk to participants under the 

proposed redesigned program, and that the 

risk of being terminated this quickly could be 

too much for many ACOs to bear. 

• Other commenters more generally 

indicated that ACOs need additional time to 

show positive performance results, 

explaining that the program’s results show 

ACOs perform better over time. One 

commenter, MedPAC, explained that if an 

ACO is improving the efficiency of care 

delivery, eventually its shared savings will 

outweigh its shared losses. Accordingly, one 

or two years of shared losses cannot be seen 

as a definitive indicator of performance given 

the small number of beneficiaries in most 

ACOs. Several commenters expressed 

concern that the proposed approach to 

potentially terminate ACOs after two years of 

poor financial performance, could result in 

termination of ACOs that may otherwise go 

on to achieve savings and make quality 

improvements for their patients if they are 

allowed to remain in the program. 

Response: We disagree with 

commenters’ suggestions that we modify 

our approach to consider three or more 

years of poor financial performance 

prior to potential termination of an ACO 

from the program. We believe that such 

an approach would effectively constrain 

the policy to addressing ACOs with 3 

consecutive years of poor financial 

performance, since results for 

performance year 3 would not be 

available until mid-way through 

performance year 4. If the 3 years of 

poor financial performance were not 

consecutive, the policy would only 

allow for limited scenarios in which we 

could remove poor performing ACOs. 

For example, under a policy that 

provides that ACOs would be 

terminated after 3 performance years of 

poor performance, if an ACO was 

negative outside corridor for 

performance year 1 and performance 

year 2 and performance year 4, we 

would not pursue termination until 

mid-way through performance year 5 

(when the results for the performance 

year 4 become available). We believe 

such an approach could allow ACOs 


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with a pattern of poor performance to 

remain in the program similar to how 

poorer performing ACOs persist in the 

program currently. 

We disagree with the commenters’ 

assertions that our proposal does not 

give ACOs sufficient time to identify 

and correct poor financial performance. 

ACOs have access to a variety of 

resources to assess their expenditure 

and utilization trends on an ongoing 

basis and to make adjustments over the 

course of the performance year. We 

provide ACOs with quarterly and 

annual expenditure and utilization 

reports, among other program reports 

(including historical benchmark reports, 

and aggregate reports with demographic 

data on the ACO’s assigned beneficiary 

population) as well as tools that ACOs 

can use to track and estimate their 

performance. We believe ACOs receive 

data in a timely manner from CMS, 

including monthly beneficiaryidentifiable claim and claim line feed 

files with Parts A, B, and D data, and 

have the ability to detect and respond to 

trends in a more timely fashion than 

commenters suggested, including before 

CMS has made a determination of poor 

financial performance. 

We disagree with the commenter that 

suggested that two performance years of 

shared losses is not a definitive 

indicator of poor performance. We have 

observed that ACOs with shared losses 

have greater difficulty in achieving 

shared savings within the same 

agreement period. As we described in 

the proposed rule and have restated in 

this final rule, our previous experience 

over a 5 performance year span suggests 

that the majority of ACOs whose first 2 

performance years are negative outside 

corridor fail to achieve savings in 

subsequent years. Therefore, we believe 

2 consecutive years of poor financial 

performance is a definitive indicator of 

the ACO’s performance trends and 

sufficient to warrant compliance actions 

that could include termination. We 

acknowledge that our experience is 

based on 3-year agreements (or in the 

case of the program’s initial entrants, 

agreement periods of 3 years and 9 

months, or 3 years and 6 months, and 

four year agreements in the case of the 

few ACOs approved to use the deferred 

renewal option which we are 

discontinuing with this final rule) and 

that we are finalizing an approach that 

implements 5-year agreements. 

Therefore, we anticipate examining the 

effects of our financial performance 

monitoring policy in the context of 

performance trends over longer 

agreement periods. Further, as we state 

elsewhere in this section of this final 

rule, we will also consider improvement 

in performance in deciding whether to 

terminate an ACO for 2 years of poor 

financial performance. This is especially 

relevant to ACOs that are negative 

outside corridor in non-sequential 

performance years. If an ACO shows a 

pattern of improving financial 

performance, or fluctuating financial 

performance, it may be indicative of the 

ACO’s ability to demonstrate consistent 

positive performance results in future 

performance years. 

Based on our experience with 

implementing the program, we disagree 

with the commenter’s assertion that the 

proposed policy if finalized will 

discourage ACOs from investing in 

program participation, out of concern 

that the potential for return on 

investment to cover start-up and 

operating costs is outweighed by the 

risk of being terminated for noncompliance with program requirements. 

We acknowledge there is risk to 

establishing and operating an ACO and 

believe that this financial performance 

monitoring policy can provide an 

additional incentive for ACOs to quickly 

improve their performance. Since the 

start of the Shared Savings Program 

hundreds of ACOs have agreed to 

participate in the program under the 

program’s current policies under which 

CMS monitors and takes compliance 

action, including termination, prior to 

the conclusion of 3-year agreement 

periods for ACOs that fail to meet 

program requirements. We note that we 

have terminated only a small number of 

ACOs for failure to meet program 

requirements. Notably, as we previously 

described in the background for this 

section, we terminate ACOs for failure 

to meet the quality performance 

standard over 2 consecutive 

performance years according to 

§ 425.316(c). Therefore we do not 

believe that ACOs will be discouraged 

from forming or entering the program 

because of a financial performance 

monitoring policy that also requires 

accountability for meeting the program’s 

goal of lowering growth in expenditures, 

and under which ACOs may be 

terminated for poor performance after 2 

performance years. 

Comment: A few commenters 

suggested that the proposed policy 

should be implemented only as a 

criterion for determining an ACO’s 

eligibility to renew its participation in 

or to re-enter the program. Several 

commenters suggested that ACOs 

should be protected from possible 

termination for poor financial 

performance for one full agreement 

period. These commenters suggested 

that ACOs that generate losses beyond 

their MLR by the end of their third 

performance year could be required to 

submit and implement a corrective 

action plan for their fourth performance 

year (of a 5-year agreement period). 

Then, as a condition of being approved 

for a second or subsequent agreement 

period, ACOs could be expected to meet 

quality standards and operate within the 

risk corridor (not generate savings below 

the MLR). 

Response: We decline to adopt the 

commenter’s suggestions because, given 

5-year agreement periods, we believe it 

would be more protective of the Trust 

Funds and Medicare FFS beneficiaries 

to allow CMS the flexibility to more 

quickly remove from the Shared Savings 

Program ACOs showing losses outside 

their corridor for two performance 

years. We note that we are finalizing in 

section II.A.5.c.(5) of this final rule, our 

proposal to consider an ACO’s past 

financial performance in determining 

whether to approve a renewing ACO’s 

or re-entering ACO’s Shared Savings 

Program application. 

Comment: Several commenters 

suggest that if an ACO performs poorly 

in performance year 1, but performs 

well in performance year 2 (results for 

which would be available in 

performance year 3), then the ACO 

should be allowed to participate in 

performance year 4. 

Response: The commenters may have 

misunderstood the proposal. Under the 

proposed approach, we would not 

terminate such an ACO for a single year 

of poor performance. We note that 

performance results are typically made 

available to ACOs in the summer 

following the conclusion of the calendar 

year performance year. In the 

commenters’ example, the soonest we 

could terminate the ACO would be after 

PY 3 results are available, which would 

occur more than halfway through PY 4. 

Under our proposal and this final rule, 

CMS retains discretion not to terminate 

an ACO after the second year of poor 

financial performance. In the 

commenters’ example, depending on the 

circumstances, CMS could either 

impose additional remedial action in PY 

4 or terminate the ACO in PY 4 if the 

ACO was again negative outside 

corridor in PY 3. Under this approach, 

the ACO may be allowed to complete 

PY 4, and if further corrective action is 

taken the ACO may be allowed to 

continue its participation in PY 5. 

Comment: A few commenters 

suggested that CMS should not 

terminate an ACO for poor financial 

performance without considering factors 

that might affect an ACO’s performance 

over its agreement period. One 

commenter suggested that for ACOs that 

have achieved significant success in the 


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past yet are struggling in the current 

performance year, CMS should not 

impose termination without considering 

whether the ACO’s poor performance is 

due to factors such as changes in the 

assignment methodology and risk 

adjustment of the patient population. 

Other commenters suggested we 

consider the impact of changes to the 

ACO’s participant list and changes in 

program policies during the agreement 

period. 

Several commenters suggested that 

CMS consider evidence of performance 

improvement over time before making a 

determination to terminate an ACO, but 

did not provide specific suggestions on 

how CMS should measure 

improvement. 

Response: We note that according to 

§ 425.212 an ACO is subject to all 

regulatory changes that become effective 

during the agreement period, with the 

exception of the following program 

areas, unless otherwise required by 

statute: (1) Eligibility requirements 

concerning the structure and 

governance of ACOs; and (2) calculation 

of sharing rate. We decline to create 

additional exceptions by not 

terminating ACOs for poor financial 

performance based on policy changes 

that become applicable within the 

ACO’s agreement period. During an 

ACO’s agreement period, we adjust the 

ACO’s historical benchmark to address 

changes in assignment, such as a result 

of regulatory changes to the program’s 

assignment methodology, and changes 

to the ACO’s ACO participant list. These 

adjustments ensure that the ACO’s 

historical benchmark expenditures 

remain comparable to performance year 

expenditures. Further, we note that our 

use of blended regional and national 

expenditure growth rates in updating 

the ACO’s historical benchmark, as we 

are finalizing in section II.D. of this final 

rule, will help to ensure that the ACO’s 

updated benchmark reflects the broader 

effect of changes to Medicare FFS 

payment policies that may be reflected 

in performance year expenditures. 

Additionally, we believe the 

applicability of the CMS–HCC risk 

adjustment methodology is not a factor 

that needs to be considered because our 

risk adjustment methodology annually 

renormalizes risk scores which helps to 

account for year to year changes in the 

risk adjustment model. 

Commenters did not provide specific 

suggestions on how we should measure 

performance improvement, but we agree 

that performance improvement could 

justify allowing an ACO to remain in the 

program after two years of poor 

financial performance. If the 

performance years in which the ACO is 

negative outside corridor are nonsequential, we anticipate considering 

whether the ACO generated savings or 

losses in the other performance years. 

For instance, we would be especially 

concerned by a pattern where an ACO 

generated losses outside corridor for 

non-sequential performance years and 

generated losses within corridor during 

the alternate year(s) especially if they 

missed the MLR by a small margin. This 

suggests a pattern of poor financial 

performance and the absence of 

corrective action to significantly 

improve performance to meet the 

program’s goals. If the years in which 

the ACO is negative outside corridor are 

non-sequential, and the ACO showed a 

pattern of performance improvement, 

such as losses or savings within their 

MSR/MLR corridor, or sharing savings 

(positive outside corridor), during the 

alternate year(s), then we would 

consider this impact and the ACO’s 

ability to continue a pattern of improved 

financial performance over time. 

Comment: Some commenters 

expressed concerns about the lack of 

predictability of the ACO’s historical 

benchmark, noting that the values can 

increase or decrease each performance 

year. One commenter stated concern 

about the proposed approach to 

terminate ACOs if they exceed their 

benchmarks because the commenter 

believes that the program’s benchmark 

methodology has been significantly 

flawed to date. This commenter 

explained that the construct of the 

benchmark is complex and many ACOs 

do not have the skill set or actuarial 

support to analyze, review and assess 

the complexities of benchmarking. One 

commenter stated that it cannot be 

determined that ACOs that fall outside 

of their negative corridor, are, in fact, 

losing the Medicare program money as 

benchmarks are not valid 

counterfactuals. One commenter 

suggested that CMS consider a standard 

that looks at the ACO’s cost growth 

relative to national expenditure growth 

trends to demonstrate that the ACO is 

an outlier requiring corrective action. 

For example, the commenter suggested 

that CMS could monitor ACOs based on 

whether the ACO’s expenditure trend is 

substantially higher than the national 

expenditure growth trend, such as 5 

percentage points higher, and take pretermination action in those cases. 

Response: ACO’s historical 

benchmarks can fluctuate in value 

during an agreement period because of 

adjustments for ACO participant list 

changes, and because of annual risk 

adjustment and the benchmark update. 

These policies ensure the continued 

comparability of the historical 

benchmark to the ACO’s performance 

year expenditures, for accuracy in 

determining shared savings and shared 

losses. We provide program reports, 

including preliminary and final 

historical benchmark reports, as well as 

annual and quarterly aggregate program 

reports on expenditure and utilization 

trends and demographic data on the 

ACO’s assigned population, to support 

ACOs’ participation in the program. We 

also educate ACOs on the use of 

quarterly program data to predict their 

financial performance. 

We disagree with the commenters 

who suggested that the program’s 

historical benchmark methodology has 

significant flaws. We continue to believe 

that the ACO’s historical benchmark is 

the most accurate measure for 

determining ACO financial 

performance. We also believe that the 

annual adjustment and update to the 

ACO’s historical benchmark improves 

the accuracy of the benchmark 

calculations. The annual risk 

adjustment methodology adjusts the 

benchmark so that it is reflective of the 

health status of the ACO’s assigned 

population. The annual update, as 

modified based on this final rule 

ensures that the benchmark reflects 

trends in both regional and national 

Medicare FFS expenditure growth with 

more weight on national trends for 

ACOs serving a larger percentage of 

beneficiaries in their region. Therefore, 

we decline the commenter’s suggestion 

that we use an alternative approach to 

determining financial performance (and 

identifying poor performers) such as 

comparing the ACO’s cost growth 

relative to national expenditure growth 

trends. 

Comment: Several commenters 

explained that an ACO with spending 

that is slightly higher than its 

benchmark should not be subject to 

remedial action or termination. The 

commenters described a number of 

reasons why spending for a performance 

year could be a few percentage points 

higher than a benchmark. For example, 

the beneficiary population could 

experience a worse than usual flu 

season, the hospital wage index in an 

ACO’s area could increase relative to 

their benchmark years, the ACO’s 

participant TINs could have joined an 

Innovation Center initiative that 

increases spending, or the ACO’s 

eligible clinicians could have earned a 

MIPS bonus, which CMS includes as 

ACO expenditures. 

Response: We decline the 

commenters’ suggestions to make 

exceptions to our approach for 

monitoring and terminating ACOs for 

poor financial performance by taking 


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into account various differences in 

expenditures and payment rates among 

providers and suppliers. Along similar 

lines, in earlier rulemaking, we have 

discussed our consideration of technical 

adjustments to benchmark and 

performance year expenditures (see, for 

example 80 FR 32796 through 32799). 

As explained in earlier rulemaking, we 

continue to believe that making 

extensive adjustments to remove the 

effect of all policy adjustments from 

benchmark and performance year 

expenditures, or allowing for 

expenditure adjustments on a case-bycase basis, would create an inaccurate 

and inconsistent picture of ACO patient 

population spending and may limit 

innovations in ACOs’ redesign of care 

processes or cost reduction strategies. 

Further, we believe that the 

modifications we are finalizing in 

section II.D of this final rule, to apply 

factors based on regional FFS 

expenditures in establishing, adjusting 

and updating the ACO’s historical 

benchmark beginning with an ACO’s 

first agreement period (for agreement 

periods beginning on July 1, 2019, and 

in subsequent years) mitigate some of 

the commenters’ concerns. In earlier 

rulemaking, we explained that by 

replacing the national average FFS 

expenditure trend and flat dollar update 

with trends observed for county level 

FFS assignable beneficiaries in each 

ACO’s unique assignment-weighted 

regional service area, benchmark 

calculations will be better structured to 

account for exogenous trend factors 

particular to each ACO’s region and the 

pool of potentially assignable 

beneficiaries therein (for example, 

higher trend due to a particularly acute 

flu season or an unusually large area 

wage index adjustment or change) (81 

FR 38004). We believe that the revised 

approach to updating the benchmark, by 

blending regional and national 

expenditure growth rates, which we are 

finalizing in section II.D. of this final 

rule, will continue to protect against 

these concerns. The weight on the 

national component of the blended 

update factor is based on an ACO’s 

penetration in its regional service area 

and the weight on the regional 

component is equal to one minus the 

national weight. Because most ACOs are 

not highly penetrated in their regional 

service areas, we believe that the 

blended update factor will still strongly 

reflect regional trends for the majority of 

ACOs. 

Comment: A few commenters 

suggested that CMS should take into 

consideration the impact of extreme and 

uncontrollable circumstances when 

monitoring ACOs for losses negative 

outside corridor and in taking related 

pre-termination actions. For example, 

one commenter suggested that ACOs 

that experienced an extreme and 

uncontrollable event during their 

agreement period should be allowed a 

waiver and/or extension of program 

requirements and/or deadlines when 

applicable. This commenter explained 

that by not providing such an option, 

some ACOs may be unfairly and 

prematurely terminated. 

Response: We appreciate the 

commenter’s suggestion that we take 

into account the impact of extreme and 

uncontrollable circumstances when 

monitoring and terminating ACOs for 

poor financial performance. We decline 

at this time to adopt the commenter’s 

suggestion to provide ACOs affected by 

extreme and uncontrollable 

circumstances with a waiver of or 

exceptions to program requirements we 

are finalizing to establish policies to 

monitor and terminate ACOs for poor 

financial performance. 

In the November 2018 final rule (83 

FR 59968 through 59979), we finalized 

the extension of policies that we 

previously adopted for addressing the 

impact of extreme and uncontrollable 

circumstances on ACO financial and 

quality performance results for 

performance year 2017 to performance 

year 2018 and subsequent years. 

Specifically, these policies address 

quality performance scoring for ACOs 

affected by extreme and uncontrollable 

circumstances and also provide for a 

reduction in the amount of shared losses 

owed by ACOs participating under a 

two-sided model for performance years 

affected by extreme and uncontrollable 

circumstances. We also explained our 

belief that under the approach of using 

regional factors in establishing and 

updating the benchmark, as described in 

section II.D of this final rule, it would 

not be necessary to make an additional 

adjustment to ACOs’ historical 

benchmarks to account for expenditure 

variations related to extreme and 

uncontrollable circumstances (83 FR 

59979). 

If we take pre-termination action 

against an ACO for poor financial 

performance, the ACO would have the 

opportunity to explain whether and 

how its financial performance was 

affected by extreme and uncontrollable 

circumstances and how those 

circumstances may also have affected its 

ability to take corrective action to 

improve its performance. We note that 

the pre-termination actions we could 

take in the case of poor financial 

performance are set forth in § 425.216, 

which include issuance of a warning 

letter or a request for a corrective action 

plan. As described in § 425.216(b), a 

corrective action plan must address 

what actions the ACO will take to 

ensure that the ACO, ACO participants, 

ACO providers/suppliers or other 

individuals or entities performing 

functions or services related to the 

ACO’s activities or both correct any 

deficiencies and comply with all 

applicable Shared Savings Program 

requirements. ACOs that are required to 

submit a corrective action plan would 

have the opportunity to explain to CMS 

the particular circumstances that 

impacted their prior performance, and 

how they will improve their financial 

performance. For instance, an ACO that 

was affected by extreme and 

uncontrollable circumstances would 

have the opportunity to explain how 

these circumstances may have impacted 

the ACO’s assigned beneficiary 

expenditures. This additional 

information may assist CMS in better 

understanding the circumstances that 

led to the ACO’s poor financial 

performance and allow CMS to better 

determine appropriate pre-termination 

options and evaluate the ACO’s 

corrective actions. Nothing in our 

regulations would prohibit an ACO from 

offering the same information in 

response to a warning letter. 

We will continue to monitor the 

impact of extreme and uncontrollable 

circumstances on ACOs, particularly as 

we gain experience with the disasterrelief policies we have finalized for 

performance year 2017 and subsequent 

performance years. We will consider 

whether any changes to our policy for 

monitoring and terminating ACOs for 

poor financial performance may be 

necessary to account for the effects of 

extreme and uncontrollable 

circumstances. Any such changes would 

be made through notice and comment 

rulemaking. 

Comment: Some commenters point 

out there are interactions between the 

proposed approach for monitoring and 

terminating ACOs for poor financial 

performance, and the policy for 

allowing ACOs in a two-sided model to 

select their MSR/MLR threshold prior to 

entering performance-based risk for the 

agreement period. These commenters 

expressed concern that the proposed 

approach to monitoring and terminating 

ACOs for poor financial performance 

could disproportionately affect ACOs 

that take on greater risk by electing a 

lower MSR/MLR. According to some 

commenters, CMS’ proposed definition 

of negative outside corridor sets a very 

low bar, especially for ACOs in 

downside financial risk models where 

the ACO can select a MLR as low as 0 

percent. Some commenters explained 


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that many ACOs view selection of the 

MSR/MLR in a two-sided model as a 

significant incentive to move into a 

performance-based risk track, but this 

proposal would create a double-edged 

sword whereby an ACO that wants to 

take on greater accountability through a 

lower MLR would be faced with the 

potential of being terminated from the 

program as a result of spending that 

exceeds its MLR. One commenter 

suggested that for ACOs in a two-sided 

model, CMS should use a variable MLR 

based on the number of the ACO’s 

assigned beneficiaries (as used to 

determine the MSR under a one-sided 

model) for purposes of determining poor 

financial performance. 

Response: We acknowledge the 

commenters’ concerns about the 

interactions between the existing policy 

of permitting ACOs under two-sided 

models to elect a symmetrical MSR/ 

MLR and our proposals with respect to 

monitoring and termination for poor 

financial performance. As discussed in 

section II.A.6.b. of this final rule, ACOs 

under a one-sided model are subject to 

a variable MSR based on their number 

of assigned beneficiaries. ACOs in twosided models may select a symmetrical 

MSR/MLR from the following options: 

Zero percent MSR/MLR; symmetrical 

MSR/MLR in a 0.5 percent increment 

between 0.5–2.0 percent; symmetrical 

MSR/MLR that varies based on the 

ACO’s number of assigned beneficiaries 

(the same as the MSR that would apply 

in a one-sided model, and the MLR is 

equal to the negative MSR). We 

established the variable MSRs to 

provide a greater degree of protection 

from normal variation in expenditures 

for smaller ACOs. For ACOs that enter 

an agreement period under a two-sided 

model, this MSR/MLR selection is made 

at the time of application. For ACOs 

participating in the BASIC track’s glide 

path, this election will be made during 

the application cycle preceding their 

first performance year in a two-sided 

model, generally during the calendar 

year before entry into risk. We believe 

that ACOs electing their MSR/MLR 

recognize the implications of their 

selection, including the potential that a 

low MSR/MLR will increase the risk of 

owing shared losses, as they are 

agreeing to be held accountable for the 

financial consequences of participation 

under this level of risk and reward. As 

a result, we believe they would also 

consider the potential impact that their 

selection may have upon their eligibility 

to continue in the program in the future. 

Accordingly, we decline the 

commenter’s suggestion to apply a 

variable MSR/MLR based on the size of 

the ACO’s assigned population instead 

of the fixed MSR/MLR selected by 

ACOs, in our approach to identifying 

ACOs with poor financial performance. 

We believe it is appropriate to use 

ACOs’ actual financial performance 

results in determining whether ACOs 

are negative outside corridor and in 

monitoring and terminating ACOs for 

poor financial performance. In 

calculating an ACO’s financial 

performance results, we use the MSR/ 

MLR that is applicable to the ACO. For 

ACOs under a one-sided model we 

apply a variable MSR based on the 

number of beneficiaries assigned to the 

ACO. For ACOs under a two-sided 

model we apply the ACO’s selected 

MSR/MLR, which is either a 

symmetrical fixed MSR/MLR between 

zero percent and 2 percent (in 

increments of 0.5 percent) or a 

symmetrical MSR/MLR that varies 

based on the number of beneficiaries 

assigned to the ACO. In section 

II.A.6.b.(3) of this final rule, we are 

finalizing an approach to modifying the 

MSR/MLR to address small population 

sizes for ACOs participating in twosided models. Under this final policy, 

we will use a variable MSR/MLR when 

performing shared savings and shared 

losses calculations if an ACO’s assigned 

beneficiary population falls below 5,000 

for the performance year, regardless of 

whether the ACO selected a fixed or 

variable MSR/MLR. This approach will 

provide further protection from shared 

losses for ACOs with small populations. 

However, we note that the ACOs to 

which we would apply this policy 

would be considered out of compliance 

with the program requirement to 

maintain a minimum of 5,000 assigned 

beneficiaries. 

Comment: Several commenters 

suggested that expanding CMS’ 

authority to terminate ACOs from the 

program based on financial performance 

undermines the collaborative nature of 

this program and the positive results 

that ACOs generate. 

Response: We do not believe that 

establishing this regulatory flexibility to 

help ensure the integrity of the program 

undermines our commitment to 

maintaining a program that encourages 

and fosters the success of ACOs that are 

committed to achieving the program’s 

goals. 

Comment: One commenter expressed 

concern that the proposed approach to 

monitoring and termination for poor 

financial performance could 

disadvantage rural providers. 

Response: We decline to make an 

exception for rural ACOs to the policy 

we are finalizing to monitor and 

terminate ACOs for poor financial 

performance. As we described in section 

II.A.5.b of this final rule, we believe that 

rural ACOs would tend to be among low 

revenue ACOs, which have 

demonstrated better financial 

performance in the Shared Savings 

Program compared to ACOs that 

includes hospitals (for example). Based 

on our experience with program 

performance results we do not believe 

that rural ACOs, such as those whose 

beneficiaries predominantly reside in 

non-metropolitan areas, would be 

disproportionately affected by a policy 

that monitors and terminates ACOs for 

poor financial performance, compared 

to ACOs whose beneficiaries 

predominantly reside in metropolitan 

areas. 

Comment: Several commenters 

suggested that CMS should create a 

direct channel for ACOs to report 

suspected fraud and abuse. These 

commenters stated that ACOs 

continuously monitor their 

expenditures. The commenters 

explained that ACOs are also 

monitoring services rendered by 

clinicians outside the ACO and keep an 

eye on reimbursements completely 

removed from their own financial 

interests other than to achieve shared 

savings. ACOs have a frontline ability 

and financial incentive to identify and 

report suspicious activity, yet ACOs 

have no direct access to CMS program 

integrity functions. 

Response: The program has several 

program and regulatory safeguards in 

place to encourage ACOs, ACO 

participants, and providers and 

suppliers to monitor and report 

allegations relating to fraud, waste, 

abuse, and overall program integrity. 

The Shared Savings Program makes 

referrals to CMS’ Center for Program 

integrity (CPI) and/or the Office of the 

Inspector General (OIG) whenever an 

ACO, ACO participant, or provider/ 

supplier raises an allegation of fraud, 

waste, or abuse. 

Anyone suspecting healthcare fraud, 

waste or abuse is encouraged to report 

it to CMS or the OIG. The OIG Hotline 

accepts tips and complaints from all 

sources about potential fraud, waste, 

abuse, and mismanagement in 

Department of Health and Human 

Services’ programs (see https://

oig.hhs.gov/FRAUD/REPORT-FRAUD/ 

INDEX.ASP for instructions). Reporting 

methods are also specified by CMS’ 

Center for Program Integrity (see https:// 

www.cms.gov/About-CMS/Components/ 

CPI/CPIReportingFraud.html for 

instructions). Additionally, concerns 

may be sent to the Shared Savings 

Program mailboxes, ACO@cms.hhs.gov 

for inquiries from external parties 


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including non-ACO entities, and 

SharedSavingsProgram@cms.hhs.gov for 

inquiries from current Shared Savings 

Program ACOs, and we will refer them 

to CPI and the OIG. 

Comment: Several commenters 

suggested that CMS develop a process 

that would allow an ACO to contest its 

termination for poor financial 

performance on the grounds that it was 

due to extenuating circumstances, or 

based on an error in CMS’ calculations. 

Response: The reconsideration review 

process is specified in subpart I of the 

program regulations. We do not believe 

it is necessary to establish a separate 

appeals process (as suggested by 

commenters) for ACOs to contest 

termination based on poor financial 

performance. We note that the 

imposition of pre-termination actions is 

not appealable. 

Comment: One commenter suggested 

that CMS revisit the policy for 

monitoring and evaluation related to 

financial performance in future 

rulemaking as it becomes implemented 

and applicable to ACOs over time. 

Response: We appreciate the 

commenter’s suggestion. As with other 

program policies, we may revisit this 

approach in future rulemaking based on 

lessons learned. 

Comment: Some commenters 

responded to CMS’ concern that ACOs 

may seek to obtain reinsurance to help 

offset their liability for shared losses as 

a way of enabling their continued 

program participation while potentially 

undermining the program’s goals. 

Several commenters urged that CMS 

should allow ACOs taking on 

performance-based risk to obtain and 

maintain reinsurance. They explained 

that ACOs need additional methods to 

repay losses. According to these 

commenters, reinsurance is an 

acceptable option for paying back losses 

associated with taking on risk, and is 

not an issue of ‘‘gaming’’ the system. 

They explained that it is a prudent 

practice to have stop loss coverage or 

reinsurance to address unexpected risk, 

and this would support ACO 

participation in the ENHANCED track 

given the higher level of potential 

downward risk in this track. 

One commenter explained the 

importance of tools like reinsurance for 

helping ACOs manage financial risk. 

The commenter explained that shared 

losses is only one form of risk associated 

with beginning an ACO, another being 

the business risk associated with the 

financial investments in starting an 

ACO (including those that begin under 

a one-sided model). Further, the 

commenter explained that providers 

must consider their full book of 

business, not just Medicare FFS, when 

determining the best way to protect 

against losses. The commenter 

suggested that CMS not limit providers’ 

ability to insure against the closure of 

their practices. 

Several commenters agreed with the 

discussion in the preamble where we 

explained our belief that prohibiting 

ACOs from obtaining reinsurance would 

be overly restrictive. One commenter 

found it difficult to believe that 

prohibiting ACOs under two-sided 

models from purchasing reinsurance 

would ultimately benefit participating 

ACOs and the Medicare program. A few 

commenters believe that as more ACOs 

participate under two-sided risk, more 

ACOs will seek reinsurance or 

partnerships with health management 

firms to mitigate risk. Several 

commenters indicated that the 

involvement of reinsurance and 

management firms will also add to the 

administrative costs of the program, 

eroding a key cost advantage of the ACO 

model over Medicare Advantage, and 

also weakening upside incentives for 

ACOs because such firms take a cut of 

savings. 

Response: We appreciate commenters’ 

consideration of our concerns about 

ACOs’ use of reinsurance to offset their 

liability for shared losses as a way of 

enabling their continued program 

participation while undermining the 

program’s goals. At this time we are not 

establishing new requirements to 

prohibit ACOs from obtaining 

reinsurance. As we note in section 

II.A.6.c. of this final rule we have also 

declined commenters’ suggestions to 

reinstate reinsurance as a permissible 

form of repayment mechanism 

arrangement. We may revisit these 

issues in future rulemaking as we gain 

additional experience with program 

policies, and particularly as more ACOs 

participate under two-sided models, 

which we anticipate will be the result 

of this final rule. 

Final Action: Based on our 

consideration of the comments we 

received, we are finalizing our proposal 

with a modification to its applicability 

date. We proposed to apply this 

approach to monitor financial 

performance for performance years 

beginning in 2019, and in subsequent 

years. We did not receive comments 

addressing the timing of applicability of 

the proposed policy. Due to the timing 

of this final rule, we believe it is 

appropriate to modify our proposal to 

finalize the applicability of this 

approach to performance years 

beginning on July 1, 2019, and in 

subsequent performance years. 

We are modifying § 425.316 to add 

paragraph (d) for monitoring ACO 

financial performance as follows: For 

performance years beginning on July 1, 

2019 and subsequent performance years, 

CMS determines whether the Medicare 

Parts A and B FFS expenditures for the 

ACO’s assigned beneficiaries for the 

performance year exceed the ACO’s 

updated benchmark by an amount equal 

to or exceeding either the ACO’s 

negative MSR under a one-sided model, 

or the ACO’s MLR under a two-sided 

model. If the Medicare Parts A and B 

FFS expenditures for the ACO’s 

assigned beneficiaries for the 

performance year exceed the ACO’s 

updated benchmark by an amount equal 

to or exceeding its negative MSR or 

MLR, CMS may take any of the pretermination actions set forth in 

§ 425.216. If the Medicare Parts A and 

B FFS expenditures for the ACO’s 

assigned beneficiaries for the 

performance year exceed the ACO’s 

updated benchmark by an amount equal 

to or exceeding its negative MSR or 

MLR for another performance year of 

the agreement period, CMS may 

immediately or with advance notice 

terminate the ACO’s participation 

agreement under § 425.218. As we 

described in our responses to comments 

in this section of this final rule, we 

anticipate taking into account certain 

relevant factors, such as an ACO’s 

improvement over time, before 

imposing remedial action or termination 

for poor financial performance. 

6. Requirements for ACO Participation 

in Two-Sided Models 

a. Overview 

In this section, we address 

requirements related to an ACO’s 

participation in performance-based risk. 

In the August 2018 proposed rule, we 

proposed technical changes to the 

program’s policies on election of the 

MSR/MLR for ACOs in the BASIC 

track’s glide path, and to address the 

circumstance of ACOs in two-sided 

models that elected a fixed MSR/MLR 

that have fewer than 5,000 assigned 

beneficiaries for a performance year. We 

proposed changes to the repayment 

mechanism requirements to update 

these policies to address the new 

participation options included in this 

final rule, including the BASIC track’s 

glide path under which participating 

ACOs must transition from a one-sided 

model to performance-based risk within 

a single agreement period. We proposed 

to add a provision that could lower the 

required repayment mechanism amount 

for BASIC track ACOs in Levels C, D, or 

E. In addition, we proposed to add 


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provisions to permit recalculation of the 

estimated amount of the repayment 

mechanism each performance year to 

account for changes in ACO participant 

composition, to specify requirements on 

the duration of repayment mechanism 

arrangements, to grant a renewing ACO 

(as defined in proposed § 425.20) the 

flexibility to maintain a single, existing 

repayment mechanism arrangement to 

support its ability to repay shared losses 

in the new agreement period so long as 

it is sufficient to cover an increased 

repayment mechanism amount during 

the new agreement period (if 

applicable), and to establish 

requirements regarding the issuing 

institutions for a repayment mechanism 

arrangement. We also proposed new 

policies to hold ACOs participating in 

two-sided models accountable for 

sharing in losses when they terminate, 

or CMS terminates, their agreement 

before the end of a performance year, 

while also reducing the amount of 

advance notice required for early 

termination. 

b. Election of MSR/MLR by ACOs 

(1) Background 

As discussed in earlier rulemaking, 

the MSR and MLR protect against an 

ACO earning shared savings or being 

liable for shared losses when the change 

in expenditures represents normal, or 

random, variation rather than an actual 

change in performance (see 76 FR 67927 

through 67929; and 76 FR 67936 

through 67937). The MSR and MLR are 

calculated as a percentage of the ACO’s 

updated historical benchmark (see 

§§ 425.604(b) and (c), 425.606(b), 

425.610(b)). 

In the June 2015 final rule, we 

finalized an approach to offer Track 2 

and Track 3 ACOs the opportunity to 

select the MSR/MLR that will apply for 

the duration of the ACO’s 3-year 

agreement period from several 

symmetrical MSR/MLR options (see 80 

FR 32769 through 32771, and 80 FR 

32779 through 32780; 

§§ 425.606(b)(1)(ii) and 425.610(b)(1)). 

We explained our belief that offering 

ACOs a choice of MSR/MLR will 

encourage ACOs to move to two-sided 

risk, and that ACOs are best positioned 

to determine the level of risk they are 

prepared to accept. For instance, ACOs 

that are more hesitant to enter a 

performance-based risk arrangement 

may choose a higher MSR/MLR, to have 

the protection of a higher threshold 

before the ACO would become liable to 

repay shared losses, thus mitigating 

downside risk, although the ACO would 

in turn have a higher threshold to meet 

before being eligible to receive shared 

savings. ACOs that are comfortable with 

a lower threshold of protection from risk 

of shared losses may select a lower 

MSR/MLR to benefit from a 

corresponding lower threshold for 

eligibility for shared savings. We also 

explained our belief that applying the 

same MSR/MLR methodology in both of 

the risk-based tracks reduces complexity 

for CMS’ operations and establishes 

more equal footing between the risk 

models. ACOs applying to the Track 1+ 

Model were also allowed the same 

choice of MSR/MLR to be applied for 

the duration of the ACO’s agreement 

period under the Model. 

ACOs applying to a two-sided model 

(currently, Track 2, Track 3 or the Track 

1+ Model) may select from the following 

options: 

• Zero percent MSR/MLR. 

• Symmetrical MSR/MLR in a 0.5 percent 

increment between 0.5–2.0 percent. 

• Symmetrical MSR/MLR that varies based 

on the ACO’s number of assigned 

beneficiaries according to the methodology 

established under the one-sided model under 

§ 425.604(b). The MSR is the same as the 

MSR that would apply in the one-sided 

model, and the MLR is equal to the negative 

MSR. 

(2) Timing and Selection of MSR/MLR 

In developing the policies for the 

August 2018 proposed rule, we 

considered what MSR/MLR options 

should be available for the BASIC 

track’s glide path, as well as the timing 

of selection of the MSR/MLR for ACOs 

entering the glide path under a onesided model and transitioning to a twosided model during their agreement 

period under the BASIC track. 

We proposed that ACOs under the 

BASIC track would have the same MSR/ 

MLR options as are currently available 

to ACOs under one-sided and two-sided 

models of the Shared Savings Program, 

as applicable to the model under which 

the ACO is participating along the 

BASIC track’s glide path. We explained 

that we believe these thresholds remain 

important to protect against savings and 

losses resulting from random variation, 

although we described in section 

II.A.5.b.(3) of the proposed rule our 

consideration of an alternate approach 

that would lower the MSR for low 

revenue ACOs (83 FR 41819 through 

41820). Further, we noted that 

providing the same MSR/MLR options 

for BASIC track ACOs under two-sided 

risk as ENHANCED track ACOs would 

be consistent with our current policy for 

Track 2 and Track 3 that allows ACOs 

to determine the level of risk they will 

accept while reducing complexity for 

CMS’ operations and establishing more 

equal footing between the risk models. 

Specifically, we proposed that ACOs 

in a one-sided model of the BASIC 

track’s glide path would have a variable 

MSR based on the ACO’s number of 

assigned beneficiaries. We proposed to 

apply the same variable MSR 

methodology as is used under 

§ 425.604(b) for Track 1. We proposed to 

specify this variable MSR methodology 

in a proposed new section of the 

regulations at § 425.605(b). We also 

proposed to specify in § 425.605(b) the 

MSR/MLR options for ACOs under twosided models of the BASIC track, 

consistent with the previously described 

symmetrical MSR/MLR options 

currently available to ACOs in twosided models of the Shared Savings 

Program and the Track 1+ Model (for 

example, as specified in § 425.610(b)). 

Because we proposed to discontinue 

Track 1, we believed it would be 

necessary to update the provision 

governing the symmetrical MSR/MLR 

options for the ENHANCED track at 

§ 425.610(b), which currently references 

the variable MSR methodology under 

Track 1. We proposed to revise 

§ 425.610(b)(1)(iii) to reference the 

requirements at § 425.605(b)(1) for a 

variable MSR under the BASIC track’s 

glide path rather than the variable MSR 

under Track 1. Because we also 

proposed to discontinue Track 2, 

concurrently with our proposal to 

discontinue Track 1, we did not believe 

it would be necessary to change the 

existing cross-reference in 

§ 425.606(b)(1)(ii)(C) to the variable 

MSR methodology under Track 1. 

As we explained in the August 2018 

proposed rule (83 FR 41837), we 

continue to believe that an ACO should 

select its MSR/MLR before assuming 

performance-based risk, and this 

selection should apply for the duration 

of its agreement period under risk. We 

believe that a policy that allows more 

frequent selection of the MSR/MLR 

within an agreement period under twosided risk (such as prior to the start of 

each performance year) could leave the 

program vulnerable to gaming. For 

example, ACOs could revise their MSR/ 

MLR selections once they have 

experience under performance-based 

risk in their current agreement period to 

maximize shared savings or to avoid 

shared losses. 

However, in light of our proposal to 

require ACOs to move between a onesided model (Level A or Level B) and a 

two-sided model (Level C, D, or E) 

during an agreement period in the 

BASIC track’s glide path, we stated our 

belief that it would be appropriate to 

allow ACOs to make their MSR/MLR 

selection during the application cycle 

preceding their first performance year in 


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a two-sided model, generally during the 

calendar year before entry into risk. 

ACOs that enter the BASIC track’s glide 

path under a one-sided model would 

still be inexperienced with 

performance-based risk, but they will 

have the opportunity to gain experience 

with the program, prior to making this 

selection. We noted that this approach 

would be another means for BASIC 

ACOs in the glide path to control their 

level of risk exposure. 

Therefore, we proposed to include a 

policy in the proposed new section of 

the regulations at § 425.605(b)(2) to 

allow ACOs under the BASIC track’s 

glide path in Level A or Level B to 

choose the MSR/MLR to be applied 

before the start of their first performance 

year in a two-sided model. This 

selection would occur before the ACO 

enters Level C, D or E of the BASIC 

track’s glide path, depending on 

whether the ACO is automatically 

transitioned to a two-sided model (Level 

C) or elects to more quickly transition to 

a two-sided model within the glide path 

(Level C, D, or E). 

In section II.A.5.b.(3) of the proposed 

rule we also described and sought 

comment on several approaches to 

allowing for potentially greater access to 

shared savings for low revenue ACOs 

compared to high revenue ACOs. We 

noted that such approaches would 

recognize the performance trends of low 

revenue ACOs based on performance 

results and the potential that low 

revenue ACOs would need additional 

capital, as a means of encouraging their 

continued participation in the program. 

One approach we considered would be 

to allow for a lower MSR during the 

one-sided model years (Level A and B) 

for low revenue ACOs in the BASIC 

track with at least 5,000 assigned 

beneficiaries for the performance year. 

For example, we considered a policy 

under which we would apply a MSR 

that is a fixed 1 percent. We also 

considered setting the MSR at a fixed 2 

percent, or effectively removing the 

threshold by setting the MSR at zero 

percent. However, we would apply a 

variable MSR based on the ACO’s 

number of assigned beneficiaries in the 

event the ACO’s population falls below 

5,000 assigned beneficiaries for the 

performance year, consistent with our 

proposal in section II.A.6.b of the 

proposed rule and as described below in 

section II.A.6.b.(3) of this final rule. 

We noted that a lower MSR (such as 

a fixed 1 percent) would reduce the 

threshold level of savings the ACO must 

generate to be eligible to share in 

savings. This would give low revenue 

ACOs greater confidence that they 

would be eligible to share in savings, 

once generated. We noted that this may 

be especially important for small ACOs 

which otherwise would have MSRs 

towards the higher end of the range 

(closer to 3.9 percent, for an ACO with 

at least 5,000 beneficiaries) for years in 

which the ACO participates under a 

one-sided model. However, we did not 

believe that a lower MSR would be 

needed to encourage participation by 

high revenue ACOs. For one, high 

revenue ACOs are likely to have larger 

numbers of assigned beneficiaries and 

therefore more likely to have lower 

MSRs (ranging from 3 percent to 2 

percent, for ACOs with 10,000 or more 

assigned beneficiaries). Further, we 

believed that their control over a 

significant percentage of total Medicare 

Parts A and B FFS expenditures for their 

assigned beneficiaries may provide a 

sufficient incentive for participation as 

they would have an opportunity to 

generate significant savings. 

In addition to allowing for a lower 

MSR for ACOs participating in a onesided model under the BASIC track, we 

also considered another approach under 

which we would allow for a relatively 

higher final sharing rate under the first 

four levels of the BASIC track’s glide 

path for low revenue ACOs. This 

approach is described further in section 

II.A.3.b of this final rule. 

Comment: Most commenters 

discussing the proposals related to 

timing and selection of the MSR/MLR 

agreed with allowing ACOs in a twosided model to select their MLR/MSR, 

with close to half also explicitly 

expressing support for the proposed 

timing of the selection. Commenters 

frequently noted that they appreciated 

the flexibility these policies would 

provide. A few commenters stated this 

flexibility was important to ACOs that 

may want to set the MSR/MLR higher or 

lower depending on how conservative 

or aggressive their goals are with respect 

to avoiding shared losses or earning 

shared savings, respectively. One 

commenter supported allowing ACOs to 

choose from a range of MSR values, 

noting the importance of allowing 

organizations to assume levels of risk 

based on their own business decisions. 

Another commenter noted that 

continuing to allow ACOs in riskbearing tracks to select their MSR/MLR 

provides ACOs with flexibility and 

autonomy that is critical to building 

confidence in accepting higher levels of 

risk. This commenter noted that the 

symmetrical nature of these rates will 

also help to protect the Medicare Trust 

Funds. 

One commenter commended CMS for 

what they described as providing the 

same options to ACOs in both one- and 

two-sided models. Another commenter 

noted that as the program develops it 

may become more apparent whether a 

fixed or variable MSR makes the most 

sense for CMS, ACOs, and beneficiaries, 

but recommended that CMS extend the 

choice of fixed and variable MSR/MLR 

options to all levels of the BASIC track, 

stating their belief that offering ACOs 

choices from the start of their 

participation in the program provides 

the best pathway for success. Several 

commenters advocated for using a fixed 

MSR of 2 or 2.5 percent for ACOs in 

one-sided models with at least 5,000 

assigned beneficiaries, with some noting 

that this approach could provide a 

greater incentive for participation 

among low revenue ACOs and rural 

ACOs. A few of these commenters also 

supported using a variable MSR for 

ACOs in one-sided models that are 

below the 5,000 beneficiary threshold. 

One commenter asked that CMS 

reconsider its proposals related to the 

MSR and MLR in order to ‘‘lessen 

restrictions and remove barriers to 

participation in risk sharing 

arrangements,’’ but did not specify 

which aspects of the MSR/MLR 

proposals they believed to be restrictive 

or to create barriers. 

Several commenters noted that they 

disagree with CMS’ current policy of 

requiring that an ACO’s MSR/MLR 

selection apply for the duration of its 

agreement period under risk, which 

would also apply to ACOs in two-sided 

levels of the BASIC track under our 

proposal. Most of these commenters 

recommended allowing ACOs to change 

their selection at the start of each 

performance year. One commenter 

requested that ACOs be permitted to reselect their MSR/MLR level in the event 

that CMS modifies the financial 

conditions of a track during the 

agreement period. 

A few commenters noted that they 

disagreed with CMS’ stated belief that 

allowing for annual selections could 

leave the program vulnerable to gaming. 

They believe instead that modifying this 

policy to permit annual selections 

would allow ACOs to continue to 

advance in operating under 

performance-based risk, grow 

competencies, and build understanding 

of the benchmarking methodology, 

which they view as essential to 

informing an ACO’s MSR/MLR 

selection. They also noted that the 

assigned beneficiary populations of 

ACOs, and their associated risk profiles, 

can change significantly over time, 

affecting an ACO’s previous MSR/MLR 

selection. These commenters also 

mentioned that other alternative 

payment models such as the Bundled 


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Payments for Care Improvement (BPCI) 

initiative allow their participants to 

change their risk thresholds more 

frequently. 

Response: We appreciate commenters’ 

feedback on our proposals around the 

timing for selection of the MSR/MLR for 

ACOs participating in the proposed 

BASIC track. We agree with the 

commenters who noted that our 

proposal to allow ACOs to select their 

MSR/MLR prior to moving to a twosided model within the glide path will 

provide flexibility for ACOs that will be 

moving into two-sided risk 

arrangements in the BASIC track, and 

we are finalizing this policy as 

proposed. We continue to believe that 

offering a choice of MSR/MLR for ACOs 

participating in two-sided models will 

encourage ACO participation in these 

models, and that ACOs are best 

positioned to determine the level of risk 

they are prepared to accept. We would 

like to clarify that our proposal did not 

extend the choice of an MSR/MLR to 

ACOs that are participating in the onesided levels of the BASIC track; 

however, as we discuss elsewhere in 

this section, we did consider certain 

other options for allowing for a lower 

MSR for low revenue ACOs under a 

one-sided model. With regard to ACOs 

participating under a one-sided model 

within the BASIC track, we believe that 

the advantages afforded by a variable 

MSR that protects the Medicare Trust 

Funds from shared savings payments 

that are due to normal variation in 

expenditures, outweigh any suggested 

advantages of providing the option for 

these ACOs to select a fixed rate MSR. 

Under the policy that we are finalizing, 

ACOs participating in Levels A or B of 

the BASIC track will have an MSR based 

on their number of assigned 

beneficiaries and will have the 

opportunity to select their MSR/MLR 

during the application cycle preceding 

their first performance year in a twosided model. 

We did not propose to change the 

requirement that the MSR/MLR 

selection apply for the duration of the 

agreement period under performancebased risk for ACOs participating in 

Track 2 or the ENHANCED track. For 

consistency, and because we still have 

concerns that allowing for an annual 

selection could lead to gaming, we 

believe that it is appropriate that this 

requirement extend to ACOs entering a 

two-sided level in the BASIC track. We 

would also like to clarify that, absent 

unusual circumstances, we would not 

seek to modify the financial terms of an 

ACO’s track during an agreement 

period. Any such change could only be 

adopted through rulemaking and, per 

§ 425.212, any regulatory changes to the 

sharing rate, unless required by statute, 

do not apply to ACOs during an 

agreement period. We note, for example, 

that ACOs currently participating in 

Tracks 1 and 2 will be allowed to 

complete their existing agreement 

period under the financial conditions of 

their current track, even though these 

tracks will no longer be available as 

participation options for ACOs entering 

a new agreement period on or after July 

1, 2019, pursuant to this final rule. 

Comment: A number of commenters 

supported a combination of a lower 

MSR and higher sharing rates for low 

revenue ACOs participating in the 

BASIC track and offered several 

different alternatives. Commenters 

explained that combining a lower MSR 

and higher final sharing rate was 

necessary to ensure there are sufficient 

and attainable incentives to support 

ACOs’ efforts to improve quality and 

lower cost, to provide early returns on 

investments as well as predictability of 

savings and the financial support ACOs 

need to ensure successful participation, 

and to incentivize low revenue and 

physician-led ACOs to participate in the 

redesigned participation options. 

Response: We appreciate the feedback 

provided by commenters on the 

approaches we considered to increase 

incentives for low revenue ACOs 

participating in the BASIC track. As 

discussed in section II.A.3.b. of this 

final rule, we are finalizing a 40 percent 

sharing rate for all one-sided model 

levels of the BASIC track’s glide path 

and a 50 percent sharing rate for twosided model levels in the BASIC track’s 

glide path. Additionally, in section 

II.A.5.c of this final rule, we are 

finalizing an exception that will permit 

new legal entities determined to be low 

revenue ACOs that are inexperienced 

with performance-based risk Medicare 

ACO initiatives to participate for 3 

performance years under a one-sided 

model within the BASIC track’s glide 

path (or 4 performance years in the case 

of ACOs entering an agreement period 

beginning on July 1, 2019) prior to being 

automatically advanced to Level E of the 

BASIC track for the remaining years of 

their agreement period. As we believe 

these policies, which represent 

modifications of our original proposals, 

will improve the incentives for 

participation by low revenue ACOs, we 

decline to adopt a lower MSR for low 

revenue ACOs participating in the onesided model levels of the BASIC track 

at this time. Furthermore, as we noted 

earlier in this section and have 

discussed in prior rulemaking (see for 

example, 80 FR 32761), we continue to 

believe that the use of a variable MSR 

for ACOs in one-sided models is 

appropriate in order to protect the Trust 

Funds from paying shared savings for 

savings that may result from random 

variation rather than from care 

coordination and quality improvement 

by the ACO. 

Final Action: After considering the 

comments received, we are finalizing 

the policies governing the MSR/MLR for 

ACOs in the BASIC track at 

§ 425.605(b), with a modification to 

include a new paragraph at 

§ 425.605(b)(2)(ii)(D) to provide that 

ACOs that elect the option to participate 

in a third year under a one-sided model 

based on the policy we are finalizing in 

section II.A.5.c of this final rule will 

select their MSR/MLR prior to 

transitioning to Level E. Under the final 

policies, ACOs in a one-sided model of 

the BASIC track’s glide path will have 

a variable MSR based on the number of 

beneficiaries assigned to the ACO. The 

variable MSR will be determined using 

the same methodology that is currently 

used for Track 1. ACOs in a two-sided 

model of the BASIC track will be able 

to choose among the MSR/MLR options 

that are available to ACOs participating 

in Track 2 or the ENHANCED track. 

ACOs participating under Level A or B 

of the BASIC track’s glide path will 

choose the MSR/MLR to be applied 

before the start of their first performance 

year in a two-sided model. This 

selection will occur before the ACO 

enters Level C, D or E of the BASIC 

track’s glide path, depending on 

whether the ACO is automatically 

transitioned to a two-sided model (Level 

C or E) or elects to more quickly 

transition to a two-sided model within 

the glide path (Level C, D, or E), and 

will be in effect for the duration of the 

agreement period that the ACO is under 

two-sided risk. We are also finalizing as 

proposed the changes to 

§ 425.610(b)(1)(iii) to add a cross 

reference the new provision at 

§ 425.605(b)(2). 

(3) Modifying the MSR/MLR To Address 

Small Population Sizes 

As discussed in the introduction to 

this section, the MSR and MLR protect 

against an ACO earning shared savings 

or being liable for shared losses when 

the change in expenditures represents 

normal, or random, variation rather than 

an actual change in performance. ACOs 

in two-sided risk models that have 

opted for a fixed MSR/MLR can choose 

a MSR/MLR of zero percent or a 

symmetrical MSR/MLR equal to 0.5 

percent, 1.0 percent, 1.5 percent, or 2.0 

percent. As discussed elsewhere in this 

final rule, we proposed that ACOs in a 

two-sided model of the new BASIC 


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track would have the same options in 

selecting their MSR/MLR, including the 

option of a variable MSR/MLR based on 

the number of beneficiaries assigned to 

the ACO. 

Under the current regulations, for all 

ACOs in Track 1 and any ACO in a twosided risk model that has elected a 

variable MSR/MLR, we determine the 

MSR and MLR (if applicable) for the 

performance year based on the number 

of beneficiaries assigned to the ACO for 

the performance year. For ACOs with at 

least 5,000 assigned beneficiaries in the 

performance year, the variable MSR can 

range from a high of 3.9 percent (for 

ACOs with at least 5,000 assigned 

beneficiaries) to a low of 2.0 percent (for 

ACOs with approximately 60,000 or 

more assigned beneficiaries). See 

§ 425.604(b). For two-sided model ACOs 

under a variable MSR/MLR, the MLR is 

equal to the negative of the MSR. 

Under section 1899(b)(2)(D) of the 

Act, in order to be eligible to participate 

in the Shared Savings Program an ACO 

must have at least 5,000 assigned 

beneficiaries. In earlier rulemaking, we 

established the requirements under 

§ 425.110 to address situations in which 

an ACO met the 5,000 assigned 

beneficiary requirement at the start of its 

agreement period, but later falls below 

5,000 assigned beneficiaries during a 

performance year. We refer readers to 

the November 2011 and June 2015 final 

rules and the CY 2017 PFS final rule for 

a discussion of the relevant background 

and related considerations (see 76 FR 

67807 and 67808, 67959; 80 FR 32705 

through 32707; 81 FR 80515 and 80516). 

CMS deems an ACO to have initially 

satisfied the requirement to have at least 

5,000 assigned beneficiaries if 5,000 or 

more beneficiaries are historically 

assigned to the ACO participants in 

each of the 3 benchmark years, as 

calculated using the program’s 

assignment methodology (§ 425.110(a)). 

CMS initially makes this assessment at 

the time of an ACO’s application to the 

program. As specified in § 425.110(b), if 

at any time during the performance 

year, an ACO’s assigned population falls 

below 5,000, the ACO may be subject to 

the pre-termination actions described in 

§ 425.216 and termination of the 

participation agreement by CMS under 

§ 425.218. As a pre-termination action, 

CMS may require the ACO to submit a 

corrective action plan (CAP) to CMS for 

approval (§ 425.216). While under a 

CAP for having an assigned population 

below 5,000 assigned beneficiaries, an 

ACO remains eligible for shared savings 

and liable for shared losses 

(§ 425.110(b)(1)). If the ACO’s assigned 

population is not at least 5,000 by the 

end of the performance year specified 

by CMS in its request for a CAP, CMS 

terminates the ACO’s participation 

agreement and the ACO is not eligible 

to share in savings for that performance 

year (§ 425.110(b)(2)). 

As specified in § 425.1110(b)(1), if an 

ACO’s performance year assigned 

beneficiary population falls below 

5,000, the ACO remains eligible for 

shared savings/shared losses, but the 

following policies apply with respect to 

the ACO’s MSR/MLR: (1) For ACOs 

subject to a variable MSR and MLR (if 

applicable), the MSR and MLR (if 

applicable) will be set at a level 

consistent with the number of assigned 

beneficiaries; (2) For ACOs with a fixed 

MSR/MLR, the MSR/MLR will remain 

fixed at the level consistent with the 

choice of MSR and MLR that the ACO 

made at the start of the agreement 

period. 

To implement the requirement for the 

variable MSR and MLR (if applicable) to 

be set at a level consistent with the 

number of assigned beneficiaries, the 

CMS Office of the Actuary (OACT) 

calculates the MSR ranges for 

populations smaller than 5,000 assigned 

beneficiaries. The following examples 

are based on our operational experience: 

If an ACO’s assigned beneficiary 

population drops to 3,000, the MSR 

would be set at 5 percent; if the 

population falls to 1,000 or 500, the 

MSR would correspondingly rise to 8.7 

percent or 12.2 percent, respectively. 

These sharp increases in the MSR reflect 

the greater random variation that can 

occur when expenditures are calculated 

across a small number of assigned 

beneficiaries. 

In the August 2018 proposed rule (83 

FR 41838), we noted that to date, the 

number of ACOs that have fallen below 

the 5,000-beneficiary threshold for a 

performance year has been relatively 

small. Among 432 ACOs that were 

reconciled in PY 2016, there were 12 

ACOs with fewer than 5,000 assigned 

beneficiaries. In PY 2015 there were 15 

(out of 392 ACOs) below the threshold 

and in PY 2014 there were 14 (out of 

333 ACOs). While the majority of these 

ACOs had between 4,000 and 5,000 

beneficiaries, we observed the 

performance year population fall as low 

as 513 for one ACO. Among the 472 

ACOs that were subject to financial 

reconciliation for performance year 

2017, over 20 ACOs (4.2 percent) fell 

below 5,000 assigned beneficiaries for 

the performance year, with three ACOs 

with under 1,000 assigned beneficiaries. 

Consistent with overall program 

participation trends, most ACOs that fell 

below the 5,000-beneficiary threshold in 

performance year 2017 and in prior 

performance years were participating in 

Track 1. These ACOs have thus 

automatically been subject to a variable 

MSR. With increased participation in 

performance-based risk models, 

however, we anticipate an increased 

likelihood of observing ACOs that have 

a fixed MSR/MLR of plus or minus 2 

percent or less falling below the 5,000- 

beneficiary threshold. 

Indeed, program data have 

demonstrated the popularity of the fixed 

MSR/MLR among ACOs in two-sided 

models. In PY 2016, the first year that 

ACOs in two-sided models were 

allowed to choose their MSR/MLR, 21 of 

22 eligible ACOs selected one of the 

fixed options. Among the 42 Track 2 

and Track 3 ACOs participating in PY 

2017, 38 selected a MSR/MLR that does 

not vary with the ACO’s number of 

assigned beneficiaries, including 11 that 

are subject to a MSR or MLR of zero 

percent. Among 101 ACOs participating 

in two-sided models in PY 2018, 80 are 

subject to one of the fixed options, 

including 18 with a MSR and MLR of 

zero percent. 

In the August 2018 proposed rule, we 

indicated that while we continue to 

believe that ACOs operating under 

performance-based risk models should 

have flexibility in determining their 

exposure to risk through the MSR/MLR 

selection, we are concerned about the 

potential for rewarding ACOs with a 

fixed MSR/MLR that are unable to 

maintain a minimum population of 

5,000 beneficiaries through the payment 

of shared savings for expenditure 

variation that is likely the result of 

normal expenditure fluctuations, rather 

than the performance of the ACO. If the 

ACO’s minimum population falls below 

5,000, the ACO is no longer in 

compliance with program requirements. 

The reduction in the size of the ACO’s 

assigned beneficiary population would 

also raise concerns that any shared 

savings payments made to the ACO 

would not reward true cost savings, but 

instead would pay for normal 

expenditure fluctuations. We noted, 

however, that an ACO under 

performance-based risk potentially 

would be at greater risk of being liable 

for shared losses, also stemming from 

such normal expenditure variation. If an 

ACO’s assigned population falls below 

the minimum requirement of 5,000 

beneficiaries, a solution to improve the 

confidence that shared savings and 

shared losses do not represent normal 

variation, but meaningful changes in 

expenditures, would be to apply a 

symmetrical MSR/MLR that varies 

based on the number of beneficiaries 

assigned to the ACO. 

The values for the variable MSR are 

shown in Table 9. As previously 


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described, the MLR is equal to the 

negative MSR. In this table, the MSR 

ranges for population sizes varying 

between from 5,000 to over 60,000 

assigned beneficiaries are consistent 

with the current approach to 

determining a variable MSR based on 

the size of the ACO’s population (see 

§ 425.604(b)), and the corresponding 

variable MLR. We have also added new 

values, calculated by the CMS OACT, 

for population sizes varying from one to 

4,999, as shown in Table 9. For ACOs 

with populations between 500–4,999 

beneficiaries, the MSR would range 

between 12.2 percent (for ACOs with 

500 assigned beneficiaries) and 3.9 

percent (for ACOs with 4,999 assigned 

beneficiaries). For ACOs with 

populations of 499 assigned 

beneficiaries or fewer, we would 

calculate the MSR to be equal to or 

greater than 12.2 percent, with the MSR 

value increasing as the ACO’s assigned 

population decreases. 

Therefore, we proposed to modify 

§ 425.110(b) to provide that we will use 

a variable MSR/MLR when performing 

shared savings and shared losses 

calculations if an ACO’s assigned 

beneficiary population falls below 5,000 

for the performance year, regardless of 

whether the ACO selected a fixed or 

variable MSR/MLR. We proposed to use 

this approach beginning with 

performance years starting in 2019. The 

variable MSR/MLR would be 

determined using the same approach 

based on number of assigned 

beneficiaries that is currently used for 

two-sided model ACOs that have 

selected the variable option. If the 

ACO’s assigned beneficiary population 

increases to 5,000 or more for 

subsequent performance years in the 

agreement period, the MSR/MLR would 

revert to the fixed level selected by the 

ACO at the start of the agreement period 

(or before moving to risk for ACOs on 

the BASIC track’s glide path), if 

applicable. While we believed this 

proposal would have a fairly limited 

reach in terms of number of ACOs 

impacted, we stated our belief that it is 

nonetheless important for protecting the 

integrity of the Trust Funds and better 

ensuring that the program is rewarding 

or penalizing ACOs for actual 

performance. We also noted that the 

policy, if finalized, would make it more 

difficult for an ACO under performancebased risk that falls below the 5,000- 

beneficiary threshold to earn shared 

savings, but would also provide greater 

protection against owing shared losses. 

We also proposed to revise the 

regulations at § 425.110 to reorganize 

the provisions in paragraph (b), so that 

all current and proposed policies for 

determining the MSR and MLR would 

apply to all ACOs whose population 

falls below the 5,000-beneficiary 

threshold and that are reconciled for 

shared savings or shared losses, as 

opposed to being limited to ACOs under 

a CAP, as provided in the existing 

provision at § 425.110(b)(1). 

Specifically, we proposed to move the 

current provisions on the determination 

of the MSR/MLR at paragraphs (b)(1)(i) 

and (ii) to a new provision at paragraph 

(b)(3) where we would also distinguish 

between the policies applicable to 

determining the MSR/MLR for 

performance years starting before 

January 1, 2019, and those that we 

proposed to apply for performance years 

starting in 2019 and subsequent years. 

We proposed to specify the additional 

ranges for the MSR (when the ACO’s 

population falls below 5,000 assigned 

beneficiaries) through revisions to the 

table at § 425.604(b), for use in 

determining an ACO’s eligibility for 

shared savings for a performance year 

starting on January 1, 2019, and any 

remaining years of the current 

agreement period for ACOs under Track 

1. We noted that the proposed ranges 

are consistent with the program’s 


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18See 76 FR 67937 through 67940 (establishing 

the requirement for Track 2 ACOs). See also 80 FR 

32781 through 32785 (adopting the same general 

requirements for Track 3 ACOs with respect to the 

repayment mechanism and discussing 

modifications to reduce burden of the repayment 

requirements on ACOs). 

19Medicare Shared Savings Program & Medicare 

ACO Track 1+ Model, Repayment Mechanism 

Arrangements, Guidance Document (July 2017, 

version #6), available at https://www.cms.gov/ 

Medicare/Medicare-Fee-for-Service-Payment/ 

sharedsavingsprogram/Downloads/RepaymentMechanism-Guidance.pdf (herein Repayment 

Mechanism Arrangements Guidance). 

current policy for setting the MSR and 

MLR (in the event a two-sided model 

ACO elected the variable MSR/MLR) 

when the population falls below 5,000 

assigned beneficiaries, and therefore 

similar ranges would be applied in 

determining the variable MSR/MLR for 

performance year 2017 and 2018. These 

ranges in § 425.604(b) are crossreferenced in the regulations for Track 

2 at § 425.606(b)(1)(ii)(C) and therefore 

would also apply to Track 2 ACOs if 

their population falls below 5,000 

assigned beneficiaries. Further, as 

discussed in section II.A.6.b.(2). of this 

final rule, we proposed to specify under 

a new section of the regulations at 

§ 425.605(b)(1) the range of MSR values 

that would apply under a one-sided 

model of the BASIC track’s glide path, 

which would also be used in 

determining the variable MSR/MLR for 

ACOs participating in two-sided models 

under the BASIC track and ENHANCED 

track. We sought comment on these 

proposals and specifically on the 

proposed MSR ranges for ACOs with 

fewer than 5,000 assigned beneficiaries, 

including the application of a MSR/ 

MLR in excess of 12 percent, in the case 

of ACOs that have failed to meet the 

requirement to maintain a population of 

at least 5,000 assigned beneficiaries and 

have very small population sizes. In 

particular, we sought commenters’ 

feedback on whether the proposed 

approach described in this section could 

improve accountability of ACOs. 

We also noted that the requirement of 

section 1899(b)(2)(D) of the Act, for an 

ACO to have at least 5,000 assigned 

beneficiaries, would continue to apply. 

The additional consequences for ACOs 

with fewer than 5,000 assigned 

beneficiaries, as specified in 

§ 425.110(b)(1) and (2) would also 

continue to apply. Under 

§ 425.110(b)(2), ACOs are not eligible to 

share savings for a performance year in 

which they are terminated for 

noncompliance with the requirement to 

maintain a population of at least 5,000 

assigned beneficiaries. As discussed in 

section II.A.6.d. of this final rule, in the 

August 2018 proposed rule, we also 

proposed to revise our regulations 

governing the payment consequences of 

early termination to include policies 

applicable to involuntarily terminated 

ACOs. Under this proposed approach, 

two-sided model ACOs would be liable 

for a pro-rated share of any shared 

losses determined for the performance 

year during which a termination under 

§ 425.110(b)(2) becomes effective. 

Comment: One commenter noted that 

CMS established the original MSR/MLR 

rates at a desired confidence level of 90 

percent but, based on their own 

analysis, they believe that CMS 

miscalculated and created thresholds 

that were closer to 75 percent, meaning 

many ACOs receive shared savings 

payments or repay losses based on 

random chance. The commenter 

recommended that CMS consider 

widening the MSR and MLR thresholds, 

such as by using a confidence level of 

99 percent, to protect ACOs from paying 

random losses and CMS from sharing 

random savings. 

In contrast, a few other commenters 

suggested that the current range for 

variable MSRs is too high. One 

commenter suggested that with a floor 

of 2 percent for ACOs with 60,000 or 

more assigned beneficiaries and higher 

values for smaller ACOs, the current 

range of MSR values disincentivizes 

small ACOs from participating in the 

program. Another commenter asked 

CMS to consider reducing the variable 

MSR to a range of 1 percent to 2.9 

percent. They noted that when the MSR 

is too high it is challenging for ACOs to 

be eligible for shared savings and there 

is a strong disincentive for ACOs to 

continue in the program. They believed 

that the proposed changes to the 

benchmarking methodology would 

reduce volatility and improve accuracy 

of benchmarks and that the range of the 

MSR should be reduced to reflect this. 

Response: We appreciate commenters’ 

feedback on the range of values used to 

determine the variable MSR. We believe 

that there are tradeoffs in setting the 

MSR range. We are concerned that 

widening the range based on a 99 

percent confidence level, while 

protecting the Trust Funds from paying 

for savings and protecting risk-bearing 

ACOs from repaying losses due to 

normal variation, would prevent the 

payment of savings (or collection of 

losses) in too many cases where savings 

or losses were not a result of normal 

variation. We also believe that imposing 

more stringent thresholds before ACOs 

are eligible to earn shared savings 

would be a deterrent to participation. At 

the same time, we are also unwilling to 

lower the range of values used to 

determine the variable MSR for ACOs in 

a one-sided risk model. While this 

would, as commenters suggest, likely 

incentivize participation, we are 

concerned that lowering the range 

would not provide adequate protection 

to the Medicare Trust Funds. 

Final Action: We did not receive any 

comments on our proposal to use a 

variable MSR/MLR when performing 

shared savings and shared losses 

calculations if the assigned beneficiary 

population for an ACO participating 

under a two-sided model falls below 

5,000 for the performance year 

regardless of whether the ACO selected 

a fixed or variable MSR/MLR. We are 

finalizing this policy as proposed 

through revisions to § 425.110(b), but 

are revising the applicability date, such 

that the new policy will apply to 

performance years beginning on or after 

July 1, 2019, rather than January 1, 

2019, in order to ensure that this change 

applies only prospectively. We are also 

making minor revisions to paragraph 

(b)(1) for improved clarity and 

consistency. 

We are also finalizing our proposals to 

specify the additional ranges for the 

MSR (when the ACO’s population falls 

below 5,000 assigned beneficiaries) 

through revisions to the table at 

§ 425.604(b) and the addition of a new 

section of the regulations at 

§ 425.605(b)(1) that includes the range 

of MSR values that will apply under the 

one-sided model of the BASIC track’s 

glide path and will also be used in 

determining the variable MSR/MLR for 

ACOs participating in two-sided models 

under the BASIC track and ENHANCED 

track. 

c. ACO Repayment Mechanisms 

(1) Background 

We discussed in earlier rulemaking 

the requirement for ACOs applying to 

enter a two-sided model to demonstrate 

they have established an adequate 

repayment mechanism to provide CMS 

assurance of their ability to repay shared 

losses for which they may be liable 

upon reconciliation for each 

performance year.18 The requirements 

for an ACO to establish and maintain an 

adequate repayment mechanism are 

described in § 425.204(f), and we have 

provided additional program guidance 

on repayment mechanism 

arrangements.19 Section 425.204(f) 

addresses various requirements for 

repayment mechanism arrangements: 

The nature of the repayment 

mechanism; when documentation of the 

repayment mechanism must be 

submitted to CMS; the amount of the 

repayment mechanism; replenishment 

of the repayment mechanism funds after 


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their use; and the duration of the 

repayment mechanism arrangement. 

Consistent with the requirements set 

forth in § 425.204(f)(2), in establishing a 

repayment mechanism for participation 

in a two-sided model of the Shared 

Savings Program, ACOs must select 

from one or more of the following three 

types of repayment arrangements: Funds 

placed in escrow; a line of credit as 

evidenced by a letter of credit that the 

Medicare program could draw upon; or 

a surety bond. Currently, our regulations 

do not specify any requirements 

regarding the institutions that may 

administer an escrow account or issue a 

line of credit or surety bond. Our 

regulations require an ACO to submit 

documentation of its repayment 

mechanism arrangement during the 

application or participation agreement 

renewal process and upon request 

thereafter. 

Under our existing regulations, a 

repayment mechanism arrangement 

must be adequate to repay at least the 

minimum dollar amount specified by 

CMS, which is determined based on an 

estimation methodology that uses 

historical Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

population. For Track 2 and Track 3 

ACOs, the repayment mechanism must 

be equal to at least 1 percent of the total 

per capita Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries, as determined based on 

expenditures used to establish the 

ACO’s benchmark for the applicable 

agreement period, as estimated by CMS 

at the time of application or 

participation agreement renewal (see 

§ 425.204(f)(1)(ii), see also Repayment 

Mechanism Arrangements Guidance). In 

the Repayment Mechanism 

Arrangements Guidance, we describe in 

detail our approach to estimating the 

repayment mechanism amount for Track 

2 and Track 3 ACOs and our experience 

with the magnitude of the dollar 

amounts. 

Program stakeholders have continued 

to identify the repayment mechanism 

requirement as a potential barrier for 

some ACOs to enter into performancebased risk tracks, particularly small, 

physician-only and rural ACOs that may 

lack access to the capital that is needed 

to establish a repayment mechanism 

with a large dollar amount. We revised 

the Track 1+ Model design in July 2017 

(See Track 1+ Model Fact Sheet 

(Updated July 2017)), to allow for 

potentially lower repayment mechanism 

amounts for participating ACOs under a 

revenue-based loss sharing limit (that is, 

ACOs that do not include an ACO 

participant that is either (i) an IPPS 

hospital, cancer center, or rural hospital 

with more than 100 beds; or (ii) an ACO 

participant that is owned or operated by 

such a hospital or by an organization 

that owns or operates such a hospital). 

This policy provides greater consistency 

between the repayment mechanism 

amount and the level of risk assumed by 

revenue-based or benchmark-based 

ACOs and helps alleviate the burden of 

securing a higher repayment mechanism 

amount based on the ACO’s benchmark 

expenditures, as required for Track 2 

and Track 3 ACOs. We believed this 

approach would be appropriate for this 

subset of Track 1+ Model ACOs because 

they are generally at risk for repaying a 

lower amount of shared losses than 

other ACOs that are subject to a 

benchmark-based loss sharing limit (that 

is, ACOs that include the types of ACO 

participants previously identified in this 

final rule). Therefore, under the Track 

1+ Model, a bifurcated approach is used 

to determine the estimated amount of an 

ACO’s repayment mechanism for 

consistency with the bifurcated 

approach to determining the loss 

sharing limit under the Track 1+ Model. 

For Track 1+ Model ACOs, CMS 

estimates the amount of the ACO’s 

repayment mechanism as follows: 

• ACOs subject to the benchmark-based 

loss sharing limit: The repayment mechanism 

amount is 1 percent of the total per capita 

Medicare Parts A and B FFS expenditures for 

the ACO’s assigned beneficiaries, as 

determined based on expenditures used to 

establish the ACO’s benchmark for the 

applicable agreement period. 

• ACOs subject to the revenue-based loss 

sharing limit: The repayment mechanism 

amount is the lesser of (1) 2 percent of the 

ACO participants’ total Medicare Parts A and 

B FFS revenue, or (2) 1 percent of the total 

per capita Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries, as determined based on 

expenditures used to establish the ACO’s 

benchmark. 

Under § 425.204(f)(3), an ACO must 

replenish the amount of funds available 

through the repayment mechanism 

within 90 days after the repayment 

mechanism has been used to repay any 

portion of shared losses owed to CMS. 

In addition, our regulations require a 

repayment mechanism arrangement to 

remain in effect for a sufficient period 

of time after the conclusion of the 

agreement period to permit CMS to 

calculate and to collect the amount of 

shared losses owed by the ACO. Under 

our current Repayment Mechanism 

Arrangements Guidance, this standard 

would be satisfied by an arrangement 

that terminates 24 months following the 

end of the agreement period. 

(2) Repayment Mechanism Amounts 

As previously noted, an ACO that is 

seeking to participate in a two-sided 

model must submit for CMS approval 

documentation supporting the adequacy 

of a mechanism for repaying shared 

losses, including demonstrating that the 

value of the arrangement is at least the 

minimum amount specified by CMS. In 

the August 2018 proposed rule, we 

proposed to modify § 425.204(f) to 

address concerns regarding the amount 

of the repayment mechanism, to specify 

the data used by CMS to determine the 

repayment mechanism amount, and to 

permit CMS to specify a new repayment 

mechanism amount annually based on 

changes in ACO participants. 

In general, we believe that, like other 

ACOs participating in two-sided risk 

tracks, ACOs applying to participate in 

the BASIC track under performancebased risk should be required to provide 

CMS assurance of their ability to repay 

shared losses by establishing an 

adequate repayment mechanism. 

Consistent with the approach used 

under the Track 1+ Model, we believed 

the amount of the repayment 

mechanism should be potentially lower 

for BASIC track ACOs compared to the 

repayment mechanism amounts 

required for ACOs in Track 2 or the 

ENHANCED track. We proposed to 

calculate a revenue-based repayment 

mechanism amount and a benchmarkbased repayment mechanism amount for 

each BASIC track ACO and require the 

ACO to obtain a repayment mechanism 

for the lesser of the two amounts 

described previously. We believed this 

aligned with our proposed approach for 

determining the loss sharing limit for 

ACOs participating in the BASIC track, 

described in section II.A.3.b. of this 

final rule. In addition, we believed this 

approach would balance concerns about 

the ability of ACOs to take on 

performance-based risk and repay any 

shared losses for which they may be 

liable with concerns about the burden 

imposed on ACOs seeking to enter and 

continue their participation in the 

BASIC track. 

Previously, we have used historical 

data to calculate repayment mechanism 

amounts, typically using the same 

reference year to calculate the estimates 

consistently for all applicants to a twosided model. As a basis for the estimate, 

we have typically used assignment and 

expenditure data from the most recent 

prior year for which 12 months of data 

are available, which tends to be 

benchmark year 2 for ACOs applying to 

enter the program or renew their 

participation agreement (for example, 

calendar year 2016 data for ACOs 


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applying to enter participation 

agreements beginning January 1, 2018). 

The Repayment Mechanism 

Arrangements Guidance includes a 

detailed description of how we have 

previously estimated 1 percent of the 

total per capita Medicare Parts A and B 

FFS expenditures for an ACO’s assigned 

beneficiaries based on the expenditures 

used to establish the ACO’s benchmark. 

To continue calculating the estimates 

with expenditures used to calculate the 

benchmark, we would need to use 

different sets of historical data for ACOs 

applying to enter or renew an agreement 

and those transitioning to a 

performance-based risk track. That is 

because ACOs applying to start a new 

agreement period under the program 

and ACOs transitioning to risk within 

different years of their current 

agreement period will have different 

benchmark years. To avoid undue 

operational burden, we proposed in the 

August 2018 proposed rule to use the 

most recent calendar year, for which 12 

months of data is available to calculate 

repayment mechanism estimates for all 

ACOs applying to enter, or transitioning 

to, performance-based risk for a 

particular performance year. We believe 

this approach to using more recent 

historical data to estimate the 

repayment mechanism amount would 

more accurately approximate the level 

of losses for which the ACO could be 

liable regardless of whether the ACO is 

subject to a benchmark-based or 

revenue-based loss sharing limit. 

Therefore, we proposed to amend 

§ 425.204(f)(4) to specify the 

methodologies and data used in 

calculating the repayment mechanism 

amounts for BASIC track, Track 2, and 

ENHANCED track ACOs. For an ACO in 

Track 2 or the ENHANCED track, we 

proposed that the repayment 

mechanism amount must be equal to at 

least 1 percent of the total per capita 

Medicare Parts A and B FFS 

expenditures for the ACO’s assigned 

beneficiaries, based on expenditures for 

the most recent calendar year for which 

12 months of data are available. For a 

BASIC track ACO, we proposed that the 

repayment mechanism amount must be 

equal to the lesser of (i) 1 percent of the 

total per capita Medicare Parts A and B 

FFS expenditures for its assigned 

beneficiaries, based on expenditures for 

the most recent calendar year for which 

12 months of data are available; or (ii) 

2 percent of the total Medicare Parts A 

and B FFS revenue of its ACO 

participants, based on revenue for the 

most recent calendar year for which 12 

months of data are available. For ACOs 

with a participant agreement start date 

of July 1, 2019, we also proposed to 

calculate the repayment mechanism 

amount using expenditure data from the 

most recent calendar year for which 12 

months of data are available. 

Currently, we generally do not revise 

the estimated repayment mechanism 

amount for an ACO during its agreement 

period. For example, we typically do 

not revise the repayment mechanism 

amount during an ACO’s agreement 

period to reflect annual changes in the 

ACO’s certified ACO participant list. 

However, in the Track 1+ Model, CMS 

may require the ACO to adjust the 

repayment mechanism amount if 

changes in an ACO’s participant 

composition occur within the ACO’s 

agreement period that result in the 

application of relatively higher or lower 

loss sharing limits. As explained in the 

Track 1+ Model Fact Sheet, if the 

estimated repayment mechanism 

amount increases as a result of the 

ACO’s change in composition, CMS 

would require the Track 1+ ACO to 

demonstrate its repayment mechanism 

is equal to this higher amount. If the 

estimated amount decreases as a result 

of its change in composition, CMS may 

permit the ACO to decrease the amount 

of its repayment mechanism (for 

example, if CMS also determines the 

ACO does not owe shared losses from 

the prior performance year under the 

Track 1+ Model). 

As we indicated in the August 2018 

proposed rule, we believe a similar 

approach may be appropriate to address 

changes in the ACO’s composition over 

the course of an agreement period and 

to ensure the adequacy of an ACO’s 

repayment mechanism as it enters 

higher levels of risk within the 

ENHANCED track or the BASIC track’s 

glide path. During an agreement period, 

an ACO’s composition of ACO 

participant TINs and the individuals 

who bill through the participant TINs 

may change. The repayment mechanism 

estimation methodology we previously 

described in this section uses data based 

on the ACO participant list, including 

estimated expenditures for the ACO’s 

assigned population, and in the case of 

the proposed BASIC track, estimated 

revenue for ACO participant TINs. See 

for example, Repayment Mechanism 

Arrangements Guidance (describing the 

calculation of the repayment 

mechanism amount estimate). As a 

result, over time the initial repayment 

mechanism amount calculated by CMS 

may no longer represent the expenditure 

trends for the ACO’s assigned 

population or ACO participant revenue 

and therefore may not be sufficient to 

ensure the ACO’s ability to repay losses. 

For this reason and we explained in the 

August 2018 proposed rule, we believe 

it would be appropriate to periodically 

recalculate the amount of the repayment 

mechanism arrangement. 

For agreement periods beginning on 

or after July 1, 2019, we proposed to 

recalculate the estimated amount of the 

ACO’s repayment mechanism 

arrangement before the second and each 

subsequent performance year in which 

the ACO is under a two-sided model in 

the BASIC track or ENHANCED track. If 

we determine the estimated amount of 

the ACO’s repayment mechanism has 

increased, we may require the ACO to 

demonstrate the repayment mechanism 

arrangement covers at least an amount 

equal to this higher amount. 

We proposed to make this 

determination as part of the ACO’s 

annual certification process, in which it 

finalizes changes to its ACO participant 

list prior to the start of each 

performance year. We would recalculate 

the estimate for the ACO’s repayment 

mechanism based on the certified ACO 

participant list each year after the ACO 

begins participation in a two-sided 

model in the BASIC track or 

ENHANCED track. If the amount has 

increased substantially (for example, by 

at least 10 percent or $100,000, 

whichever is the lesser value), we 

would notify the ACO in writing and 

require the ACO to submit 

documentation for CMS approval to 

demonstrate that the funding for its 

repayment mechanism has been 

increased to reflect the recalculated 

repayment mechanism amount. We 

would require the ACO to make this 

demonstration within 90 days of being 

notified by CMS of the required 

increase. 

We recognize that in some cases, the 

estimated amount may change 

insignificantly. Requiring an 

amendment to the ACO’s arrangement 

(such as the case would be with a letter 

of credit or surety bond) would be 

overly burdensome and not necessary 

for reassuring CMS of the adequacy of 

the arrangement. Therefore, we 

proposed to evaluate the amount of 

change in the ACO’s repayment 

mechanism, comparing the newly 

estimated amount and the amount 

estimated for the most recent prior 

performance year. We proposed that, if 

this amount increases by equal to or 

greater than either 10 percent or 

$100,000, whichever is the lesser value, 

we would require the ACO to 

demonstrate that it has increased the 

dollar amount of its arrangement to the 

recalculated amount. We solicited 

comments on whether a higher or lower 

change in the repayment mechanism 

estimate should trigger the ACO’s 


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obligation to increase its repayment 

mechanism amount. 

However, unlike the Track 1+ Model, 

we proposed that if the estimated 

amount decreases as a result of the 

ACO’s change in composition, we 

would not permit the ACO to decrease 

the amount of its repayment 

mechanism. The ACO repayment 

mechanism estimate does not account 

for an ACO’s maximum liability amount 

and it is possible for an ACO to owe 

more in shared losses than is supported 

by the repayment mechanism 

arrangement. Because of this, we believe 

it is more protective of the Trust Funds 

to not permit decreases in the 

repayment mechanism amount, during 

an ACO’s agreement period under a 

two-sided model, based on composition 

changes. 

We believe the requirements for 

repayment mechanism amounts should 

account for the special circumstances of 

renewing ACOs, which would otherwise 

have to maintain two separate 

repayment mechanisms for overlapping 

periods of time. As discussed in section 

II.A.5.c.(4). of this final rule, we 

proposed to define ‘‘renewing ACO’’ to 

mean an ACO that continues its 

participation in the program for a 

consecutive agreement period, without a 

break in participation, because it is 

either: (1) An ACO whose participation 

agreement expired and that immediately 

enters a new agreement period to 

continue its participation in the 

program; or (2) an ACO that terminated 

its current participation agreement 

under § 425.220 and immediately enters 

a new agreement period to continue its 

participation in the program. We 

proposed at § 425.204(f)(3)(iv) that a 

renewing ACO can use its existing 

repayment mechanism to demonstrate 

that it has the ability to repay losses that 

may be incurred for performance years 

in the next agreement period, as long as 

the ACO submits documentation that 

the term of the repayment mechanism 

has been extended and the amount of 

the repayment mechanism has been 

updated, if necessary. However, 

depending on the circumstances, a 

renewing ACO may have greater 

potential liability for shared losses 

under its existing agreement period 

compared to its potential liability for 

shared losses under a new agreement 

period. Therefore, we proposed that if 

an ACO wishes to use its existing 

repayment mechanism to demonstrate 

its ability to repay losses in the next 

agreement period, the amount of the 

existing repayment mechanism must be 

equal to the greater of the following: (1) 

The amount calculated by CMS in 

accordance with the benchmark-based 

methodology or revenue-based 

methodology, as applicable by track (see 

proposed § 425.204(f)(4)(iv)); or (2) the 

repayment mechanism amount that the 

ACO was required to maintain during 

the last performance year of its current 

agreement. We believed that this 

proposal would protect the financial 

integrity of the program by ensuring that 

a renewing ACO will remain capable of 

repaying losses incurred under its old 

agreement period. 

Finally, we proposed to consolidate at 

§ 425.204(f)(4) all of our proposed 

policies, procedures, and requirements 

related to the amount of an ACO’s 

repayment mechanism, including 

provisions regarding the calculation and 

recalculation of repayment mechanism 

amounts. We also proposed to revise the 

regulations at § 425.204 to streamline 

and reorganize the provisions in 

paragraph (f), which we believe is 

necessary to incorporate these and other 

proposed requirements discussed in this 

final rule. 

Comment: One commenter supported 

the flexibility that would be afforded to 

BASIC track ACOs to establish a 

repayment mechanism amount based on 

the lesser of 1 percent of the total per 

capita Medicare Parts A and B FFS 

expenditures for its assigned 

beneficiaries or 2 percent of the total 

Medicare Parts A and B FFS revenue of 

its ACO participants. The commenter 

noted that this proposal would 

encourage participation in two sidedmodels by ACOs that would otherwise 

have been unable to secure funds 

necessary to participate in a two-sided 

model. 

Response: We appreciate this 

feedback supporting our repayment 

mechanism proposal for BASIC track 

ACOs. We agree with the commenter 

that this policy should encourage 

participation by ACOs in two-sided 

models by reducing the burden 

associated with establishing a 

repayment mechanism. 

In addition, to address concerns 

raised by commenters elsewhere in this 

final rule regarding the burden on ACOs 

transitioning from the BASIC track to 

the ENHANCED track (see section 

II.A.2), we are extending this policy to 

ACOs participating in the ENHANCED 

track. We believe that this will reduce 

the burden associated with establishing 

a repayment mechanism on lowerrevenue ACOs that would qualify for the 

new revenue-based repayment 

mechanism. Accordingly, for an ACO 

participating in a two-sided model 

under either the BASIC or ENHANCED 

track, the repayment mechanism 

amount must be equal to the lesser of (1) 

1 percent of the total per capita 

Medicare Parts A and B FFS 

expenditures for its assigned 

beneficiaries, based on expenditures for 

the most recent calendar year for which 

12 months of data are available; or (ii) 

2 percent of the total Medicare Parts A 

and B FFS revenue of its ACO 

participants, based on the revenue for 

the most recent calendar year for which 

12 months of data are available. 

Comment: A few commenters 

supported our proposal to establish the 

repayment mechanism amount based on 

expenditures for the most recent 

calendar year for which 12 months of 

data are available, noting this will likely 

allow for more accurate estimates of the 

level of losses for which an ACO could 

be liable. 

Response: We appreciate this 

feedback supporting our proposal to use 

expenditure data from the most recent 

calendar year for which 12 months of 

data are available in determining an 

ACO’s repayment mechanism amount. 

We agree that this approach should lead 

to more accurate estimates of the 

approximate level of losses for which an 

ACO could be liable. We are finalizing 

this policy with respect to ACOs 

participating in the BASIC and 

ENHANCED tracks. While we originally 

proposed changes to the regulations to 

also apply this policy to Track 2 ACOs, 

we now believe that this policy would 

be irrelevant to Track 2 ACOs because 

we are retiring Track 2 as a participation 

option (see section A.2 of this final rule) 

and no new Track 2 ACOs will be 

entering the program on or after July 1, 

2019. Furthermore, because we 

proposed to apply our new policy of 

recalculating the repayment mechanism 

amount on an annual basis only for 

agreement periods beginning on or after 

July 1, 2019, we will not be required to 

recalculate repayment mechanism 

amounts for existing Track 2 ACOs. For 

these reasons, we are finalizing 

revisions to § 425.204(f) so that the 

repayment mechanism amount for Track 

2 ACOs will be based on expenditures 

used to calculate the benchmark, as is 

our current policy. 

Comment: Several commenters 

disagreed with our proposal to require 

an ACO to increase the dollar amount of 

its repayment mechanism arrangement 

in instances where the estimated 

repayment mechanism amount has 

increased by equal to or greater than 

either 10 percent or $100,000, 

whichever is the lesser value. These 

commenters stated that a threshold of 

the lesser of a 10 percent or $100,000 

increase in the estimated repayment 

mechanism value is too low. The 

commenters noted that nearly all ACOs 

with a total cost of care of $200 million 


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or more would be required to increase 

their repayment mechanism amount 

each year under a threshold of $100,000, 

which would increase the burden on 

both CMS and ACOs. One commenter 

recommended that CMS use only a 

threshold of 10 percent, rather than 

employing a ‘‘lesser of’’ approach. 

Another commenter believed that our 

proposed threshold seemed reasonable 

but requested that CMS provide 

information about the number of ACOs 

that such threshold would potentially 

impact before finalizing this policy. 

This commenter also advocated that 

ACOs required to increase their 

repayment mechanism amount under 

such a policy should be provided with 

adequate time to do so. 

Response: We are persuaded by 

commenters’ suggestions to increase the 

thresholds that would trigger the 

requirement for an ACO to increase the 

dollar amount of its repayment 

mechanism arrangement. We are 

therefore finalizing a provision that will 

require an ACO to increase its 

repayment mechanism amount if the 

estimated value of the repayment 

mechanism amount increases by equal 

to or greater than 50 percent or 

$1,000,000, whichever is the lesser 

value. This would replace our originally 

proposed threshold of 10 percent or 

$100,000. These revised amounts are 

based on an analysis we conducted of 

the most recently available ACO 

repayment mechanism data. The 

analysis showed that a higher threshold 

of 50 percent or $1,000,000 would likely 

require only ACOs that had the largest 

changes in their estimated repayment 

mechanism value (the top 5 to 10 

percent of ACOs) to increase their 

repayment mechanism amounts. We 

believe that this less restrictive 

requirement will minimize an ACO’s 

administrative burden and financial 

institution fees while adjusting for 

meaningful changes in repayment 

mechanism amounts that will help 

protect the Medicare Trust Funds. 

Comment: A few commenters 

expressed the belief that it would be 

unfair to require repayment mechanism 

amounts to increase from year to year 

without also allowing them to decrease. 

These commenters requested that CMS 

amend its proposal to allow for 

decreases in a repayment mechanism 

amount. The commenters also requested 

that CMS provide flexibility to release 

funds available through the repayment 

mechanism for a limited period of time 

(for example, for a 60 day period) for 

ACOs that need to change their 

repayment mechanism during an 

agreement period. We presume that the 

commenter suggested this to allow an 

ACO to switch to a new repayment 

mechanism without having to put up 

new monies, but the commenter does 

not directly state or suggest this. 

Response: We decline at this time to 

allow ACOs to reduce their repayment 

mechanism amount if their estimated 

repayment mechanism value decreases. 

As we noted in the background to this 

section, the repayment mechanism 

estimate does not account for an ACO’s 

maximum liability amount, and it is 

possible for an ACO to owe more in 

shared losses than is supported by a 

repayment mechanism arrangement. For 

this reason, we believe it would be more 

protective of the Trust Funds to not 

permit decreases in the repayment 

mechanism amount during an ACO’s 

agreement period under a two-sided 

model. Similarly, the suggestion to 

allow release of funds for a limited 

period of time is outside the scope of 

our proposal and we therefore decline to 

adopt such suggestion at this time. We 

will monitor the number of ACOs that 

are affected by our finalized policy and 

the extent of the administrative burden 

on ACOs and on CMS and will use this 

information to refine our policies 

through future notice and comment 

rulemaking, if warranted. 

Comment: Several commenters 

suggested the proposed repayment 

mechanism amounts were too high. A 

few commenters recommended that the 

repayment mechanism amount for 

BASIC track ACOs be lowered to 0.5 

percent of the ACO’s total per capita 

Medicare Parts A and B FFS 

expenditures or 1 percent of the total 

Medicare Parts A and B FFS revenue of 

its ACO participants. The commenters 

believed these lower amounts would be 

sufficient to prompt third-party due 

diligence and establish credit 

worthiness within the probable range of 

shared losses. 

Several other commenters expressed 

concern that rural ACOs would not be 

able to fund the required repayment 

mechanism amounts. Some noted that 

small rural hospitals, rural health 

clinics, and FQHCs lack the necessary 

resources to bear the additional 

expense. Another noted that small 

ACOs in rural areas may not have the 

cash flow to support ACO activities that 

produce savings and establish a 

repayment mechanism arrangement at 

the same time. Another commenter 

requested that when calculating a 

repayment mechanism amount CMS 

take into consideration whether the 

ACO has experienced an extreme and 

uncontrollable event. The commenter 

requested that CMS address the issue 

when developing its policy for extreme 

and uncontrollable circumstances. 

Several other commenters generally 

warned about the cost burden associated 

with the repayment mechanism 

requirement. One commenter noted that 

as non-profit, low revenue organization, 

it would potentially be forced out of the 

program because of its inability to fund 

a repayment mechanism due to lack of 

capital. Another commenter described 

the cost of having a repayment 

mechanism as contributing to the ‘‘high 

hurdle’’ of transitioning to accountable 

care. 

Response: We appreciate the feedback 

on the proposed repayment mechanism 

amounts and the perspectives offered on 

rural ACOs, ACOs affected by extreme 

and uncontrollable circumstances, and 

other ACOs with limited access to 

capital. While we recognize that 

repayment mechanisms impose costs on 

ACOs, we believe they are necessary to 

protect the financial integrity of the 

program and of the Medicare Trust 

Funds. We believe that providing a 

‘‘lesser of’’ approach to the repayment 

mechanism amount for all ACOs in twosided models will help to mitigate this 

issue for rural ACOs or ACOs that 

otherwise face funding constraints. We 

therefore decline to make changes to the 

proposed repayment mechanism 

amounts at this time. 

Final Action: After considering the 

comments received, we are finalizing 

with modification our proposed 

provisions at § 425.204(f)(4) regarding 

the repayment mechanism amount as 

follows. 

We are finalizing § 425.204(f)(4)(i) to 

state that, for a Track 2 ACO, the 

repayment mechanism amount must be 

equal to at least 1 percent of the total 

per capita Medicare Parts A and B feefor-service expenditures used to 

calculate the benchmark for the 

applicable agreement period, as 

estimated by CMS at the time of 

application. 

We are finalizing § 425.204(f)(4)(ii) to 

state that, for a BASIC track or 

ENHANCED track ACO, the repayment 

mechanism amount must be equal to the 

lesser of the following: (A) One percent 

of the total per capita Medicare Parts A 

and B fee-for-service expenditures for 

the ACO’s assigned beneficiaries, based 

on expenditures for the most recent 

calendar year for which 12 months of 

data are available; or (B) two percent of 

the total Medicare Parts A and B fee-forservice revenue of its ACO participants, 

based on revenue for the most recent 

calendar year for which 12 months of 

data are available. 

We are finalizing § 425.204(f)(4)(iii) to 

state that, for agreement periods 

beginning on or after July 1, 2019, CMS 

recalculates the ACO’s repayment 


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mechanism amount before the second 

and each subsequent performance year 

in the agreement period based on the 

certified ACO participant list for the 

relevant performance year. If the 

recalculated repayment mechanism 

amount exceeds the existing repayment 

mechanism amount by at least 50 

percent or $1,000,000, whichever is the 

lesser value, CMS notifies the ACO in 

writing that the amount of its repayment 

mechanism must be increased to the 

recalculated repayment mechanism 

amount. Within 90 days after receipt of 

such written notice from CMS, the ACO 

must submit for CMS approval 

documentation that the amount of its 

repayment mechanism has been 

increased to the amount specified by 

CMS. 

We are finalizing § 425.204(f)(4)(iv) to 

state that, in the case of an ACO that has 

submitted a request to renew its 

participation agreement and wishes to 

use its existing repayment mechanism 

to establish its ability to repay any 

shared losses incurred for performance 

years in the new agreement period, the 

amount of the repayment mechanism 

must be equal to the greater of the 

following: (A) The amount calculated by 

CMS in accordance with 

§ 425.204(f)(4)(ii) of this section; or (B) 

the repayment mechanism amount that 

the ACO was required to maintain 

during the last performance year of the 

participation agreement it seeks to 

renew. 

(3) Submission of Repayment 

Mechanism Documentation 

Currently, ACOs applying to enter a 

performance-based risk track under the 

Shared Savings Program must meet the 

eligibility requirements, including 

demonstrating they have established an 

adequate repayment mechanism under 

§ 425.204(f). We noted in the August 

2018 proposed rule that we believed 

that modifications to the existing 

repayment mechanism requirements 

would be necessary to address 

circumstances that could arise if our 

proposed approach to allowing ACOs to 

enter or change risk tracks during the 

current agreement period is finalized. 

Specifically, we believed modifications 

would be necessary to reflect the 

possibility that an ACO that initially 

entered into an agreement period under 

the one-sided model years of the BASIC 

track’s glide path will transition to 

performance-based risk within their 

agreement period, and thereby would 

become subject to the requirement to 

establish a repayment mechanism. 

The current regulations specify that 

an ACO participating under a two-sided 

model must demonstrate the adequacy 

of its repayment mechanism prior to the 

start of each agreement period in which 

it takes risk and upon request thereafter 

(§ 425.204(f)(3)). We are revisiting this 

policy in light of our proposal to 

automatically transition ACOs in the 

BASIC track’s glide path from a onesided model to a two-sided model 

beginning in their third performance 

year, and also under our proposal that 

would allow BASIC ACOs to elect to 

transition to performance-based risk 

beginning in their second performance 

year of the glide path. 

We believe ACOs participating in the 

BASIC track’s glide path should be 

required to demonstrate they have 

established an adequate repayment 

mechanism consistent with the 

requirement for ACOs applying to enter 

an agreement period under 

performance-based risk. Therefore, we 

proposed to amend the regulations to 

provide that an ACO entering an 

agreement period in Levels C, D, or E of 

the BASIC track’s glide path must 

demonstrate the adequacy of its 

repayment mechanism prior to the start 

of its agreement period and at such 

other times as requested by CMS. In 

addition, we proposed that an ACO 

entering an agreement period in Level A 

or Level B of the BASIC track’s glide 

path must demonstrate the adequacy of 

its repayment mechanism prior to the 

start of any performance year in which 

it either elects to participate in, or is 

automatically transitioned to a twosided model (Level C, Level D, or Level 

E) of the BASIC track’s glide path, and 

at such other times as requested by 

CMS. We sought comment on these 

proposals. 

Final Action: We received no 

comments on these proposals. We are 

therefore finalizing our proposed 

revisions to § 425.204(f)(3) without 

modification. 

(4) Repayment Mechanism Duration 

We acknowledged in the August 2018 

proposed rule that the proposed change 

to an agreement period of at least 5 

years would affect the term for the 

repayment mechanism. Under the 

program’s current requirements, the 

repayment mechanism must be in effect 

for a sufficient period of time after the 

conclusion of the agreement period to 

permit CMS to calculate the amount of 

shared losses owed and to collect this 

amount from the ACO (§ 425.204(f)(4)). 

We pointed readers to the June 2015 

final rule for a discussion of the 

requirement for ACOs to demonstrate 

that they would be able to repay shared 

losses incurred at any time within the 

agreement period, and for a reasonable 

period of time after the end of each 

agreement period (the ‘‘tail period’’). We 

explained that this tail period must be 

sufficient to permit CMS to calculate the 

amount of any shared losses that may be 

owed by the ACO and to collect this 

amount from the ACO (see 80 FR 

32783). This is necessary, in part, 

because financial reconciliation results 

are not available until the summer 

following the conclusion of the 

performance year. We have interpreted 

this requirement to be satisfied if the 

repayment mechanism arrangement 

remains in effect for 24 months after the 

end of the agreement period (see 

Repayment Mechanism Arrangements 

Guidance). Once ACOs are notified of 

shared losses, based on financial 

reconciliation, they have 90 days to 

make payment in full (see §§ 425.606(h) 

and 425.610(h)). 

We proposed to specify at 

§ 425.204(f)(6) the general rule that a 

repayment mechanism must be in effect 

for the duration of the ACO’s 

participation in a two-sided model plus 

24 months after the conclusion of the 

agreement period. Based on our 

experience with repayment 

mechanisms, we believed ACOs would 

be able to work with financial 

institutions to establish repayment 

mechanism arrangements that would 

cover a 5-year agreement period plus a 

24-month tail period. This proposed 

approach would have been consistent 

with the program’s current guidance. 

We proposed some exceptions to this 

general rule. First, we proposed that 

CMS may require an ACO to extend the 

duration of its repayment mechanism 

beyond the 24-month tail period if 

necessary to ensure that the ACO will 

repay CMS any shared losses for each of 

the performance years of the agreement 

period. We indicated that this may be 

necessary in rare circumstances to 

protect the financial integrity of the 

program. 

Second, we proposed that the 

duration requirement account for the 

special circumstances of renewing 

ACOs, which would otherwise have to 

maintain two separate repayment 

mechanisms for overlapping periods of 

time. As previously noted, we proposed 

at § 425.204(f)(3)(iv) that a renewing 

ACO can choose to use its existing 

repayment mechanism to demonstrate 

that it has the ability to repay losses that 

may be incurred for performance years 

in the next agreement period, as long as 

the ACO submits documentation that 

the term of the repayment mechanism 

has been extended and the amount of 

the repayment mechanism has been 

increased, if necessary. We proposed at 

§ 425.204(f)(6) that the term of the 

existing repayment mechanism must be 


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extended in these cases and that it must 

periodically be extended thereafter 

upon notice from CMS. 

We considered the amount of time by 

which we would require the existing 

repayment mechanism to be extended. 

As discussed in section II.A.5. of this 

final rule, renewing ACOs (as we 

proposed to define that term at § 425.20) 

may have differing numbers of years 

remaining under their current 

repayment mechanism arrangements 

depending on whether the ACO is 

renewing at the conclusion of its 

existing agreement period or if the ACO 

is an early renewal (terminating its 

current agreement to enter a new 

agreement period without interruption 

in participation). We recognized that it 

may be difficult for ACOs that are 

completing the term of their current 

agreement period to extend an existing 

repayment mechanism by 7 years (that 

is, for the full 5-year agreement term 

plus 24 months). Therefore, we 

considered whether the program would 

be adequately protected if we permitted 

the existing repayment mechanism to be 

extended long enough to cover the first 

2 or 3 performance years of the new 

agreement period (that is, an extension 

of 4 or 5 years, respectively, including 

the 24-month tail period). We solicited 

comment on whether we should require 

a longer or shorter extension. 

We explained that, if we permit an 

ACO to extend its existing repayment 

mechanism for less than 7 years, we 

would require the ACO to extend the 

arrangement periodically upon notice 

from CMS. Under this approach, the 

ACO would eventually have a 

repayment mechanism arrangement that 

would not expire until at least 24 

months after the end of the new 

agreement period. We sought comment 

on whether this approach should also 

apply to an ACO entering two-sided risk 

for the first time (that is, an ACO that 

is not renewing its participation 

agreement). We would continue to 

permit a renewing ACO to maintain two 

separate repayment mechanisms (one 

for the current agreement period and 

one for the new agreement period). 

Under our proposal, if CMS notifies a 

renewing ACO that its repayment 

mechanism amount will be higher for 

the new agreement period, the ACO may 

either (i) establish a second repayment 

mechanism arrangement in the higher 

amount for 7 years (or for a lesser 

duration that we have specified in this 

final rule), or (ii) increase the amount of 

its existing repayment mechanism to the 

amount specified by CMS and extend 

the term of the repayment mechanism 

arrangement for an amount of time 

specified by CMS (7 years or for a lesser 

duration that we have specified in this 

final rule). We proposed that, on the 

other hand, if CMS notifies a renewing 

ACO that the repayment mechanism 

amount for its new agreement period is 

equal to or lower than its existing 

repayment mechanism amount, then the 

ACO could similarly choose to extend 

the duration of its existing repayment 

mechanism instead of obtaining a 

second repayment mechanism for the 

new agreement period. However, in that 

case, the ACO would be required to 

maintain the repayment mechanism at 

the existing higher amount. 

Third, we believed that the term of a 

repayment mechanism may terminate 

earlier than 24 months after the 

agreement period if it is no longer 

needed. Under certain conditions, we 

permit early termination of a repayment 

mechanism and release of the 

arrangement’s remaining funds to the 

ACO. These conditions are specified in 

the Repayment Mechanism 

Arrangements Guidance, and we 

proposed to include similar 

requirements at § 425.204(f)(6). 

Specifically, we proposed that the 

repayment mechanism may be 

terminated at the earliest of the 

following conditions: 

• The ACO has fully repaid CMS any 

shared losses owed for each of the 

performance years of the agreement period 

under a two-sided model; 

• CMS has exhausted the amount reserved 

by the ACO’s repayment mechanism and the 

arrangement does not need to be maintained 

to support the ACO’s participation under the 

Shared Savings Program; or 

• CMS determines that the ACO does not 

owe any shared losses under the Shared 

Savings Program for any of the performance 

years of the agreement period. For example, 

if a renewing ACO opts to establish a second 

repayment mechanism for its new agreement 

period, it may request to cancel the first 

repayment mechanism after reconciliation for 

the final performance year of its previous 

agreement period if it owes no shared losses 

for the final performance year and it has 

repaid all shared losses, if any, incurred 

during the previous agreement period. 

We solicited comments on whether 

the provisions proposed at 

§ 425.204(f)(6) are adequate to protect 

the financial integrity of the Shared 

Savings Program, to provide greater 

certainty to ACOs and financial 

institutions, and to facilitate the 

establishment of repayment mechanism 

arrangements. 

Comment: We did not receive any 

comments in support of our proposal to 

require, as a general rule, that an ACO’s 

repayment mechanism be in effect for 

the duration of the ACO’s participation 

in a two-sided model plus 24 months 

after the conclusion of the agreement 

period, or up to a seven-year period for 

ACOs entering a five-year agreement 

period under two-sided risk. A few 

commenters requested that CMS remove 

the 24-month tail period, expressing 

concerns that a 24-month tail period 

would increase financial requirements 

for ACOs. These commenters believe 

that if CMS decides to finalize the 24- 

month tail period policy, then the 

agency should be liable to pay for 

additional shared savings discovered 

during the 24-months following the end 

of an agreement period. 

Several other commenters 

recommended that we shorten the 

repayment mechanism tail period to 12 

months, noting that this would meet the 

run-out time for financial reconciliation 

and allow sufficient time for an ACO to 

repay any associated shared losses. 

Another commenter stated that a 24- 

month tail period would place undue 

burden on small and low-revenue ACOs 

and recommended that CMS use a 12- 

to 18-month tail period instead, which 

the commenter believes is a sufficient 

period for CMS to determine if an ACO 

has incurred shared losses and for an 

ACO to repay those losses. 

Response: We are persuaded by 

commenters’ concerns regarding the 

potential burden associated with our 

proposed requirement that ACOs have 

in effect a repayment mechanism for the 

duration of the ACO’s participation in a 

two-sided model plus 24 months after 

the conclusion of the agreement period 

(which, as proposed, would require 

such ACOs to procure a repayment 

mechanism for a five-year agreement 

period plus an additional 24-month tail 

period). We agree that financial 

reconciliation and the repayment of any 

losses will normally occur within 12 

months following the conclusion of a 

performance year except in very limited 

circumstances. Because we believe that 

such exceptions would be rare based on 

or our experience in collecting shared 

losses from ACOs, we believe the added 

risk to the Trust Funds of reducing the 

tail period to 12 months would be 

limited and is outweighed by the desire 

to reduce burden on ACOs. We are 

therefore finalizing a policy to reduce 

the length of the required tail period to 

12 months following the end of the 

agreement period. 

Comment: Several commenters raised 

concerns about the ability of an ACO to 

obtain a repayment mechanism that 

would cover a 5-year agreement period 

plus our proposed 24-month tail period. 

One commenter specifically raised 

concerns about the ability of rural ACOs 

to obtain a repayment mechanism that 

would satisfy our proposed duration 

requirement due to the insufficient 


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collateral available to independent, 

rural physicians and a likely 

unwillingness of lenders to extend 

credit when there may be changes to 

regulations under the Shared Savings 

Program after the repayment mechanism 

is issued. The commenter noted that if 

an ACO does not have funding to pay 

for a repayment mechanism and is 

therefore forced to terminate its 

participation in the program, then the 

ACO will lose its investment and 

anticipated shared savings. 

Other commenters expressed concern 

that the lengthened duration would 

adversely affect ACOs that use surety 

bonds as a repayment mechanism, 

noting that that surety bonds are rarely 

issued beyond five years. One 

commenter noted that a seven-year 

surety bond would likely require an 

ACO to bear significant carrying costs. 

Another commenter stated that the 

requirement to maintain a seven-year 

term would severely limit the 

availability of surety bonds available to 

ACOs and would most likely require 

100 percent collateral, thereby imposing 

a significant liquidity and capital 

burden on ACOs. The commenter 

indicated that this would be especially 

problematic for physician-led and small, 

rural ACOs that lack access to low-cost 

capital. Another commenter advised 

that extending repayment mechanisms 

to five-year agreement period with a 24- 

month tail might limit the availability of 

surety bonds to ACOs because the 

higher risk associated with the longer 

duration of the bonded obligation could 

cause issuers to tighten their 

underwriting standards. 

Some commenters recommended a 

repayment mechanism duration of no 

more than 3 years, with annual renewal 

of the repayment mechanism through 

the end of the tail period. One 

commenter suggested that this 

alternative, coupled with a reduction of 

the threshold for requiring an ACO to 

update its repayment mechanism 

amount, would protect the financial 

integrity of the program, streamline to 

one consistent repayment mechanism, 

and preserve the viability of surety 

bonds and letters of credit for physicianled and small, rural ACOs. 

Response: We appreciate the concerns 

raised by stakeholders regarding the 

potential impact of our proposed 

repayment mechanism duration 

requirements on the availability of 

repayment mechanism arrangements, 

including the availability of surety 

bonds. We first reiterate that we are 

reducing the total required duration of 

a repayment mechanism arrangement by 

reducing the length of the required tail 

period from 24 months to 12 months 

following the end of an agreement 

period. Based on this modification to 

our proposed repayment mechanism 

duration policy and our experience with 

repayment mechanisms, we continue to 

believe that ACOs, including ACOs that 

obtain surety bonds, will be able to 

work with financial institutions to 

establish repayment mechanism 

arrangements that will cover a 5-year 

agreement period plus the 12-month tail 

period. For example, we note that five 

of eight ACOs that exercised the 

deferred renewal option finalized in the 

June 2016 final rule, secured an 

approved surety bond for a 6-year term. 

In addition, we are modifying our 

policy to permit ACOs to satisfy the 

duration requirement by establishing a 

repayment mechanism that covers a 

term of at least the first two performance 

years in which the ACO is participating 

under a two-sided model and that 

provides for automatic, annual 12- 

month extensions of the repayment 

mechanism such that the repayment 

mechanism will eventually remain in 

effect for the duration of the agreement 

period plus 12 months following the 

conclusion of the agreement period. For 

example, an ACO seeking to enter into 

a participation agreement with CMS 

under the ENHANCED track on January 

1, 2020 could choose to establish a 

repayment mechanism with a term of 

six years to cover the five-year 

agreement period plus a 12-month tail 

period. Alternatively, the ACO could 

establish a repayment mechanism 

covering the first two performance years 

(ending December 31, 2021) and 

providing for automatic annual 12 

month extensions starting at the end of 

the first performance year. After the 

repayment mechanism has been in 

effect for one performance year (that is, 

at the end of 2020, the first performance 

year of the agreement period), the term 

would automatically be extended by an 

additional 12 months (through 

December 31, 2022). Additional 

automatic 12-month extensions would 

occur on a rolling basis at the end of the 

second, third, and fourth performance 

years of the agreement period, with the 

last of these extending the arrangement 

until 12 months after the end of the 

agreement period (through December 

31, 2025). 

For an ACO entering into a 

participation agreement with CMS 

under two-sided risk on July 1, 2019 

that chooses this option (that is, a 

repayment mechanism that has a term of 

at least two performance years and that 

provides for automatic, annual 12- 

month extensions), the initial term of 

the repayment mechanism arrangement 

would be 18 months because the 

repayment mechanism would cover the 

6-month performance beginning July 1, 

2019 and the 12-month performance 

year beginning January 1, 2020. At the 

end of 2019 (after the repayment 

mechanism has been in effect for one 

performance year), the term of the 

repayment mechanism would 

automatically be extended by 12 months 

through the end of the third 

performance year of the agreement 

period (through December 31, 2021). 

Because the agreement period would 

include six performance years in total, 

additional automatic 12-month 

extensions would occur on a rolling 

basis at the end of the second, third, 

fourth, and fifth performance years, 

ultimately extending the arrangement 

until 12 months after the end of the 

agreement period (through December 

31, 2025). 

The initial term of the repayment 

mechanism cannot expire before the end 

of the second performance year because 

the amount of any shared losses 

incurred for the first performance year 

will not be known until the second half 

of the second performance year. We 

note that the annual 12-month 

extensions would be occurring one year 

before the repayment mechanism would 

otherwise expire. However, the rolling 

12-month extensions ensure that a new 

performance year will not start without 

ensuring that the repayment mechanism 

will remain in effect when the ACO is 

obligated to repay shared losses, if any, 

for that new performance year. As 

discussed below, we are finalizing a 

similar policy for any renewing ACO 

that wishes to use its existing repayment 

mechanism to guarantee its ability to 

repay shared losses. 

We believe that allowing ACOs to 

obtain a repayment mechanism with a 

shorter initial term will provide 

additional flexibility to and lessen the 

potential burden on ACOs, including 

physician-led, small and rural ACOs. 

Furthermore, we believe that requiring 

automatic, annual 12-month extensions 

of the repayment mechanism will also 

reduce the burden on an ACO to take 

action to extend or renew the term of its 

repayment mechanism, while 

sufficiently protecting the Medicare 

Trust Funds. We also believe that this 

policy, along with the ‘‘lesser of’’ 

repayment mechanism amounts policy 

that we are finalizing (as described in 

section II.A.6.c.(2) of this final rule), 

addresses concerns that certain ACOs 

have limited access to funds to obtain a 

repayment mechanism. 

While we believe that the 

modifications to the repayment 

mechanism policies that we are 

finalizing in this rule will, in total, 


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reduce burden on ACOs relative to the 

proposed policies, we recognize that 

some ACOs may still be unable to meet 

the repayment mechanism requirements 

and would need to terminate their 

participation in the program. We note 

that in these cases, the policies for 

payment consequences of early 

termination that we are finalizing in 

section II.A.6.d.(3) of this final rule 

would apply. 

Comment: One commenter affiliated 

with surety bond issuers recommended 

that the regulation should clearly state 

that extending the duration or 

increasing the amount of a surety bond 

requires the surety’s consent, and that 

refusal by the surety to extend or 

increase the bond should not trigger a 

default under the existing bond. 

Response: We realize that the surety 

would need to consent to extending the 

duration or increasing the amount of a 

surety bond, but we do not believe that 

our regulations need to be revised to 

state this. If the surety refuses to extend 

the term of the bond or to increase the 

amount of the bond, the ACO would be 

required to enter into a different or 

additional repayment mechanism 

arrangement that satisfies the terms of 

our regulations. We therefore decline to 

adopt the commenter’s 

recommendation. 

Comment: One commenter supported 

a policy we considered in the proposed 

rule that would allow a renewing ACO 

to extend its existing repayment 

mechanism long enough to cover the 

first 2 or 3 performance years of its new 

agreement period, provided that the 

ACO periodically extends its repayment 

mechanism until the end of the tail 

period. The commenter believes that 

this option would balance the need to 

protect the integrity of the program 

while not necessarily creating a burden 

that would inhibit continued ACO 

participation, which could occur if 

ACOs are required to obtain a sevenyear extension on top of an existing 

repayment term. The commenter noted 

that a seven-year extension could be 

prohibitively difficult for an ACO to 

secure. 

Response: We appreciate this 

commenter’s feedback on the alternative 

approach for extension of a renewing 

ACO’s existing repayment mechanism, 

which we considered in the proposed 

rule. We agree with the commenter’s 

concerns and are therefore finalizing a 

policy that would allow a renewing 

ACO two options for extending its 

existing repayment mechanism to meet 

the duration requirement. 

Under the first option, a renewing 

ACO’s existing repayment mechanism 

would be extended to cover the new 

agreement period plus 12 months 

following the end of the new agreement 

period. For example, an ACO that 

started participating under Track 2 of 

the Shared Savings Program in 2017 

would have established a five year 

repayment mechanism expiring on 

December 31, 2021 (covering its current 

three-year agreement period plus a 24- 

month tail period). If the ACO renews 

its participation in the program under 

the ENHANCED Track on January 1, 

2020, then the ACO would have two 

years of its existing repayment 

mechanism remaining at time of 

renewal and could therefore satisfy the 

duration requirement by extending its 

existing repayment mechanism 

arrangement by four years (until 

December 31, 2025) when entering its 

new five-year agreement period. The 

remaining term of the existing 

repayment mechanism (two years) plus 

the extension (four years) would 

together cover the full duration of the 

new five-year agreement period plus the 

12-month tail period. 

Under the second option, a renewing 

ACO’s existing repayment mechanism 

would be extended, if necessary, to 

cover a term of at least the first two 

performance years of the new agreement 

period and would provide for 

automatic, annual 12-month extensions 

of the repayment mechanism such that 

the repayment mechanism will 

eventually remain in effect until 12 

months following the completion of the 

new agreement period. For example, 

consider an ACO that has one year 

remaining on its existing repayment 

mechanism at the time it renews its 

participation on January 1, 2020. In this 

case, the existing arrangement would 

need to be extended by one year (until 

December 31, 2021) such that the new 

term of the existing repayment 

arrangement does not expire before the 

end of the second performance year of 

the new agreement period. The 

arrangement would also need to be 

amended to include a clause that 

provides for automatic, annual 12- 

month extensions of the arrangement 

starting at the end of the first 

performance year of the new agreement 

period. Thus, at the end of the first 

performance year in December 2020, the 

repayment mechanism (which would 

otherwise expire on December 31, 2021) 

would be extended an additional 12 

months and thereby expire on December 

31, 2022. At the end of the second 

performance year in December 2021, the 

repayment mechanism would again be 

extended another 12 months and 

thereby expire on December 31, 2023. 

Eventually, the rolling annual 12-month 

extensions would cause the repayment 

mechanism to expire 12 months after 

the end of the agreement period (on 

December 31, 2025), and no further 

extensions would be required. 

We believe that these options for the 

extension of an existing repayment 

mechanism arrangement will help 

ensure payment of shared losses and 

alleviate the concerns raised by the 

commenter about lengthy extensions 

potentially inhibiting continued ACO 

participation in the program. We also 

wish to note that these options would 

also be available to an ACO that 

voluntarily terminates its existing 

agreement period and then immediately 

enters a new agreement period without 

a break in participation (described as an 

early renewal in section II.A.5.c.(4) of 

this final rule) and would be applied in 

the same manner. Finally we wish to 

clarify that renewing ACOs (including 

early renewals) can also choose to 

establish a new repayment mechanism 

arrangement that either covers the full 

duration of the new agreement period 

plus the 12-month tail period or covers 

a term of at least two years and provides 

for automatic annual 12-month 

extensions as described above. 

Comment: One commenter supported 

our proposal to permit early termination 

of a repayment mechanism under 

certain conditions, such as when we 

determine that the ACO does not owe 

shared losses under the Shared Savings 

Program for any of the performance 

years of the ACO’s agreement period. 

Response: We thank the commenter 

for their support of this proposal. We 

are finalizing our policy regarding early 

termination of a repayment mechanism 

as proposed. 

Final Action: After considering the 

comments received, we are finalizing 

with modification our proposed 

provisions regarding the duration of the 

repayment mechanism at § 425.204(f)(6) 

as follows. 

We are finalizing § 425.204(f)(6) to 

state that with limited exceptions, a 

repayment mechanism must be in effect 

for the duration of an ACO’s 

participation under a two-sided model 

plus 12 months after the conclusion of 

the agreement period. 

We are finalizing § 425.204(f)(6)(i) to 

state that for an ACO that is establishing 

a new repayment mechanism to meet 

this requirement, the repayment 

mechanism must satisfy one of the 

following criteria: (A) The repayment 

mechanism covers the entire duration of 

the ACO’s participation under a twosided model plus 12 months following 

the conclusion of the agreement period; 

or (B) the repayment mechanism covers 

an term of at least the first two 


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performance years in which the ACO is 

participating under a two sided model 

and provides for automatic, annual 12- 

month extensions of the repayment 

mechanism such that the repayment 

mechanism will eventually remain in 

effect through the duration of the 

agreement period plus 12 months 

following the conclusion of the 

agreement period. 

We are finalizing § 425.204(f)(6)(ii) to 

state that for a renewing ACO that 

wishes to use its existing repayment 

mechanism to establish its ability to 

repay any shared losses incurred for 

performance years in the new agreement 

period, the existing repayment 

mechanism must be amended to meet 

one of the following criteria (A) the 

duration of the existing repayment 

mechanism is extended by an amount of 

time that covers the duration of the new 

agreement period plus 12 months 

following the conclusion of the new 

agreement period; or (B) the duration of 

the existing repayment mechanism is 

extended, if necessary, to cover a term 

of at least the first two performance 

years of the new agreement period and 

provides for automatic, annual 12- 

month extensions of the repayment 

mechanism such that the repayment 

mechanism will eventually remain in 

effect through the duration of the new 

agreement period plus 12 months 

following the conclusion of the new 

agreement period. 

We are finalizing § 425.204(f)(6)(iii) to 

state that, CMS may require an ACO to 

extend the duration of its repayment 

mechanism beyond the 12-month tail 

period if necessary to ensure that the 

ACO fully repays CMS any shared 

losses for each of the performance years 

of the agreement period. 

We are finalizing § 425.204(f)(6)(iv) to 

state that a repayment mechanism may 

be terminated at the earliest of the 

following conditions: (A) The ACO has 

fully repaid CMS any shared losses 

owed for each of the performance years 

of the agreement period under a twosided model; (B) CMS has exhausted the 

amount reserved by the ACO’s 

repayment mechanism and the 

arrangement does not need to be 

maintained to support the ACO’s 

participation under the Shared Savings 

Program; or (C) CMS determines that the 

ACO does not owe any shared losses 

under the Shared Savings Program for 

any of the performance years of the 

agreement period. 

We note that, as modified, paragraphs 

§ 425.204(f)(6)(i) and (ii), set forth the 

ways in which an ACO may meet the 

general requirement for the repayment 

mechanism described in § 425.204(f)(6). 

Based on these finalized provisions, if 

CMS notifies a renewing ACO that its 

repayment mechanism amount will be 

higher for the new agreement period, 

the ACO may either (i) establish a 

second repayment mechanism 

arrangement in the higher amount under 

one of the options set forth in 

§ 425.204(f)(6)(i); or (ii) increase the 

amount of its existing repayment 

mechanism to the higher amount and 

amend the existing repayment 

mechanism arrangement under one of 

the options set forth in 

§ 425.204(f)(6)(ii). On the other hand, if 

CMS notifies a renewing ACO that the 

repayment mechanism amount for its 

new agreement period is equal to or 

lower than its existing repayment 

mechanism amount, the ACO may 

choose to amend its existing repayment 

mechanism under one of the options set 

forth in instead of obtaining a second 

repayment mechanism for the new 

agreement period. However, in that 

case, the ACO would be required to 

maintain the repayment mechanism at 

the existing higher amount. 

(5) Institutions Issuing Repayment 

Mechanism Arrangements 

We also proposed additional 

requirements related to the financial 

institutions through which ACOs 

establish their repayment mechanism 

arrangements that would be applicable 

to all ACOs participating in a 

performance-based risk track. With the 

proposed changes to offer only the 

BASIC track and ENHANCED track for 

agreement periods beginning on July 1, 

2019 and in subsequent years, we 

anticipate an increase in the number of 

repayment mechanism arrangements 

CMS will review with each annual 

application cycle. We believe the 

proposed new requirements regarding 

the financial institutions with which 

ACOs establish their repayment 

mechanisms would provide CMS greater 

certainty about the adequacy of 

repayment mechanism arrangements 

and ultimately ease the process for 

reviewing and approving the ACO’s 

repayment mechanism arrangement 

documentation. 

Currently, as described in the 

program’s Repayment Mechanism 

Arrangements Guidance, CMS will 

accept an escrow account arrangement 

established with a bank that is insured 

by the Federal Deposit Insurance 

Corporation (FDIC), a letter of credit 

established at a FDIC-insured 

institution, and a surety bond issued by 

a company included on the U.S. 

Department of Treasury’s list of certified 

(surety bond) companies (available at 

https://www.fiscal.treasury.gov/ 

fsreports/ref/suretyBnd/c570_a-z.htm). 

We have found that arrangements issued 

by these institutions tend to be more 

conventional arrangements that conform 

to the program’s requirements. 

However, we recognize that some ACOs 

may work with other types of financial 

institutions that may offer similarly 

acceptable products, but which may not 

conform to the standards described in 

our existing Repayment Mechanism 

Arrangements Guidance. For example, 

some ACOs may prefer to use a credit 

union to establish an escrow account or 

a letter of credit for purposes of meeting 

the repayment mechanism arrangements 

requirement, but credit unions are 

insured under the National Credit 

Union Share Insurance Fund program, 

rather than by the FDIC. Although the 

insuring entity is different, credit 

unions typically are insured up to the 

same insurance limit as FDIC-insured 

banks and are otherwise capable of 

offering escrow accounts and letters of 

credit that meet program requirements. 

We also believe that incorporating more 

complete standards for repayment 

mechanisms into the regulations would 

provide additional clarity for ACOs 

regarding acceptable repayment 

mechanisms and will help to avoid 

situations where an ACO may obtain a 

repayment mechanism arrangement 

from an entity that ultimately is unable 

to pay CMS the value of the repayment 

mechanism in the event CMS seeks to 

use the arrangement to recoup shared 

losses for which the ACO is liable. 

Since the June 2015 final rule, several 

ACO applicants have requested use of 

arrangements from entities other than 

those described in our Repayment 

Mechanism Arrangements Guidance, 

such as a letter of credit issued by the 

parent corporation of an ACO, and 

funds held in escrow by an attorney’s 

office. In reviewing these requests, we 

found a similar level of complexity 

resulting from the suggested 

arrangements as we did with our earlier 

experiences reviewing alternative 

repayment arrangements, which were 

permitted during the initial years of the 

Shared Savings Program until the 

regulations were revised in the June 

2015 final rule to remove the option to 

establish an appropriate alternative 

repayment mechanism. In proposing to 

eliminate this option, we explained that 

a request to use an alternative 

repayment mechanism increases 

administrative complexity for both 

ACOs and CMS during the application 

process and is more likely to be 

declined by CMS (see 79 FR 72832). 

Although our program guidance (as 

specified in Repayment Mechanism 


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Arrangements Guidance, version 6, July 

2017) encourages ACOs to obtain a 

repayment mechanism from a financial 

institution, these recent requests for 

approval of more novel repayment 

arrangements have alerted CMS to the 

potential risk that ACOs may seek 

approval of repayment mechanism 

arrangements from organizations other 

than those that CMS has determined are 

likely to be most financially sound and 

able to offer products that CMS can 

readily verify as appropriate repayment 

mechanisms that ensure the ACO’s 

ability to repay any shared losses. 

Therefore, we proposed to revise 

§ 425.204(f)(2) to specify the following 

requirements about the institution 

issuing the repayment mechanism 

arrangement: An ACO may demonstrate 

its ability to repay shared losses by 

placing funds in escrow with an insured 

institution, obtaining a surety bond from 

a company included on the U.S. 

Department of Treasury’s List of 

Certified Companies, or establishing a 

line of credit (as evidenced by a letter 

of credit that the Medicare program can 

draw upon) at an insured institution. 

We anticipated updating the Repayment 

Mechanism Arrangements Guidance to 

specify the types of institutions that 

would meet these new requirements. 

For example, in the case of funds placed 

in escrow and letters of credit, the 

repayment mechanism could be issued 

by an institution insured by either the 

Federal Deposit Insurance Corporation 

or the National Credit Union Share 

Insurance Fund. The proposed revisions 

would bring clarity to the program’s 

requirements, which will assist ACOs in 

selecting, and reduce burden on CMS in 

reviewing and approving, repayment 

mechanism arrangements. We 

welcomed commenters’ suggestions on 

these proposed requirements for ACOs 

regarding the issuing institution for 

repayment mechanism arrangements. 

Comment: Several commenters 

expressed support for our proposal to 

expand the list of institutions with 

which an ACO may establish a 

repayment mechanism to include any 

insured institution. Some commenters 

noted that credit unions may provide 

ACOs with more economical repayment 

mechanism arrangements and could 

increase market competition, which 

could potentially lower the overall cost 

of accessing repayment mechanisms. 

Another commenter expressed 

appreciation for our proposed policies 

on the basis that they would alleviate 

burden and reduce barriers to 

participation for small and rural ACOs. 

Several other commenters expressed 

the belief that ACOs need repayment 

mechanism alternatives other than the 

arrangements that we addressed in our 

Repayment Mechanism Arrangements 

Guidance or proposed in the August 

2018 proposed rule. Some commenters 

specifically requested that CMS allow 

insurance or reinsurance coverage as a 

repayment mechanism. A few 

commenters noted that reinsurance is an 

established health care industry 

standard, and that accepting reinsurance 

as a repayment mechanism would 

encourage more ACOs to participate in 

the ENHANCED track. Other 

commenters noted that some ACOs 

already obtain reinsurance in addition 

to meeting their repayment mechanism 

obligations and that CMS should 

therefore consider reinsurance to be an 

acceptable repayment mechanism, as we 

did in our November 2011 final rule (76 

FR 67979). 

Other commenters requested that we 

to permit ACOs to establish alternative 

repayment mechanisms as we did in our 

November 2011 final rule (76 FR 67979). 

These commenters expressed the belief 

that having alternative options would 

facilitate ACO participation in the 

program. While the commenters 

recognized the additional administrative 

complexity of permitting ACO to 

establish alternative arrangements, they 

believe that the number of ACOs 

seeking these such arrangements would 

be small, thus limiting the burden on 

ACOs and CMS during the repayment 

mechanism application process. 

A few commenters recommended that 

CMS consider allowing ACOs to repay 

losses through reduced payment rates 

for ACO eligible clinicians, similar to 

the MACRA financial risk standards. 

The commenters believe that some 

ACOs would prefer such a method over 

repaying losses in a lump sum. These 

commenters also recommended that 

CMS remove the repayment mechanism 

requirement when an ACO can prove 

that it has an investor or financial 

backer with a demonstrated high credit 

rating. Such financial backers could 

include outside investors, insurers, or 

hospitals or health systems that are 

involved with the ACO and providing 

financial support. The commenters 

believe that the current repayment 

mechanism process is time consuming 

and costly and that this suggested 

alternative could reduce those burdens 

while still protecting the Medicare Trust 

Funds. 

Response: We appreciate the support 

offered for our proposal to expand the 

list of institutions with which an ACO 

may establish a repayment mechanism, 

as well as the feedback from other 

stakeholders recommending that CMS 

offer ACOs additional options for 

establishing a repayment mechanism 

arrangement. As indicated by some of 

the commenters, we originally allowed 

ACOs to obtain reinsurance coverage or 

to establish another appropriate 

repayment mechanism in the early years 

of the program. However, we elected to 

eliminate those alternatives in the June 

2015 final rule (see 80 FR 32783– 

32784). We noted in that rule that no 

ACO had ultimately established 

reinsurance as its repayment 

mechanism. ACOs that explored that 

option told us that it was difficult to 

obtain reinsurance in part because of 

insurers’ lack of experience with the 

Shared Savings Program and the ACO 

model, and because Shared Savings 

Program ACOs take on performancebased risk rather than insurance risk. 

Additionally, we indicated that the 

terms of reinsurance policies could vary 

greatly and prove difficult for CMS to 

effectively evaluate. We also noted that, 

based on our experience, alternative 

repayment mechanisms increased 

administrative complexity for ACOs and 

CMS during the application process, 

and were more likely to be rejected by 

CMS than one of the specified 

repayment mechanisms. 

While we indicated in the June 2015 

rule that we would potentially consider 

reinstating reinsurance as a repayment 

mechanism option at some point in the 

future, we did not propose to reinstate 

either reinsurance or alternative 

repayment mechanisms in the August 

2018 rule, and we therefore consider 

these comments to fall outside the scope 

of this final rule. We similarly believe 

that suggestions to allow ACOs to repay 

loses through reductions to payment 

rates or to waive the repayment 

mechanism in the presence of a 

creditworthy financial backer fall 

outside the scope of this final rule. We 

would need to further evaluate these 

suggestions before considering whether 

to propose them in future rulemaking. 

Final Action: After considering 

comments received, we are finalizing 

§ 425.204(f)(2) as proposed to specify 

that an ACO that will participate in a 

two-sided model must establish one or 

more of the following repayment 

mechanisms in an amount and by a 

deadline specified by CMS in 

accordance with § 425.204: An escrow 

account with an insured institution; a 

surety bond from a company included 

on the U.S. Department of Treasury’s 

List of Certified Companies; or a line of 

credit at an insured institution (as 

evidenced by a letter of credit that the 

Medicare program can draw upon). 


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d. Advance Notice for and Payment 

Consequences of Termination 

(1) Background 

Sections 425.218 and 425.220 of the 

regulations describe the Shared Savings 

Program’s termination policies. Section 

425.221, added by the June 2015 final 

rule, specifies the close-out procedures 

and payment consequences of early 

termination. Under § 425.218, CMS can 

terminate the participation agreement 

with an ACO when the ACO fails to 

comply with any of the requirements of 

the Shared Savings Program. As 

described in § 425.220, an ACO may 

also voluntarily terminate its 

participation agreement. The ACO must 

provide at least 60 days advance written 

notice to CMS and its ACO participants 

of its decision to terminate the 

participation agreement and the 

effective date of its termination. 

The November 2011 final rule 

establishing the Shared Savings Program 

indicated at § 425.220(b) (although this 

provision was subsequently revised) 

that ACOs that voluntarily terminated 

during a performance year would not be 

eligible to share in savings for that year 

(76 FR 67980). The June 2015 final rule 

revised this policy to specify in 

§ 425.221(b)(1) that if an ACO 

voluntarily terminates with an effective 

termination date of December 31st of the 

performance year, the ACO may share in 

savings only if it has completed all 

required close-out procedures by the 

deadline specified by CMS and has 

satisfied the criteria for sharing savings 

for the performance year. ACOs that 

voluntarily terminate with an effective 

date of termination prior to December 

31st of a performance year and ACOs 

that are involuntarily terminated under 

§ 425.218 are not eligible to share in 

savings for the performance year. In the 

November 2018 final rule (83 FR 59958 

and 59959) we finalized revisions to 

§ 425.221(b) to allow our policies on the 

payment consequences of early 

termination to apply to ACOs 

participating in a 6-month performance 

year from January 1, 2019, through June 

30, 2019. 

The current regulations also do not 

impose any liability for shared losses on 

two-sided model ACOs that terminate 

from the program prior to the last 

calendar day of a given performance 

year. As explained in the June 2015 

final rule, the program currently has no 

methodology for partial year 

reconciliation (80 FR 32817). As a 

result, ACOs that voluntarily terminate 

before the end of the performance year 

are neither eligible to share in savings 

nor accountable for any shared losses. 

In the August 2018 proposed rule (83 

FR 41843 and 41844), we indicated that 

the existing policies on termination and 

the payment consequences of early 

termination raise concerns for both 

stakeholders and CMS. First, 

stakeholders have raised concerns that 

the current requirement for 60 days 

advance notice of a voluntary 

termination is too long because it does 

not allow ACOs to make timely, 

informed decisions about their 

continued participation in the program. 

Further, we noted that we were 

concerned that under the current policy, 

ACOs in two-sided models that are 

projecting losses have an incentive to 

leave the program prior to the end of a 

performance year, whereas ACOs that 

are projecting savings are likely to stay. 

Absent a change in our current policies 

on early termination, we believed these 

incentives could have a detrimental 

effect on the Medicare Trust Funds. 

(2) Advance Notice of Voluntary 

Termination 

In the August 2018 proposed rule, we 

stated that we were sympathetic to 

stakeholder concerns that the existing 

requirement for a 60-day notification 

period may hamper ACOs’ ability to 

make timely and informed decisions 

about their continued participation in 

the program. A key factor in the timing 

of ACOs’ participation decisions is the 

availability of program reports. 

Financial reconciliation reports 

(showing CMS’ determination of the 

ACO’s eligibility for shared savings or 

losses) are typically made available in 

the summer following the conclusion of 

the calendar year performance year (late 

July–August of the subsequent calendar 

year). Due to the timing of the 

production of quarterly reports (with 

information on the ACO’s assigned 

beneficiary population, and expenditure 

and utilization trends), an ACO 

contemplating a year-end termination 

typically only has two quarters of 

feedback for the current performance 

year to consider in its decision-making 

process. This is because quarterly 

reports are typically made available 

approximately 6 weeks after the end of 

the applicable calendar year quarter. For 

example, quarter 3 reports would be 

made available to ACOs in 

approximately mid-November of each 

performance year. These dates for 

delivery of program reports also interact 

with the application cycle timeline 

(with ACOs typically required to notify 

CMS of their intent to apply in May, 

typically before quarter 1 reports are 

available, and submit applications 

during the month of July, prior to 

receiving quarter 2 reports), as 

applicants seek to use financial 

reconciliation data for the prior 

performance year and quarterly report 

data for the current performance year to 

make participation decisions about their 

continued participation, particularly 

ACOs applying to renew their 

participation for a subsequent 

agreement period. 

In the proposed rule, we stated that 

our belief that adopting a shorter notice 

requirement would provide ACOs with 

more flexibility to consider their options 

with respect to their continued 

participation in the program. We 

therefore proposed to revise § 425.220 to 

reduce the minimum notification period 

from 60 to 30 days. Reducing the notice 

requirement to 30 days would typically 

allow ACOs considering a year-end 

termination to base their decision on 

three quarters of feedback reports 

instead of two, given current report 

production schedules. 

Comment: We received several 

comments supporting our proposal to 

reduce the notice requirement for 

voluntary termination to 30 days, with 

some commenters noting that this 

change would allow an ACO to have 

more data on which to base its 

participation decision for the upcoming 

performance year. A few other 

commenters noted that they would 

support reducing the minimum 

notification period if an ACO that 

complied with the notice requirement 

could voluntarily terminate from the 

program without financial 

reconciliation for that year. 

Response: We appreciate the 

commenters’ support for this policy and 

agree that reducing the length of the 

notice requirement would allow an ACO 

to consider additional information, such 

as the information provided in their 

third quarter feedback reports, when 

making its participation decisions for 

the upcoming performance year and are 

finalizing this policy as proposed. As 

described in the next section of this 

final rule, we are also finalizing our 

proposal, with modification, to conduct 

financial reconciliation for voluntarily 

terminating ACOs with an effective date 

of termination after June 30 and, if 

applicable, to pro-rate any shared losses. 

This policy for voluntarily terminating 

ACOs will be applicable for 12-month 

performance years beginning on or after 

January 1, 2020, delayed from the 

original proposed date of January 1, 

2019. Under this policy, ACOs giving at 

least 30 days advance notice for an 

effective termination date on or before 

June 30 of the performance year will not 

be subject to financial reconciliation 

and will not be accountable for shared 


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20 In the August 2018 proposed rule (83 FR 

41845), we inadvertently stated that the ACOs that 

terminate from the NGACO Model with an effective 

date of termination after March 30 are also eligible 

to share in savings. We wish to clarify that ACOs 

that terminate from the NGACO Model at any point 

after the start of the performance year are not 

eligible to earn shared savings for that performance 

year. 

losses for the performance year in which 

their termination becomes effective. 

Final Action: After considering the 

comments received on this issue, we are 

finalizing the proposed revisions to 

§ 425.220 to reduce the minimum 

notification period for voluntary 

termination from 60 to 30 days without 

modification. 

(3) Payment Consequences of 

Termination 

In section II.6.d.3 of the August 2018 

proposed rule, we discussed the 

payment consequences of early 

termination of an ACO’s participation 

agreement. We reconsidered the 

program’s current policies on payment 

consequences of termination under 

§ 425.221 in light of our proposal to 

reduce the amount of advance notice 

from ACOs of their voluntarily 

termination of participation under 

§ 425.220. While we believed that the 

proposal to shorten the notice period for 

voluntary termination under § 425.220 

from 60 to 30 days would be beneficial 

to ACOs, we recognized that it might 

increase gaming among risk-bearing 

ACOs facing losses, as ACOs would 

have more time and information to 

predict their financial performance with 

greater accuracy. 

To deter gaming while still providing 

flexibility for ACOs in two-sided models 

to make decisions about their continued 

participation in the program, we 

considered several policy alternatives to 

hold these ACOs accountable for some 

portion of the shared losses generated 

during the performance year in which 

they terminate their participation in the 

program. 

We first considered a policy similar to 

that used in the Next Generation ACO 

(NGACO) Model whereby ACOs may 

terminate without penalty if they 

provide notice of termination to CMS on 

or before February 28, with an effective 

date 30 days after the date of the notice 

(March 30). ACOs that terminate after 

that date are subject to financial 

reconciliation. These ACOs are liable for 

any shared losses determined.20 The 

NGACO Model adopted March 30 as the 

deadline for the effective termination 

date in order to align with timelines for 

the Quality Payment Program. 

Specifically, this date ensures that 

clinicians affiliated with a terminating 

NGACO will not be included in the 

March 31 snapshot date for QP 

determinations. However, while we 

acknowledged the merit of reducing 

provider uncertainty around Quality 

Payment Program eligibility, we also 

recognized that in the early part of the 

performance year ACOs have a limited 

amount of information on which to base 

termination decisions. We noted that we 

are especially concerned that holding 

ACOs accountable for full shared losses 

may lead many organizations to leave 

the program early in the performance 

year, including those that would have 

ultimately been eligible for shared 

savings had they continued their 

participation. Post-termination, Shared 

Savings Program ACOs no longer have 

access to the same program resources 

that can help facilitate care 

management, such as beneficiaryidentifiable claims data or payment rule 

waivers, including the SNF 3-day rule 

waiver. This could make it more 

challenging for these entities to reduce 

costs, possibly offsetting any benefits to 

the Medicare Trust Funds from reduced 

gaming. 

Given the drawbacks of setting an 

early deadline for ACOs to withdraw 

without financial risk, we also 

considered a policy under which riskbearing ACOs that voluntarily terminate 

with an effective date after June 30 of a 

performance year would be liable for a 

portion of any shared losses determined 

for the performance year. We explained 

that we believe June 30 is a reasonable 

deadline for the effective date of 

termination as it allows ACOs time to 

accumulate more information and make 

decisions regarding their continued 

participation in the program. As is the 

case under current policy, for eligible 

clinicians in an ACO that terminates its 

participation in a Shared Savings 

Program track that is an Advanced APM 

effective between March 31 and June 30, 

we would make QP determinations as 

specified in our regulation at 

§ 414.1425(b) based on one or more QP 

determination snapshot periods 

(January 1–March 31, and possibly also 

January 1–June 30). But, in accordance 

with our regulations at § 414.1425(c)(5) 

and (d)(3), an eligible clinician who 

would otherwise have received QP 

status based on one of those QP 

determinations would not be a QP or 

Partial QP for the year. Instead, those 

eligible clinicians would be subject to 

MIPS and scored using the APM scoring 

standard (unless they are excluded from 

MIPS on some other ground). 

We proposed to conduct financial 

reconciliation for all ACOs in two-sided 

models that voluntarily terminate after 

June 30. We proposed to use the full 12 

months of performance year 

expenditure data in performing 

reconciliation for terminated ACOs with 

partial year participation. For those 

ACOs that generate shared losses, we 

would pro-rate the shared loss amount 

by the number of months during the 

year in which the ACO was in the 

program. To calculate the pro-rated 

share of losses, CMS would multiply the 

amount of shared losses calculated for 

the performance year by the quotient 

equal to the number of months of 

participation in the program during the 

performance year, including the month 

in which the termination was effective, 

divided by 12. We would count any 

month in which the ACO had at least 1 

day of participation. Therefore, an ACO 

with an effective date of termination any 

time in July would be liable for 7/12 of 

any shared losses determined, while an 

ACO with an effective date of 

termination any time in August would 

be liable for 8/12, and so forth. An ACO 

with an effective date of termination in 

December would be liable for the 

entirety of shared losses. Terminated 

ACOs would continue to receive 

aggregate data reports following 

termination, but, as under current 

policy, would lose access to beneficiarylevel claims data and any payment rule 

waivers. 

In the August 2018 proposed rule (83 

FR 41846), we explained that we believe 

this approach provides an incentive for 

ACOs to continue to control growth in 

expenditures and report quality for the 

relevant performance year even after 

they leave the program, as both can 

reduce the amount of shared losses 

owed. Increasing the proportion of 

shared losses owed with the number of 

months in the year that the ACO 

remains in the program also helps to 

counteract the potential for gaming, as 

ACOs that wait to base their termination 

decision on additional information 

would be liable for a higher portion of 

any shared losses that are incurred. This 

approach also reflects the fact that ACOs 

that terminate later in the performance 

year would have had access to program 

flexibilities (for example, the SNF 3-day 

rule waiver) for a longer period of time. 

We also considered the payment 

consequences of early termination for 

ACOs that are involuntarily terminated 

by CMS under § 425.218. Although 

these ACOs are not choosing to leave 

the program of their own accord and 

thus are not using termination as a 

means of avoiding their responsibility 

for shared losses, we believe they 

should not be excused from 

responsibility for some portion of 

shared losses simply because they failed 

to comply with program requirements. 


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Further, as we explained in the August 

2018 proposed rule, we believe it is 

more appropriate to hold involuntarily 

terminated ACOs accountable for a 

portion of shared losses during any 

portion of the performance year. Since 

involuntary terminations can occur 

throughout the performance year, 

establishing a cut-off date for 

determining the payment consequences 

for these ACOs could allow some ACOs 

to avoid accountability for their losses. 

Therefore, we proposed to pro-rate 

shared losses for ACOs in two-sided 

models that are involuntarily terminated 

by CMS under § 425.218 for any portion 

of the performance year during which 

the termination becomes effective. We 

proposed that the same methodology as 

previously described for pro-rating 

shared losses for voluntarily terminated 

ACOs would also apply to determine 

shared losses for involuntarily 

terminated ACOs. 

We considered whether to allow 

ACOs voluntarily terminating after June 

30 but before December 31 an 

opportunity to share in a portion of any 

shared saving earned. However, we 

decided to limit the proposed changes 

to shared losses. While we recognized 

that this approach might appear to favor 

CMS, we noted our belief that ACOs 

expecting to generate savings are less 

likely to terminate early in the first 

place. We explained that under the 

program’s current regulations at 

§ 425.221(b)(1), ACOs that voluntarily 

terminate effective December 31 and 

that meet the current criteria in 

§ 425.221 may still share in savings. We 

note that this provision was 

subsequently revised in November 2018 

final rule (83 FR 59958 and 59959) to 

refer to an effective date of termination 

of the last calendar day of the 

performance year, in order to allow the 

policies governing the payment 

consequences of early termination to 

apply to ACOs participating in a 6- 

month performance year from January 1, 

2019, through June 30, 2019. 

In the August 2018 proposed rule, we 

proposed to amend § 425.221 to provide 

that ACOs in two-sided models that are 

terminated by CMS under § 425.218 or 

certain ACOs that voluntarily terminate 

under § 425.220 will be liable for a prorated amount of any shared losses 

determined for the performance year in 

which the termination becomes 

effective, with the pro-rated amount 

reflecting the number of months during 

the performance year that the ACO was 

in the program. We proposed to apply 

this policy to ACOs in two-sided models 

for performance years beginning in 2019 

and subsequent performance years. 

We also proposed to specify in the 

regulations at § 425.221 the payment 

consequences of termination during CY 

2019 for ACOs preparing to enter or 

participating under agreements 

beginning July 1, 2019. First, as 

discussed in detail in section II.A.7. of 

the proposed rule, we would reconcile 

ACOs based on the respective 6-month 

performance year methodology for their 

participation during a 6-month period 

in 2019 in which they are either in a 

current agreement period beginning on 

or before January 1, 2019, or under a 

new agreement period beginning on July 

1, 2019. We proposed that an ACO 

would be eligible to receive shared 

savings for a 6-month performance year 

during 2019, if they complete the term 

of this performance year, regardless of 

whether they choose to continue their 

participation in the program after the 

end of the performance year. That is, we 

would reconcile: ACOs that started a 

first or second agreement period on 

January 1, 2016, that extend their 

agreement period for a fourth 

performance year, and complete this 

performance year (concluding June 30, 

2019); and ACOs that enter an 

agreement period on July 1, 2019, and 

terminate December 31, 2019, the final 

calendar day of their first performance 

year (defined as a 6-month period). 

For an ACO that participates for a 

portion of a 6-month performance year 

during 2019 (January 1, 2019, through 

June 30, 2019, or July 1, 2019, through 

December 31, 2019) we proposed the 

following: (1) If the ACO terminates its 

participation agreement effective before 

the end of the performance year, we 

would not reconcile the ACO for shared 

savings or shared losses (if a two-sided 

model ACO); (2) if CMS terminates a 

two-sided model ACO’s participation 

agreement effective before the end of the 

performance year, the ACO would not 

be eligible for shared savings and we 

would reconcile the ACO for shared 

losses and pro-rate the amount 

reflecting the number of months during 

the performance year that the ACO was 

in the program. 

To determine pro-rated shared losses 

for a portion of the 6-month 

performance year, we would determine 

shared losses incurred during CY 2019 

and multiply this amount by the 

quotient equal to the number of months 

of participation in the program during 

the performance year, including the 

month in which the termination was 

effective, divided by 12. We would 

count any month in which the ACO had 

at least one day of participation. 

Therefore, if an ACO that started a first 

or second agreement period on January 

1, 2016, extended its agreement period 

for a 6-month performance year from 

January 1, 2019, through June 30, 2019, 

and was terminated by CMS with an 

effective date of termination of May 1, 

2019, the ACO would be liable for 5/12 

of any shared losses determined. If a 

July 1, 2019 starter was terminated by 

CMS with an effective date of 

termination of November 1, 2019, the 

ACO would also be liable for 5/12 of 

any shared losses determined. An ACO 

with an effective date of termination in 

December would be liable for the 

entirety of shared losses for the 6-month 

performance year. 

Second, ACOs that are starting a 12- 

month performance year in 2019 would 

have the option to participate for the 

first 6 months of the year prior to 

terminating their current agreement and 

entering a new agreement period 

beginning on July 1, 2019. This includes 

ACOs that would be starting their 2nd 

or 3rd performance year of an agreement 

period in 2019, as well as ACOs that 

deferred renewal under § 425.200(e) and 

are starting a new agreement period in 

Track 2 or Track 3 on January 1, 2019. 

We proposed that ACOs with an 

effective date of termination of June 30, 

2019, that enter a new agreement period 

beginning on July 1, 2019, would be 

eligible for pro-rated shared savings or 

shared losses for the 6-month period 

from January 1, 2019, through June 30, 

2019, determined according to 

§ 425.609. 

In the August 2018 proposed rule (83 

FR 41846), we noted that we believe 

some ACOs may act quickly to enter one 

of the new participation options made 

available under the proposed redesign 

of the program. We explained our view 

that ACOs that complete the 6-month 

period of participation in 2019 should 

have the opportunity to share in the 

savings or be accountable for the losses 

for this period. However, we 

acknowledged that certain ACOs may 

ultimately realize they are not yet 

prepared to participate under a new 

agreement beginning on July 1, 2019 

and seek to terminate quickly. We stated 

that although we would encourage 

ACOs to consider making the transition 

to one of the newly available 

participation options in 2019 in order to 

more quickly enter a participation 

agreement based on the proposed 

polices, we also did not want to unduly 

bind ACOs that aggressively pursue 

these new options. We believed the 

proposed approach would provide a 

means for ACOs to terminate their 

current participation agreement 

effective on June 30, 2019, prior to 

renewing their participation for an 

agreement period beginning July 1, 

2019, or to quickly terminate from a 


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new agreement period beginning on July 

1, 2019, without the concern of liability 

for shared losses for a portion of the 

year. 

In addition to the proposed changes to 

§ 425.221(b) to accommodate the 

proposed new requirements governing 

the payment consequences of early 

termination, we also proposed further 

revisions to streamline and reorganize 

the provisions in § 425.221(b), which we 

believed were necessary to incorporate 

the proposed requirements. We sought 

comment on these proposals and the 

alternative policies discussed in section 

II.6.d.3 of the proposed rule. 

In section II.E.4 of the August 2018 

proposed rule (83 FR 41899), we 

proposed policies to mitigate the 

impacts of extreme and uncontrollable 

circumstances on ACO quality and 

financial performance. As part of these 

proposals, we discussed an approach for 

mitigating shared losses for ACOs 

participating in a performance-based 

risk track (83 FR 41903 and 41904). In 

this discussion, we acknowledged that it 

is possible that ACOs that either 

voluntarily terminate after June 30th of 

a 12-month performance year or are 

involuntarily terminated and will be 

reconciled to determine a pro-rated 

share of any shared losses could also be 

affected by extreme and uncontrollable 

circumstances. In this case, we 

proposed that the amount of shared 

losses calculated for the calendar year 

would be adjusted to reflect the number 

of months and the percentage of the 

assigned beneficiary population affected 

by extreme and uncontrollable 

circumstances, before we calculate the 

pro-rated amount of shared losses for 

the portion of the year the ACO 

participated in the Shared Savings 

Program. For example, assume that: A 

disaster was declared for October 2019 

through December 2019; an affected 

ACO had been involuntarily terminated 

on March 31, 2019 and will be 

reconciled for its participation during 

the portion of the performance year 

from January 1, 2019 through March 31, 

2019. The ACO is determined to have 

shared losses of $100,000 for calendar 

year 2019; and 25 percent of the ACO’s 

assigned beneficiaries reside in the 

disaster area. In this scenario, we would 

adjust the ACO’s losses in the following 

manner: $100,000¥($100,000 × 0.25 × 

0.25) = $100,000¥$6,250 = $93,750, 

then we would multiply these losses by 

the portion of the year the ACO 

participated = $93,750 × 0.25 = 

$23,437.50. 

We proposed to specify in revisions to 

§§ 425.606(i) and 425.610(i), and in the 

proposed new provision for the BASIC 

track at § 425.605(f), that the policies 

regarding extreme and uncontrollable 

circumstances proposed in section II.E.4 

of the August 2018 proposed rule would 

also apply to ACOs that are reconciled 

for a partial year of performance under 

§ 425.221(b)(2) as a result of voluntary 

or involuntary early termination. The 

proposed revisions to §§ 425.606(i) and 

425.610(i) also addressed the 

applicability of these policies to a Track 

2 or Track 3 ACO that starts a 12-month 

performance year on January 1, 2019, 

and then elects to voluntarily terminate 

its participation agreement with an 

effective termination date of June 30, 

2019, and enters a new agreement 

period starting on July 1, 2019; these 

ACOs would be reconciled for the 

performance period from January 1, 

2019, through June 30, 2019, consistent 

with the proposed new provision at 

§ 425.221(b). 

Comment: One commenter expressed 

support for our proposal to pro-rate 

shared losses for any ACO in a twosided model that voluntarily terminates 

after June 30 or that is involuntarily 

terminated by CMS under § 425.218. 

The commenter also supported our 

proposed methodology for calculating 

pro-rated shared losses. 

Several commenters agreed that an 

ACO that voluntarily terminates from 

the program should be held responsible 

for repayment of pro-rated shared losses 

based on the date of termination; 

however, they expressed their belief that 

an ACO that is involuntarily terminated 

by CMS should not be held responsible 

for any shared losses. They believe that 

an ACO that is involuntarily terminated 

by CMS is willing to continue to 

participate in the program and comply 

with program requirements, and, 

therefore, if CMS chooses to terminate 

any such ACO’s participation 

agreement, CMS should be the one to 

absorb any losses. 

Response: We appreciate the support 

for our proposals to pro-rate shared 

losses and for our proposed 

methodology for calculating pro-rated 

shared losses. We are finalizing these 

policies as proposed with the exception 

of the date of applicability which, as 

described below, is being delayed to 

performance years starting on or after 

July 1, 2019. 

We disagree with the commenters 

who believe that an ACO that is subject 

to involuntary termination by CMS 

under § 425.218 should be 

unaccountable for any shared losses. 

Under § 425.218, CMS may terminate an 

ACO’s participation agreement when 

the ACO, or its ACO participants, ACO 

provider/suppliers or other individuals 

or entities performing functions or 

services related to ACO activities, failed 

to comply with one or more program 

requirements. Accordingly, we believe 

that it would be unfair to treat any such 

ACO more favorably with respect to the 

payment consequences of early 

termination than an ACO that 

voluntarily decided to terminate its 

participation agreement. 

Comment: Several commenters 

requested that we reconsider allowing 

ACOs that voluntarily terminate after 

June 30 (but before December 31) an 

opportunity to share in a portion of any 

savings earned. A few of these 

commenters noted that there may be 

scenarios in which an ACO is forced to 

terminate early, and the ACO should not 

be penalized when such scenarios 

occur. Another commenter suggested 

that we allow an ACO that terminates 

early to continue to be eligible to share 

in savings so long as the ACO meets the 

criteria set forth in § 425.221. It was 

unclear whether this commenter was 

expressing support for our existing 

policy set forth in § 425.221, regarding 

an ACO’s eligibility to receive shared 

savings when the ACO terminates its 

participation prior to the end of its 

agreement period with an effective date 

of December 31 of a performance year, 

or whether the commenter believes that 

an ACO should be eligible to receive 

shared savings when it terminates its 

participation agreement before 

December 31 of a performance year so 

long as the ACO completes the requisite 

close-out procedures described in the 

current provision at § 425.221(a). 

Response: We continue to believe that 

it is important to maintain incentives for 

continued program participation and 

therefore, we decline to make any 

changes to our existing policies 

regarding the eligibility of an ACO to 

share in savings when the ACO 

voluntarily terminates its participation 

agreement. Under the program’s current 

regulations at § 425.221(b)(1), an ACO 

that voluntarily terminates its 

participation agreement effective on the 

last calendar day of the performance 

year and that meets the criteria in 

§ 425.221 may still share in savings. 

Comment: One commenter opposed 

our proposal to conduct financial 

reconciliation for ACOs in two-sided 

models that voluntarily terminate after 

June 30, stating that it would compel an 

ACO to assume greater risk for losses 

during the year in which it voluntarily 

terminates. The commenter also noted 

that there are significant adjustments to 

benchmarks that occur as part of the 

annual financial reconciliation that are 

unknowable to ACOs early in the year, 

providing limited time for planning and 

decision-making regarding program 

participation. The commenter further 


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stated that most ACOs have invested 

significant resources to participate in 

the program and usually terminate only 

as a last resort. 

Response: We recognize that, in 

contrast to our current regulations, our 

proposed policies regarding the 

payment consequences of early 

termination would place ACOs at risk 

for shared losses in a year in which they 

voluntarily terminate prior to the end of 

the performance year. We also recognize 

that ACOs deciding whether to 

terminate early will be required to do so 

with incomplete information. While we 

do not intend to harm ACOs that decide 

to terminate as a last resort, we believe 

that our proposed policies are necessary 

to safeguard the Medicare Trust Funds 

against ACOs potentially gaming their 

participation decisions. 

Comment: Several commenters, while 

not expressing general opposition to 

requiring a voluntarily terminating ACO 

to repay a pro-rated share of shared 

losses, did disagree with our proposal to 

use June 30 as the cut-off date for 

determining whether an ACO would be 

liable, noting that ACOs would not have 

sufficient information on which to base 

a termination decision that early in the 

year. One commenter expressed the 

belief that the proposed date was 

problematic given 60- to 90-day lags 

associated with being able to perform 

claims-based analytics and therefore 

recommended that CMS simply 

continue the current practice of not prorating shared losses for early 

termination. Another commenter noted 

that an ACO would only have one 

quarter of performance year data by that 

point and would not have yet received 

its financial reconciliation report for the 

prior performance year. This commenter 

noted that a June 30 deadline would 

also conflict with the performance 

period for QPs under the Quality 

Payment Program, which ends on 

August 31, thus potentially affecting 

their ability to qualify as participating in 

an Advanced APM. The commenter 

recommended that CMS should 

therefore hold an ACO accountable for 

shared losses only if the ACO 

voluntarily terminates with an effective 

termination date on or after August 31. 

Commenters also suggested several 

other different alternatives to the 

proposed June 30 cut-off date. Several 

commenters expressed the belief that 

ACOs should have three quarters of data 

available to them to make an informed 

decision about continued participation. 

A few other commenters suggested 

using an effective date of termination for 

this policy that is 30 days after the 

receipt of second quarter data. Another 

commenter requested using September 

30 as the cut-off date, noting this 

deadline would allow ACOs time to 

fully analyze two quarters of financial 

data before making the decision to 

voluntarily terminate. Another 

commenter supported using a 

September 30 date for ACOs in their 

first year under any risk track model 

and, in particular, for ACOs in Level C 

of the BASIC track. 

Response: We believe there are tradeoffs between allowing ACOs more time 

and information to make participation 

decisions without penalty and requiring 

an earlier cut-off date to reduce the risk 

of gaming. We continue to believe that 

the proposed cut-off date of June 30 

strikes a balance between these tradeoffs. We also acknowledge one 

commenter’s point that under this 

policy there may be cases in which an 

ACO voluntarily terminates with an 

effective date after June 30 but before 

August 31 would mean that QPs 

participating in the ACO would no 

longer qualify as participating in an 

Advanced APM even though the ACO 

would still be accountable for a portion 

of any shared losses. However, we 

believe that the potential benefits to the 

Trust Funds outweighs this concern. For 

these reasons, we decline to adopt the 

commenters’ suggested alternatives and 

are finalizing our proposal to hold ACOs 

in two-sided models that voluntarily 

terminate with an effective date after 

June 30 liable for a pro-rated share of 

shared losses. 

Comment: One commenter 

recommended that CMS take into 

consideration whether an ACO had 

experienced an extreme and 

uncontrollable circumstance when 

applying the proposed policies around 

payment consequences of early 

termination. The commenter requested 

that the proposed methodology exclude 

losses that occur as a direct result of an 

extreme and uncontrollable event. 

Response: In the November 2018 final 

rule we finalized our proposals to 

extend the extreme and uncontrollable 

circumstances policies used for 

performance year 2017 to performance 

year 2018 and subsequent years (see 83 

FR 59968 through 59979). In this final 

rule we are finalizing additional 

changes to address how these policies 

will be implemented for ACOs that are 

responsible for pro-rated shared losses 

under our new policies governing the 

payment consequences of early 

termination and that experience an 

extreme and uncontrollable event 

during the calendar year in which their 

termination becomes effective. 

Specifically, we will calculate the 

ACO’s shared loss amount based on the 

12 month calendar year, adjusting the 

shared losses amount to reflect the 

number of months and the percentage of 

the assigned beneficiary population 

affected by extreme and uncontrollable 

circumstances, before we calculate the 

pro-rated amount of shared losses for 

the portion of the year the ACO 

participated in the Shared Savings 

Program before termination. 

Accordingly, the policies we are 

finalizing regarding the payment 

consequences of early termination do in 

fact consider whether an ACO 

experienced an extreme and 

uncontrollable circumstance during the 

performance year and the losses that 

may have occurred as a result of any 

such circumstance. 

Final Action: After considering the 

comments received, we are finalizing 

the proposals described in this section 

with modifications to reflect a new date 

of applicability. We are amending 

§ 425.221(b) of the regulations to 

provide that for performance years 

beginning on or after July 1, 2019, ACOs 

in two-sided models with an effective 

termination date before the last calendar 

day of the performance year that 

voluntarily terminate under § 425.220 

with an effective date of termination 

after June 30 or that are terminated by 

CMS at any time during the 

performance year will be liable for a 

pro-rated amount of any shared losses 

determined, with the pro-rated amount 

reflecting the number of months during 

the performance year that the ACO was 

in the program. 

We originally proposed that the 

modifications to our policies on the 

payment consequences of early 

termination would be effective for 

performance years beginning in 2019. 

As a result of the delayed date of 

applicability, we are not finalizing our 

proposal to require ACOs under a twosided risk model that begin a 6-month 

performance year on January 1, 2019, 

and that are involuntarily terminated by 

CMS to repay a pro-rated amount of any 

shared losses determined. However, we 

are finalizing our proposal that ACOs 

under a two-sided model that begin a 6- 

month performance year on July 1, 

2019, and that are involuntarily 

terminated by CMS would be required 

to repay a pro-rated amount of any 

shared losses determined. We are 

finalizing this provision at 

§ 425.221(b)(2)(ii). As reflected in 

§ 425.221(b)(3)(i), we are also finalizing 

our proposal that ACOs that start a 12- 

month performance year on January 1, 

2019, that subsequently terminate their 

participation agreement with an 

effective date of termination of June 30, 

2019, and enter a new agreement period 

beginning on July 1, 2019, would be 


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eligible for pro-rated shared savings or 

accountable for pro-rated shared losses 

for the 6-month period from January 1, 

2019, through June 30, 2019, as 

determined in accordance with 

§ 425.609. 

We are also finalizing our proposal 

that the amount of shared losses 

determined for ACOs that are liable for 

pro-rated shared losses due to early 

termination will be adjusted to account 

for extreme and uncontrollable 

circumstances through revisions to 

§§ 425.606(i) and 425.610(i) and in the 

new provision for the BASIC track at 

§ 425.605(f). 

7. Participation Options for Agreement 

Periods Beginning in 2019 

a. July 1, 2019 Agreement Start Date and 

Early Renewal Option 

(1) Background From the August 2018 

Proposed Rule on Proposals for 6-Month 

Performance Years During CY 2019 

In the August 2018 proposed rule (83 

FR 41847 through 41849), we proposed 

a July 1, 2019 start date for ACOs to 

enter agreement periods under the 

proposed new participation options 

within the BASIC track and the 

ENHANCED track, and a voluntary 6- 

month extension for ACOs whose first 

or second agreement periods expire 

December 31, 2018 to ensure these 

ACOs could continue their participation 

in the program without interruption. In 

conjunction with these proposals, we 

would also need a methodology to 

determine performance for ACOs under 

two, 6-month performance years during 

CY 2019, from January 1, 2019, through 

June 30, 2019, and from July 1, 2019, 

through December 31, 2019. 

We explained that in the November 

2011 final rule establishing the Shared 

Savings Program, we implemented an 

approach for accepting and reviewing 

applications from ACOs for 

participation in the program on an 

annual basis, with agreement periods 

beginning January 1 of each calendar 

year. We also finalized an approach to 

offer two application periods for the 

first year of the program, allowing for an 

April 1, 2012 start date and a July 1, 

2012 start date. In establishing these 

alternative start dates for the program’s 

first year, we explained that the statute 

does not prescribe a particular 

application period or specify a start date 

for ACO agreement periods (see 76 FR 

67835 through 67837). We considered 

concerns raised by commenters about a 

January 1, 2012 start date, which would 

have closely followed the November 

2011 publication of the final rule. 

Specifically, commenters were 

concerned about the ability of potential 

ACOs to organize, complete, and submit 

an application in time to be accepted 

into the first cohort as well as our ability 

to effectively review applications by 

January 1, 2012. Comments also 

suggested that larger integrated health 

care systems would be able to meet the 

application requirements on short 

notice while small and rural entities 

might find this timeline more difficult 

and could be unable to meet the newlyestablished application requirements for 

a January 1 start date (76 FR 67836). 

In the August 2018 proposed rule, we 

explained that the considerations that 

informed our decision to establish 

alternative start dates at the inception of 

the Shared Savings Program were also 

relevant in determining the timing for 

making the proposed new participation 

options available. We explained that 

postponing the start date for agreement 

periods under these new participation 

options until later in 2019 would allow 

ACOs time to consider the new 

participation options and prepare for 

program changes; make investments and 

other business decisions about 

participation; obtain buy-in from their 

governing bodies and executives; 

complete and submit an application that 

conforms to the new participation 

options, if finalized; and resolve any 

deficiencies and provider network 

issues that may be identified, including 

as a result of program integrity and law 

enforcement screening. Postponing the 

start date for new agreement periods 

would also allow both new applicants 

and ACOs currently participating in the 

program an opportunity to make any 

changes to the structure and 

composition of their ACO as may be 

necessary to comply with the new 

program requirements for the ACO’s 

preferred participation option, if 

changes to the participation options are 

finalized as proposed. 

Therefore, we proposed to offer a July 

1, 2019 start date as the initial 

opportunity for ACOs to enter an 

agreement period under the BASIC track 

or the ENHANCED track. As described 

in the August 2018 proposed rule, we 

anticipated the application cycle for the 

July 1, 2019 start date would begin in 

early 2019. We also elected to forgo the 

application cycle that otherwise would 

take place during CY 2018 for a January 

1, 2019 start date for new Shared 

Savings Program participation 

agreements, initial use of the SNF 3-day 

rule waiver (as further discussed in 

section II.A.7.c.(1). of this final rule), 

and entry into the Track 1+ Model (as 

further discussed in section II.F. of this 

final rule). We explained that although 

several ACOs that entered initial 

agreements beginning in 2015 had 

deferred renewal into a second 

agreement period by 1 year in 

accordance with § 425.200(e) and will 

begin participating in a new 3-year 

agreement period beginning on January 

1, 2019 under a performance-based risk 

track, applications would not be 

accepted from other ACOs for a new 

agreement period beginning on January 

1, 2019. We proposed that the July 1, 

2019 start date would be a one-time 

opportunity, and thereafter we would 

resume our typical process of offering 

an annual application cycle that allows 

for review and approval of applications 

in advance of a January 1 agreement 

start date. Therefore, we anticipated also 

offering an application cycle in 2019 for 

a January 1, 2020 start date for new, 5- 

year participation agreements, and 

continuing to offer an annual start date 

of January 1 thereafter. We 

acknowledged that a delayed 

application due date for an agreement 

period beginning in 2019 could affect 

parties planning to participate in the 

Shared Savings Program for 

performance year 2019 and that are 

relying on the pre-participation waiver. 

Guidance for affected parties was posted 

on the CMS website. See Medicare 

Shared Savings Program Waivers: 

Special ACO Pre-Participation Waiver 

Guidance for the 2019 Application 

Cycle (Issued: August 9, 2018), available 

at https://www.cms.gov/Medicare/ 

Fraud-and-Abuse/ 

PhysicianSelfReferral/Downloads/2019- 

Pre-Participation-Waiver-Guidance.pdf. 

We also explained that under the 

current Shared Savings Program 

regulations, the policies for determining 

financial and quality performance are 

based on an expectation that a 

performance year will have 12 months 

that correspond to the calendar year. 

Beneficiary assignment also depends on 

use of a 12-month assignment window, 

with retrospective assignment based on 

the 12-month calendar year performance 

year, and prospective assignment based 

on an offset assignment window before 

the start of the performance year. Given 

the calendar year basis for performance 

years under the current regulations, we 

considered how to address—(1) the 

possible 6-month lapse in participation 

that could result for ACOs that entered 

a first or second 3-year agreement 

period beginning on January 1, 2016, 

due to the lack of availability of an 

application cycle for a January 1, 2019 

start date; and (2) the July 1 start date 

for agreement periods starting in 2019. 

To address the implications of a 

midyear start date on program 

participation and applicable program 

requirements, we considered our 

previous experience with the program’s 


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initial entrants, April 1, 2012 starters 

and July 1, 2012 starters. In particular, 

we considered our approach for 

determining these ACOs’ first 

performance year results (see § 425.608). 

The first performance year for April 1 

and July 1 starters was defined as 21 

and 18 months respectively (see 

§ 425.200(c)(2)). The methodology we 

used to determine shared savings and 

losses for these ACOs’ first performance 

year consisted of an optional interim 

payment calculation based on the ACO’s 

first 12 months of participation and a 

final reconciliation occurring at the end 

of the ACO’s first performance year. 

This final reconciliation took into 

account the 12 months covered by the 

interim payment period as well as the 

remaining 6 or 9 months of the 

performance year, thereby allowing us 

to determine the overall savings or 

losses for the ACO’s first performance 

year. All ACOs opting for an interim 

payment reconciliation, including ACOs 

participating under Track 1, were 

required to assure CMS of their ability 

to repay monies determined to be owed 

upon final first year reconciliation. For 

Track 2 ACOs, the adequate repayment 

mechanism required for entry into a 

performance-based risk arrangement 

was considered to be sufficient to also 

assure return of any overpayment of 

shared savings under the interim 

payment calculation. Track 1 ACOs 

electing interim payment were similarly 

required to demonstrate an adequate 

repayment mechanism for this purpose. 

(See 76 FR 67942 through 67944). 

This interim payment calculation 

approach used in the program’s first 

year resulted in relatively few ACOs 

being eligible for payment based on 

their first 12 months of program 

participation. Few Track 1 ACOs 

established the required repayment 

mechanism in order to be able to receive 

an interim payment of shared savings, if 

earned. Not all Track 2 ACOs, which 

were required to establish repayment 

mechanisms as part of their 

participation in a two-sided model, 

elected to receive payment for shared 

savings or to be held accountable for 

shared losses based on an interim 

payment calculation. Of the 114 ACOs 

reconciled for a performance year 

beginning on April 1 or July 1, 2012, 

only 16 requested an interim payment 

calculation in combination with having 

established the required repayment 

mechanism. Of these 16 ACOs, 9 were 

eligible for an interim payment of 

shared savings, of which one Track 1 

ACO was required to return the 

payment based on final results for the 

performance year. One Track 2 ACO 

repaid interim shared losses, which 

were ultimately returned to the ACO 

based on its final results for the 

performance year. 

This approach to interim and final 

reconciliation was developed for the 

first two cohorts of ACOs, beginning in 

the same year and to which the same 

program requirements applied. The 

program has since evolved to include 

different benchmarking methodologies 

(depending on whether an ACO is in its 

first agreement period, or second 

agreement period beginning in 2016 or 

in 2017 and subsequent years) and 

different assignment methodologies 

(prospective assignment and 

preliminary prospective assignment 

with retrospective reconciliation), 

among other changes. In the August 

2018 proposed rule, we expressed 

concern about introducing further 

complexity into program calculations by 

proposing to follow a similar approach 

of offering an extended performance 

year with the option for an interim 

payment calculation with final 

reconciliation for ACOs affected by the 

delayed application cycle for agreement 

periods starting in 2019. 

To address the implications of a 

midyear start date on program 

participation and applicable program 

requirements, we proposed to use an 

approach that would maintain financial 

reconciliation and quality performance 

determinations based on a 12-month 

calendar-year period, but would pro-rate 

shared savings/shared losses for each 

potential 6-month period of 

participation during 2019. Accordingly, 

we proposed an approach for 

implementing the proposed July 1, 2019 

start date that included the following 

opportunities for ACOs, based on their 

agreement period start date: 

ACOs entering an agreement period 

beginning on July 1, 2019, would be in 

a participation agreement for a term of 

5 years and 6 months, of which the first 

performance year would be defined as 6 

months (July 1, 2019, through December 

31, 2019), and the 5 remaining 

performance years of the agreement 

period would each consist of a 12- 

month calendar year. 

ACOs that entered a first or second 

agreement period with a start date of 

January 1, 2016, would have the 

opportunity to elect to extend their 

agreement period for an optional fourth 

performance year, defined as the 6- 

month period from January 1, 2019 

through June 30, 2019. This election to 

extend the agreement period would be 

voluntary and an ACO could choose not 

to make this election and therefore 

conclude its participation in the 

program with the expiration of its 

current agreement period on December 

31, 2018. As discussed in section 

II.A.7.a.(2) of this final rule, we 

finalized the 6-month extension and the 

related policies for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019, in the November 

2018 final rule. 

An existing ACO that wants to 

quickly move to a new participation 

agreement under the BASIC track or the 

ENHANCED track could voluntarily 

terminate its participation agreement 

with an effective date of termination of 

June 30, 2019, and apply to enter a new 

agreement period with a July 1, 2019 

start date to continue its participation in 

the program. This includes 2017 

starters, 2018 starters, and 2015 starters 

that deferred renewal by 1 year, and 

entered into a second agreement period 

under Track 2 or Track 3 beginning on 

January 1, 2019. If the ACO’s 

application is approved by CMS, the 

ACO could enter a new agreement 

period beginning on July 1, 2019. (We 

would consider these ACOs to be early 

renewals.) ACOs currently in an 

agreement period that includes a 12- 

month performance year 2019 that 

choose to terminate their current 

participation agreement effective June 

30, 2019, and enter a new agreement 

period beginning on July 1, 2019, would 

be reconciled for their performance 

during the first 6 months of 2019. As 

described in section II.A.5.c.(5).(b). of 

this final rule, an ACO’s participation 

options for the July 1, 2019 start date 

would depend on whether the ACO is 

a low revenue ACO or a high revenue 

ACO and the ACO’s experience with 

performance-based risk Medicare ACO 

initiatives. As described in the August 

2018 proposed rule, and section 

II.A.5.c.(5).(c) of this final rule, an early 

renewal ACO would be considered to be 

entering its next consecutive agreement 

period for purposes of the applicability 

of policies that phase-in over time (the 

weight used in the regional benchmark 

adjustment, equal weighting of the 

benchmark years, and the quality 

performance standard). 

In the August 2018 proposed rule, we 

considered several alternatives to the 

proposal to offer an agreement period of 

5 years and 6 months beginning on July 

1, 2019 (made up of 6 performance 

years, the first of which is 6 months in 

duration). We considered whether to 

offer instead an agreement period of five 

performance years (including a first 

performance year of 6 months). Under 

this alternative the agreement period 

would be 4 years and 6 months in 

duration. As previously described, in 

section II.A.2. of this final rule in 

connection with the discussion of our 


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proposal to extend the agreement period 

from 3 years to 5 years, program results 

have shown that ACOs tend to perform 

better the longer they are in the program 

and longer agreement periods provide 

additional time for ACOs to perform 

against a benchmark based on historical 

data from the 3 years prior to their start 

date. Further, the proposed changes to 

the benchmarking methodology (see 

section II.D. of this final rule) would 

result in more accurate benchmarks and 

mitigate the effects of reliance on 

increasingly older historical data as the 

agreement period progresses. We 

believed these considerations were also 

relevant to the proposed one-time 

exception to allow for a longer 

agreement period of 5 years and 6 

months for ACOs that enter a new 

agreement period on July 1, 2019. 

We also considered forgoing an 

application cycle for a 2019 start date 

altogether and allowing ACOs to enter 

agreement periods for the BASIC track 

and ENHANCED track for the first time 

beginning in January 1, 2020. We noted 

that this approach would allow ACOs 

additional time to consider the redesign 

of the program, make organizational and 

operational plans, and implement 

business and investment decisions, and 

would avoid the complexity of needing 

to determine performance based on 6- 

month performance years during CY 

2019. However, our proposed approach 

of offering an application cycle during 

2019 for an agreement period start date 

of July 1, 2019, would allow for a more 

rapid progression of ACOs to the 

redesigned participation options, 

starting in mid-2019. Further, we noted 

that under this alternative, we would 

also want to offer ACOs that started a 

first or second agreement period on 

January 1, 2016, a means to continue 

their participation between the 

conclusion of their current 3-year 

agreement (December 31, 2018) and the 

start of their next agreement period 

(January 1, 2020), should the ACO wish 

to continue in the program. Under an 

alternative that would postpone the start 

date for the new participation options to 

January 1, 2020, we would need to 

allow ACOs that started a first or second 

agreement period on January 1, 2016, to 

elect a 12-month extension of their 

current agreement period to cover the 

duration of CY 2019. 

We also proposed a number of 

modifications to the regulations text in 

order to effectuate the decision to delay 

the start date to July 1, 2019, and to 

allow for agreement periods of at least 

five years as opposed to 3-year 

agreement periods. We proposed 

modifications to the definitions of 

‘‘agreement period’’ and ‘‘performance 

year’’ in § 425.20. We proposed 

modifications to the provision at 

§ 425.200(b)(2) to reflect that the term of 

the participation agreement is 3 years 

and 6 months for an ACO that entered 

an agreement period starting on January 

1, 2016, that elects to extend its 

agreement period until June 30, 2019. 

We proposed to add a heading to 

§ 425.200(b)(3) to specify that the 

provision applies to agreement periods 

beginning in 2017 and 2018. In 

addition, we proposed to add a new 

provision at § 425.200(b)(4) to specify 

that, for agreement periods beginning in 

2019 the start date is—(1) January 1, 

2019, and the term of the participation 

agreement is 3 years for ACOs whose 

first agreement period began in 2015 

and who deferred renewal of their 

participation agreement under 

§ 425.200(e); or (2) July 1, 2019, and the 

term of the participation agreement is 5 

years and 6 months. We also proposed 

to add a new provision at 

§ 425.200(b)(5) to specify that, for 

agreement periods beginning in 2020 

and subsequent years, the start date is 

January 1 of that year and the term of 

the participation agreement is 5 years. 

In light of the proposed modifications 

to § 425.200(c) to establish two 6-month 

performance years during CY 2019, we 

also proposed to revise the regulation at 

§ 425.200(d), which reiterates an ACO’s 

obligation to submit quality measures in 

the form and manner required by CMS 

for each performance year of the 

agreement period, to address the quality 

reporting requirements for ACOs 

participating in a 6-month performance 

year during CY 2019. 

We sought comment on these 

proposals and the related 

considerations, as well as the 

alternatives considered. 

(2) Background on the November 2018 

Final Rule Establishing a Voluntary 6- 

Month Performance Year From January 

1, 2019, Through June 30, 2019 for 

Eligible ACOs 

In the November 2018 final rule (83 

FR 59941 through 59959), we finalized 

a voluntary 6-month extension for ACOs 

that entered a first or second agreement 

period beginning on January 1, 2016, 

whose agreement periods would 

otherwise expire December 31, 2018. 

We also adopted a methodology for 

determining financial and quality 

performance for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019, in a new section 

of the regulations at § 425.609. Under 

this methodology, we will perform 

reconciliation for ACOs that extend 

their agreement period for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019, based on the 

ACO’s performance during the entire 

12-month calendar year, and then prorate the calendar year shared savings or 

shared losses to reflect the ACO’s 

participation in that 6-month period. 

We also finalized certain changes to 

the program’s regulations to establish 

the 6-month extension and to make 

certain technical and conforming 

changes. We finalized as proposed the 

modifications to the definition of 

‘‘agreement period’’ in § 425.20 to 

broaden the definition to generally refer 

to the term of the participation 

agreement and the revisions to 

§ 425.200(a) to allow for agreement 

periods greater than 3 years. We also 

finalized our proposal to add a 

provision at § 425.200(b)(2) specifying 

that the term of the participation 

agreement is 3 years and 6 months for 

an ACO that entered an agreement 

period starting on January 1, 2016, that 

elects to extend its agreement period 

until June 30, 2019. 

We also finalized as proposed the 

revision to the definition of 

‘‘performance year’’ in § 425.20 to mean 

the 12-month period beginning on 

January 1 of each year during the 

agreement period, unless otherwise 

specified in § 425.200(c) or noted in the 

participation agreement. Therefore, we 

also finalized the proposed revisions to 

§ 425.200(c) to make necessary 

formatting changes and specify an 

additional exception to the definition of 

performance year as a 12-month period. 

Specifically, we finalized our proposal 

to add a provision specifying that for an 

ACO that entered a first or second 

agreement period with a start date of 

January 1, 2016, and that elects to 

extend its agreement period by a 6- 

month period, the ACO’s fourth 

performance year is the 6-month period 

between January 1, 2019, and June 30, 

2019. 

In light of the modifications we 

finalized to § 425.200(c) to establish a 6- 

month performance year during CY 

2019, we also finalized the proposed 

revisions to the regulation at 

§ 425.200(d), which reiterates an ACO’s 

obligation to submit quality measures in 

the form and manner required by CMS 

for each performance year of the 

agreement period, to address the quality 

reporting requirements for ACOs 

participating in the 6-month 

performance year from January 1, 2019, 

through June 30, 2019. We noted that 

ACOs electing the voluntary 6-month 

extension will be required to report 

quality measures for the 2019 reporting 

period, based on CY 2019, consistent 

with the existing quality reporting 

process and methodology. 


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(3) Establishing a July 1, 2019 Start Date 

and Early Renewal Option 

In the following discussion, we 

address the comments we received on 

our proposal to allow for a July 1, 2019 

agreement start date, as well as the 

alternatives we considered to this 

proposed approach. We also address 

comments we received on the proposed 

early renewal option that would allow 

ACOs currently in an agreement period 

that includes a 12-month performance 

year 2019 that choose to terminate their 

current participation agreement 

effective June 30, 2019, and enter a new 

agreement period beginning on July 1, 

2019, to be reconciled for their 

performance during the first 6 months of 

2019. We described these proposals in 

section II.A.7.a.(1) of this final rule. 

Comment: Some commenters 

supported the proposed approach of 

offering a July 1, 2019 agreement start 

date, indicating the importance of 

providing ACOs the opportunity to 

begin or continue their participation in 

the program. Some commenters 

expressed their disappointment that the 

delay in rulemaking prevented a new 

cohort of ACOs from starting on January 

1, 2019, and indicated that many ACOs 

have been eagerly awaiting application 

details and are prepared to participate 

in 2019. These commenters explained 

that while the timing will present 

challenges, such as a compressed 

timeline to analyze program changes, 

review application materials, make 

decisions regarding participation and 

gather all of the required information to 

submit applications, it is critical that 

CMS continue to offer a participation 

option for 2019. One commenter 

explained that given the interconnected 

relationship between the Shared 

Savings Program and the Quality 

Payment Program, it is crucial that CMS 

policy development not inadvertently 

deter ACOs from transitioning to risk in 

2019. 

Of the commenters addressing the 

timing for implementation of the 

redesigned participation options, many 

commenters urged CMS to implement 

the redesigned participation options 

under the BASIC track and the 

ENHANCED track for agreement periods 

beginning on January 1, 2020 and in 

subsequent years. Many of these 

commenters suggested allowing ACOs 

whose agreement periods expire on 

December 31, 2018, a 12-month 

extension instead of a 6-month 

extension. 

Commenters expressed the following 

concerns with the proposed July 1, 2019 

start date: 

• Commenters raised concerns regarding 

the approach for determining performance 

for the two, 6-month performance years, as 

summarized elsewhere in section II.A.7 of 

this final rule. Some commenters expressed 

concerns about the complexity caused by 

ACOs being reconciled under two different 

methodologies for each 6-month performance 

year during CY 2019, with some ACOs 

operating under current program rules and 

others operating under new program rules. 

One commenter stated that the proposed July 

1, 2019 start date, if implemented, would add 

confusion and make the program less 

predictable for participating providers whose 

prior experience with the program has been 

based on full calendar year performance 

periods. 

• Some commenters expressed concerns 

about rapid implementation of the proposed 

redesigned participation options. One 

commenter explained that in past experience 

when CMS has rushed the application period 

and start date it has resulted in 

implementation issues. One commenter 

pointed to the significant changes proposed 

to the program, and the lateness of the 

proposed rule as reasons to move the start 

date from July 1, 2019, to January 1, 2020. 

Several commenters suggested that CMS 

should ensure there is enough time for CMS 

and participants to consider the participation 

options, and prepare for an application cycle 

after the final rule is finalized. A few 

commenters requested that CMS delay the 

implementation of the redesigned 

participation options under the BASIC track 

and the ENHANCED track until January 1, 

2020, if CMS is not ready to implement the 

new participation options for a July 1, 2019 

start date. 

Another commenter suggested allowing at 

least a 6-month preparation period for the 

application cycle after publication of the 

final rule so that ACOs and ACO participants 

can adequately prepare and successfully 

implement any changes adopted in the final 

rule. 

• Several commenters expressed concerns 

about the timing of a mid-year start date, 

because ACOs would have limited data about 

their performance during performance year 

2018, and the first 6-months of 2019 (if 

applicable). 

• One commenter stated that a July 1, 2019 

start date would result in only six months to 

improve performance. 

Commenters explained that the advantages 

of a January 1, 2020 start date included the 

following: 

• Allowing additional time for ACOs and 

program stakeholders to assess the policy 

changes and for ACOs, ACO participants and 

ACO providers/suppliers to make 

participation decisions to maximize their 

financial and quality outcomes. One 

commenter explained that CMS and program 

stakeholders will need time to disseminate 

information to physicians. 

• Giving new ACOs adequate time to form 

and to review participation criteria. 

• Allowing CMS additional time to ensure 

smooth and effective implementation of the 

significant changes that were proposed in the 

August 2018 proposed rule. 

• Avoiding the complexity of the July 1, 

2019 start date and the methodology for 

determining performance for the two, 6- 

month performance years during CY 2019. 

One commenter explained a January 2020 

start date was preferable because it would 

give ACOs the opportunity to succeed under 

the new participation options for a full 12- 

month performance year, as opposed to 

requiring these ACOs to participate in two 

partial years under 2 different methodologies. 

• Allowing ACOs entering performancebased risk models additional time to prepare 

their repayment mechanism arrangements, 

including to raise capital for their repayment 

mechanism. 

Other commenters more generally 

urged CMS to slow the pace of 

regulatory change for the Shared 

Savings Program. One commenter 

explained that early adopters of the 

Shared Savings Program have expressed 

dissatisfaction with CMS’ repeated 

changes to the program requirements 

and structure, which the commenter 

describes as burdensome particularly for 

rural and small health systems. One 

commenter expressed their appreciation 

for the changes to date implemented by 

CMS throughout the Medicare program 

to meaningfully reduce provider burden 

and allow providers to spend more time 

with patients. However, the commenter 

expressed their belief that implementing 

new Shared Savings Program 

participation agreements under such an 

accelerated timeframe does not align 

with these other welcomed reductions 

in provider burden or with CMS’ goals 

of strengthening and stabilizing the 

Shared Savings Program. 

Response: We appreciate commenters’ 

support for the proposed one-time, July 

1, 2019 agreement period start date. 

This mid-year start date would allow for 

continuity in participation by ACOs 

whose agreement periods expire 

December 31, 2018, that elect to 

voluntarily extend their current 

agreement period for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019, under the 

policies adopted in the November 2018 

final rule (83 FR 59942 through 59946), 

without requiring additional rulemaking 

to establish an option for a longer 

extension. Recently, 90 percent of 

eligible ACOs with a first or second 

agreement period start date of January 1, 

2016, whose agreements would 

otherwise expire on December 31, 2018, 

elected to voluntarily extend their 

agreements for the 6-month performance 

year from January 1, 2019, through June 

30, 2019. We believe this demonstrates 

a high level of interest by ACOs in 

continuing their participation in the 

program by preserving their option to 

renew their participation uninterrupted 

for a new agreement period starting on 

July 1, 2019. 


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Further, as discussed in the August 

2018 proposed rule, we continue to 

believe it is important to create a 

pathway for ACOs to more rapidly 

transition to performance-based risk. 

Allowing for a July 1, 2019 agreement 

start date would allow for a more rapid 

progression to the redesigned 

participation options under the BASIC 

track and the ENHANCED track, 

compared to alternatives that would 

postpone implementation of the 

redesigned participation options until 

2020 or later. We also recognize the 

possibility that there are prospective 

ACOs that may have been unable to 

apply to enter the program given our 

decision to forgo an application cycle in 

CY 2018 for a January 1, 2019 agreement 

start date, and a July 1, 2019 start date 

will allow them to enter the program 

sooner. 

We refer readers to the November 

2018 final rule (83 FR 59942 through 

59946) for our responses to comments 

on the length of the extension available 

to ACOs whose agreement periods 

expire December 31, 2018. We believe 

many of the same considerations 

discussed in those responses are 

relevant in responding to the comments 

suggesting that we forgo an application 

cycle in CY 2019 and offer an initial 

agreement start date under the 

redesigned participation options of 

January 1, 2020 (necessitating a 12 

month extension for ACOs whose 

agreement periods expire December 31, 

2018). For instance, we believe ACOs 

whose agreement periods expire on 

December 31, 2018, have been weighing 

their participation options in advance of 

applying to renew for a subsequent 

agreement period, and will have 

additional time to make these 

determinations during the 6-month 

extension (if elected). In particular, 

ACOs reaching the end of their second 

agreement period under Track 1, would 

already have been weighing their 

participation options under two-sided 

models, given the current requirement 

that ACOs transition to a two-sided 

model by the start of their third 

agreement period in the program. In 

fact, our decision to finalize the 6- 

month extension allows ACOs 

completing their second agreement 

period in Track 1 to continue 

participation under their current 

agreement period and thereby have 

additional time under a one-sided 

model that otherwise would not have 

been available to them. 

In response to commenters’ concerns 

about the timing of a mid-year 

agreement period start date in relation 

to the availability of performance results 

for prior performance years, including 

performance year 2018 and the 6-month 

performance year from January 1, 2019, 

through June 30, 2019, we note that we 

provide ACOs with quarterly and 

annual aggregate program reports as 

well as other tools that they can use to 

track and estimate their performance. 

We educate ACOs on the use of 

quarterly program data to predict their 

financial performance. Therefore, we 

believe that ACOs have access to a 

variety of resources to assess their 

performance trends in order to help 

inform their participation decisions. 

With respect to the commenter’s 

concern that ACOs entering the program 

with an agreement period start date of 

July 1, 2019 would have only six 

months to improve performance, we 

note that such ACOs may take steps to 

ensure their readiness to meet the 

program’s objectives in advance of 

program entry. Specifically, we believe 

that ACOs preparing to enter an initial 

agreement period starting on July 1, 

2019, may wish to take steps to ensure 

their operational readiness by 

implementing redesigned care processes 

in preparation to meet the program’s 

goals beginning July 1, 2019. These 

steps will assist these ACOs in 

succeeding under the approach for 

determining performance for the 6- 

month performance year from July 1, 

2019, through December 31, 2019, 

which we are finalizing in this final 

rule, under which they will be 

accountable for pro-rated performance 

during the entire CY 2019. Further we 

believe ACOs new to the Shared Savings 

Program that are considering 

participation under the BASIC track’s 

glide path may find the longer 

agreement period available with the July 

1, 2019 start date advantageous. With an 

agreement period spanning 5 years and 

6 months, ACOs that start in the 

program on July 1, 2019, would gain 

additional time in the program under 

the same historical benchmark prior to 

benchmark rebasing. As we previously 

described in section II.A.2. of this final 

rule, ACOs may find the greater 

predictability of benchmarks under 

longer agreement periods to be an 

advantage. Under our policies described 

in section II.A.7.c.(7). of this final rule, 

ACOs entering the BASIC track’s glide 

path under a one-sided model, for an 

agreement period beginning on July 1, 

2019, gain an additional 6-months of 

participation under a one-sided model, 

prior to being automatically advanced 

through the glide path. Therefore, 

eligible ACOs entering an agreement 

period beginning on July 1, 2019, may 

participate for a total of 2.5 years (3 

performance years) under a one-sided 

model if they begin in Level A and 

transition through each level of the glide 

path, or 3.5 years (4 performance years) 

if the ACO is a new legal entity, low 

revenue ACO that enters in Level A, 

transitions to Level B, and opts to 

remain in Level B for an extra 

performance year before transitioning to 

Level E for the remaining years of its 

agreement period. 

We appreciate commenters’ concerns 

about the possible need for additional 

time for CMS to prepare to implement 

the redesigned participation options. 

However, the timeframe for 

implementing the initial offering of the 

redesigned participation options for a 

July 1, 2019 start date is operationally 

feasible. We have recently redesigned 

our ACO management system, which 

supports application management 

functions among other functions. This 

management system facilitates our 

implementation of the redesigned 

participation options finalized in this 

final rule. The system changes include 

providing new user friendly interfaces 

for ACOs to manage their ACO 

participant list and list of ACO 

providers/suppliers. We have received 

positive feedback from ACOs on the 

functionality of this new system, which 

includes opportunities for real-time 

feedback on the Medicare enrollment 

status of ACO participants and 

streamlined processes. We also note that 

compared to the first year of the 

program where we had 3 application 

cycles, in advance of the April 1, 2012, 

July 1, 2012, and January 1, 2013 start 

dates, we will have only two application 

cycles in CY 2019, in advance of the 

July 1, 2019 start date and January 1, 

2020 start date. Furthermore, unlike the 

first year of the program, we now have 

experience with 8 application cycles, 

and have applied lessons learned to 

streamline the process to make it more 

user friendly and efficient after each 

cycle. As a result, we will be able to 

provide an efficient and transparent 

process for ACOs to apply for a new 

agreement period beginning on July 1, 

2019, so that they may begin 

participation under the redesigned 

program options as soon as possible. 

On balance, we believe it is important 

not to delay the implementation of the 

redesigned participation options under 

the Shared Savings Program, and to 

offer an opportunity for ACOs to enter 

the program or renew their participation 

for an agreement period under the new 

BASIC track or the ENHANCED track 

beginning on July 1, 2019. While we 

recognize that ACOs, ACO participants, 

and ACO providers/suppliers will need 

to adapt to the redesigned program 

requirements, we decline commenters’ 


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suggestions that we delay the 

implementation of these changes, and 

thereby maintain the status quo, in an 

effort to avoid the burden associated 

with what we believe are necessary 

program changes to drive ACOs to more 

aggressively pursue the program’s goals 

of lowering growth in Medicare FFS 

expenditures and improving quality of 

care for Medicare beneficiaries. 

We appreciate commenters’ concerns 

about the potential complexity of the 

approach for determining performance 

for 6-month performance years during 

CY 2019, as opposed to an alternative 

approach that would allow for 

implementation of the redesigned 

participation options for agreement 

periods beginning on January 1, 2020, 

and subsequent years, which would 

maintain 12-month performance years. 

To assist ACOs in understanding the 

operational details of participation in a 

6-month performance year from July 1, 

2019, through December 31, 2019, we 

anticipate providing education and 

offering outreach to ACOs through the 

various methods available, including 

guidance documents, webinars, FAQs 

and a weekly newsletter. 

In sections II.A.7.b. and II.A.7.c. of 

this final rule we respond to comments 

on the specific aspects of the 

methodology for determining financial 

and quality performance for the 6- 

month performance year from July 1, 

2019, through December 31, 2019, and 

other aspects of program participation 

affected by a 6-month performance year, 

including concerns about ACOs 

participating in two 6-month 

performance years during CY 2019. 

Comment: One commenter urged 

CMS to stagger the implementation of 

the proposed program redesign, so that 

it would apply on July 1, 2019, as 

proposed only to those ACOs that have 

been in the Shared Savings Program the 

longest, and would go into effect on 

January 1, 2020, for organizations that 

joined the program more recently, and 

January 1, 2021 for organizations that 

began in the program in 2018. 

Response: We decline the 

commenter’s suggested approach for 

staggering the program redesign policies 

based upon an ACO’s experience within 

the Shared Savings Program. As 

discussed previously, we continue to 

believe it is important to create a 

pathway for ACOs to more rapidly 

transition to performance-based risk. We 

note, as explained in section II.A.2 of 

this final rule, ACOs within a current 

agreement period may complete their 

current agreement under their existing 

track (Track 1, Track 2, Track 3, or the 

Track 1+ Model). Under the policies we 

proposed and are finalizing, these ACOs 

would be required to renew in either the 

BASIC track or the ENHANCED track to 

continue their participation in the 

Shared Savings Program for a 

subsequent agreement period. For 

example, ACOs that entered a first or 

second agreement period beginning on 

January 1, 2016, and that elect the 

voluntary 6-month extension for the 

performance year from January 1, 2019, 

through June 30, 2019, would need to 

renew under the redesigned program 

participation options for a new 

agreement period beginning on July 1, 

2019. ACOs with a first or second 

agreement period start date of January 1, 

2017, or January 1, 2018, would be 

required to renew in either the BASIC 

track or the ENHANCED track to 

continue their participation in the 

Shared Savings Program for a 

subsequent agreement period beginning 

on January 1, 2020, or January 1, 2021 

(respectively). 

Comment: Several commenters 

expressed confusion over whether ACOs 

may complete their current 3-year 

agreement period, or if early renewal for 

an agreement beginning on July 1, 2019, 

is mandatory. One commenter 

questioned whether the early renewal 

option includes the 6-month extension 

from January 1, 2019, through June 30, 

2019. 

Response: We wish to clarify that 

early renewal is voluntary. Early 

renewal does not include a 6-month 

extension from January 1, 2019, through 

June 30, 2019, which was finalized in 

the November 2018 final rule and is 

limited to ACOs that entered a first or 

second agreement period beginning on 

January 1, 2016, whose agreement 

periods would otherwise expire on 

December 31, 2018. However, we note 

that early renewal will be available for 

ACOs that begin a 12-month 

performance year on January 1, 2019, 

and voluntarily elect to terminate their 

participation agreement with an 

effective date of termination of June 30, 

2019, in order to enter a new agreement 

period starting on July 1, 2019. As 

discussed in section II.A.7.b. of this 

final rule, these early renewal ACOs 

would be reconciled for the 6-month 

performance period from January 1, 

2019, through June 30, 2019, and for the 

6-month performance year from July 1, 

2019, through December 31, 2019. 

Comment: A few commenters 

expressed their support for the 

availability of the ACO Pre-Participation 

Waiver to protect ACO-related start-up 

arrangements in anticipation of new 

participants in the Shared Savings 

Program and the proposed redesigned 

program tracks. 

Response: We thank the commenters 

for their feedback. Comments on the 

waivers of fraud and abuse laws are 

beyond the scope of this rulemaking. 

However, we note that on August 9, 

2018, OIG and CMS jointly issued 

special guidance on the start date and 

end dates of the ACO Pre-Participation 

Waiver for the 2019 application cycle. 

See Medicare Shared Savings Program 

Waivers: Special ACO Pre-Participation 

Waiver Guidance for the 2019 

Application Cycle (Issued: August 9, 

2018), available at https://www.cms.gov/ 

Medicare/Fraud-and-Abuse/ 

PhysicianSelfReferral/Downloads/2019- 

Pre-Participation-Waiver-Guidance.pdf. 

Complete information on fraud and 

abuse waivers issued in connection with 

the Shared Savings Program is available 

at: https://www.cms.gov/Medicare/ 

Fraud-and-Abuse/ 

PhysicianSelfReferral/Fraud-andAbuse-Waivers.html. No waivers of any 

fraud and abuse authorities are being 

issued in this final rule. 

Final Action: After consideration of 

the public comments received, we are 

finalizing our proposal for a one-time 

July 1, 2019 agreement period start date 

as the initial opportunity for ACOs to 

enter an agreement period under the 

redesigned participation options of the 

BASIC track or the ENHANCED track as 

described in sections II.A.2. and II.A.3. 

of this final rule. Further, as described 

in section II.A.5.c. of this final rule, we 

are finalizing our proposals with respect 

to the removal of the ‘‘sit-out’’ period 

after termination, and the definition of 

‘‘renewing ACO’’ and are revising our 

regulations to allow an ACO to 

terminate its current participation 

agreement and renew early by entering 

a new agreement period without a break 

in participation. Under these final 

policies, ACOs that begin a 12-month 

performance year on January 1, 2019, 

may voluntarily elect to terminate their 

participation agreement with an 

effective date of termination of June 30, 

2019, in order to enter a new agreement 

period under the new participation 

options starting on July 1, 2019. 

We are finalizing the proposed 

modifications to § 425.200(b)(3) to add a 

heading to specify that the provision 

applies to agreement periods beginning 

in 2017 and 2018. We are also finalizing 

the addition of a new provision at 

§ 425.200(b)(4) to specify that, for 

agreement periods beginning in 2019 

the start date is—(1) January 1, 2019, 

and the term of the participation 

agreement is 3 years for ACOs whose 

first agreement period began in 2015 

and who deferred renewal of their 

participation agreement under 

§ 425.200(e); or (2) July 1, 2019, and the 


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term of the participation agreement is 5 

years and 6 months. We are also 

finalizing the addition of a new 

provision at § 425.200(b)(5) specifying 

that, for agreement periods beginning in 

2020 and subsequent years, the start 

date is January 1 of the applicable year, 

and the term of the participation 

agreement is 5 years. 

We are also finalizing the proposed 

revisions to § 425.200(c) to incorporate 

an additional exception to the definition 

of performance year as a 12-month 

period. We are adding paragraph (c)(3) 

specifying that for an ACO that entered 

an agreement period with a start date of 

July 1, 2019, the ACO’s first 

performance year of the agreement 

period is defined as the 6-month period 

between July 1, 2019, and December 31, 

2019. 

The provision at § 425.200(d), as 

revised in the November 2018 final rule, 

reiterates an ACO’s obligation to submit 

quality measures in the form and 

manner required by CMS for each 

performance year of the agreement 

period, including as applicable 

according to § 425.609. Because the 

existing language of § 425.200(d), as 

revised by the November 2018 final 

rule, is broad enough to cover the 

quality reporting requirements for both 

6-month performance years as specified 

under § 425.609, no further revision to 

this provision is required at this time to 

reflect our decision to finalize the July 

1, 2019 agreement start and the 

provisions in § 425.609(c) governing the 

6-month performance year from July 1, 

2019, through December 31, 2019 (see 

section II.A.7.c.(4) of this final rule for 

a discussion of the related quality 

reporting requirements). 

b. Methodology for Determining 

Financial and Quality Performance for 

the 6-Month Performance Year During 

2019 

(1) Overview 

In this section we discuss our final 

policies for determining financial and 

quality performance for the 6-month 

performance year from July 1, 2019, 

through December 31, 2019. We also 

finalize an approach for determining 

performance during the period from 

January 1, 2019, through June 30, 2019, 

for ACOs that begin a 12-month 

performance year on January 1, 2019, 

and terminate their participation 

agreement with an effective date of 

termination of June 30, 2019, in order to 

enter a new agreement period starting 

on July 1, 2019. Consistent with our 

proposal in the August 2018 proposed 

rule (83 FR 41851 through 41853), the 

methodology that we are adopting for 

making this determination aligns with 

the methodology for determining 

financial and quality performance for 

ACOs whose agreement periods would 

otherwise expire on December 31, 2018, 

that voluntarily elect to extend their 

agreement for the 6-month performance 

year from January 1, 2019, through June 

30, 2019, as finalized in the November 

2018 final rule (83 FR 59946 through 

59951) and as specified at § 425.609(b). 

As we noted in the August 2018 

proposed rule, this approach to 

reconciling ACO performance for a 6- 

month performance year (or 

performance period) during 2019 will 

not alter the methodology that will be 

applied to determine financial 

performance for ACOs that complete a 

12 month performance year 

corresponding to CY 2019 (83 FR 

41850). In this section of this final rule, 

we also explain that the policies we are 

adopting require use of our authority 

under section 1899(i)(3) of the Act. 

Consistent with the approach taken in 

the August 2018 proposed rule, we use 

two terms, ‘‘6-month performance year’’ 

and ‘‘performance period’’ in discussing 

the 6-month periods during 2019. We 

use the term ‘‘6-month performance 

year’’ to refer to the following: (1) The 

fourth performance year from January 1, 

2019, through June 30, 2019, for ACOs 

that started a first or second agreement 

period on January 1, 2016, and extend 

their current agreement period for this 

6-month period; and (2) the first 

performance year from July 1, 2019, 

through December 31, 2019, for ACOs 

that enter an agreement period 

beginning on July 1, 2019. For an ACO 

starting a 12-month performance year on 

January 1, 2019, that terminates its 

participation agreement with an 

effective date of termination of June 30, 

2019, and enters a new agreement 

period beginning on July 1, 2019, we 

refer to the 6-month period from January 

1, 2019, through June 30, 2019, as a 

‘‘performance period’’. 

In section II.A.7.b. of the August 2018 

proposed rule, we proposed to use the 

same overall approach to determining 

ACO financial and quality performance 

for the two 6-month performance years 

during CY 2019 (the 6-month 

performance year from January 1, 2019, 

through June 30, 2019, and the 6-month 

performance year from July 1, 2019, 

through December 31, 2019). We noted 

that the specific policies used to 

calculate factors used in making these 

determinations would differ based on 

the ACO’s track, its agreement period 

start date, and the agreement period in 

which the ACO participates (for factors 

that phase-in over multiple agreement 

periods). In the August 2018 proposed 

rule, we proposed to specify the 

methodologies for reconciling these 6- 

month performance years during 2019 

in a new section of the regulations at 

§ 425.609. 

Under our proposed approach to 

determining performance for ACOs 

participating in the 6-month 

performance years (or the 6-month 

performance period) during 2019, CMS 

would reconcile the financial and 

quality performance of these ACOs after 

the conclusion of CY 2019. For ACOs 

that extended their agreement period for 

the 6-month performance year from 

January 1, 2019, through June 30, 2019, 

or ACOs that terminated their agreement 

period early on June 30, 2019, and 

entered a new agreement period 

beginning on July 1, 2019, CMS would 

first reconcile the ACO based on its 

performance during the entire 12-month 

calendar year, and then pro-rate the 

calendar year shared savings or shared 

losses to reflect the ACO’s participation 

in that 6-month period. In a separate 

calculation, CMS would reconcile an 

ACO that participated for a 6-month 

performance year from July 1, 2019, 

through December 31, 2019, for the 12- 

month calendar year in a similar 

manner, and pro-rate the shared savings 

or shared losses to reflect the ACO’s 

participation during that 6-month 

performance year. 

In the August 2018 proposed rule (83 

FR 41850 and 41851), we explained this 

approach would avoid a more 

burdensome interim payment process 

that could accompany an alternative 

approach of implementing, for example, 

an 18-month performance year from July 

1, 2019 to December 31, 2020. 

Consistent with the policies that applied 

to the 18- and 21-month performance 

years offered for the first cohorts of 

Shared Savings Program ACOs, such a 

policy could require ACOs to establish 

a repayment mechanism that otherwise 

might not be needed, create uncertainty 

over whether the ACO may ultimately 

need to repay CMS based on final 

results for the extended performance 

year, and delay ACOs seeing a return on 

their investment in program 

participation, if eligible for shared 

savings. 

We explained our belief that the 

proposed approach of determining 

performance during a 6-month 

performance year (or performance 

period) based on data for the full 12- 

month calendar year would allow 

continuity in program operations 

(including operations that occur on a 

calendar year basis) for ACOs that have 

either one or two 6-month performance 

years (or performance period) within CY 

2019. Specifically, the proposed 


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approach would allow for payment 

reconciliation to remain on a calendar 

year basis, which would be most 

consistent with the calendar year-based 

methodology for calculating benchmark 

expenditures, trend and update factors, 

risk adjustment, county expenditures 

and regional adjustments. We also 

explained that deviating from a 12- 

month reconciliation calculation by 

using fewer than 12 months of 

expenditures could interject actuarial 

biases relative to the benchmark 

expenditures, which are based on 12- 

month benchmark years. As a result, we 

believed this approach to reconciling 

ACOs based on a 12-month period 

would protect the actuarial soundness 

of the financial reconciliation 

methodology. We also explained our 

belief that the alignment of the proposed 

approach with the standard 

methodology used to perform the same 

calculations for 12-month performance 

years that correspond to a calendar year 

would make it easier for ACOs and 

other program stakeholders to 

understand the proposed methodology. 

As is the case with typical calendar 

year reconciliations in the Shared 

Savings Program, we anticipated results 

with respect to participation during CY 

2019 would be made available to ACOs 

in summer 2020. We explained that this 

would allow those ACOs that are 

eligible to share in savings as a result of 

their participation in the program 

during CY 2019 to receive payment of 

shared savings following the conclusion 

of the calendar year consistent with the 

standard process and timing for annual 

payment reconciliation under the 

program. We proposed to provide 

separate reconciliation reports for each 

6-month performance year (or 

performance period) and to pay shared 

savings or recoup shared losses 

separately for each 6-month 

performance year (or performance 

period) during 2019 based on these 

results. 

In section II.A.7.b.(2). of the August 

2018 proposed rule (83 FR 41851 

through 41853), we described in detail 

our proposed approach to determining 

an ACO’s performance for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019. These policies 

were adopted in the November 2018 

final rule (83 FR 59946 through 59951) 

and are specified in paragraph (b) of a 

new section of the regulations at 

§ 425.609. 

(2) Determining Performance for the 6- 

Month Performance Year From July 1, 

2019, Through December 31, 2019 

In section II.A.7.b.(3). of the August 

2018 proposed rule (83 FR 41853 

through 41854), we described in detail 

our proposed approach to determining 

an ACO’s performance for the 6-month 

performance year from July 1, 2019, 

through December 31, 2019. Our 

proposed policies addressed the 

following: (1) The ACO participant list 

that will be used to determine 

beneficiary assignment; (2) the approach 

to assigning beneficiaries for the 6- 

month performance year; (3) the quality 

reporting period for the 6-month 

performance year; (4) the benchmark 

year assignment methodology and the 

methodology for calculating, adjusting 

and updating the ACO’s historical 

benchmark; and (5) the methodology for 

determining shared savings and shared 

losses for the ACO for the performance 

year. We proposed to specify the 

methodology for reconciling the 6- 

month performance year from July 1, 

2019, through December 31, 2019, in 

paragraph (c) of a new section of the 

regulations at § 425.609. 

We noted that in determining 

performance for the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, we would 

follow the same general methodological 

steps for calculating pro-rated shared 

savings and shared losses as would 

apply for the 6-month performance year 

from January 1, 2019 through June 30, 

2019. However, we noted that, for 

example, the applicable benchmarking 

methodology, which is based on the 

ACO’s agreement period in the program, 

and financial model, which is based on 

the track in which the ACO is 

participating, would be different. 

We proposed to use the ACO 

participant list for the performance year 

beginning July 1, 2019, to determine 

beneficiary assignment, consistent with 

the assignment methodology the ACO 

selected at the start of its agreement 

period under proposed 

§ 425.400(a)(4)(ii). As discussed in 

section II.A.7.c. of the August 2018 

proposed rule (83 FR 41855 through 

41856), this would be the ACO 

participant list that was certified as part 

of the ACO’s application to enter an 

agreement period beginning on July 1, 

2019. 

To determine beneficiary assignment, 

we proposed to consider the allowed 

charges for primary care services 

furnished to the beneficiary during a 12 

month assignment window, allowing for 

a 3 month claims run out. For the 6- 

month performance year from July 1, 

2019, through December 31, 2019, we 

proposed to determine the assigned 

beneficiary population using the 

following assignment windows: 

• For ACOs under preliminary prospective 

assignment with retrospective reconciliation, 

the assignment window would be CY 2019. 

• For ACOs under prospective assignment, 

Medicare FFS beneficiaries would be 

prospectively assigned to the ACO based on 

the beneficiary’s use of primary care services 

in the most recent 12 months for which data 

are available. We would use an assignment 

window before the start of the agreement 

period on July 1, 2019. As an example, we 

noted that we could use an assignment 

window from April 30, 2018, through March 

31, 2019 (note that the example in the 

proposed rule inadvertently included only 11 

months and should have been April 1, 2018, 

through March 31, 2019). Under this 

approach, the 3-month gap between the end 

of the assignment window and the start of the 

performance year would be consistent with 

the typical gap for calendar year performance 

years that begin on January 1. Beneficiaries 

would remain prospectively assigned to the 

ACO at the end of CY 2019 unless they meet 

any of the exclusion criteria under 

§ 425.401(b) during the calendar year. 

As discussed in section II.A.7.c.(4). of 

the August 2018 proposed rule (83 FR 

41856), to determine ACO performance 

during either 6-month performance year 

in 2019, we proposed to use the ACO’s 

quality performance for the 2019 

reporting period, and to calculate the 

ACO’s quality performance score as 

provided in § 425.502. 

Consistent with current program 

policy, we would determine assignment 

for the benchmark years based on the 

ACO’s certified ACO participant list for 

the agreement period beginning on July 

1, 2019. 

For the 6-month performance year 

from July 1, 2019, through December 31, 

2019, we would calculate the 

benchmark and assigned beneficiary 

expenditures as though the performance 

year were the entire calendar year. The 

ACO’s historical benchmark would be 

determined according to the 

methodology applicable to the ACO 

based on its agreement period in the 

program. We proposed to apply the 

methodology for establishing, updating 

and adjusting the ACO’s historical 

benchmark as specified in proposed 

§ 425.601, except that data from CY 

2019 would be used in place of data for 

the 6-month performance year in certain 

calculations, as follows: 

• The benchmark would be adjusted for 

changes in severity and case mix between 

benchmark year 3 and CY 2019 based on 

growth in prospective HCC risk scores, 

subject to a symmetrical cap of positive or 

negative 3 percent that would apply for the 

agreement period such that the adjustment 

between BY3 and any performance year in 

the agreement period would never be more 

than 3 percent in either direction. (See the 

discussion in section II.D.2. of the August 

2018 proposed rule.) 


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• The benchmark would be updated to CY 

2019 according to the methodology described 

under proposed § 425.601(b) using a blend of 

national and regional growth rates. (See the 

discussion in section II.D.3.(d). of the August 

2018 proposed rule.) 

For determining performance during 

the 6-month performance year from July 

1, 2019, through December 31, 2019, we 

would apply the methodology for 

determining shared savings and shared 

losses according to the approach 

specified for the ACO’s track under its 

agreement period beginning on July 1, 

2019: The proposed BASIC track 

(§ 425.605) or ENHANCED track 

(§ 425.610). However, we acknowledged 

that some exceptions to the otherwise 

applicable methodology would be 

needed because we were proposing to 

calculate the expenditures for assigned 

beneficiaries over the full CY 2019 for 

purposes of determining shared savings 

and shared losses for the 6-month 

performance year from July 1, 2019 

through December 31, 2019. We 

proposed to use the following steps to 

calculate shared savings and shared 

losses: 

• Average per capita Medicare 

expenditures for Parts A and B services for 

CY 2019 would be calculated for the ACO’s 

performance year assigned beneficiary 

population. Additionally, when calculating 

CY 2019 expenditures to be used in 

determining performance for the July 1, 2019 

through December 31, 2019 performance 

year, we would include expenditures for all 

assigned beneficiaries that are alive as of 

January 1, 2019, including those with a date 

of death prior to July 1, 2019, except 

prospectively assigned beneficiaries that are 

excluded under § 425.401(b). We explained 

that the inclusion of beneficiaries with a date 

of death before July 1, 2019, is necessary to 

maintain consistency with benchmark year 

and regional expenditure adjustments and 

associated trend and update factor 

calculations. 

• We would compare these expenditures 

to the ACO’s updated benchmark determined 

for the calendar year as previously described. 

• We would apply the MSR and MLR (if 

applicable). 

++ The ACO’s assigned beneficiary 

population for the performance year starting 

on July 1, 2019, would be used to determine 

the MSR for one-sided model ACOs (under 

Level A or Level B of the BASIC track) and 

the variable MSR/MLR for ACOs in a twosided model that selected this option at the 

start of their agreement period. In the event 

a two-sided model ACO selected a fixed 

MSR/MLR at the start of its agreement 

period, and the ACO’s performance year 

assigned population falls below 5,000 

beneficiaries, the MSR/MLR would be 

determined based on the number of assigned 

beneficiaries as proposed in section II.A.6.b. 

of the August 2018 proposed rule (83 FR 

41837 through 41839). 

++ To qualify for shared savings, the 

ACO’s average per capita Medicare 

expenditures for its performance year 

assigned beneficiaries during CY 2019 must 

be below its updated benchmark for the year 

by at least the MSR established for the ACO. 

++ To be responsible for sharing losses 

with the Medicare program, the ACO’s 

average per capita Medicare expenditures for 

its performance year assigned beneficiaries 

during CY 2019 must be above its updated 

benchmark for the year by at least the MLR 

established for the ACO. 

• We would determine the shared savings 

amount if we determine the ACO met or 

exceeded the MSR, and if the ACO met the 

minimum quality performance standards 

established under § 425.502, and as described 

in section II.A.7.c.(4) of the August 2018 

proposed rule (83 FR 41856 through 41858), 

and otherwise maintained its eligibility to 

participate in the Shared Savings Program. 

We would determine the shared losses 

amount if we determine the ACO met or 

exceeded the MLR. To determine these 

amounts, we would do the following: 

++ We would apply the final sharing rate 

or loss sharing rate to first dollar savings or 

losses. 

++ For ACOs that generated savings that 

met or exceeded the MSR, we would 

multiply the difference between the updated 

benchmark expenditures and performance 

year assigned beneficiary expenditures by the 

applicable final sharing rate based on the 

ACO’s track and its quality performance 

under § 425.502. 

++ For ACOs that generated losses that 

met or exceeded the MLR, we would 

multiply the difference between the updated 

benchmark expenditures and performance 

year assigned beneficiary expenditures by the 

applicable shared loss rate based on the 

ACO’s track and its quality performance 

under § 425.502 (for ACOs in the 

ENHANCED track where the loss sharing rate 

is determined based on the ACO’s quality 

performance). 

• We would adjust the shared savings 

amount for sequestration by reducing by 2 

percent and compare the sequestrationadjusted shared savings amount to the 

applicable performance payment limit based 

on the ACO’s track. 

• We would compare the shared losses 

amount to the applicable loss sharing limit 

based on the ACO’s track. 

• We would pro-rate any shared savings 

amount, as adjusted for sequestration and the 

performance payment limit, or any shared 

losses amount, as adjusted for the loss 

sharing limit, by multiplying by one half, 

which represents the fraction of the calendar 

year covered by the 6-month performance 

year. This pro-rated amount would be the 

final amount of shared savings that would be 

paid to the ACO for the 6-month performance 

year or the final amount of shared losses that 

would be owed by the ACO for the 6-month 

performance year. 

We sought comment on these 

proposals. 

Comment: Several commenters 

expressed concerns that under the 

proposed approach, ACOs participating 

in the performance year from July 1, 

2019, through December 31, 2019, 

would also be accountable for their 

financial performance during the first 

six months of CY 2019. Several 

commenters indicated that ACOs would 

not have program reports or sufficient 

patient data to affect care for their 

assigned population during the first six 

months of CY 2019, during the period 

prior to the start of their agreement 

period. These commenters noted this 

concern with respect to ACOs that are 

entering an initial agreement period 

beginning on July 1, 2019, as well as 

ACOs that are currently participating in 

the program that make ACO participant 

list changes effective for a new 

agreement period beginning on July 1, 

2019. To address this issue, one 

commenter suggested that one approach 

could be to create a 6-month benchmark 

comparison that adjusts for the ACO’s 

participation in a portion of the year, 

taking into account differences in 

expenditures based on seasonality. 

Response: We appreciate the 

commenters’ concern that ACOs 

entering agreement periods beginning 

on July 1, 2019, may have relatively 

little data in order to be able to 

understand and affect change for their 

assigned Medicare FFS population for 

the 6-month performance year, but 

would be accountable for the cost and 

quality of care for this beneficiary 

population for the entire 12 month CY 

2019. We note, beneficiaries who are 

prospectively assigned or preliminary 

prospectively assigned to the ACO 

would have received the plurality of 

their primary care services from 

physicians and other practitioners in the 

ACO during the 12 month assignment 

window. As a result, ACO participants 

will have data based on the services 

they furnished to these Medicare FFS 

beneficiaries. Additionally, to assist in 

addressing this concern, we will 

provide aggregate and beneficiary-level 

data, consistent with §§ 425.702 and 

425.704 (respectively), shortly after 

ACOs begin the agreement period. We 

will provide each ACO with an 

Assignment List Report identifying the 

ACO participant and ACO provider/ 

supplier who provided the most 

primary care services to an assigned 

beneficiary during the assignment 

window. Further, we will provide 

monthly beneficiary-identifiable claim 

and claim line feed data files. The first 

time a beneficiary is included in an 

eligible ACO’s claim and claim line feed 

data files we provide 36 months of 

historical Part A, B and D data to the 

ACO. 

Additionally, quarterly and annual 

aggregate reports include expenditure 

and utilization trends, and demographic 

data on the ACO’s assigned population 


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will be provided during the 

performance year. This information 

should help ACOs identify the 

practitioners with data necessary to 

coordinate care for their beneficiaries, 

observe trends in the care for the ACO’s 

assigned population, and support the 

ACO’s care coordination activities for its 

assigned population during the 6-month 

performance year from July 1, 2019, 

through December 31, 2019. 

We continue to believe the proposed 

approach is the most appropriate 

methodology for determining an ACO’s 

financial and quality performance for 

the 6-month performance year from July 

1, 2019, through December 31, 2019, 

based on its performance during the 

entire 12-month calendar year. This 

approach maintains alignment with the 

program’s existing methodology for 

using 12 months of expenditure data in 

determining the ACO’s financial 

performance, and also allows for the use 

of a 12-month period for quality 

measure assessment. Further, this 

approach maintains alignment with the 

methodology we finalized for the 6- 

month performance year from January 1, 

2019, through June 30, 2019, in the 

November 2018 final rule. We therefore 

decline to adopt the commenter’s 

suggestion to use an alternative 

approach of calculating the benchmark 

based on a period of other than 12 

months, such as 6 months. 

Comment: A few commenters 

suggested that ACOs beginning an 

agreement period on July 1, 2019, 

should participate in an 18-month first 

performance year under the new 

agreement. Another commenter 

suggested that CMS allow for 18-month 

performance years in subsequent years, 

as well as for agreement periods 

beginning on July 1, 2019. 

Response: We decline to adopt the 

commenters’ suggestions that we allow 

for an 18-month performance year for 

ACOs entering agreement periods 

beginning on July 1, 2019, and in 

subsequent years. In the August 2018 

proposed rule (83 FR 41850 through 

41851), we explained our concerns 

about using a performance year that is 

determined based on a period other than 

12 months, and described the challenges 

with our experience with the program’s 

initial 21-month and 18-month 

performance years for ACOs entering 

the Shared Savings Program with start 

dates in 2012. We expressed our 

concerns that using such an approach 

might introduce further complexity into 

program calculations, and could require 

ACOs to establish a repayment 

mechanism that otherwise might not be 

required, adding additional burden and 

expense. In addition, we noted that this 

approach would create uncertainty over 

whether the ACO may ultimately need 

to repay CMS based on final results for 

the extended performance year and 

delay ACOs seeing a return on their 

investment in program participation if 

eligible for shared savings. 

Comment: Many commenters 

expressed concerns about the potential 

burden on ACOs of managing and 

implementing the necessary 

modifications to operational processes 

to account for two separate beneficiary 

populations (derived from two separate 

ACO participant lists, and potentially 

two different assignment windows and 

assignment methodologies) in one 

calendar year, while also meeting 

program expectations. Several 

commenters indicated that the burdens 

associated with this approach could 

result in shared losses and/or possible 

exit from the program by ACOs under a 

two-sided model. 

A few commenters expressed this 

concern, in particular, for ACOs under 

the prospective assignment 

methodology. They explained that while 

some beneficiaries will be attributed to 

the ACO for both performance periods, 

there will be a portion of an ACO’s 

beneficiary population that is assigned 

for only one performance period. For 

beneficiaries assigned for only the first 

performance period, the ACO would 

have to continue to deploy resources to 

manage this population even after they 

are no longer assigned to the ACO. For 

beneficiaries assigned only in the 

second performance period, the ACO 

would be responsible for costs incurred 

in the first half of the year when the 

ACO had no ability to manage these 

beneficiaries’ care. As a result, ACOs 

will have to scale up resources and 

infrastructure in order to mitigate the 

impact on quality and cost. Moreover, 

with little influence over beneficiaries’ 

expenditures outside of the performance 

period, ACOs could potentially be at 

risk for exceeding their benchmark. 

To address these concerns, some 

commenters suggested that CMS use a 

single assignment window and 

beneficiary assignment methodology to 

determine an ACO’s assigned 

beneficiary population for the entire CY 

2019, including for ACOs that 

participate in multiple performance 

years during 2019, regardless of whether 

the ACO is in the fourth performance 

year of an extended agreement period, 

the first half of a 12-month performance 

year starting on January 1, 2019, or an 

initial performance year under the 

proposed BASIC track or ENHANCED 

track starting on July 1, 2019. 

Specifically, some commenters 

suggested that we use the assignment 

window from October 1, 2017, through 

September 30, 2018, for determining 

prospective assignment for both 6- 

month performance years. These 

commenters believe this approach to 

determining prospective assignment 

would remove the challenges associated 

with population churn and the 

mismatch between at-risk expenditures 

and potential savings. Several 

commenters made this suggestion as 

part of describing an alternative 

approach under which we would use 

the ACO participant list certified by the 

ACO for the performance year beginning 

on January 1, 2019, in determining a 

prospectively assigned population for 

both 6-month performance years. 

However, other commenters urged CMS 

to allow ACOs participating in a 

performance year beginning on January 

1, 2019, to make changes to their ACO 

participant lists before entering a new 

agreement period beginning on July 1, 

2019. See discussion in section 

II.A.7.c.(2). of this final rule. 

Response: We agree with commenters’ 

suggestions that for purposes of 

determining prospective assignment for 

the 6-month performance year from July 

1, 2019, through December 31, 2019, it 

is preferable to use an offset assignment 

window from October 1, 2017, through 

September 30, 2018, rather than a later 

assignment window, as we originally 

proposed. We believe that maintaining 

the same prospective assignment 

window for both 6-month performance 

years during CY 2019 has a number of 

advantages, including avoiding 

inconsistencies between the 

performance year and benchmark year 

assignment windows, and reducing the 

potential differences in the populations 

assigned to the ACO for each 

performance year during CY 2019. We 

note, however, that ACO participant list 

differences between each 6-month 

performance year could still result in 

significantly different assigned 

beneficiary populations, even when the 

assignment window remains the same. 

Given our desire to offer currently 

participating ACOs entering a new 

agreement period starting on July 1, 

2019, an opportunity to make changes to 

their ACO participant lists applicable 

for the 6-month performance year 

starting on July 1, 2019, we decline the 

commenters’ suggestion that we use the 

same ACO participant list finalized for 

the performance year starting on January 

1, 2019, in determining beneficiary 

assignment for the performance year 

from July 1, 2019, through December 31, 

2019. 

Accordingly, for the performance year 

from July 1, 2019, through December 31, 

2019, for ACOs under the preliminary 


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prospective assignment methodology, 

the assigned beneficiary population 

would be determined after the end of 

the performance year, consistent with 

how it is currently determined for ACOs 

under the preliminary prospective 

assignment methodology, based on the 

12-month calendar year that 

corresponds to the performance year. 

For ACOs under the prospective 

assignment methodology the assignment 

window for the 6-month performance 

year from July 1, 2019, through 

December 31, 2019, would be the same 

as the assignment window for the 6- 

month performance year from January 1, 

2019, through June 30, 2019. Therefore, 

for ACOs that participate in both 6- 

month performance years during CY 

2019, if the ACO maintains the same 

ACO participant list for all of CY 2019 

and the same beneficiary assignment 

methodology, then the assigned 

beneficiary population for the July 1, 

2019, through December 31, 2019 

performance year would be expected to 

closely resemble the assigned 

beneficiary population for the 

performance year or performance period 

from January 1, 2019, through June 30, 

2019. 

However, we also recognize that 

under the redesign of program 

participation options, ACOs entering an 

agreement period beginning on July 1, 

2019, would have the opportunity to 

select the beneficiary assignment 

methodology that would apply for the 6- 

month performance year from July 1, 

2019, through December 31, 2019, and 

this could result in the ACO being 

under a different assignment 

methodology than it was under for the 

first 6 months of CY 2019. In this case, 

there may be greater differences in the 

assigned beneficiary populations for 

each 6-month performance year for 

ACOs that participate in both 6-month 

performance years, even if their ACO 

participant list remains similar or 

unchanged. 

Final Action: After consideration of 

the public comments received, we are 

finalizing, with modifications, the 

proposed approach for determining 

financial and quality performance for 

ACOs participating in a 6-month 

performance year from July 1, 2019, 

through December 31, 2019. Our final 

policies are specified in paragraph (c) of 

§ 425.609. 

For ACOs that select a prospective 

beneficiary assignment methodology for 

the 6-month performance year from July 

1, 2019, through December 31, 2019, we 

plan to use an assignment window from 

October 1, 2017, through September 30, 

2018, to align with the assignment 

window used to determine prospective 

assignment for performance years 

beginning on January 1, 2019. This is a 

modification to our proposal to use an 

assignment window reflecting the most 

recent 12 months of data available as 

described in the August 2018 proposed 

rule. Accordingly, we are revising the 

provision at § 425.609(c)(1)(ii)(A) to 

state that for ACOs under prospective 

assignment, the assignment window is 

the same as the assignment window that 

applies under § 425.609(b)(1)(ii)(A) for 

ACOs under prospective assignment for 

the 6-month performance year from 

January 1, 2019, through June 30, 2019. 

As explained in section II.D of this 

final rule, we are finalizing our 

proposed changes to the risk adjustment 

methodology with modification. 

Consistent with our original proposal, 

growth in prospective HCC risk scores 

will be subject to a cap of positive 3 

percent, but we are not finalizing our 

proposal to cap downward adjustments 

in these risk scores. Therefore we are 

making necessary conforming changes 

to the provision at § 425.609(c)(3)(i)(A) 

to reflect this change. 

In addition, in the November 2018 

final rule we made certain clarifying 

revisions to the introductory text in 

§ 425.609(b). Accordingly, we are also 

modifying the introductory text at 

§ 425.609(c) to incorporate similar 

clarifying revisions. 

In summary, we will do the following 

to determine the ACO’s financial and 

quality performance during the 6-month 

performance year from July 1, 2019, 

through December 31, 2019. (Where 

applicable, we have identified 

references to policies we are finalizing 

elsewhere in this final rule.) 

We will use the ACO participant list 

for the performance year beginning July 

1, 2019, to determine beneficiary 

assignment, consistent with the 

assignment methodology the ACO 

selected at the start of its agreement 

period according to the provision we are 

finalizing at § 425.400(a)(4)(ii) (as 

discussed in section II.A.4.c of this final 

rule). 

We will use the ACO’s quality 

performance for the 2019 reporting 

period to determine the ACO’s quality 

performance score as specified in 

§ 425.502, and as described in section 

II.A.7.c.(4) of this final rule. 

We will establish, adjust and update 

the ACO’s historical benchmark 

according to the benchmarking policies 

we are finalizing for agreement periods 

beginning on July 1, 2019, and in 

subsequent years, except that the 

benchmark will be adjusted for changes 

in severity and case mix based on 

growth in prospective HCC risk scores 

between BY3 and CY 2019, subject to a 

cap of positive 3 percent, and the 

benchmark will be updated to CY 2019. 

(See section II.D. of this final rule and 

the new section of the regulations at 

§ 425.601.) We will compare the ACO’s 

updated historical benchmark to the 

expenditures during CY 2019 for the 

ACO’s performance year assigned 

beneficiaries. 

We will apply the MSR and MLR (if 

applicable). The ACO’s assigned 

beneficiary population for the 

performance year starting on July 1, 

2019, will be used to determine the 

MSR for one-sided model ACOs (under 

Level A or Level B of the BASIC track) 

and the variable MSR/MLR for ACOs in 

a two-sided model that selected this 

option at the start of their agreement 

period. The provisions on the MSR/ 

MLR are specified in a new section of 

the regulations at § 425.605(b) for the 

BASIC track, and § 425.610(b) for the 

ENHANCED track. In the event a twosided model ACO selected a fixed MSR/ 

MLR at the start of its agreement period, 

and the ACO’s performance year 

assigned population falls below 5,000 

beneficiaries, the MSR/MLR will be 

determined based on the number of 

assigned beneficiaries, according to the 

approach we are finalizing at 

§ 425.110(b)(3), as discussed in section 

II.A.6.b.(3). of this final rule. 

If the difference between the ACO’s 

updated benchmark and assigned 

beneficiary expenditures is positive and 

is greater than or equal to the MSR and 

the ACO has met the quality 

performance standard, the ACO will be 

eligible for shared savings. If the ACO 

is in a two-sided model and the 

difference between the ACO’s updated 

benchmark and assigned beneficiary 

expenditures is negative and is greater 

than or equal to the MLR (in absolute 

value terms), the ACO will be liable for 

shared losses. ACOs will share in first 

dollar savings and losses. The amount of 

any shared savings will be determined 

using the applicable final sharing rate, 

which is determined based on the 

ACO’s track for the agreement period 

(and the payment model within that 

track, if applicable) and taking into 

account the ACO’s quality performance 

for 2019. We will adjust the amount of 

shared savings for sequestration, and 

then cap the amount of shared savings 

at the applicable performance payment 

limit for the ACO’s track. Similarly, the 

amount of any shared losses will be 

determined using the loss sharing rate 

for the ACO’s track and, as applicable, 

for ACOs in tracks with a loss sharing 

rate that depends upon quality 

performance, the ACO’s quality 

performance for 2019. We will then cap 

the amount of shared losses at the 


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applicable loss sharing limit for the 

ACO’s track (and the payment model 

within that track, if applicable). We will 

then pro-rate the amount of shared 

savings or shared losses by multiplying 

by one-half, which represents the 

fraction of the calendar year covered by 

the 6-month performance year. This prorated amount is the final amount of 

shared savings earned or shared losses 

owed by the ACO for the 6-month 

performance year from July 1, 2019, 

through December 31, 2019. 

(3) Determining Performance for the 6- 

Month Performance Period From 

January 1, 2019, Through June 30, 2019, 

for Early Renewals 

Under the policies we are finalizing in 

this final rule to remove the ‘‘sit-out’’ 

period after termination (see section 

II.A.5.c. of this final rule) and to allow 

for a July 1, 2019 agreement start date 

(see section II.A.7.a. of this final rule), 

ACOs that begin a 12-month 

performance year on January 1, 2019, 

may voluntarily elect to terminate their 

participation agreement with an 

effective date of termination of June 30, 

2019, in order to enter a new agreement 

period starting on July 1, 2019 (referred 

to as early renewal). Under the changes 

that we are finalizing to our policies 

governing the payment consequences of 

early termination at § 425.221, ACOs 

with an effective date of termination of 

June 30, 2019, that enter a new 

agreement period beginning on July 1, 

2019, will be eligible for pro-rated 

shared savings or liable for pro-rated 

shared losses for the 6-month period 

from January 1, 2019, through June 30, 

2019, determined according to 

§ 425.609. 

In the August 2018 proposed rule (83 

FR 41849 and 41850), we proposed to 

determine performance for the 6-month 

performance period from January 1, 

2019, through June 30, 2019, for ACOs 

renewing early for a July 1, 2019 

agreement start date, using the same 

methodology as would be used to 

determine an ACO’s performance for the 

6-month performance year from January 

1, 2019, through June 30, 2019. In the 

November 2018 final rule (83 FR 59946 

through 59951), we finalized the 

methodology for determining an ACO’s 

performance for this 6-month 

performance year in a new provision of 

the regulations at § 425.609(b). In the 

August 2018 proposed rule, we 

described the applicability of certain 

aspects of this methodology to early 

renewal ACOs for the 6-month 

performance period from January 1, 

2019, through June 30, 2019. We noted 

that the approach for determining 

beneficiary assignment, and for 

adjusting and updating the historical 

benchmark for the 6-month performance 

year from January 1, 2019, through June 

30, 2019, would be consistent with the 

assignment and benchmarking 

methodologies in the program’s 

regulations applicable for performance 

years beginning on January 1, 2019. 

Therefore, these policies would 

similarly apply to determining 

performance for the period from January 

1, 2019, through June 30, 2019, for early 

renewals. Accordingly, in the August 

2018 proposed rule, we proposed to 

include a cross reference to the 

provision under § 425.221 in the 

introductory text to § 425.609(b) in 

order to allow reconciliation of early 

renewals for the performance period 

from January 1, 2019, through June 30, 

2019, to be based on their financial 

performance during the entire 12-month 

calendar year 2019 according to the 

methodology in the provision at 

§ 425.609. 

In section II.A.7.c. of this final rule we 

discuss other modifications that we are 

making to § 425.609 to address the 

applicability of certain policies to ACOs 

participating in a 6-month performance 

year or performance period in 2019. The 

affected policies include the following: 

the quality measure sampling 

methodology (section II.A.7.c.(4)); the 

extreme and uncontrollable 

circumstances policies (section 

II.A.7.c.(5)); payment and recoupment 

(section II.A.7.c.(6)); and sharing of CY 

2019 aggregate data (section II.A.7.c.(9)). 

Final Action: We did not receive any 

comments specifically addressing the 

methodology for determining financial 

and quality performance for the 6- 

month performance period from January 

1, 2019, through June 30, 2019, for 

ACOs that terminate their agreement 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019. Therefore, we are finalizing 

without modification our proposal to 

determine performance for the 6-month 

performance period from January 1, 

2019, through June 30, 2019, for ACOs 

renewing early for the July 1, 2019 

agreement start date, by applying the 

same methodology as is used to 

determine an ACO’s performance for the 

6-month performance year from January 

1, 2019, through June 30, 2019 (finalized 

at § 425.609(b) in the November 2018 

final rule). We are also finalizing 

revisions to the introductory text at 

§ 425.609(b) to incorporate a reference 

to the provision at § 425.221(b)(3)(i), 

which specifies that an ACO starting a 

12-month performance year on January 

1, 2019, that terminates its participation 

agreement with an effective date of 

termination of June 30, 2019, and that 

enters a new agreement period 

beginning on July 1, 2019, is eligible for 

pro-rated shared savings or liable for 

pro-rated shared losses for the 6-month 

period from January 1, 2019, through 

June 30, 2019, as determined in 

accordance with § 425.609. 

(4) Use of Authority Under Section 

1899(i)(3) of the Act 

In the August 2018 proposed rule (83 

FR 41851), we explained our belief that 

the proposals to determine shared 

savings and shared losses for the 6- 

month performance years starting on 

January 1, 2019, and July 1, 2019 (or the 

6-month performance period from 

January 1, 2019, through June 30, 2019, 

for ACOs that elect to voluntarily 

terminate their existing participation 

agreement, effective June 30, 2019, and 

enter a new agreement period starting 

on July 1, 2019), using expenditures for 

the entire CY 2019 and then pro-rating 

these amounts to reflect the shorter 

performance year, require the use of our 

authority under section 1899(i)(3) of the 

Act to use other payment models. 

Section 1899(d)(1)(B)(i) of the Act 

specifies that, in each year of the 

agreement period, an ACO is eligible to 

receive payment for shared savings only 

if the estimated average per capita 

Medicare expenditures under the ACO 

for Medicare FFS beneficiaries for Parts 

A and B services, adjusted for 

beneficiary characteristics, is at least the 

percent specified by the Secretary below 

the applicable benchmark under section 

1899(d)(1)(B)(ii) of the Act. We 

explained our belief that the proposed 

approach to calculating the 

expenditures for assigned beneficiaries 

over the full calendar year, comparing 

this amount to the updated benchmark 

for 2019, and then pro-rating any shared 

savings (or shared losses, which already 

are implemented using our authority 

under section 1899(i)(3) of the Act) for 

the 6-month performance year (or 

performance period) involves an 

adjustment to the estimated average per 

capita Medicare Part A and Part B FFS 

expenditures determined under section 

1899(d)(1)(B)(i) of the Act that is not 

based on beneficiary characteristics. 

Such an adjustment is not contemplated 

under the plain language of section 

1899(d)(1)(B)(i) of the Act. As a result, 

we stated it would be necessary to use 

our authority under section 1899(i)(3) of 

the Act to calculate performance year 

expenditures and determine the final 

amount of any shared savings (or shared 

losses) for a 6-month performance year 

(or performance period) during 2019, in 

the proposed manner. 

In order to use our authority under 

section 1899(i)(3) of the Act to adopt an 


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alternative payment methodology to 

calculate shared savings and shared 

losses for a 6-month performance year 

(or performance period) during 2019, we 

must determine that the alternative 

payment methodology will improve the 

quality and efficiency of items and 

services furnished to Medicare 

beneficiaries, without additional 

program expenditures. In the August 

2018 proposed rule, we explained our 

belief that the proposed approach of 

allowing ACOs that started a first or 

second agreement period on January 1, 

2016, to extend their agreement period 

for a 6-month performance year from 

January 1, 2019, through June 30, 2019, 

and of allowing entry into the program’s 

redesigned participation options 

beginning on July 1, 2019, if finalized, 

would support continued participation 

by current ACOs that must renew their 

agreements to continue participating in 

the program, while also resulting in 

more rapid progression to two-sided risk 

by ACOs within current agreement 

periods and ACOs entering the program 

for an initial agreement period. As 

discussed in the Regulatory Impact 

Analysis of the August 2018 proposed 

rule (83 FR 41915 through 41928), it 

was our belief that this approach would 

continue to allow for lower growth in 

Medicare FFS expenditures based on 

projected participation trends. 

Therefore, we did not believe that the 

proposed methodology for determining 

shared savings or shared losses for 

ACOs in a 6-month performance year (or 

performance period) during 2019 would 

result in an increase in spending beyond 

the expenditures that would otherwise 

occur under the statutory payment 

methodology in section 1899(d) of the 

Act. Further, we noted that the 

proposed approach to measuring ACO 

quality performance for a 6-month 

performance year (or performance 

period) based on quality data reported 

for CY 2019 would maintain 

accountability for the quality of care 

ACOs provide to their assigned 

beneficiaries. Participating ACOs would 

also have an incentive to perform well 

on the quality measures in order to 

maximize the shared savings they may 

receive and minimize any shared losses 

they must pay in tracks where the loss 

sharing rate is determined based on the 

ACO’s quality performance. Therefore, 

we noted our expectation that the 

proposed approach to reconciling ACOs 

for a 6-month performance year (or 

performance period) during 2019 would 

continue to lead to improvement in the 

quality of care furnished to Medicare 

FFS beneficiaries. 

In the November 2018 final rule, we 

finalized the proposed approach to 

determining financial and quality 

performance for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019. In that final rule 

(83 FR 59949 through 59950), we 

explained our belief that the approach 

to determining shared savings and 

shared losses for this 6-month 

performance year meets the 

requirements for use of our authority 

under section 1899(i)(3) of the Act 

because it will not result in an increase 

in spending beyond the expenditures 

that would otherwise occur under the 

statutory payment methodology in 

section 1899(d) of the Act and will lead 

to continued improvement in the 

quality of care furnished to Medicare 

FFS beneficiaries. 

Similarly, as discussed in the 

Regulatory Impact Analysis section of 

this final rule (see section V), we believe 

the approach to determining shared 

savings and shared losses for the 6- 

month performance year from July 1, 

2019, through December 31, 2019, for 

ACOs that enter an agreement period 

beginning on July 1, 2019, and for the 

6-month performance period from 

January 1, 2019, through June 30, 2019, 

for ACOs that elect to voluntarily 

terminate their existing participation 

agreement, effective June 30, 2019, and 

enter a new agreement period starting 

on July 1, 2019, meets the requirements 

for use of our authority under section 

1899(i)(3) of the Act. The considerations 

we described in the August 2018 

proposed rule in relation to the 

proposed methodology and in the 

November 2018 final rule in 

conjunction with finalizing the 

methodology for determining shared 

savings and shared losses for the 6- 

month performance year from January 1, 

2019, through June 30, 2019, were 

relevant in making this determination. 

Specifically, we do not believe that 

the methodology for determining shared 

savings or shared losses for ACOs in a 

6-month performance year (or 

performance period), as finalized in this 

section of this final rule, will result in 

an increase in spending beyond the 

expenditures that would otherwise 

occur under the statutory payment 

methodology in section 1899(d) of the 

Act. We believe the following factors 

would allow for lower growth in 

Medicare FFS expenditures based on 

projected participation trends: (1) In 

combination with the voluntary 6- 

month extension we finalized in the 

November 2018 final rule for ACOs 

whose agreement periods expire on 

December 31, 2018, the July 1, 2019 

agreement start date will support 

continued participation by these ACOs; 

(2) the early renewal option for the July 

1, 2019 agreement start date could also 

result in more rapid progression to twosided risk by ACOs within current 

agreement periods; and (3) the July 1, 

2019 start date encourages participation 

by new ACOs in initial agreement 

periods under redesigned participation 

options in which ACOs will more 

rapidly progress to performance-based 

risk. 

Further, we believe the approach we 

are finalizing for reconciling early 

renewal ACOs for the 6-month 

performance period from January 1, 

2019 through June 30, 2019, and for 

reconciling the 6-month performance 

year from July 1, 2019, through 

December 31, 2019, for ACOs that begin 

a new agreement period on July 1, 2019, 

will continue to lead to improvement in 

the quality of care furnished to 

Medicare FFS beneficiaries. As 

described elsewhere in this section of 

this final rule, the approach to 

measuring ACO quality performance for 

the 6-month performance year from July 

1, 2019, through December 31, 2019, or 

for the 6-month performance period 

from January 1, 2019, through June 30, 

2019, based on quality data reported for 

CY 2019, will maintain accountability 

for the quality of care ACOs provide to 

their assigned beneficiaries. 

Participating ACOs will have an 

incentive to perform well on the quality 

measures in order to maximize the 

shared savings they may receive and 

minimize any shared losses they must 

pay in tracks where the loss sharing rate 

is determined based on the ACO’s 

quality performance. 

c. Applicability of Program Policies to 

ACOs Participating in a 6-Month 

Performance Year or Performance 

Period in 2019 

In the August 2018 proposed rule (83 

FR 41854), we proposed that program 

requirements under 42 CFR part 425 

that are applicable to the ACO under the 

ACO’s chosen participation track and 

based on the ACO’s agreement start date 

would be applicable to an ACO 

participating in a 6-month performance 

year, unless otherwise stated. We 

finalized this approach with respect to 

ACOs participating in the 6-month 

performance year from January 1, 2019, 

through June 30, 2019, in the November 

2018 final rule (83 FR 59951). In that 

final rule, we explained that we 

received no comments on this general 

proposal, which would allow routine 

program operations to continue to apply 

for ACOs participating under a shorter 

performance year, and ensure 

consistency in the applicability and 


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implementation of our requirements 

across all program participants, 

including ACOs participating in a 6- 

month performance year. For these same 

reasons, we are also finalizing this 

approach with respect to ACOs 

participating in the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, and the 6- 

month performance period from January 

1, 2019, through June 30, 2019. This 

approach will ensure program policies 

are applied consistently for all ACOs 

participating in a 6-month performance 

year from January 1, 2019, through June 

30, 2019 and/or from July 1, 2019, 

through December 31, 2019, and to 

ACOs that terminate their agreement 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019. 

In this section, we describe the 

program participation options that are 

affected by our decision to forgo an 

application cycle in CY 2018 for a 

January 1, 2019 start date, and offer 

instead an application cycle in CY 2019 

for a July 1, 2019 start date. We also 

discuss modifications to program 

policies to allow for the 6-month 

performance period from January 1, 

2019, through June 30, 2019 for early 

renewal ACOs, and the 6-month 

performance year from July 1, 2019, 

through December 30, 2019. These 

modifications include updates to the 

existing provisions in § 425.609, which 

were initially established for the 6- 

month performance year from January 1, 

2019, through June 30, 2019, to extend 

them to the 6-month performance 

period from January 1, 2019, through 

June 30, 2019, and the 6-month 

performance year from July 1, 2019, 

through December 30, 2019. 

(1) Application Cycle for Use of a SNF 

3-Day Rule Waiver Beginning July 1, 

2019 

Eligible ACOs may apply for use of a 

SNF 3-day rule waiver at the time of 

application for an initial agreement or to 

renew their participation. Further, as 

described in sections II.B.2.a. and II.F. 

of this final rule, ACOs within a current 

agreement period under Track 3, or the 

Track 1+ Model may apply for a SNF 3- 

day rule waiver, which if approved 

would begin at the start of the next 

performance year. As discussed in 

section II.B.2.a. of this final rule, we are 

finalizing our proposal to make the SNF 

3-day rule waiver under the Shared 

Savings Program more broadly available 

to BASIC track ACOs (under a two-sided 

model) and ENHANCED track ACOs, 

regardless of their choice of beneficiary 

assignment methodology. 

As described in the November 2018 

final rule (83 FR 59951), in light of our 

decision to forgo an application cycle in 

CY 2018 for a January 1, 2019 agreement 

start date, we are not offering an 

opportunity for ACOs to apply for a start 

date of January 1, 2019, for initial use 

of a SNF 3-day rule waiver. The 

application cycle for the July 1, 2019 

start date will be the next opportunity 

for eligible ACOs to begin use of a SNF 

3-day rule waiver, if they apply for and 

are approved to use the waiver as part 

of the application cycle for the July 1, 

2019 start date. This includes ACOs 

within an existing agreement period in 

Track 3 that would not otherwise have 

the opportunity to apply to begin use of 

the waiver until January 1, 2020. We 

note that the existing regulation at 

§ 425.612(b), which requires 

applications for waivers to be submitted 

to CMS in the form and manner and by 

a deadline specified by CMS, provides 

the flexibility to accommodate a July 1, 

2019 SNF 3-day rule waiver start date 

for eligible ACOs in a performance year 

beginning on January 1, 2019. As a 

result, we do not need to make any 

corresponding revisions to this 

provision to accommodate the July 1, 

2019 start date. 

Final Action: We received generally 

supportive comments for our SNF 3-day 

rule waiver proposals, and we point 

readers to the related discussion in 

section II.B.2.a. of this final rule. We are 

finalizing without modification our 

proposal to offer ACOs within existing 

agreement periods in Track 3 and the 

Track 1+ Model the opportunity to 

apply to begin use of a SNF 3-day rule 

waiver as part of the application cycle 

for the July 1, 2019 start date. 

(2) Annual Certifications and ACO 

Participant List Modifications 

At the end of each performance year, 

ACOs complete an annual certification 

process. At the same time as this annual 

certification process, CMS also requires 

ACOs to review, certify and 

electronically sign official program 

documents to support the ACO’s 

participation in the upcoming 

performance year. As we stated in the 

August 2018 proposed rule (83 FR 

41855), and reiterated in the November 

2018 final rule (83 FR 59951 and 

59952), requirements for this annual 

certification, and other certifications 

that occur on an annual basis, continue 

to apply to all currently participating 

ACOs in advance of the performance 

year beginning on January 1, 2019. 

As we explained in the August 2018 

proposed rule (83 FR 41855), in the case 

of ACOs that participate for a portion of 

CY 2019 under one agreement and enter 

a new agreement period starting on July 

1, 2019, the certifications made in 

advance of the performance year starting 

on January 1, 2019, would have 

relevance only for the 6-month period 

from January 1, 2019, through June 30, 

2019. These ACOs would need to 

complete another certification as part of 

completing the requirements to enter a 

new agreement period beginning on July 

1, 2019, which would be applicable for 

the duration of their first performance 

year under the new agreement period, 

from July 1, 2019, through December 31, 

2019. 

Each ACO is required to certify its list 

of ACO participant TINs before the start 

of its agreement period, before every 

performance year thereafter, and at such 

other times as specified by CMS in 

accordance with § 425.118(a). A request 

to add ACO participants must be 

submitted prior to the start of the 

performance year in which these 

additions would become effective. In 

order to remove an ACO participant, an 

ACO must notify CMS no later than 30 

days after termination of an ACO 

participant agreement, and the entity is 

deleted from the ACO participant list 

effective as of the termination date of 

the ACO participant agreement. 

However, absent unusual 

circumstances, the ACO participant list 

that was certified prior to the start of the 

performance year is used for the 

duration of the performance year. An 

ACO’s certified ACO participant list for 

a performance year is used to determine 

beneficiary assignment for the 

performance year and therefore also the 

ACO’s quality reporting samples and 

financial performance. See 

§ 425.118(b)(3) and see also Medicare 

Shared Savings Program ACO 

Participant List and Participant 

Agreement Guidance (July 2018, version 

5), available at https://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ 

Downloads/ACO-Participant-ListAgreement.pdf. As we explained in the 

August 2018 proposed rule, these 

policies would apply for ACOs 

participating in a 6-month performance 

year consistent with the terms of the 

existing regulations. 

As we explained in the August 2018 

proposed rule (83 FR 41855) and 

reiterated in the November 2018 final 

rule (83 FR 59952), ACOs that started a 

first or second agreement period on 

January 1, 2016, that extend their 

agreement period for a 6-month 

performance year beginning on January 

1, 2019, will have the opportunity 

during 2018 to make changes to their 

ACO participant list to be effective for 

the 6-month performance year from 


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January 1, 2019, through June 30, 2019. 

If these ACOs elect to continue their 

participation in the program for a new 

agreement period starting on July 1, 

2019, they would have an opportunity 

to submit a new ACO participant list as 

part of their renewal application for the 

July 1, 2019 start date. 

An ACO that enters a new agreement 

period beginning on July 1, 2019, will 

submit and certify its ACO participant 

list for the agreement period beginning 

on July 1, 2019, according to the 

requirements in § 425.118(a). The ACO’s 

approved ACO participant list will 

remain in effect for the full performance 

year from July 1, 2019, through 

December 31, 2019. These ACOs will 

have the opportunity to add or delete 

ACO participants prior to the start of the 

next performance year, following the 

established schedule. Any additions to 

the ACO participant list that are 

approved by CMS will become effective 

at the start of performance year 2020. 

The program’s current regulations 

prevent duplication of shared savings 

payments; thus, under § 425.114, ACOs 

may not participate in the Shared 

Savings Program if they include an ACO 

participant that participates in another 

Medicare initiative that involves shared 

savings. In addition, under 

§ 425.306(b)(2), each ACO participant 

that submits claims for services used to 

determine the ACO’s assigned 

beneficiary population must be 

exclusive to one Shared Savings 

Program ACO. If, during a benchmark or 

performance year (including the 3- 

month claims run out for such 

benchmark or performance year), an 

ACO participant that participates in 

more than one ACO submits claims for 

services used in assignment, CMS will 

not consider any services billed through 

the TIN of the ACO participant when 

performing assignment for the 

benchmark or performance year, and the 

ACO may be subject to the pretermination actions set forth in 

§ 425.216, termination under § 425.218, 

or both. 

In the August 2018 proposed rule (83 

FR 41855 and 41856), we noted the 

following examples regarding ACO 

participants that submit claims for 

services that are used in assignment, 

and that are participating in a Shared 

Savings Program ACO for a 12-month 

performance year during 2019 (such as 

a 2017 starter, 2018 starter, or 2015 

starter that deferred renewal until 2019). 

If the ACO remains in the program 

under its current agreement past June 

30, 2019, these ACO participants would 

not be eligible to be included on the 

ACO participant list of another ACO 

applying to enter a new agreement 

period under the program beginning on 

July 1, 2019. An ACO participant in 

these circumstances could be added to 

the ACO participant list of a July 1, 2019 

starter effective for the performance year 

beginning on January 1, 2020, only if it 

is no longer participating in the other 

Shared Savings Program ACO and is not 

participating in another initiative 

identified in § 425.114(a). 

If an ACO starting a 12-month 

performance year on January 1, 2019, 

terminates its participation agreement 

with an effective date of termination of 

June 30, 2019, the effective end date of 

the ACO participants’ participation 

would also be June 30, 2019. Such 

ACOs that elect to enter a new 

agreement period beginning on July 1, 

2019, can make ACO participant list 

changes that would be applicable for 

their new agreement period. This means 

that the ACO participants of the 

terminating ACO could choose to be 

added to the ACO participant list of 

another July 1, 2019 starter, effective for 

the performance year beginning on July 

1, 2019. 

Comment: Some commenters urged 

CMS to provide ACOs with 

opportunities to add and delete ACO 

participants throughout the performance 

years (or performance period) during 

2019 and to clarify when such 

opportunities would be available. One 

commenter encouraged CMS to allow 

ACO participants to switch ACOs 

effective for the July 1, 2019 agreement 

start date, even if the ACO participant 

is in an ACO with an existing 

participation agreement that expires 

after July 1, 2019. 

Response: As we described in the 

August 2018 proposed rule, an ACO that 

enters a new agreement period 

beginning on July 1, 2019, would submit 

and certify its ACO participant list 

before July 1, 2019, according to the 

existing requirements in § 425.118(a). 

We do not believe it is operationally 

feasible to allow, as the commenters 

suggest, ACOs within a 12-month 

performance year beginning on January 

1, 2019, to make ACO participant list 

changes effective for the second half of 

the year, unless the ACO is an early 

renewal ACO that elects to voluntarily 

terminate its existing participation 

agreement, effective June 30, 2019, and 

enter a new agreement period starting 

on July 1, 2019. For ACOs participating 

in a 12-month performance year during 

2019, such mid-year changes to their 

ACO participant lists would alter the 

2019 prospective assignment lists (if 

applicable), and may have other 

significant operational impacts (such as 

on benchmark calculations). Therefore, 

we will allow ACOs to submit ACO 

participant change requests in 

accordance with usual program 

procedures in order to indicate 

additions, updates, and deletions to 

their existing ACO participant lists and, 

if applicable, SNF affiliate lists at the 

following times: During 2018, in 

advance of a 12-month or 6-month 

performance year beginning on January 

1, 2019; and as part of the application 

cycle for a July 1, 2019 agreement start 

date for ACOs applying to enter, renew 

or re-enter an agreement period in the 

Shared Savings Program. 

Comment: More generally, a few 

commenters suggest that there is a lost 

opportunity for ACO participants to 

collaborate if some join an ACO for the 

6-month performance year beginning on 

July 1, 2019, and other ACO participants 

are added to the same ACO for the 

performance year beginning on January 

1, 2020. 

Response: Although it is possible that 

ACOs with a July 1, 2019 agreement 

start date may be precluded from adding 

certain providers and suppliers to their 

ACO participant list for the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, because 

they are already participating in another 

ACO, there will be only a short amount 

of time before the ACO may modify its 

ACO participant list for the performance 

year beginning January 1, 2020, to 

include these entities. In addition, this 

initial 6-month performance year will 

give the original ACO participants time 

to gain experience with the ACO and its 

selected payment track before additional 

ACO participants are added at the start 

of performance year 2020. We also note 

that ACO participant list additions are 

optional. We encourage ACOs to 

carefully consider the impact of 

modifying their ACO participant lists, 

given the potential impact of these 

changes on a variety of program 

operations, including assignment, the 

ACO’s historical benchmark, 

performance-year financial calculations, 

and the quality reporting sample. 

(3) Repayment Mechanism 

Requirements 

ACOs must demonstrate that they 

have in place an adequate repayment 

mechanism prior to entering a two-sided 

model. Consistent with the final policy 

described in section II.A.6.c of this final 

rule, and the new provision at 

§ 425.204(f)(6), the repayment 

mechanism must be in effect for the 

duration of an ACO’s participation in a 

two-sided model plus 12 months 

following the conclusion of the 

agreement period. An ACO may fulfill 

this requirement by establishing a 

repayment mechanism that covers the 


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entire agreement period plus an 

additional 12 months or by obtaining a 

repayment mechanism with a term of at 

least the first two performance years in 

which the ACO is participating under a 

two-sided model and that provides for 

automatic, annual 12-month extensions 

of the repayment mechanism through 

the remaining duration of the agreement 

period such that the repayment 

mechanism will eventually remain in 

effect until 12 months following the 

conclusion of the agreement period. 

Consistent with the final policy 

described in section II.A.6.c. of this final 

rule and in § 425.204(f)(4)(iv), a 

renewing ACO that is currently 

participating under a two-sided model 

and enters a new agreement period 

beginning on July 1, 2019, will also be 

permitted to use its existing repayment 

mechanism to establish its ability to 

repay shared losses incurred for 

performance years in its new agreement 

period. An ACO choosing this option 

would be required to either extend the 

term of the existing repayment 

mechanism such that it is in effect until 

12 months following the end of the new 

agreement period or extend the term of 

the existing repayment mechanism, if 

necessary, such that it covers the first 

two performance years of the new 

agreement period and provides for 

automatic, annual 12-month extensions 

of the repayment mechanism, which 

will result in the repayment mechanism 

eventually remaining in effect for 12 

months after the end of the new 

agreement period. The ACO would also 

be required to increase the amount of its 

repayment mechanism to reflect the 

new repayment mechanism amount 

determined for its new agreement 

period, unless CMS notifies the 

renewing ACO that the repayment 

mechanism amount for its new 

agreement period is equal to or lower 

than its existing repayment mechanism 

amount. If the repayment mechanism 

amount calculated for the new 

agreement period is lower than the 

existing repayment mechanism amount, 

the ACO would be required to maintain 

the repayment mechanism at the 

existing higher amount. 

We are also finalizing a policy that, 

for agreement periods beginning on or 

after July 1, 2019, we will recalculate 

the estimated amount of the ACO’s 

repayment mechanism arrangement 

before the second and each subsequent 

performance year in which the ACO is 

under a two-sided model in the BASIC 

track or ENHANCED track. For example, 

for an ACO with a July 1, 2019 

agreement start date, we will recalculate 

the amount of the ACO’s repayment 

mechanism, in accordance with our 

final regulation at § 425.204(f)(4), before 

the start of performance year 2020. If the 

recalculated repayment mechanism 

amount exceeds the existing repayment 

mechanism amount by at least 50 

percent or $1,000,000, whichever is the 

lesser value, we would require the ACO 

to increase its repayment mechanism 

amount, consistent with the approach 

described in section II.A.6.c. of this final 

rule and § 425.204(f)(4)(iii). 

We refer readers to section II.A.6.c. of 

this final rule for a discussion of 

comments received on the proposed 

changes to the repayment mechanism 

requirements. 

(4) Quality Reporting and Quality 

Measure Sampling 

As described in the August 2018 

proposed rule (83 FR 41856 through 

41858), to determine an ACO’s quality 

performance during either 6-month 

performance year during 2019, we 

proposed to use the ACO’s quality 

performance for the 2019 reporting 

period as determined under § 425.502. 

For ACOs that participate in only one of 

the 6-month performance years (such as 

ACOs that started a first or second 

agreement period on January 1, 2016, 

that extend their agreement period by 6 

months and do not continue in the 

program past June 30, 2019, or ACOs 

that enter an initial agreement period 

beginning on July 1, 2019), we would 

also account for the ACO’s quality 

performance using quality measure data 

reported for the 12-month CY 2019. 

ACOs that terminate their agreement 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019, would also be required to 

complete quality reporting for the 2019 

reporting period, and we would 

determine quality performance for the 

performance period from January 1, 

2019, through June 30, 2019, in the 

same manner as for ACOs with a 6- 

month performance year from January 1, 

2019, through June 30, 2019, that enter 

a new agreement period beginning on 

July 1, 2019. 

As we explained in the August 2018 

proposed rule, the following 

considerations support this proposed 

approach. For one, use of a 12-month 

period for quality measure assessment 

maintains alignment with the program’s 

existing quality measurement approach, 

and aligns with the proposed use of 12 

months of expenditure data (for CY 

2019) in determining the ACO’s 

financial performance. Also, this 

approach would continue to align the 

program’s quality reporting period with 

policies under the Quality Payment 

Program. ACO professionals that are 

MIPS eligible clinicians (not QPs based 

on their participation in an Advanced 

APM or otherwise excluded from MIPS) 

would continue to be scored under 

MIPS using the APM scoring standard 

that covers all of 2019. (For further 

discussion of the interactions with the 

Quality Payment Program see section 

II.A.7.c.(8). of this final rule.) Second, 

the measure specifications for the 

quality measures used under the 

program require 12 months of data. See 

for example, the Shared Savings 

Program ACO 2018 Quality Measures 

Narrative Specification Document 

(January 20, 2018), available at https:// 

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/sharedsavings

program/Downloads/2018-reportingyear-narrative-specifications.pdf. Third, 

in light of our proposal to use 12 

months of expenditures (based on CY 

2019) in determining shared savings and 

shared losses for a 6-month performance 

year, it would also be appropriate to 

hold ACOs accountable for the quality 

of the care furnished to their assigned 

beneficiaries during this same 

timeframe. Fourth, and lastly, using an 

annual quality reporting cycle for the 6- 

month performance year would avoid 

the need to introduce new reporting 

requirements, and therefore potential 

additional burden on ACOs, that would 

arise from a requirement that ACOs 

report quality separately for each 6- 

month performance year during CY 

2019. 

The ACO participant list is used to 

determine beneficiary assignment for 

purposes of generating the quality 

reporting samples. Beneficiary 

assignment is performed using the 

applicable assignment methodology 

under § 425.400, either preliminary 

prospective assignment or prospective 

assignment, with excluded beneficiaries 

removed under § 425.401(b), as 

applicable. The samples for claimsbased measures are typically 

determined based on the assignment list 

for calendar year quarter 4. The sample 

for quality measures reported through 

the CMS Web Interface is typically 

determined based on the beneficiary 

assignment list for calendar year quarter 

3. The CAHPS for ACOs survey sample 

is typically determined based on the 

beneficiary assignment list for calendar 

year quarter 2. 

As discussed in section II.A.7.c.(2). of 

this final rule, ACOs that participate in 

both 6-month performance years during 

2019 may use a different ACO 

participant list for each performance 

year (for example, in the case of an ACO 

that started a first or second agreement 

period on January 1, 2016, that extends 

its current agreement period by 6 

months, and then makes changes to its 


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ACO participant list as part of its 

renewal application for a July 1, 2019 

start date). Further, as explained in 

section II.A.7.c.(4). of the August 2018 

proposed rule, under our proposed 

approach, it was possible that different 

assignment methodologies and 

assignment windows would be used to 

assign beneficiaries to ACOs for the two 

6-month performance years during 

2019. Therefore, we considered which 

certified ACO participant list and 

assignment methodology to use to 

identify the samples of beneficiaries for 

quality reporting for the entire 2019 

reporting period for ACOs participating 

in one or both of the 6-month 

performance years during 2019 (or the 

6-month performance period for ACOs 

that elect to voluntarily terminate their 

existing participation agreement, 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019). 

For purposes of determining the 

quality reporting samples for the 2019 

reporting period, we proposed to use the 

ACO’s most recent certified ACO 

participant list available at the time the 

quality reporting samples are generated, 

and the assignment methodology most 

recently applicable to the ACO for a 

2019 performance year. We explained 

our belief that this approach would 

result in the most relevant beneficiary 

samples for 2019 quality reporting. For 

instance, for purposes of measures 

reported by ACOs through the CMS Web 

Interface, ACOs must work together 

with their ACO participants and ACO 

providers/suppliers to abstract data 

from medical records for reporting. In 

the case of an ACO that started a new 

agreement period on July 1, 2019, basing 

assignment for the CMS Web Interface 

quality reporting sample on the most 

recent ACO participant list would allow 

this coordination to occur between the 

ACO and its current ACO participant 

TINs, rather than requiring the ACO to 

coordinate with ACO participants from 

a prior performance year that may no 

longer be included on the ACO 

participant list for the agreement period 

beginning on July 1, 2019. Further, 

basing the sample for the CAHPS for 

ACOs survey on the most recent ACO 

participant list could ensure the ACO 

receives feedback from the ACO’s 

assigned beneficiaries on their 

experience of care with ACO 

participants and ACO providers/ 

suppliers based on the ACO’s current 

ACO participant list, rather than based 

on its prior ACO participant list. This 

could allow for more meaningful care 

coordination improvements by the ACO 

in response to the feedback from the 

survey. Additionally, we believed this 

proposed approach to determining the 

ACO’s quality reporting samples was 

also appropriate for an ACO that 

participates in only one 6-month 

performance year during 2019 because 

the most recent certified ACO 

participant list applicable for the 

performance year would also be the 

certified ACO participant list that is 

used to determine financial 

performance. 

For ACOs that enter an agreement 

period beginning on July 1, 2019, 

including new ACOs, ACOs that 

extended their prior participation 

agreement for the 6-month performance 

year from January 1, 2019, through June 

30, 2019, and ACOs that start a 12- 

month performance year on January 1, 

2019, and terminate their participation 

agreement with an effective date of 

termination of June 30, 2019, and enter 

a new agreement period beginning on 

July 1, 2019, we proposed to use the 

certified ACO participant list for the 

performance year starting on July 1, 

2019, to determine the quality reporting 

samples for the 2019 reporting period. 

This most recent certified ACO 

participant list would therefore be used 

to determine the quality reporting 

samples for the 2019 reporting year, 

which would be used to determine 

performance for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019 (or performance 

period for ACOs that elect to voluntarily 

terminate their existing participation 

agreement, effective June 30, 2019, and 

enter a new agreement period starting 

on July 1, 2019) and the 6-month 

performance year from July 1, 2019, 

through December 31, 2019. 

Beneficiary assignment for purposes 

of generating the quality reporting 

samples would be based on the 

assignment methodology applicable to 

the ACO during its 6-month 

performance year from July 1, 2019, 

through December 31, 2019, under 

§ 425.400, either preliminary 

prospective assignment or prospective 

assignment, with excluded beneficiaries 

removed under § 425.401(b), as 

applicable. We anticipated the 

assignment windows for the quality 

reporting samples would be as follows 

based on our operational experience: (1) 

Samples for claims-based measures 

would be determined based on the 

assignment list for calendar year quarter 

4; (2) the sample for CMS Web Interface 

measures would be determined based 

on the assignment list for calendar year 

quarter 3, which equates to the ACO’s 

first quarter of its 6-month performance 

year beginning on July 1, 2019; and (3) 

the sample for the CAHPS for ACOs 

survey would be determined based on 

the initial prospective or preliminary 

prospective assignment list for the 6- 

month performance year beginning on 

July 1, 2019. 

We believed it would be necessary to 

use the initial assignment list for the 

CAHPS for ACOs survey sample, to 

make use of the most recent available 

prospective assignment list data and 

quarterly preliminary prospective 

assignment data for ACOs for the 6- 

month performance year beginning on 

July 1, 2019. Further, for CMS Web 

Interface measures and claims-based 

measures, the proposed approach would 

be consistent with the current 

methodology for determining the 

samples. 

We proposed to specify the ACO 

participant list that would be used in 

determining the quality reporting 

samples for measuring quality 

performance for the 6-month 

performance years in a new section of 

the regulations at § 425.609(b) and (c). 

In the November 2018 final rule (83 

FR 59953 through 59955), we finalized 

an approach under which we will use 

the ACO’s latest certified ACO 

participant list (the ACO participant list 

effective on January 1, 2019) to 

determine the quality reporting samples 

for the 2019 reporting period for ACOs 

that extend their participation 

agreement for the 6-month performance 

year from January 1, 2019, through June 

30, 2019. This policy is specified at 

§ 425.609(b). 

Comment: One commenter supported 

CMS’ proposal to require ACOs that 

participate in both the 6-month 

performance year (or performance 

period) from January 1, 2019, through 

June 30, 2019, and the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, to report 

the CMS Web Interface measures only 

once for the 2019 reporting period, and 

to use the most recent ACO participant 

list as of July 1, 2019, to determine the 

quality reporting samples. The 

commenter noted that this proposed 

approach would reduce administrative 

burden for participating providers. 

However, several comments indicated 

commenters mistakenly believed that 

ACOs participating in both the 6-month 

performance year (or performance 

period) from January 1, 2019, through 

June 30, 2019, and the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, would be 

required to report quality data twice for 

CY 2019. One commenter stated that 

reporting twice would be expensive and 

time consuming. 

Response: As we explained in the 

November 2018 final rule (83 FR 59954), 


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because we proposed to use quality 

performance during all of CY 2019 to 

assess quality performance in both of 

the 6-month performance years (or 

performance period) in CY 2019, we 

proposed that ACOs would only be 

required to report quality once for CY 

2019, regardless of whether they 

complete their participation in the 

program following the conclusion of the 

6-month performance year from January 

1, 2019, through June 30, 2019, or if 

they renew for a new agreement period 

beginning on July 1, 2019. Therefore, 

ACOs participating in the 6-month 

performance year from January 1, 2019, 

through June 30, 2019, and the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, will only 

report quality once for CY 2019. We will 

apply the program’s sampling 

methodology, as we have described in 

this section of this final rule, to 

determine the beneficiaries eligible for 

the samples for claims-based measures 

(as calculated by CMS), CMS Web 

Interface reporting, and the CAHPS for 

ACOs survey. We will follow the same 

approach to determine quality 

performance for the 6-month 

performance period from January 1, 

2019, through June 30, 2019, and the 6- 

month performance year from July 1, 

2019, through December 31, 2019, for 

ACOs that elect to voluntarily terminate 

their existing participation agreement, 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019. 

We also note that for the 2019 

reporting period, ACOs would be 

required to report quality data through 

the CMS Web Interface, according to the 

method and timing of submission 

established by CMS. The period for 

reporting quality data through the CMS 

Web Interface typically occurs for a 12- 

week period between January and 

March, following the conclusion of the 

calendar year. Thus, ACOs that 

participate in a 6-month performance 

year from July 1, 2019, through 

December 31, 2019, along with all other 

Shared Savings Program ACOs that 

participate in the program in 2019 

would be required to report for the 2019 

reporting period, and would report 

quality data through the CMS Web 

Interface during the designated 

reporting period in early 2020. 

Similarly, ACOs participating in the 6- 

month performance year from July 1, 

2019, through December 31, 2019, 

would be required to contract with a 

CMS-approved vendor to administer the 

CAHPS for ACOs survey for the 2019 

reporting period, consistent with 

program-wide policies applicable to all 

other ACOs. 

Final Action: After considering the 

comments received, we are finalizing 

our proposal to determine an ACO’s 

quality performance during the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, using the 

ACO’s quality performance for the 12- 

month CY 2019 (2019 reporting period) 

as determined under § 425.502. The 

approach we finalized in the November 

2018 final rule, for determining an 

ACO’s quality performance for the 6- 

month performance year from January 1, 

2019, through June 30, 2019, using the 

ACO’s quality performance for the 12- 

month CY 2019 (2019 reporting period) 

as determined under § 425.502, will 

apply to determine quality performance 

for the performance period from January 

1, 2019, through June 30, 2019, for 

ACOs that elect to voluntarily terminate 

their existing participation agreement, 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019. 

We are also finalizing our proposal 

that the ACO participant list finalized 

for the first performance year of the 

ACO’s agreement period beginning on 

July 1, 2019, is used to determine the 

quality reporting samples for the 2019 

reporting year for the following ACOs 

that also participate in a performance 

year or performance period from 

January 1, 2019, through June 30, 2019: 

(1) An ACO that extends its 

participation agreement for a 6-month 

performance year from January 1, 2019, 

through June 30, 2019, and enters a new 

agreement period beginning on July 1, 

2019; and (2) an ACO that participates 

in the program for the first 6 months of 

a 12-month performance year during 

2019, but elects to voluntarily terminate 

its existing participation agreement 

effective June 30, 2019, and enters a 

new agreement period starting on July 1, 

2019. This policy will be specified in 

revisions to § 425.609(b)(2). 

We are also finalizing our proposal to 

include a provision at § 425.609(c)(2), to 

specify that for purposes of the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, the ACO 

participant list finalized for the first 

performance year of the ACO’s 

agreement period beginning on July 1, 

2019, is used to determine the quality 

reporting samples for the 2019 reporting 

year for all ACOs. 

(5) Applicability of Extreme and 

Uncontrollable Circumstances Policies 

In section II.E.4. of the August 2018 

proposed rule (83 FR 41899 through 

41906), we proposed that the policies 

for addressing extreme and 

uncontrollable circumstances would 

apply to ACOs participating in each of 

the 6-month performance years during 

2019 (or the 6-month performance 

period for ACOs that elect to voluntarily 

terminate their existing participation 

agreement, effective June 30, 2019, and 

enter a new agreement period starting 

on July 1, 2019). Because we had 

proposed to use 12 months of data, 

based on the calendar year, to determine 

quality and financial performance for 

the two 6-month performance years (or 

performance period) during 2019, we 

explained our belief that it would be 

necessary to account for disasters 

occurring in any month(s) of CY 2019 

for ACOs participating in a 6-month 

performance year (or performance 

period) during 2019 regardless of 

whether the ACO is actively 

participating in the Shared Savings 

Program at the time of the disaster. 

Therefore, for ACOs affected by a 

disaster in any month of 2019, we 

would use the alternative scoring 

methodology specified in § 425.502(f) to 

determine the quality performance score 

for the 2019 quality reporting period, if 

the reporting period is not extended. In 

order to determine financial 

performance for ACOs with a 6-month 

performance year (or performance 

period) in CY 2019 that are affected by 

an extreme or uncontrollable 

circumstance during CY 2019, we 

proposed to first determine shared 

losses for the ACO over the full calendar 

year, adjust the ACO’s losses for 

extreme and uncontrollable 

circumstances, and then determine the 

portion of shared losses for the 6-month 

performance year (or performance 

period) according to the methodology 

proposed under § 425.609. We proposed 

to specify the applicability of these 

disaster relief policies to determining an 

ACO’s financial and quality 

performance for a 6-month performance 

year (or performance period) in a new 

section of the regulations at 

§ 425.609(d). 

We also proposed to apply our 

policies regarding extreme and 

uncontrollable circumstances to ACOs 

that are liable for a pro-rated share of 

losses, determined based on their 

financial performance during the entire 

performance year, as a consequence of 

voluntary termination of a 12-month 

performance year after June 30, or 

involuntary termination by CMS. We 

proposed that the amount of shared 

losses calculated for the calendar year 

would be adjusted to reflect the number 

of months and the percentage of the 

assigned beneficiary population affected 

by extreme and uncontrollable 


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circumstances, before we calculate the 

pro-rated amount of shared losses for 

the portion of the year the ACO 

participated in the Shared Savings 

Program. For ACOs that are 

involuntarily terminated during the 6- 

month performance year from July 1, 

2019, through December 31, 2019, prorated shared losses for the 6-month 

performance year would be determined 

based on assigned beneficiary 

expenditures for the full calendar year 

2019 and then would be pro-rated to 

account for the partial year of 

participation prior to the involuntary 

termination and the impact of extreme 

and uncontrollable circumstances on 

the ACO. We proposed to specify these 

policies in modifications to 

§ 425.221(b), and through new 

provisions at § 425.605(f)(2)(i) (a new 

section of the regulations establishing 

the BASIC track), § 425.606(i)(2)(i) 

(Track 2), and § 425.610(i)(2)(i) 

(ENHANCED track). 

In the November 2018 final rule (83 

FR 59968 through 59979), we extended 

the policies for addressing the impact of 

extreme and unusual circumstances on 

financial and quality performance that 

we had previously adopted for 

performance year 2017 to performance 

year 2018 and subsequent years. The 

policies governing the calculation of 

shared losses in the event of extreme 

and unusual circumstances are at 

§ 425.606(i) for Track 2. For Track 3, as 

renamed in this final rule the 

ENHANCED track, the policies are at 

§ 425.610(i). The policies for 

determining the ACO’s quality 

performance score are at § 425.502(f). In 

a new section of the regulations at 

§ 425.609(d), we specified that these 

policies would also apply to the 

determination of an ACO’s financial and 

quality performance for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019. 

Final Action: There were no 

comments directed specifically at our 

proposals with respect to the 

application of our policies for 

addressing the impact of extreme and 

uncontrollable circumstances to ACOs 

participating in a 6-month performance 

year from July 1, 2019, through 

December 31, 2019. We are finalizing as 

proposed the policies for determining 

the financial and quality performance 

for the 6-month performance year from 

July 1, 2019, through December 31, 

2019, for ACOs affected by extreme and 

uncontrollable circumstances during CY 

2019. We are finalizing revisions to 

§ 425.609(d)(1) to add to a reference to 

the provision at § 425.609(c), which 

governs the determination of shared 

losses for ACOs participating in a 6- 

month performance year from July 1, 

2019, through December 31, 2019. 

Therefore, for ACOs with a 6-month 

performance year from July 1, 2019, 

through December 31, 2019, that are 

affected by an extreme or uncontrollable 

circumstance during CY 2019, we will 

first determine shared losses for the 

ACO over the full calendar year, adjust 

the ACO’s losses for extreme and 

uncontrollable circumstances, and then 

determine the portion of shared losses 

for the 6-month performance year (or 

performance period) according to the 

methodology under § 425.609(c). As 

discussed in section II.A.7.c.(4) of this 

final rule and as specified in the 

regulations at § 425.609(c)(2), for ACOs 

participating in the 6-month 

performance year from July 1, 2019, 

through December 31, 2019 we will use 

the ACO’s quality performance for the 

2019 reporting period to determine the 

ACO’s quality performance score as 

specified in § 425.502. As finalized in 

the November 2018 final rule, the 

provision at § 425.502(f) specifies the 

policies for determining an ACO’s 

quality performance score when the 

ACO is affected by extreme and 

uncontrollable circumstances. 

Therefore, these policies will also apply 

to the determination of an ACO’s quality 

performance during the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, in the event 

the ACO is affected by an extreme and 

uncontrollable circumstance during CY 

2019. 

There were no comments directed 

specifically at our proposals with 

respect to the application of our policies 

for addressing the impact of extreme 

and uncontrollable circumstances to 

ACOs participating in a performance 

period from January 1, 2019, through 

June 30, 2019, because they elect to 

voluntarily terminate their existing 

participation agreement, effective June 

30, 2019, and enter a new agreement 

period starting on July 1, 2019. We are 

finalizing our proposal to adjust shared 

losses for the 6-month performance 

period from January 1, 2019, through 

June 30, 2019, to address the impact of 

extreme and uncontrollable 

circumstances on ACOs that elect to 

voluntarily terminate their existing 

participation agreement, effective June 

30, 2019, and enter a new agreement 

period starting on July 1, 2019. As we 

previously described in section 

II.A.7.b.(3). of this final rule, early 

renewal ACOs will be reconciled for the 

6-month performance period from 

January 1, 2019, through June 30, 2019, 

according to § 425.609(b). Further, we 

are finalizing as proposed the revisions 

to § 425.606(i)(2)(i) (Track 2) and 

§ 425.610(i)(2)(i) (ENHANCED track) in 

order to apply the disaster relief policies 

in determining shared losses for the 6- 

month performance period from January 

1, 2019, through June 30, 2019, for early 

renewing ACOs. 

More generally, there were no 

comments directed at our proposals to 

revise § 425.606(i)(2)(i) (Track 2) and 

§ 425.610(i)(2)(i) (ENHANCED track), 

and to add a new provision at 

§ 425.605(f) (BASIC track), to apply the 

disaster relief policies to ACOs 

accountable for pro-rated shared losses 

as a payment consequence of early 

termination under the revisions to 

§ 425.221(b) that we are making in this 

final rule. We are finalizing these 

policies as proposed. These policies will 

also apply to determining pro-rated 

shared losses for ACOs that are 

involuntarily terminated from a 6- 

month performance year from July 1, 

2019, through December 31, 2019. 

Lastly, as discussed in II.A.2. of this 

final rule, we are finalizing our 

proposed addition of the new BASIC 

track. Therefore, we are also revising 

§ 425.609(d)(1) to add a cross reference 

to § 425.605(f) so that the policies for 

adjusting shared losses for extreme and 

uncontrollable circumstances will apply 

to ACOs participating in two-sided 

models of the BASIC track during the 6- 

month performance year from July 1, 

2019, through December 31, 2019. 

(6) Payment and Recoupment for 6- 

Month Performance Years 

In the August 2018 proposed rule (83 

FR 41858), we proposed policies 

regarding CMS’ notification to ACOs of 

shared savings and shared losses, and 

the timing for an ACO’s repayment of 

shared losses, for both the 6-month 

performance year (or performance 

period) from January 1, 2019, through 

June 30, 2019, and the 6-month 

performance year from July 1, 2019, 

through December 31, 2019. We 

proposed to provide separate 

reconciliation reports for each 6-month 

performance year, and to pay shared 

savings or recoup shared losses 

separately for each 6-month 

performance year. Since we proposed to 

perform financial reconciliation for both 

6-month performance years during 2019 

after the end of CY 2019, we anticipated 

that financial performance reports for 

both of these 6-month performance 

years would be available in Summer 

2020, similar to the expected timeframe 

for issuing financial performance 

reports for the 12-month 2019 

performance year (and for 12-month 

performance years generally). 


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We proposed to apply the same 

policies regarding notification of shared 

savings and shared losses, and the 

timing of repayment of shared losses, to 

ACOs in 6-month performance years 

that apply under our current regulations 

to ACOs in 12-month performance 

years. We proposed to specify in a new 

regulation at § 425.609 that CMS would 

notify the ACO of shared savings or 

shared losses for each reconciliation, 

consistent with the notification 

requirements specified in § 425.604(f), 

proposed § 425.605(e), § 425.606(h), and 

§ 425.610(h). Specifically, we proposed 

that: (1) CMS notifies an ACO in writing 

regarding whether the ACO qualifies for 

a shared savings payment, and if so, the 

amount of the payment due; (2) CMS 

provides written notification to an ACO 

of the amount of shared losses, if any, 

that it must repay to the program; and 

(3) if an ACO has shared losses, the 

ACO must make payment in full to CMS 

within 90 days of receipt of notification. 

Because we anticipated results for 

both 6-month performance years would 

be available at approximately the same 

time, we acknowledged that there is a 

possibility that an ACO could be eligible 

for shared savings for one 6-month 

performance year and liable for shared 

losses for the other 6-month 

performance year. Although the same 

12-month period would be used to 

determine performance, the outcome for 

each partial calendar year performance 

year could be different because of 

differences in the ACO’s assigned 

population (for example, resulting from 

potentially different ACO participant 

lists and the use of different assignment 

methodologies), different benchmark 

amounts resulting from the different 

benchmarking methodologies applicable 

to each agreement period, and/or 

differences in the ACO’s track of 

participation. 

In earlier rulemaking, we considered 

the circumstance where, over the course 

of its participation in the Shared 

Savings Program, an ACO may earn 

shared savings in some years and incur 

losses in other years. We considered 

whether the full amount of shared 

savings payments should be paid in the 

year in which they accrue, or whether 

some portion should be withheld to 

offset potential future losses. However, 

we did not finalize a withholding from 

shared savings. See 76 FR 67941 and 

67942. Instead, an ACO’s repayment 

mechanism provides a possible source 

of recoupment for CMS should the ACO 

fail to timely pay shared losses within 

the 90-day repayment window. 

We revisited these considerations 

about withholding shared savings 

payments in light of our proposed 

approach to determining ACO 

performance for the two 6-month 

performance years at approximately the 

same time following the conclusion of 

CY 2019. We proposed to conduct 

reconciliation for each 6-month 

performance year at the same time. After 

reconciliation for both 6-month 

performance years is complete, we 

would furnish notice of shared savings 

or shared losses due for each 

performance year at the same time, 

either in a single notice or two separate 

notices. For ACOs that have mixed 

results for the two 6-month performance 

years of 2019, being eligible for a shared 

savings payment for one performance 

year and owing shared losses for the 

other performance year, we proposed to 

reduce the shared savings payment for 

one 6-month performance year by the 

amount of any shared losses owed for 

the other 6-month performance year. 

This approach would guard against 

CMS making a payment to an 

organization that has an unpaid debt to 

the Medicare program, and therefore 

would be protective of the Trust Funds. 

We believed this approach would also 

be less burdensome for ACOs, for 

example, in the event that the ACO’s 

shared losses are completely offset by 

the ACO’s shared savings. We noted that 

this approach to offsetting shared losses 

against any shared savings could result 

in a balance of either unpaid shared 

losses that must be repaid, or a 

remainder of shared savings that the 

ACO would be eligible to receive. 

We proposed to specify these policies 

on payment and recoupment for ACOs 

in 6-month performance years within 

CY 2019 in a new section of the 

regulations at § 425.609(e). In the 

November 2018 final rule (83 FR 59955 

and 59956), we finalized at § 425.609(e) 

requirements for CMS to notify ACOs of 

shared savings and shared losses, and 

the timing for an ACO’s repayment of 

shared losses, for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019. 

Comment: Some commenters 

explained that receiving separate 

reconciliation reports for the two 

performance periods only adds to the 

complexity of the program, including 

deciphering appropriate financial 

distributions, if applicable. 

Response: Given that we are 

determining financial performance for 

two separate 6-month performance 

years, based on separate historical 

benchmark calculations, financial 

models, and assigned beneficiary 

populations, we believe it necessary to 

provide separate reconciliation report 

packages to ACOs for each 6-month 

performance year. We believe ACOs are 

interested in the specific details of the 

performance calculations, and would 

also to seek to understand how their 

performance compares between the two 

6-month performance years (if 

applicable). 

Final Action: Although we received 

comments on our proposed approach to 

notifying ACOs of their results for each 

6-month performance year separately, 

we did not receive comments 

addressing our proposal regarding the 

timing for ACOs’ repayment of shared 

losses for 6-month performance year 

from July 1, 2019, through December 31, 

2019, or on our proposal to reduce the 

shared savings payment for one 6-month 

performance year by the amount of any 

shared losses owed for the other 6- 

month performance year for ACOs that 

have mixed results for the two 6-month 

performance years of 2019. 

After considering the comments 

received, we are finalizing the proposed 

policies on payment and recoupment for 

the 6-month performance year from July 

1, 2019, through December 31, 2019, 

and the performance period from 

January 1, 2019, through June 30, 2019, 

for ACOs that terminate their agreement 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019. These policies will be specified in 

modifications to § 425.609(e). These 

policies are consistent with the 

program’s existing policies for 

notification to ACOs about payment and 

recoupment for 12-month performance 

years, and for the 6-month performance 

year from January 1, 2019, through June 

30, 2019, as finalized in the November 

2018 final rule. These policies also take 

into account that some ACOs may 

participate in both 6-month 

performance years (or performance 

period) and will be reconciled for their 

financial and quality performance for 

both periods. 

We note that we are finalizing our 

proposed policies with a change in the 

enumeration scheme. Specifically, we 

are placing the general provisions 

regarding notification to ACOs of shared 

savings and losses at § 425.609(e)(1), 

and we are placing the policies 

addressing ACOs with mixed results for 

the two 6-month performance periods at 

§ 425.609(e)(2). In the introductory text 

of § 425.609(e)(1), we are including 

references to the performance period 

from January 1, 2019, through June 30, 

2019, and the 6-month performance year 

from July 1, 2019, through December 31, 

2019. We are also adding a crossreference to § 425.605(e) regarding the 

notification requirements for the new 

BASIC track, and we are maintaining 

the existing cross-reference to the 

notification requirements under 


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§ 425.610(h), which now applies to 

ACOs participating in the ENHANCED 

track. 

Under the revised § 425.609(e)(1), 

CMS notifies the ACO of shared savings 

or shared losses separately for the 

January 1, 2019, through June 30, 2019 

performance year (or performance 

period) and the July 1, 2019, through 

December 31, 2019 performance year, 

consistent with the notification 

requirements specified in §§ 425.604(f), 

425.605(e), 425.606(h), and 425.610(h), 

as applicable. Specifically, CMS notifies 

an ACO in writing regarding whether 

the ACO qualifies for a shared savings 

payment, and if so, the amount of the 

payment due. CMS provides written 

notification to an ACO of the amount of 

shared losses, if any, that it must repay 

to the program. If an ACO has shared 

losses, the ACO must make payment in 

full to CMS within 90 days of receipt of 

notification. 

We are finalizing as proposed the 

policies for addressing ACOs that have 

mixed results for the two 6-month 

performance years (or performance 

period) of 2019, earning shared savings 

for one performance year (or 

performance period) and owing shared 

losses for the other performance year (or 

performance period). We are revising 

the regulations to add a new provision 

at § 425.609(e)(2) to specify that if an 

ACO is reconciled for both the January 

1, 2019, through June 30, 2019 

performance year (or performance 

period) and the July 1, 2019, through 

December 31, 2019 performance year, 

CMS issues a separate notice of shared 

savings or shared losses for each 

performance year (or performance 

period), and if the ACO has shared 

savings for one performance year (or 

performance period) and shared losses 

for the other performance year (or 

performance period), CMS reduces the 

amount of shared savings by the amount 

of shared losses. If any amount of shared 

savings remains after completely 

repaying the amount of shared losses 

owed, the ACO is eligible to receive 

payment for the remainder of the shared 

savings. If the amount of shared losses 

owed exceeds the amount of shared 

savings earned, the ACO is accountable 

for payment of the remaining balance of 

shared losses in full. 

(7) Automatic Transition of ACOs Under 

the BASIC Track’s Glide Path 

Under our proposed design of the 

BASIC track’s glide path, ACOs that 

enter the glide path at Levels A through 

D would be automatically advanced to 

the next level of the glide path at the 

start of each subsequent performance 

year of the agreement period. The five 

levels of the glide path would phase-in 

over the duration of an ACO’s 

agreement period. The design of the 

BASIC track’s glide path is therefore 

tied to the duration of the agreement 

period. 

With our proposal to offer agreement 

periods of 5 years and 6 months to 

ACOs with July 2019 start dates, we 

believed it was necessary to address 

how we would apply the policy for 

moving ACOs along the glide path in an 

agreement period with a duration of 

more than 5 years. As discussed in 

section II.A.7.c.(7) of the August 2018 

proposed rule (83 FR 41858 through 

41859), we proposed a one-time 

exception to be specified in § 425.600, 

whereby the automatic advancement 

policy would not apply to the second 

performance year for an ACO entering 

the BASIC track’s glide path for an 

agreement period beginning on July 1, 

2019. For performance year 2020, the 

ACO would remain in the same level of 

the BASIC track’s glide path that it 

entered for the 6-month performance 

year beginning on July 1, 2019, unless 

the ACO uses the proposed flexibility to 

advance to a higher level of risk and 

potential reward more quickly. The 

ACO would automatically advance to 

the next level of the BASIC track’s glide 

path at the start of performance year 

2021 and all subsequent performance 

years of the agreement period, unless 

the ACO chooses to advance more 

quickly. This proposed approach would 

allow a modest increase in the amount 

of time initial entrants in the BASIC 

track’s glide path could remain under a 

particular level, including a one-sided 

model. 

Generally, commenters favored an 

approach that would allow ACOs to 

remain under a one-sided model of the 

BASIC track’s glide path for additional 

time. See section II.A.3.b. of this final 

rule for comment summaries concerning 

the automatic progression along the 

BASIC track’s glide path. We did not 

receive any comments specifically 

addressing the proposed one-time 

exception to the automatic advancement 

policy, applicable to the second 

performance year of the BASIC track’s 

glide path for an ACO entering an 

agreement period beginning July 1, 

2019. 

Final Action: We are finalizing as 

proposed a one-time exception to be 

specified at § 425.600(a)(4)(i)(B)(2)(i), 

whereby the automatic advancement 

policy will not apply to the second 

performance year for an ACO entering 

the BASIC track’s glide path for an 

agreement period beginning on July 1, 

2019. For performance year 2020, the 

ACO will remain in the same level of 

the BASIC track’s glide path it entered 

for the 6-month performance year 

beginning on July 1, 2019, unless the 

ACO chooses to advance to a higher 

level of risk and potential reward more 

quickly. The ACO will automatically 

advance to the next level of the BASIC 

track’s glide path at the start of 

performance year 2021 and all 

subsequent performance years of the 

agreement period, unless the ACO 

chooses to advance more quickly. 

(8) Interactions With the Quality 

Payment Program 

As described in section II.A.7.c.(8). of 

the August 2018 proposed rule (83 FR 

41859), we took into consideration how 

the proposed July 1, 2019 start date 

could interact with other Medicare 

initiatives, particularly the Quality 

Payment Program timelines relating to 

participation in APMs. In the CY 2018 

Quality Payment Program final rule 

with comment period, we finalized a 

policy for APMs that start or end during 

the QP Performance Period. 

Specifically, under § 414.1425(c)(7)(i), 

for Advanced APMs that start during the 

QP Performance Period and are actively 

tested for at least 60 continuous days 

during a QP Performance Period, CMS 

will make QP determinations and 

Partial QP determinations for eligible 

clinicians in the Advanced APM. CMS 

makes QP determinations for eligible 

clinicians in an Advanced APM three 

times during the QP Performance Period 

using claims data for services furnished 

from January 1 through each of the 

respective QP determination dates: 

March 31, June 30, and August 31 

(§ 414.1425(b)(1)) (sometimes referred to 

as snapshot dates). We explained that an 

Advanced APM (such as a two-sided 

model of the Shared Savings Program) 

would need to begin operations by July 

1 of a given performance year in order 

to be actively tested for at least 60 

continuous days before August 31—the 

last date on which QP determinations 

are made during a QP Performance 

Period (as specified in § 414.1425(b)(1)). 

Therefore, we believed that our 

proposed July 1, 2019 start date for the 

proposed new participation options 

under the Shared Savings Program 

would align with Quality Payment 

Program rules and requirements for 

participation in Advanced APMs. 

Further, as described in section 

II.A.7.c.(4) of the August 2018 proposed 

rule (see 83 FR 41856), our proposal to 

use a 12-month period for quality 

measure assessment for either 6-month 

performance year (or the 6-month 

performance period) during 2019 would 

maintain alignment with the program’s 

existing quality measurement approach. 


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This approach would also continue to 

align the program’s quality reporting 

period with policies under the Quality 

Payment Program. We explained that 

ACO professionals that are MIPS 

eligible clinicians (not QPs based on 

their participation in an Advanced APM 

or otherwise excluded from MIPS) 

would continue to be scored under 

MIPS using the APM scoring standard 

that covers all of 2019. 

In the November 2018 final rule (83 

FR 59956 and 59957), we responded to 

comments on QP determinations for 

eligible clinicians participating in an 

ACO whose agreement period expires 

on December 31, 2018, that elects a 

voluntary extension for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019, and does not 

continue in the program past June 30, 

2019. We also clarified what happens to 

an eligible clinician’s QP status if they 

are participating in an ACO that is in a 

track that meets the Advanced APM 

criteria and elects to extend for the 6- 

month performance year from January 1, 

2019, through June 30, 2019, and either 

voluntarily terminates or is 

involuntarily terminated prior to June 

30, 2019. Further, we responded to 

comments on the proposal to require 

ACOs in a 6-month performance year 

from January 1, 2019, through June 30, 

2019, to report on quality based on 12- 

months of data for 2019, and the MIPS 

quality reporting requirements for MIPS 

eligible clinicians in ACOs that elect to 

extend their participation agreement for 

the 6-month performance year from 

January 1, 2019, through June 30, 2019. 

Comment: One commenter raised the 

possibility for confusion around the 

applicability of the APM scoring 

standard under the MIPS or the 

availability of APM incentive payments 

for eligible clinicians in ACOs that 

move from lower risk in the 6-month 

performance year (or performance 

period) from January 1, 2019, through 

June 30, 2019, to an Advanced APM for 

the 6-month performance year from July 

1, 2019, through December 31, 2019. 

One commenter requested that CMS 

consider ACOs that enter two-sided risk 

models that meet the Advanced APM 

criteria for agreement periods beginning 

on July 1, 2019, to be participating in 

the Advanced APM for the entire 

calendar year for purposes of computing 

the QP thresholds for participating 

eligible clinicians. One commenter 

expressed concern that the July 1, 2019 

start date will create confusion among 

some providers, due to the likely 

interaction with the snapshots that are 

used to determine QP status under the 

Quality Payment Program. For example, 

the commenter stated that for eligible 

clinicians in an ACO that transitions 

from Track 1 to the ENHANCED track 

for an agreement period beginning on 

July 1, 2019, there would only be a 

single snapshot period upon which to 

base the QP determination. One 

commenter recommended that CMS 

make it clear that ‘‘renewing’’ Track 2 

and Track 3 ACOs may move into the 

new ENHANCED track without 

jeopardizing their participation in an 

Advanced APM and potential QP status 

for their eligible clinicians for that year 

of the transition. 

Response: We believe these comments 

reflect the need for clarification about 

whether an ACO’s participation in Level 

E of the BASIC track or the ENHANCED 

track for the 6-month performance year 

from July 1, 2019, through December 31, 

2019, would allow its eligible clinicians 

to potentially attain QP status and earn 

an APM Incentive Payment, as well as 

be excluded from the MIPS reporting 

requirements and payment adjustment 

for 2019. An eligible clinician 

participating in an Advanced APM who 

is determined to be a QP based on any 

of the three snapshot dates for QP 

determinations will receive the full 

APM Incentive Payment in the 

corresponding payment year. Eligible 

clinicians in ACOs that elect to 

participate in Level E of the BASIC track 

or the ENHANCED track for the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, may earn 

the APM Incentive Payment and be 

excluded from the MIPS reporting 

requirements and payment adjustment 

for 2019 if they meet the requisite QP 

payment amount (50 percent) or patient 

count (35 percent) thresholds on the 

third QP snapshot (August 31, 2019) 

during the QP performance period. 

When conducting QP determinations for 

the third snapshot (August 31, 2019) for 

ACOs that elect to participate in Level 

E of the BASIC track or the ENHANCED 

track for the 6-month performance year 

from July 1, 2019, through December 31, 

2019, we will continue to use the entire 

QP performance period (that is, January 

1, 2019, through August 31, 2019) rather 

than conducting QP determinations 

from July 1, 2019, through August 31, 

2019. 

We also believe there is a need to 

clarify what happens to an eligible 

clinician’s QP status if they are 

participating in an ACO that is in a track 

that meets the Advanced APM criteria 

for the 6-month performance year from 

July 1, 2019, through December 31, 

2019, and either voluntarily terminates 

or is involuntarily terminated on or 

before August 31, 2019. If their ACO 

terminates or is involuntarily 

terminated on or before August 31, 

2019, then eligible clinicians will lose 

the opportunity to attain QP status as a 

result of the termination. In addition, 

the eligible clinicians would not be 

scored under MIPS using the APM 

Scoring Standard because they would 

not be captured as participants in a 

MIPS APM on one of the four snapshots 

used to determine APM participation. If 

the ACO is in an active agreement 

period on August 31, 2019, then eligible 

clinicians who are determined to be QPs 

based on the third QP snapshot will 

maintain their QP status and be 

considered MIPS APM participants, 

even if the ACO’s agreement is 

terminated after that date. 

Comment: Some commenters 

requested clarification on how quality 

reporting for a 6-month performance 

year based on 12-months of data for 

2019 will satisfy the MIPS quality 

reporting requirements for MIPS eligible 

clinicians in ACOs that participate in a 

6-month performance year from July 1, 

2019, through December 31, 2019. 

Response: We believe the comments 

reflect the need for clarification about 

whether 2019 quality performance for a 

6-month performance year from July 1, 

2019, through December 31, 2019, under 

the Shared Savings Program will count 

the same as a full year of performance 

for purposes of the APM scoring 

standard. That is, would the 2019 

quality reporting for the 6-month 

performance year count toward the final 

MIPS score in the same way that it 

would for an ACO that is participating 

in a full 12-month performance year in 

the program. 

As discussed in section II.A.7.c.(4). of 

this final rule, we are finalizing a policy 

of using a 12-month period for quality 

performance assessment for the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, in order to 

maintain alignment with the program’s 

existing quality measurement approach, 

and with policies under the Quality 

Payment Program. ACO professionals 

that are MIPS eligible clinicians (not 

QPs based on their participation in an 

Advanced APM or otherwise excluded 

from MIPS) participating in an ACO that 

completes a 6-month performance year 

from July 1, 2019, through December 31, 

2019, would be scored under MIPS 

using the APM Scoring Standard for 

2019, based on quality data submitted 

for all of 2019 during the regular 

submission period in early 2020. 

(9) Sharing CY 2019 Aggregate Data 

With ACOs in 6-Month Performance 

Period From January 2019 Through June 

2019 

As established in the November 2018 

final rule (83 FR 59957), we will 


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continue to provide ACOs participating 

in a 6-month performance year from 

January 1, 2019, through June 30, 2019, 

with aggregate reports for all four 

quarters of CY 2019 based on the ACO 

participant list in effect for that 6-month 

performance year. This policy is 

specified in revisions to § 425.702. In 

the August 2018 proposed rule (83 FR 

41859), we proposed to apply this same 

policy for ACOs that participate in the 

first 6 months of a 12-month 

performance year in 2019 but then 

terminate their participation agreement 

with an effective date of termination of 

June 30, 2019, and enter a new 

agreement period beginning July 1, 

2019. We explained that this would give 

ACOs a more complete understanding of 

the Medicare FFS beneficiary 

population that is the basis for 

reconciliation for the 6 month period 

from January 1, 2019, through June 30, 

2019, by allowing them to continue to 

receive data, including demographic 

characteristics and expenditure/ 

utilization trends for this assigned 

beneficiary population for the entire 

calendar year. We believed this 

proposed approach would allow us to 

maintain transparency by providing 

ACOs with data that relates to the entire 

period for which the expenditures for 

the beneficiaries assigned to the ACO 

for this 6-performance period would be 

compared to the ACO’s benchmark 

(before pro-rating any shared savings or 

shared losses to reflect the length of the 

performance year), and maintain 

consistency with the reports delivered 

to ACOs that participate in a 12-month 

performance year in 2019. Otherwise, 

we could be limited to providing ACOs 

with aggregate reports only for the first 

and second quarters of 2019, even 

though under our proposed 

methodology for assessing the financial 

performance of ACOs in a 6-month 

performance period would involve 

consideration of expenditures from 

outside this period during 2019. 

Comment: One commenter believed 

ACOs participating in both 6-month 

performance years (or the 6-month 

performance period) will be burdened 

by having two sets of aggregate program 

reports from CMS (such as assignment 

summary reports, and expenditure/ 

utilization trend reports), and 

incorrectly asserted that ACOs will 

receive two sets of monthly beneficiaryidentifiable claim and claim line feed 

data files. 

Response: We believe many ACOs 

participating in the 6-month 

performance years (or the 6-month 

performance period) during 2019 will 

seek an in-depth understanding of their 

performance trends during each of the 

6-month performance years (or the 6- 

month performance period) and will 

also want to assess how their financial 

performance compares between the two 

6-month periods (if applicable). We 

believe these ACOs would be supported 

by the availability of quarterly and 

annual program reports on their 

assigned beneficiary population for each 

performance year (or performance 

period), including demographic 

information and expenditure/utilization 

trends for the applicable assigned 

beneficiary population. We also 

recognize, however, that how an ACO 

uses these data is often specific to the 

individual circumstances of the 

organization and its data analysis 

capacity, among other factors. 

Further, we provide monthly 

beneficiary-identifiable data, in claim 

and claim line feed files, to eligible 

ACOs based on the requirements 

specified in § 425.704. We provide 

ACOs with beneficiary identifiable 

claims data for prospectively assigned 

beneficiaries, and for assignable 

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 during the performance year. 

We note that these files include Parts A, 

B, and D data, and support the ACO’s 

quality assessment and improvement 

activities, and population-based 

activities relating to improved health. 

Under the program’s current policies, 

we would deliver the monthly claim 

and claim line feed files to the ACO for 

the relevant population within each 

performance year, determined based on 

the certified ACO participant list in 

effect for that performance year. 

Operationally, this means eligible ACOs 

participating in the 6-month 

performance year (or performance 

period) from January 1, 2019, through 

June 30, 2019 will receive claim and 

claim line feed files each month based 

on the ACO participant list certified 

prior to the start of their performance 

year beginning on January 1, 2019. 

These ACOs will receive data files 

containing claims with dates of service 

through June 2019. Eligible ACOs 

participating in the 6-month 

performance year from July 1, 2019, 

through December 31, 2019 will receive 

claim and claim line feed files each 

month based on the ACO participant list 

certified prior to the start of July 1, 

2019. These ACOs will receive data files 

containing claims with dates of service 

through December 2019. 

In the November 2018 final rule (83 

FR 59957), we also summarized and 

addressed comments requesting 

additional guidance and education on 

whether there will be disruptions in 

sharing claims files with ACOs 

participating in a 6-month performance 

year in CY 2019. We refer readers to that 

discussion for additional information on 

this issue. 

Final Action: After considering the 

comments we received on our data 

sharing proposal, we are finalizing our 

proposal to provide ACOs participating 

in a 6-month performance period from 

January 1, 2019, through June 30, 2019, 

with aggregate reports for all four 

quarters of CY 2019 based on the ACO 

participant list in effect for the first 6 

months of the year. In section 

II.A.7.b.(3) of this final rule we describe 

modifications that we are making to 

§ 425.609(b) in order to extend this 

provision to the determination of prorated shared savings and shared losses 

for the performance period from January 

1, 2019, through June 30, 2019, for 

ACOs that terminate their agreement 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019. The policy for sharing aggregate 

data with ACOs in a 6-month 

performance year from January 1, 2019, 

through June 30, 2019, is specified in 

the existing provision at § 425.702, as 

revised by the November 2018 final 

rule, which applies to ‘‘an ACO eligible 

to be reconciled under § 425.609(b).’’ 

Therefore, with the policies established 

in this final rule, this existing provision 

on sharing CY 2019 aggregate data will 

apply not only to ACOs in a 6-month 

performance year from January 1, 2019, 

through June 30, 2019, but also to ACOs 

that terminate their current agreement 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019. 

(10) Technical or Conforming Changes 

To Allow for 6-Month Performance 

Years 

In the August 2018 proposed rule (83 

FR 41859 and 41860), we proposed to 

make certain technical, conforming 

changes to provisions of the Shared 

Savings Program regulations to reflect 

our proposal to add a new provision at 

§ 425.609 to govern the calculation of 

the financial results for the 6-month 

performance years within CY 2019. In 

the November 2018 final rule, we 

finalized a subset of the proposed 

technical, conforming changes as 

necessary to reflect the addition of the 

new provision at § 425.609 to govern the 

calculation of the financial results for 

the 6-month performance year from 

January 1, 2019, through June 30, 2019 

(83 FR 59957 through 59958). 

There were no comments directed 

specifically at our proposed technical 

and conforming changes to allow for a 


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6-month performance year from July 1, 

2019, through December 31, 2019. 

The following changes finalized in the 

November 2018 final rule for purposes 

of the 6-month performance year from 

January 1, 2019, through June 30, 2019, 

will also apply to the 6-month 

performance year from July 1, 2019, 

through December 31, 2019. 

Our revisions to § 425.315 (the 

policies on reopening determinations of 

shared savings and shared losses to 

correct financial reconciliation 

calculations) to incorporate a reference 

to notification of shared savings and 

shared losses for ACOs in a 6-month 

performance year within CY 2019, as 

specified in § 425.609(e). 

Our revisions to § 425.100 to add a 

reference to § 425.609 in order to 

include ACOs that participate in a 6- 

month performance year during 2019 in 

the general description of ACOs that are 

eligible to receive payments for shared 

savings under the program. 

Our revisions to § 425.400(a)(1)(ii), 

describing the step-wise process for 

determining beneficiary assignment for 

each performance year, to specify that 

this process applies to ACOs 

participating in a 6-month performance 

year within CY 2019, and that 

assignment is determined based on the 

beneficiary’s utilization of primary care 

services during the entirety of CY 2019, 

as specified in § 425.609. 

In this final rule, we are finalizing the 

remaining proposed modifications to 

the Shared Savings Program regulations 

to incorporate additional technical and 

conforming changes that are necessary 

to ensure that the policies previously 

finalized for ACOs in a 6-month 

performance year from January 1, 2019, 

through June 30, 2019, will also apply 

to ACOs in a 6-month performance year 

from July 1, 2019, through December 31, 

2019. 

In § 425.401(b), describing the 

exclusion of beneficiaries from an 

ACO’s prospective assignment list at the 

end of a performance year or benchmark 

year and quarterly each performance 

year, we proposed to specify that these 

exclusions would occur at the end of CY 

2019 for purposes of determining 

assignment to an ACO in a 6-month 

performance year in accordance with 

§§ 425.400(a)(3)(ii) and 425.609. In the 

November 2018 final rule, we finalized 

the applicability of this policy to 

determining prospective assignment for 

ACOs participating in a 6-month 

performance year from January 1, 2019, 

through June 30, 2019. With this final 

rule, we are further modifying 

§ 425.401(b) to add a cross-reference to 

§ 425.609(c)(1)(ii), which governs the 

determination of prospective 

assignment for ACOs participating in a 

6-month performance year from July 1, 

2019, through December 31, 2019. 

We proposed to incorporate 

references to § 425.609 in the 

regulations that govern establishing, 

adjusting, and updating the benchmark, 

including proposed § 425.601, and the 

existing provisions at § 425.602, and 

§ 425.603, to specify that the annual risk 

adjustment and update to the ACO’s 

historical benchmark for the 6-month 

performance years during 2019 would 

use factors based on the entirety of CY 

2019. For clarity and simplicity, we 

proposed to add a paragraph to each of 

these sections to explain the following: 

(1) Regarding the annual risk adjustment 

applied to the historical benchmark, 

when CMS adjusts the benchmark for 

the 6-month performance years 

described in § 425.609, the adjustment 

will reflect the change in severity and 

case mix between benchmark year 3 and 

CY 2019; (2) Regarding the annual 

update to the historical benchmark, 

when CMS updates the benchmark for 

the 6-month performance years 

described in § 425.609, the update to the 

benchmark will be based on growth 

between benchmark year 3 and CY 

2019. In the November 2018 final rule, 

we finalized these amendments, as 

applicable to the January 1, 2019, 

through June 30, 2019 performance year 

with the addition of provisions 

§ 425.602(c) and § 425.603(g). 

In a new section of the regulations at 

§ 425.601(g), on establishing, adjusting, 

and updating the benchmark for 

agreement periods beginning on July 1, 

2019, and in subsequent years (as 

discussed in section II.D. of this final 

rule), we are specifying that the annual 

risk adjustment and update to the ACO’s 

historical benchmark for the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, will use 

factors based on the entirety of CY 2019. 

The provision explains the following: 

(1) Regarding the annual risk adjustment 

applied to the historical benchmark, 

when CMS adjusts the benchmark for 

the 6-month performance year described 

in § 425.609(c), the adjustment will 

reflect the change in severity and case 

mix between benchmark year 3 and CY 

2019; (2) Regarding the annual update to 

the historical benchmark, when CMS 

updates the benchmark for the 6-month 

performance year described in 

§ 425.609(c), the update to the 

benchmark will be based on growth 

between benchmark year 3 and CY 

2019. 

We also proposed to incorporate 

references to § 425.609 in the following 

provisions regarding the calculation of 

shared savings and shared losses, 

§ 425.604, proposed § 425.605, 

§ 425.606, and § 425.610. For clarity and 

simplicity, we proposed to add a 

paragraph to each of these sections 

explaining that shared savings or shared 

losses for the 6-month performance 

years are calculated as described in 

§ 425.609. That is, all calculations will 

be performed using CY 2019 data in 

place of performance year data. In the 

November 2018 final rule, we finalized 

these amendments, as applicable to the 

January 1, 2019, through June 30, 2019 

performance year with the addition of 

provisions at § 425.604(g), § 425.606(j), 

and § 425.610(j). 

We are now finalizing the proposal to 

apply the same approach to determining 

shared savings and shared losses for the 

6-month performance year from July 1, 

2019, through December 31, 2019. 

Therefore, in a new section of the 

regulations at § 425.605(g), we are 

specifying that shared savings or shared 

losses for the 6-month performance year 

from July 1, 2019, through December 31, 

2019, are calculated as described in 

§ 425.609 for ACOs participating under 

the BASIC track (as discussed in 

sections II.A.2. and II.A.3. of this final 

rule). In addition, we are also finalizing 

our proposal to add a new section of the 

regulations at § 425.610(k), on the 

calculation of shared savings and losses 

for the 6-month performance year from 

July 1, 2019, through December 31, 

2019, for ACOs participating under the 

ENHANCED track (as discussed in 

section II.A.2 of this final rule). 

In the August 2018 proposed rule, we 

proposed to add a reference to § 425.609 

in § 425.204(g) to allow for 

consideration of claims billed under 

merged and acquired entities’ TINs for 

purposes of establishing an ACO’s 

benchmark for an agreement period that 

includes a 6-month performance year. 

Upon further consideration, we do not 

believe it is necessary at this time to 

revise § 425.204(g) to incorporate a 

reference to § 425.609. The provision at 

§ 425.204(g) describes the use of certain 

claims in establishing an ACO’s 

benchmark. However, § 425.609 only 

makes changes to the way in which the 

benchmark is adjusted and updated to 

allow for a 6-month performance year. 

For ACOs participating in a 6-month 

performance year (or performance 

period) in 2019, the ACO’s benchmark 

would already be established under 

§§ 425.601 (as finalized in this final 

rule), 425.602 or 425.603 (as applicable). 

B. Fee-for-Service Benefit Enhancements 

1. Background 

As discussed in earlier rulemaking 

(for example, 80 FR 32759), we believe 


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that models where ACOs bear a degree 

of financial risk have the potential to 

induce more meaningful systematic 

change than one-sided models. We 

explained that two-sided performancebased risk provides stronger incentives 

for ACOs to achieve savings and, as 

discussed in detail in the Regulatory 

Impact Analysis (see section V. of this 

final rule), our experience with the 

program indicates that ACOs in twosided models generally perform better 

than ACOs that participate under a onesided model. ACOs that bear financial 

risk have a heightened incentive to 

restrain wasteful spending by their ACO 

participants and ACO providers/ 

suppliers. This, in turn, may reduce the 

likelihood of over-utilization of services. 

Relieving these ACOs of the burden of 

certain statutory and regulatory 

requirements may provide ACOs with 

additional flexibility to innovate further, 

which could in turn lead to even greater 

cost savings, without inappropriate risk 

to program integrity. 

In the December 2014 proposed rule 

(79 FR 72816 through 72826), we 

discussed in detail a number of specific 

payment rules and other program 

requirements for which we believed 

waivers could be necessary under 

section 1899(f) of the Act to permit 

effective implementation of two-sided 

performance-based risk models in the 

Shared Savings Program. We invited 

comments on how these waivers could 

support ACOs’ efforts to increase quality 

and decrease costs under two-sided risk 

arrangements. Based on review of these 

comments, in the June 2015 final rule 

(80 FR 32800 through 32808), we 

finalized a waiver of the requirement in 

section 1861(i) of the Act for a 3-day 

inpatient hospital stay prior to the 

provision of Medicare-covered posthospital extended care services for 

beneficiaries who are prospectively 

assigned to ACOs that participate in 

Track 3 (§ 425.612). We refer to this 

waiver as the SNF 3-day rule waiver. 

We established the SNF 3-day rule 

waiver to provide an additional 

incentive for ACOs to take on risk by 

offering greater flexibility for ACOs that 

have accepted the higher level of 

performance-based risk under Track 3 to 

provide necessary care for beneficiaries 

in the most appropriate care setting. 

Section 50324 of the Bipartisan 

Budget Act added section 1899(l) of the 

Act (42 U.S.C. 1395jjj(l)) to provide 

certain Shared Savings Program ACOs 

the ability to provide telehealth 

services. Specifically, beginning January 

1, 2020, for telehealth services furnished 

by a physician or practitioner 

participating in an applicable ACO, the 

home of a beneficiary is treated as an 

originating site described in section 

1834(m)(4)(C)(ii) and the geographic 

limitation under section 

1834(m)(4)(C)(i) of the Act does not 

apply with respect to an originating site 

described in section 1834(m)(4)(C)(ii), 

including the home of the beneficiary. 

In the August 2018 proposed rule (83 

FR 41861–41867), we proposed 

modifications to the existing SNF 3-day 

rule waiver and proposed to establish 

regulations to govern telehealth services 

furnished in accordance with section 

1899(l) of the Act to prospectively 

assigned beneficiaries by physicians and 

practitioners participating in certain 

applicable ACOs. We also proposed to 

use our authority under section 1899(f) 

of the Act to waive the requirements of 

section 1834(m)(4)(C)(i) and (ii) of the 

Act as necessary to provide for a 90-day 

grace period to allow for payment for 

telehealth services furnished to a 

beneficiary who was prospectively 

assigned to an applicable ACO, but was 

subsequently excluded from assignment 

to the ACO. We also proposed to require 

that ACO participants hold beneficiaries 

financially harmless for telehealth 

services that are not provided in 

compliance with section 1899(l) of the 

Act or during the 90-day grace period, 

as previously discussed. 

2. Proposed Revisions 

a. Shared Savings Program SNF 3-Day 

Rule Waiver 

(1) Background 

The SNF 3-day rule waiver under 

§ 425.612 allows for Medicare payment 

for otherwise covered SNF services 

when ACO providers/suppliers 

participating in eligible Track 3 ACOs 

admit eligible prospectively assigned 

beneficiaries, or certain excluded 

beneficiaries during a grace period, to 

an eligible SNF affiliate without a 3-day 

prior inpatient hospitalization. All other 

provisions of the statute and regulations 

regarding Medicare Part A post-hospital 

extended care services continue to 

apply. This waiver became available 

starting January 1, 2017, and all ACOs 

participating under Track 3 or applying 

to participate under Track 3 are eligible 

to apply for the waiver. 

We limited the waiver to ACOs that 

elect to participate under Track 3 

because these ACOs are participating 

under two-sided risk and, under the 

prospective assignment methodology 

used in Track 3, beneficiaries are 

assigned to the ACO at the start of the 

performance year and remain assigned 

for the entire year, unless they are 

excluded. Thus it is clearer to the ACO 

which beneficiaries are eligible to 

receive services under the waiver than 

it would be to an ACO under Track 1 

or Track 2, which use a preliminary 

prospective assignment methodology 

with retrospective reconciliation (80 FR 

32804). As we explained in the August 

2018 proposed rule (83 FR 41861), we 

continue to believe that it is appropriate 

to limit the waiver to ACOs 

participating under a two-sided risk 

model because, as discussed in the 

background to this section, models 

under which ACOs bear a degree of 

financial risk hold greater potential than 

one-sided models to induce more 

meaningful systematic change, promote 

accountability for a patient population 

and coordination of patient medical 

care, and encourage investment in 

redesigned care processes. As a result, 

models under which ACOs bear a 

degree of financial risk provide a 

stronger incentive for ACOs not to over 

utilize services than do one-sided 

models. It is important to establish clear 

policies as to the availability of the SNF 

3-day rule waiver for coverage of SNF 

services furnished to a particular 

beneficiary without a prior 3 day 

inpatient stay to permit the ACOs and 

their SNF affiliates to comply with the 

conditions of the waiver and to facilitate 

our ability to monitor for misuse. It 

would also be feasible to establish such 

clarity for ACOs electing to participate 

in a two-sided risk model under a 

preliminary prospective assignment 

methodology with retrospective 

reconciliation. 

Under preliminary prospective 

assignment with retrospective 

reconciliation, ACOs are given up-front 

information about their preliminarily 

assigned FFS beneficiary population. 

This information is updated quarterly to 

help ACOs refine their care 

coordination activities. Under the 

revised criteria for sharing data with 

ACOs finalized in the June 2015 final 

rule, beginning with performance year 

2016, we have provided ACOs under 

preliminary prospective assignment 

with quarterly and annual assignment 

lists that identify the beneficiaries who 

are preliminarily prospectively 

assigned, as well as beneficiaries who 

have received at least one primary care 

service in the most recent 12-month 

period from an ACO participant that 

submits claims for services used in the 

assignment methodology (see 

§ 425.702(c)(1)(ii)(A), and related 

discussion in 80 FR 32734 through 

32737). The specific beneficiaries 

preliminarily assigned to an ACO 

during each quarter can vary. 

(2) Proposals 

As described in section II.A.4.c. of the 

August 2018 proposed rule (83 FR 


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41811) and again in this final rule, we 

proposed to allow ACOs to select the 

beneficiary assignment methodology to 

be applied at the start of their agreement 

period (prospective assignment or 

preliminary prospective assignment 

with retrospective reconciliation) and 

the opportunity to elect to change this 

selection prior to the start of each 

performance year. Further, as described 

in sections II.A.3. and II.A.4.b. of the 

August 2018 proposed rule (83 FR 

41801 & 41810) and again in this final 

rule, we proposed that BASIC track 

ACOs entering the track’s glide path 

under a one-sided model would be 

automatically transitioned to a twosided model during their agreement 

period and could elect to enter twosided risk more quickly (prior to the 

start of their agreement period or as part 

of an annual election to move to a 

higher level of risk within the BASIC 

track). 

As described in the August 2018 

proposed rule (83 FR 41861), in light of 

these proposed flexibilities for program 

participation, as well as our experience 

in providing ACOs under preliminary 

prospective assignment with data on 

populations of beneficiaries, we stated 

that it would be appropriate to expand 

eligibility for the SNF 3-day rule waiver 

to include ACOs participating in a twosided model under preliminary 

prospective assignment. As explained in 

the August 2018 proposed rule and 

again in this section, we originally 

excluded Track 2 ACOs, which 

participate under two-sided risk, from 

eligibility for the SNF 3-day rule waiver 

because beneficiaries are assigned to 

Track 2 ACOs using a preliminary 

prospective assignment methodology 

with retrospective reconciliation and 

thus it could be unclear to ACOs which 

beneficiaries would be eligible to 

receive services under the waiver. We 

proposed that risk-bearing ACOs 

selecting preliminary prospective 

assignment with retrospective 

reconciliation should be offered the 

same tools and flexibility to increase 

quality and decrease costs that are 

available to ACOs electing prospective 

assignment, to the maximum extent 

possible. We stated that it would be 

possible to provide ACOs that select 

preliminary prospective assignment 

with retrospective reconciliation with 

more clarity regarding which 

beneficiaries may be eligible to receive 

services under the waiver if we were to 

establish a cumulative list of 

beneficiaries preliminarily assigned to 

the ACO during the performance year. It 

would be appropriate to establish such 

a cumulative list because the 

beneficiaries preliminarily assigned to 

an ACO may vary during each quarter 

of a performance year. 

Under preliminary prospective 

assignment with retrospective 

reconciliation, once a beneficiary 

receives at least one primary care 

service furnished by an ACO 

participant, the ACO has an incentive to 

coordinate care of the Medicare 

beneficiary, including SNF services, for 

the remainder of the performance year 

because of the potential for the 

beneficiary to be assigned to the ACO 

for the performance year. Under our 

proposed approach, we would not 

remove preliminarily prospectively 

assigned beneficiaries from the list of 

beneficiaries eligible to receive SNF 

services under the waiver on a quarterly 

basis. Instead, once a beneficiary is 

listed as preliminarily prospectively 

assigned to an eligible ACO for the 

performance year, according to the 

assignment lists provided by CMS to an 

ACO at the beginning of each 

performance year and for quarters 1, 2, 

and 3 of each performance year, then 

the SNF 3-day rule waiver would 

remain available with respect to 

otherwise covered SNF services 

furnished to that beneficiary by a SNF 

affiliate of the ACO, consistent with the 

requirements of § 425.612(a), for the 

remainder of the performance year. 

We proposed that the waiver would 

be limited to SNF services provided 

after the beneficiary first appeared on 

the preliminary prospective assignment 

list for the performance year, and that a 

beneficiary would no longer be eligible 

to receive covered services under the 

waiver if he or she subsequently enrolls 

in a Medicare group (private) health 

plan or is otherwise no longer enrolled 

in Part A and Part B. In other words, 

ACOs participating in a performancebased risk track and under preliminary 

prospective assignment with 

retrospective reconciliation would 

receive an initial performance year 

assignment list followed by assignment 

lists for quarters 1, 2, and 3 of each 

performance year, and the SNF 3-day 

rule waiver would be available with 

respect to all beneficiaries who have 

been identified as preliminarily 

prospectively assigned to the ACO on 

one or more of these four assignment 

lists, unless they enroll in a Medicare 

group health plan or are no longer 

enrolled in both Part A and Part B. 

Providers and suppliers are expected to 

confirm a beneficiary’s health insurance 

coverage to determine if they are eligible 

for FFS benefits. In addition, we noted 

that under existing Medicare payment 

policies, services furnished to Medicare 

beneficiaries outside the U.S. are not 

payable except under very limited 

circumstances. Therefore, in general, a 

waiver-eligible beneficiary who resides 

outside the U.S. during a performance 

year would technically remain eligible 

to receive SNF services furnished in 

accordance with the waiver, but SNF 

services furnished to the beneficiary 

outside the U.S. would not be payable. 

We note that our proposal to allow 

preliminarily prospectively assigned 

beneficiaries to remain eligible for the 

SNF 3-day rule waiver until the end of 

the performance year may include 

beneficiaries who ultimately are 

excluded from assignment to the ACO 

based upon their assignment to another 

Shared Savings Program ACO or their 

alignment with an entity participating 

in another shared savings initiative. 

Thus, a beneficiary may be eligible for 

admission under a SNF 3-day rule 

waiver based on being preliminarily 

prospectively assigned to more than one 

ACO during a performance year. As 

previously discussed, we believe ACOs 

that bear a degree of financial risk have 

a strong incentive to manage the care for 

all beneficiaries who appear on any 

preliminary prospective assignment list 

during the year and to continue to focus 

on furnishing appropriate levels of care 

because they do not know which 

beneficiaries ultimately will be assigned 

to the ACO for the performance year. 

Further, because there remains the 

possibility that a beneficiary could be 

preliminarily prospectively assigned to 

an ACO at the beginning of the year, not 

preliminarily assigned in a subsequent 

quarter, but then retrospectively 

assigned to the ACO at the end of the 

performance year, we believe it is 

appropriate that preliminarily 

prospectively assigned beneficiaries 

remain eligible to receive services under 

the SNF 3-day rule waiver for the 

remainder of the performance year to 

aid ACOs in coordinating the care of 

their entire beneficiary population. 

Because the ACO will ultimately be 

held responsible for the quality and 

costs of the care furnished to all 

beneficiaries who are assigned at the 

end of the performance year, we believe 

the ACO should have the flexibility to 

use the SNF 3-day rule waiver to permit 

any beneficiary who has been identified 

as preliminarily prospectively assigned 

to the ACO during the performance year 

to receive covered SNF services without 

a prior 3 day hospital stay when 

clinically appropriate. For this reason, 

we do not believe it is necessary to 

extend the 90-day grace period that 

applies to beneficiaries assigned to 

waiver-approved ACOs participating 

under the prospective assignment 


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methodology to include beneficiaries 

who are preliminarily prospectively 

assigned to a waiver-approved ACO. 

Rather, beneficiaries who are 

preliminarily prospectively assigned to 

a waiver-approved ACO will remain 

eligible to receive services furnished in 

accordance with the SNF 3-day rule 

waiver for the remainder of that 

performance year unless they enroll in 

a Medicare group health plan or are 

otherwise no longer enrolled in Part A 

and Part B. In addition, in order to help 

protect beneficiaries from incurring 

significant financial liability for SNF 

services received without a prior 3-day 

inpatient stay after an ACO’s 

termination date, we would also like to 

clarify that an ACO must include, as a 

part of the notice of termination to ACO 

participants under § 425.221(a)(1)(i), a 

statement that its ACO participants, 

ACO providers/suppliers, and SNF 

affiliates may no longer use the SNF 

3-day rule waiver after the ACO’s date 

of termination. We would also like to 

clarify that if a beneficiary is admitted 

to a SNF prior to an ACO’s termination 

date, and all requirements of the SNF 

3-day rule waiver are met, the SNF 

services furnished without a prior 3-day 

stay would be covered under the SNF 

3-day rule waiver. 

In summary, we proposed to revise 

the regulations at § 425.612(a)(1) to 

expand eligibility for the SNF 3-day rule 

waiver to include ACOs participating in 

a two-sided model under preliminary 

prospective assignment with 

retrospective reconciliation. The SNF 

3-day rule waiver would be available for 

such ACOs with respect to all 

beneficiaries who have been identified 

as preliminarily prospectively assigned 

to the ACO on the initial performance 

year assignment list or on one or more 

assignment lists for quarters 1, 2, and 3 

of the performance year, for SNF 

services provided after the beneficiary 

first appeared on one of the assignment 

lists for the applicable performance 

year. The beneficiary would remain 

eligible to receive SNF services 

furnished in accordance with the waiver 

unless he or she is no longer eligible for 

assignment to the ACO because he or 

she is no longer enrolled in both Part A 

and Part B or has enrolled in a Medicare 

group health plan. 

Finally, as described in the August 

2018 proposed rule (83 FR 41862), 

stakeholders representing rural health 

providers have pointed out that the SNF 

3-day rule waiver is not currently 

available for SNF services furnished by 

critical access hospitals and other small, 

rural hospitals operating under a swing 

bed agreement. Section 1883 of the Act 

permits certain small, rural hospitals to 

enter into a swing bed agreement, under 

which the hospital can use its beds, as 

needed, to provide either acute or SNF 

care. As defined in the regulations at 42 

CFR 413.114, a swing bed hospital is a 

hospital or CAH participating in 

Medicare that has CMS approval to 

provide post-hospital SNF care and 

meets certain requirements. These 

stakeholders indicate that because there 

are fewer SNFs in rural areas, there are 

fewer opportunities for rural ACOs to 

enter into agreements with SNF 

affiliates. These stakeholders also 

believe that the current policy may 

disadvantage beneficiaries living in 

rural areas who may not be in close 

proximity to a SNF and would need to 

travel longer distances to benefit from 

the SNF 3-day rule waiver. The 

stakeholders requested that we revise 

the regulations to permit providers that 

furnish SNF services under a swing bed 

agreement to be eligible to partner with 

ACOs for purposes of the SNF 3-day 

rule waiver. 

In order to furnish SNF services under 

a swing bed agreement, hospitals must 

be substantially in compliance with the 

SNF participation requirements 

specified at 42 CFR 482.58(b), whereas 

CAHs must be substantially in 

compliance with the SNF participation 

requirements specified at 42 CFR 

485.645(d). However, currently, 

providers furnishing SNF services under 

a swing bed agreement are not eligible 

to partner and enter into written 

agreements with ACOs for purposes of 

the SNF 3-day rule waiver because: (1) 

The SNF 3-day rule waiver under the 

Shared Savings Program regulations at 

§ 425.612(a)(1) waives the requirement 

for a 3-day prior inpatient 

hospitalization only with respect to 

otherwise covered SNF services 

furnished by an eligible SNF and does 

not extend to otherwise covered posthospital extended care services 

furnished by a provider under a swing 

bed agreement; and (2) CAHs and other 

rural hospitals furnishing SNF services 

under swing bed agreements are not 

included in the CMS 5-star Quality 

Rating System and, therefore, cannot 

meet the requirement at 

§ 425.612(a)(1)(iii)(A) that, to be eligible 

to partner with an ACO for purposes of 

the SNF 3-day rule waiver, the SNF 

must have and maintain an overall 

rating of 3 or higher under the CMS 

5-star Quality Rating System. 

For the reasons described in the June 

2015 final rule (80 FR 32804), we 

believe it is necessary to offer ACOs 

participating under two-sided risk 

models additional tools and flexibility 

to manage and coordinate care for their 

assigned beneficiaries, including the 

flexibility to admit a beneficiary for 

SNF-level care without a prior 3-day 

inpatient hospital stay. We agree with 

stakeholders that there are fewer SNFs 

in rural areas. Therefore, we agree with 

rural stakeholders that risk-bearing 

ACOs in rural areas would be better able 

to coordinate and manage care, and thus 

to control unnecessary costs, if the SNF 

3-day rule waiver extended to otherwise 

covered SNF services provided by a 

hospital or CAH under a swing bed 

agreement. We believe this proposal 

would primarily benefit ACOs located 

in rural areas because most CAHs and 

hospitals that are approved to furnish 

post-acute SNF-level care via a swing 

bed agreement are located in rural areas. 

Consistent with this proposal, we also 

proposed to revise the regulations 

governing the SNF 3-day rule waiver at 

§ 425.612(a)(1) to indicate that, for 

purposes of determining eligibility to 

partner with an ACO for the SNF 3-day 

rule waiver, SNFs include providers 

furnishing SNF services under swing 

bed arrangements. In addition, we 

proposed to revise § 425.612(a)(1)(iii)(A) 

to specify that the minimum 3-star 

rating requirement applies only if the 

provider furnishing SNF services is 

eligible to be included in the CMS 5-star 

Quality Rating System. We do not have 

a comparable data element to the CMS 

5-star Quality Rating System for 

hospitals and CAHs under swing bed 

agreements; however, under 

§ 425.612(d)(2), we monitor and audit 

the use of payment waivers in 

accordance with § 425.316. We will 

continue to monitor the use of the SNF 

3-Day Rule Waiver and reserve the right 

to terminate an ACO’s SNF 3-day rule 

waiver if the waiver is used 

inappropriately or beneficiaries are not 

receiving appropriate care. 

Additionally, we note the possibility 

that a beneficiary could be admitted to 

a hospital or CAH, have an inpatient 

stay of less than 3 days, and then be 

admitted to the same hospital or CAH 

under its swing bed agreement. As 

previously discussed, we believe ACOs 

that bear a degree of financial risk have 

a stronger incentive not to over utilize 

services and have an incentive to 

recommend a beneficiary for admission 

to a SNF only when it is medically 

appropriate. We also note this scenario 

could occur when a beneficiary meets 

the generally applicable 3-day stay 

requirement. Thus, we do not believe 

extending the SNF 3-day rule waiver to 

include services furnished by a hospital 

or CAH under a swing bed agreement 

would create a new gaming opportunity. 

To reduce burden and confusion for 

eligible ACOs not currently approved 

for a SNF 3-day rule waiver, we 


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proposed that these revisions would be 

applicable for SNF 3-day rule waivers 

approved for performance years 

beginning on July 1, 2019, and in 

subsequent years. This would allow for 

one, as opposed to multiple, application 

deadlines thus reducing the overall 

burden for ACOs applying for the 

waiver and prevent confusion over ACO 

outreach and communication materials 

related to application deadlines. 

Because we are forgoing the application 

cycle for a January 1, 2019 start date, we 

proposed to apply the revisions to ACOs 

approved to use the SNF 3-day rule 

waiver for performance years beginning 

on July 1, 2019, and in subsequent 

years. This includes both ACOs that 

start a new agreement period under the 

proposed new participation options on 

July 1, 2019, and those ACOs that are 

applying for a waiver during the term of 

an existing participation agreement. For 

ACOs currently participating in the 

Shared Savings Program with an 

agreement period beginning in 2017 or 

2018, that have previously been 

approved for a SNF 3-day rule waiver, 

the proposed revisions to the SNF 3-day 

rule waiver would be applicable starting 

on July 1, 2019, and for all subsequent 

performance years. ACOs with an 

approved SNF 3-day rule waiver would 

be able to modify their 2019 SNF 

affiliate list for the performance year 

beginning on January 1, 2019; however, 

they would not be able to add a hospital 

or CAH operating under a swing bed 

agreement to their SNF affiliate list until 

the July 1, 2019 change request review 

cycle. CMS would notify all ACOs, 

including ACOs with a 12 month 

performance year 2019, of the schedule 

for this change request review cycle. 

Consistent with these proposed 

revisions to the SNF 3-day rule waiver, 

we proposed to add a new provision at 

§ 425.612(a)(1)(vi) to allow ACOs 

participating in performance-based risk 

within the BASIC track or ACOs 

participating in Track 3 or the 

ENHANCED track to request to use the 

SNF 3-day rule waiver. We did not 

propose to make the revisions to the 

SNF 3-day rule waiver applicable for 

Track 2 ACOs because we proposed to 

phase out Track 2, as discussed at 

section II.A.2. of this final rule. ACOs 

currently participating under Track 2 

that choose to terminate their existing 

participation agreement and reapply to 

the Shared Savings Program under the 

ENHANCED track or BASIC track, at the 

highest level of risk and potential 

reward, as described under section 

II.A.2. of this final rule, would be 

eligible to apply for the SNF 3-day rule 

waiver. 

For the reasons discussed in this 

section, we believe that the proposed 

modifications of the SNF 3-day rule 

waiver would provide additional 

incentives for ACOs to participate in the 

Shared Savings Program under 

performance-based risk and are 

necessary to support ACO efforts to 

increase quality and decrease costs 

under performance-based risk 

arrangements. We invited comments on 

these proposals and related issues. 

Comment: Many commenters 

supported our proposed changes to the 

SNF 3-day rule waiver. In particular, 

some reasons commenters stated that 

they were supportive of the proposed 

changes to the SNF 3-day rule waiver 

were that it supports patient 

engagement, care coordination, and aids 

ACOs in increasing quality and 

reducing unnecessary costs. Many 

commenters were particularly 

supportive of our proposal to allow twosided ACOs that selected the 

preliminary prospective with 

retrospective reconciliation assignment 

methodology to apply for the SNF 3-day 

rule waiver as well as our proposal to 

allow facilities under a swing bed 

agreement to partner with ACOs as SNF 

affiliates. 

Response: We appreciate commenters’ 

support for the proposed policies 

regarding the SNF 3-day rule waiver. 

Comment: One commenter opposed 

allowing ACOs under the preliminary 

prospective with retrospective 

reconciliation assignment methodology 

the opportunity to apply for a SNF 3- 

day rule waiver. The commenter stated 

there is potential for mishaps related to 

cost sharing and benefit availability for 

beneficiaries who ultimately are not 

assigned to an ACO. 

Response: We proposed that 

beneficiaries who appear on the initial, 

Q1, Q2, and Q3 preliminary prospective 

assignment list reports will remain 

eligible for the SNF–3 day rule waiver 

for the performance year, unless they 

are no longer eligible for both Part A 

and Part B or enroll in a Medicare group 

health plan, in order to minimize 

confusion concerning beneficiary 

eligibility. We also note that FFS 

eligibility status for all beneficiaries, 

regardless of assignment methodology, 

may change; therefore, beneficiary 

insurance coverage and cost sharing 

responsibilities should be verified at the 

time they receive services. Therefore, 

we disagree with the commenter that 

there are special concerns related to 

whether a beneficiary is ultimately 

assigned to an ACO under preliminary 

prospective assignment with 

retrospective reconciliation with respect 

to the SNF 3-day rule waiver, and we 

decline to modify the proposal based on 

this comment. 

Comment: A few commenters 

opposed the proposal to allow facilities 

under a swing bed agreements to partner 

with ACOs as SNF affiliates. 

Specifically, some commenters stated it 

would represent an unfair trade practice 

and would be inconsistent with 

restrictions applied to traditional SNFs. 

One commenter suggested continuously 

monitoring SNF affiliates under swing 

bed agreements to ensure they maintain 

a high-level of care. Other commenters 

suggested requiring facilities under 

swing bed agreements to provide a 

sufficient demonstration of hardship in 

placement of discharging patients with 

adequate post-acute care in order to be 

eligible to partner with an ACO as a 

SNF affiliate. 

Response: As we noted previously, in 

order to furnish SNF services under a 

swing bed agreement, hospitals must be 

substantially in compliance with the 

SNF participation requirements 

specified at 42 CFR 482.58(b), and CAHs 

must be substantially in compliance 

with the SNF participation requirements 

specified at 42 CFR 485.645(d). While 

we believe the CMS 5-Star Quality 

Rating System is a good measure to help 

assure beneficiaries that the SNF 

affiliate provides quality care, there are 

instances when the Star Quality Rating 

System does not apply, and we believe 

it is important to provide beneficiaries 

with the opportunity to be admitted to 

a SNF if their health care providers 

believe they do not require a 3-day 

inpatient stay. In order to provide 

beneficiaries in rural areas the 

opportunity to use the SNF 3-day rule 

waiver, we believe it is necessary to 

provide an exception to the CMS 5-Star 

Quality Rating System requirement for 

SNF providers furnishing SNF services 

under a swing bed arrangement. We will 

monitor the use of the SNF 3-Day Rule 

Waiver and reserve the right to 

terminate an ACO’s SNF 3-day rule 

waiver if the waiver is used 

inappropriately or beneficiaries are not 

receiving appropriate care. We do not 

believe it is necessary to require 

hospitals or CAHs under a swing bed 

agreements to demonstrate hardship in 

placement of discharging patients with 

adequate post-acute care as they have 

already sufficiently demonstrated to 

CMS they meet the requirements to 

operate under a swing bed agreement. 

Beneficiaries in rural areas have fewer 

post-acute care facility options, 

therefore we do not believe it is 

necessary to require facilities in rural 

areas to provide further documentation 

demonstrating the number of facilities 


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located near their rural beneficiary 

populations. 

Comment: Some commenters 

disagreed with limiting the SNF 3-day 

rule waiver to ACOs participating under 

performance-based risk tracks. These 

commenters suggested allowing all 

Shared Savings Program ACOs to apply 

for the SNF–3-day rule waiver. One 

commenter provided the following 

reasons in support of this suggestion: (1) 

ACOs should have the ability to reform 

their practice patterns before they are 

required to take on financial risk, (2) 

beneficiaries may experience 

‘‘iatrogenic harm’’ from a hospital stay 

longer than they need, and (3) the 

Shared Savings Program has 

experienced reductions in SNF 

utilizations demonstrating that ACOs 

are not interested in over utilizing SNF 

care. 

Response: We agree with commenters 

that ACOs participating in the Shared 

Savings Program have incentives to not 

over utilize care and reform their 

practice patterns; however, based on our 

experience with Track 1 we have 

learned that a SNF 3-day rule waiver is 

not a necessary incentive to encourage 

ACOs to participate under a one-sided 

model. We continue to believe that 

using the authority under section 

1899(f) of the Act to waive certain 

payment or other program requirements 

may be necessary to permit effective 

implementation of two-sided 

performance-based risk tracks under the 

Shared Savings Program (80 FR 32799). 

Comment: One commenter opposed 

further modifications to the SNF 3-day 

rule waiver until CMS evaluates the 

impact the waiver has had on patient 

outcomes in the program. 

Response: We continue to monitor the 

use of the SNF 3-day rule waiver and 

reserve the right to terminate an ACO’s 

SNF 3-day rule waiver if the waiver is 

used inappropriately or beneficiaries are 

not receiving appropriate care. To date, 

we have not observed misuse of the SNF 

3-day rule waiver, nor have we received 

complaints from (or about) beneficiaries 

negatively impacted by the SNF 3-day 

rule waiver. We will continue to 

monitor the implementation of this 

waiver. 

Comment: Several commenters 

submitted suggestions concerning our 

requirement that SNF affiliates have and 

maintain an overall rating of 3 or higher 

under the CMS 5-star Quality Rating 

System (§ 425.612(a)(1)(iii)(A)). 

Commenters report that the measure is 

difficult to attain, which limits the SNFs 

eligible to partner with ACOs, reduces 

the effectiveness of the waiver, and 

limits beneficiary choice. Some 

commenters suggested modifying this 

requirement to use only one star rating 

data element instead of the overall 

score. One commenter suggested that as 

APMs, ACOs are self-regulated to 

provide low-cost, high-quality care; 

therefore; the star rating requirement is 

not necessary. Some commenters 

suggested we provide a list of SNFs that 

are eligible SNF affiliates for ACOs to 

partner with. 

Response: We did not propose to 

change the requirement for SNF 

affiliates that are not operating under a 

swing bed arrangement to have and 

maintain an overall rating of 3 or higher 

under the CMS 5-star Quality Rating 

System in the proposed rule. We decline 

at this time to remove the star rating 

requirement for facilities eligible for a 

rating under the CMS 5-star Quality 

Rating System because, as stated in 

earlier rulemaking, we believe this 

requirement provides beneficiaries with 

evidence that the SNF provides quality 

care (80 FR 32805). We will continue to 

evaluate the requirements of the SNF 

3-day rule waiver and will propose any 

modifications we believe may be 

necessary to aid ACOs in successfully 

coordinating and delivering high quality 

beneficiary care in future rulemaking. 

We do not believe it is necessary to 

produce a list of SNF affiliates for ACOs 

to partner with since the CMS 5-star 

Quality Rating System is publicly 

available for both ACOs and 

beneficiaries to view the overall quality 

score for Medicare enrolled SNFs. 

Comment: A few commenters 

suggested we modify the beneficiary 

eligibility requirement which limits the 

SNF 3-day rule waiver to beneficiaries 

that do not currently reside in a SNF or 

other long-term care facility 

(§ 425.602(a)(1)(ii)(B)). Commenters 

stated these beneficiaries also provide 

the opportunity to lower costs if they 

become eligible for the SNF 3-day rule 

waiver. One commenter suggested all 

beneficiaries seen at a hospital on an 

ACO participant list should be eligible 

for the SNF 3-day rule waiver. Another 

commenter suggested all assignable 

beneficiaries for ACOs under the 

prospective assignment methodology 

should become eligible for the SNF 3- 

day rule waiver as this would be 

equitable to the proposal to include 

quarterly beneficiaries assigned under 

the preliminary prospective with 

retrospective reconciliation assignment 

methodology. 

Response: We did not propose any 

modifications to § 425.602(a)(1)(ii)(B) at 

this time. However, we have concerns 

that long-term care facilities might have 

an incentive to inappropriately apply 

the SNF 3-day rule waiver to 

beneficiaries residing in their facility as 

the payment rate is different between 

the two types of facility stays. 

Consistent with the approach taken 

under the Pioneer ACO Model and Next 

Generation ACO Model, we do not 

consider independent or assisted living 

facilities to be long-term care settings for 

purposes of determining a beneficiary’s 

eligibility to receive SNF services 

pursuant to the SNF 3-day rule waiver. 

We do not believe it is appropriate to 

extend the SNF 3-day rule waiver to all 

beneficiaries who are seen at a hospital 

on an ACO’s participant list or 

beneficiaries assignable to an ACO 

under the prospective assignment 

methodology. Under 

§ 425.702(c)(1)(ii)(C), we provide ACOs 

that have selected the prospective 

assignment methodology with a list of 

their prospectively assigned 

beneficiaries so that the ACO knows the 

universe of beneficiaries who could be 

assigned to the ACO for the performance 

year, and we believe it is appropriate for 

the waiver to be used with respect to 

those beneficiaries. Additionally, ACOs 

under the prospective assignment 

methodology have their assignment list 

set at the start of each performance year 

and no beneficiaries are added to the 

list. Assignable beneficiaries will not be 

added during the performance year to 

the assigned beneficiary population for 

an ACO under the prospective 

assignment methodology for purposes of 

either the quality reporting sample or 

financial reconciliation. Therefore, we 

do not believe it is appropriate to extend 

the SNF–3-day rule waiver to 

beneficiaries who cannot be included on 

the final list of assigned beneficiaries for 

an ACO. We do not believe these 

suggested modifications to the SNF 

3-day rule waiver would be necessary to 

permit effective implementation of twosided performance-based risk tracks 

under the Shared Savings Program (80 

FR 32799). 

Comment: Some commenters 

suggested we revise 

§ 425.612(a)(1)(ii)(G) which requires a 

beneficiary to ‘‘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’’ to be eligible for the 

SNF 3-day rule waiver. Commenters 

suggested we allow other qualified 

clinicians to evaluate the beneficiary. A 

few commenters stated that this 

requirement creates additional burden 

and sometimes additional billable 

services when a physician must 

evaluate a beneficiary who has already 

been evaluated by an ACO provider/ 

supplier who is a NP, PA, or CNS. 

Response: In order to be eligible to 

receive covered SNF services under the 


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SNF 3-day rule waiver, a beneficiary 

must have been evaluated and approved 

for admission to the SNF within 3 days 

prior to the admission by an ACO 

provider/supplier who is a physician, 

consistent with the beneficiary 

evaluation and admission plan. We do 

not believe that this criterion precludes 

review and approval by an ACO 

provider/supplier who is a physician of 

an evaluation conducted by another 

provider/supplier, for example, 

approval by the ACO medical director 

or other ACO provider/supplier who is 

a physician involved in the beneficiary’s 

care of a recommendation for SNF 

admission by an NP, PA, of CNS who 

has directly evaluated the beneficiary. 

Additionally, under § 425.613, ACO 

providers/suppliers in risk-bearing 

ACOs under the prospective assignment 

methodology may be able to conduct the 

evaluation via a telehealth service, if all 

applicable requirements are met. 

Comment: One commenter 

recommended we require ACOs to 

enhance communication and 

interoperability of EHRs with SNFs. The 

commenter suggested that improving 

the dissemination of electronic health 

records among providers will result in 

improved coordination of services and 

reduced inefficiencies as patients’ 

transition from one care setting to 

another. The commenter further 

supported this suggestion stating it 

aligns with CMS’ goal of improved 

interoperability and would result in 

improved services. 

Response: While we believe EHRs are 

mutually beneficial for ACOs and SNFs, 

and we encourage their use among 

health care providers, we decline to 

require SNF affiliates to implement 

EHRs to align with the ACOs they 

partner with. We are concerned such a 

requirement could create inefficiencies 

or have other unintended consequences, 

as SNF affiliates are not required to 

remain exclusive to a single ACO. SNF 

affiliates can partner with more than 

one Shared Savings Program ACO as 

well as with ACOs participating in other 

Medicare shared savings initiatives. In 

addition, such a requirement would be 

beyond the scope of the policies 

proposed in the August 2018 proposed 

rule. 

Final Action: After considering the 

comments received in response to the 

proposals to revise the SNF 3-day rule 

waiver, we are finalizing the policies as 

proposed. Specifically, we are finalizing 

the revisions to § 425.612(a)(1) to 

expand eligibility for the SNF 3-day rule 

waiver to include ACOs participating in 

a two-sided model under preliminary 

prospective assignment with 

retrospective reconciliation. We are 

finalizing revisions to § 425.612(a)(1) to 

indicate that, for purposes of 

determining eligibility to partner with 

an ACO for the SNF 3-day rule waiver, 

SNFs include providers furnishing SNF 

services under swing bed arrangements. 

Additionally, we are finalizing revisions 

to § 425.612(a)(1)(iii)(A) to specify that 

the minimum 3-star rating requirement 

applies only if the provider furnishing 

SNF services is eligible to be included 

in the CMS 5-star Quality Rating 

System. Lastly, we are finalizing a new 

provision at § 425.612(a)(1)(vi) to allow 

ACOs participating in performancebased risk within the BASIC track or 

ACOs participating in Track 3 or the 

ENHANCED track to request to use the 

SNF 3-day rule waiver. 

b. Billing and Payment for Telehealth 

Services 

(1) Background 

Under section 1834(m) of the Act, 

Medicare pays for certain Part B 

telehealth services furnished by a 

physician or practitioner under certain 

conditions, even though the physician 

or practitioner is not in the same 

location as the beneficiary. As of 2018, 

the telehealth services must be 

furnished to a beneficiary located in one 

of the types of originating sites specified 

in section 1834(m)(4)(C)(ii) of the Act 

and the originating site must satisfy at 

least one of the requirements of section 

1834(m)(4)(C)(i)(I) through (III) of the 

Act. An originating site is the location 

at which a beneficiary who is eligible to 

receive a telehealth service is located at 

the time the service is furnished via a 

telecommunications system. 

Generally, for Medicare payment to be 

made for telehealth services under the 

PFS, several conditions must be met 

(§ 410.78(b)). Specifically, the service 

must be on the Medicare list of 

telehealth services and must meet all of 

the following requirements for payment: 

• The telehealth service must be furnished 

via an interactive telecommunications 

system, as defined at § 410.78(a)(3). CMS 

pays for telehealth services provided through 

asynchronous (that is, store and forward) 

technologies, defined at § 410.78(a)(1), only 

for Federal telemedicine demonstration 

programs conducted in Alaska or Hawaii. 

• The service must be furnished to an 

eligible beneficiary by a physician or other 

practitioner specified at § 410.78(b)(2) who is 

licensed to furnish the service under State 

law as specified at § 410.78(b)(1). 

• The eligible beneficiary must be located 

at an originating site at the time the service 

being furnished via a telecommunications 

system occurs. The eligible originating sites 

are specified in section 1834(m)(4)(C)(ii) of 

the Act and § 410.78(b)(3) and, for telehealth 

services furnished during 2018, include the 

following: The office of a physician or 

practitioner, a CAH, RHC, FQHC, hospital, 

hospital-based or CAH-based renal dialysis 

center (including satellites), SNF, and 

community mental health center. 

• As of 2018, the originating site must be 

in a location specified in section 

1834(m)(4)(C)(i) of the Act and § 410.78(b)(4). 

The site must be located in a health 

professional shortage area that is either 

outside of a Metropolitan Statistical Area 

(MSA) or within a rural census tract of an 

MSA, located in a county that is not included 

in an MSA, or be participating in a Federal 

telemedicine demonstration project that has 

been approved by, or receives funding from, 

the Secretary of Health and Human Services 

as of December 31, 2000. 

When these conditions are met, 

Medicare pays a facility fee to the 

originating site and provides separate 

payment to the distant site practitioner 

for the service. 

Section 1834(m)(4)(F)(i) of the Act 

defines Medicare telehealth services to 

include professional consultations, 

office visits, office psychiatry services, 

and any additional service specified by 

the Secretary, when furnished via a 

telecommunications system. A list of 

Medicare telehealth services is available 

through the CMS website (at https://

www.cms.gov/Medicare/MedicareGeneral-Information/Telehealth/ 

Telehealth-Codes.html). Under section 

1834(m)(4)(F)(ii) of the Act, CMS has an 

annual process to consider additions to 

and deletions from the list of telehealth 

services. CMS does not include any 

services as telehealth services when 

Medicare does not otherwise make a 

separate payment for them. 

Under the Next Generation ACO 

Model, the Innovation Center has been 

testing a Telehealth Expansion Benefit 

Enhancement under which CMS has 

waived the geographic and originating 

site requirements for services that are on 

the list of telehealth services when 

furnished to aligned beneficiaries by 

eligible telehealth practitioners (see the 

CMS website at https://

innovation.cms.gov/Files/x/nextgenacotelehealthwaiver.pdf). The purpose of 

this waiver is to test whether giving 

participating ACOs the flexibility to 

furnish telehealth services in more 

geographic areas and from the 

beneficiary’s home will lower costs, 

improve quality, and better engage 

beneficiaries in their care. 

(2) Provisions of the Bipartisan Budget 

Act for Telehealth in the Shared Savings 

Program 

Section 50324 of the Bipartisan 

Budget Act amends section 1899 of the 

Act to add a new subsection (l) to 

provide certain ACOs the ability to 

expand the use of telehealth. The 

Bipartisan Budget Act provides that, 


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with respect to telehealth services for 

which payment would otherwise be 

made that are furnished on or after 

January 1, 2020 by a physician or 

practitioner participating in an 

applicable ACO to a Medicare FFS 

beneficiary prospectively assigned to 

the applicable ACO, the following shall 

apply: (1) The home of a beneficiary 

shall be treated as an originating site 

described in section 1834(m)(4)(C)(ii) of 

the Act, and (2) the geographic 

limitation under section 

1834(m)(4)(C)(i) of the Act shall not 

apply with respect to an originating site, 

including the home of a beneficiary, 

subject to State licensing requirements. 

The Bipartisan Budget Act defines the 

home of a beneficiary as the place of 

residence used as the home of a 

Medicare FFS beneficiary. 

The Bipartisan Budget Act defines an 

‘‘applicable ACO’’ as an ACO 

participating in a two-sided model of 

the Shared Savings Program (as 

described in § 425.600(a)) or a two-sided 

model tested or expanded under section 

1115A of the Act, for which FFS 

beneficiaries are assigned to the ACO 

using a prospective assignment method. 

The Bipartisan Budget Act also 

provides that, in the case where the 

home of the beneficiary is the 

originating site, there shall be no facility 

fee paid to the originating site. It further 

provides that no payment may be made 

for telehealth services furnished in the 

home of the beneficiary when such 

services are inappropriate to furnish in 

the home setting, such as services that 

are typically furnished in inpatient 

settings such as a hospital. 

Lastly, the Bipartisan Budget Act 

requires the Secretary to conduct a 

study on the implementation of section 

1899(l) of the Act that includes an 

analysis of the utilization of, and 

expenditures for, telehealth services 

under section 1899(l). No later than 

January 1, 2026, the Secretary must 

submit a report to Congress containing 

the results of the study, together with 

recommendations for legislation and 

administrative action as the Secretary 

determines appropriate. 

(3) Proposals 

We proposed to add a new section of 

the Shared Savings Program regulations 

at § 425.613 to govern the payment for 

certain telehealth services furnished, in 

accordance with section 1899(l) of the 

Act, as added by the Bipartisan Budget 

Act. As required by section 1899(l) of 

the Act, we proposed to treat the 

beneficiary’s home as an originating site 

and not to apply the originating site 

geographic restrictions under section 

1834(m)(4)(C)(i) of the Act for telehealth 

services furnished by a physician or 

practitioner participating in an 

applicable ACO. Thus, we proposed to 

make payment to a physician or 

practitioner billing though the TIN of an 

ACO participant in an applicable ACO 

for furnishing otherwise covered 

telehealth services to beneficiaries 

prospectively assigned to the applicable 

ACO, including when the originating 

site is the beneficiary’s home and 

without regard to the geographic 

limitations under section 

1834(m)(4)(C)(i) of the Act. As we note 

in section II.A.4.c. of the August 2018 

proposed rule (83 FR 41811) and again 

in this final rule, the Shared Savings 

Program offers two similar, but distinct, 

assignment methodologies, prospective 

assignment and preliminary prospective 

assignment with retrospective 

reconciliation. We proposed to apply 

these policies regarding payment for 

telehealth services to ACOs under a 

two-sided model that participate under 

the prospective assignment method. We 

believed that these ACOs meet the 

definition of applicable ACO under 

section 1899(l)(2)(A) of the Act. Because 

final assignment is not performed under 

the preliminary prospective assignment 

methodology until after the end of the 

performance year, we do not believe it 

is ‘‘a prospective assignment method’’ 

as required under section 

1899(l)(2)(A)(ii). Although we do not 

believe that ACOs that participate under 

the preliminary prospective assignment 

with retrospective reconciliation 

method meet the definition of an 

applicable ACO, we welcomed 

comments on our interpretation of this 

provision. 

We proposed that the policies 

governing telehealth services furnished 

in accordance with section 1899(l) of 

the Act would be effective for telehealth 

services furnished in performance years 

beginning in 2020 and subsequent years 

by physicians or practitioners 

participating in ACOs that are operating 

under a two-sided model with a 

prospective assignment methodology for 

the applicable performance year. This 

would include physicians and 

practitioners participating in ACOs with 

a prospective assignment method for a 

performance year in the ENHANCED 

track (including Track 3 ACOs with an 

agreement period starting in 2018 or on 

January 1, 2019), or in levels C, D, or E 

of the BASIC track. Because ACOs 

participating in the Track 1+ Model are 

participating in a two-sided model 

tested under section 1115A and use 

prospective assignment, we note that 

physicians and practitioners 

participating in Track 1+ ACOs would 

also be able to furnish and be paid for 

telehealth services in accordance with 

section 1899(l) of the Act. Physicians 

and practitioners participating in Track 

2 ACOs would not be able to furnish 

and be paid for telehealth services in 

accordance with section 1899(l) of the 

Act because Track 2 ACOs do not 

participate under a prospective 

assignment methodology. Additionally, 

the ability to furnish and be paid for 

telehealth services in accordance with 

section 1899(l) of the Act would not 

extend beyond the term of the ACO’s 

participation agreement. If CMS 

terminates an ACO’s participation 

agreement under § 425.218, then the 

ability of physicians and other 

practitioners billing through the TIN of 

an ACO participant to furnish and be 

paid for telehealth services in 

accordance with section 1899(l) of the 

Act will end on the date specified in the 

notice of termination. Further, to help 

protect beneficiaries from potential 

exposure to significant financial 

responsibility. we would also like to 

clarify that an ACO must include, as a 

part of its notice of termination to ACO 

participants under § 425.221(a)(1)(i), a 

statement that physicians and other 

practitioners who bill through the TIN 

of an ACO participant can no longer 

furnish and be paid for telehealth 

services in accordance with section 

1899(l) of the Act after the ACO’s date 

of termination. 

As discussed in section II.A.4. of the 

August 2018 proposed rule (83 FR 

41810) and again in this final rule, we 

proposed to allow ACOs in the BASIC 

and ENHANCED tracks the opportunity 

to change their beneficiary assignment 

methodology on an annual basis. As a 

result, the ability of physicians and 

other practitioners billing through the 

TIN of an ACO participant in these 

ACOs to furnish and be paid for 

telehealth services in accordance with 

section 1899(l) of the Act could change 

from year to year depending on the 

ACO’s choice of assignment 

methodology. Should an ACO in the 

BASIC track or ENHANCED track 

change from the prospective assignment 

methodology to preliminary prospective 

assignment methodology with 

retrospective reconciliation for a 

performance year, the ACO would no 

longer satisfy the requirements to be an 

applicable ACO for that year and 

physicians and other practitioners 

billing through the TIN of an ACO 

participant in that ACO could only 

furnish and be paid for telehealth 

services if the services meet all 

applicable requirements, including the 


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21https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/Downloads/ 

clm104c12.pdf. 

originating site requirements, under 

section 1834(m)(4)(C) of the Act. 

We proposed that the beneficiary’s 

home would be a permissible 

originating site type for telehealth 

services furnished by a physician or 

practitioner participating in an 

applicable ACO. Under this proposal, in 

addition to being eligible for payment 

for telehealth services when the 

originating site is one of the types of 

originating sites specified in section 

1834(m)(4)(C)(ii) of the Act, a physician 

or other practitioner billing through the 

TIN of an ACO participant in an 

applicable ACO could also furnish and 

be paid for such services when the 

originating site is the beneficiary’s home 

(assuming all other requirements are 

met). As discussed earlier, section 

1899(l)(1)(A) of the Act, as added by 

section 50324 of the Bipartisan Budget 

Act, defines a beneficiary’s home to be 

the place of residence used as the home 

of the beneficiary. In addition, we 

proposed that Medicare would not pay 

a facility fee when the originating site 

for a telehealth service is the 

beneficiary’s home. 

Further, we proposed that the 

geographic limitations under section 

1834(m)(4)(C)(i) of the Act would not 

apply to any originating site, including 

a beneficiary’s home, for telehealth 

services furnished by a physician or 

practitioner billing through the TIN of 

an ACO participant in an applicable 

ACO. This would mean that a physician 

or practitioner billing through the TIN 

of an ACO participant in an applicable 

ACO could furnish and be paid for 

telehealth services when the beneficiary 

receives those services while located at 

an originating site in an urban area that 

is within an MSA, assuming all other 

requirements are met. We also proposed 

to require that, consistent with section 

1899(l)(1)(B) of the Act, the originating 

site must comply with State licensing 

requirements. 

We proposed that the treatment of the 

beneficiary’s home as an originating site 

and the non-application of the 

originating site geographic restrictions 

would be applicable only to payments 

for services on the list of Medicare 

telehealth services. The approved list of 

telehealth services is maintained on our 

website and is subject to annual updates 

(https://www.cms.gov/Medicare/ 

Medicare-General-Information/ 

Telehealth/Telehealth-Codes.html). 

However, as provided in section 

1899(l)(3)(B) of the Act, in the case 

where the beneficiary’s home is the 

originating site, Medicare will not pay 

for telehealth services that are 

inappropriate to be furnished in the 

home even if the services are on the 

approved list of telehealth services. 

Therefore, we proposed that ACO 

participants must not submit claims for 

services specified as inpatient only 

when the service is furnished as a 

telehealth service and the beneficiary’s 

home is the originating site. For 

example, CPT codes G0406, G0407, 

G0408, G0425, G0426, and G0427 are 

used for reporting inpatient hospital 

visits and are included on the 2018 

approved telehealth list. As described in 

Chapter 12, section 190.3.1, of the 

Medicare Claims Processing Manual,21

Medicare pays for inpatient or 

emergency department telehealth 

services furnished to beneficiaries 

located in a hospital or SNF; therefore, 

consistent with the current FFS 

telehealth requirements, we believe it 

would be inappropriate for an ACO 

participant to submit a claim for an 

inpatient telehealth visit when the 

originating site is the beneficiary’s 

home. 

As described in the August 2018 

proposed rule (83 FR 41865), we are 

concerned about potential beneficiary 

financial liability for telehealth services 

provided to beneficiaries excluded from 

assignment under the Shared Savings 

Program. A beneficiary prospectively 

assigned to an applicable ACO at the 

beginning of a performance year can 

subsequently be excluded from 

assignment if he or she meets the 

exclusion criteria specified under 

§ 425.401(b). To address delays in 

communicating beneficiary exclusions 

from the assignment list, the Telehealth 

Expansion Benefit Enhancement under 

the Next Generation ACO Model 

provides for a 90-day grace period that 

functionally acts as an extension of 

beneficiary eligibility to receive services 

under the Benefit Enhancement and 

permits some additional time for the 

ACO to receive quarterly exclusion lists 

from CMS and communicate beneficiary 

exclusions to its participants. We also 

provide for a 90-day grace period with 

respect to the Shared Savings Program 

SNF 3-day rule waiver under 

§ 425.612(a)(1), which allows for 

coverage of qualifying SNF services 

furnished to a beneficiary who was 

prospectively assigned to an ACO that 

has been approved for the waiver at the 

beginning of the performance year, but 

was excluded in the most recent 

quarterly update to the ACO’s 

prospective assignment list. 

Based upon the experience in the 

Next Generation ACO Model, we believe 

it would be inadvisable not to provide 

some protection for beneficiaries who 

are prospectively assigned to an 

applicable ACO at the start of the year, 

but are subsequently excluded from 

assignment. It is not operationally 

feasible for CMS to notify the ACO and 

for the ACO, in turn, to notify its ACO 

participants and ACO providers/ 

suppliers immediately of the 

beneficiary’s exclusion. The lag in 

communication may then cause a 

physician or practitioner billing under 

the TIN of an ACO participant to 

unknowingly furnish a telehealth 

service to a beneficiary who no longer 

qualifies to receive telehealth services 

under section 1899(l) of the Act. 

Therefore, we proposed to use our 

waiver authority under section 1899(f) 

of the Act to waive the originating site 

requirements in section 1834(m)(4)(C) of 

the Act as necessary to provide for a 90- 

day grace period for payment of 

otherwise covered telehealth services, to 

allow sufficient time for CMS to notify 

an applicable ACO of any beneficiary 

exclusions, and for the ACO then to 

inform its ACO participants and ACO 

providers/suppliers of those exclusions. 

We believe it is necessary, to protect 

beneficiaries from potential financial 

liability related to use of telehealth 

services furnished by physicians and 

other practitioners billing through the 

TIN of an ACO participant in an 

applicable ACO, to establish this 90-day 

grace period in the case of a 

prospectively assigned beneficiary who 

is later excluded from assignment to an 

applicable ACO. 

More specifically, we proposed to 

waive the originating site requirements 

in section 1834(m)(4)(C) of the Act to 

allow for coverage of telehealth services 

furnished by a physician or practitioner 

billing through the TIN of an ACO 

participant in an applicable ACO to an 

excluded beneficiary within 90 days 

following the date that CMS delivers the 

relevant quarterly exclusion list under 

§ 425.401(b). We proposed to amend 

§ 425.612 to add a new paragraph (f) 

establishing the terms and conditions of 

this waiver. This waiver would permit 

us to make payment for otherwise 

covered telehealth services furnished 

during a 90 day grace period to 

beneficiaries who were initially on an 

applicable ACO’s list of prospectively 

assigned beneficiaries for the 

performance year, but were 

subsequently excluded during the 

performance year. Under the terms of 

this waiver, CMS would make payments 

for telehealth services furnished to such 

a beneficiary as if they were telehealth 

services authorized under section 


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1899(l) of the Act if the following 

conditions are met: 

• The beneficiary was prospectively 

assigned to an applicable ACO at the 

beginning of the relevant performance year, 

but was excluded in the most recent 

quarterly update to the assignment list under 

§ 425.401(b); 

• The telehealth services are furnished to 

the beneficiary by a physician or practitioner 

billing through the TIN of an ACO 

participant in an applicable ACO within 90 

days following the date that CMS delivers the 

quarterly exclusion list to the applicable 

ACO. 

• But for the beneficiary’s exclusion from 

the applicable ACO’s assignment list, CMS 

would have made payment to the ACO 

participant for such services under section 

1899(l) of the Act. 

In addition, as described in the 

August 2018 proposed rule (83 FR 

41865) we are concerned that there 

could be scenarios where a beneficiary 

could be charged for non-covered 

telehealth services that were a result of 

an inappropriate attempt to furnish and 

be paid for telehealth services under 

section 1899(l) of the Act by a physician 

or practitioner billing through the TIN 

of an ACO participant in an applicable 

ACO. Specifically, we are concerned 

that a beneficiary could be charged for 

non-covered telehealth services if a 

physician or practitioner billing through 

the TIN of an ACO participant in an 

applicable ACO were to attempt to 

furnish a telehealth service that would 

be otherwise covered under section 

1899(l) of the Act to a FFS beneficiary 

who is not prospectively assigned to the 

applicable ACO, and payment for the 

telehealth service is denied because the 

beneficiary is not eligible to receive 

telehealth services furnished under 

section 1899(l) of the Act. We believe 

this situation could occur as a result of 

a breakdown in one or more processes 

of the applicable ACO and its ACO 

participants. For example, the ACO 

participant may not verify that the 

beneficiary appears on the ACO’s 

prospective assignment list, as required 

under section 1899(l) of the Act, prior 

to furnishing a telehealth service. In this 

scenario, Medicare would deny 

payment of the telehealth service claim 

because the beneficiary did not meet the 

requirement of being prospectively 

assigned to an applicable ACO. We are 

concerned that, once the claim is 

rejected, the beneficiary may not be 

protected from financial liability, and 

thus could be charged by the ACO 

participant for non-covered telehealth 

services that were a result of an 

inappropriate attempt to furnish 

telehealth services under section 

1899(l), potentially subjecting the 

beneficiary to significant financial 

liability. In this circumstance, we 

proposed to assume that the physician 

or other practitioner’s intent was to rely 

upon section 1899(l) of the Act. We 

believe this is a reasonable assumption 

because, as a physician or practitioner 

billing under the TIN of an ACO 

participant in an applicable ACO, the 

healthcare provider should be well 

aware of the rules regarding furnishing 

telehealth services and, by submitting 

the claim, demonstrated an expectation 

that CMS would pay for telehealth 

services that would otherwise have been 

rejected for lack of meeting the 

originating site requirements in section 

1834(m)(4)(C) of the Act. We believe 

that in this scenario, the rejection of the 

claim could easily have been avoided if 

the ACO and the ACO participant had 

procedures in place to confirm that the 

requirements for furnishing such 

telehealth services were satisfied. 

Because each of these entities is in a 

better position than the beneficiary to 

know the requirements of the Shared 

Savings Program and to ensure that they 

are met, we believe that the applicable 

ACO and/or its ACO participants should 

be accountable for such denials and the 

ACO participant should be prevented 

from charging the beneficiary for the 

non-covered telehealth service. 

Therefore, we proposed that in the event 

that CMS makes no payment for 

telehealth services furnished to a FFS 

beneficiary and billed through the TIN 

of an ACO participant in an applicable 

ACO and the only reason the claim was 

non-covered is because the beneficiary 

was not prospectively assigned to the 

ACO or was not in the 90 day grace 

period, all of the following beneficiary 

protections would apply: 

• The ACO participant must not charge the 

beneficiary for the expenses incurred for 

such services; 

• The ACO participant must return to the 

beneficiary any monies collected for such 

services; and 

• The ACO may be subject to compliance 

actions, including being required to submit a 

corrective action plan (CAP) under 

§ 425.216(b) for CMS approval. If the ACO is 

required to submit a CAP and, after being 

given an opportunity to act upon the CAP, 

the ACO fails to implement the CAP or 

demonstrate improved performance upon 

completion of the CAP, we may terminate the 

participation agreement as specified under 

§ 425.216(b)(2). These proposed beneficiary 

protections are reflected in the proposed new 

regulation at § 425.613, which implements 

the requirements of section 1899(l) of the Act 

and establishes the policies governing the use 

of telehealth services by applicable ACOs 

and their ACO participants and ACO 

providers/suppliers. 

Lastly, in the August 2018 proposed 

rule, we included a proposed change to 

the public reporting requirements under 

§ 425.308 to include an ACO’s use of 

payment rule waivers under § 425.612, 

if applicable, or telehealth services 

under § 425.613, if applicable, or both. 

We welcomed comments on these 

proposals for implementing the 

requirements of section 1899(l) of the 

Act, as added by the Bipartisan Budget 

Act, and related issues. Our proposed 

policies concerning the applicability of 

the SNF 3-day rule waiver and 

expanded coverage for telehealth 

services in accordance with section 

1899(l) of the Act by track are 

summarized in Table 10. 


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Comment: A number of commenters 

expressed their support for the 

proposals to make payments to 

physicians or practitioners for 

furnishing otherwise covered telehealth 

services, including when the originating 

site is the beneficiary’s home. Several 

commenters wrote that the telehealth 

proposals would specifically help those 

who are home bound, or lack 

transportation, to have access to primary 

care services that would otherwise be 

unavailable. A few commenters 

supported the proposal to allow the 

beneficiary’s home to be the originating 

site, and encouraged CMS to remove all 

originating site requirements. 

Response: We appreciate commenters’ 

support for the proposed policies for 

implementing the telehealth 

requirements of section 1899(l) of the 

Act, as added by the Bipartisan Budget 

Act. 

Comment: A few commenters 

generally supported our telehealth 

proposals, but expressed uncertainty 

about how this new provision would 

impact FQHCs and encouraged CMS to 

clarify the language in the proposed rule 

to clearly allow FQHCs to provide 

telehealth services through their 

participation in an ACO. 

Response: Although RHCs and FQHCs 

are authorized to serve as an originating 

site for telehealth services, RHCs and 

FQHCs are not authorized to serve as a 

distant site for telehealth consultations. 

We also wish to clarify that RHCs and 

FQHCs may not share space, staff, 

supplies, equipment, and/or other 

resources with an onsite Medicare Part 

B FFS practice operated by the same 

RHC or FQHC physician(s) and/or nonphysician(s) practitioners. Additionally, 

RHC and FQHC practitioners may not 

furnish or separately bill for RHC or 

FQHC-covered professional services as a 

Part B provider in the RHC or FQHC. 

Additional details about these 

prohibitions are available in Chapter 13 

of the Medicare Benefit Policy Manual 

(https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/ 

Downloads/bp102c13.pdf). Therefore, 

practitioners furnishing services in a 

RHC or FQHC facility cannot furnish 

telehealth services, though a beneficiary 

may use an RHC/FQHC facility as an 

originating site. 

Comment: One commenter requested 

a real time benefit eligibility system for 

physician offices. 

Response: The Shared Savings 

Program regulations do not prohibit 

ACOs from creating a beneficiary 

eligibility system to aid their ACO 

providers and suppliers in identifying 

prospectively assigned beneficiaries. 

Beneficiary FFS coverage should be 

verified at the time they receive services 

to determine eligibility. 

Comment: One ACO commenter 

stated rural populations do not have 

access to the proper technology to 

effectively implement telehealth 

services, which would limit the 

practical usage of the proposal for this 

ACO. 

Response: The Bipartisan Budget Act 

and this final rule do not impose any 

new limitations on delivery of 

telehealth services, instead the new 

provisions allow for a greater number of 

beneficiaries to be eligible to receive 

covered telehealth services. Eligible 

beneficiaries without the proper 

technology to receive telehealth services 

from their home remain eligible to 

receive such services from other 

originating sites such as a practitioner’s 

office or an RHC or FQHC. 

Comment: Commenters generally 

supported the proposal to apply the 

proposed telehealth policies to ACOs 

under a two-sided model. However, 

they encouraged CMS to expand the 

coverage to include ACOs under the 

preliminary prospective with 

retrospective reconciliation assignment 

methodology in order to create 

consistency with the SNF waiver, and 

make the proposals more streamlined 

for CMS to manage. A few commenters 

suggested that CMS allow ACOs to 

apply the telehealth proposals to 

voluntary aligned beneficiaries who are 

assigned to an ACO under the 

preliminary prospective with 

retrospective reconciliation assignment 

methodology. One commenter suggested 

that telehealth coverage be extended to 

ACOs under one-sided tracks, stating 

that ACOs in shared savings only 


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models have generated more savings 

than ACOs in two-sided models. 

Response: We appreciate the 

commenters’ support; however, CMS 

does not believe it is necessary to 

implement the Shared Savings Program 

to use its waiver authority to broaden 

the expansion of coverage for telehealth 

services beyond what Congress has 

specified for the Shared Savings 

Program. Section 1899(l)(2)(A) of the 

Act specifies in the definition of 

applicable ACO the requirements that 

an ACO must operate under a two-sided 

model under which beneficiaries are 

assigned using a prospective assignment 

methodology. Therefore, in view of 

Congress’ decision to limit the 

expansion of coverage of telehealth 

services under section 1899(l) of the Act 

to physicians and practitioners in 

applicable ACOs, we do not believe it 

would be necessary for purposes of 

carrying out the Shared Savings 

Program to use our authority under 

section 1899(f) of the Act to issue a 

waiver allowing ACO providers/ 

suppliers participating in ACOs 

operating under a one-sided model or to 

which beneficiaries are preliminary 

prospectively assigned to receive 

payment for expanded telehealth 

services in the same manner as for 

telehealth services furnished under 

1899(l). 

Comment: Several commenters 

suggested the implementation of a 

waiver under section 1899(f) to allow 

the proposed telehealth policies to begin 

on July 1, 2019. 

Response: We proposed that the 

policies governing telehealth services 

furnished in accordance with section 

1899(l) of the Act would be effective for 

telehealth services furnished in 

performance years beginning in 2020 

and subsequent years in accordance 

with the Bipartisan Budget Act. 

Therefore, consistent with the effective 

date specified by Congress, we decline 

to use our authority under section 

1899(f) of the Act to issue a waiver to 

allow physicians and practitioners 

participating in applicable ACOs to 

furnish telehealth services pursuant to 

section 1899(l) of the Act in the 6 

months between July 1, 2019, and 

December 31, 2019. 

Comment: One commenter requested 

that CMS clarify how we would 

determine a ‘‘telehealth service must not 

be inappropriate to furnish in the home 

setting’’ (§ 425.613(a)(1)(iv)) and define 

the ‘‘inappropriate use of telehealth 

services’’ (§ 425.613(d)(2)). 

Additionally, the commenter asked 

whether there would be different coding 

requirements for telehealth services 

delivered where the beneficiary’s home 

is the originating site. 

Response: As we previously detailed, 

we have determined CPT codes G0406, 

G0407, G0408, G0425, G0426, and 

G0427 are inappropriate to furnish in 

the home setting. We identified these 

codes because they are specific to an 

inpatient setting and we believe it is 

inappropriate to deliver any service 

identified as an inpatient service in the 

home of a beneficiary. ACO providers/ 

suppliers furnishing telehealth services 

must comply with all applicable Shared 

Savings Program and FFS regulations 

concerning furnishing telehealth 

services. Telehealth originating site 

claims are submitted independently 

from the physician services claims; 

beneficiaries and practitioners must 

refrain from submitting claims for an 

originating site facility fee when the 

services is furnished in the beneficiary’s 

home. 

Comment: One commenter agreed 

with the 90-day grace period for 

beneficiaries, and that ACO TINs should 

not charge beneficiaries if they 

inappropriately furnish a telehealth 

service to a beneficiary. Another 

commenter suggested waiving costsharing obligations for beneficiaries 

receiving telehealth services wherever 

possible. 

Response: We thank commenters for 

their support. We proposed telehealth 

services furnished in accordance with 

section 1899(l) of the Act in accordance 

with the Bipartisan Budget Act. The 

Bipartisan Budget Act does not include 

provisions allowing providers and 

suppliers to waive cost-sharing 

obligations; therefore, we decline to 

create additional provisions addressing 

telehealth service cost-sharing 

requirements. 

Comment: One commenter suggested 

that telepsychiatry plays an important 

role in the health care system through 

improving patient outcomes and 

reducing costs for patients with 

undiagnosed mental illness and 

substance use disorders. Another 

commenter suggested CMS allow 

beneficiaries to receive telehealth 

services from their home or residence 

from an emergency physician. The 

commenter cited the shortage of 

hospitals and emergency departments in 

rural communities as the reason they 

believed this would be an appropriate 

service. 

Response: The list of telehealth 

services is updated through the annual 

physician fee schedule. The public has 

the opportunity to submit requests to 

add or delete services on an ongoing 

basis. We invite the commenter to make 

suggestions for additions to the 

Medicare list of telehealth services 

through this process. 

Comment: One commenter expressed 

concern that requiring ACO providers/ 

suppliers to preview quarterly 

beneficiary assignment lists prior to 

delivering telehealth services, and not 

receiving payment if the beneficiary was 

not eligible to receive telehealth 

services, would be an administrative 

burden for ACOs. 

Response: Section 1899(l) of the Act 

requires that physicians and 

practitioners must be participating in an 

ACO to which beneficiaries are assigned 

using a prospective assignment method 

to be eligible to furnish covered 

telehealth services under that 

subsection, which services must be 

furnished to an assigned beneficiary. 

Shared Savings Program ACOs and their 

ACO providers/suppliers are not 

required to provide telehealth services, 

but if they chose to, the beneficiaries to 

whom they furnish such services must 

appear on the ACO’s prospective 

assignment list. 

Comment: One commenter suggested 

that ACOs should publicly report their 

delivery of telehealth services via their 

participation in the Shared Savings 

Program; the commenter suggested that 

this would prevent ACO participants 

from misusing benefit enhancements 

provided by CMS. 

Response: We agree that transparency 

is important for reducing misuse of 

telehealth service delivery. In the 

August 2018 proposed rule, we 

proposed modifications to § 425.308 to 

include public reporting of an ACO’s 

use of payment rule waivers under 

§ 425.612, if applicable, or telehealth 

services under § 425.613, if applicable, 

or both. 

Comment: One commenter suggested 

that any application to bill for telehealth 

services furnished pursuant to § 1899(l) 

needs to be concise for risk-bearing 

ACOs. 

Response: Our proposed policies 

under § 425.613 did not include any 

application process. 

Final Action: After considering the 

comments received in response to the 

proposed policies for implementing the 

telehealth requirements of section 

1899(l) of the Act, as added by the 

Bipartisan Budget Act, we are finalizing 

the proposed policies for ACOs 

participating under performance-based 

risk that has elected the prospective 

assignment methodology under 

§ 425.400(a)(3). Accordingly, we are also 

finalizing the addition of § 425.613. 

Lastly, we are finalizing the proposed 

modifications to § 425.308(b)(6) to 

include a requirement for public 

reporting of an ACO’s use of payment 


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rule waivers under § 425.612, if 

applicable, or telehealth services under 

§ 425.613, if applicable, or both. 

C. Providing Tools To Strengthen 

Beneficiary Engagement 

1. Background on Beneficiary 

Engagement 

Section 1899(b)(2)(G) of the Act 

requires an ACO to ‘‘define processes to 

promote . . . patient engagement.’’ 

Strengthening beneficiary engagement is 

one of CMS’ goals to help transform our 

health care system into one that delivers 

better care, smarter spending and 

healthier people, and that puts the 

beneficiary at the center of care. We 

stated in the November 2011 final rule 

that the term ‘‘patient engagement’’ 

means the active participation of 

patients and their families in the 

process of making medical decisions (76 

FR 67828). The regulation at § 425.112 

details the patient-centeredness criteria 

for the Shared Savings Program, and 

requires that ACOs implement processes 

to promote patient engagement 

(§ 425.112(b)(2)). 

In addition, section 50341 of the 

Bipartisan Budget Act, which amends 

section 1899 of the Act, allows certain 

ACOs to each establish a beneficiary 

incentive program for assigned 

beneficiaries who receive qualifying 

primary-care services in order to 

encourage Medicare FFS beneficiaries to 

obtain medically necessary primary care 

services. In order to implement the 

amendments to section 1899 of the Act, 

and consistent with our goal to 

strengthen beneficiary engagement, we 

proposed policies in the August 2018 

proposed rule to allow any ACO in 

Track 2, levels C, D, or E of the BASIC 

track, or the ENHANCED track to 

establish a CMS-approved beneficiary 

incentive program to provide incentive 

payments to eligible beneficiaries who 

receive qualifying services. 

Furthermore, we proposed to revise 

our policies related to beneficiary 

notifications. Specifically, we proposed 

to require additional content for 

beneficiary notifications and that 

beneficiaries receive such notices at the 

first primary care visit of each 

performance year. Finally, we sought 

comment on whether we should create 

an alternative beneficiary assignment 

methodology, in order to promote 

beneficiary free choice, under which a 

beneficiary would be assigned to an 

ACO if the beneficiary has ‘‘opted-in’’ to 

assignment to the ACO. 

2. Beneficiary Incentives 

a. Overview 

As we indicated in the August 2018 

proposed rule, we believe that patient 

engagement is an important part of 

motivating and encouraging more active 

participation by beneficiaries in their 

health care. We continue to believe that 

ACOs that engage beneficiaries in the 

management of their health care may 

experience greater success in the Shared 

Savings Program. In the November 2011 

final rule (see 76 FR 67958), we noted 

that some commenters had suggested 

that beneficiary engagement and 

coordination of care could be enhanced 

by providing additional incentives to 

beneficiaries that would potentially 

motivate and encourage beneficiaries to 

become actively involved in their care. 

One commenter gave the example of 

supplying scales to beneficiaries with 

congestive heart failure to help them 

better manage this chronic disease. 

Other commenters were concerned that 

certain beneficiary incentives such as 

gifts, cash, or other remuneration could 

be inappropriate incentives for receiving 

services or remaining assigned to an 

ACO or with a particular ACO 

participant or ACO provider/supplier. 

In the November 2011 final rule, we 

finalized a provision at § 425.304(a)(1) 

that prohibits ACOs, ACO participants, 

ACO providers/suppliers, and other 

individuals or entities performing 

functions or services related to ACO 

activities from providing gifts or other 

remuneration to beneficiaries as 

incentives for (i) receiving items and 

services from or remaining in an ACO 

or with ACO providers/suppliers in a 

particular ACO, or (ii) receiving items or 

services from ACO participants or ACO 

providers/suppliers. However, in 

response to comments, we finalized a 

provision at § 425.304(a)(2) to provide 

that, subject to compliance with all 

other applicable laws and regulations, 

an ACO, ACO participants, and ACO 

providers/suppliers, and other 

individuals or entities performing 

functions or services related to ACO 

activities may provide in-kind items or 

services to beneficiaries if there is a 

reasonable connection between the 

items or services and the medical care 

of the beneficiary, and the items or 

services are preventive care items or 

services, or advance a clinical goal of 

the beneficiary, including adherence to 

a treatment regime; adherence to a drug 

regime; adherence to a follow-up care 

plan; or management of a chronic 

disease or condition. For example, an 

ACO provider may give a blood pressure 

monitor to a beneficiary with 

hypertension in order to encourage 

regular blood pressure monitoring and 

thus educate and engage the beneficiary 

to be more proactive in his or her 

disease management. In this instance, 

such a gift would not be considered an 

improper incentive to encourage the 

beneficiary to remain with an ACO, 

ACO participant, or ACO provider/ 

supplier. 

We noted in the August 2018 

proposed rule that nothing precludes 

ACOs, ACO participants, or ACO 

providers/suppliers from offering a 

beneficiary an incentive to promote his 

or her clinical care if the incentive does 

not violate the Federal anti-kickback 

statute (section 1128B(b) of the Act), the 

civil monetary penalties law provision 

relating to beneficiary inducements 

(section 1128A(a)(5) of the Act, known 

as the Beneficiary Inducements CMP), 

or other applicable law. For additional 

information on beneficiary incentives 

that may be permissible under the 

Federal anti-kickback statute and the 

Beneficiary Inducements CMP, see the 

final rule published by the Office of 

Inspector General (OIG) on December 7, 

2016 titled ‘‘Medicare and State Health 

Care Programs: Fraud and Abuse; 

Revisions to the Safe Harbors Under the 

Anti-Kickback Statute and Civil 

Monetary Penalty Rules Regarding 

Beneficiary Inducements’’ (81 FR 

88368), as well as other resources that 

can be found on the OIG website at 

oig.hhs.gov. 

In addition, as we explained in the 

August 2018 proposed rule, we believe 

that the existing regulation at 

§ 425.304(a)(2) already provides ACOs 

with a considerable amount of 

flexibility to offer beneficiary incentives 

to encourage patient engagement, 

promote care coordination, and achieve 

the objectives of the Shared Savings 

Program. Further, ACOs, ACO 

participants, and ACO providers/ 

suppliers need not furnish beneficiary 

incentives under the existing regulation 

at § 425.304(a)(2) to every beneficiary; 

they have the flexibility to offer 

incentives on a targeted basis to 

beneficiaries who, for example, are most 

likely to achieve the clinical goal that 

the incentive is intended to advance. 

Although the appropriateness of any inkind beneficiary incentives must be 

determined on a case-by-case basis, we 

believe a wide variety of incentives 

could be acceptable under the existing 

regulation under § 425.304(a)(2), 

including, for example, the following: 

• Vouchers for over-the-counter 

medications recommended by a health care 

provider. 

• Prepaid, non-transferable vouchers that 

are redeemable for transportation services 


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solely to and from an appointment with a 

health care provider. 

• Items and services to support 

management of a chronic disease or 

condition, such as home air-filtering systems 

or bedroom air-conditioning for asthmatic 

patients, and home improvements such as 

railing installation or other home 

modifications to prevent re-injury. 

• Wellness program memberships, 

seminars, and classes. 

• Electronic systems that alert family 

caregivers when a family member with 

dementia wanders away from home. 

• Vouchers for those with chronic diseases 

to access chronic disease self-management, 

pain management and falls prevention 

programs. 

• Vouchers for those with malnutrition to 

access meals programs. 

• Phone applications, calendars or other 

methods for reminding patients to take their 

medications and promote patient adherence 

to treatment regimes. 

As the previously stated examples 

indicate, we consider vouchers, that is, 

certificates that can be exchanged for 

particular goods or services (for 

example, a certificate for one free gym 

class at a local gym), to be ‘‘in-kind 

items or services’’ under existing 

§ 425.304(a)(2) (redesignated as 

§ 425.304(b) in this final rule). 

Accordingly, an ACO may offer 

vouchers as beneficiary incentives 

under § 425.304(a)(2) so long as the 

vouchers meet all the other 

requirements of § 425.304(a)(2). 

In addition, we explained in the 

August 2018 proposed rule that, for 

purposes of the Shared Savings 

Program, we consider gift cards that are 

in the nature of a voucher, that is, gift 

cards that can be used only for 

particular goods or services, to be ‘‘inkind items or services’’ that can be 

offered under existing § 425.304(a)(2), 

provided that the requirements are 

satisfied. A gift card that is not in the 

nature of a voucher, however, such as a 

gift card to a general store, would not 

meet the requirements for ‘‘in-kind item 

or service’’ under existing 

§ 425.304(a)(2). Furthermore, we 

consider a gift card that can be used like 

cash, for example, a VISA or Amazon 

‘‘gift card,’’ to be a ‘‘cash equivalent’’ 

that can be offered only as an incentive 

payment under an approved beneficiary 

incentive program, provided that all of 

the criteria set forth in § 425.304(c), as 

finalized, are satisfied. We emphasized 

that, as previously stated, the 

determination and appropriateness of 

any in-kind beneficiary incentive must 

be determined on a case-by-case basis. 

Although we believe that ACOs, ACO 

participants, ACO providers/suppliers 

and other individuals or entities 

performing functions or services related 

to ACO activities are already permitted 

to furnish a broad range of beneficiary 

incentives under existing § 425.304(a)(2) 

(including the previously stated 

examples), we noted that stakeholders 

have advocated that ACOs be permitted 

to offer a more flexible, and extensive 

range of beneficiary incentives that are 

not currently allowable under § 425.304. 

In particular, stakeholders have sought 

to offer monetary incentives that 

beneficiaries could use to purchase 

retail items, which would not qualify as 

in-kind items or services under 

§ 425.304. 

b. Provisions of the Bipartisan Budget 

Act for ACO Beneficiary Incentive 

Programs 

As previously noted, and as explained 

in the August 2018 proposed rule, in 

order to encourage Medicare FFS 

beneficiaries to obtain medically 

necessary primary care services, the 

recent amendments to section 1899 of 

the Act permit certain ACOs to establish 

beneficiary incentive programs to 

provide incentive payments to assigned 

beneficiaries who receive qualifying 

primary care services. We believe that 

such amendments will empower 

individuals and caregivers in care 

delivery. Specifically, the Bipartisan 

Budget Act added section 1899(m)(1)(A) 

of the Act, which allows ACOs to apply 

to operate an ACO beneficiary incentive 

program. The Bipartisan Budget Act also 

added a new subsection (m)(2) to 

section 1899 of the Act, which provides 

clarification regarding the general 

features, implementation, duration, and 

scope of approved ACO beneficiary 

incentive programs. In addition, the 

Bipartisan Budget Act added section 

1899(b)(2)(I) of the Act, which requires 

ACOs that seek to operate a beneficiary 

incentive program to apply to operate 

the program at such time, in such 

manner, and with such information as 

the Secretary may require. 

Section 1899(m)(1)(A) of the Act, as 

added by the Bipartisan Budget Act, 

allows ACOs participating in certain 

payment models described in section 

1899(m)(2)(B) of the Act to apply to 

establish an ACO beneficiary incentive 

program to provide incentive payments 

to Medicare FFS beneficiaries who are 

furnished qualifying services. Section 

1899(m)(1)(A) of the Act also specifies 

that the Secretary shall permit an ACO 

to establish such a program at the 

Secretary’s discretion and subject to 

such requirements, including program 

integrity requirements, as the Secretary 

determines necessary. 

Section 1899(m)(1)(B) of the Act 

requires the Secretary to implement the 

ACO beneficiary incentive program 

provisions under section 1899(m) of the 

Act on a date determined appropriate by 

the Secretary, but no earlier than 

January 1, 2019 and no later than 

January 1, 2020. In addition, section 

1899(m)(2)(A) of the Act, as added by 

the Bipartisan Budget Act, specifies that 

an ACO beneficiary incentive program 

shall be conducted for a period of time 

(of not less than 1 year) as the Secretary 

may approve, subject to the termination 

of the ACO beneficiary incentive 

program by the Secretary. 

Section 1899(m)(2)(H) of the Act 

provides that the Secretary may 

terminate an ACO beneficiary incentive 

program at any time for reasons 

determined appropriate by the 

Secretary. In addition, the Bipartisan 

Budget Act amended section 1899(g)(6) 

of the Act to provide that there shall be 

no administrative or judicial review 

under section 1869 or 1878 of the Act, 

or otherwise, of the termination of an 

ACO beneficiary incentive program. 

Section 1899(m)(2)(B) of the Act 

requires that an ACO beneficiary 

incentive program provide incentive 

payments to all of the following 

Medicare FFS beneficiaries who are 

furnished qualifying services by the 

ACO: (1) Medicare FFS beneficiaries 

who are preliminarily prospectively or 

prospectively assigned (or otherwise 

assigned, as determined by the 

Secretary) to an ACO in a Track 2 or 

Track 3 payment model described in 

§ 425.600(a) (or in any successor 

regulation) and (2) Medicare FFS 

beneficiaries who are assigned to an 

ACO, as determined by the Secretary, in 

any future payment models involving 

two-sided risk. 

Section 1899(m)(2)(C) of the Act, as 

added by the Bipartisan Budget Act, 

defines a qualifying service, for which 

incentive payments may be made to 

beneficiaries, as a primary care service, 

as defined in § 425.20 (or in any 

successor regulation), with respect to 

which coinsurance applies under 

Medicare part B. Section 1899(m)(2)(C) 

of the Act also provides that a qualifying 

service is a service furnished through an 

ACO by: (1) An ACO professional 

described in section 1899(h)(1)(A) of the 

Act who has a primary care specialty 

designation included in the definition of 

primary care physician under § 425.20 

(or any successor regulation) (2) an ACO 

professional described in section 

1899(h)(1)(B) of the Act; or (3) a FQHC 

or RHC (as such terms are defined in 

section 1861(aa) of the Act). 

As added by the Bipartisan Budget 

Act, section 1899(m)(2)(D) of the Act 

provides that an incentive payment 

made by an ACO under an ACO 

beneficiary incentive program shall be 

in an amount up to $20, with the 


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maximum amount updated annually by 

the percentage increase in the consumer 

price index for all urban consumers 

(United States city average) for the 12- 

month period ending with June of the 

previous year. Section 1899(m)(2)(D) of 

the Act also requires that an incentive 

payment be in the same amount for each 

Medicare FFS beneficiary regardless of 

the enrollment of the beneficiary in a 

Medicare supplemental policy 

(described in section 1882(g)(1) of the 

Act), in a State Medicaid plan under 

Title XIX or a waiver of such a plan, or 

in any other health insurance policy or 

health benefit plan. Finally, section 

1899(m)(2)(D) of the Act requires that an 

incentive payment be made for each 

qualifying service furnished to a 

beneficiary during a period specified by 

the Secretary and that an incentive 

payment be made no later than 30 days 

after a qualifying service is furnished to 

the beneficiary. 

Section 1899(m)(2)(E) of the Act, as 

added by the Bipartisan Budget Act, 

provides that no separate payment shall 

be made to an ACO for the costs, 

including the costs of incentive 

payments, of carrying out an ACO 

beneficiary incentive program. The 

section further provides that this 

requirement shall not be construed as 

prohibiting an ACO from using shared 

savings received under the Shared 

Savings Program to carry out an ACO 

beneficiary incentive program. In 

addition, section 1899(m)(2)(F) of the 

Act provides that incentive payments 

made by an ACO under an ACO 

beneficiary incentive program shall be 

disregarded for purposes of calculating 

benchmarks, estimated average per 

capita Medicare expenditures, and 

shared savings for purposes of the 

Shared Savings Program. 

As added by the Bipartisan Budget 

Act, section 1899(m)(2)(G) of the Act 

provides that an ACO conducting an 

ACO beneficiary incentive program 

shall, at such times and in such format 

as the Secretary may require, report to 

the Secretary such information and 

retain such documentation as the 

Secretary may require, including the 

amount and frequency of incentive 

payments made and the number of 

Medicare FFS beneficiaries receiving 

such payments. Finally, section 

1899(m)(3) of the Act excludes 

payments under an ACO beneficiary 

incentive program from being 

considered income or resources or 

otherwise taken into account for 

purposes of: (1) Determining eligibility 

for benefits or assistance under any 

Federal program or State or local 

program financed with Federal funds; or 

(2) any Federal or State laws relating to 

taxation. 

c. Beneficiary Incentive Programs 

In order to implement the changes set 

forth in section 1899(b)(2) and (m) of the 

Act, we proposed to add regulation text 

at § 425.304(c) that would allow ACOs 

participating under certain two-sided 

models to establish beneficiary 

incentive programs to provide incentive 

payments to assigned beneficiaries who 

receive qualifying services. In 

developing such proposed policy, we 

considered the statutory provisions set 

forth in section 1899(b)(2) and (m) of the 

Act, as amended, as well as the 

following: The application process for 

establishing a beneficiary incentive 

program; who can furnish an incentive 

payment; the amount, timing, and 

frequency of an incentive payment; how 

an incentive payment may be financed, 

and necessary program integrity 

requirements. We addressed each of 

these considerations in the August 2018 

proposed rule. 

As previously explained, section 

1899(m)(1)(A) of the Act authorizes ‘‘an 

ACO participating under this section 

under a payment model described in 

clause (i) or (ii) of paragraph (2)(B)’’ to 

establish an ACO beneficiary incentive 

program. In turn, section 

1899(m)(2)(B)(i) of the Act describes 

ACOs participating in ‘‘Track 2 and 

Track 3 payment models as described in 

section 425.600(a) . . . (or in any 

successor regulation).’’ Section 

1899(m)(2)(B)(ii) of the Act describes 

ACOs participating in ‘‘any future 

payment models involving two-sided 

risk.’’ As discussed in section II.A.2. of 

the August 2018 proposed rule, we 

proposed to (1) discontinue Track 2 as 

a participation option and limit its 

availability to agreement periods 

beginning before July 1, 2019; (2) 

rename Track 3 the ‘‘ENHANCED 

track’’; and (3) require ACOs with 

agreement periods beginning July 1, 

2019 and in subsequent years to enter 

either the ENHANCED track (which 

entails two-sided risk) or the new 

BASIC track (in which Levels A and B 

have one-sided models and Levels C, D, 

and E have two-sided risk). As noted in 

proposed § 425.600(a)(3), for purposes 

of the Shared Savings Program, all 

references to the ENHANCED track 

would be deemed to include Track 3; 

the terms are synonymous. As discussed 

in section II.A.2. and II.A.3. of this final 

rule, we are finalizing these policies as 

proposed. Accordingly, Track 2 and 

ENHANCED track ACOs are described 

under section 1899(m)(2)(B)(i) of the 

Act, and ACOs in Levels C, D, or E of 

the BASIC track are described under 

section 1899(m)(2)(B)(ii) of the Act. As 

a result, Track 2 ACOs, ENHANCED 

track ACOs, and ACOs in Levels, C, D, 

or E of the BASIC track are authorized 

to establish beneficiary incentive 

programs under section 1899(m)(1)(A) 

of the Act. 

Section 1899(m)(1)(B) of the Act states 

that the ‘‘Secretary shall implement this 

subsection on a date determined 

appropriate by the Secretary. Such date 

shall be no earlier than January 1, 2019, 

and no later than January 1, 2020.’’ We 

proposed to allow ACOs to establish a 

beneficiary incentive program beginning 

no earlier than July 1, 2019. As 

discussed later in this section, ACOs 

that are approved to operate a 

beneficiary incentive program shall 

conduct the program for at least 1 year, 

as required by section 1899(m)(2)(A) of 

the Act, unless CMS terminates the 

ACO’s beneficiary incentive program. 

As we explained in the August 2018 

proposed rule (83 FR 41870), this 

means, for example, that an ACO 

currently participating in the Shared 

Savings Program under Track 2 or Track 

3 whose agreement period expires on 

December 31, 2019 would be ineligible 

to operate a beneficiary incentive 

program starting on July 1, 2019 because 

the ACO would have only 6 months of 

its agreement remaining as of July 1, 

2019. Under our proposed policy, the 

ACO would, however, be permitted to 

start a beneficiary incentive program on 

January 1, 2020 (assuming it renews its 

agreement to participate in the Shared 

Savings Program). 

We considered the operational impact 

of having both a midyear beneficiary 

incentive program cycle (for ACOs that 

seek to establish a beneficiary incentive 

program beginning on July 1, 2019) and 

a calendar year beneficiary incentive 

program cycle (for ACOs that seek to 

establish a beneficiary incentive 

program beginning on January 1, 2020, 

or a later January 1 start date). We stated 

our belief that it could be confusing for 

ACOs, and difficult for CMS to monitor 

approved beneficiary incentive 

programs, if some ACOs begin their 

beneficiary incentive programs in July 

2019 and other ACOs begin their 

beneficiary incentive programs in 

January 2020. We explained in the 

August 2018 proposed rule that, under 

this approach, annual certifications 

regarding intent to continue a 

beneficiary incentive program (as 

further discussed herein) would be 

provided by ACOs at different times of 

the year, depending on when each ACO 

established its beneficiary incentive 

program. To address this, we believe it 

is necessary to require ACOs that 

establish a beneficiary incentive 


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program on July 1, 2019 to commit to an 

initial beneficiary incentive program 

term of 18 months (with certifications 

required near the conclusion of the 18- 

month period and for each consecutive 

12-month period thereafter). However, 

we proposed that any ACO that 

establishes a beneficiary incentive 

program beginning on January 1 of a 

performance year would be required to 

commit to an initial beneficiary 

incentive program term of 12 months. 

This would allow the term cycles of all 

ACO beneficiary incentive programs to 

later ‘‘sync’’ so that they all operate on 

a calendar year beginning on January 1, 

2021. As an alternative, we considered 

permitting all ACOs to establish a 

beneficiary incentive program beginning 

January 1, 2020. However, we expressed 

our belief that some ACOs may prefer to 

establish a beneficiary incentive 

program on July 1, 2019, rather than 

delay until January 1, 2020. 

The statute does not prescribe 

procedures that ACOs must adhere to in 

applying to establish a beneficiary 

incentive program. In addition, beyond 

the requirement that ACOs participate 

in Track 2, Track 3 (which, as we 

previously discussed, will be renamed 

the ‘‘ENHANCED track’’) or a ‘‘future 

payment model involving two-sided 

risk’’ (sections 1899(m)(2)(B)(i) and (ii) 

of the Act), the new provisions do not 

describe what factors we should 

consider in evaluating whether an ACO 

should be permitted to establish a 

beneficiary incentive program. Instead, 

section 1899(m)(1)(A) of the Act states 

that the ‘‘Secretary shall permit such an 

ACO to establish such a program at the 

Secretary’s discretion and subject to 

such requirements . . . as the Secretary 

determines necessary.’’ We proposed 

that the application for the beneficiary 

incentive program be in a form and 

manner specified by CMS, which may 

be separate from the application to 

participate in the Shared Savings 

Program. We explained that in our 

proposal that we would provide 

additional information regarding the 

application on our website. 

We proposed to permit eligible ACOs 

to apply to establish a beneficiary 

incentive program during the July 1, 

2019 application cycle or during a 

future annual application cycle for the 

Shared Savings Program. In addition, 

we proposed to permit an eligible ACO 

that is mid-agreement to apply to 

establish a beneficiary incentive 

program during the application cycle 

prior to the performance year in which 

the ACO chooses to begin implementing 

its beneficiary incentive program. We 

explained that this proposed policy 

would apply to ACOs that enter a twosided model at the start of an agreement 

period but that do not apply to establish 

a beneficiary incentive program at the 

time of their initial or renewal 

application to the Shared Savings 

Program. This means, for example, that 

an ACO that enters the Shared Savings 

Program under a two-sided model but 

that does not seek to offer a beneficiary 

incentive program until its second 

performance year could apply to offer a 

beneficiary incentive program during 

the application cycle in advance of its 

second performance year. This would 

also apply to ACOs that enter the BASIC 

track’s glide path under a one-sided 

model and that apply to establish a 

beneficiary incentive program beginning 

with a performance year under a twosided model (see discussion in sections 

II.A.3.b. and II.A.4.b. of this final rule). 

We proposed that an ACO be required 

to operate its beneficiary incentive 

program effective at the beginning of the 

performance year following CMS’ 

approval of the ACO’s application to 

establish the beneficiary incentive 

program. The ACO would then be 

required to operate the approved 

beneficiary incentive program for the 

entirety of such 12-month performance 

year (for ACOs that establish a 

beneficiary incentive program on 

January 1, 2020, or a later January 1 start 

date) or for an initial 18-month period 

(for ACOs that establish a beneficiary 

incentive program on July 1, 2019). 

We proposed that an ACO with an 

approved beneficiary incentive program 

application be permitted to operate its 

beneficiary incentive program for any 

consecutive performance year if it 

complies with certain certification 

requirements. Specifically, we proposed 

that an ACO that seeks to continue to 

offer its beneficiary incentive program 

beyond the initial 12-month or 18- 

month term (as previously discussed) be 

required to certify, in the form and 

manner and by a deadline specified by 

CMS, its intent to continue to operate its 

beneficiary incentive program for the 

entirety of the next performance year, 

and that its beneficiary incentive 

program continues to meet all 

applicable requirements. We explained 

in the August 2018 proposed rule that 

CMS may terminate a beneficiary 

incentive program, in accordance with 

§ 425.304(c)(7), as proposed, if an ACO 

fails to provide such certification. We 

believe this certification requirement is 

necessary for CMS to monitor 

beneficiary incentive programs. We 

explained that we would provide 

further information regarding the annual 

certification process through 

subregulatory guidance. 

In addition to the application and 

certification requirements previously 

described, we considered whether an 

ACO that offers a beneficiary incentive 

program should be required to notify 

CMS of any modification to its 

beneficiary incentive program prior to 

implementing such modification. We 

solicited comments on this issue. 

With respect to who may receive an 

incentive payment, we stated in the 

August 2018 proposed rule that a FFS 

beneficiary would be eligible to receive 

an incentive payment if the beneficiary 

is assigned to an ACO through either 

preliminary prospective assignment 

with retrospective reconciliation, as 

described in § 425.400(a)(2), or 

prospective assignment, as described in 

§ 425.400(a)(3). We noted that Track 2 is 

under preliminary prospective 

assignment with retrospective 

reconciliation under § 425.400(a)(2). In 

addition, as discussed in section II.A.4. 

of the proposed rule, we proposed to 

permit BASIC track and ENHANCED 

track ACOs to enter an agreement period 

under preliminary prospective 

assignment, as described in 

§ 425.400(a)(2), or under prospective 

assignment, as described in 

§ 425.400(a)(3). Further, we explained 

that a beneficiary may choose to 

voluntarily align with an ACO, and, if 

eligible for assignment, the beneficiary 

would be prospectively assigned to the 

ACO (regardless of track) for the 

performance year under § 425.402(e)(1). 

Therefore, consistent with our proposed 

policy regarding which ACOs may 

establish a beneficiary incentive 

program, we explained that any 

beneficiary assigned to an ACO that is 

participating under Track 2; Levels C, D, 

or E of the BASIC track; or the 

ENHANCED track would be eligible to 

receive an incentive payment under that 

ACO’s CMS-approved beneficiary 

incentive program. 

Section 1899(m)(2)(C) of the Act sets 

forth the definition of a qualifying 

service for purposes of the beneficiary 

incentive program. We mirrored the 

language in the proposed regulation text 

noting that ‘‘a qualifying service is a 

primary care service,’’ as defined in 

§ 425.20, ‘‘with respect to which 

coinsurance applies under part B,’’ 

furnished through an ACO by ‘‘an ACO 

professional who has a primary care 

specialty designation included in the 

definition of primary care physician’’ 

under § 425.20; an ACO professional 

who is a physician assistant, nurse 

practitioner, or clinical nurse specialist; 

or a FQHC or RHC. Accordingly, we 

explained that, under our proposal, any 

service furnished by an ACO 

professional who is a physician but does 


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not have a specialty designation 

included in the definition of primary 

care physician would not be considered 

a qualifying service for which an 

incentive payment may be furnished. 

With respect to the amount of any 

incentive payment, we stated that 

section 1899(m)(2)(D)(i) of the Act 

provides that an incentive payment 

made by an ACO in accordance with a 

beneficiary incentive program shall be 

‘‘in an amount up to $20.’’ Accordingly, 

we proposed to incorporate a $20 

incentive payment limit into the 

regulation. We also proposed to adopt 

the provision at section 1899(m)(2)(D)(i) 

of the Act, which provides that the $20 

maximum amount must be ‘‘updated 

annually by the percentage increase in 

the consumer price index for all urban 

consumers (United States city average) 

for the 12-month period ending with 

June of the previous year.’’ To avoid 

minor changes in the updated maximum 

amount, however, we expressed our 

belief that it would be necessary to 

round the updated maximum incentive 

payment amount to the nearest whole 

dollar. We explained that we would 

post the updated maximum payment 

amount on the Shared Savings Program 

website and/or in a guidance document 

regarding beneficiary incentive 

programs. 

We also proposed to adopt the 

requirement that the incentive payment 

be ‘‘in the same amount for each 

Medicare fee-for-service beneficiary’’ 

without regard to enrollment of such a 

beneficiary in a Medicare supplemental 

policy, in a State Medicaid plan, or a 

waiver of such a plan, or in any other 

health insurance policy or health plan. 

(Section 1899(m)(2)(D)(ii) of the Act.) 

Accordingly, under our proposal, all 

incentive payments distributed by an 

ACO under its beneficiary incentive 

program must be of equal monetary 

value. In other words, an ACO would 

not be permitted to offer higher-valued 

incentive payments for particular 

qualifying services or to particular 

beneficiaries. However, we explained 

that an ACO would be able to provide 

different types of incentive payments 

(for example, a gift card to some 

beneficiaries and a check to others) 

depending on a beneficiary’s preference, 

so long as all incentive payments 

offered by the ACO under its beneficiary 

incentive program were of equal 

monetary value. 

Furthermore, as required by section 

1899(m)(2)(D)(iii) of the Act, we 

proposed that an ACO furnish an 

incentive payment to an eligible 

beneficiary each time the beneficiary 

receives a qualifying service. In 

addition, in accordance with section 

1899(m)(2)(D)(iv) of the Act, we 

proposed to require that each incentive 

payment be ‘‘made no later than 30 days 

after a qualifying service is furnished to 

such a beneficiary.’’ 

We considered the individuals and 

entities that should be permitted to offer 

incentive payments to beneficiaries 

under a beneficiary incentive program. 

We noted in the August 2018 proposed 

rule that section 1899(m)(2)(D) of the 

Act, which addresses incentive 

payments, contemplates that incentive 

payments be furnished directly by an 

ACO to a beneficiary. In addition, we 

expressed our belief that this 

requirement would be necessary 

because the ACO is in the best position 

to ensure that any incentive payments 

offered are distributed only to eligible 

beneficiaries and that other program 

requirements are met. We therefore 

proposed to require that the ACO legal 

entity, and not ACO participants or 

ACO providers/suppliers, furnish the 

incentive payments directly to 

beneficiaries. We sought comment, 

however, on other potential methods for 

distributing an incentive payment to a 

beneficiary. 

As previously explained, section 

1899(m)(1)(A) of the Act allows the 

Secretary to establish ‘‘program integrity 

requirements, as the Secretary deems 

necessary.’’ Given the significant fraud 

and abuse concerns associated with 

offering cash incentives, we expressed 

our belief that it would be necessary to 

prohibit ACOs from distributing 

incentive payments to beneficiaries in 

the form of cash. Cash incentive 

payments would be inherently difficult 

to track for reporting and auditing 

purposes since they would not 

necessarily be tied to documents 

providing written evidence that a cash 

incentive payment was furnished to an 

eligible beneficiary for a qualifying 

service. The inability to trace a cash 

incentive would make it difficult for 

CMS to ensure that an ACO has 

uniformly furnished incentive payments 

to all eligible beneficiaries and has not 

made excessive payments or otherwise 

used incentive payments to improperly 

attract ‘‘healthier’’ beneficiaries while 

disadvantaging beneficiaries who are 

less healthy or have a disability. 

Therefore, we proposed to require that 

incentive payments be in the form of a 

cash equivalent, which includes 

instruments convertible to cash or 

widely accepted on the same basis as 

cash, such as checks and debit cards. 

In addition, we considered record 

retention requirements related to 

beneficiary incentive programs. Section 

1899(m)(2)(G) of the Act provides that 

an ACO ‘‘conducting an ACO 

Beneficiary Incentive Program . . . 

shall, at such times and in such format 

as the Secretary may require . . . retain 

such documentation as the Secretary 

may require, including the amount and 

frequency of incentive payments made 

and the number of Medicare fee-forservice beneficiaries receiving such 

payments.’’ We explained our belief that 

it is important for an ACO to be 

accountable for its beneficiary incentive 

program and to mitigate any gaming, 

fraud, or waste that may occur as a 

result of its beneficiary incentive 

program. Accordingly, we proposed that 

any ACO that implements a beneficiary 

incentive program maintain records that 

include the following information: 

Identification of each beneficiary that 

received an incentive payment, 

including name and HICN or Medicare 

beneficiary identifier; the type (such as 

check or debit card) and amount (that is, 

the value) of each incentive payment 

made to each beneficiary; the date each 

beneficiary received a qualifying service 

and the HCPCS code for the 

corresponding service; the identification 

of the ACO provider/supplier that 

furnished the qualifying service; and the 

date the ACO provided each incentive 

payment to each beneficiary. We 

proposed that an ACO that establishes a 

beneficiary incentive program be 

required to maintain and make available 

such records in accordance with 

§ 425.314(b). In addition to these record 

retention proposals, we explained that 

any ACO that establishes a beneficiary 

incentive program would be expected to 

update its compliance plan (as required 

under § 425.300(b)(2)), to address any 

finalized regulations that address 

beneficiary incentive programs. 

Furthermore, we proposed that an 

ACO be required to fully fund the costs 

associated with operating a beneficiary 

incentive program, including the cost of 

any incentive payments. We further 

proposed to prohibit ACOs from 

accepting or using funds furnished by 

an outside entity, including, but not 

limited to, an insurance company, 

pharmaceutical company, or any other 

entity outside of the ACO, to finance its 

beneficiary incentive program. We 

explained our belief that these 

requirements are necessary to reduce 

the likelihood of undue influence 

resulting in inappropriate steering of 

beneficiaries to specific products or 

providers/suppliers. We sought 

comments on this issue. 

We also proposed to incorporate 

language in section 1899(m)(2)(E) of the 

Act, which provides that ‘‘[t]he 

Secretary shall not make any separate 

payment to an ACO for the costs, 

including incentive payments, of 


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carrying out an ACO Beneficiary 

Incentive Program . . . Nothing in this 

subparagraph shall be construed as 

prohibiting an ACO from using shared 

savings received under this section to 

carry out an ACO Beneficiary Incentive 

Program.’’ Specifically, we proposed 

under § 425.304(a)(2) that the policy 

regarding use of shared savings apply 

with regard to both in-kind items and 

services furnished under § 425.304(b) 

and incentive payments furnished 

under § 425.304(c). 

Further, we proposed to prohibit 

ACOs from shifting the cost of 

establishing or operating a beneficiary 

incentive program to a Federal health 

care program, as defined at section 

1128B(f) of the Act. Essentially, ACOs 

would not be permitted to bill the cost 

of an incentive payment to any plan or 

program that provides health benefits, 

whether directly, through insurance, or 

otherwise, which is funded directly, in 

whole or in part, by the United States 

Government. We expressed our belief 

this requirement is necessary because 

billing another Federal health care 

program for the cost of a beneficiary 

incentive program would potentially 

violate section 1899(m)(2)(E) of the Act 

which prohibits the Secretary from 

making any separate payment to an 

ACO for the costs of carrying out a 

beneficiary incentive program, 

including the costs of incentive 

payments. We sought comments on all 

of our proposed program integrity 

requirements. 

In addition, we proposed to 

implement the language in section 

1899(m)(2)(F) of the Act that ‘‘incentive 

payments made by an ACO . . . shall be 

disregarded for purposes of calculating 

benchmarks, estimated average per 

capita Medicare expenditures, and 

shared savings under this section.’’ We 

also proposed to disregard incentive 

payments made by an ACO for purposes 

of calculating shared losses under this 

section given that that shared savings 

would be disregarded. 

Furthermore, we proposed to 

implement the language set forth in 

section 1899(m)(3) of the Act, which 

provides that ‘‘any payment made under 

an ACO Beneficiary Incentive Program 

. . . shall not be considered income or 

resources or otherwise taken into 

account for the purposes of determining 

eligibility for benefits or assistance (or 

the amount or extent of benefits or 

assistance) under any Federal program 

or any State or local program financed 

in whole or in part with Federal funds; 

or any Federal or state laws relating to 

taxation.’’ We included this in our 

proposal at § 425.304(c)(6). 

With regard to termination of a 

beneficiary incentive program, section 

1899(m)(2)(H) of the Act provides that 

the ‘‘Secretary may terminate an ACO 

Beneficiary Incentive Program . . . at 

any time for reasons determined 

appropriate by the Secretary.’’ We 

explained our belief that it would be 

appropriate for CMS to terminate an 

ACO’s use of the beneficiary incentive 

program for failure to comply with the 

requirements of our finalized proposals 

at § 425.304, in whole or in part, and for 

the reasons set forth in § 425.218(b), and 

we proposed this policy at 

§ 425.304(c)(7). We solicited comment 

on whether it would be appropriate for 

the Secretary to terminate a beneficiary 

incentive program in other 

circumstances as well, or whether an 

ACO should have the ability to 

terminate its beneficiary incentive 

program early. In addition, we proposed 

to require any ACO that wishes to 

reestablish a beneficiary incentive 

program after termination to reapply in 

accordance with the procedures 

established by CMS. We also proposed 

to modify our regulations at § 425.800 to 

implement the language set forth in 

section 1899(g)(6) of the Act, which 

provides that there shall be no 

administrative or judicial review under 

section 1869 or 1878 of the Act or 

otherwise of the termination of an ACO 

beneficiary incentive program. 

With regard to evaluation of 

beneficiary incentive programs, we 

noted that section 50341(c) of the 

Bipartisan Budget Act requires that, no 

later than October 1, 2023, the Secretary 

evaluate and report to Congress an 

analysis of the impact of implementing 

beneficiary incentive programs on 

health expenditures and outcomes. We 

welcomed comments on whether there 

might be information that we should 

require ACOs to maintain (in addition to 

the information that would be 

maintained as part of record retention 

requirements set forth at proposed 

§ 425.304(c)(4)(i)) to support such an 

evaluation of beneficiary incentive 

programs. We noted, however, that we 

do not want to discourage participation 

by imposing overly burdensome data 

management requirements on ACOs. We 

therefore sought comment on reporting 

requirements for ACOs that are 

approved to establish a beneficiary 

incentive program. 

In addition, we noted that under the 

existing regulations for monitoring ACO 

compliance with program requirements, 

CMS may employ a range of methods to 

monitor and assess ACOs, ACO 

participants and ACO providers/ 

suppliers to ensure that ACOs continue 

to satisfy Shared Savings Program 

eligibility and program requirements 

(§ 425.316). We explained that the scope 

of this provision would include 

monitoring ACO, ACO participant, and 

ACO provider/supplier compliance with 

the requirements for establishing and 

operating a beneficiary incentive 

program. 

We considered whether beneficiaries 

should be notified of the availability of 

a beneficiary incentive program. 

Because beneficiary incentives may be 

subject to abuse, we expressed our belief 

that it is necessary, and we proposed, to 

prohibit the advertisement of a 

beneficiary incentive program. We 

explained that we were considering, 

however, whether ACOs should be 

required to make beneficiaries aware of 

the incentive via approved outreach 

material from CMS. For example, under 

the program’s existing regulations 

(§ 425.312(a)), including as revised in 

section II.C.3.a. of this final rule, all 

ACO participants are required to notify 

beneficiaries that their ACO providers/ 

suppliers are participating in the Shared 

Savings Program. We solicited comment 

on whether the notifications required 

under § 425.312(a) should include 

information regarding the availability of 

an ACO’s beneficiary incentive program, 

and, if so, whether CMS should supply 

template language on the topic. We also 

sought comment on how and when an 

ACO might otherwise notify its 

beneficiaries that its beneficiary 

incentive program is available, without 

inappropriately steering beneficiaries to 

voluntarily align with the ACO or to 

seek care from specific ACO 

participants, and, whether it would be 

appropriate to impose restrictions 

regarding advertising a beneficiary 

incentive program. We noted that we 

would expect any beneficiary 

notifications regarding incentive 

payments to be maintained and made 

available for inspection in accordance 

with § 425.314. 

To ensure transparency and to meet 

the requirements of section 

1899(m)(2)(G) of the Act requiring that 

an ACO ‘‘conducting an ACO 

Beneficiary Incentive Program. . . shall, 

at such times and in such format as the 

Secretary may require, report to the 

Secretary such information. . .as the 

Secretary may require, including the 

amount and frequency of incentive 

payments made and the number of 

Medicare fee-for-service beneficiaries 

receiving such payments,’’ we further 

proposed to revise the program’s public 

reporting requirements in § 425.308 to 

require any ACO that has been approved 

to implement a beneficiary incentive 

program to publicly report certain 

information about incentive payments 


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on its public reporting web page. 

Specifically, we proposed to require 

ACOs to publicly report, for each 

performance year, the total number of 

beneficiaries who receive an incentive 

payment, the total number of incentive 

payments furnished, HCPCS codes 

associated with any qualifying payment 

for which an incentive payment was 

furnished, the total value of all 

incentive payments furnished, and the 

total type of each incentive payment (for 

example, check or debit card) furnished. 

We noted that this proposed policy 

would require reporting for the 6-month 

performance year that begins on July 1, 

2019. We sought comment on whether 

information about a beneficiary 

incentive program should be publicly 

reported by the ACO or simply reported 

to CMS annually or upon request. 

In summary, we proposed to revise 

the regulation at § 425.304 to enable an 

ACO participating in Track 2, levels C, 

D, or E of the BASIC track, or the 

ENHANCED track, to establish a 

beneficiary incentive program to 

provide incentive payments to 

beneficiaries for qualifying primary care 

services in compliance with the 

requirements outlined in the revised 

regulations. 

Our proposed policies concerning an 

ACO’s ability to establish a beneficiary 

incentive program are summarized in 

Table 11. 

Comment: Commenters generally 

supported our proposed policies 

regarding beneficiary incentive 

programs. Commenters stated that the 

provision of beneficiary incentive 

payments may lead to more patient 

engagement opportunities. Some 

commenters specifically expressed that 

our proposed policy is not overly 

restrictive and is instead attentive to 

minimizing provider and beneficiary 

burden. 

A few commenters who generally 

supported the proposal expressed that 

CMS should ensure that each ACO that 

implements a beneficiary incentive 

program has maximum flexibility to 

tailor the program so that it fits the 

needs of the ACO’s beneficiaries. One 

commenter expressed support for our 

proposal because it would give ACOs 

the flexibility to determine what types 

of incentives to use (that is, in-kind 

incentives or incentive payments under 

a CMS-approved beneficiary incentive 

program). 

However, several commenters 

expressed concern about the potential 

administrative burden and operational 

costs associated with implementing a 

beneficiary incentive program and 

expressed that such programs should 

remain optional. One commenter 

expressed that, because an ACO must 

bear the costs of any incentive payment 

and furnish an incentive payment to 

each assigned beneficiary for each 

qualifying service, the costs to an ACO 

that serves high-risk patients may be 

greater than the costs to an ACO that 

serves low-risk patients (because highrisk patients may need receive more 

qualifying services). The commenter 

indicated that our proposed policy 

would therefore likely discourage ACOs 

from transitioning to performance-based 

risk. Other commenters stated generally 

that a beneficiary incentive program 

would create additional frustration for 

staff and add expense to office 

operations. 

Response: While we appreciate the 

concerns raised by commenters 

regarding the administrative and 

operational costs associated with 

operating a beneficiary incentive 

program, we emphasize that ACOs are 

not required to establish a beneficiary 

incentive program. Instead, each eligible 

ACO has the discretion to decide 


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whether to apply to offer such a 

program. We believe it is important to 

provide certain ACOs under two-sided 

risk with the option to establish a CMSapproved beneficiary incentive program 

as an additional tool for managing the 

care of assigned beneficiaries. Thus, 

pursuant to and consistent with the 

requirements in section 1899(m) of the 

Act, we will permit certain ACOs to 

apply to establish a beneficiary 

incentive program. Any ACO that 

wishes to establish a beneficiary 

incentive program should evaluate the 

costs and potential administrative 

burden and whether it has the resources 

to successfully implement a beneficiary 

incentive program prior to submitting 

an application because an ACO that 

submits an application to establish a 

beneficiary incentive program would be 

required to implement the program if its 

application is approved. 

In terms of flexibility for ACOs to 

design their beneficiary incentive 

program to fit the needs of its 

beneficiaries, we are providing ACOs 

with some flexibility to determine the 

value of the incentive payments that 

they will furnish under a beneficiary 

incentive program (that is, a value of up 

to $20 per incentive payment to each 

assigned beneficiary for each qualifying 

service received) and the form of 

incentive payments (that is, whether an 

incentive payments will be made as a 

check, debit card, or a traceable cash 

equivalent). However, due to various 

restrictions in section 50341 of the 

Bipartisan Budget Act and the potential 

for fraud and abuse, we are otherwise 

limiting an ACO’s flexibility with regard 

to how it may implement a beneficiary 

incentive program. We intend to 

monitor beneficiary incentive programs 

to determine whether it may be 

appropriate to afford ACOs additional 

flexibility in implementing a beneficiary 

incentive program in future rulemaking. 

Comment: One commenter 

recommended that CMS extend the 

window in which an ACO must provide 

an incentive payment to beneficiary 

from 30 to 45 days from the date the 

qualifying service is furnished. Another 

commenter suggested that CMS allow 

ACOs to provide beneficiaries with a 

$40 incentive payment once annually, 

similar to the Next Generation ACO 

Model. 

Response: As we previously 

explained, section 1899(m)(2)(D) of the 

Act requires that an incentive payment 

be made for each qualifying service 

furnished to a beneficiary be made no 

later than 30 days after a qualifying 

service is furnished to the beneficiary. 

Therefore, in order to comply with 

section 1899(m)(2)(D) of the Act, we 

decline to extend the payment window 

for a qualifying service beyond 30 days 

or to allow ACOs to provide 

beneficiaries with a $40 incentive 

payment once annually. 

Comment: One commenter requested 

that CMS clarify whether incentive 

payments furnished under an approved 

beneficiary incentive program could 

implicate the federal fraud and abuse 

laws, such as the civil monetary 

penalties law provision relating to 

beneficiary inducements. 

Response: Section 1128B(b)(3)(K) of 

the Act states that ‘‘illegal 

remuneration’’ under the anti-kickback 

statute does not include ‘‘an incentive 

payment made to a Medicare fee-forservice beneficiary by an ACO under an 

ACO Beneficiary Incentive Program 

established under subsection (m) of 

section 1899, if the payment is made in 

accordance with the requirements of 

such subsection and meets such other 

conditions as the Secretary may 

establish.’’ Further, pursuant to section 

1128(A)(i)(6)(B) of the Act, a practice 

permissible under the anti-kickback 

statute, whether through statutory 

exception or regulations issued by the 

Secretary, is also excepted from the 

beneficiary inducements CMP. Parties 

are encouraged to consult legal counsel 

as needed. 

Comment: Several commenters raised 

program integrity concerns regarding 

beneficiary incentive programs and 

suggested that CMS closely monitor any 

approved beneficiary incentive program. 

A few commenters stated that CMS 

should be mindful of inadvertently 

allowing ACOs to use beneficiary 

incentive programs to cherry-pick 

patients. For example, one ACO 

suggested that CMS implement 

safeguards to ensure that high-revenue 

ACOs do not inadvertently attract 

healthier patients, which could 

potentially skew quality metrics. 

Another commenter expressed similar 

concerns regarding the lack of 

safeguards applicable to beneficiary 

incentive programs, which could 

present opportunities for gaming. The 

commenter suggested that CMS 

implement an audit process, issue 

guidance, and impose additional 

requirements designed to minimize 

beneficiary cherry-picking and to 

mitigate MA parity concerns to ensure 

that ACOs would be unable to 

specifically target and engage certain 

individuals to selectively control their 

risk profile. Another commenter 

recommended that CMS evaluate 

beneficiary incentive programs prior to 

the date required by section 50341 of 

the Bipartisan Budget Act, on the basis 

that such programs are subject to abuse 

and may have unintended 

consequences. 

Response: We appreciate the 

commenters’ concerns that some ACOs 

may attempt to target a beneficiary 

incentive program toward beneficiaries 

with certain health profiles and we 

agree that program safeguards should 

prohibit an ACO from cherry-picking 

beneficiaries. We note that we have 

proposed, and we are finalizing, several 

safeguards at § 425.304(c) to help 

mitigate the program integrity risks 

associated with beneficiary incentive 

programs. For example, under 

§ 425.304(c)(4)(iv) ACOs will be 

prohibited from offering an incentive 

payment as part of an advertisement or 

solicitation to beneficiaries. In addition, 

under § 425.304(c)(3)(iv)(C) an ACO will 

be required to furnish incentive 

payments in the same amount to each 

eligible beneficiary. We believe these 

safeguards will prevent larger, high 

revenue ACOs with a beneficiary 

incentive program from steering 

beneficiaries from smaller, low revenue 

ACOs that do not have a beneficiary 

incentive program and will also limit 

the ability of ACOs to cherry-pick 

certain beneficiaries. 

In addition, we are also finalizing 

proposed revisions to the audit and 

record retention requirements set forth 

at § 425.314(a)(4) and (b)(1) to ensure 

that we will have the ability to 

effectively audit an ACO’s operation of 

its beneficiary incentive program. 

Furthermore, we note that, under the 

existing regulations for monitoring ACO 

compliance with program requirements, 

we may employ a range of methods to 

monitor and assess ACOs, ACO 

participants and ACO providers/ 

suppliers to ensure that ACOs continue 

to satisfy Shared Savings Program 

eligibility and program requirements 

(§ 425.316). The scope of this provision 

would allow us to monitor ACO, ACO 

participant, and ACO provider/supplier 

compliance with the requirements for 

establishing and operating a beneficiary 

incentive program. We believe that the 

finalized program integrity requirements 

at § 425.304(c)(4) and our existing 

regulatory safeguards will mitigate the 

commenters’ concerns. 

Comment: We received several 

comments related to our proposed bases 

for termination of an ACO’s beneficiary 

incentive program. One commenter 

expressed that CMS should have the 

option to terminate an ACO’s 

beneficiary incentive program when the 

ACO uses its program to improperly 

steer or influence beneficiaries, fails to 

maintain records regarding its program 

or make such records available to CMS, 

or otherwise fails to meet the 


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requirements of the program. The 

commenter recommended that CMS 

establish clear standards with which an 

ACO must comply in order to operate a 

beneficiary incentive program. The 

commenter also indicated that 

termination should be a last resort and 

suggested that, when a beneficiary 

incentive program is terminated for 

noncompliance with program 

requirements, beneficiaries, the public, 

and other ACOs, should receive 

advanced notice of the termination and 

the opportunity to submit to CMS 

comments regarding the termination, 

including CMS’s basis for termination. 

Response: We plan to issue guidance 

regarding the bases for which we may 

require an ACO to terminate its 

beneficiary incentive program under 

§ 425.304(c)(7). We agree with the 

commenter that an ACO should notify 

its assigned beneficiaries that its 

beneficiary incentive program is 

terminated in cases where CMS requires 

such termination due to the ACO’s 

noncompliance with program 

requirements. However, we disagree 

with the commenter’s suggestion that 

the public should have advanced notice 

of the termination and the opportunity 

to submit comments to CMS. Our bases 

for termination relate to noncompliance 

with CMS regulations, accordingly, we 

believe that providing the public with 

an opportunity to comment on a 

proposed termination would be 

inappropriate. We will monitor ACO 

implementation of beneficiary incentive 

programs and we will determine 

whether termination is appropriate, 

without public comment, in cases where 

an ACO is noncompliant with program 

requirements. 

Comment: Some commenters do not 

believe that the $20 maximum amount 

for an incentive payment is sufficient to 

encourage beneficiaries to receive 

qualifying services. Commenters cited 

various reasons such as the cost 

associated with long distance travel. 

Some of these commenters suggested 

that CMS permit ACOs to reimburse 

beneficiaries for transportation costs in 

addition to furnishing a $20 monetary 

incentive payment for each qualifying 

service. One commenter suggested that 

CMS allow ACOs to share a percentage 

of savings with its beneficiaries and 

provide a higher percentage of savings 

to high-risk patients, so that ACOs can 

better engage riskier populations. 

Another commenter expressed that a 

one-size-fits-all approach to incentive 

payment amounts might not serve all 

ACO participants well because ACO 

participants may operate in different 

environments and may want to offer 

incentive payments in different 

amounts, as appropriate for their region. 

Response: We recognize the 

commenters’ concerns regarding setting 

the maximum value of the incentive 

payment amount to $20 (as adjusted 

annually) for each qualifying service. 

However, this $20 maximum value for 

any monetary incentive payment is 

consistent with the requirements in 

section 1899(m)(2)(D) of the Act. Earlier 

in the preamble, we explained that, 

under existing § 425.304(a), an ACO 

may furnish to beneficiaries prepaid, 

non-transferable vouchers that are 

redeemable for transportation services 

solely to and from an appointment with 

a health care provider. We believe this 

addresses the concerns of commenters 

who believe that CMS should allow 

ACOs to reimburse beneficiaries for 

transportation costs in addition to 

furnishing a $20 monetary incentive 

payment for each qualifying service. In 

addition, we explained that Section 

1899(m)(2)(D) of the Act requires that an 

incentive payment offered under a 

beneficiary incentive program be in the 

same amount for each Medicare FFS 

beneficiary. Accordingly, we decline to 

adopt the suggestion that we allow 

ACOs to share a percentage of savings 

with its beneficiaries and provide a 

higher percentage of savings to high-risk 

patients. Furthermore, while we 

understand the commenter’s concern 

about a one-size-fits-all approach to 

incentive payment amounts, we believe 

that requiring ACOs to provide a 

uniform incentive amount for each 

qualifying service mitigates the 

potential for abuse, including the 

potential that ACOs will provide higher 

incentives in some areas to attract 

healthier beneficiaries and/or excluding 

some beneficiaries from receiving an 

incentive due to their location and/or 

health status. 

Comment: One commenter sought 

clarification as to whether a beneficiary 

can receive more than one incentive 

payment per year, whether a beneficiary 

can deny receipt of an incentive 

payment, and what an ACO would need 

to do if a beneficiary denied an 

incentive payment. 

Response: We reiterate that an ACO 

approved to operate a beneficiary 

incentive program is required to furnish 

an incentive payment to each 

beneficiary each time a beneficiary 

receives a qualifying service. Thus, if a 

beneficiary is prospectively assigned to 

an ACO participating in the 

ENHANCED track and receives two 

primary care services that are 

considered qualifying services, the ACO 

operating a beneficiary incentive 

program would be required to furnish 

two incentive payments to the 

beneficiary. Although we do not believe 

that it will be likely, a beneficiary may 

deny receipt of an incentive payment, 

we will provide additional clarification 

on how ACOs should handle such 

situations in sub-regulatory guidance. 

Comment: Some commenters 

expressed that an ACO should not be 

required to finance a beneficiary 

incentive program and that they should 

be allowed to finance a program using 

funds from organizations outside of the 

ACO. One commenter stated that CMS’s 

concerns regarding undue influence 

could be mitigated by establishing 

appropriate safeguards, including 

accounting mechanisms for outside 

funds and public disclosure of funding 

sources. 

A few commenters believe that CMS 

should fund beneficiary incentive 

programs, including incentive 

payments. Other commenters proposed 

that CMS should pay in full for any 

qualifying service included as part of 

the Shared Savings Program attribution 

methodology. These same commenters 

expressed that CMS should also be 

responsible for any beneficiary 

copayment for a qualifying service, 

rather than requiring an ACO to fund an 

incentive payment, which a beneficiary 

may then use to pay for a part of the 

beneficiary’s copayment. 

Response: We decline to reconsider 

our proposed ban on allowing ACOs to 

use funds from an outside entity to 

establish or operate a beneficiary 

incentive program. We are concerned 

that non-ACO entities would offer 

remuneration to ACOs in order to 

influence them to order items or 

services from the outside entity, which 

may ultimately affect a beneficiary’s 

care coordination through the ACO. 

Although this concern may be mitigated 

by program requirements that further 

promote transparency, we would still be 

concerned that ACOs would not 

accurately disclose outside funding 

sources and that it would be difficult to 

track such funding sources. Thus, we 

decline to reconsider our prohibition on 

ACOs using funding from entities 

outside of the ACO to finance a 

beneficiary incentive programs. 

In addition, we disagree with the 

recommendation that CMS fund 

beneficiary incentive programs. Section 

1899(m)(2)(E) of the Act specifically 

prohibits the Secretary from making any 

separate payment to an ACO for the 

costs of carrying out a beneficiary 

incentive program, including the costs 

of incentive payments. In addition, we 

note that beneficiary incentive programs 

are voluntary and that any ACO that is 

concerned about the potential costs 


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associated with implementing a 

beneficiary incentive program can 

choose to refrain from offering such a 

program. We emphasize that ACOs that 

choose to refrain from offering a 

beneficiary incentive program may still 

choose to offer certain in-kind items and 

services to beneficiaries in accordance 

with § 425.304(b). 

Comment: A few commenters 

recommended that CMS consider the 

significant financial investment 

required by ACOs that establish a 

beneficiary incentive program when 

rebasing benchmarks. One commenter 

recommended that CMS consider 

positively adjusting an ACO’s 

performance year financial results based 

on the ACO’s beneficiary incentive 

program expenses, which will add to 

the ACO’s operational costs and limit 

the ACO’s resources. 

Response: Section 1899(m)(2)(F) of 

the Act provides that ‘‘incentive 

payments made by an ACO . . . shall be 

disregarded for purposes of calculating 

benchmarks, estimated average per 

capita Medicare expenditures, and 

shared savings.’’ Thus, we decline to 

adopt suggestions that we consider an 

ACO’s costs associated with establishing 

or implementing a beneficiary incentive 

program in rebasing benchmarks or in 

adjusting an ACO’s financial results. 

Comment: Some commenters 

recommended that CMS explore 

additional tools similar to beneficiary 

incentive programs to encourage 

beneficiaries to seek and receive 

preventative and care management 

services that ultimately lower costs and 

reduce unnecessary utilization. One 

commenter requested that CMS provide 

descriptive examples of permissible 

beneficiary incentive programs and 

implement a system to respond to 

ACOs’ questions regarding such 

programs. A few commenters suggested 

that we allow ACOs to furnish 

beneficiary incentives similar to those 

provided under Medicare Advantage 

(MA). One of the commenters 

specifically expressed that CMS should 

incorporate aspects of the MA ValueBased Insurance Design Model into the 

Shared Savings Program, by allowing 

ACOs to offer supplemental benefits 

such as food vouchers or reduced cost 

sharing to align beneficiaries with 

specified chronic conditions. Another 

commenter urged CMS to consider 

allowing ACOs to use patient 

engagement tools (including those 

provided by MA), such as allowing NPIlevel participation, providing ACOs 

with upfront funding for transportation 

services, and waiving certain postdischarge home supervision 

requirements. 

A few commenters proposed that 

CMS allow ACOs to waive copayments. 

One of these commenters recommended 

that CMS, OIG, and the Innovation 

Center allow ACOs to waive copayments and deductibles in the ACO’s 

first performance year and then 

conditionally based on an ACO’s 

achievement of minimum quality scores 

in subsequent years. Another 

commenter encouraged CMS to waive 

patient cost sharing for certain health 

services that have been shown to 

successfully provide beneficiaries with 

preventative care services such as care 

management (including annual wellness 

visits and chronic care management 

services), stating that the administrative 

burden associated with collecting cost 

sharing leads many health care 

providers to simply not offer certain 

services. 

Response: We will take the 

commenters’ suggestions under 

consideration for future rulemaking, 

however, at this time, we are 

implementing beneficiary incentive 

programs in accordance with the 

provisions as set forth in section 

1899(m) of the Act. We direct 

commenters to our discussion in the 

preamble to the August 2018 proposed 

rule (see 83 FR 41868 through 41874), 

where we explained the wide variety of 

incentives that could be acceptable 

under our existing regulation at 

§ 425.304(a). 

Comment: Some commenters 

suggested that entities other than an 

ACO should be permitted to distribute 

incentive payments to beneficiaries. 

One commenter recommended that we 

modify our proposed policy to allow 

ACO participants to furnish incentive 

payments on the basis that ACO 

participants will likely share in an 

ACO’s savings and losses. Another 

commenter stated that it would be more 

effective if ACO provider/suppliers, and 

not the ACO legal entity, furnish 

inventive payments at the point of care. 

These commenters noted that this 

would help prevent incentives from 

being used as a recruitment tool. 

Another commenter recommended that 

we permit each individual ACO to 

determine the best method for 

distributing incentive payments under 

its beneficiary incentive program. Other 

commenters suggested that we allow an 

ACO to implement its beneficiary 

incentive program through select ACO 

participants instead of on an ACO-wide 

basis. 

Response: Section 1899(m)(1)(A) of 

the Act provides that ‘‘an ACO . . . may 

apply to establish an ACO Beneficiary 

Incentive Program to provide incentive 

payments to such beneficiaries who are 

furnished qualifying services.’’ 

Additionally, 1899(m)(2)(D) of the Act 

refers to ‘‘an incentive payment made by 

an ACO pursuant to an ACO Beneficiary 

Incentive Program.’’ We interpreted 

these two statements to mean that only 

an ACO, not an ACO participant or ACO 

provider/supplier, may furnish 

incentive payments to beneficiaries. We 

also believe that ACOs are better 

equipped to deal with tracking 

incentives because they receive claims 

data that they can use to identify 

beneficiaries who received a qualifying 

service and must be offered an incentive 

payment. In addition, we believe that 

ACOs are better equipped to handle 

reporting, record retention, and audit 

requirements associated with 

beneficiary incentive programs. For 

example, in most instances, ACOs are 

better equipped to implement and 

standardize the necessary reporting 

structure and record keeping 

requirements set forth in § 425.304(c). 

ACO participants are less likely to have 

the technology necessary to 

appropriately track and report on the 

distribution of incentive payments. 

Allowing ACO participants to furnish 

incentive payments may result in ACO 

participants incurring additional cost to 

update their reporting systems. For 

these reasons, we decline to permit 

entities other than an ACO to distribute 

incentive payments to beneficiaries. 

Comment: A few commenters 

suggested that CMS permit ACOs other 

than those participating under Track 2, 

Levels C, D, or E of the BASIC track, or 

the ENHANCED track to establish 

beneficiary incentive programs. One of 

these commenters asserted that allowing 

additional types of ACOs the 

opportunity to provide beneficiary 

incentive programs could provide CMS 

with better information about the types 

of incentive payments that work best for 

different kinds of beneficiaries (such as 

beneficiaries from different backgrounds 

or with different conditions). The 

commenter believes that this type of 

information could provide CMS with 

valuable lessons learned and model 

practices that could later be used to 

expand and strengthen beneficiary 

incentive programs across other 

healthcare settings. Another commenter 

strongly believed that high-value patient 

care is dependent upon clinicians 

having the tools to effectively manage 

beneficiary care and therefore 

recommended that we allow ACOs in 

one-sided model arrangements to 

provide incentives. 

Response: While we appreciate the 

commenters’ concerns, we decline to 

permit ACOs other than those 

participating under Track 2, Levels C, D, 


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or E of the BASIC track, or the 

ENHANCED track to establish 

beneficiary incentive programs. Section 

1899(m)(2)(B) of the Act authorizes only 

‘‘an ACO participating . . . under a 

payment model described in clause (i) 

or (ii) of paragraph (2)(B)’’ to establish 

an ACO beneficiary incentive program. 

As we previously discussed, Track 2 

and ENHANCED track ACOs are 

described under section 1899(m)(2)(B)(i) 

of the Act, and ACOs in Levels C, D, or 

E of the BASIC track are described 

under section 1899(m)(2)(B)(ii) of the 

Act. As a result, Track 2 ACOs, 

ENHANCED track ACOs, and ACOs in 

Levels, C, D, or E of the BASIC track are 

the only types of ACOs that are 

authorized to establish beneficiary 

incentive programs. For these reasons, 

we decline to permit ACOs participating 

in one-sided models to establish 

beneficiary incentive programs. 

Comment: In the August 2018 

proposed rule, we sought comment on 

whether beneficiary notifications 

required under § 425.312(a) should 

include information regarding the 

availability of an ACO’s beneficiary 

incentive program, and, if so, whether 

CMS should supply template language 

on the topic. We received a variety of 

comments on this issue. A few 

commenters supported CMS supplying 

template language on the basis that it 

would limit the potential for fraud and 

abuse. These commenters recommended 

that CMS test its template language to 

ensure it is accurate, neutral, and not 

misleading. One ACO commenter 

expressed that ACOs should be allowed 

to develop marketing and outreach 

materials to explain the program and the 

terms under which a beneficiary could 

receive an incentive payment. Another 

commenter opposed a beneficiary 

notification requirement for beneficiary 

incentive programs because not all 

ACOs have sufficient funding to 

implement a beneficiary incentive 

program. The same commenter 

recommended that CMS provide 

standardized language only to ACOs 

that implement a beneficiary incentive 

program. A few other commenters 

opposed beneficiary notification 

requirements and supported a 

prohibition on advertisements on the 

basis that notifications and 

advertisement may be used to 

inappropriately steer beneficiaries 

toward an ACO. One commenter 

believed that advertising of beneficiary 

incentive programs would be too fraught 

with program integrity risks but stated 

that CMS should supply ACOs with 

template language for beneficiary 

notifications on the topic. 

Response: We have modified our 

policy to require that an ACO or its ACO 

participants notify beneficiaries of the 

availability of the beneficiary incentive 

program in accordance with 

§ 425.312(b). We continue to believe 

that patient engagement is an important 

part of motivating and encouraging 

more active participation by 

beneficiaries in their health care and 

that notifying beneficiaries of their 

ability to receive an incentive payment 

may encourage beneficiaries to obtain 

medically necessary primary care 

services. We also agree with 

commenters who believe that ACOs that 

operate a beneficiary incentive program 

should use a standardized template, 

developed by CMS, to inform 

beneficiaries of the availability of a 

beneficiary incentive program. 

Thus, as detailed in II.C.3.a, under 

§ 425.304(c)(4)(iii) and as set forth in 

§ 425.312, we will require that an ACO 

or its ACO participants notify assigned 

beneficiaries of the availability of a 

beneficiary incentive program using the 

standardized beneficiary notice 

template provided by CMS. In § 425.312 

we provide the requirements regarding 

how an ACO must furnish such 

notifications, specifically, that the 

notification must be carried out by an 

ACO or its ACO participants during 

each relevant performance year by 

providing each assigned beneficiary 

with a standardized written notice prior 

to or at the first primary care visit of the 

performance year in the form and 

manner specified by CMS. 

We believe it is important that ACOs 

and/or their ACO participants provide 

beneficiaries with a standardized, CMSdeveloped beneficiary notice in order to 

limit the potential for fraud and abuse. 

In addition, in an effort to prevent 

‘‘cherry-picking’’ and ‘‘lemon-dropping’’ 

of beneficiaries, or other types of 

beneficiary steering, we are finalizing 

our proposal to prohibit ACOs from 

offering an incentive payment as part of 

marketing materials and activities, 

including but not limited to, an 

advertisement or solicitation, to a 

beneficiary. We believe this prohibition 

is necessary to prevent large, high 

revenue ACOs that have the necessary 

capital to establish and operate a 

beneficiary incentive program from 

steering beneficiaries away from 

smaller, low revenue ACOs. We note 

that the beneficiary incentive program 

notification required under 

§ 425.304(c)(4)(iii) will be exempt from 

the prohibition on marketing a 

beneficiary incentive program. 

Upon publication of the rule, CMS 

will publish guidance regarding 

beneficiary notifications that include 

education and outreach materials that 

an ACO must use to notify beneficiaries’ 

about its beneficiary incentive program. 

Finally, we agree with commenters’ 

suggestions that we test the template 

language to ensure it is accurate, 

neutral, and not misleading. We plan to 

work with our internal partners to 

conduct beneficiary focus groups to test 

the template language. 

Comment: We received conflicting 

commenter feedback regarding our 

proposed record retention and reporting 

requirements related to beneficiary 

incentive programs. A few commenters 

supported our proposal to require ACOs 

to maintain and make available to CMS 

records that identify each beneficiary 

that received an incentive payment, the 

ACO provider/supplier that furnished 

the qualifying service, the amount of 

each incentive payment made to each 

beneficiary, the date of service each 

beneficiary received a qualifying 

service, and date the ACO provided 

each incentive payment. These 

commenters suggested that ACOs 

should be permitted to publically report 

this information to enable interested 

beneficiaries to find more information 

on beneficiary incentive programs. One 

of the commenters encouraged CMS to 

reduce administrative burden by 

adopting a policy that requires ACOs to 

maintain records related to their 

beneficiary incentive programs but does 

not require ACOs to publicly report 

information under § 425.308. 

Other commenters were opposed to 

our proposed record retention 

requirements for approved beneficiary 

incentive programs, arguing that they 

impose overly burdensome data 

managing requirements that will result 

in additional uncompensated operating 

expenses that CMS would not 

reimburse. One commenter stated that 

our proposal would discourage ACOs 

from implementing a beneficiary 

incentive program because it would 

require them to develop a database to 

track and annually report on the results 

of a beneficiary incentive program. 

Another commenter recommended that 

CMS reduce burden on ACOs by instead 

relying on existing claims or other 

available data for such information. 

Response: We appreciate the 

commenters’ concerns regarding the 

potential burden of our proposed 

reporting requirements, however, we 

believe it is important for an ACO to be 

accountable for its beneficiary incentive 

program and that such requirements are 

necessary to help mitigate any fraud, 

waste, or abuse that may occur under a 

beneficiary incentive program. In 

addition, we note that section 

1899(m)(2)(G) of the Act provides that 


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an ACO conducting a beneficiary 

incentive program ‘‘shall, at such times 

and in such format as the Secretary may 

require . . . retain such documentation 

as the Secretary may require, including 

the amount and frequency of incentive 

payments made and the number of 

Medicare fee-for-service beneficiaries 

receiving such payments.’’ Accordingly, 

we are finalizing without modification 

our proposal to require that an ACO that 

implements a beneficiary incentive 

program must, in accordance with 

§ 425.314(b), maintain and make 

available the records described in our 

proposal at § 425.304(c)(4). We believe 

that the transparency associated with 

our proposed reporting requirements is 

necessary to help mitigate the potential 

for fraud and program integrity 

concerns. In addition, we disagree with 

the suggestion that CMS use its claims 

data to determine whether a beneficiary 

received a qualifying service. We cannot 

safely assume that an ACO distributed 

an incentive payment for a qualifying 

service to a beneficiary solely based on 

claims data. 

Comment: A few commenters 

opposed a policy that we considered in 

our proposed rule that would require an 

ACO that offers a beneficiary incentive 

program to notify CMS of any 

modification to its beneficiary incentive 

program prior to implementing such 

modification. The commenters 

expressed their belief that this 

requirement would be too broad and 

would unnecessarily delay an ACO’s 

ability to implement changes to its 

operational processes because the ACO 

would need to await CMS’ decision on 

the ACO’s proposed modification to its 

beneficiary incentive program. One 

commenter expressed concern that this 

sort of notification could prevent ACOs 

from making changes to the program 

that would ultimately help 

beneficiaries. 

Response: We have revisited whether 

to require an ACO to notify CMS of any 

modification to its beneficiary incentive 

program prior to implementing such 

modification. After additional 

consideration, we believe such a policy 

would support program integrity 

because it would allow us to ensure that 

the requested modification meets 

program requirements. In addition, this 

policy would allow us to evaluate 

beneficiary incentive programs as 

required under § 50341(c) of the BBA. 

Therefore, we are finalizing at 

§ 425.304(c)(2)(iii) a provision that 

requires an ACO to submit to CMS a 

description of any proposed material 

change to its CMS-approved beneficiary 

incentive program. Such notice must be 

submitted in the form and manner and 

by the deadline specified by CMS. The 

new provision further states that CMS 

will promptly evaluate the proposed 

material change and approve or reject it. 

We anticipate requiring 30 days advance 

notice of the proposed changes, which 

should allow us sufficient time to 

review the changes and thereby allow 

ACOs to make the approved changes on 

a timely basis. 

We anticipate providing additional 

guidance on what constitutes a 

‘‘material change’’ to a beneficiary 

incentive program. As an example, 

because we anticipate that the 

beneficiary incentive program 

application will require ACOs to specify 

the value of the incentive payment that 

the ACO is planning to issue for each 

qualifying service, we would consider a 

material change to include any change 

in the dollar amount of the incentive. 

Comment: Some commenters 

recommended that CMS expand the 

definition of qualifying service to 

include additional services. One 

commenter suggested that we include 

annual wellness visits in the definition 

of qualifying service to promote annual 

wellness visits as a best practice for 

beneficiary engagement. One 

commenter suggested that CMS allow 

each ACO to select which qualifying 

services it would incentivize under its 

beneficiary incentive program. Another 

commenter suggested that 

transportation services should be 

included in the definition of a 

qualifying service. 

Response: CMS appreciates the 

commenters’ feedback. Section 

1899(m)(2)(C) of the Act defines 

‘‘qualifying service,’’ for which 

incentive payments may be made to 

beneficiaries, as a primary care service, 

as defined in § 425.20 (or in any 

successor regulation), with respect to 

which coinsurance applies under part B. 

Section 1899(m)(2)(C) of the Act also 

provides that a qualifying service is a 

service furnished through an ACO by: 

(1) An ACO professional described in 

section 1899(h)(1)(A) of the Act who has 

a primary care specialty designation 

included in the definition of primary 

care physician under § 425.20 (or any 

successor regulation); (2) an ACO 

professional described in section 

1899(h)(1)(B) of the Act; or (3) a FQHC 

or RHC (as such terms are defined in 

section 1861(aa) of the Act). For this 

reason, we decline to allow ACOs to 

select the qualifying services that they 

would incentivize under a beneficiary 

incentive program or to include 

transportation services in the definition 

of a qualifying service. However, we 

will consider expanding the definition 

of primary care service (as defined in 

§ 425.20) in future rulemaking so that 

additional services, such as wellness 

visits, may be considered ‘‘qualifying 

services.’’ 

Comment: One commenter 

recommended that CMS make available 

summary information about the use of 

beneficiary incentive programs by 

beneficiaries when ACO program results 

are released to help ACOs determine 

whether to implement a beneficiary 

incentive program. 

Response: We will consider the 

commenter’s suggestion to provide 

ACOs with analyses of the use of the 

beneficiary incentive programs in future 

years, after we have gathered sufficient 

program data. 

Comment: A few commenters 

recommended that CMS permit ACOs to 

use targeted beneficiary incentive 

payments as tool in population health 

management. One commenter suggested 

that enabling ACOs to leverage 

beneficiary incentives to target certain 

high-risk populations while excluding 

lower-risk populations, may maximize 

an ACO’s ability to make the most of 

limited resources and address the needs 

of high-risk beneficiaries. 

Response: Section 1899(m) of the Act 

does not differentiate between high- and 

low-risk beneficiaries and does not 

authorize CMS to do so. Rather, section 

1899(m)(2)(B) requires that an ACO that 

establishes a beneficiary incentive 

program provide incentive payments to 

each assigned Medicare fee-for-service 

beneficiary who is furnished a 

qualifying service. Furthermore, we 

believe it would be unfair to prohibit 

certain beneficiaries from receiving an 

incentive payment under an approved 

beneficiary incentive program and we 

would not want to dissuade low-risk 

beneficiaries from receiving 

preventative care in the form of a 

primary care service. Accordingly, we 

decline to adopt the commenters’ 

suggestions. 

Final Action: We are finalizing our 

proposals regarding beneficiary 

incentive program as follows: 

• We are finalizing § 425.304(c)(1) to state 

that for performance years beginning on July 

1, 2019 and for subsequent performance 

years, an ACO that is participating under 

Track 2, Levels C, D, or E of the BASIC track, 

or the ENHANCED track may establish a 

beneficiary incentive program to provide 

monetary incentive payments to Medicare 

fee-for-service beneficiaries who receive a 

qualifying service. 

• We are finalizing our application 

procedures policy at § 425.304(c)(2) to state 

that to establish or reestablish a beneficiary 

incentive program, an ACO must submit a 

complete application in the form and manner 

and by a deadline specified by CMS. CMS 

will evaluate an ACO’s application to 


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determine whether the ACO satisfies the 

requirements of this section, and approve or 

deny the application. If an ACO wishes to 

make a material change to its CMS approved 

beneficiary incentive program, the ACO must 

submit a description of the material change 

to CMS in a form and manner and by a 

deadline specified by CMS. CMS will 

promptly evaluate the proposed material 

change and approve or reject it. 

• We are finalizing beneficiary incentive 

program requirements at § 425.304(c)(3). 

Under section § 425.304(c)(3) an ACO must 

begin to operate its approved beneficiary 

incentive program beginning on July 1, 2019 

or January 1 of the relevant performance year. 

In addition, we are finalizing 

§ 425.304(c)(3)(i) to state that, subject to the 

termination provisions we are finalizing at 

§ 425.304(c)(7), an ACO must operate its 

approved beneficiary incentive program for 

an initial period of 18 months in the case of 

an ACO approved to operate a beneficiary 

incentive program beginning on July 1, 2019, 

or 12 months in the case of an ACO approved 

to operate a beneficiary incentive program 

beginning on January 1 of a performance 

year. For each consecutive year that an ACO 

wishes to operate its beneficiary incentive 

program after the CMS-approved initial 

period, it must certify its intent to continue 

to operate the beneficiary incentive program 

for the entirety of the relevant performance 

year and that the beneficiary incentive 

program meets all applicable requirements. 

Furthermore, we are finalizing provisions at 

§ 425.304(c)(3)(ii) to state that a fee-forservice beneficiary is eligible to receive an 

incentive payment under a beneficiary 

incentive program if the beneficiary is 

assigned to the ACO through either 

preliminary prospective assignment, as 

described in § 425.400(a)(2), or prospective 

assignment, as described in § 425.400(a)(3). 

We are finalizing § 425.304(c)(3)(iii) to state 

that a qualifying service for the program is a 

primary care service (as defined in § 425.20) 

with respect to which coinsurance applies 

under Part B, if the service is furnished 

through an ACO by either an ACO 

professional who has a primary care specialty 

designation included in the definition of 

primary care physician under § 425.20, an 

ACO professional who is a physician 

assistant, nurse practitioner, or certified 

nurse specialist, or a FQHC or RHC. In 

addition, we are finalizing § 425.304(c)(3)(iv) 

to state that an ACO that establishes a 

beneficiary incentive program must furnish 

an incentive payment for each qualifying 

service furnished to an eligible beneficiary. 

Each such incentive payment must: (1) Be in 

the form of a check, debit card, or a traceable 

cash equivalent; (2) not exceed $20, as 

adjusted annually by the percentage increase 

in the consumer price index for all urban 

consumers (United States city average) for 

the 12-month period ending with June of the 

previous year, rounded to the nearest whole 

dollar amount; and (3) be provided by the 

ACO to the beneficiary no later than 30 days 

after a qualifying service is furnished. An 

ACO must furnish incentive payments in the 

same amount to each eligible Medicare feefor-service beneficiary without regard to 

enrollment of such beneficiary in a Medicare 

supplemental policy (described in section 

1882(g)(1) of the Act), in a State Medicaid 

plan under title XIX or a waiver of such a 

plan, or in any other health insurance policy 

or health benefit plan. 

• We are finalizing program integrity 

requirements at § 425.304(c)(4). Specifically, 

we are finalizing § 425.304(c)(4)(i) to state 

that an ACO that establishes a beneficiary 

incentive program must maintain records 

related to the beneficiary incentive program 

that include: The identification of each 

beneficiary that received an incentive 

payment, including beneficiary name and 

HICN or Medicare beneficiary identifier; the 

type and amount of each incentive payment 

made to each beneficiary; the date each 

beneficiary received a qualifying service, the 

corresponding HCPCS code for the qualifying 

service, and identification of the ACO 

provider/supplier that furnished the 

qualifying service; and the date the ACO 

provided each incentive payment to each 

beneficiary. In addition, we are finalizing 

§ 425.304(c)(4)(ii) to state that An ACO must 

not use funds from any entity or organization 

outside of the ACO to establish or operate a 

beneficiary incentive program and must not 

directly, through insurance, or otherwise, bill 

or otherwise shift the cost of establishing or 

operating a beneficiary incentive program to 

a Federal health care program. Furthermore, 

under § 425.304(c)(4)(iii) we are requiring 

that an ACO or its ACO participants notify 

assigned beneficiaries of the availability of 

the beneficiary incentive program in 

accordance with § 425.312(b). We are 

finalizing § 425.304(c)(4)(iv) to state that, 

except for the beneficiary notifications 

required under § 425.304(c) section, the 

beneficiary incentive program must not be 

the subject of marketing materials and 

activities, including but not limited to, an 

advertisement or solicitation to a beneficiary 

or any potential patient whose care is paid 

for in whole or in part by a Federal health 

care program (as defined at 42 U.S.C. 1320a– 

7b(f)). 

• We are finalizing § 425.304(c)(5) to state 

that CMS disregards incentive payments 

made by an ACO under § 425.304(c)(1) in 

calculating an ACO’s benchmarks, estimated 

average per capita Medicare expenditures, 

and shared savings and losses. 

• We are finalizing § 425.304(c)(6) to state 

that incentive payments made under a 

beneficiary incentive program are not 

considered income or resources or otherwise 

taken into account for purposes of 

determining eligibility for benefits or 

assistance (or the amount or extent of 

benefits or assistance) under any Federal 

program or under any State or local program 

financed in whole or in part with Federal 

funds, or for purposes of any Federal or State 

laws relating to taxation. 

• We are finalizing § 425.304(c)(7) to state 

that CMS may require an ACO to terminate 

its beneficiary incentive program at any time 

for either failure to comply with the 

requirements set forth in § 425.304 or any of 

the grounds for ACO termination set forth in 

§ 425.218(b). 

d. Clarification of Existing Rules 

As explained in the preamble to the 

August 2018 proposed rule, we are also 

taking this opportunity to add 

regulation text at renumbered 

§ 425.304(b)(3) to clarify that the in-kind 

items or services provided to a Medicare 

FFS beneficiary under § 425.304 must 

not include Medicare-covered items or 

services, meaning those items or 

services that would be covered under 

Title XVIII of the Act on the date the inkind item or service is furnished to the 

beneficiary. It was always our intention 

that the in-kind items or services 

furnished under existing § 425.304(a) be 

non-Medicare-covered items and 

services so that CMS can accurately 

monitor the cost of medically necessary 

care in the Shared Savings Program and 

to minimize the potential for fraud and 

abuse. We also clarify that the provision 

of in-kind items and services is 

available to all Medicare FFS 

beneficiaries and is not limited solely to 

beneficiaries assigned to an ACO. 

Finally, we proposed a technical change 

to the title and structure of § 425.304. 

Specifically, we proposed to replace the 

title of § 425.304 with ‘‘Beneficiary 

incentives’’ and to add a new section 

§ 425.305, with a title ‘‘Other program 

safeguards’’, by redesignating 

paragraphs § 425.304(b) and (c) as 

§ 425.305(a) and (b), and to make 

conforming changes to regulations that 

refer to section § 425.304. Specifically, 

we proposed to make the following 

conforming changes: amending 

§ 425.118 in paragraph (b)(1)(iii) by 

removing ‘‘§ 425.304(b)’’ and adding in 

its place ‘‘§ 425.305(a)’’; amending 

§ 425.224 in newly redesignated 

paragraph (b)(1)(v) by removing 

‘‘§ 425.304(b)’’ and adding in its place 

‘‘§ 425.305(a)’’; amending § 425.310 in 

paragraph (c)(3) by removing 

‘‘§ 425.304(a)’’ and adding in its place 

‘‘§ 425.304’’; and amending § 425.402 in 

paragraph (e)(3)(i) by removing 

‘‘§ 425.304(a)(2)’’ and adding in its place 

‘‘§ 425.304(b)(1).’’ 

Final Action: We did not receive any 

comments specifically addressing our 

proposed technical changes to the title 

and structure of § 425.304. Therefore, 

we are finalizing our proposed technical 

changes without modification. 

3. Empowering Beneficiary Choice 

a. Beneficiary Notifications 

(1) Background on Beneficiary 

Notifications 

To ensure full transparency between 

providers participating in Shared 

Savings Program ACOs and the 

beneficiaries they serve, the November 

2011 final rule established requirements 

for how a Shared Savings Program ACO 

must notify Medicare FFS beneficiaries 

receiving primary care services at the 


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22Accountable Care Organizations & You, 

available at https://www.medicare.gov/Pubs/pdf/ 

11588-Accountable-Care-Organizations-FAQs.pdf. 

23Empowering Patients to Make Decisions About 

Their Healthcare: Register for MyMedicare.gov and 

Select Your Primary Clinician, available at https:// 

www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/Downloads/volalignment-bene-fact-sheet.pdf. 

point of care that the physician, 

hospital, or other provider is 

participating in a Shared Savings 

Program ACO (76 FR 67945 through 

67946). Specifically, the November 2011 

final rule established a requirement that 

ACO participants provide standardized 

written notices to beneficiaries of both 

their ACO provider’s/supplier’s 

participation in the Shared Savings 

Program and the potential for CMS to 

share beneficiary identifiable data with 

the ACO. 

We initially established the 

beneficiary notification requirements for 

ACOs to protect beneficiaries by 

ensuring patient engagement and 

transparency, including requirements 

related to beneficiary notification, since 

the statute does not mandate that ACOs 

provide information to beneficiaries 

about the Shared Savings Program (76 

FR 67945 through 67946). The 

beneficiary information notices 

included information on whether a 

beneficiary was receiving services from 

an ACO participant or ACO provider/ 

supplier, and whether the beneficiary’s 

expenditure and quality data would be 

used to determine the ACO’s eligibility 

to receive a shared savings payment. 

In the June 2015 final rule, we 

amended the beneficiary notification 

requirement and sought comment on 

simplifying the process of disseminating 

the beneficiary information notice. We 

received numerous comments from 

ACOs that the beneficiary notification 

requirement was too burdensome and 

created some confusion amongst 

beneficiaries about the Shared Savings 

Program (80 FR 32739). As a result, we 

revised the rule so that ACO providers/ 

suppliers would be required to provide 

the notification by simply posting signs 

in their facilities and by making the 

notice available to beneficiaries upon 

request. 

We also amended our rule to 

streamline the beneficiary notification 

process by which beneficiaries may 

decline claims data sharing and 

finalized the requirement that ACO 

participants use CMS-approved 

template language to notify beneficiaries 

regarding participation in an ACO and 

the opportunity to decline data sharing. 

In order to streamline operations, 

reduce burden and cost on ACOs and 

their providers, and avoid creating 

beneficiary confusion, we also 

streamlined the process for beneficiaries 

to decline data sharing by consolidating 

the data opt out process through 1–800– 

MEDICARE in the June 2015 final rule 

(80 FR 32737 through 32743). 

Beneficiaries must contact 1–800– 

MEDICARE to decline sharing their 

Medicare claims data or to reverse that 

decision. 

As we explained in the August 2018 

proposed rule, under the program’s 

current requirements, an ACO 

participant (for example physician 

practices and hospitals) must notify 

beneficiaries in writing of its 

participation in an ACO by posting 

signs in its facilities and, in settings in 

which beneficiaries receive primary care 

services, by making a standardized 

written notice (the ‘‘Beneficiary 

Information Notice’’) available to 

beneficiaries upon request (§ 425.312). 

We provide ACOs with templates, in 

English and Spanish, to share with their 

ACO participants for display or 

distribution. To summarize: 

• The poster language template indicates 

the providers’ participation in the Shared 

Savings Program; describes ACOs and what 

they mean for beneficiary care; highlights 

that a beneficiary’s freedom to choose his or 

her doctors and hospitals is maintained; and 

indicates that beneficiaries have the option to 

decline to have their Medicare Part A, B, and 

D claims data shared with their ACO or other 

ACOs. The poster must be in a legible format 

for display and in a place where beneficiaries 

can view it. 

• The Beneficiary Information Notice 

template covers the same topics and includes 

details on how beneficiaries can select their 

primary clinician via MyMedicare.gov and 

voluntarily align to the ACO. 

In addition to these two templates, there 

are currently two other ways that 

beneficiaries can learn about ACOs and of 

their option to decline Medicare claims data 

sharing with ACOs: 

• Medicare & You handbook. The language 

in the ACO section of the handbook 

(available at https://www.medicare.gov/pubs/ 

pdf/10050-Medicare-and-You.pdf) describes 

ACOs and tells beneficiaries they will be 

notified at the point of care if their doctor 

participates in the Shared Savings Program. 

It explains what doctor participation in an 

ACO means for a beneficiary’s care and that 

beneficiaries have the right to receive care 

from any doctor that accepts Medicare. The 

ACO section of the handbook also explains 

that beneficiaries must call 1–800– 

MEDICARE (1–800–633–4227) to decline 

sharing their health care information with 

ACOs or to reverse that decision. 

• 1–800–MEDICARE. Customer service 

representatives are equipped with scripted 

language about the Shared Savings Program, 

including background about ACOs. The 

customer service representatives also can 

collect information from beneficiaries about 

declining or reinstating Medicare claims data 

sharing. 

Further, beginning in July 2017, 

Medicare FFS beneficiaries have been 

able to login to MyMedicare.gov to select 

the primary clinician whom they 

believe is most responsible for their 

overall care coordination (a process we 

refer to as voluntary alignment). The 

instructions for selecting a primary 

clinician are also included in the 

Medicare & You handbook, issued by 

CMS annually to Medicare beneficiaries. 

The Shared Savings Program uses a 

beneficiary’s selection of a primary 

clinician for assignment purposes, when 

applicable, for ACOs in all tracks 

beginning in performance year 2018 

(§ 425.402(e)). 

We have made information about the 

Shared Savings Program publicly 

available to educate ACOs, providers/ 

suppliers, beneficiaries and the general 

public, and to further program 

transparency. This includes fact sheets, 

program guidance and specifications, 

program announcements and data 

available through the Shared Savings 

Program website (see https://

www.cms.gov/Medicare/Medicare-Feefor-Service-Payment/sharedsavings

program/index.html). This material 

includes resources designed to educate 

beneficiaries about the Shared Savings 

Program and ACOs,22 and specifically 

on the voluntary alignment process.23

(2) Proposed Revisions 

In the August 2018 proposed rule, we 

proposed to revisit the program’s 

existing requirements at § 425.312 to 

ensure beneficiaries have a sufficient 

opportunity to be informed about the 

program and how it may affect their care 

and their data (83 FR 41875). We also 

proposed changes in response to section 

50331 of the Bipartisan Budget Act, 

which amends section 1899(c) of the 

Act to require that the Secretary 

establish a process by which Medicare 

FFS beneficiaries are (1) ‘‘notified of 

their ability’’ to identify an ACO 

professional as their primary care 

provider (for purposes of assigning the 

beneficiary to an ACO, as described in 

§ 425.402(e)) and (2) ‘‘informed of the 

process by which they may make and 

change such identification.’’ 

In proposing revisions to § 425.312 we 

considered how to make the notification 

a comprehensive resource that compiles 

certain information about the program 

and what participation in the program 

means for beneficiary care. We were 

concerned that, while there are many 

sources of information on the program 

that are available to beneficiaries, the 

existing information exists in separate 

resources, which may be time 


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consuming for beneficiaries to compile, 

and, as a result, may be underutilized. 

In the August 2018 proposed rule, we 

also considered methods of notification 

that would better ensure that 

beneficiaries receive the comprehensive 

notification at the point of care. Our 

existing regulations emphasize use of 

posted signs in facilities and, in settings 

where beneficiaries receive primary care 

services, standardized written notices as 

a means to notify beneficiaries at the 

point of care that ACO providers/ 

suppliers are participating in the 

program and of the beneficiary’s 

opportunity to decline data sharing. We 

expressed our concern that, although 

standardized written notices must be 

made available upon request, few 

beneficiaries, or others who accompany 

beneficiaries to their medical 

appointments, may initiate requests for 

this information and, in turn, 

beneficiaries may not have the 

information they need to make informed 

decisions about their health care and 

their data. 

Finally, in the August 2018 proposed 

rule, we considered how to minimize 

burden on the ACO providers/suppliers 

that would provide the notification. We 

sought to balance the requirements of 

the notification to beneficiaries with the 

increased burden on health care 

providers that could draw their 

attention away from patient care. 

With these considerations in mind, 

and to further facilitate beneficiary 

access to information on the Shared 

Savings Program, we proposed to 

modify § 425.312(a) to require 

additional content for beneficiary 

notices. We proposed that, beginning 

July 1, 2019, the ACO participant must 

notify beneficiaries at the point of care 

about voluntary alignment in addition 

to notifying beneficiaries that its ACO 

providers/suppliers are participating in 

the Shared Savings Program and that the 

beneficiary has the opportunity to 

decline claims data sharing. 

Specifically, the ACO participant must 

notify the beneficiary of his or her 

ability to, and the process by which, he 

or she may identify or change 

identification of a primary care provider 

for purposes of voluntary alignment. 

We proposed to modify § 425.312(b) 

to require that, beginning July 1, 2019, 

ACO participants must provide the 

information specified in § 425.312(a) to 

each Medicare FFS beneficiary at the 

first primary care visit of each 

performance year. Under our proposal, 

an ACO participant would be required 

to provide this notice during a 

beneficiary’s first primary care visit in 

the 6-month performance year from July 

1, 2019 through December 31, 2019, as 

well as the first primary care visit in the 

12-month performance year that begins 

on January 1, 2020 (and in all 

subsequent performance years). We 

proposed that this notice would be in 

addition to the existing requirement that 

an ACO participant must post signs in 

its facilities and make standardized 

written notices available upon request. 

To mitigate the burden of this 

additional notification, we proposed to 

require ACO participants to use a 

template notice that we would prepare 

and make available to ACOs. We 

explained that the template notice 

would contain all of the information 

required to be disclosed under 

§ 425.312(a), including information on 

voluntary alignment. With respect to 

voluntary alignment, we explained that 

the template notice would provide 

details regarding how a beneficiary may 

select his or her primary care provider 

on MyMedicare.gov, and the step-bystep process by which a beneficiary 

could designate an ACO professional as 

his or her primary care provider, and 

how the beneficiary could change such 

designation. We also explained that the 

CMS-developed template notice would 

encourage beneficiaries to check their 

ACO professional designation regularly 

and to update such designation when 

they change care providers or move to 

a new area. We stated that the template 

notice could be provided to 

beneficiaries at their first primary care 

visit during a performance year, and the 

same template notice could be furnished 

upon request in accordance with our 

existing regulation at § 425.312(b)(2). 

We expressed our belief that this 

proposed approach would appropriately 

balance the factors we described and 

achieve our desired outcome of more 

consistently educating beneficiaries 

about the program while mitigating 

burden of additional notification on 

ACO participants. In addition, we 

believed this approach would provide 

detailed information on the program to 

beneficiaries more consistently at a 

point in time when they may be 

inclined to review the notice and have 

an opportunity to ask questions and 

address their concerns. Furthermore, we 

believed this approach would pose 

relatively little additional burden on 

ACO participants, since they are already 

required to provide written notices to 

beneficiaries upon request. 

We sought comment as to alternative 

means of dissemination of the 

beneficiary notice, including the 

frequency with which and by whom the 

notice should be furnished. For 

example, we sought comment on 

whether a beneficiary should receive the 

written notice at the beneficiary’s first 

primary care visit of the performance 

year, or during the beneficiary’s first 

visit of the performance year with any 

ACO participant. We also sought 

comment on whether there are 

alternative media for disseminating the 

beneficiary notice that might be less 

burdensome on ACOs, such as 

dissemination via email. 

In addition, we solicited comment on 

whether the template notice should 

include other information outlining 

ACO activities that may be related to or 

affect a Medicare FFS beneficiary. We 

explained that such activities could 

include: ACO quality reporting and 

improvement activities, ACO financial 

incentives to lower growth in 

expenditures, ACO care redesign 

processes (such as use of care 

coordinators), the ACO’s use of payment 

rule waivers (such as the SNF 3-day rule 

waiver), and the availability of an ACO’s 

beneficiary incentive program. 

We also welcomed feedback on the 

format, content, and frequency of our 

proposed additional notice to 

beneficiaries about the Shared Savings 

Program, the benefits and drawbacks to 

requiring additional notification about 

the program at the point of care, and the 

degree of additional burden this 

notification activity could place on ACO 

participants. More specifically, we 

welcomed feedback on the timing of 

providing the proposed annual notice to 

the beneficiary, particularly what would 

constitute the appropriate point of care 

for the beneficiary to receive the notice. 

We also took the opportunity to 

propose regulation text at renumbered 

§ 425.312(a) to clarify our longstanding 

requirement that beneficiary notification 

obligations apply with regard to all 

Medicare FFS beneficiaries, not only to 

beneficiaries who have been assigned to 

an ACO (76 FR 67945 through 67946). 

We sought comment on whether an 

ACO that elects prospective assignment 

should be required to disseminate the 

beneficiary notice at the point of care 

only to beneficiaries who are 

prospectively assigned to the ACO, 

rather than to all Medicare FFS 

beneficiaries. 

Finally, we proposed technical 

changes to the title and structure of 

§ 425.312. For example, we proposed to 

replace the title of § 425.312 with 

‘‘Beneficiary notifications.’’ 

Comment: Although a few 

commenters supported our proposed 

changes to the beneficiary notice 

requirements, most commenters did not 

support them. One commenter, a 

national, nonprofit consumer service 

organization that works to ensure access 

to affordable health care for older adults 

and people with disabilities, supported 


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the revised beneficiary notice 

requirements. This commenter stated 

that CMS templates—especially those 

that have been consumer-tested for 

clarity and effectiveness—are 

appropriate when there is a risk of 

beneficiary steering, such as with 

voluntary alignment. A few 

commenters, including two national 

non-profit legal senior citizen advocacy 

organizations and a provider advocacy 

group, generally supported our proposal 

but urged us to do consumer testing on 

the standardized notice that we would 

develop to ensure relevant information 

is conveyed accurately and objectively, 

in a manner that beneficiaries can use 

and understand. 

Some commenters supported our 

proposal to require that the notice 

address a beneficiary’s ability to, and 

the process by which a beneficiary may, 

identify a primary care provider for 

purposes of voluntary alignment. One 

commenter expressed the belief that the 

proposed notice requirements would 

encourage ACO participants to engage 

patients in conversations describing 

patient rights; give beneficiaries critical 

information about possible 

consequences of receiving care in an 

ACO, including whether ACO 

participants are incentivized in ways 

that could affect service delivery; and 

better enable beneficiaries to select the 

best ACO for their needs. One 

commenter stated its support for the 

proposal and believed that beneficiaries 

are more likely to review the 

information and ask questions if the 

notice is provided at the point of care. 

This commenter suggested that the 

beneficiary notice should not simply be 

included with other routine forms. 

However, in contrast, a majority of 

commenters stated that the new 

notification requirements would be 

burdensome on practices from a 

workflow, efficiency, and supply cost 

perspective. Some commenters opined 

that it would be challenging to add 

another notice to the important 

documents that patients are already 

asked to review with each visit. Several 

commenters specifically stated that this 

proposal was in direct contrast to our 

Patients over Paperwork initiative. 

Some commenters stated that the 

administrative burden imposed by our 

proposed notification requirements 

would especially burden ACOs 

comprised of independent physician 

practices, which would have difficulty 

ensuring that beneficiaries do not 

receive duplicative notices if the 

beneficiaries see clinicians at different 

practices during the year. 

Some commenters stated that clinical 

workflows and electronic record 

systems would require reconfiguration 

for scheduling additional visit time, 

incorporating reminder prompts, and 

documentation of required notice 

delivery. Some of these commenters 

also indicated that our proposed policy 

would require a large investment by 

ACOs in building out electronic health 

records (EHR) system workflows, 

educating providers and staff, and 

tracking compliance with requirements, 

taking away from the beneficiaries’ care 

and taking away from limited IT 

resources. 

Many commenters requested that we 

refrain from implementing mandatory 

written annual notifications. Several 

commenters suggested that, if CMS 

believes that beneficiaries receive the 

notification, then CMS should instead 

disseminate the notice to beneficiaries. 

Many commenters expressed their 

belief that our proposed changes would 

fail to improve the beneficiary 

notification process and suggested that 

we continue with our existing 

beneficiary notification requirements. 

Some commenters stated that CMS has 

not provided any evidence that 

beneficiaries are inadequately notified. 

Other commenters suggested that, rather 

than creating a new notice requirement, 

we should strengthen the existing 

notifications that ACO participants 

deliver to beneficiaries. In addition, 

many commenters noted that we 

previously tried a similar notification 

policy that was later removed in the 

2015 Shared Savings Program final rule 

(80 FR 32740) after stakeholders 

explained that the beneficiary 

notification template was confusing to 

beneficiaries. 

One commenter disagreed with the 

proposal while also describing our 

existing notification requirements as too 

burdensome for ACO participants. This 

commenter expressed its belief that it is 

costly for an ACO to keep up with new 

templates and replace signs in its 

facilities every year. 

Response: We appreciate the support 

that we have received for our proposed 

beneficiary notification requirements. In 

addition, while we understand the 

apprehension that many commenters 

have regarding our proposed beneficiary 

notification requirements, we believe 

that it is important to revise our existing 

notification requirements to ensure that 

beneficiaries receive information that 

puts them in the driver’s seat and 

provides them with the information 

they need to make decisions about their 

care. The notifications will allow 

beneficiaries to more fully engage in 

their health care by helping them better 

understand their care options and make 

informed decisions regarding their 

health care. We believe that this is 

especially important as the program has 

made changes to the ways in which 

beneficiaries may be assigned to an ACO 

(such as through voluntary alignment) 

and extended the beneficiary 

enhancements that are available to 

ACOs and their assigned beneficiaries. 

For these reasons, we believe that it 

is important that beneficiaries are 

informed that they are part of an ACO. 

Again, this information will help 

beneficiaries better understand their 

care options and make better-informed 

decisions regarding their health care. 

For example, we believe that notifying 

beneficiaries about an ACO’s goals and 

objectives (for example, improving the 

health of populations), and each ACO’s 

strategy for achieving such goals and 

objectives, can serve as a catalyst for 

educating beneficiaries about the 

importance of preventive services such 

as annual wellness visits. 

Furthermore, we note that we are 

required under section 1899(c) of the 

Act to establish a process by which 

Medicare fee-for-service beneficiaries 

are (1) ‘‘notified of their ability’’ to 

identify an ACO professional as their 

primary care provider (for purposes of 

assigning the beneficiary to an ACO), 

and (2) ‘‘informed of the process by 

which they may make and change such 

identification.’’ We proposed changes to 

our beneficiary notification 

requirements in part to address this 

requirement. 

We seek to balance the need to better 

engage beneficiaries in their health care 

with the potential for increased burden 

on ACO participants. Although many 

sources of information on the program 

are already available to beneficiaries, as 

noted in the preamble to the August 

2018 proposed rule (80 FR 41875) we 

are concerned that the existing 

information exists in separate resources, 

which may be time consuming for 

beneficiaries to compile, and as a result, 

may be underutilized. Moreover, 

although we appreciate commenters’ 

concerns that our proposed beneficiary 

notification requirements may require 

ACOs or ACO participants to bare 

additional costs, implement system and 

EHR changes, or allocate additional time 

for patient visits (so that participants 

can explain the content of the notice to 

beneficiaries), we believe that it is 

necessary to ensure that beneficiaries 

are aware of the existence of the ACO 

to which they are assigned, the choice 

of the ACO participant and its ACO 

providers/suppliers to participate in the 

ACO, the beneficiary’s alignment 

options, and, if applicable, information 

on a beneficiary incentive program. 


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We believe that the use of CMSdeveloped templates, which would be 

developed and tested with stakeholder 

feedback, will reduce the overall burden 

on providers. In addition, after 

evaluating commenters’ concerns, we 

have decided to modify some of our 

proposed requirements regarding the 

beneficiary notice to help further reduce 

the potential for burden on ACOs and 

ACO participants. 

First, we are modifying our proposed 

policy to allow an ACO or its ACO 

participants to disseminate the 

beneficiary notifications. We believe 

this change may help mitigate the 

potential for administrative and 

operational burden on providers. We 

note that, in accordance with 

§ 425.314(c), it is the ACO that will 

ultimately be accountable for 

compliance with the beneficiary 

notification requirements. 

Second, we will not require that the 

notification be provided to beneficiaries 

at the point of care during a 

beneficiary’s first primary care visit of 

each performance year. Instead, we will 

require that an ACO or its ACO 

participants disseminate the beneficiary 

notification at a beneficiary’s first 

primary care service visit of the 

performance year or at some point 

earlier in the performance year. We 

believe that this change will alleviate 

some of the operational burdens that 

may be associated with tracking 

whether a beneficiary received a notice 

at its first primary care service visit of 

a performance year. 

Third, although we still encourage 

ACO participants to distribute the 

notice to beneficiaries at the point of 

care to address any beneficiary 

questions or concerns, we would permit 

an ACO or its ACO participants to 

distribute beneficiary notifications 

through electronic transmission (such as 

email) or mail. We note that regardless 

of the method of notification used, 

under § 425.314, the ACO must 

maintain and make available evidence 

that a notification was distributed to 

each beneficiary. 

Finally, we note that we have also 

restructured the beneficiary notification 

provision at § 425.312 for clarity. 

Paragraph (a) of that section now relates 

to the general notification requirement, 

which applies with regard to all FFS 

beneficiaries. In addition, paragraph (b) 

of that section relates to notifications 

regarding the availability of a 

beneficiary incentive program, which 

applies only with regard to assigned 

beneficiaries in an ACO that operates a 

beneficiary incentive program. (As 

explained in section II.C.2.c. of this final 

rule, such notifications will be required 

under § 425.304(c)(4)(iii).) We believe 

that beneficiary incentive program 

notification should apply only with 

regard to assigned beneficiaries (the 

only types of beneficiaries who can 

receive an incentive payment under a 

beneficiary incentive program) because 

requiring an ACO to provide notice of 

the availability of a beneficiary 

incentive program to all FFS 

beneficiaries would essentially amount 

to marketing of a beneficiary incentive 

program. We intend to issue 

subregulatory guidance regarding the 

two notifications (the general 

notification and the beneficiary 

incentive program notification) and 

anticipate providing two notification 

templates: One that addresses the 

general notification requirements at 

§ 425.312(a) and another that addresses 

only the beneficiary incentive program 

requirements at § 425.312(b). 

Comment: We received many 

comments and feedback on the means of 

dissemination of this additional notice 

to beneficiaries about the Shared 

Savings Program, including the 

drawbacks to requiring additional 

notification about the program at the 

point of care and the degree of 

additional burden this notification 

activity may place on ACO participants. 

A few commenters stated that ACO 

participants should be allowed to 

decide the means of dissemination. 

Some commenters suggested that CMS 

allow for the use of recorded telephone 

messages to disseminate the beneficiary 

notifications. Many other commenters 

suggested that CMS allow ACOs and/or 

ACO participants to distribute 

beneficiary notices through electronic 

mediums. Some commenters believed 

that ACOs should have the option to 

provide the beneficiary notice in an 

electronic or paper format. Several 

commenters suggested that ACOs be 

given the option to distribute 

beneficiary notices to Medicare 

beneficiaries through means such as 

patient portal messages or letters instead 

of being required to physically hand out 

the notices during a face-to-face visit. 

These commenters believe that ACOs 

should be permitted to take advantage of 

EHR capabilities that allow ACOs to 

identify and send communications to 

beneficiaries. One commenter stated 

that ACOs should provide the notice to 

beneficiaries via email. Another 

commenter recommended that CMS 

consider providing ACOs with talking 

points they can share with their ACO 

participants and ACO providers/ 

suppliers to guide verbal notifications to 

beneficiaries, rather than requiring a 

written beneficiary notice requirement. 

Finally, one commenter requested that 

CMS provide ACOs with beneficiary 

addresses and phone numbers so that 

ACOs can contact beneficiaries with the 

standardized notices on the primary 

care providers’ behalf to streamline the 

process and reduce the administrative 

burden. 

Response: We understand the 

commenters concerns and, although we 

still encourage ACO participants to 

distribute the notice to patients at the 

point of care to address any questions or 

concerns that a beneficiary may have, 

we plan to require an ACO (directly or 

through its ACO participants) to 

distribute beneficiary notifications in 

writing through electronic transmission 

(such as email) or mail. We decline to 

allow for the use of non-written 

notifications (such as recorded 

telephone messages) because we believe 

that such notifications would be 

difficult for us to monitor and for 

beneficiaries to retrieve for future 

reference. We will provide additional 

information regarding permissible 

methods of notification in guidance, 

which we will issue prior to the July 1, 

2019 effective date. 

Comment: Many commenters did not 

support CMS’ proposal to require ACO 

participants to disseminate the 

beneficiary notice at the point of care 

during a beneficiary’s first primary care 

visit of the performance year and 

provided alternatives to reduce 

potential administrative and operational 

burdens. A few commenters suggested 

that any ACO provider/supplier should 

be able to disseminate the notice on the 

beneficiary’s first service visit of the 

year. Some commenters believed that 

CMS should instead allow ACOs to 

provide the notice to beneficiaries at 

any point during a performance year, 

and not specifically at a beneficiary’s 

first primary care service visit of the 

performance year. A few commenters 

stated that there should not be any 

restrictions on when the notification 

must be provided to beneficiaries. Some 

commenters provided suggestions 

related to the timing of the notice and 

coordination across CMS programs. For 

example, one commenter recommended 

that beneficiary notifications be aligned 

between the Shared Savings Program 

and the Next Generation ACO Model. 

Response: Based on the feedback we 

received from commenters and as 

previously discussed, we will require an 

ACO or its ACO participants to 

disseminate the beneficiary notification 

at a beneficiary’s first primary care 

service visit of the performance year or 

at some point earlier in the performance 

year. In this way, we hope to balance 

the requested flexibility from ACOs and 


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ACO participants with the need to 

provide useful and important 

information to beneficiaries. 

In addition, we note that there are 

substantial differences between the 

beneficiary notification requirements for 

the Shared Savings Program, which is a 

permanent program established under 

section 1899 of the Act, and the Next 

Generation ACO Model, which is being 

tested by the Innovation Center under 

section 1115A of the Act. We plan, 

however, to leverage lessons learned 

and, where possible, align the 

notifications as we develop the Shared 

Savings Program beneficiary notification 

templates. 

Comment: Some commenters 

expressed concern about the content of 

the beneficiary notice and whether the 

information contained in the notice 

would be accessible to beneficiaries. 

Many commenters suggested that CMS 

consider beneficiaries’ perspective of 

the notification and simplify the 

language in the template notice. Several 

commenters suggested that we work 

with stakeholders and beneficiary focus 

groups on developing the notice and 

determining the best method for 

dissemination. Some of these 

commenters suggested that no new or 

revised notifications should be 

implemented without input from these 

groups. 

Several commenters stated that ACOs 

should be allowed to develop the 

notification language on their own 

based on guidance from CMS. These 

commenters believe that allowing ACOs 

to develop the notification language 

would help ensure that the notifications 

account for the culture of the ACO’s 

region and allow ACOs and ACO 

participants to engage beneficiaries in a 

more meaningful way. 

Several commenters believe that our 

proposed changes to the content of the 

beneficiary notice would cause 

tremendous beneficiary confusion. A 

number of commenters opined that 

ACOs would need to dedicate staff to 

address beneficiary questions regarding 

the notifications. One commenter stated 

that, based on its experience, our 

previous beneficiary notification 

requirements (which required that an 

ACO provide such notification at the 

point of care) added ten minutes per 

visit so that providers or staff could 

explain the template notice to 

beneficiaries. The commenter also 

criticized the content of our existing 

template notice, stating that it is not 

beneficiary friendly nor written at an 

appropriate literacy level. The 

commenter stated its belief that the 

template notice content causes 

beneficiaries to become concerned that 

the government has their data and, as a 

result, opt-out of data sharing, which 

limits ACOs from receiving data that 

would help them coordinate beneficiary 

care. In addition, a few commenters 

stated that when we previously 

instituted beneficiary notice 

requirements that required notice at the 

point of care, many beneficiaries were 

confused and expressed fear that their 

benefits and/or network would be 

changed, believed the beneficiary notice 

was a ‘‘Medicare, Social Security and 

Internal Revenue scam.’’ A few 

commenters stated that some 

beneficiaries believed that the datasharing notification was an attempt by 

the ACO to steal their identities. These 

commenters also stated that many ACOs 

had to reassign staff members from 

clinical duties to answering beneficiary 

questions about the notifications. 

Several commenters expressed their 

belief that a comprehensive written 

notice furnished at the time of a 

planned primary care visit is likely to 

overwhelm beneficiaries with 

information about topics that are only 

tangentially related to that visit, which 

would impair clinical efficiency and 

experience of care for that visit. These 

commenters also expressed that it is 

unlikely that the information would be 

retained or retrieved by beneficiaries for 

later review. One commenter asserted 

that the notification should provide 

clear information about ACO activities 

that have a tangible impact on care 

experience including care coordination, 

beneficiary incentive programs, and the 

SNF 3-day rule waiver. Finally, a few 

commenters suggested keeping the 

notice regarding voluntary alignment 

separate from all other beneficiary 

notifications. 

Response: We appreciates 

commenters’ concerns that the 

beneficiary notification may cause 

confusion among beneficiaries. We plan 

to work with our internal partners to 

conduct beneficiary focus groups to 

ensure that the content of the template 

notice is written in plain language and 

is easy for beneficiaries to understand. 

We will also consider working with 

focus groups in the future to include 

information regarding an ACO’s use of 

a SNF 3-day rule waiver and other 

benefit enhancements. We believe that 

soliciting beneficiary input during 

development of the template and testing 

the template will mitigate concerns over 

the content of the notice. 

In addition, we believe that 

consolidating the general Shared 

Savings Program notices to Medicare 

fee-for-service beneficiaries, including 

the notification regarding voluntary 

alignment, into a single template will 

assist ACO participants in informing 

beneficiaries about their coordination of 

care. We invite ACO input through 

established modes of communication 

with CMS on any templates that we 

develop and intend to take such 

comments into consideration during any 

future revisions of the templates. 

We appreciate that some commenters 

would like to develop the notification 

language on their own based on 

guidance from CMS, however, as stated 

above, we believe that using template 

language is important to reduce 

operational burden and to ensure that 

beneficiaries receive consistent 

information regarding the program. 

Further, we note that the policy we 

are finalizing will allow ACOs to choose 

whether to furnish the notifications 

(directly or through their ACO 

participants) prior to or at a 

beneficiary’s first primary care visit of 

the performance year. This additional 

flexibility addresses commenter 

concerns that beneficiaries could be 

overwhelmed by receiving the 

notifications during the first primary 

care visit and that furnishing the notice 

during such visit would impair clinical 

efficiency and experience of care. 

Finally, we will ensure that the 

notices comply with any applicable 

Sections 504 and 508 of the 

Rehabilitation Act of 1973. Section 508 

requires Federal agencies to ensure that 

people with disabilities have 

comparable access to and use of 

electronic information technology. 

Section 504 requires, among other 

things, that Federal agencies and 

recipients of Federal financial assistance 

provide individuals with disabilities 

with appropriate auxiliary aids where 

necessary to ensure effective 

communication. 

Final Action: After considering the 

comments received, we are finalizing 

with modification our revisions at 

§ 425.312 regarding beneficiary 

notifications as follows: 

• We are finalizing § 425.312(a)(1) to state 

that an ACO shall ensure that Medicare feefor-service beneficiaries are notified about all 

of the following: (1) That each ACO 

participant and its ACO providers/suppliers 

are participating in the Shared Savings 

Program; (2) the beneficiary’s opportunity to 

decline claims data sharing under § 425.708; 

and (3) beginning July 1, 2019, the 

beneficiary’s ability to, and the process by 

which, he or she may identify or change 

identification of the individual he or she 

designated for purposes of voluntary 

alignment (as described in § 425.402(e)). 

Such notification must be carried out through 

all of the following methods: (1) By an ACO 

participant posting signs in its facilities and, 

in settings in which beneficiaries receive 

primary care services, making standardized 


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written notices available upon request; and 

(2) during the performance year beginning on 

July 1, 2019 and each subsequent 

performance year, by an ACO or ACO 

participant providing each beneficiary with a 

standardized written notice prior to or at the 

first primary care visit of the performance 

year in the form and manner specified by 

CMS. 

• We are finalizing § 425.312(b)(1) to state 

that, beginning July 1, 2019, an ACO that 

operates a beneficiary incentive program 

under § 425.304(c) shall ensure that the ACO 

or its ACO participants notify assigned 

beneficiaries of the availability of the 

beneficiary incentive program, including a 

description of the qualifying services for 

which an assigned beneficiary is eligible to 

receive an incentive payment (as described in 

§ 425.304(c)). We are finalizing 

§ 425.312(b)(2) to state that notification of 

such information must be carried out by an 

ACO or ACO participant during each relevant 

performance year by providing each assigned 

beneficiary with a standardized written 

notice prior to or at the first primary care 

visit of the performance year in the form and 

manner specified by CMS. 

b. Beneficiary Opt-In Based Assignment 

Methodology 

In the November 2011 final rule 

establishing the Shared Savings Program 

(76 FR 67865), we discussed comments 

that we had received in response to our 

proposed assignment methodology 

suggesting alternative beneficiary 

assignment methodologies in order to 

promote beneficiary free choice. For 

example, some commenters suggested 

that a beneficiary should be assigned to 

an ACO only if the beneficiary ‘‘optedin’’ or enrolled in the ACO. We did not 

adopt an opt-in or enrollment 

requirement for several reasons, 

including our belief that such a 

prospective opt-in approach that allows 

beneficiaries to voluntarily elect to be 

assigned to an ACO would completely 

sever the connection between 

assignment and actual utilization of 

primary care services. A patient could 

choose to be assigned to an ACO from 

which he or she had received very few 

or no primary care services at all. 

However, more recently, some 

stakeholders have suggested that we 

reconsider whether it might be feasible 

to incorporate a beneficiary ‘‘opt-in’’ 

methodology under the Shared Savings 

Program. These stakeholders believe 

that under the current beneficiary 

assignment methodology, it can be 

difficult for an ACO to effectively 

manage a beneficiary’s care when there 

is little or no incentive or requirement 

for the beneficiary to cooperate with the 

patient management practices of the 

ACO, such as making recommended 

lifestyle changes or taking medications 

as prescribed. The stakeholders noted 

that in some cases, an assigned 

beneficiary may receive relatively few 

primary care services from ACO 

professionals in the ACO and the 

beneficiary may be unaware that he or 

she has been assigned to the ACO. 

These stakeholders suggested we 

consider an alternative assignment 

methodology under which a beneficiary 

would be assigned to an ACO if the 

beneficiary ‘‘opted-in’’ to the ACO in 

order to reduce the reliance on the 

existing assignment methodology under 

subpart E and as a way to make the 

assignment methodology more patientcentered, and strengthen the 

engagement of beneficiaries in their 

health care. These stakeholders believe 

that using such an approach to 

assignment could empower 

beneficiaries to become better engaged 

and empowered in their health care 

decisions. 

Although arguably beneficiaries ‘‘optin’’ to assignment to an ACO under the 

existing claims-based assignment 

methodology in the sense that claimsbased assignment is based on each 

beneficiary’s exercise of free choice in 

seeking primary care services from ACO 

providers/suppliers, in the August 2018 

proposed rule (83 FR 41876) we 

explained our belief that incorporating 

an opt-in based assignment 

methodology, and de-emphasizing the 

claims-based assignment methodology, 

could have merit as a way to assign 

beneficiaries to ACOs. Therefore, we 

noted that we are exploring options for 

developing an opt-in based assignment 

methodology to further encourage and 

empower beneficiaries to become better 

engaged and empowered in their health 

care decisions. This approach to 

beneficiary assignment might also allow 

ACOs to better target their efforts to 

manage and coordinate care for those 

beneficiaries for whose care they will 

ultimately be held accountable. As 

discussed in section II.V.2.b. of the 

November 2018 final rule (83 FR 59959 

through 59964), we have recently 

implemented a voluntary alignment 

process, which is an electronic process 

that allows beneficiaries to designate a 

primary clinician as responsible for 

coordinating their overall care. If a 

beneficiary designates an ACO 

professional as responsible for their 

overall care and the requirements for 

assignment under § 425.402(e) are met, 

the beneficiary will be prospectively 

assigned to that ACO. For 2018, the first 

year in which beneficiaries could be 

assigned to an ACO based on their 

designation of a primary clinician in the 

ACO as responsible for coordinating 

their care, 4,314 beneficiaries 

voluntarily aligned to 339 ACOs, and 

338 beneficiaries were assigned to an 

ACO based solely on their voluntary 

alignment. Ninety-two percent of the 

beneficiaries who voluntarily aligned 

were already assigned to the same ACO 

under the claims-based assignment 

algorithm. 

Voluntary alignment is based upon 

the relationship between the beneficiary 

and a single practitioner in the ACO. In 

contrast, as we described in the August 

2018 proposed rule, an opt-in based 

assignment methodology would be 

based on an affirmative recognition of 

the relationship between the beneficiary 

and the ACO, itself. Under an opt-in 

based assignment methodology, a 

beneficiary would be assigned to an 

ACO if the beneficiary opted into 

assignment to the ACO. Therefore, 

under an opt-in approach, ACOs might 

have a stronger economic incentive to 

compete against other ACOs and 

healthcare providers not participating in 

an ACO because to the extent the ACO 

is able to increase quality and reduce 

expenditures for duplicative and other 

unnecessary care, it could attract a 

greater number of beneficiaries to opt-in 

to assignment the ACO. There are a 

number of policy and operational 

issues, including the issues previously 

identified in the November 2011 final 

rule that would need to be addressed in 

order to implement an opt-in based 

methodology to assign beneficiaries to 

ACOs. These issues include the process 

under which beneficiaries could opt-in 

to assignment to an ACO, ACO 

marketing guidelines, beneficiary 

communications, system infrastructure 

to communicate beneficiary opt-ins, and 

how to implement an opt-in based 

assignment methodology that responds 

to stakeholder requests while 

conforming with existing statutory and 

program requirements under the Shared 

Savings Program. We discussed these 

issues in Section II.C.3.b of the August 

2018 proposed rule. 

As we explained in the August 2018 

proposed rule, we believe under an optin based assignment methodology, it 

would be important for ACOs to manage 

notifying beneficiaries, collecting 

beneficiary opt-in data, and reporting 

the opt-in data to CMS. On an annual 

basis, ACOs would notify their 

beneficiary population about their 

participation in the Shared Savings 

Program and provide the beneficiaries a 

window during which time they could 

notify the ACO of their decision to optin and be assigned to the ACO, or to 

withdraw their opt-in to the ACO. 

Opting-in to a Shared Savings Program 

ACO could be similar to enrolling in a 

MA plan. MA election periods define 

when an individual may enroll or 


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disenroll from a MA plan. An 

individual (or his/her legal 

representative) must complete an 

enrollment request (using an enrollment 

form approved by CMS, an online 

application mechanism, or through a 

telephone enrollment) to enroll in a MA 

plan and submit the request to the MA 

plan during a valid enrollment period. 

MA plans are required by 42 CFR 422.60 

to submit a beneficiary’s enrollment 

information to CMS within the 

timeframes specified by CMS, using a 

standard IT transaction system. 

Subsequently, CMS validates the 

beneficiary’s eligibility, at which point 

the MA plan must meet the remainder 

of its enrollment-related processing 

requirements (for example, sending a 

notice to the beneficiary of the 

acceptance or rejection of the 

enrollment within the timeframes 

specified by CMS). Procedures have 

been established for disenrolling from a 

MA plan during MA election periods. 

(For additional details about the 

enrollment process under MA, see the 

CMS website at https://www.cms.gov/ 

Medicare/Eligibility-and-Enrollment/ 

MedicareMangCareEligEnrol/ 

index.html, and the Medicare Managed 

Care Manual, chapter 2, section 40 at 

https://www.cms.gov/Medicare/ 

Eligibility-and-Enrollment/ 

MedicareMangCareEligEnrol/ 

Downloads/CY_2018_MA_Enrollment_

and_Disenrollment_Guidance_6-15- 

17.pdf). 

Because opting-in or withdrawing an 

opt-in to assignment to a Shared Savings 

Program ACO could be similar to 

enrolling or disenrolling in a MA plan, 

we would need to establish the ACO 

opt-in process and timing in a way to 

avoid beneficiary confusion as to the 

differences between the Shared Savings 

Program and MA, and whether the 

beneficiary is opting-in to assignment to 

an ACO or enrolling in a MA plan. We 

would also need to determine how 

frequently beneficiaries would be able 

to opt-in or withdraw an opt-in to an 

ACO, and whether there should be 

limits on the ability to change an optin after the end of the opt-in window, 

in order to reduce possible beneficiary 

assignment ‘‘churn’’. We noted that 

beneficiaries opting-in to assignment to 

an ACO would still retain the freedom 

to choose to receive care from any 

Medicare-enrolled provider or supplier, 

including providers and suppliers 

outside the ACO. The ACO would be 

responsible for providing the list of 

beneficiaries who have opted-in to 

assignment to the ACO, along with each 

beneficiary’s Medicare number, address, 

and certain other demographic 

information, to CMS in a form and 

manner specified by CMS. After we 

receive this information from the ACO, 

we would verify that each of the listed 

beneficiaries meets the beneficiary 

eligibility criteria set forth in 

§ 425.401(a) before finalizing the ACO’s 

assigned beneficiary population for the 

applicable performance year. To 

perform these important opt-in related 

functions, ACOs might need to acquire 

new information technology systems, 

along with additional support staff, to 

track, monitor and transmit opt-in data 

to CMS, including effective dates for 

beneficiaries who opt-in or withdraw an 

opt-in to the ACO. Furthermore, 

changes in an ACO’s composition of 

ACO participants and ACO providers/ 

suppliers could affect a beneficiary’s 

interest in maintaining his or her 

alignment with the ACO through an optin approach. As a result, we explained 

that we believe it would also be critical 

for an ACO participating under opt-in 

based assignment to inform 

beneficiaries of their option to withdraw 

their opt-in to the ACO, generally, and 

specifically, in the event that an ACO 

participant or ACO provider/supplier, 

from which the beneficiary has received 

primary care services is no longer 

participating in the ACO. 

MA has marketing guidelines and 

requirements that apply to enrollment 

activities to prevent selective marketing 

or discrimination based on health 

status. (See 42 CFR 422.2260 through 

422.2276 and section 30.4 of the 

Medicare Marketing Guidelines located 

at https://www.cms.gov/Medicare/ 

Health-Plans/ManagedCareMarketing/ 

FinalPartCMarketingGuidelines.html.) 

We explained that if we were to adopt 

an opt-in process for the Shared Savings 

Program, we would impose similar 

requirements to ensure ACOs are 

providing complete and accurate 

information to beneficiaries to inform 

their decision-making regarding optingin to assignment to an ACO, and not 

selectively marketing or discriminating 

based on health status or otherwise 

improperly influencing beneficiary 

choice. Additionally, ACOs would be 

required to establish a method for 

tracking the beneficiaries they have 

notified regarding the opportunity to 

opt-in to assignment to the ACO, and 

the responses received. Under 

§ 425.314, ACOs agree and must require 

their ACO participants, ACO providers/ 

suppliers, and other individuals or 

entities performing functions or services 

related to ACO activities to agree that 

CMS has the right to audit, inspect, 

investigate, and evaluate records and 

other evidence that pertain to the ACO’s 

compliance with the requirements of the 

Shared Savings Program. We noted that 

we believe this provision would 

authorize CMS to conduct oversight 

regarding ACOs’ records documenting 

the beneficiaries who received such a 

notification and the beneficiary 

responses. 

As we stated in the August 2018 

proposed rule (83 FR 41877 and 41878), 

we are also considering how we would 

implement an opt-in based assignment 

methodology that addresses stakeholder 

requests, while conforming to existing 

program requirements. First, the 

requirement at section 1899(b)(2)(D) of 

the Act, that an ACO have at least 5,000 

assigned beneficiaries, would continue 

to apply. Thus, under an opt-in based 

assignment methodology, an ACO still 

would be required to have at least 5,000 

FFS beneficiaries, who meet our 

beneficiary eligibility criteria, assigned 

to the ACO at the time of application 

and for the entirety of the ACO’s 

agreement period. We indicated that we 

are concerned that using an opt-in based 

assignment methodology as the sole 

basis for assigning beneficiaries to an 

ACO could make it difficult for many 

ACOs to meet the 5,000 assigned 

beneficiary requirement under section 

1899(b)(2)(D) of the Act. In particular, 

we noted that we were considering how 

an opt-in based assignment 

methodology would be implemented for 

new ACOs that have applied to the 

Shared Savings Program, but have not 

yet been approved by CMS to 

participate in the program. It could be 

difficult for a new ACO to achieve 5,000 

beneficiary opt-ins prior to the start of 

its first performance year under the 

program, as required by the statute in 

order to be eligible for the program. It 

could also be difficult for certain 

established ACOs, such as ACOs located 

in rural areas, to achieve and maintain 

5,000 beneficiary opt-ins. Smaller 

assigned beneficiary populations would 

also significantly increase the minimum 

savings rate and minimum loss rate 

(MSR and MLR) thresholds used to 

determine eligibility for shared savings 

and accountability for shared losses 

when these rates are based on the size 

of the ACO’s assigned population as 

described in section II.A.6.b. of this 

final rule. Smaller assigned beneficiary 

populations would also be a potential 

concern if ACOs and their ACO 

participants were to target care 

management to a small subset of 

patients at the expense of a more 

comprehensive transformation of care 

delivery with benefits that would have 

otherwise extended to a wider mix of 


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patients regardless of whether they are 

assigned to the ACO. 

Second, under an opt-in assignment 

approach, we could allow beneficiaries 

to opt-in before they have received a 

primary care service from a physician in 

the ACO, or any service from an ACO 

provider/supplier. This would be 

similar to the situation that can 

sometimes occur under MA, where a 

beneficiary enrolls in a MA plan 

without having received services from 

any of the plan’s providers. That means 

a beneficiary could be assigned to an 

ACO based solely on his or her optingin to the ACO, and the ACO would be 

accountable for the total cost and 

quality of care provided to the opted-in 

beneficiary, including care from 

providers/suppliers that are not 

participating in the ACO. Section 

1899(c) of the Act requires that 

beneficiaries be assigned to an ACO 

based on their use of primary care 

services furnished by physicians in the 

ACO, or beginning January 1, 2019, 

services provided in FQHCs/RHCs. In 

the August 2018 proposed rule, we 

noted that in order to meet this 

requirement under an opt-in based 

assignment methodology, we were 

considering whether we would need to 

continue to require that a beneficiary 

receive at least one primary care service 

from an ACO professional in the ACO 

who is a primary care physician or a 

physician with a specialty used in 

assignment (similar to our current 

requirement under § 425.402(b)(1)), in 

order for the beneficiary to be eligible to 

opt-in to assignment to the ACO. 

Third, we explained that we were 

considering whether any changes would 

need to be made to our methodology for 

establishing an ACO’s historical 

benchmark if we were to implement an 

opt-in based assignment methodology. 

Under the current assignment 

methodology used in the Shared 

Savings Program, we assign 

beneficiaries to ACOs for a performance 

year based upon either voluntary 

alignment or the claims-based 

assignment methodology. Because the 

vast majority of beneficiaries are 

assigned using the claims-based 

assignment methodology, we are able to 

use the same claims-based assignment 

methodology to assign beneficiaries for 

purposes of either a performance year or 

a benchmark year. The expenditures of 

the beneficiaries assigned to the ACO 

for a benchmark year are then used in 

the determination of the benchmark. 

However, the same approach would not 

be possible under an assignment 

methodology based solely on a 

beneficiary opt-in approach. If we were 

to adopt an entirely opt-in based 

assignment methodology, we would 

need to consider if any changes would 

need to be made to our methodology for 

establishing an ACO’s historical 

benchmark to address selection bias 

and/or variation in expenditures 

because beneficiaries would not have 

opted-in to assignment to the ACO 

during the 3 prior years included in the 

historical benchmark under § 425.602, 

§ 425.603, or proposed new § 425.601. 

Thus, under an entirely opt-in based 

assignment methodology there could be 

a large disconnect between the 

beneficiaries who have opted-in to 

assignment to the ACO for a 

performance year and the beneficiaries 

who are assigned to the ACO on the 

basis of claims for the historical 

benchmark years. An adjustment to the 

benchmark would be necessary to 

address these discrepancies. 

Alternatively, if we were to adopt a 

methodology under which we use 

expenditures from the 3 historical 

benchmark years only for beneficiaries 

who have opted-in to assignment to the 

ACO in the applicable performance 

year, it could create an imbalance 

because the expenditures for the years 

that comprise the historical benchmark 

would not include expenditures for 

decedents because beneficiaries 

necessarily would have survived 

through the baseline period in order to 

opt-in for the given performance year. A 

similar approach was initially applied 

in the Pioneer ACO Model, but it 

required complex adjustments to ACOs’ 

benchmarks to account for significantly 

lower spending in historical base years 

for assigned beneficiaries, who 

necessarily survived for the one or more 

years between the given base year and 

the applicable performance year in 

which they were assigned to the ACO. 

It would likely be even more difficult 

and complex to consistently and 

accurately adjust the benchmark in the 

context of our proposal to change to 5 

year agreement periods (or a 6 year 

agreement period for agreement periods 

starting on July 1, 2019) because the 

historical benchmarks would eventually 

rely on an even smaller subset of base 

year claims available for beneficiaries 

who were enrolled in both Medicare 

Parts A and B during the base year and 

have survived long enough to cover the 

up to 7-year gap between the historical 

base year and the performance year for 

which they have opted-in to assignment 

to the ACO. 

In light of these issues, we stated that 

we were considering implementing an 

opt-in based assignment methodology 

that would address stakeholder requests 

that we incorporate such an approach to 

make the assignment methodology more 

patient-centered, while also addressing 

statutory requirements and other Shared 

Savings Program requirements. 

Specifically, we explained our belief 

that it may be feasible to incorporate an 

opt-in based assignment methodology 

into the Shared Savings Program in the 

following manner. We would allow, but 

not require, ACOs to elect an opt-in 

based assignment methodology. Under 

this approach, at the time of application 

to enter or renew participation in the 

Shared Savings Program, an ACO could 

elect an opt-in based assignment 

methodology that would apply for the 

length of the agreement period. Under 

this approach, we would use the 

assignment methodology under subpart 

E of the regulations, including the 

provisions at §§ 425.400, 425.401, 

425.402 and 425.404 (herein referred to 

as the ‘‘existing assignment 

methodology’’ which would be 

comprised of a claims-based assignment 

methodology and voluntary alignment), 

to determine whether an ACO applicant 

meets the initial requirement under 

section 1899(b)(2)(D) of the Act to be 

eligible to participate in the program. 

We would use this approach because 

the ACO applicant would not be able to 

actively seek Medicare beneficiary optins until the next opt-in window. That 

is, we would continue to determine an 

ACO’s eligibility to participate in the 

program under the requirement that an 

ACO have at least 5,000 assigned 

beneficiaries using the program’s 

existing assignment methodology. 

Therefore, an ACO that elects to 

participate under opt-in based 

assignment could be eligible to enter an 

agreement period under the program if 

we determine that it has at least 5,000 

assigned beneficiaries in each of the 3 

years prior to the start of the ACO’s 

agreement period, based on the claimsbased assignment methodology and 

voluntarily aligned beneficiaries. 

If an ACO chooses not to elect the optin based assignment methodology 

during the application or renewal 

process, then beneficiaries would 

continue to be assigned to the ACO 

based on the existing assignment 

methodology (claims-based assignment 

with voluntary alignment). As an 

alternative to allowing ACOs to 

voluntarily elect participation in an optin based assignment methodology we 

noted that we were also considering 

discontinuing the existing assignment 

methodology and applying an opt-in 

based assignment methodology 

program-wide (described herein as a 

hybrid assignment approach which 

includes beneficiary opt-in, modified 


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claims-based assignment, and voluntary 

alignment). As described in the August 

2018 proposed rule, ACOs could face 

operational challenges in implementing 

opt-in based assignment, and this 

approach to assignment could affect the 

size and composition of the ACO’s 

assigned population, specifically to 

narrow the populations served by ACO. 

In light of these factors, we stated that 

we believe it would be important to gain 

experience with opt-in based 

assignment as a voluntary participation 

option before modifying the program to 

allow only this participation option. 

In the August 2018 proposed rule (83 

FR 41879 through 41881), we described 

a hybrid approach under which, for 

ACOs electing to participate under an 

opt-in based assignment methodology, 

we would assign beneficiaries to the 

ACO based on beneficiary opt-ins, 

supplemented by voluntary alignment 

and a modified claims-based 

methodology. Notwithstanding the 

assignment methodology under 

§ 425.402(b), under this hybrid 

approach, a beneficiary would be 

prospectively assigned to an ACO that 

has elected the opt-in based assignment 

methodology if the beneficiary opted in 

to assignment to the ACO or voluntarily 

aligned with the ACO by designating an 

ACO professional as responsible for 

their overall care. If a beneficiary was 

not prospectively assigned to such an 

ACO based on either beneficiary opt-in 

or voluntary alignment, then the 

beneficiary would be assigned to such 

ACO only if the beneficiary received the 

plurality of his or her primary care 

services from the ACO and received at 

least seven primary care services from 

one or more ACO professionals in the 

ACO during the applicable assignment 

window. If a beneficiary did not receive 

at least seven primary care services from 

one or more ACO professionals in the 

ACO during the applicable assignment 

window, then the beneficiary would not 

be assigned to the ACO on the basis of 

claims even if the beneficiary received 

the plurality of their primary care 

services from the ACO. We noted that 

this threshold of seven primary care 

services would be consistent with the 

threshold established by an integrated 

healthcare system in a prior 

demonstration that targeted intervention 

on chronic care, high risk patients in 

need of better coordinated care due to 

their frequent utilization of health care 

services. A threshold for assignment of 

seven primary care services would mean 

that up to 25 percent of an ACO’s 

beneficiaries who would have been 

assigned to the ACO under the existing 

assignment methodology under 

§ 425.402(b) could continue to be 

assigned to the ACO based on claims. 

We explained that we believed it could 

be appropriate to establish a minimum 

threshold of seven primary care services 

for assigning beneficiaries to ACOs 

electing an opt-in based assignment 

methodology because it would enable 

such ACOs to focus their care 

coordination activities on beneficiaries 

who have either opted-in to assignment 

to the ACO or voluntarily aligned with 

the ACO, or who are receiving a high 

number of primary care services from 

ACO professionals and may have 

complex conditions requiring care 

coordination. We sought comment on 

whether to use a higher or lower 

minimum threshold for determining 

beneficiaries assigned to the ACO under 

a modified claims-based assignment 

approach. 

Under this hybrid approach to 

assignment, we would allow the ACO a 

choice of claims-based beneficiary 

assignment methodology as discussed in 

section II.A.4.c. of this final rule. 

Therefore, ACOs that elect to participate 

under opt-in based assignment for their 

agreement period would also have the 

opportunity to elect either prospective 

or preliminary prospective claims-based 

assignment prior to the start of their 

agreement period, and to elect to change 

this choice of assignment methodology 

annually. 

More generally, we stated that we 

believe this hybrid assignment 

methodology, which would incorporate 

claims-based and opt-in based 

assignment methods, as well as 

voluntary alignment, could be 

preferable to an opt-in only approach. A 

hybrid assignment methodology would 

increase the number of beneficiaries for 

whom the ACO would be accountable 

for quality and cost of care delivery and 

thereby provide stronger statistical 

confidence for shared savings or shared 

losses calculations and provide a 

stronger incentive for ACOs and their 

ACO participants and ACO providers/ 

suppliers to improve care delivery for 

every FFS beneficiary rather than 

focusing only on beneficiaries who 

happen to have opted-in to assignment 

to the ACO. 

For ACOs that enter an agreement 

period in the Shared Savings Program 

under an opt-in based assignment 

methodology, we would allow for a 

special election period during the first 

calendar year quarter of the ACO’s first 

performance year for beneficiaries to 

opt-in to assignment to the ACO. For 

each subsequent performance year of an 

ACO’s agreement period, the opt-in 

period would span the first three 

calendar year quarters (January through 

September) of the prior performance 

year. Beneficiaries that opt-in, and are 

determined eligible for assignment to 

the ACO, would be prospectively 

assigned to the ACO for the following 

performance year. Under this approach, 

there would be no floor or minimum 

number of opt-in beneficiaries required. 

Rather, we would consider whether, in 

total, the ACO’s assigned beneficiary 

population (comprised of beneficiaries 

who opt-in, beneficiaries assigned under 

the modified claims-based assignment 

approach, and beneficiaries who have 

voluntarily aligned) meets the minimum 

population size of 5,000 assigned 

beneficiaries each performance year to 

comply with the requirements for 

continued participation in the program. 

To illustrate this hybrid assignment 

approach in determining performance 

year assignment: If an ACO has 2,500 

beneficiaries assigned under the 

modified claims-based assignment 

approach who have not otherwise 

opted-in to assignment to the ACO, and 

50 voluntarily aligned beneficiaries who 

have not otherwise opted-in to 

assignment to the ACO, then the ACO 

would be required to have at least 2,450 

beneficiaries who have opted-in to 

assignment to remain in compliance 

with the program eligibility requirement 

to have at least 5,000 assigned 

beneficiaries. 

Consistent with current program 

policy, ACOs electing the opt-in based 

assignment methodology with a 

performance year assigned population 

below the 5,000-minimum may be 

subject to the pre-termination actions in 

§ 425.216 and termination of their 

participation agreement under 

§ 425.218. Under the proposals for 

modifying the MSR/MLR to address 

small population sizes described in 

section II.A.6.b.(3). of this final rule, if 

an ACO that elects an opt-in based 

assignment methodology has an 

assigned population below 5,000 

beneficiaries, the ACO’s MSR/MLR 

would be set at a level consistent with 

the number of assigned beneficiaries to 

provide assurance that shared savings 

and shared losses represent meaningful 

changes in expenditures rather than 

normal variation. 

As an alternative approach, we also 

considered requiring ACOs that have 

elected an opt-in based assignment 

methodology to maintain at least a 

minimum number of opt-in 

beneficiaries assigned in each 

performance year of its agreement 

period. We explained our belief that any 

minimum population requirement 

should be proportional to the size of 

ACO’s population, to recognize 

differences in the population sizes of 


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ACOs across the program. We also 

considered whether we should require 

incremental increases in the size of the 

ACO’s opt-in assigned population over 

the course of the ACO’s agreement 

period, recognizing that it may take time 

for ACOs to implement the opt-in 

approach and for beneficiaries to opt-in. 

Another factor we considered is the 

possibility that the size of an ACO’s 

population, and therefore the proportion 

of opt-in beneficiaries, could be affected 

by ACO participant list changes, and 

changes in the ACO providers/suppliers 

billing through ACO participant TINs, 

which could affect claims-based 

assignment, and the size of the ACO’s 

voluntarily aligned population. Changes 

in the size of the ACO’s claims-based 

assigned and voluntarily aligned 

populations could cause the ACO to fall 

out of compliance with a required 

proportion of opt-in assigned 

beneficiaries, even if there has been no 

reduction in the number of opt-in 

assigned beneficiaries. 

We anticipated that under opt-in 

based assignment, we would not 

establish restrictions on the geographic 

locations of the ACOs from which a 

beneficiary could select. This would be 

consistent with the program’s voluntary 

alignment process, under which a 

beneficiary could choose to designate a 

primary clinician as being responsible 

for his or her care even if this clinician 

is geographically distant from the 

beneficiary’s place of residence. Also, 

currently under the program’s existing 

claims-based assignment methodology, 

beneficiaries who receive care in 

different parts of the country during the 

assignment window can be assigned to 

an ACO that is geographically distant 

from the beneficiary’s place of 

residence. This approach also 

recognizes that a beneficiary could be 

assigned to a geographically distant 

ACO as a result of his or her individual 

circumstances, such as a beneficiary’s 

change in place of residence, the 

beneficiary spending time in and 

receiving care in different parts of the 

country during the year (sometimes 

referred to as being a ‘‘snowbird’’), or 

the beneficiary receiving care from a 

tertiary care facility that is 

geographically distant from his or her 

home. Further, we noted that this 

approach is in line with the expanded 

telehealth policies discussed in section 

II.B.2.b. of this final rule under which 

certain geographic and other restrictions 

would be removed. We welcomed 

comment on whether to establish 

geographic limitations on opt-in based 

assignment such that a beneficiary’s 

choice of ACOs for opt-in would be 

limited to ACOs located near the 

beneficiary’s place of residence, or 

where the beneficiary receives his or her 

care, or a combination of both. 

When considering the options for 

incorporating an opt-in based 

assignment methodology, we considered 

if such a change in assignment 

methodology would also require 

changes to the proposed benchmarking 

methodology under § 425.601. A hybrid 

assignment approach could potentially 

require modifications to the 

benchmarking methodology to account 

for factors such as: Differences in 

beneficiary characteristics, including 

health status, between beneficiaries who 

may be amenable to opting-in to 

assignment to an ACO, beneficiaries 

who voluntarily align, and beneficiaries 

assigned under a modified claims-based 

assignment methodology who must 

have received at least seven primary 

care services from the ACO; differences 

between the existing claims-based 

assignment methodology and the 

alternative claims-based approach under 

which a minimum of seven primary care 

services would be required for 

assignment; and discrepancies caused 

by the use of the existing claims-based 

assignment methodology to perform 

assignment for historical benchmark 

years and the use of a hybrid assignment 

methodology for performance years. We 

explained that, for simplicity, we prefer 

an approach that would use, to the 

greatest extent possible, the program’s 

benchmarking methodology, as 

proposed to be modified as discussed in 

section II.D. of this final rule. This 

would allow us to more rapidly 

implement an opt-in based assignment 

approach, and may be easier to 

understand for ACOs and other program 

stakeholders experienced with the 

program’s benchmarking methodology. 

We considered the following approach 

to establishing and adjusting the 

historical benchmark for ACOs that 

elect an opt-in based assignment 

methodology. 

As explained in the August 2018 

proposed rule (83 FR 41880 through 

41882), in establishing the historical 

benchmark for ACOs electing an opt-in 

based beneficiary assignment 

methodology, we would follow the 

benchmarking approach described in 

the provisions of the proposed new 

regulation at § 425.601. In particular, we 

would continue to determine 

benchmark year assignment based on 

the population of beneficiaries that 

would have been assigned to the ACO 

under the program’s existing assignment 

methodology in each of the 3 most 

recent years prior to the start of the 

ACO’s agreement period. However, we 

would take a different approach to 

annually risk adjusting the historical 

benchmark expenditures than the one 

we had proposed in Section II.D of the 

proposed rule and in the proposed 

provisions at §§ 425.605(a)(1) and 

425.610(a)(2). 

In risk adjusting the historical 

benchmark for each performance year, 

we would maintain the current 

approach of categorizing beneficiaries 

by Medicare enrollment type; however, 

we would further stratify the benchmark 

year 3 and performance year assigned 

populations into groups that we 

anticipate would have comparable 

expenditures and risk score trends. That 

is, we would further stratify the 

performance year population into two 

categories: (1) Beneficiaries who are 

assigned using the modified claimsbased assignment methodology and 

must have received seven or more 

primary care services from ACO 

professionals and who have not also 

opted-in to assignment to the ACO; and 

(2) beneficiaries who opt-in and 

beneficiaries who voluntarily align. A 

beneficiary who has opted-in to 

assignment to the ACO would continue 

to be stratified in the opted in 

population throughout the agreement 

period regardless of whether the 

beneficiary would have been assigned 

using the modified claims-based 

assignment methodology because the 

beneficiary received seven or more 

primary care services from the ACO. 

We would also further stratify the 

BY3 population, determined using the 

existing assignment methodology, into 

two categories: (1) Beneficiaries who 

received seven or more primary care 

services from the ACO; and (2) 

beneficiaries who received six or fewer 

primary care services from the ACO. 

We explained that we anticipate that 

beneficiaries who opt-in would likely be 

a subset of beneficiaries who would 

have been assigned under the existing 

claims-based assignment methodology. 

As previously described, 92 percent of 

voluntarily aligned beneficiaries were 

already assigned to the same ACO using 

the existing claims-based assignment 

methodology. Further, based on our 

experience with the program, about 75 

percent of ACOs’ assigned beneficiaries 

receive six or fewer primary care service 

visits annually. Similar to the trend we 

have observed with voluntarily aligned 

beneficiaries, we believe the opt-in 

beneficiaries would tend to resemble in 

health status and acuity a subset of the 

ACO’s typical claims-based assigned 

population; that is, we anticipate opt-in 

beneficiaries, as with voluntarily 

aligned beneficiaries, would resemble 

the population of beneficiaries assigned 


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in the benchmark year that received six 

or fewer primary care services. 

We would determine ratios of risk 

scores for the comparable populations of 

performance year and BY3 assigned 

beneficiaries. We would calculate these 

risk ratios by comparing the risk scores 

for the BY3 population with seven or 

more primary care services with the risk 

scores for the performance year 

population with seven or more primary 

care services who have not otherwise 

opted-in or voluntarily aligned. We 

would also calculate risk ratios for the 

remaining beneficiary population by 

comparing risk scores for the BY3 

population with six or fewer primary 

care services with the risk scores for the 

performance year population of opt-in 

and voluntarily aligned beneficiaries. 

We would use these ratios to risk adjust 

the historical benchmark expenditures 

not only by Medicare enrollment type, 

but also by these stratifications. That is, 

for each Medicare enrollment type, we 

would apply risk ratios comparing the 

risk scores of the BY3 population with 

seven or more primary care services and 

the risk scores of the performance year 

population with seven or more primary 

care services to adjust the historical 

benchmark expenditures for the 

population with seven or more primary 

care services in the benchmark period. 

Similarly, we would apply risk ratios 

comparing the risk scores of the BY3 

population with six or fewer primary 

care services and the risk scores of the 

performance year opt-in or voluntarily 

aligned population to adjust the 

historical benchmark expenditures for 

the population with six or fewer 

primary care services in the benchmark 

period. We presumed this would be a 

reasonable approach based on our 

expectation that opt-in beneficiaries will 

resemble the population of 

beneficiaries, assigned under the 

existing claims-based assignment 

methodology, who have 6 or fewer 

primary care services with the ACO 

annually. This presumption was 

supported by the assumptions that 

ACOs may selectively market opt-in to 

lower cost beneficiaries, and 

beneficiaries that require less intensive 

and frequent care may be more inclined 

to opt-in. However, since we lack 

experience with an opt-in based 

assignment approach, we indicated that 

we would monitor the effects of this 

policy to determine if it is effective in 

addressing the differences in 

characteristics between the population 

assigned for purposes of establishing the 

ACO’s benchmark under the existing 

assignment methodology and the 

population assigned for the performance 

year under the hybrid assignment 

approach, and if further adjustments 

may be warranted such as additional 

adjustments to the historical benchmark 

to account for such differences. 

In rebasing the ACO’s benchmark, 

which occurs at the start of each new 

agreement period, we would include in 

the benchmark year assigned population 

beneficiaries who had opted in to the 

ACO in a prior performance year that 

equates to a benchmark year for the 

ACO’s new agreement period. For 

example, if an ACO elected opt-in for a 

5-year agreement period beginning on 

January 1, 2020, and concluding on 

December 31, 2024, and a beneficiary 

opted in and was assigned for 

performance year 2023 and remained 

opted in and assigned for performance 

year 2024, we would include this 

beneficiary in the benchmark year 

assigned population for BY2 (2023) and 

BY3 (2024) when we rebase the ACO for 

its next agreement period beginning 

January 1, 2025. We considered that the 

health status of an opt-in beneficiary 

may continue to change over time as the 

beneficiary ages, which would be 

accounted for in our use of full CMS– 

HCC risk scores in risk adjusting the 

rebased historical benchmark. We 

considered approaches to further adapt 

the rebasing methodology to account for 

the characteristics of the ACO’s opt-in 

beneficiaries, and the ACO’s experience 

with participating in an opt-in based 

assignment methodology. 

We considered an approach under 

which we could determine the assigned 

population for the ACO’s rebased 

benchmark using the program’s existing 

assignment methodology and 

incorporate opt-in assigned beneficiaries 

in the benchmark population. In risk 

adjusting the ACO’s rebased benchmark 

each performance year, we could use a 

stratification approach similar to the 

approach previously described in this 

discussion. That is we would stratify the 

BY3 population into two categories: (1) 

Beneficiaries who received seven or 

more primary care services from the 

ACO; and (2) beneficiaries who received 

six or fewer primary care services from 

the ACO. We would categorize opt-in 

beneficiaries, assigned in BY3, into 

either one of these categories based on 

the number of primary care services 

they received from ACO during BY3. 

We could continue to stratify the 

performance year population assigned 

under the hybrid assignment 

methodology into two categories: (1) 

Beneficiaries who are assigned using the 

modified claims-based assignment 

methodology and must have received 

seven or more primary care services 

from ACO professionals and who have 

not also opted-in to assignment to the 

ACO; and (2) beneficiaries who opt-in 

and beneficiaries who voluntarily align. 

We would apply risk ratios comparing 

the risk scores of the BY3 population 

with seven or more primary care 

services and the risk scores of the 

performance year population with seven 

or more primary care services to adjust 

the historical benchmark expenditures 

for the population with seven or more 

primary care services in the benchmark 

period. Similarly, we would apply risk 

ratios comparing the risk scores of the 

BY3 population with six or fewer 

primary care services and the risk scores 

of the performance year opt-in or 

voluntarily aligned population to adjust 

the historical benchmark expenditures 

for the population with six or fewer 

primary care services in the benchmark 

period. 

An alternative approach to rebasing 

the benchmark for an ACO that elected 

opt-in assignment in their most recent 

prior agreement period and continues 

their participation in an opt-in based 

assignment methodology in their new 

agreement period, would be to use the 

hybrid assignment approach to 

determine benchmark year assignment. 

To risk adjust the benchmark for each 

performance year we could then stratify 

the BY3 and the performance year 

assigned populations into two 

categories: (1) Beneficiaries assigned 

through the modified claims-based 

assignment methodology who received 

seven or more primary care services 

from the ACO; or (2) beneficiaries who 

opt-in and beneficiaries who voluntarily 

align. This approach would move ACOs 

to participation under a purely hybrid 

assignment approach since we would no 

longer use the existing assignment 

methodology in establishing the 

benchmark. However, this approach 

could result in smaller benchmark year 

assigned populations compared to 

populations determined based on the 

more inclusive, existing assignment 

methodology. In turn, this approach 

could result in ACOs that were 

successful at opting-in beneficiaries 

being ineligible to continue their 

participation in the program under an 

opt-in assignment methodology because 

they do not meet the program’s 

eligibility requirement to have at least 

5,000 beneficiaries assigned in each 

benchmark year. 

As described in section II.D. of this 

final rule, as part of the proposed 

changes to our benchmarking 

methodology, we proposed that annual 

adjustments in prospective CMS–HCC 

risk scores would be subject to a 

symmetrical cap of positive or negative 

3 percent that would apply for the 


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agreement period, such that the 

adjustment between BY3 and any 

performance year in the agreement 

period would never be more than 3 

percent in either direction. We 

explained that we were considering 

whether a modified approach to 

applying these caps would be necessary 

for ACOs that elect opt-in based 

assignment methodology. For example, 

for the first performance year an optedin beneficiary is assigned to an ACO, we 

could allow for full upward or 

downward CMS–HCC risk adjustment, 

thereby excluding these beneficiaries 

from the symmetrical risk score caps. 

This would allow us to account for 

newly opted-in beneficiaries’ full CMS– 

HCC scores in risk adjusting the 

benchmark. In each subsequent 

performance year, the opted-in 

beneficiaries remain aligned to the ACO, 

we could use an asymmetrical approach 

to capping increases and decreases in 

risk scores. We would cap increases in 

the opt-in beneficiaries’ CMS–HCC risk 

scores to guard against changes in 

coding intensity, but we would apply no 

cap to decreases in their CMS–HCC risk 

scores. That is, the risk scores for these 

opt-in beneficiaries would be subject to 

the positive 3 percent cap, but not the 

negative 3 percent cap. We believed this 

approach would safeguard against ACOs 

trying to enroll healthy beneficiaries, 

who would likely be less expensive than 

their benchmark population, in order to 

benefit from having a limit on 

downward risk adjustment. 

Beneficiaries who have not otherwise 

opted-in who are assigned to the ACO 

based on the modified claims-based 

assignment methodology and those that 

voluntarily align would be subject to the 

proposed symmetrical 3 percent cap. 

We also noted that we do not apply caps 

to risk scores when we rebase an ACO’s 

historical benchmark, which allows the 

historical benchmark to reflect the 

current health status of the beneficiary 

populations assigned for the benchmark 

years. 

As indicated in the alternatives 

considered section of the Regulatory 

Impact Analysis at Section V.D. of the 

proposed rule, there is limited 

information presently available to 

model the behavioral response to an 

opt-in based assignment methodology, 

for example in terms of ACOs’ 

willingness to elect such an approach 

and beneficiaries’ willingness to opt-in. 

However, we noted that for some 

policies we can draw upon our initial 

experience with implementing 

voluntary alignment. As we stated in the 

August 2018 proposed rule (83 FR 

41882), we believe the approach to 

adjusting benchmarks to address an optin based assignment methodology that 

we described in the proposed rule, 

could address our concerns about the 

comparability of benchmark and 

performance year populations. We 

noted that if such a policy were to be 

finalized we would monitor the impact 

of these adjustments on ACOs’ 

benchmarks, and we would also 

monitor to determine ACOs’ and 

beneficiaries’ response to the opt-in 

based assignment participation option, 

characteristics of opt-in beneficiaries 

and the ACOs they are assigned to, and 

the cost and quality trends of opt-in 

beneficiaries to determine if further 

development to the program’s financial 

methodology would be necessary to 

account for this approach. 

We also anticipated that if we were to 

establish an opt-in based assignment 

methodology, we would need to 

establish program integrity requirements 

similar to the program integrity 

requirements with respect to voluntary 

alignment at § 425.402(e)(3). The ACO, 

ACO participants, ACO providers/ 

suppliers, ACO professionals, and other 

individuals or entities performing 

functions and services related to ACO 

activities would be prohibited from 

providing or offering gifts or other 

remuneration to Medicare beneficiaries 

as inducements to influence their 

decision to opt-in to assignment to the 

ACO. The ACO, ACO participants, ACO 

providers/suppliers, ACO professionals, 

and other individuals or entities 

performing functions and services 

related to ACO activities would also be 

prohibited from directly or indirectly, 

committing any act or omission, or 

adopting any policy that coerces or 

otherwise influences a Medicare 

beneficiary’s decision to opt-in to 

assignment to an ACO. Offering 

anything of value to a Medicare 

beneficiary as an inducement to 

influence the Medicare beneficiary’s 

decision to opt-in (or not opt-in) to 

assignment to the ACO would not be 

considered to have a reasonable 

connection to the medical care of the 

beneficiary, as required under the 

proposed provision at § 425.304(b)(1). 

Finally, we emphasized that, as is the 

case for all FFS beneficiaries currently 

assigned to an ACO on the basis of 

claims or voluntary alignment, under an 

opt-in based assignment methodology, 

beneficiaries who opt-in to assignment 

to an ACO would retain their right to 

seek care from any Medicare-enrolled 

provider or supplier of their choosing, 

including providers and suppliers 

outside the ACO. 

We solicited comment on whether we 

should offer ACOs an opportunity to 

voluntarily choose an alternative 

beneficiary assignment methodology 

under which an ACO could elect to 

have beneficiaries assigned to the ACO 

based on a beneficiary opt-in 

methodology supplemented by 

voluntary alignment and a modified 

claims-based assignment methodology. 

We welcomed comments as to whether 

it would be appropriate to establish a 

minimum threshold number of primary 

care services, such as seven primary 

care services, for purposes of using 

claims to assign beneficiaries to ACOs 

electing an opt-in based assignment 

methodology to enable these ACOs to 

focus their care coordination efforts on 

those beneficiaries who have either 

opted-in to assignment to or voluntarily 

aligned with the ACO, or who are 

receiving a high number of primary care 

services from ACO professionals, and 

may have complex conditions requiring 

a significant amount of care 

coordination. We sought comment on 

whether this minimum threshold for use 

in determining modified claims-based 

assignment should be set at a higher or 

lower. We also welcomed comments on 

an appropriate methodology for 

establishing and adjusting an ACO’s 

historical benchmark under an opt-in 

based assignment methodology. Further, 

we sought comment on how to treat optin beneficiaries when rebasing the 

historical benchmark for renewing 

ACOs. Additionally, we welcomed 

comments on any other considerations 

that might be relevant to adopting a 

methodology under which beneficiaries 

may opt-in to assignment to an ACO, 

including ways to minimize burden on 

beneficiaries, ACOs, ACO participants, 

and ACO providers/suppliers and avoid 

beneficiary confusion. 

In the August 2018 proposed rule (83 

FR 41882 and 41883), we explained that 

we envisioned that if we were to 

incorporate such an opt-in based 

assignment methodology, the election 

by ACOs would be entirely voluntary. 

ACOs that did not elect this beneficiary 

assignment option would continue to 

have their beneficiaries assigned using 

the existing claims-based assignment 

methodology with voluntary alignment 

under § 425.402. However, we also 

sought comment on whether we should 

discontinue the existing assignment 

methodology under subpart E and 

instead assign beneficiaries to all ACOs 

using a hybrid assignment methodology, 

which would incorporate opt-in based 

assignment and the modified claimsbased assignment methodology, as well 

as voluntary alignment. Under such an 

approach, the use of a modified 

benchmarking methodology could help 


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to ensure that an appropriate weight 

would be placed on the risk-adjusted 

expenditures of the ACO’s opt-in 

population as this population increases 

in size. 

Comment: A majority of commenters 

did not support the idea of an opt-in 

based assignment methodology. Many 

commenters preferred that CMS 

maintain the existing claims-based 

assignment methodology with voluntary 

alignment and not replace it with an 

opt-in or a hybrid assignment 

methodology. One commenter stated 

that, as described in the proposed rule, 

the beneficiary opt-in would move the 

program away from its fundamental 

purpose and that ACOs should focus on 

recruiting the right doctors and other 

health care providers to improve the 

health of their patients, not recruiting 

patients to opt-in to the ACO. 

Another commenter expressed 

concerns about the small number of 

beneficiaries that would opt into an 

ACO, stating that it is extremely 

unlikely that many beneficiaries who 

were not already assigned through 

claims or by designating a primary care 

provider would choose to opt into an 

ACO. One commenter believed that 

because there is no connection between 

opt-in enrollment and actual utilization 

of primary care services, an opt-in based 

assignment methodology is not the 

answer to stakeholder concerns about 

the current beneficiary assignment 

methodology or changes in the assigned 

beneficiary population from year to 

year. A few commenters expressed 

concerns that establishing an ACO’s 

benchmark under an opt-in 

methodology would become more 

complicated (due to opt-in beneficiaries 

potentially having different expected 

cost growth than the average 

beneficiary) and difficult (due to the 

5,000 minimum beneficiary threshold 

requirement). One commenter expressed 

concerns about the hybrid approach, 

stating that the seven-claim threshold is 

high enough to fundamentally change 

the Shared Savings Program, because 

the vast majority of potentially 

attributable ACO beneficiaries are not 

high-risk and, therefore, may never need 

seven primary care services in a given 

period of time. One commenter 

suggested that beneficiary assignment 

would fall dramatically under an opt-in 

assignment methodology and CMS 

would have to implement a much 

higher shared savings rate in order to 

support the large ACO investments that 

a beneficiary enrollment process would 

require. 

Several commenters were concerned 

that an opt-in assignment methodology 

could have significant operational 

impact on ACOs. One commenter stated 

that if the opt-in assignment 

methodology involved active outreach 

by providers, it would impose 

additional work streams and resource 

use on practices. Another commenter 

stated that although opt-in based 

enrollment is a valuable idea utilized by 

health plans, many ACOs do not have 

the infrastructure, including staff, to 

operate such a process. Another 

commenter stated that altering the 

assignment methodology to require 

beneficiaries to actively elect an ACO 

would create insurmountable 

administrative complexities and would 

be confusing to beneficiaries. One 

commenter stated that the process is 

likely to increase administrative 

burdens for ACOs, particularly those 

which are made up of independent 

physicians. The commenter 

recommended that, CMS should ensure 

that ACOs that do not have the 

resources available to actively pursue 

beneficiary opt-in are not inadvertently 

punished through additional changes to 

the claims-based assignment 

methodology. 

One commenter stated that 

beneficiary opt-in would effectively end 

physician participation in the Shared 

Savings Program and that physician 

practices, especially those that are 

unaffiliated with a health system or a 

health plan, do not have the resources 

needed to develop and implement the 

complex, continuous enrollment and 

reporting processes described in the 

proposed rule. The commenter believed 

that a requirement that beneficiaries 

opt-in to assignment to an ACO would 

significantly increase the costs of 

administering and running an ACO, 

skewing the cost-benefit analysis that 

many physician practices consider 

before joining the program. 

Response: We appreciate the 

commenters’ feedback regarding our 

considerations in relation to the 

possible development of an opt-in based 

assignment methodology. These 

comments will help to inform any 

future consideration of an opt-in based 

assignment methodology. 

Comment: Several commenters 

supported CMS in exploring options for 

developing a voluntary opt-in based 

assignment methodology to complement 

the existing assignment methodology 

under subpart E. These commenters 

suggested that such an approach may 

make the assignment methodology more 

patient-centered and further encourage 

and empower beneficiaries to become 

better engaged in their healthcare 

decisions. Some commenters were 

supportive of an opt-in based 

assignment methodology to support 

beneficiary engagement. These 

commenters provided a variety of 

reasons for their support: 

• To give beneficiaries greater agency in 

directing their care choices. Beneficiaries 

should know how to navigate the system in 

which they receive care, understand the sets 

of incentives that may drive health care 

decisions, and appreciate their own role 

within an ACO to ensure they have the best 

opportunity to attain their health goals. 

• To provide ACOs with the ability to 

‘‘market’’ their quality statistics for increased 

awareness of their network, similar to 

employee annual healthcare enrollment. 

• To help drive demand for coordinated, 

value-based care within Medicare FFS. 

• To supplement the current measures of 

quality and value under the Shared Savings 

Program. 

One commenter supported a hybrid 

approach with a modified claims-based 

assignment approach that focuses on the 

most complex patients, such as high risk 

patients or those receiving care for 

chronic conditions. Another commenter 

supported a hybrid approach that would 

enable beneficiaries to either voluntarily 

align with an ACO-participating 

physician or nurse practitioner of their 

choice or to opt-in to the ACO directly. 

The commenter stated that the hybrid 

approach could be extended universally 

to all ACOs by default provided claimsbased assignment continued to be based 

on the plurality of primary care services 

as opposed to a minimum threshold (for 

example, seven qualified primary care 

services) for those who do not opt-in. 

Another commenter suggested that CMS 

release additional information and data 

on the possible seven-primary care 

service threshold, as they are concerned 

that this threshold is too high and could 

have the unintended consequence of 

significantly lowering several ACOs’ 

assigned beneficiary counts. One 

commenter supported the potential optin based assignment methodology, as 

long as ACOs can voluntarily participate 

but believed that there should be 

geographic limits placed in assigning 

ACO beneficiaries. 

Response: We thank commenters for 

their comments. As we have indicated, 

we will share these comments with the 

Innovation Center for consideration as 

part of the development of any future 

opt-in based assignment methodology. 

Comment: Several commenters 

recommended that further research and 

testing is needed on the implications of 

an opt-in approach before implementing 

such an alternative assignment 

methodology in the Shared Savings 

Program. For example, several 

commenters suggested that CMS test 

alternative approaches in smaller 

models in a variety of markets to 

determine whether they meet 


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programmatic goals. One commenter 

recommended testing appropriate 

marketing opportunities for ACOs, 

analogous to those in Medicare 

Advantage. Another commenter 

suggested that any changes to the 

assignment methodology should be 

incremental and first be pilot-tested. 

One commenter recommended that, 

before offering a pure opt-in assignment 

methodology or a hybrid approach, CMS 

should continue to explore the potential 

burdens ACOs could encounter if 

beneficiaries are permitted to opt-in to 

assignment to an ACO and how the 

option would be explained to 

beneficiaries. 

Many commenters were concerned 

with the level of beneficiary outreach 

and education that would be necessary 

to implement an opt-in approach. One 

commenter stated that through yearly 

focus groups, they found that most 

beneficiaries are not familiar with ACOs 

and any policy that would allow 

beneficiaries to opt-in would require a 

great deal of beneficiary education and 

generate a large amount of beneficiary 

unease. One commenter suggested that 

if CMS were to move forward with an 

opt-in assignment approach, ACOs 

would need to provide beneficiaries 

with timely, easily accessible, and clear 

information about which providers are a 

part of the ACO, the ACO’s quality 

rating, the number and types of 

complaints filed against the ACO (if 

any), and any other information that 

will help beneficiaries make the best 

decision given their healthcare needs. 

The commenter also recommended that 

the information should be presented in 

a standardized format that is easy to 

understand as well as culturally and 

linguistically appropriate. One 

commenter suggested that CMS develop 

informational materials in a variety of 

modalities, formats, and languages to 

ensure Medicare beneficiaries have a 

clear understanding of the benefits and 

potential risks/compromises associated 

with ACOs. The commenter also 

recommended that CMS develop 

beneficiary informational materials and 

instructions that contain enough 

information for beneficiaries to provide 

informed consent and understand what 

their election means. Finally, one 

commenter suggested allowing 

beneficiaries to opt-in by telephone, 

mailing, and at the point of care in the 

physician’s office in addition to the 

current electronic method. 

Several commenters expressed 

concern that the opt-in for beneficiaries 

is redundant with voluntary alignment 

as beneficiaries already have the option 

to choose a primary clinician and thus 

opt-in to an ACO in which the clinician 

participates. One commenter expressed 

concern that the similarity between the 

opt-in option and the voluntary 

alignment option may cause confusion 

among beneficiaries. One commenter 

suggested CMS should continue to 

monitor the effectiveness of voluntary 

alignment before implementing an optin policy and that the benefits of 

beneficiary opt-in versus beneficiary 

voluntary alignment are not clear. Some 

commenters recommended that before 

moving towards the development of an 

opt-in methodology, CMS focus on 

making improvements to increase the 

use of the voluntary alignment option, 

which would serve as an incremental 

improvement in response to the broader 

challenge of educating Medicare 

beneficiaries about ACOs. One 

commenter suggested aligning an opt-in 

based assignment methodology with the 

voluntary alignment option so that the 

beneficiary can essentially ‘‘opt-in’’ to 

the ACO by selecting their primary 

clinician. 

Response: We appreciate the 

commenters’ feedback regarding our 

considerations in relation to the 

possible development of an opt-in based 

assignment methodology. We will 

consider the feedback provided by the 

commenters as part of any future 

consideration of an opt-in based 

assignment methodology. 

Comment: Some commenters 

compared an opt-in based assignment 

methodology to Medicare Advantage. 

One commenter stated that the opt-in 

based assignment methodology 

discussed in the proposed rule seems 

contrary to the goals of beneficiary 

engagement and the beneficiary freedom 

of choice offered under FFS Medicare 

and would be significantly similar to 

managed care plans, which could create 

confusion between the Shared Savings 

Program and Medicare Advantage. 

Another commenter raised concerns 

based on its current Medicare 

Advantage experience, which strongly 

suggests that beneficiaries do not 

actively make plan choices for 

themselves. This commenter stated that 

adding a requirement that beneficiaries 

choose to be part of an ACO does not 

seem like an assignment method that 

will result in the long-term stabilization 

and success of the program, while 

creating administrative burden and 

confusion for beneficiaries. One 

commenter stated that the shared 

savings economic model simply does 

not support the type of investments that 

Medicare Advantage plans make in 

enrolling beneficiaries. 

A commenter stated that one primary 

advantage of ACOs over Medicare 

Advantage plans is their lower 

administrative costs. The commenter 

contends that once an opt-in based 

assignment methodology is 

implemented, ACO administrative costs 

would increase. Another commenter 

stated that beneficiaries and providers 

already require constant reminders of 

the differences between a Shared 

Savings Program ACO and a Medicare 

Advantage Plan and an opt-in based 

assignment methodology into the 

Shared Savings Program would provide 

further confusion. One commenter 

believed that, unlike in Medicare 

Advantage, beneficiaries would not 

have a clear financial incentive to enroll 

in an ACO because doing so would have 

no effect on their premium or costsharing arrangements. The commenter 

further contends that Medicare FFS 

beneficiaries often place a high value on 

their freedom of choice and may be 

concerned that enrollment in an ACO 

would restrict them to a particular 

network. Another commenter expressed 

concerns that an opt-in methodology for 

ACOs could overlap and interfere with 

Medicare Advantage enrollment and 

expressed concern that there would not 

be appropriate regulations in place, 

such as those that apply in Medicare 

Advantage, and as a result providers 

could ‘‘cherry-pick’’ patients who are 

more likely to help performance or 

‘‘lemon-drop’’ patients who may be 

more costly. 

Response: We thank the commenters 

for their feedback and will share these 

comments with the Innovation Center to 

further inform the development of a 

model testing an opt-in based 

assignment methodology. 

Final Action: We are not finalizing an 

opt-in assignment methodology for the 

Shared Savings Program at this time; 

however, we will work with the 

Innovation Center to develop a model to 

determine the viability of an opt-in 

assignment methodology and may 

consider adopting such an approach in 

the Shared Savings Program through 

future rulemaking. 

D. Benchmarking Methodology 

Refinements 

1. Background 

An ACO’s historical benchmark is 

calculated based on expenditures for 

beneficiaries that would have been 

assigned to the ACO in each of the 3 

calendar years prior to the start of the 

agreement period (§§ 425.602(a), 

425.603(b) and (c)). For ACOs that have 

continued their participation for a 

second or subsequent agreement period, 

the benchmark years for their current 

agreement period are the 3 calendar 


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years of their previous agreement 

period. 

There are currently differences 

between the methodology used to 

establish the ACO’s first agreement 

period historical benchmark (§ 425.602) 

and the methodology for establishing 

the ACO’s rebased historical benchmark 

in its second or subsequent agreement 

period (§ 425.603). We refer readers to 

discussions of the benchmark 

calculations in earlier rulemaking for 

details on the development of the 

current policies (see November 2011 

final rule, 76 FR 67909 through 67927; 

June 2015 final rule, 80 FR 32785 

through 32796; June 2016 final rule, 81 

FR 37953 through 37991). For example, 

in resetting (or rebasing) an ACO’s 

historical benchmark, we replace the 

national trend factor (used in in the first 

agreement period methodology) with 

regional trend factors, and we use a 

phased approach to adjust the rebased 

benchmark to reflect a percentage of the 

difference between the ACO’s historical 

expenditures and FFS expenditures in 

the ACO’s regional service area. This 

rebasing methodology incorporating 

factors based on regional FFS 

expenditures was finalized in the June 

2016 final rule and is used to establish 

the benchmark for ACOs beginning a 

second or subsequent agreement period 

in 2017 and later years. An interim 

approach was established in the June 

2015 final rule under which we adjusted 

the rebased benchmarks for ACOs that 

entered a second agreement period 

beginning in 2016 to account for savings 

generated in their first agreement period 

(§ 425.603(b)(2)). 

In developing the June 2016 final rule, 

we considered the weight that should be 

applied in calculating the regional 

adjustment to an ACO’s historical 

expenditures. We finalized a phased 

approach to transition to a higher 

weight in calculating the regional 

adjustment, where we determine the 

weight used in the calculation 

depending on whether the ACO is found 

to have lower or higher spending 

compared to its regional service area 

(§ 425.603(c)(9)). For ACOs that have 

higher spending compared to their 

regional service area, the weight placed 

on the regional adjustment is reduced to 

25 percent (compared to 35 percent) in 

the first agreement period in which the 

regional adjustment is applied, and 50 

percent (compared to 70 percent) in the 

second agreement period in which the 

adjustment is applied. Ultimately a 

weight of 70 percent will be applied in 

calculating the regional adjustment for 

all ACOs beginning no later than the 

third agreement period in which the 

ACO’s benchmark is rebased using this 

methodology, unless the Secretary 

determines that a lower weight should 

be applied. 

The annual update to the ACO’s 

historical benchmark also differs for 

ACOs in their first versus second or 

subsequent agreement periods. In an 

ACO’s first agreement period, the 

benchmark is updated each performance 

year based solely on the absolute 

amount of projected growth in national 

FFS spending for assignable 

beneficiaries (§ 425.602(b)). Although 

section 1899(d)(1)(B)(ii) of the Act 

requires us to update the benchmark 

using the projected absolute amount of 

growth in national per capita 

expenditures for Medicare Parts A and 

B services, we used our authority under 

section 1899(i)(3) of the Act to adopt an 

alternate policy under which we 

calculate the national update based on 

assignable beneficiaries, a subset of the 

Medicare FFS population as defined 

under § 425.20. For ACOs in a second or 

subsequent agreement period (beginning 

in 2017 and later years), we update the 

rebased benchmark annually to account 

for changes in FFS spending for 

assignable beneficiaries in the ACO’s 

regional service area (§ 425.603(d)). We 

also used our authority under section 

1899(i)(3) of the Act to adopt this 

alternate update factor based on regional 

FFS expenditures. 

For all ACOs, at the time of 

reconciliation for each performance 

year, we further adjust the benchmark to 

account for changes in the health status 

and demographic factors of the ACO’s 

performance year assigned beneficiary 

population (§§ 425.602(a)(9), 

425.603(c)(10)). We use separate 

methodologies to risk-adjust the 

benchmark for populations of newly 

assigned and continuously assigned 

beneficiaries. For newly assigned 

beneficiaries, we use CMS–HCC 

prospective risk scores to adjust for 

changes in severity and case mix. We 

use demographic factors to adjust for 

changes in the health status of 

beneficiaries continuously assigned to 

the ACO. However, if the CMS–HCC 

prospective risk scores for the ACO’s 

continuously assigned population 

decline, CMS will adjust the benchmark 

to reflect changes in severity and case 

mix for this population using the lower 

CMS–HCC prospective risk score. CMS– 

HCC prospective risk scores are based 

on diagnoses from the prior calendar 

year, as well as demographic factors. 

In section II.D. of the August 2018 

proposed rule (83 FR 41883) we 

proposed several changes to the 

program’s benchmarking methodology. 

We proposed to replace the current risk 

adjustment methodology that separately 

considers newly and continuously 

assigned beneficiaries with an approach 

that uses changes in CMS–HCC 

prospective risk scores for all 

beneficiaries, subject to a symmetrical 

cap. We also proposed to incorporate 

regional expenditures into benchmarks 

starting in an ACO’s first agreement 

period, to modify the regional 

adjustment to the historical benchmark 

by revising the schedule of weights that 

are applied to the adjustment and 

imposing a cap on the dollar amount of 

the adjustment, and to use a blend of 

regional and national trend factors to 

trend and update the benchmark. These 

proposals are described in more detail 

in sections II.D.2 and II.D.3 of this final 

rule. 

Comment: A few commenters 

provided general support for the 

proposed changes to the program’s 

benchmarking methodologies, with one 

commenter noting they could lead to 

more accurate determinations of savings 

and losses. This commenter also 

believed that the benchmarking 

proposals would help to encourage high 

performing ACOs to remain in the 

program and not be forced out due to 

inaccurate and unfair benchmarks. 

However, the commenter did not 

specify which elements of the current 

approach they believe to be inaccurate 

or unfair. 

Response: We appreciate the general 

support offered for the proposed 

modifications to the benchmarking 

methodologies. We believe our 

proposals to allow for more complete 

upward risk adjustment and to 

incorporate regional factors into 

benchmarks during an ACO’s first 

agreement period, which we are 

finalizing in this final rule, will help to 

improve benchmark accuracy by making 

an ACO’s historical benchmark more 

reflective of the health status of its 

assigned beneficiary population and the 

local circumstances the ACO faces. 

Comment: A few commenters called 

for improving the transparency and 

predictability and reducing the 

complexity of the program’s 

benchmarking methodology. One 

commenter stated that greater 

transparency would allow ACOs to 

perform enhanced analytics and to 

better forecast their future performance. 

Several other commenters urged CMS to 

provide ACOs with additional data, 

including the data used by the agency 

to develop benchmarks. One commenter 

explained that this would allow ACOs 

to replicate CMS’ methodology and 

improve their understanding of their 

own benchmarks. This commenter 

noted further that the current lack of 

clarity regarding the determination of 


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the benchmark is a serious financial risk 

that may deter continued participation. 

Other commenters generally called for 

greater alignment between the Shared 

Savings Program and Medicare 

Advantage in terms of spending targets 

or rates of growth in benchmarks, noting 

this would add predictability, reduce 

complexity, and create a more level 

playing field with respect to spending 

targets for the health care providers in 

a region. Another commenter suggested 

that staff in CMS regional offices 

representing the Shared Savings 

Program develop more expertise in the 

benchmarking methodology so that they 

could provide ACO leaders with one-onone technical assistance in the place of 

more generalized webinars. 

Response: We believe that the policies 

we are finalizing in this rule, including 

simplifying the risk adjustment 

methodology and adopting a more 

consistent benchmarking methodology 

across agreement periods, will promote 

both transparency and predictability. 

We appreciate commenters’ input on 

how to further improve transparency 

and will consider these suggestions as 

we develop future education and 

outreach plans. We also note that we 

will continue to make data available, 

such as the county expenditure and 

county assigned beneficiary public use 

files and ACO public use files 

containing ACO-level financial and 

quality results for each performance 

year, which will allow stakeholders to 

perform their own analyses. We also 

appreciate commenters’ interest in 

fostering greater alignment between the 

Shared Savings Program and Medicare 

Advantage. We will continue to explore 

opportunities to align the requirements 

of the two programs. 

Comment: One commenter requested 

that CMS refrain from making any 

changes to the benchmarking or 

financial performance methodology 

during an existing agreement period. 

Further, they requested that CMS 

provide ACOs with sufficient data to 

assess the impact of such changes on 

their performance and allow them to 

elect whether to adopt the change 

immediately or defer to the next 

agreement period. 

Response: We would like to note that 

the changes to the program’s 

benchmarking methodology and to the 

financial risk models being finalized in 

this rule will be effective for new 

agreement periods beginning on July 1, 

2019, and in subsequent years. ACOs 

that start a 12-month performance year 

on January 1, 2019, will have the option 

to complete the remaining years of their 

agreement period under their current 

track and subject to their existing 

benchmarking methodology. However, 

with the elimination of the required 

‘‘sit-out period’’ being finalized in this 

rule (see section II.A.5.c.(4).(b) of this 

final rule), ACOs that wish to transition 

to the new policies sooner may do so by 

terminating their current participation 

agreement and immediately beginning a 

new agreement period. We believe that 

this approach will provide ACOs that 

are partway through an agreement 

period with more flexibility around the 

speed at which they transition to the 

new policies. As noted in the response 

to the previous comment, we will 

continue to make public use data 

available that can be used by ACOs to 

inform their decision-making. 

2. Risk Adjustment Methodology for 

Adjusting Historical Benchmark Each 

Performance Year 

a. Background 

When establishing the historical 

benchmark, we use the CMS–HCC 

prospective risk adjustment model to 

calculate beneficiary risk scores to 

adjust for changes in the health status of 

the population assigned to the ACO. 

The effect of this policy is to apply full 

CMS–HCC risk adjustment to account 

for changes in case mix in the assigned 

beneficiary population between the first 

and third benchmark years and between 

the second and third benchmark years. 

For consistency, this approach is also 

used in adjusting the historical 

benchmark to account for changes to the 

ACO’s certified ACO participant list for 

performance years within an agreement 

period and when resetting the ACO’s 

historical benchmark for its second or 

subsequent agreement period. See 

§§ 425.602(a)(3) and (8), 425.603(c)(3) 

and (8); see also Medicare Shared 

Savings Program, Shared Savings and 

Losses and Assignment Methodology 

Specifications (May 2018, version 6) 

available at https://www.cms.gov/ 

Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/ 

program-guidance-andspecifications.html. Further, we use full 

CMS–HCC risk adjustment when risk 

adjusting county level FFS expenditures 

and to account for differences between 

the health status of the ACO’s assigned 

population and the assignable 

beneficiary population in the ACO’s 

regional service area as part of the 

methodology for adjusting the ACO’s 

rebased historical benchmark to reflect 

regional FFS expenditures in the ACO’s 

regional service area (see 

§ 425.603(c)(9)(i)(C), (e)). 

To account for changes in beneficiary 

health status between the historical 

benchmark period and the performance 

year, we perform risk adjustment using 

a methodology that differentiates 

between newly assigned and 

continuously assigned beneficiaries, as 

defined in § 425.20. As specified under 

§§ 425.604(a), 425.606(a), and 

425.610(a), we use CMS–HCC 

prospective risk scores to account for 

changes in severity and case mix for 

newly assigned beneficiaries between 

the third benchmark year (BY3) and the 

performance year. We use demographic 

factors to adjust for these changes in 

continuously assigned beneficiaries. 

However, if the CMS–HCC prospective 

risk scores for the continuously assigned 

population are lower in the performance 

year, we use the lower CMS–HCC 

prospective risk scores to adjust for 

changes in severity and case mix in this 

population. As we described in earlier 

rulemaking, this approach provides a 

balance between accounting for actual 

changes in the health status of an ACO’s 

population while limiting the risk due 

to coding intensity shifts—that is, efforts 

by ACOs, ACO participants, and/or 

ACO providers/suppliers to find and 

report additional beneficiary diagnoses 

so as to increase risk scores—that would 

artificially inflate ACO benchmarks (see 

for example, 81 FR 38008). 

As described in the Shared Savings 

and Losses and Assignment 

Methodology specifications referenced 

previously in this section, all CMS–HCC 

and demographic beneficiary risk scores 

used in financial calculations for the 

Shared Savings Program are 

renormalized to ensure that the mean 

risk score among assignable 

beneficiaries in the national FFS 

population is equal to one. 

Renormalization helps to ensure 

consistency in risk scores from year to 

year, given changes made to the 

underlying risk score models. All risk 

adjustment calculations for the Shared 

Savings Program, including risk score 

renormalization, are performed 

separately for each Medicare enrollment 

type (ESRD, disabled, aged/dual eligible 

for Medicare and Medicaid, and aged/ 

non-dual eligible for Medicare and 

Medicaid). 

In practice, to risk adjust expenditures 

from one year to another, we multiply 

the expenditures that are to be adjusted 

by the quotient of two renormalized risk 

scores, known as the risk ratio. For 

example, to risk adjust the expenditures 

for an ACO’s assigned beneficiary 

population from the first benchmark 

year to the third, we multiply 

benchmark year 1 (BY1) expenditures, 

by a risk ratio equal to the mean 

renormalized risk score among the 

ACO’s assigned beneficiaries in 

benchmark year 3 (BY3) divided by the 


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mean renormalized risk score among the 

ACO’s assigned beneficiaries in BY1. 

One percent growth in renormalized 

risk scores between 2 years would be 

expressed by a risk ratio of 1.010. This 

ratio reflects growth in risk for the 

ACO’s assigned beneficiary population 

relative to that of the national assignable 

population. 

ACOs and other program stakeholders 

have expressed various concerns about 

the methodology for risk adjusting an 

ACO’s benchmark each performance 

year, as described in comments on 

previous rulemaking (see 76 FR 67916 

through 67919, 80 FR 32777 through 

32778, 81 FR 37962 through 37968). We 

refer readers to these earlier rules for 

more detailed discussions of the issues 

raised by stakeholders. A common 

concern raised is that the current risk 

adjustment methodology does not 

adequately adjust for changes in health 

status among continuously assigned 

beneficiaries between the benchmark 

and performance years. Commenters 

have argued that the lack of upward 

CMS–HCC risk adjustment in response 

to increased patient acuity makes it 

harder for ACOs to realize savings and 

serves as a barrier to more ACOs taking 

on performance-based risk. 

Stakeholders have also raised 

concerns that the current methodology, 

under which risk adjustment is 

performed separately for newly and 

continuously assigned beneficiaries, 

creates uncertainty around benchmarks. 

One commenter in prior rulemaking 

described the policy as rendering the 

role of risk scores ‘‘opaque’’, making it 

difficult for ACOs to anticipate how risk 

scores may affect their financial 

performance (81 FR 37968). We have 

attempted to increase transparency 

around the program’s risk adjustment 

process by providing beneficiary-level 

risk score information in quarterly and 

annual reports, as well as by providing 

detailed explanations of the risk 

adjustment calculations to ACOs 

through webinars. However, despite 

these efforts, concerns about 

transparency remain, as evidenced by 

the many requests for technical 

assistance from ACOs related to risk 

adjustment. 

b. Proposed Revisions 

We appreciate the concerns regarding 

our current risk adjustment 

methodology raised by stakeholders, 

who have indicated that the current 

approach may not adequately recognize 

negative changes in health status that 

occur at the individual beneficiary level, 

particularly among continuously 

assigned beneficiaries who have 

experienced an acute event, such as a 

heart attack, stroke, or hip fracture, 

between the third benchmark year and 

the applicable performance year. We 

recognize that such acute events, which 

almost always require a hospitalization, 

are likely to have an upward impact on 

CMS–HCC risk scores that is not 

attributable to provider coding 

initiatives. 

At the same time, we remain 

concerned that CMS–HCC risk scores, in 

general, are susceptible to increased 

diagnostic coding efforts. As noted 

previously, we employ full CMS–HCC 

risk adjustment when establishing an 

ACO’s historical benchmark for its first 

agreement period, when adjusting the 

benchmark to account for participant 

list changes within an agreement period, 

and when resetting the benchmark for a 

second or subsequent agreement period, 

as we believe that doing so improves the 

accuracy of the benchmark. We have 

observed evidence of a modest increase 

in diagnostic coding completeness in 

the benchmark period for ACOs in their 

second agreement period (rebased 

ACOs). Simulation results suggest that 

rebased ACOs were more likely to 

benefit from full CMS–HCC risk 

adjustment in the benchmark period 

than were ACOs in a first agreement 

period. For rebased ACOs, the 

benchmark period coincides with their 

first agreement period in the Shared 

Savings Program, a time when these 

ACOs and their ACO participants and 

ACO providers/suppliers had an 

incentive to engage in increased coding 

so as to maximize their performance 

year risk scores, as well as their rebased 

benchmark in the next agreement 

period. ACOs in a first agreement period 

would have had less incentive to 

encourage their ACO participants and 

ACO providers/suppliers to engage in 

coding initiatives during the benchmark 

period as it took place before they 

entered the program. We recognize, 

however, that increased coding by ACO 

participants and ACO providers/ 

suppliers may also reflect efforts to 

facilitate care coordination, quality 

improvement, and population 

management activities which require 

more complete clinical information at 

the point of care. 

We also acknowledge that our current 

approach to risk adjustment for the 

performance year makes it difficult for 

ACOs to predict how their financial 

performance may be affected by risk 

adjustment. The current approach 

involves multiple steps including 

identifying newly and continuously 

assigned beneficiaries for each ACO for 

both the performance year and BY3, 

computing mean CMS–HCC risk scores 

for both populations and mean 

demographic risk scores for the 

continuously assigned beneficiary 

population by Medicare enrollment 

type, conducting a test to determine 

whether an ACO will receive CMS–HCC 

or demographic risk adjustment for its 

continuously assigned population, and 

determining and applying the risk ratios 

used to adjust benchmark expenditures 

for the performance year. Although we 

have made efforts to explain these steps 

in detail through our program 

specifications, report documentation, 

and webinars, and have made 

beneficiary-level risk score data 

available, we frequently receive requests 

for technical assistance in this area 

suggesting that the methodology is still 

not entirely clear to ACOs. 

To balance these competing concerns, 

during the development of the proposed 

rule we considered policies that would 

allow for some upward growth in CMS– 

HCC risk scores between the benchmark 

period and the performance year, while 

still limiting the impact of ACO coding 

initiatives, and also provide greater 

clarity for ACOs than the current 

methodology. In contemplating 

alternative policies, we also considered 

lessons learned from other CMS 

initiatives, including models tested by 

the Innovation Center. Finally, as we 

wished to encourage ACOs to take on 

higher levels of risk, we considered the 

importance of adopting a balanced risk 

adjustment methodology that would 

provide ACOs with some protection 

against decreases in risk scores. 

In the August 2018 proposed rule (83 

FR 41885), we explained that our 

preferred approach would be to 

eliminate the distinction between newly 

and continuously assigned beneficiaries. 

We would use full CMS–HCC risk 

adjustment for all assigned beneficiaries 

between the benchmark period and the 

performance year, subject to a 

symmetrical cap of positive or negative 

3 percent for the agreement period, 

which would apply such that the 

adjustment between BY3 and any 

performance year in the agreement 

period would never be more than 3 

percent in either direction. In other 

words, the risk ratios applied to 

historical benchmark expenditures to 

capture changes in health status 

between BY3 and the performance year 

would never fall below 0.970 nor be 

higher than 1.030 for any performance 

year over the course of the agreement 

period. As is the case under the current 

policy, risk adjustment calculations 

would still be carried out separately for 

each of the four Medicare enrollment 

types (ESRD, disabled, aged/dual 

eligible, aged/non-dual eligible) and 

CMS–HCC prospective risk scores for 


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each enrollment type would still be 

renormalized to the national assignable 

beneficiary population for that 

enrollment type before the cap is 

applied. Table 12 provides an 

illustrative example of how the cap 

would be applied to the risk ratio used 

to adjust historical benchmark 

expenditures to reflect changes in health 

status between BY3 and the 

performance year, for any performance 

year in the agreement period: 

In the example, the decrease in the 

disabled risk score and the increase in 

the aged/dual risk score would both be 

subject to the positive or negative 3 

percent cap. Changes in the ESRD and 

aged/non-dual risk scores would not be 

affected by the cap; the ACO would 

receive full upward and downward 

adjustment, respectively, for these 

enrollment types. 

As we explained in the August 2018 

proposed rule, this approach would 

provide full CMS–HCC risk adjustment 

for ACOs with changes in CMS–HCC 

risk below the cap, and a partial 

adjustment for ACOs with changes in 

CMS–HCC risk above the cap. Initial 

modeling suggested that among the 239 

ACOs that received demographic risk 

adjustment for their continuously 

assigned population under the current 

policy in PY 2016 (55 percent of the 432 

total ACOs reconciled), around 86 

percent would have received a larger 

positive adjustment to their benchmark 

had this policy been in place. Therefore, 

as we stated in the August 2018 

proposed rule, we believed this 

approach would more consistently 

account for worsening health status of 

beneficiaries compared to the current 

policy. This could reduce the incentive 

for ACOs to avoid complex patients and 

potentially lead more ACOs to accept 

higher levels of performance-based risk. 

However, because of the cap on the 

increase in CMS–HCC risk, we believed 

that this policy would continue to 

provide protection to the Medicare 

Trust Funds against unwarranted 

increases in CMS–HCC prospective risk 

scores that are due to increased coding 

intensity, by limiting the impact of such 

increases on ACO benchmarks. 

By instituting a symmetrical cap, this 

approach would also limit large 

decreases in CMS–HCC prospective risk 

scores across all assigned beneficiaries. 

We believed that such an approach 

would provide ACOs with a greater 

incentive to assume performance-based 

risk than the current methodology, 

which provides ACOs with no 

protection from risk score decreases. 

Among the 193 ACOs that received 

CMS–HCC risk adjustment under the 

current policy for their continuously 

assigned population in PY 2016, 69 

percent would have received a smaller 

negative adjustment with the 

symmetrical 3 percent cap. We also 

believed that this approach, which 

mirrors one of the risk adjustment 

methodologies tested in the Next 

Generation ACO Model, would have an 

advantage over the current Shared 

Savings Program policy in that it would 

be more straightforward, making it 

easier for ACOs to understand and 

determine the impact of risk adjustment 

on their benchmark. ACOs would be 

subject to risk adjustment within a 

clearly defined range, allowing them to 

more easily predict their performance. 

Our proposed choice of 3 percent as 

the preferred level for the symmetrical 

cap was influenced by program 

experience. A review of CMS–HCC risk 

score trends among Shared Savings 

Program ACOs found that a 3 percent 

cap on changes in aged/non-dual CMS– 

HCC risk scores (the enrollment 

category that represents the majority of 

assigned beneficiaries for most ACOs) 

would limit positive risk adjustment for 

less than 30 percent of ACOs, even 

when there is a 5-year lapse between 

BY3 and the performance year, which 

would be the case in the final year of a 

5 year agreement period under the 

proposal discussed in section II.A.2. of 

this final rule (or a 6-year lapse for the 

final performance year of the agreement 

period for ACOs that start a new 

agreement period on July 1, 2019, under 

the proposal discussed in section II.A.2. 

of this final rule). A 3-percent 

symmetrical cap was also advocated by 

some commenters on the 2016 proposed 

rule, who encouraged the Shared 

Savings Program to adopt a risk 

adjustment model similar to the one 

being used by the Next Generation ACO 

Model (see 81 FR 37968). Although we 

stated that we believed that a 3 percent 

cap on changes in CMS–HCC risk scores 

would be reasonable and appropriate, 

we also considered alternate levels for a 

cap or allowing full CMS–HCC risk 

adjustment with no cap at all. However, 

we were concerned that a lower cap 

would not offer enough ACOs 

meaningfully greater protection against 

health status changes relative to the 

current approach. At the same time, we 

were concerned that adopting a higher 

cap, or allowing for full, uncapped risk 

adjustment would not provide sufficient 

protection against potential coding 

initiatives. 

After consideration of these 

alternatives, we proposed to change the 

program’s risk adjustment methodology 

to use CMS–HCC prospective risk scores 

to adjust the historical benchmark for 

changes in severity and case mix for all 

assigned beneficiaries, subject to a 

symmetrical cap of positive or negative 

3 percent for the agreement period for 

agreement periods beginning on July 1, 

2019, and in subsequent years. The cap 

would reflect the maximum change in 

risk scores allowed in an agreement 

period between BY3 and any 


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performance year in the agreement 

period. For ACOs participating in a 5 

year and 6-month agreement period 

beginning on July 1, 2019, as discussed 

in section II.A.7. of this final rule, the 

cap would represent the maximum 

change in risk scores for the agreement 

period between BY3 and CY 2019 in the 

context of determining financial 

performance for the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, as well as 

the maximum change in risk scores 

between BY3 and any of the subsequent 

five performance years of the agreement 

period. We would apply this approach 

to ACOs participating under the 

proposed BASIC track, as reflected in 

the proposed new section of the 

regulations at § 425.605, and to ACOs 

participating under the proposed 

ENHANCED track, as reflected in the 

proposed modifications to § 425.610. 

We sought comment on this proposal, 

including the level of the cap. 

Comment: Many of the stakeholders 

that commented on the proposed 

changes to the risk adjustment 

methodology applauded the proposed 

discontinuation of the current 

methodology, which distinguishes 

between newly and continuously 

assigned beneficiaries, and generally 

supported CMS’ efforts to better 

recognize changes in beneficiary risk 

scores during an agreement period. A 

few commenters noted that the current 

policy creates unnecessary confusion 

and complexity, while another 

commenter believed that not allowing 

for upward CMS–HCC adjustment for all 

beneficiaries was unreasonable. Another 

commenter described the proposed 

approach as being simpler than the 

current methodology while being more 

protective of changes in patient mix. 

Unlike other commenters, MedPAC 

encouraged CMS to continue to 

distinguish between newly and 

continuously assigned beneficiaries, but 

to modify the current methodology to 

adjust benchmarks based on only 

demographic factors for continuously 

assigned beneficiaries and based on 

CMS–HCC scores for newly assigned 

beneficiaries. Under this approach we 

would no longer use CMS–HCC risk 

scores to perform downward 

adjustments for continuously assigned 

beneficiaries, which would remove the 

asymmetry of the current methodology. 

MedPAC expressed concern that the 

proposed methodology would allow 

ACO benchmarks to increase due to 

either more aggressive coding efforts or 

the worsening health status of assigned 

beneficiaries and that an ACO would 

potentially be penalized when patients’ 

health is maintained or better managed, 

which they noted is a key objective of 

the program. They believe that their 

recommended alternative would 

improve the alignment of ACO financial 

incentives with beneficiary health 

status, allowing ACOs to benefit 

financially when they do a good job of 

maintaining patient’s health. 

Response: We appreciate commenters’ 

support of our proposal to eliminate the 

current methodology used to risk adjust 

historical benchmark expenditures and 

our desire to better recognize changes in 

beneficiary health status while still 

protecting the Medicare Trust Funds 

from increases in coding intensity. We 

agree with commenters that the 

elimination of the current methodology, 

which distinguishes between newly and 

continuously assigned beneficiaries, 

should provide a less complex and more 

transparent risk adjustment approach. 

We believe that MedPAC’s suggested 

approach would not accomplish one of 

the goals of our proposed modification 

to the risk adjustment methodology, 

which was to provide better recognition 

for changes in beneficiary health status 

between the benchmark period and the 

performance year. We are also 

concerned that by limiting downward 

adjustments in risk scores for 

continuously assigned beneficiaries to 

the changes in demographic risk scores 

for this population, MedPAC’s 

recommended methodology could 

create windfall gains for an ACO if 

average CMS–HCC risk scores for the 

ACO’s continuously assigned 

beneficiaries decrease more (or increase 

less) between the benchmark period and 

the performance year than the national 

average. 

Comment: Several commenters 

appeared to support the proposed 

symmetrical 3 percent cap on changes 

in risk scores, with one requesting that 

it be allowed to go into effect for 

performance years beginning on January 

1, 2019. They suggested that the 

proposed change would reduce the 

uncertainty regarding the impact of risk 

adjustment on ACO financial results 

due to the 6-month agreement period 

extension for some ACOs. Other 

commenters who supported this 

proposal requested that CMS provide 

greater transparency regarding the 

expected impacts of the proposed cap 

and encouraged CMS to monitor the cap 

to ensure that it is providing proper 

balance between CMS’s concerns about 

increases in coding intensity and the 

desire for health care providers to 

accurately capture beneficiary health 

status. However, most of the 

commenters who offered general 

support for the proposed changes to the 

risk adjustment methodology, as well as 

other commenters, opposed the 

proposed symmetrical 3 percent cap. 

Several commenters, including 

commenters representing academic and 

research institutions, physician 

associations, health care alliances and 

task forces, and individual ACOs, 

expressed concern that that the 

proposed symmetrical cap on risk score 

changes may have unintended 

consequences by introducing incentives 

for ACO to engage in favorable risk 

selection; that is, to avoid sicker 

beneficiaries or to seek out healthier 

beneficiaries. A few commenters 

recommended that, at a minimum, CMS 

eliminate the proposed downside cap. 

Many commenters expressed 

concerns that the proposed cap would 

not be sufficient to adequately capture 

health status changes over a 5-year 

agreement period. A number of 

commenters representing the same 

organization stated that the proposed 

cap would not protect health care 

providers who serve the most medically 

complicated patients and would make 

shared savings unattainable by 

continuing to incorrectly capture the 

health status of beneficiaries. Several 

other commenters described the 3 

percent cap as arbitrary and insufficient 

when applied across a five-year 

agreement period. Others called for 

increasing the cap on upward 

adjustments over the length of the 

agreement period in order to account for 

the aging of the population and natural 

progression of disease over the 

agreement period and to best capture 

acuity increases in years farthest from 

the benchmark. Another commenter 

noted that an upward cap on risk 

adjustment would limit the ability to 

capture random changes in patient mix 

which, in turn, would reduce the 

predictability of an ACO’s financial 

performance and make the program less 

attractive. Another commenter 

suggested that artificially capping risk 

scores denies ACOs access to 

information that provides an accurate 

picture of patient health status. One 

commenter pointed out that a 

symmetrical 3 percent cap would leave 

both ACOs and CMS vulnerable to 

significant changes in population 

demographics. Another commenter 

liked that the proposed cap was more 

consistent with policies used in the 

Next Generation ACO Model but was 

concerned that, when applied over a 5- 

year agreement period, the 3 percent cap 

would penalize ACOs that treat high 

risk patients or patients whose burden 

of illness increases over time. 

While the perceived inability of the 

proposed cap to capture health status 

changes over a five year agreement 


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period was the most commonly cited 

concern among commenters, many 

commenters also had concerns about the 

potential impact of the proposed cap on 

upward benchmark adjustments for 

ACOs whose providers are new to the 

concept of risk adjustment, ACOs that 

are engaged in efforts to improve their 

diagnostic coding to better reflect the 

acuity of their patients, or ACOs that are 

working to manage care for complex 

patients who were previously receiving 

only episodic services. One commenter 

expressed the belief that limiting 

increases in CMS–HCC risk scores 

punishes ACOs that are attempting to 

accurately capture the conditions of 

their patients and suggested that the 

proposed cap would lead to greater 

restrictions on changes in risk scores 

than the current policy. Other 

commenters had similar concerns, 

indicating that the proposed upward 

limit on risk score growth would 

discourage efforts by ACOs to improve 

diagnostic coding. One commenter 

stated that accurate risk adjustment 

based on patients’ complete CMS–HCC) 

classification was one of the key 

components to organizational success in 

a Shared Savings Program ACO and 

expressed the belief that the proposed 

cap would not provide sufficient 

incentives for health care providers to 

make investments in improving their 

documentation and coding practices. 

Another commenter noted that as 

patients receive better, more 

coordinated care, their risk profile will 

also increase and that health care 

providers should be encouraged to 

continue to care for complex patients 

who could benefit from comprehensive 

care management. 

One commenter did not offer a 

suggestion for a specific alternative to 

the proposed symmetrical 3 percent cap 

but requested that CMS provide the 

modeling upon which it based its 

proposal so that ACOs can analyze the 

same data that CMS used and provide 

recommendations for a higher cap that 

would meet the needs of both CMS and 

ACOs. However, many other 

commenters offered a variety of 

alternatives to the proposed cap. The 

most common recommendation was for 

a symmetrical 5 percent cap over the 

agreement period. One commenter 

stated that this cap would be more 

accurate over a 5-year term. Another 

commenter justified this higher cap for 

the agreement period by noting that 

ACOs may experience changes in the 

population that affect the risk score by 

more than 1 percent per year. Another 

suggestion offered by several 

commenters was to allow risk scores to 

change by 3 percent annually over the 

course of the agreement period, such 

that an ACO’s risk score would be 

allowed to change by 3 percent in the 

first year of the agreement period, by an 

additional 3 percent in the second year, 

and so on. One commenter suggested 

that a 3 percent annual cap would 

preserve stability and better reflect the 

clinical complexity and patient 

characteristics of an ACO’s population. 

Commenters also suggested other 

alternatives including fixed caps for the 

agreement period above 5 percent, caps 

that increase for each subsequent year of 

the agreement period, or caps that vary 

based on ACO size or ACO track. 

Alternatively, several commenters 

called for full, uncapped CMS–HCC risk 

adjustment. A few commenters 

suggested that using risk scores that are 

renormalized to the national population 

would protect the Medicare Trust Funds 

from increased coding without the need 

for caps. Another commenter noted that 

uncapped risk adjustment would be 

consistent with risk adjustment in 

Medicare Advantage. Others suggested 

that full risk adjustment would help 

organizations that serve higher acuity 

patient populations and would protect 

small and medium size ACOs from 

changes in risk profiles that can result 

from patient churn. One commenter 

expressed the belief that capping risk 

adjustment would harm ACOs that have 

been affected by an extreme and 

uncontrollable circumstance, as such 

events can have negative impacts on 

beneficiary mental and physical health 

that would not be present in the 

benchmark years. 

Response: We appreciate all of the 

comments we received on these 

proposals. After considering the 

comments received in response to our 

proposed changes to the risk adjustment 

methodology, we are finalizing our 

proposal to use CMS–HCC risk scores to 

adjust the historical benchmark for all 

beneficiaries. While we are finalizing 

our proposal to cap positive risk score 

changes at 3 percent, we are not 

finalizing our proposal to limit negative 

risk score changes. Although we 

originally believed that a symmetrical 

cap would offer a balanced approach 

and provide an incentive for ACOs to 

accept performance-based risk by 

protecting them from large negative 

adjustments to their benchmark 

expenditures, we ultimately share the 

concern raised by some commenters 

that this approach would encourage 

favorable risk selection. If ACOs seek to 

attract low-cost beneficiaries or avoid 

high-cost beneficiaries, they could lower 

their performance year expenditures 

without any corresponding adjustment 

to their benchmark due to the cap on 

negative risk adjustments. We believe 

that this effect would be detrimental to 

medically complex patients, who may 

miss the opportunity to receive better 

coordinated care through an ACO, as 

well as to the Medicare Trust Funds. 

However, after additional 

consideration, we are finalizing our 

proposal to apply a 3 percent cap on 

upward risk adjustment. We remain 

concerned that adopting a higher cap on 

risk score increases, or adopting no cap, 

would provide insufficient protection 

against efforts to increase coding 

intensity. 

We disagree with the premise implied 

by some commenters that the overall 

disease burden of an ACO’s assigned 

beneficiary population will necessarily 

increase over a longer agreement period. 

The cap on risk score increases will be 

applied to changes in an ACO’s mean 

renormalized CMS–HCC risk score 

between benchmark year 3 and the 

performance year. The changes in the 

mean risk scores will reflect both 

changes in health status among 

beneficiaries that are assigned to the 

ACO in both periods and the impact of 

beneficiaries exiting and entering the 

ACO’s assigned beneficiary population 

between the two periods. We might 

expect disease burden to increase 

among the stable component of the 

ACO’s assigned beneficiary population 

because, by default, this population will 

be older during the performance year 

than during the third benchmark year. 

However, the impact of the churn in the 

ACO’s beneficiary population is 

indeterminate, meaning that it could 

increase or decrease the ACO’s average 

risk score. For example, an ACO’s 

overall mean risk score could decrease 

if a disproportionately large number of 

new Medicare enrollees are assigned to 

the ACO in the performance year, even 

if the mean risk score for the stable 

component of the population has 

increased. We continue to believe that a 

positive 3 percent cap represents a 

reasonable balance between recognizing 

potential differences in health status 

between an ACO’s benchmark year 3 

and performance year populations and 

protecting the Trust Funds against 

excessive coding. 

We recognize that changes in risk 

scores can occur when providers and 

suppliers increase the completeness and 

accuracy of their diagnostic coding, 

even if these efforts are not made with 

an intention of gaming. We do not 

believe that the proposed 3 percent cap 

in upward risk adjustment that we are 

finalizing would necessarily harm or 

reduce incentives for ACOs that are 

attempting to more accurately capture 


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the conditions of their patients. As we 

described in the August 2018 proposed 

rule, our analysis based on performance 

year 2016 found that the proposed 3 

percent cap on risk score increases 

would have been less restrictive than 

the current approach for ACOs that 

received demographic risk adjustment 

for their continuously assigned 

population and would have the added 

benefit of being simpler and more 

transparent. 

We also noted in the proposed rule 

that in a review of risk score trends 

among Shared Savings Program ACOs, a 

3 percent cap on changes in aged/nondual risk scores would limit positive 

risk adjustment for less than 30 percent 

of ACOs over a 5- or 6-year period. This 

analysis, which was based on CMS– 

HCC risk score trends between 2009 and 

2015 and between 2010 and 2015 (using 

benchmark and performance year risk 

score data from performance year 2015 

results) and trends between 2011 and 

2016 (using benchmark and 

performance year risk score data from 

performance year 2016 results), found 

generally comparable results for the 

other three Medicare enrollment types. 

The aged/dual category showed the 

highest percentage of ACOs that would 

be bound by a positive 3 percent cap 

over a 5- or 6-year period at 30 to 33 

percent. We have since performed 

additional analysis that looked at 5-year 

trends in ACO CMS–HCC risk scores 

using benchmark and performance year 

data from results for performance years 

2014 through 2017. This expanded 

analysis found similar results, with the 

share of ACOs with 5-year risk score 

increases exceeding 3 percent ranging 

from 20 percent for ESRD to 32 percent 

for aged/dual. We would like to note, 

however, that even for ACOs affected by 

the cap, there will most often be a 

varying mix of risk ratios across the four 

enrollment types. Furthermore, capping 

will not limit a potential benchmark 

increase related to shifts in beneficiaries 

from lower to higher-cost enrollment 

types (for example, growth in the 

proportion of aged/dual beneficiaries 

between benchmark year 3 and the 

performance year). We would like to 

note that for stakeholders interested in 

conducting their own analyses of risk 

score trends, the Shared Savings 

Program ACO public use files, available 

on the CMS website for performance 

years 2013 through 2017, include ACOlevel CMS–HCC risk scores for each 

benchmark year and performance year. 

We appreciate the concern raised by 

one commenter about the implications 

of the risk adjustment cap on ACOs 

whose assigned beneficiaries reside in 

areas impacted by an extreme and 

uncontrollable circumstance. We 

believe that the 3 percent cap that we 

are finalizing will allow for greater 

growth in risk scores for continuously 

assigned beneficiaries relative to the 

current policy. Thus, we believe the 

policy will better recognize any negative 

health status changes experienced by 

ACO assigned beneficiaries residing in 

disaster-affected areas than our current 

approach, while still guarding against 

increases in coding intensity. 

Although we believe that the 3 

percent cap on positive risk adjustment 

that we are finalizing in this rule is 

reasonable, we will monitor the impacts 

of the cap as we gain experience with 

the new policy and, if appropriate, will 

propose modifications through future 

notice and comment rulemaking. 

Comment: Several commenters 

recommended that any cap be applied at 

the aggregate level rather than the 

enrollment type level. One commenter 

suggested that capping the risk ratios in 

the aggregate across the four beneficiary 

enrollment types to account for smaller 

sample sizes and resulting higher 

volatility for certain enrollment types. 

Another commenter noted that applying 

the cap at the aggregate level would be 

more appropriate to accurately reflect 

the changing risk and mix of an ACO’s 

population. An additional commenter 

expressed the belief that ACOs should 

not be penalized if they have low risk 

score growth overall but high growth in 

any one given eligibility category. 

Response: We appreciate the 

perspectives offered by commenters on 

whether the risk score cap should be 

applied at the enrollment type level or 

the aggregate level. Although an 

aggregate approach could potentially 

address concerns about greater volatility 

among enrollment types with fewer 

beneficiaries, we believe that the 

proposed approach of applying the cap 

separately for each enrollment type 

would be more consistent with other 

benchmarking calculations, which are 

also performed for each enrollment 

type, and would also be more 

transparent. We therefore are finalizing 

our proposal to apply the cap on risk 

adjustment increases at the enrollment 

type level. 

Comment: Several commenters 

acknowledged that excessive coding 

was a potential concern but encouraged 

CMS to consider an approach other than 

capping CMS–HCC risk score growth to 

address this issue. One commenter 

suggested implementing a coding 

intensity adjustment like the one used 

in Medicare Advantage, creating audit 

mechanisms to detect inappropriate 

coding, and introducing harsh penalties 

for ACOs found to engage in these 

practices. Some of these ideas were 

echoed by other commenters who 

suggested that CMS consider 

approaches used by Medicare 

Advantage or make greater use of 

auditing. Another commenter suggested 

using ACO Consumer Assessment of 

Healthcare Providers and Systems 

(CAHPS) survey data to determine the 

extent to which increases in CMS–HCC 

scores reflect changes in coding versus 

changes in health status and to use that 

information to limit benchmark 

increases in a more refined, ACOspecific manner after an initial grace 

period. 

One commenter recommended using 

a prospectively-determined annual 

coding factor adjustment that CMS 

could, with advance regulatory notice to 

ACOs, retroactively modify if the final 

observed risk trend for the applicable 

performance years deviates significantly 

from what was projected. The 

commenter noted that this approach is 

currently used in the Next Generation 

ACO Model and that it would be 

preferable to the renormalization 

approach currently employed in the 

Shared Savings Program because it 

would allow ACOs more predictability 

in their financial forecasting. 

Response: We did not propose or seek 

comment on alternative mechanisms for 

addressing coding concerns in the 

proposed rule and are therefore not 

adopting any of these suggestions at this 

time. We believe the cap we are 

finalizing on positive growth in 

renormalized risk scores provides a 

transparent approach to limiting the 

potential adverse effects of ACO-level 

coding initiatives. However, we will 

continue to monitor this issue and, if 

necessary, we will make appropriate 

refinements to the risk adjustment 

methodology to address coding 

concerns through future rulemaking. 

Comment: Some commenters offered 

other criticisms of the program’s current 

risk adjustment methodology or the 

CMS–HCC model, with a number 

suggesting refinements. For example, 

several commenters recommended that 

risk adjustment should account for 

social and economic factors, with one 

commenter suggesting that CMS use 

clinical and social characteristics 

included in the CAHPS survey to 

further adjust ACO benchmarks. One 

commenter recommended including a 

frailty adjustment such as is used in the 

Programs for All-Inclusive Care for the 

Elderly (PACE) program to better reflect 

the true cost of caring for patients near 

the end of life. Another commenter 

suggested that CMS explore changes to 

the risk adjustment model to lower the 

influence of provider-reported risk 


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factors and rely more on demographic 

factors and beneficiary-reported 

diagnoses, functional status, and other 

factors that can provide equal or greater 

explanatory statistical power than the 

current model. A different commenter 

also noted that the program’s risk 

adjustment methodology still does not 

account for important factors such as 

functional status and severity or stage of 

illness. Another commenter requested 

that CMS refine the CMS–HCC risk 

adjustment methodology to better 

account for the unique characteristics 

and needs of the SNF population. 

One commenter noted that the CMS– 

HCC risk adjustment model does not 

recognize all chronic conditions using 

chronic ischemic heart disease without 

angina pectoris as an example. This 

commenter noted that individuals with 

heart disease (with or without angina) 

require on-going care management for 

this chronic condition and health care 

providers need the resources to do so. 

The same commenter also noted that the 

current annual adjustment to the 

historical benchmark for changes in 

beneficiary health status at the time of 

reconciliation does not take into 

consideration disease progression and/ 

or unforeseen circumstances or changes 

in health status and/or acuity. They 

believed that an increase in adjustment 

frequency would assist ACOs in being 

more successful. A separate commenter 

also suggested that CMS fully 

recalculate benchmarks more 

frequently, but did not explain what 

they perceived as the benefits of this 

option. 

Another commenter recommended 

that risk scores for ACO beneficiaries 

should mirror risk scoring for Medicare 

Advantage patients but did not provide 

further context for this suggestion. A 

different commenter suggested that CMS 

adopt a rolling risk adjustment 

methodology similar to the one that is 

used in the Next Generation ACO Model 

in place of the current approach that 

compares each performance year to 

benchmark year 3. 

A few other commenters 

recommended that CMS modify the 

current methodology to use the same 

CMS–HCC risk score model to calculate 

risk scores for both the benchmark years 

and the performance year. Another 

commenter requested that CMS make 

adjustments to ACO baseline scores, not 

just benchmarks, as many conditions 

that may be newly documented when 

patients are assigned to an ACO are not 

new diagnoses for the patient. A few 

commenters requested that CMS 

implement the same risk adjustment 

policy for the Shared Savings Program 

and Medicare Advantage or across all 

Medicare programs to ensure parity, 

while another recommended that CMS 

consider policies that equalize current 

actuarial disparities that result from risk 

adjustment across Medicare programs. 

Response: We appreciate the concerns 

raised by commenters and the 

suggestions offered for refining the 

Shared Savings Program’s general risk 

adjustment methodology, which for 

each benchmark or performance year, 

relies on the national CMS–HCC 

prospective risk adjustment model used 

in Medicare Advantage for that same 

calendar year. Using the CMS–HCC 

prospective risk adjustment model 

allows the Shared Savings Program to 

align with Medicare Advantage and 

allows us to incorporate risk adjustment 

enhancements and refinements, such as 

future adjustments for beneficiaries with 

multiple conditions, as they are 

incorporated into the CMS–HCC model 

over time. We will share the feedback 

received on the CMS–HCC model with 

our CMS colleagues that administer that 

model. 

We decline at this time to adopt 

commenters’ suggestions for further 

refinements to the risk adjustment 

methodology for the Shared Savings 

Program. We believe that the 

modifications to the risk adjustment 

methodology that we are finalizing will 

better recognize changes in health status 

in an ACO’s assigned beneficiary 

population than the current 

methodology, while still providing a 

degree of protection against intensive 

coding practices. We also note that our 

current practice of using risk scores that 

are renormalized to the national 

assignable FFS population adjusts for 

changes in the underlying CMS–HCC 

models that may occur between 

benchmark years or between benchmark 

years and the performance year. 

Final Action: After considering the 

comments received and additional 

internal analysis, we are finalizing 

some, but not all, of our proposed 

changes to the program’s risk 

adjustment methodology. Specifically, 

we will use CMS–HCC prospective risk 

scores to adjust the historical 

benchmark for changes in severity and 

case mix for all assigned beneficiaries, 

subject to a cap of positive 3 percent for 

the agreement period for agreement 

periods beginning on July 1, 2019, and 

in subsequent years. This cap will 

reflect the maximum increase in risk 

scores allowed between BY3 and any 

performance year in the agreement 

period. For ACOs participating in a 5 

year and 6-month agreement period 

beginning on July 1, 2019, as discussed 

in section II.A.7. of this final rule, the 

cap will represent the maximum change 

in risk scores for the agreement period 

between BY3 and CY 2019 in the 

context of determining financial 

performance for the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, as well as 

the maximum change in risk scores 

between BY3 and any of the subsequent 

five performance years of the agreement 

period. The cap will be applied 

separately for each of the four 

enrollment types. We will apply this 

approach for ACOs participating under 

the BASIC track through a new 

provision of the regulations at 

§ 425.605(a), and for ACOs participating 

under the proposed ENHANCED track 

through modifications to the existing 

provision at § 425.610(a). We are not 

finalizing our proposal to apply a 3 

percent cap on negative risk score 

changes. 

3. Use of Regional Factors When 

Establishing and Resetting ACOs’ 

Benchmarks 

a. Background 

As described in the background for 

this section, we apply a regional 

adjustment to the rebased historical 

benchmark for ACOs entering a second 

or subsequent agreement period in 2017 

or later years. This adjustment reflects a 

percentage of the difference between the 

regional FFS expenditures in the ACO’s 

regional service area and the ACO’s 

historical expenditures. The percentage 

used in calculating the adjustment is 

phased in over time, ultimately reaching 

70 percent, unless the Secretary 

determines a lower weight should be 

applied and such lower weight is 

specified through additional notice and 

comment rulemaking. 

In the June 2016 final rule, we laid 

out the steps used to calculate and 

apply the regional adjustment (see 81 

FR 37963). These steps are recapped 

here: 

• First, we calculate the ACO’s rebased 

historical benchmark and regional average 

expenditures for the most recent benchmark 

year for each Medicare enrollment type 

(ESRD, disabled, aged/dual eligible, aged/ 

non-dual eligible), resulting in average per 

capita expenditure values for each of the 

Medicare enrollment types. The regional 

average expenditure amounts are adjusted for 

differences between the health status of the 

ACO’s assigned beneficiary population and 

that of the assignable population in the 

ACO’s regional service area. 

• For each Medicare enrollment type, we 

then determine the difference between the 

average per capita regional amount and the 

average per capita amount of the ACO’s 

rebased historical benchmark. These values 

may be positive or negative. For example, the 

difference between these values for a 

particular Medicare enrollment type will be 


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expressed as a negative number if the value 

of the ACO’s rebased historical benchmark 

expenditure for that Medicare enrollment 

type is greater than the regional average 

amount. 

• Next, we multiply the resulting 

difference for each Medicare enrollment type 

by the applicable percentage weight used to 

calculate the amount of the regional 

adjustment for that agreement period. The 

products (one for each Medicare enrollment 

type) resulting from this step are the amounts 

of the regional adjustments that will be 

applied to the ACO’s historical benchmark. 

• We then apply the adjustment to the 

ACO’s rebased historical benchmark by 

adding the adjustment amount for the 

Medicare enrollment type to the ACO’s 

rebased historical benchmark expenditure for 

the same Medicare enrollment type. 

• We next multiply the regionally-adjusted 

value of the ACO’s rebased historical 

benchmark for each Medicare enrollment 

type by the proportion of the ACO’s assigned 

beneficiary population for that Medicare 

enrollment type, based on the ACO’s 

assigned beneficiary population for 

benchmark year 3. 

• Finally, we sum expenditures across the 

four Medicare enrollment types to determine 

the ACO’s regionally-adjusted rebased 

historical benchmark. 

In the June 2016 final rule, we also 

detailed how the percentage weight 

used to calculate the regional 

adjustment will be phased in over time 

(see 81 FR 37971 through 37974). For 

the first agreement period in which this 

methodology applies, ACOs for which 

the weighted average adjustment across 

the enrollment types is positive (net 

positive adjustment) will receive a 

weight of 35 percent for all enrollment 

types (including individual enrollment 

types for which the adjustment is 

negative) and ACOs for which the 

weighted average adjustment is negative 

(net negative adjustment) will receive a 

weight of 25 percent for all enrollment 

types (including individual enrollment 

types for which the adjustment is 

positive). For the second agreement 

period in which the methodology 

applies, ACOs with a net positive 

adjustment will receive a weight of 70 

percent for all enrollment types and 

ACOs with a net negative adjustment 

will receive a weight of 50 percent for 

all enrollment types. By the third 

agreement period in which the 

methodology applies, ACOs with either 

a net positive or a net negative 

adjustment will receive a weight of 70 

percent for all enrollment types, unless 

the Secretary determines that a lower 

weight should be applied. 

This regional adjustment is one of 

three ways in which regional 

expenditures are currently incorporated 

into the program’s methodology for 

resetting the historical benchmark for an 

ACO’s second or subsequent agreement 

period. We also use regional, instead of 

national, trend factors for each 

enrollment type to restate BY1 and BY2 

expenditures in BY3 terms when 

calculating the rebased benchmark, and 

we use regional update factors to update 

the regionally-adjusted rebased 

historical benchmark to the performance 

year at the time of financial 

reconciliation. As described in the June 

2016 final rule (81 FR 37977 through 

37981), we used our statutory authority 

under section 1899(i)(3) of the Act to 

adopt a policy under which we update 

the benchmark using regional factors in 

lieu of the projected absolute amount of 

growth in national per capita 

expenditures for Parts A and B services 

under the original Medicare FFS 

program as required under section 

1899(d)(1)(B)(ii) of the Act. 

The regional trend factors used to 

calculate an ACO’s rebased benchmark 

and the regional update factors used to 

update the benchmark to the 

performance year represent growth rates 

in risk-adjusted FFS expenditures 

among assignable beneficiaries in the 

ACO’s regional service area, including 

beneficiaries assigned to the ACO. An 

ACO’s regional service area is defined at 

§ 425.20 as all counties in which at least 

one of the ACO’s assigned beneficiaries 

resides. To calculate expenditures used 

in determining the regional adjustment 

and the trend and update factors, we 

first calculate risk-adjusted FFS 

expenditures among assignable 

beneficiaries for each county in the 

ACO’s regional service area and then 

weight these amounts by the proportion 

of the ACO’s assigned beneficiaries 

residing in each county, with all 

calculations performed separately by 

Medicare enrollment type (ESRD, 

disabled, aged/dual, aged/non-dual). 

In the June 2016 final rule, we 

discussed the benefits that we believe to 

be associated with incorporating 

regional expenditures into ACO 

benchmarks. We explained, for 

example, that the incorporation of 

regional expenditures provides an ACO 

with a benchmark that is more reflective 

of FFS spending in the ACO’s region 

than a benchmark based solely on the 

ACO’s own historical expenditures (see 

81 FR 37955). We believe that this 

approach creates stronger financial 

incentives for ACOs that have been 

successful in reducing expenditures to 

remain in the program, thus improving 

program sustainability. Many 

commenters expressed support for the 

approach, citing it as an improvement 

over the existing rebasing methodology 

(see 81 FR 37956). In the June 2016 final 

rule, we also discussed how using 

regional trend and update factors would 

allow us to better capture the cost 

experience in the ACO’s region, the 

health status and socio-economic 

dynamics of the regional population, 

and location-specific Medicare 

payments when compared to using 

national FFS expenditures (see 81 FR 

37976 through 37977). In that rule, we 

stated our intention to explore the 

possibility of incorporating regional 

expenditures, including the regional 

adjustment and regional trend and 

update factors, in the benchmark 

established for an ACO’s first agreement 

period (see 81 FR 37973). In section 

II.D.3.b. of this final rule, we discuss our 

proposals for incorporating regional 

expenditures into the benchmarks for 

ACOs in their first agreement period 

under the program. 

We also acknowledged in the June 

2016 final rule that the incorporation of 

regional expenditures into ACO 

benchmarks can have differential effects 

depending on an ACO’s individual 

circumstances (see 81 FR 37955). For 

example, ACOs with low historical 

expenditures relative to their regional 

service area will see their rebased 

historical benchmark increase due to the 

regional adjustment, whereas the 

benchmarks for higher spending ACOs 

will be reduced. One concern is that, as 

the higher weights for the regional 

adjustment are phased in over time, the 

benchmarks for low-spending ACOs 

may become overly inflated to the point 

where these organizations need to do 

little to maintain or change their 

practices to generate savings. For 

higher-spending ACOs, there is the 

concern that a negative regional 

adjustment will discourage program 

participation or discourage these ACOs 

from caring for complex, high-cost 

patients. There is also concern about the 

longer-term effects on participation 

resulting from lower trend and update 

factors among ACOs that have had past 

success in reducing expenditures and 

that serve a high proportion of the 

beneficiaries within certain counties in 

their regional service area. In sections 

II.D.3.c. and II.D.3.d. of this final rule, 

we discuss our proposals in the August 

2018 proposed rule designed to mitigate 

these concerns. 

b. Applying Regional Expenditures in 

Determining the Benchmark for an 

ACO’s First Agreement Period 

A number of stakeholders offering 

comments on the February 2016 

proposed rule advocated for extending 

the policies incorporating regional 

expenditures proposed for determining 

the rebased benchmarks for ACOs 

entering a second or subsequent 


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agreement period under the program to 

the methodology for establishing the 

benchmarks for ACOs in their first 

agreement period under the program 

(see 81 FR 37971). While we declined to 

modify the methodology used to 

establish benchmarks for ACOs in a first 

agreement period to incorporate 

regional expenditures as part of the June 

2016 final rule, we did signal our 

intention to explore this matter further 

after gaining experience with the new 

rebasing methodology (see 81 FR 

37973). 

Since the publication of the June 2016 

final rule we have employed the new 

methodology to determine rebased 

benchmarks for ACOs starting second 

agreement periods in 2017 and 2018. 

This experience has reinforced our 

belief that a benchmarking methodology 

that incorporates regional expenditures, 

in addition to an ACO’s own historical 

expenditures, is important for the 

sustainability of the program. For 

agreement periods starting in 2017, for 

example, we found that around 80 

percent of ACOs receiving a rebased 

benchmark benefitted from receiving a 

regional adjustment. Having observed 

variation across ACO regional service 

areas, we also maintain that the 

incorporation of regional expenditure 

trends can lead to more accurate 

benchmarks that better reflect 

experience in ACOs’ individual regions 

than benchmarks computed solely using 

national factors. As we explained in the 

August 2018 proposed rule (83 FR 

41887), we believe that introducing 

regional expenditures into the 

benchmarking methodology for ACOs in 

a first agreement period, as has been 

recommended by stakeholders, would 

serve to further strengthen the 

incentives under the program, improve 

program sustainability, and increase the 

accuracy of benchmark calculations for 

new ACOs by making their benchmarks 

more reflective of the regional 

environment in which these 

organizations operate. We also believe 

that adopting a more consistent 

benchmarking methodology would 

provide greater simplicity and more 

predictability for ACOs. Under this 

approach, ACOs entering the program 

would only be required to familiarize 

themselves with a single benchmarking 

methodology that would apply for all 

agreement periods under the program. 

For the previously stated reasons, we 

proposed to incorporate regional 

expenditures into the benchmarking 

methodology for ACOs in a first 

agreement period for all ACOs entering 

the program beginning on July 1, 2019, 

and in subsequent years. Under this 

proposal, we would use almost the same 

methodology for determining the 

historical benchmarks for ACOs in their 

first agreement period as would apply 

for ACOs in their second or subsequent 

agreement period, including all policies 

proposed in the August 2018 proposed 

rule, should they be finalized, regarding 

establishing the historical benchmark at 

the start of the agreement period, 

adjusting the historical benchmark for 

each performance year within an 

agreement period, and updating the 

benchmark for each performance year 

(or for CY 2019 in the context of 

determining the financial performance 

of ACOs during the 6-month 

performance year from July 1, 2019, 

through December 31, 2019, as 

discussed in section II.A.7. of this final 

rule). The only distinction between the 

methodology that would be used to 

determine the historical benchmark for 

ACOs in their first agreement period 

and those in a second or subsequent 

agreement period would be the weights 

that are applied to the 3 benchmark 

years. Under this proposal, we would 

continue to use weights of 10 percent, 

30 percent, and 60 percent to weight the 

3 benchmark years, respectively, when 

calculating the historical benchmark for 

an ACO in its first agreement period, 

rather than the equal weights that are 

used in resetting the benchmark for 

ACOs entering a second or subsequent 

agreement period. As described in the 

June 2015 final rule (80 FR 32787 

through 32788), the use of equal weights 

when calculating the rebased 

benchmark was motivated by the 

concern that placing higher weights on 

the later benchmark years would reduce 

the incentive for ACOs that generate 

savings or that are trending positive in 

their first agreement period to 

participate in the program over the 

longer run, or reduce incentives for 

ACOs to achieve savings in the final 

year of their first agreement period. This 

concern is not relevant for ACOs in a 

first agreement period. Therefore, for 

these ACOs, we favored maintaining the 

existing weights, which we believe are 

more accurate because they capture the 

ACO’s most recent experience in the 

benchmark period. 

We proposed to add a new provision 

to the regulations at § 425.601 that 

would describe how we would 

establish, adjust, update and reset 

historical benchmarks using factors 

based on regional FFS expenditures for 

all ACOs for agreement periods 

beginning on July 1, 2019, and in 

subsequent years. We sought comment 

on this proposal. 

Comment: The majority of comments 

we received on the proposal to 

incorporate regional expenditures in an 

ACO’s first agreement period were 

generally supportive of the idea. One 

commenter also offered support for the 

proposed implementation timeline and 

a few commenters noted that they 

agreed with using weights of 25 and 35 

for the regional adjustment for ACOs in 

their initial agreement period. Some 

commenters, while providing general 

support for the proposal, did not 

necessarily agree with CMS’ proposals 

to modify the regional adjustment or the 

trend and update factors used in 

benchmarking discussed in sections 

II.D.3.c and II.D.3.d of this final rule, 

respectively. One commenter supported 

the proposal to incorporate regional 

expenditures into an ACO’s benchmark 

starting in its first agreement period and 

our proposal to continue using weights 

of 10 percent, 30 percent, and 60 

percent for the first, second, and third 

benchmark years in an ACO’s first 

agreement period, respectively, but 

requested that CMS provide additional 

clarification on how these proposals 

would impact the majority of ACOs 

participating in the program. 

Commenters provided various 

justifications for their support of 

incorporating regional expenditures into 

an ACO’s initial benchmark: 

• Several commenters noted that 

incorporating regional trends would allow 

the benchmark to better reflect an ACO’s 

local environment, with a few stating such 

benchmarks would be more accurate and 

fairer. 

• A few commenters noted their belief that 

using a blend of ACO historical expenditures 

and regional expenditure data is preferable to 

relying on only one or the other and 

supported implementing the regional 

adjustment when an ACO first enters the 

program rather than waiting until at least the 

second agreement period. Other commenters 

remarked that the earlier incorporation of 

regional factors into benchmarks was 

particularly important given the proposed 

longer five-year agreement periods. 

• Several commenters suggested that 

incorporating regional expenditures into the 

benchmark for an ACO’s first agreement 

period could improve incentives for 

participation among low-cost ACOs, with 

some noting it could incentivize 

participation among low cost providers 

without necessarily discouraging less 

efficient providers from entering the 

program. 

• One commenter expressed the belief that 

incorporating a regional adjustment in an 

ACO’s first agreement period can correct for 

issues stemming from mean reversion. They 

noted that a modest positive regional 

adjustment could provide an incentive for 

participation for low spending ACOs whose 

expenditure growth is likely to increase as 

they regress to the mean and that a modest 

negative regional adjustment could reduce 

potential windfall gains that would otherwise 

go to high spending ACOs that are likely to 


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see slower expenditure growth without 

entirely removing their incentive to 

participate. 

• Several commenters supported moving 

towards regional benchmarks because it 

accelerated the process of aligning the Shared 

Savings Program with Medicare Advantage. 

• One commenter generally supported 

inclusion of regional expenditures in Shared 

Savings Program benchmarks because the 

Next Generation ACO Model incorporates 

regional expenditures in its benchmarking 

methodology. 

• One commenter noted that the proposed 

policy would provide predictability and 

simplicity for ACOs as they seek to 

understand the nuances of the regulatory 

environment. 

• One commenter appeared to 

misunderstand the proposal, noting that it 

might force an ACO to ‘‘use national trending 

for the first contract rather than regional.’’ 

They stated that using national growth rates 

was a disadvantage to most ACOs and has a 

disparate impact on urban and rural ACOs. 

The commenter urged CMS to incorporate 

regional factors in determining the 

benchmark for an ACO’s first agreement 

period as well as subsequent agreement 

periods. 

Response: We thank commenters for 

their support of the proposal to apply 

regional expenditures in determining 

the benchmark for an ACO’s first 

agreement period, which we are 

finalizing, along with the proposed 

policies described in sections II.D.3.c 

and II.D.3.d of this final rule. We believe 

that this policy will provide a greater 

incentive for lower cost ACOs to 

participate in the program, allow 

benchmarks to better reflect the local 

environment in which an ACO operates, 

and reduce complexity by using a 

comparable benchmarking methodology 

across all agreement periods. 

Comment: Several commenters 

opposed incorporating regional 

expenditures into an ACO’s first 

agreement period benchmark due to 

concerns about how the policy would 

impact incentives for higher cost ACOs. 

One commenter opposed the use of a 

regional adjustment in an ACO’s first 

agreement period and recommended 

eliminating such adjustments from the 

program’s benchmarking methodology 

entirely. This commenter expressed the 

belief that these adjustments, 

particularly if implemented in an ACO’s 

first agreement period, would lead to 

exit by ACOs with spending above their 

region’s average given the program’s 

voluntary nature. In their view, there is 

a significant risk that the Shared Saving 

Program ‘‘will degenerate into a 

program that is viable only for providers 

that are already more efficient for their 

region or serve patients who are 

healthier and lower-risk in ways not 

captured by the HCC score.’’ A few 

other commenters also expressed 

concerns that the policy would harm 

ACOs that serve patients with special 

needs, threatening the viability of such 

ACOs or making it unattractive for 

ACOs to include providers and 

suppliers that treat such patients, with 

one providing hypothetical examples to 

demonstrate how difficult it would be 

for an ACO with costs notably higher 

than its region to achieve share 

savings—or avoid shared losses—even if 

the ACO was successful in reducing 

spending. Other commenters offering 

general support for the proposal still 

warned that incorporating regionallyadjusted benchmarks too quickly could 

discourage participation by high 

spending health care providers, causing 

CMS to miss the opportunity to realize 

savings while at the same time 

subsidizing already low-spending 

providers. They urged CMS to proceed 

with this policy in a way that 

encourages participation by high 

spending providers and suppliers in this 

voluntary program. Another commenter 

encouraged CMS to monitor the impact 

of the regional benchmarking 

methodology on participation by 

provider/supplier type, and to make 

refinements if necessary to ensure 

participation. 

Response: We appreciate the concerns 

raised by the commenters that 

incorporating regional adjustments into 

ACO historical benchmarks too quickly 

could reduce the attractiveness of the 

Shared Savings Program to ACOs that 

have been historically inefficient 

compared to their region or that treat 

high cost, special needs patients. As 

described in the next section, we are 

finalizing a modification to the schedule 

of weights used in calculating the 

regional adjustment, which will reduce 

the weight that is applied to the regional 

adjustment in the first agreement period 

for ACOs that have higher costs than 

their region. We believe that using a 

lower weight to determine the regional 

adjustment in these circumstances will 

improve the business case for more 

higher-cost ACOs to participate in the 

program. 

Comment: One commenter expressed 

the belief that changing the regional 

benchmarking methodology may deter 

new entrants and drive existing ACOs to 

leave the program. However, it was 

somewhat unclear as to whether they 

were opposed to the proposed changes 

or to the incorporation of regional 

expenditures into ACOs’ benchmarks in 

general. They noted that ACOs in 

regions where spending and 

benchmarks are low have little incentive 

to participate in the program because 

they have less opportunity to reduce 

costs and increase savings for CMS; 

however, they did not suggest an 

alternative approach that would 

ameliorate their concerns. 

Response: We believe that the 

extension of regional adjustments to 

ACOs in their first agreement period 

will tend to increase incentives for 

ACOs that are low cost relative to their 

region compared to the current 

benchmarking methodology. For ACOs 

in a second or subsequent agreement 

period, the modifications to the regional 

adjustment described in section II.D.3.c. 

of this final rule will tend to limit the 

absolute size of adjustments for ACOs 

that are efficient relative to their region 

compared to the current policy. 

However, we believe that these 

adjustments will continue to be 

generous enough to retain participation 

by many existing ACOs that are efficient 

relative to their region and should 

improve the business case for 

participation among ACOs that have 

higher costs than their regions, 

especially considering our decision in 

this final rule to lower the weight of the 

regional adjustment for such higher cost 

ACOs to 15 percent in the first 

agreement period (compared to 25 

percent in the proposed rule). For ACOs 

operating in low-cost regions whose 

historical costs are comparable to their 

region, we believe that the 

modifications we are finalizing will 

have a limited impact relative to the 

current policy. 

Comment: A few commenters raised 

concerns about the implications of 

incorporating regional factors into the 

calculation of benchmarks for ACOs in 

rural areas. One commenter noted that 

regional benchmarking did not make 

sense for many rural clinics because 

they are competing against themselves 

and they quickly arrive at the limit of 

expenditures they can control. Another 

commenter expressed concern that 

regional adjustments are not accurate for 

rural-based health care systems. They 

believe that in rural areas served by one 

health care system most primary care 

visits are with a specialist and the 

assignable beneficiary population tends 

to be skewed towards more costly and 

complex patients. They requested that 

CMS expand the definition of region to 

include nearby markets where physician 

access is more evenly distributed and 

also exclude rural areas from regional 

adjustment, though it was unclear 

whether the commenter was requesting 

that CMS exclude rural counties from 

regional expenditure calculations or 

requesting that rural ACOs be exempt 

from receiving a regional adjustment to 

their benchmark. A different commenter 

perceived the program’s benchmarking 


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methodology to be flawed, explaining 

that it is structured to provide bonuses 

to high cost providers who reduce 

spending while not rewarding costefficient providers who enter the 

program and keep costs down. They 

believe that the current proposals do not 

go far enough to address these perceived 

flaws, particularly for beneficiaries in 

rural areas and environments with costbased reimbursement, such as Critical 

Access Hospitals; but they did not 

explain why they believed the proposed 

changes to be inadequate. The 

commenter advocated for broader 

changes to Medicare payment policy for 

rural providers and requested that CMS 

engage with rural stakeholders to further 

explore a benchmarking methodology 

that would reflect such changes. 

Response: As we have acknowledged, 

the incorporation of regional factors into 

ACO benchmarks would have varying 

effects on ACOs depending on each 

organization’s individual circumstances. 

We believe that this is also the case for 

ACOs operating in rural areas. As 

described in section II.D.3.d of this final 

rule, we are finalizing our proposed 

policy of using blended national and 

regional trend and update factors for all 

ACOs, which we believe will help to 

mitigate concerns about ACOs, 

including rural ACOs, that are dominant 

in their region driving regional trends. 

For such ACOs, the national component 

of the blend would tend to receive a 

high weight. For a rural ACO whose 

assigned beneficiaries comprise a large 

share of assignable beneficiaries in its 

region, we would expect the impact of 

the regional adjustment on an historical 

benchmark to be small because the 

ACOs’ historical expenditures would be 

similar to regional expenditures. In 

practice, we have observed that few of 

the ACOs that have received 

benchmarks that incorporate regional 

factors under the methodology at 

§ 425.603(c) for second agreement 

periods starting in 2017 and 2018 have 

had penetration rates higher than 50 

percent and those ACOs whose 

beneficiaries reside primarily in nonmetropolitan areas (a proxy for rural 

ACOs) have received a mix of positive 

and negative regional adjustments. 

We decline to modify our policies for 

defining an ACO’s regional service area 

to encompass nearby markets or to 

exclude counties in which some of an 

ACO’s assigned beneficiaries reside. We 

believe that such modifications could 

lead to a regional expenditure value that 

is not reflective of the area in which an 

ACO operates or may simply add 

complexity to the methodology without 

materially changing its outcome. We 

also decline to provide an exemption to 

the regional adjustment for ACOs 

operating in rural areas or any other 

ACOs as we favor a consistent, programwide policy. We appreciate one 

commenter’s recommendation that we 

seek to better address issues related to 

reimbursement of rural providers; 

however, we believe such issues would 

require further study and are outside the 

scope of this final rule. 

Comment: One commenter noted that 

while the proposed policy to 

incorporate regional expenditures into 

the calculation of the benchmark 

starting in an ACO’s first agreement 

period might make sense in some areas 

of the country, there are many areas in 

the state of California where they 

believe that additional efficiencies 

cannot be realized. They believe that 

providers in California are at a 

significant disadvantage under this 

program due to the state’s historically 

low spending growth compared to other 

areas of the country. The commenter 

urged CMS to consider changes for 

providers in such markets but did not 

specify which changes they believe 

would remedy this issue. 

Response: We have acknowledged 

that the program’s benchmarking 

methodology can have different effects 

on ACOs depending on whether they 

are located in a high or low growth 

region and how their own historical 

spending compares with that of their 

region. While the introduction of 

blended national and regional trend and 

update factors may reduce the first 

agreement period benchmark of ACOs 

located in regions with below average 

growth compared to the current 

methodology that uses only national 

trends, all else being equal, the blend 

should help these ACOs in subsequent 

agreement periods in which they would 

have been subject to purely regional 

trends under current policy. 

Final Action: After considering the 

comments received, we are finalizing 

our proposal to incorporate regional 

expenditures into the benchmarking 

methodology starting in an ACO’s first 

agreement period for all ACOs entering 

the program for an agreement period 

beginning on July 1, 2019, and in 

subsequent years. Under this policy we 

will use almost the same methodology 

to determine the historical benchmarks 

for ACOs in their first agreement period 

as for ACOs in their second or 

subsequent agreement period, including 

the policies described in sections 

II.D.3.c and II.D.3.d. that we are 

adopting in this final rule. The only 

distinction between the methodology 

that will be used to determine the 

historical benchmark for ACOs in their 

first agreement period and those in a 

second or subsequent agreement period 

will be the weights that are applied to 

the three benchmark years. We will 

continue to use weights of 10 percent, 

30 percent, and 60 percent to weight the 

three benchmark years, respectively, 

when calculating the historical 

benchmark for an ACO in its first 

agreement period, rather than the equal 

weights that are used in resetting the 

benchmark for ACOs entering a second 

or subsequent agreement period. These 

policies are included in the new 

provision at § 425.601, which will 

govern the determination of historical 

benchmarks for all ACOs for agreement 

periods starting on July 1, 2019, or in 

subsequent agreement periods. We are 

also finalizing conforming changes to 

§§ 425.602 and 425.603 to indicate that 

these provisions will now apply to the 

determination of the historical 

benchmark for ACOs entering a first 

agreement period on or before January 1, 

2018, or ACOs entering a second or 

subsequent agreement period on or 

before January 1, 2019, respectively. We 

note that we originally proposed 

changes to the regulations to indicate 

that § 425.602 would apply to ACOs 

entering a first agreement on or before 

January 1, 2019. However, given our 

decision to forgo the application cycle 

for a January 1, 2019 start date, there 

will be no ACOs beginning a first 

agreement period on that date. 

c. Modifying the Regional Adjustment 

In finalizing the phase-in structure for 

the original regional adjustment in the 

June 2016 final rule, we acknowledged 

that it might be necessary to reevaluate 

the effects of the regional adjustment on 

the Shared Savings Program and, if 

warranted, to modify the adjustment 

through additional rulemaking. 

Therefore, we adopted a policy under 

which the maximum weight to be 

applied to the adjustment would be 70 

percent, unless the Secretary determines 

that a lower weight should be applied, 

as specified through future rulemaking 

(see 81 FR 37969 through 32974). 

Relevant considerations in determining 

the appropriate weight to be applied to 

the adjustment include, but are not 

limited to, effects on net program costs; 

the extent of participation in the 

program; and the efficiency and quality 

of care received by beneficiaries. 

In the August 2018 proposed rule (83 

FR 41888), we noted that we had 

revaluated the effects of the regional 

adjustment as part of the regulatory 

impact analysis required for the 

proposed rule (see section IV. of the 

proposed rule) and had also taken into 

consideration our experience in 

applying the regional adjustment under 


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the policies established in the June 2016 

final rule. We noted that while we 

continued to believe that it is necessary 

to employ a benchmarking methodology 

that incorporates expenditures in an 

ACO’s regional service area in addition 

to the ACO’s own historical 

expenditures in order to maintain or 

improve program sustainability, we 

were concerned that, if unaltered, the 

regional adjustment will have 

unintended consequences and adverse 

effects on ACO incentives as discussed 

in the Regulatory Impact Analysis for 

the proposed rule. 

By design, the regional adjustment 

results in more generous benchmarks for 

ACOs that spend below their regions. 

We noted in section II.D.3.c. of the 

proposed rule that our initial experience 

with the regional adjustment found that 

80 percent of ACOs that renewed for a 

second agreement period starting in 

2017 received a positive adjustment. 

These ACOs saw their benchmarks 

increase by 1.8 percent, on average, 

when the adjustment was applied with 

the 35 percent weight, with several 

ACOs seeing increases of over 5 percent, 

and one over 7 percent. We also noted 

that preliminary results for ACOs that 

renewed for a second agreement period 

starting in 2018 showed a similar share 

of ACOs receiving a positive adjustment 

and one ACO seeing an adjustment of 

over 10 percent. We noted our concern 

that as the weight applied to the 

regional adjustment increases, 

benchmarks for the ACOs with the 

lowest spending relative to their region 

would become overly inflated to the 

point where they would need to do little 

to change their care practices to generate 

savings, which could reduce incentives 

for these ACOs to improve the efficiency 

of care provided to beneficiaries. 

We noted that, on the other hand, the 

regional adjustment reduces 

benchmarks for ACOs with higher 

spending compared to their region. 

Among 14 ACOs that received a net 

negative regional adjustment to their 

benchmark in 2017, the average 

reduction was 1.6 percent, with one 

ACO seeing a reduction of over 7 

percent. These adjustments were 

calculated using only a 25 percent 

weight. Although preliminary results for 

ACOs that started a second agreement 

period in 2018 showed slightly smaller 

negative adjustments, on average, we 

were concerned that the ACOs with the 

highest relative costs, some of which 

have targeted specific beneficiary 

populations that are inherently more 

complex and costly than the regional 

average, would find little value in 

remaining in the Shared Savings 

Program when faced with a significantly 

reduced benchmark as the weight 

applied to the adjustment increases. 

To reduce the likelihood that the 

regional adjustment will have these 

undesired effects, we proposed policies 

that would limit the magnitude of the 

adjustment by reducing the weight that 

is applied to the adjustment and 

imposing an absolute dollar limit on the 

adjustment. We explained that we 

believe moderating the regional 

adjustment would lower potential 

windfall gains to lower-cost ACOs and 

could help to improve the incentive for 

higher-cost ACOs to continue to 

participate in the program. 

First, we proposed to amend the 

schedule of weights used to phase in the 

regional adjustment. Consistent with 

our current policy, the first time that an 

ACO is subject to a regional adjustment, 

we would apply a weight of 35 percent 

if the ACO’s historical spending was 

lower than its region and a weight of 25 

percent if the ACO’s historical spending 

was higher than its region. The second 

time that an ACO is subject to a regional 

adjustment, we would apply a weight of 

50 percent if the ACO’s historical 

spending was lower than its region and 

35 percent if the ACO’s historical 

spending was higher than its region. 

The third or subsequent time that an 

ACO is subject to a regional adjustment 

we would apply a weight of 50 percent 

in all cases. 

We sought to make two points related 

to the proposed schedule of weights 

clear. First, consistent with our current 

policy under § 425.603(c)(8) for 

determining the adjusted benchmark for 

the second or subsequent performance 

year of an ACO’s agreement period, in 

calculating an adjusted benchmark for 

an ACO that makes changes to its ACO 

participant list or assignment 

methodology, we would use the same 

set of weights as was used for the first 

performance year in the agreement 

period. For example, an ACO that is 

subject to a weight of 25 percent in its 

first performance year of an agreement 

period would continue to be subject to 

a weight of either 35 or 25 percent, 

depending on whether the ACO’s 

historical expenditures, as adjusted, are 

higher or lower than its region, for any 

subsequent years in the same agreement 

period. 

Second, for renewing or re-entering 

ACOs (see section II.A.5.c. of this final 

rule) that previously received a rebased 

historical benchmark under the current 

benchmarking methodology adopted in 

the June 2016 final rule, we would 

consider the agreement period the ACO 

is entering upon renewal or re-entry in 

combination with the weight previously 

applied to calculate the regional 

adjustment to the ACO’s benchmark in 

the ACO’s most recent prior agreement 

period to determine the weight that 

would apply in the new agreement 

period. We included several examples 

of the application of these policies (83 

FR 41889). In the final action statement 

for this section of the final rule we 

provide updated examples based on the 

policies we are finalizing. 

The weights included in the proposed 

new schedule were chosen in part to 

maintain consistency with the current 

schedule, which already includes the 

25, 35, and 50 percent values. 

Furthermore, we stated our belief that 

using 50 percent as the maximum 

weight would be appropriate because it 

strikes an even balance between 

rewarding an ACO for attainment 

(efficiencies already demonstrated at the 

start of the agreement period) versus 

improvement during the agreement 

period over its past historical 

performance. 

We also noted that while this 

proposal would reduce the maximum 

regional adjustment as compared to 

current regulations, our proposal to 

extend the regional adjustment to ACOs 

in their first agreement period in the 

program would increase the number of 

years that an ACO would be subject to 

the adjustment. Thus, the lower 

maximum weight in later years would 

be balanced to some extent by an earlier 

phase-in. 

Based on the magnitude of regional 

adjustments observed in the first 2 years 

under the existing rebasing 

methodology, which were calculated 

using the lowest weights under the 

current phase-in schedule, we were 

concerned that reducing the maximum 

weight on the adjustment may not be 

sufficient to guard against the undesired 

effects of large positive or negative 

regional adjustments on incentives 

faced by individual ACOs. Therefore, to 

complement the proposed changes to 

the schedule of weights used to phasein the regional adjustment, we also 

considered options for imposing a cap 

on the dollar amount of the regional 

adjustment. We believed that limiting 

regional adjustments for ACOs that are 

particularly low- or high-cost relative to 

their regions, would better align 

incentives for these ACOs with program 

goals, while continuing to reward ACOs 

that have already attained efficiency 

relative to their regional service areas. 

We thus also proposed to cap the 

regional adjustment amount using a flat 

dollar amount equal to 5 percent of 

national per capita expenditures for 

Parts A and B services under the 

original Medicare FFS program in BY3 

for assignable beneficiaries identified 


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for the 12-month calendar year 

corresponding to BY3 using data from 

the CMS OACT. The cap would be 

calculated and applied by Medicare 

enrollment type (ESRD, disabled, aged/ 

dual eligible, aged/non-dual eligible) 

and would apply for both positive and 

negative adjustments. 

We explained our belief that defining 

the cap based on national per capita 

expenditures would offer simplicity and 

transparency in that, for each 

enrollment type, a single value would 

be applicable for all ACOs with the 

same agreement start date. When 

selecting the level of the proposed cap, 

we aimed to choose a level that would 

only constrain the adjustment for the 

most extreme ACOs. When looking at 

the distribution of observed final 

regional adjustments among the 73 

ACOs that received a rebased 

benchmark in 2017, we found that the 

amount of the regional adjustment 

calculated for around 95 percent of 

these ACOs would fall under a 

symmetrical cap equal to 5 percent of 

national FFS expenditures. We also 

noted our belief that capping the 

amount of the regional adjustment at 

this level would continue to provide a 

meaningful reward for ACOs that are 

efficient relative to their region, while 

reducing windfall gains for the ACOs 

with the lowest relative costs. Similarly, 

capping the amount of a negative 

regional adjustment at this level would 

continue to impose a penalty on ACOs 

that are less efficient relative to their 

region, but by guarding against 

extremely high negative adjustments, 

should increase the program’s ability to 

retain ACOs that serve complex patients 

and that may need some additional time 

to lower costs. 

We explained that to implement the 

cap, we would continue to calculate the 

difference between the average per 

capita regional amount and the per 

capita rebased benchmark amount for 

each Medicare enrollment type. We 

would continue to multiply the 

difference for each enrollment type by 

the appropriate weight (determined 

using the schedule described 

previously) in order to determine the 

uncapped adjustment for each Medicare 

enrollment type. For positive 

adjustments, the final adjustment 

amount for a particular enrollment type 

would be set equal to the lesser of the 

uncapped adjustment or a dollar 

amount equal to 5 percent of the 

national per capita FFS expenditures for 

assignable beneficiaries in that 

enrollment type for BY3. For negative 

adjustments, the final adjustment 

amount for a particular enrollment type 

would be set equal to the greater (that 

is, the smaller negative value) of either 

the uncapped adjustment or the 

negative of 5 percent of the national per 

capita FFS expenditures for assignable 

beneficiaries in that enrollment type for 

BY3. We would then apply the final 

adjustment for each enrollment type to 

the benchmark expenditures for that 

enrollment type in the same manner 

that we currently apply the uncapped 

regional adjustment. Table 13 provides 

an illustrative example of how the final 

adjustment would be determined. 

In this example, the ACO’s positive 

adjustment for ESRD would be 

constrained by the cap because the 

uncapped adjustment amount exceeds 5 

percent of the national assignable FFS 

expenditure for the ESRD population. 

Likewise, the ACO’s negative 

adjustment for the disabled population 

would also be reduced by the cap. The 

adjustments for aged/dual and aged/ 

non-dual eligible populations would not 

be affected. 

We also considered an alternative 

approach under which the cap would be 

applied at the aggregate level rather than 

at the Medicare enrollment type level. 

Under this approach, we would 

calculate regional adjustments by 

Medicare enrollment type as we do 

currently and then determine the 

weighted average of these adjustments, 

using the enrollment distribution in the 

ACO’s BY3 assigned beneficiary 

population, to arrive at a single 

aggregate regional adjustment. We 

would then determine a weighted 

average of national per capita FFS 

expenditures for assignable beneficiaries 

across the four enrollment types, again 

using the enrollment distribution in the 

ACO’s BY3 assigned beneficiary 

population, to arrive at a single 

aggregate national expenditure value. 

We would calculate a symmetrical 

aggregate cap equal to positive or 

negative 5 percent of the aggregate 

national expenditure value and compare 

this cap to the uncapped aggregate 

regional adjustment amount to 

determine the final aggregate regional 

adjustment. Specifically, if the 

uncapped aggregate regional adjustment 

amount is above the aggregate cap, then 

the final aggregate regional adjustment 

would equal the cap. However, if the 

uncapped aggregate regional adjustment 

amount is below the aggregate cap, then 

the final aggregate regional adjustment 

would equal the uncapped regional 

adjustment amount. The regional 

adjustment calculated for each Medicare 

enrollment type would then be 

multiplied by the ratio of the final 

aggregate regional adjustment to the 

uncapped aggregate regional 

adjustment. If the uncapped aggregate 

regional adjustment exceeds the 


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aggregate cap, this ratio will be less than 

one and the regional adjustment for 

each Medicare enrollment type would 

be reduced by the same percentage. If 

the uncapped aggregate regional 

adjustment is less than or equal to the 

aggregate cap, the ratio will equal one 

and the regional adjustment would not 

be reduced for any Medicare enrollment 

type. 

For example, if the uncapped 

aggregate regional adjustment amount 

was $550 and the aggregate cap was 

$500, the final aggregate regional 

adjustment would be $500. The regional 

adjustment for each Medicare 

enrollment type would be multiplied by 

a ratio of $500 to $550 or 0.909. This is 

equivalent to reducing the adjustment 

for each enrollment type by 9.1 percent. 

As another example, if the uncapped 

aggregate regional adjustment was $450 

and the aggregate cap remained at $500, 

the final aggregate regional adjustment 

would be $450 because it is less than 

the aggregate cap. The regional 

adjustment for each Medicare 

enrollment type would be multiplied by 

a ratio equal to 1, and thus would not 

be reduced. 

Initial modeling found the two 

methods to be comparable for most 

ACOs but suggested that our proposed 

approach (capping the regional 

adjustment at the Medicare enrollment 

type level) is somewhat more effective 

at limiting larger upside or downside 

adjustments. We explained that this was 

likely because the aggregate approach 

smooths out variation in adjustments 

across individual enrollment types. For 

example, for some ACOs, large positive 

adjustments in one enrollment type may 

be offset by smaller positive 

adjustments, or negative adjustments in 

other enrollment types under the 

aggregate approach. We explained that 

the proposed approach also aligns with 

our current benchmark calculations, 

which are done by Medicare enrollment 

type, and provides greater accuracy and 

transparency. Under this approach, the 

cap would only reduce the magnitude of 

the adjustment for a particular 

enrollment type if the original uncapped 

value of the adjustment is relatively 

large. This would not necessarily be the 

case under the aggregate approach, 

where adjustments for all enrollment 

types, large or small, would be reduced 

if the aggregate regional adjustment 

exceeds the aggregate cap. 

In the August 2018 proposed rule (83 

FR 41890), we expressed our belief that 

imposing a cap on the magnitude of the 

adjustment, coupled with the proposed 

changes to the schedule of weights used 

in applying the regional adjustment, 

would help to reduce windfall gains to 

low-spending ACOs and would also 

help to reduce the incentive for higher 

spending ACOs to leave the program by 

limiting the negative adjustments these 

ACOs will experience. We anticipated 

that the proposed cap on the regional 

adjustment would provide stronger 

incentives for higher spending ACOs to 

remain in the program (by reducing the 

magnitude of the benchmark decrease 

associated with negative regional 

adjustments) than disincentives for 

lower spending ACOs. We noted that we 

expected this latter group would still be 

sufficiently rewarded by the regional 

adjustment under the proposed 

approach to encourage their continued 

participation in the program. However, 

we also noted our belief that by 

reducing the windfall gains for these 

ACOs, the proposed constraints on the 

regional adjustment would lead to 

greater incentives for these ACOs to 

further reduce spending in order to 

increase their shared savings payments. 

In summary, we proposed both to 

modify the schedule of weights used to 

phase in the regional adjustment and to 

impose a cap on the dollar amount of 

the adjustment. For the first agreement 

period that an ACO is subject to the 

regional adjustment, we proposed to 

apply a weight of 35 percent if the 

ACO’s historical spending was lower 

than its region and a weight of 25 

percent if the ACO’s historical spending 

was higher than its region. For the 

second agreement period, we proposed 

to apply weights of 50 percent and 35 

percent for lower and higher spending 

ACOs, respectively. For the third or 

subsequent agreement period, we 

proposed to apply a weight of 50 

percent for all ACOs. Additionally, we 

would impose a symmetrical cap on the 

regional adjustment equal to positive or 

negative 5 percent of the national per 

capita FFS expenditures for assignable 

beneficiaries for each enrollment type. 

We proposed to apply the modified 

schedule of weights and the cap on the 

regional adjustment for agreement 

periods beginning on July 1, 2019, and 

in subsequent years. The policies 

proposed in section II.D.3.c of the 

proposed rule were included in the 

proposed new provision at § 425.601, 

which would govern the determination 

of historical benchmarks for all ACOs 

for agreement periods starting on July 1, 

2019, and in subsequent years. We 

sought comment on these proposals, as 

well as the alternative capping 

methodology considered. We also 

sought comment on the proposed 

timeline for application of these 

proposals. 

Comment: One commenter supported 

the proposed maximum weight of 50 

percent on the regional adjustment, 

stating that they agreed with CMS’ 

reasoning behind the proposed policy 

and noted that it would also help to 

ensure that smaller Medicare markets 

and larger markets with greater ACO 

concentration would sustain 

competitive pressure, both between 

ACOs within a particular market and 

between the Shared Savings Program 

and traditional Medicare FFS payment 

polices, across multiple agreement 

periods. 

However, nearly all of the other 

commenters that addressed our 

proposals to modify the regional 

adjustment opposed reducing the 

maximum weight on the regional 

adjustment from 70 percent to 50 

percent. One commenter described the 

proposal to lower the maximum weight 

as premature. They noted that the 

current policy was only finalized two 

years ago and, given the existing phasein schedule, no ACO has yet reached a 

weight of 70 percent. Several 

commenters expressed the belief that 

this policy would penalize ACOs that 

have performed well or put them at a 

competitive disadvantage, with some 

commenters disputing CMS’ 

characterization of large positive 

regional adjustments as potential 

windfalls. One commenter suggested 

that lowering the maximum weight 

could reduce recruitment and retention 

of high value and experienced ACOs. 

Another commenter stated that this 

proposal, combined with the proposal to 

cap the regional adjustment, would 

make it more difficult for ACOs to earn 

shared savings that they could then use 

to cover the incremental costs of 

accountable care. One commenter 

favored retaining the 70 percent 

maximum adjustment because they 

believe it would lead to greater 

alignment between the Shared Savings 

Program and Medicare Advantage given 

the regional nature of the benchmarking 

and bid process in that program. A few 

commenters suggested that this proposal 

was an example of CMS ‘‘changing the 

rules,’’ which, one commenter noted, 

can erode confidence in the program. 

Another commenter stated they did not 

support the proposed modifications to 

the regional adjustment; but, in their 

justification of this position they 

appeared to be conflating the proposed 

modifications the regional adjustment 

with the proposal to use a blend of 

national and regional factors to establish 

and update the benchmark. 

Response: We appreciate commenters’ 

feedback related to our proposal to 

reduce the maximum weight of the 

regional adjustment from 70 percent to 

50 percent. We view the regional 


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adjustment as providing a more accurate 

benchmark that recognizes ACOs that 

have attained efficiency relative to their 

region as well as a means of 

incentivizing these ACOs to participate 

in the program and further reduce 

spending. We also recognize that greater 

alignment of the Shared Savings 

Program with Medicare Advantage is a 

shared goal among a number of 

commenters. However, based on our 

first two years of experience in applying 

regional adjustments in the calculation 

of ACO historical benchmarks, we 

continue to believe that the proposed 

limit on the regional adjustment for 

ACOs that are low cost relative to their 

region will help to ensure that these 

ACOs are not in a position where they 

can earn shared savings with little to no 

additional reductions in cost, a situation 

that we believe would arise if the weight 

placed on the adjustment is permitted to 

rise to 70 percent, as provided under the 

current schedule. 

We also continue to believe that many 

ACOs would still have an incentive to 

participate in the program with a 

maximum weight of 50 percent on the 

regional adjustment. This belief is 

influenced by our experience with the 

Next Generation ACO Model. The 

model provided for up to a 1 percent 

increase to benchmarks for ACOs with 

lower spending compared to their 

region. ACOs with lower spending than 

their region elected to participate in the 

model, and overall, the model showed 

that beneficiaries aligned to Next 

Generation ACOs had lower spending 

than other fee-for-service beneficiaries 

who were not aligned with an ACO in 

their region, as noted by the first year 

evaluation (https://innovation.cms.gov/ 

Files/reports/nextgenacofirstannrpt.pdf). The policies we are 

finalizing in this rule will provide a 

significantly larger adjustment than that 

tested by the Next Generation ACO 

Model, even when accounting for the 

maximum 50 percent weight applied to 

the regional adjustments in future 

agreement periods and the symmetrical 

cap equal to 5 percent of national per 

capita expenditures for Parts A and B 

services for assignable beneficiaries. 

Comment: A number of commenters 

suggested alternative phase-in schedules 

or levels for the weights applied to the 

regional adjustment: 

• Several commenters suggested the 

following schedule of weights for ACOs that 

have lower or higher expenditures, 

respectively, relative to their region: 30 or 25 

percent in first agreement period in which 

the ACO is subject to the regional 

adjustment, 50 or 35 percent in second 

agreement period receiving adjustment; 70 or 

50 percent in third agreement period 

receiving adjustment; and 70 for all ACOs in 

the fourth and subsequent agreement periods. 

Another commenter also recommended using 

weights of 70 or 50 percent in the third 

agreement period in which an ACO is subject 

to the regional adjustment but did not 

comment on which weights should be 

applied for other agreement periods; 

• One commenter recommended that CMS 

implement a more gradual phase-in than the 

proposed approach and provide maximum 

flexibility and choices for ACOs. They 

suggested applying a weight that increases 

over the course of an ACO’s first five-year 

agreement period with a regional adjustment, 

such as a 10 percent weight in the first two 

years, 20 percent in the second two years, 

and 30 percent in the final year; 

• A few commenters recommended that 

CMS adopt the following phase-in schedule: 

35 or 25 percent in the first agreement period 

with a regional adjustment, 60 or 45 percent 

in the second agreement with a regional 

adjustment, and 70 percent in the third and 

all subsequent agreement periods with a 

regional adjustment. The same commenters 

also recommended that CMS consider an 

alternative under which an ACO would have 

an option to gradually incorporate regional 

expenditure data into their benchmarks, with 

an increase of 10 percent annually during an 

agreement period. 

• A few commenters recommended raising 

the maximum weight on the adjustment to 75 

percent. 

As described in section II.D.3.b of this 

final rule, several commenters had 

concerns that incorporating regional 

adjustments in an ACO’s first agreement 

period would disincentivize 

participation among ACOs whose costs 

have historically been high relative to 

their region, with some advising CMS 

not to incorporate such adjustments too 

quickly. MedPAC noted its belief that 

blending ACO-specific historical costs 

with regional FFS costs through the 

application of the regional adjustment is 

a reasonable approach, but also 

suggested that the share of the 

benchmark attributed to regional costs 

should start low and be refined as 

program results are evaluated over time. 

Another commenter also called for 

gradually incorporating regional data 

into benchmarks in order to better 

account for the specific characteristics 

of the patient population of each 

individual ACO. 

One commenter recommended 

eliminating regional adjustments that 

blend ACO historical spending with 

regional spending. The commenter 

presented evidence to suggest that 

regional adjustments led to the exit from 

the program of ACOs with a first 

agreement period ending on December 

31, 2016, and spending above their 

region’s average. They expressed 

concern that the pattern of selective 

participation would grow only worse if 

ACOs are required to assume downside 

risk as negative regional adjustments 

would cause some higher cost ACOs to 

face certain shared losses. They believe 

that the proposals to reduce the 

maximum weight on the regional 

adjustment to 50 percent and to cap the 

amount of the adjustment at 5 percent 

of national Medicare FFS expenditures 

would do little to mitigate the risk that 

the program would become viable only 

for ACOs serving healthier patients. In 

lieu of a regional adjustment, the 

commenter recommended incentivizing 

efficiency relative to an ACO’s region by 

increasing the sharing rates for lower 

cost ACOs. 

Response: We appreciate commenters’ 

suggestions for alternatives to the 

proposed phase-in schedule and weight 

levels for the regional adjustment. We 

also appreciate the recommendation 

that we incentivize efficiency among 

lower cost ACOs through modifications 

to the sharing rate as opposed to 

through a regional adjustment, but we 

believe this suggestion falls outside the 

scope of policies contemplated in the 

August 2018 proposed rule. 

We continue to believe that reducing 

the maximum weight of the regional 

adjustment from 70 percent to 50 

percent is appropriate in order to 

promote continuous improvement and 

prevent potential windfall gains to 

lower cost ACOs. Further, and as 

previously described based on our 

experience with a more modest positive 

adjustment tested in the Next 

Generation ACO Model for ACOs shown 

to be efficient relative to their region, we 

are not convinced by the comments that 

reducing the weight to this level would 

significantly deter lower cost ACOs 

from participating in the program. 

However, based on comments 

received on the proposals described in 

this section and in section II.D.3.b of 

this final rule, we are concerned that 

our proposed policies for modifying the 

regional adjustment may not sufficiently 

improve incentives for ACOs that are 

high cost relative to their region to enter 

or remain in the program. In particular, 

we are concerned by evidence presented 

by one commenter regarding the 

selective exit by certain ACOs with a 

first agreement period ending on 

December 31, 2016, and by the 

possibility raised by a few commenters 

that a negative regional adjustment 

could, by itself, cause some ACOs to 

owe shared losses. We believe that it is 

important to maintain incentives for 

participation among higher cost ACOs, 

as these ACOs can offer high potential 

for savings for the Trust Funds and, in 

some cases, may serve complex, highrisk patients who would benefit from 

improved care management. To that 


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end, we are therefore finalizing a 

modified schedule of weights that 

would slow the phase-in of the regional 

adjustment for these ACOs relative to 

our original proposal. Specifically, for 

the first agreement period that an ACO 

is subject to a regional adjustment, we 

will apply a weight of 15 percent if the 

ACO’s historical spending was higher 

than its region, for the second agreement 

period that an ACO is subject to a 

regional adjustment we will apply a 

weight of 25 percent if the ACO was 

higher than its region, for the third 

agreement period that an ACO is subject 

to a regional adjustment we will apply 

a weight of 35 percent if the ACO was 

higher than its region, and for the fourth 

and all subsequent agreement periods 

that an ACO is subject to a regional 

adjustment we will apply a weight of 50 

percent. In the final action statement for 

this section we provide examples of 

how this policy would be applied for 

renewing or re-entering ACOs that were 

previously subject to a regional 

adjustment under the current 

methodology. 

We selected 15 percent as the initial 

weight of the regional adjustment for 

ACOs that are higher spending than 

their region in order to balance our 

concerns about maintaining 

participation incentives with 

maintaining incentives to reduce 

spending. In making this selection, we 

performed an analysis in which we 

examined, ex post facto, what level of 

weight applied to regional adjustments 

for higher cost ACOs entering the 

program in performance year 2014 

would have produced roughly 

comparable average shared savings 

payments to those earned on average by 

lower cost ACOs entering the program 

in same performance year. A simulated 

15 percent weight for higher cost ACOs 

resulted in the desired balance with 

shared savings to lower cost ACOs. This 

analysis supports our belief that 

reducing the weight that will be applied 

to a negative regional adjustment in an 

ACO’s first agreement period will 

preserve a reasonable business case for 

participation by higher cost ACOs and 

improve the incentive for higher cost 

ACOs to enter the program and that 

slowing the phase-in of the weights will 

help to retain these ACOs in subsequent 

agreement periods. We believe 

increased participation among such 

ACOs will lead to coordinated care for 

more Medicare beneficiaries and 

generate additional savings for the 

Medicare Trust Funds. 

Comment: Commenters had mixed 

reactions to the proposed symmetrical 

cap on the regional adjustment, with a 

majority requesting that CMS impose a 

higher cap or no cap at all. Among 

commenters that opposed capping the 

adjustment, one commenter described 

the proposed 5 percent level as arbitrary 

and a few others expressed the belief 

that CMS should not intervene in the 

market in this manner and should allow 

competition among ACOs and other 

providers to address and eventually 

mitigate outlier situations. Several 

commenters suggested that limiting the 

magnitude of the regional adjustment 

would undermine policy goals, with one 

noting that the cap could reduce the 

incentive for ACOs to drive costs lower. 

One commenter expressed the belief 

that the proposed cap on the regional 

adjustment is based on the false 

assumption that low Medicare 

expenditures are due to an inordinately 

healthy population or extremely 

efficient healthcare delivery system, 

when they may in fact be due to a lack 

of patient access to appropriate services 

as they explain is the case in the state 

of Hawaii. This commenter believes that 

the program’s current regional 

benchmarking methodology would 

appropriately assist ACOs in Hawaii 

with achieving savings and reward these 

ACOs for seeking to improve upon the 

already low cost of care per beneficiary. 

A few commenters that opposed 

limiting the regional adjustment 

recommended that if CMS decides to 

move forward with the proposed cap, 

the agency should increase the level of 

the cap. Some suggested using a cap of 

positive or negative 7 percent. Another 

commenter recommended an 8 percent 

cap applied at the aggregate level rather 

than at the enrollment type level. They 

noted that this higher cap would allow 

for an efficiency return similar to what 

Medicare Advantage plans can receive 

net of their administrative costs for 

administering the plan (around 7 

percent). This commenter also noted 

that if CMS were choosing between a 

policy to cap the regional adjustment at 

5 percent and a policy to limit the 

weights on the adjustment, they would 

prefer that CMS limit the weight on the 

adjustment and either eliminate or raise 

the cap. Several other commenters 

appeared to support the idea of a cap on 

the regional adjustment, but also 

recommended that CMS consider 

raising the level of the cap with specific 

suggestions ranging from 7 percent to 10 

percent. One commenter noted that they 

understood CMS’ rationale in wanting 

to mitigate the effects of excessive 

regional adjustments but believe that 

such adjustments can benefit a region by 

leveling costs across health care 

providers within the region as more 

organizations transition to value-based 

care and can provide an incentive for 

high-cost ACOs to decrease costs and for 

low-cost organizations to join efforts 

towards furnishing value-based care. 

Others believed a higher cap would be 

sufficient to ‘‘control for outliers.’’ 

By contrast, other commenters 

supported the proposed 5 percent cap 

on the regional adjustment or requested 

that the cap be made even more 

stringent. One commenter expressed the 

belief that the proposed cap would 

reduce the current disincentive for 

ACOs serving complex, frail, and 

functionally limited populations to 

continue in the program and another 

noted that it would ‘‘control for 

outliers.’’ One commenter 

recommended that CMS adopt a lower 

cap than 5 percent, stating that this 

lower cap would be beneficial for ACOs 

serving complex and costly populations 

whose expenditures are not fully 

predicted by risk scores. 

Several commenters agreed with the 

proposed symmetrical cap of 5 percent 

of national Medicare FFS expenditures 

but requested that CMS incentivize 

ACOs to take on more risk by providing 

ACOs in two sided models with an 

option to use national benchmarks 

instead of benchmarks that incorporate 

regional factors. They believe this 

option would be desirable for ACOs in 

historically low-cost regions that would 

otherwise not be willing to take on risk. 

A few other commenters that did not 

necessarily support the proposed 5 

percent cap also suggested that CMS 

allow use of national rather than 

regional factors to determine the 

benchmark for physician-led ACOs or 

ACOs in small markets dominated by 

one or two health systems. 

Response: We are finalizing our 

proposal to implement a symmetrical 

cap equal to 5 percent of national per 

capita FFS expenditures for assignable 

beneficiaries for each enrollment type. 

We recognize that there are tradeoffs in 

adopting any cap and that limiting the 

magnitude of positive adjustments 

could reduce incentives for 

participation or further cost reduction 

efforts among ACOs that have low costs, 

whether due to efficiency, patient mix, 

or limited patient access to services. 

However, we continue to believe that a 

symmetrical 5 percent cap on the 

regional adjustment will protect the 

Medicare Trust Funds from excessive 

positive adjustments and will improve 

incentives for participation among 

higher-cost ACOs, particularly when 

combined with the modified schedule of 

weights that we are adopting in this 

rule, which slows the phase-in of the 

regional adjustment for ACOs with 

historical costs above their region. 


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Additionally, we are not 

contemplating policies that would allow 

certain ACOs to move to a benchmark 

that incorporates national rather than 

regional factors at this time. Given the 

existing variations in expenditures 

between regions, we believe that the use 

of regional factors in determining the 

benchmarks for all ACOs, will ensure 

that these benchmarks better reflect the 

specific circumstances each ACO faces. 

Comment: One commenter asserted 

that CMS did not provide convincing 

evidence that the proposed 

modifications to the regional adjustment 

would strike the appropriate balance 

between competing objectives, 

including providing incentives for 

ACOs to reduce spending (by reducing 

the impact of current spending on future 

benchmarks) and for efficient ACOs to 

extend participation, addressing mean 

reversion, and reducing disincentives 

for higher cost ACOs to participate. The 

commenter noted that the appropriate 

size of the adjustment may vary over 

time, just as the primary rationale for an 

adjustment changes over time. The 

commenter explained that in an ACO’s 

first agreement period the primary 

rationale for an adjustment is to address 

mean reversion and in later agreement 

periods the primary rationale is to 

reduce the link between an ACO’s 

current performance and future 

benchmarks, thus providing an 

incentive for ACOs to continue to 

reduce spending. Furthermore, the 

commenter encouraged CMS to conduct 

additional analysis and offered 

suggestions for what that analysis might 

entail and recommended that the agency 

refine its proposals for modifying the 

regional adjustment, if warranted. 

Response: We appreciate this 

commenter’s input on the factors that 

should be considered when determining 

the appropriate magnitude of the 

regional adjustment, as well as the 

suggestions for additional analyses. We 

agree with the commenter that 

determining the appropriate magnitude 

of the regional adjustment involves 

weighing different considerations such 

as how to incentivize both high and low 

cost ACOs to participate in the program 

and reduce spending and how to avoid 

making windfall payments to ACOs. We 

believe that the changes we are adopting 

in this rule attempt to balance these 

various concerns. We will monitor and 

evaluate the impact of the changes that 

we are making the regional adjustment 

in this final rule, and as we gain 

experience may propose additional 

refinements through future notice and 

comment rulemaking, if warranted. 

Comment: We received few comments 

on our proposal to apply the proposed 

cap at the enrollment type level. One 

commenter expressed support for this 

proposal, stating that this approach 

would best serve to limit the most 

extreme adjustments to ACO 

benchmarks and also aligns with the 

current method for calculating ACO 

benchmarks. Another commenter would 

prefer CMS to apply the proposed 5 

percent cap at the aggregate level. This 

commenter noted that when applied at 

the enrollment type level, the proposed 

approach would effectively apply a cap 

of less than 5 percent, in aggregate, if 

any one of the four categories is below 

the 5 percent cap. The commenter 

believes this result would reduce 

incentives for ACOs to perform well. 

Response: As we described in the 

proposed rule, our analysis found that 

implementing the cap at the aggregate 

level rather than by enrollment type as 

proposed would have little impact for 

most ACOs, but we acknowledge that 

for some ACOs the proposed approach 

would be somewhat more stringent. We 

continue to prefer the enrollment typelevel approach for this reason as we 

believe it will better allow us to meet of 

our goals of reducing potential windfalls 

and improving incentives for higher cost 

ACOs. This approach also aligns more 

closely with other benchmark 

calculations, as noted by one 

commenter. We are finalizing our 

proposal to apply the cap separately for 

each enrollment type. 

Comment: A few commenters stressed 

the importance of careful risk 

adjustment when combining an ACO’s 

historical expenditures with regional 

average expenditures through a regional 

adjustment; however, one commenter 

noted that risk adjustment will always 

be inadequate to some degree. While 

this commenter did not agree with using 

regional adjustments at the current time, 

they suggested that if regional 

adjustments are used in the future, CMS 

should implement additional measures 

to ensure that ACOs are not penalized 

for serving higher-risk patients. In 

particular, the commenter suggested 

offering ACOs a per-beneficiary care 

management fee that is higher for 

higher-risk patients. 

Response: We agree with these 

commenters that it is important to 

adjust for differences in health status 

between an ACO’s assigned beneficiary 

population and the assignable 

beneficiary population in its region 

when calculating and applying the 

regional adjustment to the historical 

benchmark, which is why in the June 

2016 final rule (81 FR 37967) we 

finalized a policy of using full CMS– 

HCC risk adjustment for this purpose. 

We appreciate the commenter’s 

suggestion that we adopt further 

measures to ensure that ACOs are not 

penalized for serving higher risk 

patients; however, we believe that their 

recommendation of offering a perbeneficiary care management fee is 

outside the scope of the policies 

addressed in the proposed rule. 

Comment: Several commenters 

recommended modifying the regional 

adjustment by removing an ACO’s own 

assigned beneficiaries from the regional 

expenditure amount used to calculate 

the adjustment. One commenter 

recommended revising the definition of 

an ACO’s regional service area to 

include only counties where at least one 

percent of an ACO’s assigned 

beneficiaries reside to reduce 

complexity and provide a better 

reflection of an ACO’s regional service 

area. Another commenter requested that 

the regional comparison be based on the 

FFS population because they note that 

their ACO drives their regional market. 

Response: In the June 2016 final rule, 

CMS made the policy decision to 

calculate regional expenditures based 

on all assignable FFS beneficiaries in an 

ACO’s regional service area, including 

beneficiaries assigned to that ACO or 

any ACO (see 81 FR 37960). We 

discussed in the August 2018 proposed 

rule some of our ongoing concerns about 

a policy that would exclude ACOassigned beneficiaries from these 

calculations (see section II.D.3.d of the 

proposed rule). These concerns include 

the potential for bias due to small 

sample sizes or differences in the 

spending and utilization patterns 

between ACO-assigned and nonassigned beneficiaries, the potential 

incentive for ACOs to avoid high risk 

beneficiaries, and greater operational 

complexity. In the June 2016 final rule, 

we also discussed our rationale for 

including in the definition an ACO’s 

regional service area all counties in 

which at least one assigned beneficiary 

resides (81 FR 37959). We believe this 

approach is necessary to accurately 

reflect the diversity of the ACO’s 

assigned beneficiary population and 

provide a complete picture of the ACO’s 

regional service area. We are unclear if 

the commenter requesting a comparison 

based on the FFS population is 

requesting that the regional adjustment 

be based on a comparison between the 

ACO’s own historical expenditures and 

national FFS expenditures or between 

the ACO’s own historical expenditures 

and regional expenditures based on all 

FFS beneficiaries rather than assignable 

beneficiaries. We did not contemplate 

either approach in the proposed rule, as 

we did not propose any changes to the 

population used in the regional 


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adjustment calculation. Accordingly, we 

decline to make any changes to our 

current policy of calculating regional 

expenditures based on all assignable 

beneficiaries in an ACO’s regional 

service area, including beneficiaries 

assigned to that ACO or any other ACO. 

However, as described in section 

II.D.3.d. of this final rule, ACOs whose 

assigned beneficiaries comprise a large 

share of their regional assignable 

populations will receive a higher weight 

on the national component of the 

blended trend and update factors used 

in benchmark calculations. 

Final Action: After considering the 

comments received, we are finalizing 

with modification our proposal to 

modify the schedule of weights used to 

phase in the regional adjustment and are 

finalizing, as proposed, the proposal to 

impose a cap on the dollar amount of 

the adjustment. For the first agreement 

period that an ACO is subject to the 

regional adjustment, we will apply a 

weight of 35 percent if the ACO’s 

historical spending was lower than its 

region and a weight of 15 percent if the 

ACO’s historical spending was higher 

than its region. For the second 

agreement period, we will apply 

weights of 50 percent and 25 percent for 

lower and higher spending ACOs, 

respectively. For the third agreement 

period, we will apply weights of 50 

percent and 35 percent, respectively. 

For the fourth or subsequent agreement 

period, we will apply a weight of 50 

percent for all ACOs. Additionally, we 

will impose a symmetrical cap on the 

regional adjustment equal to positive or 

negative 5 percent of the national per 

capita FFS expenditures for assignable 

beneficiaries for each enrollment type. 

We proposed to apply the modified 

schedule of weights and the cap on the 

regional adjustment for agreement 

periods beginning on July 1, 2019, and 

in subsequent years. These policies will 

be included in a new provision of the 

regulations at § 425.601, which will 

govern the determination of historical 

benchmarks for all ACOs for agreement 

periods starting on July 1, 2019, and in 

subsequent years. 

We note that for renewing or reentering ACOs (see section II.A.5.c. of 

this final rule) that previously received 

a rebased historical benchmark under 

the current benchmarking methodology 

set forth in § 425.603, we will consider 

the agreement period the ACO is 

entering upon renewal or re-entry in 

combination with the weight previously 

applied to calculate the regional 

adjustment to the ACO’s benchmark in 

the ACO’s most recent prior agreement 

period to determine the weight that will 

apply in the new agreement period. For 

example, an ACO that was subject to a 

weight of 35 or 25 percent in its second 

agreement period in the Shared Savings 

Program (first agreement period subject 

to a regional adjustment) under the 

current benchmarking methodology that 

enters its third agreement period in the 

program (second agreement period 

subject to a regional adjustment) would, 

under the policies we are adopting in 

this final rule, be subject to a weight of 

50 or 25 percent. By contrast, if the 

same ACO terminated during its second 

agreement period and subsequently reenters the program, the ACO would face 

a weight of 35 or 15 percent until the 

start of its next agreement period. For a 

new ACO identified as a re-entering 

ACO because greater than 50 percent of 

its ACO participants have recent prior 

participation in the same ACO, we will 

consider the weight most recently 

applied to calculate the regional 

adjustment to the benchmark for the 

ACO in which the majority of the new 

ACO’s participants were participating 

previously. 

d. Modifying the Methodology for 

Calculating Growth Rates Used in 

Establishing, Resetting, and Updating 

the Benchmark 

As discussed previously, we believe 

that using regional expenditures to 

trend forward BY1 and BY2 to BY3 in 

the calculation of the historical 

benchmark and to update the 

benchmark to the performance year has 

the advantage of producing more 

accurate benchmarks. Regional trend 

and update factors allow us to better 

capture the cost experience in the 

ACO’s region, the health status and 

socio-economic dynamics of the 

regional population, and locationspecific Medicare payments when 

compared to using national FFS 

expenditures. However, in the August 

2018 proposed rule (83 FR 41891) we 

acknowledged the concern raised by 

stakeholders that the use of regional 

trend or update factors may affect ACOs’ 

incentives to reduce spending growth or 

to continue participation in the 

program, particularly in circumstances 

where an ACO serves a high proportion 

of beneficiaries in select counties 

making up its regional service area. For 

such an ACO, a purely regional trend 

will be more influenced by the ACO’s 

own expenditure patterns, making it 

more difficult for the ACO to 

outperform its benchmark and 

conflicting with our goal to move ACOs 

away from benchmarks based solely on 

their own historical costs. We therefore 

considered options that would continue 

to incorporate regional expenditures 

into trend and update factors while still 

protecting incentives for ACOs that 

serve a high proportion of the Medicare 

FFS beneficiaries in their regional 

service area. 

One approach, supported by a number 

of stakeholders commenting on the 2016 

proposed rule, would be to exclude an 

ACO’s own assigned beneficiaries from 

the population used to compute regional 

expenditures. However, as we explained 

in the June 2016 final rule (81 FR 37959 

through 37960), we believe that such an 

approach would create potential bias 

due to the potential for small sample 

sizes and differences in the spending 

and utilization patterns between ACOassigned and non-assigned beneficiaries. 

The latter could occur, for example, if 

an ACO tends to focus on a specialized 

beneficiary population. We are also 

concerned that excluding an ACO’s own 

assigned beneficiaries from the 

population could provide ACOs with an 

incentive to influence the assignment 

process by seeking to provide more care 

to healthy beneficiaries and less care to 

more costly beneficiaries. Given these 

concerns, in developing the proposals 

for the August 2018 proposed rule we 

chose to focus on alternative options 

that would address stakeholder 

concerns by using a combination of 

national and regional factors. 

The first approach we considered 

would use a blend of national and 

regional growth rates to trend forward 

BY1 and BY2 to BY3 when establishing 

or resetting an ACO’s historical 

benchmark (referred to as the nationalregional blend). By incorporating a 

national trend factor that is more 

independent of an ACO’s own 

performance, we believe that the 

national-regional blend would reduce 

the influence of the ACO’s assigned 

beneficiaries on the ultimate trend 

factor applied. It would also lead to 

greater symmetry between the Shared 

Savings Program and Medicare 

Advantage which, among other 

adjustments, applies a national 

projected trend to update county-level 

expenditures. 

Under this approach, the nationalregional blend would be calculated as a 

weighted average of national FFS and 

regional trend factors, where the weight 

assigned to the national component 

would represent the share of assignable 

beneficiaries in the ACO’s regional 

service area that are assigned to the 

ACO, calculated as described in section 

II.D.3.d of the proposed rule. The weight 

assigned to the regional component 

would be equal to 1 minus the national 

weight. As an ACO’s penetration in its 

region increases, a higher weight would 

be placed on the national component of 

the national-regional blend and a lower 


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weight on the regional component, 

reducing the extent to which the trend 

factors reflect the ACO’s own 

expenditure history. 

The national component of the 

national-regional blend would be trend 

factors computed for each Medicare 

enrollment type using per capita FFS 

expenditures for the national assignable 

beneficiary population. These trend 

factors would be calculated in the same 

manner as the national trend factors 

used to trend benchmark year 

expenditures for ACOs in a first 

agreement period under the current 

regulations. For example, the national 

trend factor for the aged/non-dual 

population for BY1 would be equal to 

BY3 per capita FFS expenditures among 

the national aged/non-dual assignable 

population divided by BY1 per capita 

FFS expenditures among the national 

aged/non-dual assignable population. 

Consistent with our current approach, 

the per capita FFS expenditures used in 

these calculations would not be 

explicitly risk-adjusted. By using risk 

ratios based on risk scores renormalized 

to the national assignable population, as 

described in section II.D.2. of this final 

rule, we are already controlling for 

changes in risk in the national 

assignable population elsewhere in the 

benchmark calculations, rendering 

further risk adjustment of the national 

trend factors unnecessary. 

The regional component of the 

national-regional blend would be trend 

factors computed for each Medicare 

enrollment type based on the weighted 

average of risk-adjusted county FFS 

expenditures for assignable 

beneficiaries, including assigned 

beneficiaries, in the ACO’s regional 

service area. These trend factors would 

be computed in the same manner as the 

regional trend factors used to trend 

benchmark year expenditures for ACOs 

that enter a second or subsequent 

agreement period in 2017 or later years 

under the current regulations. The 

regional trend factors reflect changes in 

expenditures within given counties over 

time, as well shifts in the geographic 

distribution of an ACO’s assigned 

beneficiary population. This is due to 

the fact that regional expenditures for 

each year are calculated as the weighted 

average of county-level expenditures for 

that year where the weight for a given 

county is the proportion of the ACO’s 

assigned beneficiaries residing in that 

county in that year. 

The weights used to blend the 

national and regional components 

would be calculated separately for each 

Medicare enrollment type using data for 

BY3. To calculate the national weights, 

we would first calculate for each 

enrollment type the share of assignable 

beneficiaries that are assigned to the 

ACO in each county in the ACO’s 

regional service area. We would then 

weight each county’s share by the 

proportion of the ACO’s total assigned 

beneficiary population in that 

enrollment type residing in that county 

to obtain the regional share. This 

weighting approach mirrors the 

methodology used to calculate regional 

expenditures, as it gives higher 

precedence to counties where more of 

the ACO’s assigned beneficiaries reside 

when determining the ACO’s overall 

penetration in its region. 

As an example, assume an ACO has 

11,000 assigned beneficiaries with aged/ 

non-dual eligible enrollment status and 

the ACO’s regional service area consists 

of two counties, County A and County 

B. There were 10,000 assignable aged/ 

non-dual beneficiaries residing in 

County A in BY3, with 9,000 assigned 

to the ACO in that year. There were 

12,000 assignable aged/non-dual 

beneficiaries residing in County B with 

2,000 assigned to the ACO. The weight 

for the national component of the 

blended trend factor for the aged/nondual enrollment type would be: 

[(Assigned Beneficiaries in County A/ 

Assignable Beneficiaries in County A) × 

(Assigned Beneficiaries in County A/ 

Total Assigned Beneficiaries)] + 

[(Assigned Beneficiaries in County B/ 

Assignable Beneficiaries in County B) × 

(Assigned Beneficiaries in County B/ 

Total Assigned Beneficiaries)] or 

[(9,000/10,000) × (9,000/11,000)] + 

[(2,000/12,000) × (2,000/11,000)], or 

76.7 percent. The weight given to the 

regional component of the blended 

trend factor for aged/non-dual 

enrollment type in this example would 

be 23.3 percent. Because this 

hypothetical ACO has high penetration 

in its regional service area, the national 

component of the blended trend factor 

would receive a much higher weight 

than the regional component. 

Initial modeling among 73 ACOs that 

renewed for a second agreement period 

in 2017 found that the weighted average 

share of assignable beneficiaries in an 

ACO’s regional service area that are 

assigned to the ACO ranged from under 

1 percent to around 60 percent, when 

looking at all four enrollment types 

combined, with a median of 12.3 

percent and a mean of 15.1 percent. 

Among the 73 ACOs, 8 (11 percent) had 

regional shares above 30 percent. We 

found similar distributions when 

looking at the four enrollment types 

individually. Among ACOs with overall 

regional shares above 30 percent, the 

simulated use of blended trend factors 

caused changes in benchmarks (relative 

to current policy) of ¥0.8 percent to 0.3 

percent, with half seeing a slight 

negative impact and the other half 

seeing a slight positive impact. Based on 

these statistics, it appears that most 

ACOs currently do not have significant 

penetration in their regional service 

areas. As a result, we would expect that 

for most ACOs the regional component 

of the blended trend factor would 

receive a higher weight than the 

national component and that the overall 

impact of the national-regional blend on 

benchmarks relative to current policy 

would be small. Should penetration 

patterns change over time, the blended 

formula would automatically shift more 

weight to the national component of the 

trend factor. 

We would also use a national-regional 

blend when updating the historical 

benchmark for each performance year. 

That is, we would multiply historical 

benchmark expenditures for each 

Medicare enrollment type by an update 

factor that blends national and regional 

expenditure growth rates between BY3 

and the performance year. The national 

component for each update factor would 

equal performance year per capita FFS 

expenditures for the national assignable 

beneficiary population for that 

enrollment type divided by BY3 per 

capita FFS expenditures for the national 

assignable beneficiary population for 

that enrollment type. As described 

above, the FFS expenditures for the 

national population would not be riskadjusted. The regional component for 

each update factor would equal the 

weighted average of risk-adjusted 

county FFS expenditures among 

assignable beneficiaries, including the 

ACO’s assigned beneficiaries, in the 

ACO’s regional service area in the 

performance year divided by the 

weighted average of risk-adjusted 

county FFS expenditures among 

assignable beneficiaries, including the 

ACO’s assigned beneficiaries, in the 

ACO’s regional service area in BY3. This 

regional component would be computed 

in the same manner as the regional 

updates used to update the rebased 

benchmark for ACOs that enter a second 

or subsequent agreement period in 2017 

or later years under the current 

regulations. The weights used to blend 

the national and regional components of 

the update factor would be calculated in 

the same manner as the weights that we 

proposed to use in calculating the 

blended trend factors for the historical 

benchmark, except they would be based 

on performance year rather than BY3 

data. That is, the weight assigned to the 

national component would represent 

the share of assignable beneficiaries in 


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ACO’s regional service area that are 

assigned to the ACO (based on a 

weighted average of county-level shares) 

in the performance year and the weight 

assigned to the regional component 

would be equal to 1 minus that share. 

In addition to the national-regional 

blend, we considered an alternate 

approach that would incorporate 

national trends at the county level 

instead of at the regional service area 

level (national-county blend). Under 

this alternative, for each county that is 

in an ACO’s regional service area in 

BY3, we would calculate trend factors to 

capture growth in county-level riskadjusted expenditures for assignable 

beneficiaries from BY1 to BY3 and from 

BY2 to BY3. Each county-level trend 

factor would be blended with the 

national trend factor. The blended trend 

factor for each county would be a 

weighted average of the national and 

county-level trends where the weight 

applied to the national component 

would be the share of assignable 

beneficiaries in the county that are 

assigned to the ACO in BY3. The weight 

applied to the county component of the 

blend would be 1 minus the national 

weight. 

After computing the blended trend 

factor for each county, we would 

determine the weighted average across 

all counties in the ACO’s regional 

service area in BY3, using the 

proportion of assigned beneficiaries 

residing in each county in BY3 as 

weights to obtain an overall blended 

trend factor. We would then apply this 

overall blended trend factor to the 

expenditures for the ACO’s assigned 

beneficiary population for the relevant 

benchmark year. All calculations would 

be done separately for each Medicare 

enrollment type. A similar approach 

would be used to compute update 

factors between BY3 and the 

performance year, but using weights 

based on share of assignable 

beneficiaries in each county that are 

assigned to the ACO in the performance 

year. 

Returning to the hypothetical ACO 

from above, under the national-county 

blend we would calculate separate 

blended trend factors for County A and 

County B. For County A, the national 

component would receive a weight of 

90.0 percent (9,000/10,000) and the 

county component would receive a 

weight of 1 minus 90.0 percent, or 10.0 

percent. For County B, the national 

component would receive a weight of 

16.7 percent (2,000/12,000) and the 

county component would receive a 

weight of 1 minus 16.7 percent, or 83.3 

percent. After computing the blended 

trend factor for each county, we would 

take the weighted average across the two 

counties, with County A’s blended trend 

factor receiving a weight of 81.8 percent 

(9,000/11,000) and County B’s blended 

trend factor receiving a weight of 18.2 

percent (2,000/11,000). 

Our modeling suggested that, for most 

ACOs, applying the blend at the countylevel would yield similar results to the 

national-regional blend. However, for 

ACOs that have experienced shifts in 

the geographic distribution of their 

assigned beneficiaries over time, we 

found the two methods to diverge. This 

is because the national-regional blend 

reflects not only changes in 

expenditures within specific counties 

over time, but also changes in the 

geographic distribution of the ACO’s 

own assigned beneficiaries. The 

national-county blend, by contrast, 

holds the geographic distribution of an 

ACO’s assigned beneficiaries fixed at 

the BY3 distribution (for trend factors) 

or at the performance year distribution 

(for update factors), potentially reducing 

accuracy. 

In the August 2018 proposed rule, we 

also expressed the concern that 

calculating trends at the county rather 

than regional level, in addition to being 

less accurate, would be less transparent 

to ACOs. While national and regional 

trends are both used under our current 

benchmarking policies, and are thus 

familiar to ACOs, county-level trends 

would present a new concept. For these 

reasons, we explained that we favored 

the approach that incorporates national 

trends at the regional rather than county 

level. 

Finally, we considered yet another 

approach that would simply replace 

regional trend and update factors with 

national factors for ACOs above a 

certain threshold of penetration in their 

regional service area. Specifically, if the 

share of assignable beneficiaries in an 

ACO’s regional service area that are 

assigned to that ACO (computed as 

described above as a weighted average 

of county-level shares) is above the 90th 

percentile among all currently active 

ACOs for a given enrollment type in 

BY3, we would use national trend 

factors to trend forward BY1 and BY2 

expenditures to BY3. For ACOs that are 

below the 90th percentile for a given 

enrollment type, we would continue to 

use regional factors as we do under the 

current policy. We would use a similar 

approach for the update factors, except 

the threshold would be based on the 

share of assignable beneficiaries that are 

assigned to the ACO in the performance 

year rather than BY3. Among the 73 

ACOs that entered a second agreement 

period in 2017, the 90th percentile for 

the four enrollment types ranged 

between 25 and 30 percent of assignable 

beneficiaries in the ACO’s regional 

service area. We noted that one 

drawback of this approach relative to 

the blended approaches previously 

described is that it would treat ACOs 

that are just below the threshold and 

just above the threshold very differently, 

even though they may be similarly 

influencing expenditure trends in their 

regional service areas. 

We also noted that as we had 

previously indicated with respect to 

regional trends (see, for example, 81 FR 

37976) and as suggested by our 

modeling, the national-regional blend, 

as well as the other options considered, 

would have mixed effects on ACOs 

depending on how the expenditure 

trends in an ACO’s regional service area 

differ from the national trend. ACOs 

that have high penetration in their 

regional service area and that have 

helped to drive lower growth in their 

region relative to the national trend 

would benefit from this policy. ACOs 

that have contributed to higher growth 

in their regions would likely have lower 

benchmarks as a result of this policy 

than under current policy, helping to 

protect the Medicare Trust Fund and 

providing increased incentives for these 

ACOs to lower costs. 

Based on the considerations 

previously discussed, we proposed to 

use a blend of national and regional 

trend factors (that is, the nationalregional blend) to trend forward BY1 

and BY2 to BY3 when determining the 

historical benchmark. We also proposed 

to use a blend of national and regional 

update factors, computed as described 

in section II.D.3.d of the proposed rule, 

to update the historical benchmark to 

the performance year (or to CY 2019 in 

the context of determining the financial 

performance of ACOs for the 6-month 

performance year from July 1, 2019 

through December 31, 2019, as proposed 

in section II.A.7. of the proposed rule). 

The blended trend and update factors 

would apply to determine the historical 

benchmark for all agreement periods 

starting on July 1, 2019, or in 

subsequent years, regardless of whether 

it is an ACO’s first, second, or 

subsequent agreement period. We also 

made clear that in the event an ACO 

makes changes to its certified ACO 

participant list for a given performance 

year or its assignment methodology 

selection, the weight that would be 

applied to the national and regional 

components of the blended trend and 

update factors would be recomputed to 

reflect changes in the composition of the 

ACO’s assigned beneficiary population 

in BY3. 


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Because the proposed blended update 

factor would be used in place of an 

update factor based on the projected 

absolute amount of growth in national 

per capita expenditures for Parts A and 

B services under the original FFS 

program as called for in section 

1899(d)(1)(B)(ii) of the Act, we noted 

that this proposal would require us to 

use our authority under section 

1899(i)(3) of the Act. This provision 

grants the Secretary the authority to use 

other payment models, including 

payment models that use alternative 

benchmarking methodologies, if the 

Secretary determines that doing so 

would improve the quality and 

efficiency of items and services 

furnished under Title XVIII and the 

alternative methodology would result in 

program expenditures equal to or lower 

than those that would result under the 

statutory payment model. 

In the August 2018 proposed rule (83 

FR 41893), we expressed our belief that 

by combining a national component that 

is more independent of an ACO’s own 

experience with a regional component 

that captures location-specific trends, 

the proposed blended update factor 

would mitigate concerns about ACO 

influence on regional trend factors, 

improving the accuracy of the 

benchmark update and potentially 

protecting incentives for ACOs that may 

have high penetration in their regional 

service areas. As such, we believed that 

this proposed change to the statutory 

benchmarking methodology would 

improve the quality and efficiency of 

the program. As discussed in the 

Regulatory Impact Analysis for the 

August 2018 proposed rule (section IV. 

of the proposed rule), we projected that 

this proposed approach, in combination 

with other changes to the statutory 

payment model proposed elsewhere in 

the proposed rule, as well as current 

policies established using the authority 

of section 1899(i)(3) of the Act, would 

not increase program expenditures 

relative to those under the statutory 

payment model. 

In summary, we proposed to use a 

blend of national and regional trend 

factors to trend forward BY1 and BY2 to 

BY3 when determining the historical 

benchmark and a blend of national and 

regional update factors to update the 

historical benchmark to the performance 

year (or to CY 2019 in the context of 

determining the financial performance 

of ACOs for the 6-month performance 

year from July 1, 2019 through 

December 31, 2019, as proposed in 

section II.A.7. of the proposed rule). The 

national component of the blended 

trend and update factors would receive 

a weight equal to the share of assignable 

beneficiaries in the regional service area 

that are assigned to the ACO, computed 

as described in section II.D.3.d of the 

proposed rule by taking a weighted 

average of county-level shares. The 

regional component of the blended 

trend and update factors would receive 

a weight equal to 1 minus the national 

weight. The proposed blended trend 

and update factors would apply to all 

agreement periods starting on July 1, 

2019, or in subsequent years, regardless 

of whether it is an ACO’s first, second, 

or subsequent agreement period. These 

proposed policies were included in the 

proposed new provision at § 425.601, 

which would govern the determination 

of historical benchmarks for all ACOs 

for agreement periods starting on July 1, 

2019, or in subsequent years. We sought 

comment on these proposals, as well as 

the alternatives considered, including 

incorporating national trends at the 

county rather than regional level or 

using national trend factors for ACOs 

with penetration in their regional 

service area exceeding a certain 

threshold. 

Comment: One commenter strongly 

supported the use of blended regional 

and national trend factors when 

calculating the historical benchmark. 

This commenter expressed the belief 

that this policy would ensure that ACOs 

whose assigned beneficiaries comprise a 

large percentage of the region’s 

Medicare FFS beneficiaries are not 

adversely impacted by their successful 

efforts to reduce the total cost of care. 

The commenter believes that this policy 

will encourage large ACOs to remain in 

the program and increases the 

likelihood that they will continue to 

generate savings over multiple 

agreement periods. Another commenter 

supported the use of blended national 

and regional trend factors as long as the 

regional trend factor is based on FFS 

beneficiaries and does not include 

beneficiaries enrolled in Medicare 

Advantage. 

Several other commenters generally 

agreed with the concept of blending 

national and regional growth rates to 

trend or update benchmarks with 

greater weight given to national trends 

for ACOs that serve a large share of the 

FFS population in their areas but 

requested that CMS exclude ACO 

assigned beneficiaries from the regional 

component of the blend. A few 

commenters suggested excluding ACO 

assigned beneficiaries from the national 

component as well. A larger number of 

commenters recommended using purely 

regional trend factors based on a 

regional population that excludes ACO 

assigned beneficiaries to trend and 

update benchmarks instead of a blend. 

Other commenters were also in favor of 

excluding ACO assigned beneficiaries in 

regional trends but did not specify 

whether they believed this should occur 

in addition to or in place of a blend. 

Commenters also appeared to have 

mixed views on whether the exclusion 

should be limited to a particular ACO’s 

own assigned beneficiaries, all Shared 

Savings Program assigned beneficiaries, 

or beneficiaries assigned to any 

Medicare shared savings initiative. One 

commenter did not specifically call for 

removing ACO assigned beneficiaries 

from regional calculations but requested 

that CMS take additional steps to 

address the problem of regionally 

significant ACOs driving expenditures 

in their service areas. As noted in 

section II.D.3.c. of this final rule, some 

commenters also called for excluding 

ACO assigned beneficiaries from the 

regional expenditures used to calculate 

an ACO’s regional adjustment. 

One commenter noted that while the 

proposed blending of national and 

regional growth rates would likely be an 

improvement over the current approach 

used in the rebasing methodology 

adopted in the June 2016 final rule, it 

would only partially improve the 

incentive for ACOs that are dominant in 

their region to reduce spending and that 

by placing a significant weight on the 

national component in these situations, 

the blend would do a worse job of 

capturing the local spending trends 

facing an ACO. Another commenter 

expressed similar views, noting that the 

proposed national-regional blend was ‘‘a 

step in the right direction’’ but could 

over-emphasize the national trend 

component, which ignores local market 

dynamics. The commenter believes that 

the blend would diminish the incentive 

that ACOs have to concentrate in high 

trend areas of the country and to control 

trend at the local level. In addition, this 

commenter believes that excluding ACO 

assigned beneficiaries from the regional 

reference population is a simpler 

solution that eliminates the situation 

where an ACO is being directly 

evaluated against itself. Several other 

commenters also raised concerns about 

ACOs competing against themselves or 

influencing regional trends when 

assigned beneficiaries are included in 

regional expenditure calculations, 

which could make it more difficult for 

an ACO to realize savings or to be 

comfortable taking on increasing 

amounts of risk. Other commenters 

suggested that including ACO assigned 

beneficiaries in regional trends reduced 

incentives for ACOs to participate or to 

reduce expenditures, particularly among 

rural ACOs. Several other commenters 


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suggested that removing ACO assigned 

beneficiaries was necessary to obtain a 

true comparison between an ACO and 

its region or would produce more 

accurate benchmarks. 

Several commenters also provided 

suggestions for how to address potential 

small sample size issues that could 

result from removing ACO assigned 

beneficiaries from regional expenditure 

calculations including expanding the 

geographic area to include adjacent or 

otherwise similar counties, using 

Hospital Referral Regions in place of 

counties, averaging over multiple years, 

increasing weights on counties with 

lower proportions of assigned 

beneficiaries, or employing other 

statistical techniques. One commenter 

noted that if the Shared Savings 

Program grows to the point where the 

non-ACO FFS population is very small, 

CMS should select a desirable rate at 

which benchmarks should grow and 

apply it to all ACOs. 

Response: We appreciate the 

comments we received on our proposal 

to use a blend of national and regional 

growth rates to trend and update the 

historical benchmark. We agree with 

commenters that our proposed approach 

of using a blend of national and regional 

growth rates to trend and update the 

historical benchmark would help to 

address concerns about ACOs with high 

penetration driving the trends in their 

regions and are finalizing this proposal. 

For the reasons described in the June 

2016 final rule (81 FR 37960), we did 

not propose to remove ACO assigned 

beneficiaries from the regional or 

national populations used to compute 

growth rates or the regional adjustment 

and are not adopting commenters’ 

recommendations regarding this 

approach at this time. As we noted in 

the June 2016 final rule, we believe that 

removing assigned beneficiaries could 

lead to biased calculations, particularly 

in the case of ACOs serving higher cost 

beneficiaries within their regions and 

we have significant concerns about the 

complexity of the customized 

calculations that would be necessary to 

remove each ACO’s own assigned 

beneficiaries from the calculation of 

growth rates, as suggested by some 

commenters. We believe such 

calculations would be operationally 

burdensome and less transparent. As we 

are not modifying our proposal in order 

to remove ACO assigned beneficiaries 

from the determination of either 

regional or national growth rates, we do 

not believe it is necessary to adopt 

commenters’ various recommendations 

for addressing small sample size issues. 

National and regional expenditures 

will continue to be based on assignable 

beneficiaries in the FFS population 

during the applicable benchmark or 

performance year. Beneficiaries with 

months of Medicare Advantage 

enrollment during a particular 

benchmark or performance year may be 

included in the assignable beneficiary 

population for that year, but we would 

only consider the months in which 

those beneficiaries were enrolled in 

both Parts A and B and not enrolled in 

Medicare Advantage in making 

expenditure calculations. 

Comment: One commenter disagreed 

with the proposed approach of using a 

blend of national and regional growth 

rates, stating that this holds 

organizations in areas with historically 

low spending growth to a higher 

standard than those who are in high 

spending growth areas by assuming that 

regions with slower growth will be able 

to maintain these low trends when, in 

fact, the opposite may be true. The 

commenter believes that CMS should 

incentivize organizations in low growth 

areas to participate by using national 

trends only and by applying a more 

dramatic increase in their trend. 

Specifically, the commenter 

recommended that organizations that 

are in regions with growth trends below 

the national average and that have had 

historical spending at or below 85 

percent of the national average should 

receive a 3 percent increase to their 

growth factor based national trends. 

Organizations with historical spending 

at or below 90 percent or 95 percent of 

the national average could receive a 2 

percent or 1 percent added to their 

trend, respectively. Another commenter 

stated that he supported the move 

towards a national-regional blend, but 

also believes that the current proposal 

penalizes organizations with historically 

low spending growth. This commenter 

also supported a 3 percent increase to 

the trend factor for ACOs in regions 

with below average cost growth that 

have historical spending at or below 85 

percent of the national average. Both 

commenters expressed the belief that 

this approach would encourage 

organizations in California and other 

efficient areas to transition to a riskbased APM instead of continuing in 

MIPS. Another commenter 

recommended that CMS consider using 

a prospectively determined trend rate, 

which would allow for greater 

predictability of financial results by 

ACOs, noting that such trend rates are 

used in the Next Generation ACO Model 

and Medicare Advantage program. 

Similarly, one commenter called for 

using a ‘‘pre-determined inflation 

adjustment’’. 

Response: We do not agree with one 

commenter’s assertion that the proposed 

policy of using a blend of national and 

regional growth rates to trend or update 

the benchmark assumes that regions 

with slow growth will continue to have 

slow growth, because the proposed 

policy relies on retrospective growth 

rates, which reflect actual growth rates. 

In contrast, we believe that using 

prospectively determined trend rates or 

adjustments, as suggested by some 

commenters, could have this problem, 

even if this approach may offer other 

advantages. 

We do recognize that, all else being 

equal, ACOs in regions with slower than 

average growth would fare worse under 

the blended approach than they would 

under a policy that relies on purely 

national growth rates. However, we 

believe that it is important to balance 

the goal of creating incentives for 

participation with the desire to reflect 

the local circumstances of an ACO’s 

region, in order to avoid windfall gains 

to ACOs that are located in low growth 

areas. 

We also believe that providing a 

growth rate ‘‘add on’’ for efficient ACOs 

in such areas could help to increase 

participation by ACOs in these areas, 

but could similarly lead to windfall 

gains to the detriment of the Trust 

Funds. 

Comment: One commenter suggested 

that the proposed policies would not 

adequately solve the disparity in 

regional trend factors. They noted that 

ACOs in some areas of the country are 

faced with trying to beat national trends 

while regional trends are much higher. 

Response: We believe that our 

proposal to incorporate regional factors 

into an ACO’s benchmark for its first 

agreement period, which we are 

finalizing, helps to address the concern 

raised by this commenter that ACOs in 

areas with high cost growth are at a 

disadvantage when national factors are 

used to trend or update the benchmark. 

Under the new policy that we are 

adopting in this final rule, all ACOs, 

including those in their first agreement 

period, will receive a blend of national 

and regional trend and update factors. 

Furthermore, for most ACOs, the weight 

applied to the regional growth rate will 

likely be higher than the weight applied 

to the national growth rate. 

Comment: Several commenters did 

not agree with our proposal for 

weighting the regional and national 

components of growth rates. One 

commenter expressed the belief that this 

weighting should be based on multilevel 

statistical modeling approaches rather 

than what the commenter described as 

an arbitrary weighting scheme. Another 


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commenter expressed concern about 

weighting the regional benchmark in 

inverse proportion to an ACO’s market 

share, noting that the better an ACO 

performs, the more it reduces its 

regional benchmark, effectively 

reducing the opportunity for future 

savings. Another commenter also 

opposed applying a greater weight to the 

national trend factor based on market 

penetration stating that an assessment of 

an ACO’s effectiveness should not be 

tied to the size of market penetration 

and that CMS should be able to set a 

financial target in a market that 

determines whether or not an ACO was 

effective in generating savings, rather 

than creating a moving target based on 

an ACO’s individual circumstances. 

One additional commenter, while not 

specifically addressing the proposed 

weighting methodology, expressed the 

belief that regional factors should be a 

bigger percentage of the formulas as 

healthcare is a local phenomenon. 

Response: We are finalizing our 

proposed methodology for blending 

regional and national factors, which 

automatically adjusts the weight of the 

two components to reflect the 

percentage of an ACO’s assigned 

beneficiaries relative to its region. We 

believe this approach will be more 

transparent and familiar to ACOs than 

an approach that relies on statistical 

modeling, while still reducing the 

extent to which the overall blended 

trend factor reflects an individual ACO’s 

performance for ACOs that are highly 

penetrated in their region. As we noted 

in the proposed rule, we observed a 

median penetration rate for ACOs of 

around 12 percent. Therefore, we 

anticipate that for the majority of ACOs 

this weighing approach will provide a 

higher weight for regional factors (for 

example, 88 percent based on the 

median) as opposed to national factors. 

We disagree with commenters that 

basing the weights of the national 

growth factor on an ACO’s market 

penetration constitutes an assessment of 

an ACO’s performance. The rationale 

behind using an ACO’s market 

penetration to determine the national 

weight is meant to reduce the impact 

that an ACO’s own expenditure patterns 

will have on the growth rates used to 

trend and update its benchmark. 

Comment: A few commenters 

recommended modifying the update 

that is applied to an ACO’s benchmark 

for a performance year that is affected 

by an extreme an uncontrollable 

circumstance. For example, these 

commenters recommended that CMS 

apply a growth rate that is the higher of 

the national growth rate for assignable 

beneficiaries or the regional growth rate 

for assignable beneficiaries (excluding 

an ACO’s own assigned beneficiaries). A 

few other commenters recommended 

that CMS use the proposed blend of 

national and regional expenditure 

growth rates to update the benchmark in 

‘‘normal times’’ but use a purely 

regional growth rate in the event of an 

extreme and uncontrollable 

circumstance. 

Response: In the November 2018 final 

rule (83 FR 59968 through 59979) we 

finalized policies to extend, with minor 

modifications, the performance year 

2017 extreme and uncontrollable 

circumstances policies to performance 

year 2018 and subsequent years. These 

policies include an alternate quality 

scoring methodology for ACOs that are 

affected by extreme and uncontrollable 

circumstances and an adjustment to 

shared losses based on the percentage of 

the total months in the performance 

year affected by extreme and 

uncontrollable circumstances and the 

percentage of the ACO’s assigned 

beneficiaries residing in an affected 

area. In that final rule, we explained our 

belief that the use of regional growth 

rates in determining benchmark update 

factors for all ACOs, as we are finalizing 

in this final rule, would provide an 

inherent adjustment to the historical 

benchmark for expenditure changes 

resulting from extreme and 

uncontrollable circumstances during the 

agreement period. 

We appreciate commenters’ 

suggestions for additional approaches to 

providing relief for ACOs impacted by 

extreme and uncontrollable 

circumstances. We are concerned that 

the suggestion offered by some 

commenters of using the higher of the 

national or regional rate implicitly 

assumes that expenditures will always 

rise in a year affected by an extreme and 

uncontrollable circumstance, which 

may not always be the case. We 

therefore believe this approach would 

not appropriately address instances 

where expenditures for an ACO 

declined between the benchmark period 

and the performance year due to an 

extreme and uncontrollable event 

occurring during the performance year. 

It also may not appropriately address 

circumstances where expenditures are 

higher in the benchmark period than 

they otherwise would have been due to 

an extreme and uncontrollable event 

and then show a decline between the 

benchmark period and the performance 

year. We believe that a blended 

national-regional trend factor will better 

correct for such variations than a 

national trend factor alone, because 

regional expenditures are more likely 

than national expenditures to share the 

expenditure impacts of a natural 

disaster experienced by an individual 

ACO. We also decline to adopt the 

suggestion of using a purely regional 

growth rate in place of a blended growth 

rate in cases where there is an extreme 

and uncontrollable event in the 

benchmark period or the performance 

year as we believe that even following 

an extreme and uncontrollable event, it 

is still important to use a nationalregional blend to address concerns 

about ACOs with high market 

penetration driving the expenditure 

growth rate in their own regions. 

Final Action: After considering the 

comments received, we are finalizing 

our proposal to use a blend of national 

and regional trend factors to trend 

forward BY1 and BY2 to BY3 when 

determining the historical benchmark 

and a blend of national and regional 

update factors to update the historical 

benchmark to the performance year (or 

to CY 2019 in the context of 

determining the financial performance 

of ACOs for the 6-month performance 

year from July 1, 2019, through 

December 31, 2019, as finalized in 

section II.A.7. of this the final rule). The 

national component of the blended 

trend and update factors will receive a 

weight equal to the share of assignable 

beneficiaries in the regional service area 

that are assigned to the ACO, computed 

by taking a weighted average of countylevel shares. The regional component of 

the blended trend and update factors 

will receive a weight equal to 1 minus 

the national weight. The proposed 

blended trend and update factors will 

apply for all agreement periods starting 

on July 1, 2019, or in subsequent years, 

regardless of whether it is an ACO’s 

first, second, or subsequent agreement 

period. These policies are included in 

the new provision at § 425.601, which 

will govern the determination of 

historical benchmarks for all ACOs for 

agreement periods starting on July 1, 

2019, or in subsequent years. 

As explained in the August 2018 

proposed rule, the use of a blended 

update factor requires us to use our 

authority under section 1899(i)(3) of the 

Act. This provision grants the Secretary 

the authority to use other payment 

models, including payment models that 

use alternative benchmarking 

methodologies, if the Secretary 

determines that doing so would improve 

the quality and efficiency of items and 

services furnished under Title XVIII and 

the alternative methodology would 

result in program expenditures equal to 

or lower than those that would result 

under the statutory payment model. As 

discussed in the Regulatory Impact 

Analysis (section V. of this final rule), 


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we continue to believe that using a 

blend of national and regional growth 

rates to update the benchmark, in 

combination with the other changes to 

the statutory payment model being 

finalized in this final rule, as well as 

current policies established using the 

authority of section 1899(i)(3) of the 

Act, would not increase program 

expenditures beyond the expenditures 

that would otherwise occur under the 

statutory payment methodology in 

section 1899(d) of the Act. Specifically, 

we believe that these policies together 

will result in more accurate and 

predictable benchmarks for use over 

longer agreement periods during which 

ACOs will be required to participate 

under performance-based risk. We 

believe policies that encourage ACOs to 

take greater accountability for the cost of 

the care furnished to their assigned 

beneficiaries offer greater incentives for 

ACOs to invest in effective care 

management efforts that lead to 

improved coordination of beneficiary 

care and to continue to improve quality 

of care and out-perform other Medicare 

fee-for-service providers on related 

quality of care and outcome measures. 

As a result, we believe the policies that 

we are adopting in this final rule using 

our authority under section 1899(i)(3) of 

the Act, including the modifications to 

the methodology for updating the 

historical benchmark discussed in this 

section, will lead to continued 

improvement in the quality of care 

furnished to Medicare fee-for-servicebeneficiaries. 

4. Technical Changes To Incorporate 

References to Benchmark Rebasing 

Policies 

We proposed to make certain 

technical, conforming changes to the 

following provisions to reflect our 

proposal to add a new section of the 

regulations at § 425.601 to govern the 

calculation of the historical benchmark 

for all agreement periods starting on 

July 1, 2019, and in subsequent years. 

We also proposed to make conforming 

changes to these provisions to 

incorporate the policies on resetting, 

adjusting, and updating the benchmark 

that were adopted in the June 2016 final 

rule, and codified in the regulations at 

§ 425.603. 

• Under subpart C, which governs 

application procedures, add references to 

§§ 425.601 and 425.603 in § 425.204(g); 

• Under subpart D, which governs the 

calculation of shared savings and losses, add 

references to § 425.603 in §§ 425.604 (Track 

1) and 425.606 (Track 2); and add references 

to §§ 425.601 and 425.603 in § 425.610 

(ENHANCED track); 

• As part of the modifications to § 425.610, 

make a wording change to the paragraph 

currently numerated as (a)(2)(ii) that could 

not be completed with the June 2016 final 

rule due to a typographical error. In this 

paragraph, we would remove the phase 

‘‘adjusts for changes’’, and in its place add 

the phrase ‘‘CMS adjusts the benchmark for 

changes’’; and 

• Under subpart I, which governs the 

reconsideration review process, add 

references to §§ 425.601 and 425.603 to 

§ 425.800(a)(4). In addition, as previously 

described, we have used our authority under 

section 1899(i)(3) of the Act to modify certain 

aspects of the statutory payment and 

benchmarking methodology under section 

1899(d) of the Act. Accordingly, we also 

proposed to amend § 425.800(a)(4) to clarify 

that the preclusion of administrative and 

judicial review applies only to the extent that 

a specific calculation is performed in 

accordance with section 1899(d) of the Act. 

Final Action: We did not receive any 

comments regarding these proposed 

technical changes to incorporate 

references to benchmark rebasing 

policies. We are finalizing the changes 

described in this section as proposed. 

We also received no comments 

specifically addressing our proposal to 

revise § 425.800 to clarify that the 

preclusion of administrative and 

judicial review with respect to certain 

financial calculations applies only to 

the extent that a specific calculation is 

performed in accordance with section 

1899(d) of the Act. We are finalizing 

these modifications as proposed. 

E. Updating Program Policies 

1. Overview 

In section II.E of the proposed rule, 

we proposed revisions designed to 

update certain policies under the 

Shared Savings Program. The policies 

discussed in sections II.E.2. through 

II.E.6 of the August 2018 proposed rule 

were addressed in the November 2018 

final rule (83 FR 59959 through 59988). 

In section II.E.7 of the proposed rule, we 

solicited comments on how Medicare 

ACOs and Part D sponsors could be 

encouraged to collaborate so as to 

improve the coordination of pharmacy 

care for Medicare FFS beneficiaries. We 

discuss the comments received in 

response to this solicitation in section 

II.E.2 of this final rule. 

2. Coordination of Pharmacy Care for 

ACO Beneficiaries 

Medicare ACOs and other 

stakeholders have indicated an interest 

in collaborating to enhance the 

coordination of pharmacy care for 

Medicare FFS beneficiaries to reduce 

the risk of adverse events and improve 

medication adherence. For example, 

areas where ACOs and the sponsors of 

stand-alone Part D PDPs might 

collaborate to enhance pharmacy care 

coordination include establishing 

innovative approaches to increase 

clinician formulary compliance (when 

clinically appropriate) and medication 

compliance; providing pharmacy 

counseling services from pharmacists; 

and implementing medication therapy 

management. Part D sponsors may be 

able to play a greater role in 

coordinating the care of their enrolled 

Medicare FFS beneficiaries and having 

greater accountability for their overall 

health outcomes, such as for 

beneficiaries with chronic diseases 

where treatment and outcome are highly 

dependent on appropriate medication 

use and adherence. Increased 

collaboration between ACOs and Part D 

sponsors may facilitate better and more 

affordable drug treatment options for 

beneficiaries by encouraging the use of 

generic prescription medications, where 

clinically appropriate, or reducing 

medical errors through better 

coordination between health care 

providers and Part D sponsors. 

As we explained in the August 2018 

proposed rule, we believe that Medicare 

ACOs and Part D sponsors may be able 

to enter into appropriate business 

arrangements to support improved 

pharmacy care coordination, provided 

such arrangements comply with all 

applicable laws and regulations. 

However, challenges may exist in 

forming these arrangements. Under the 

Pioneer ACO Model, an average of 54 

percent of the beneficiaries assigned to 

Pioneer ACOs in 2012 were also 

enrolled in a PDP in that year, with the 

median ACO having at most only 13 

percent of its assigned beneficiaries 

enrolled in a plan offered by the same 

PDP parent organization. For 

performance year 2016, we found that 

approximately 70 percent of the 

beneficiaries assigned to Shared Savings 

Program ACOs had continuous Part D 

coverage. 

We believe timely access to data 

could improve pharmacy care 

coordination. Although CMS already 

provides Medicare ACOs with certain 

Part D prescription drug event data, it 

may be useful for both Medicare ACOs 

and Part D sponsors to share certain 

clinical data and pharmacy data with 

each other to support coordination of 

pharmacy care. Any data sharing 

arrangements between ACOs and Part D 

sponsors should comply with all 

applicable legal requirements regarding 

the privacy and confidentiality of such 

data, including the Health Insurance 

Portability and Accountability Act of 

1996 (HIPAA) Privacy and Security 

Rules. 


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In the August 2018 proposed rule, we 

solicited comment on how Medicare 

ACOs, and specifically Shared Savings 

Program ACOs, and Part D sponsors 

could work together and be encouraged 

to improve the coordination of 

pharmacy care for Medicare FFS 

beneficiaries to achieve better health 

outcomes, better health care, and lower 

per-capita expenditures for Medicare 

beneficiaries. In addition, we sought 

comment on what kind of support 

would be useful for Medicare ACOs and 

Part D sponsors in establishing new, 

innovative business arrangements to 

promote pharmacy care coordination to 

improve overall health outcomes for 

Medicare beneficiaries. We also sought 

comment on issues related to how CMS, 

Medicare ACOs and Part D sponsors 

might structure the financial terms of 

these arrangements to reward Part D 

sponsors’ contributions towards 

achieving program goals, including 

improving the beneficiary’s 

coordination of care. Lastly, we sought 

comment on whether ACOs are 

currently partnering with Part D 

sponsors, if there are any barriers to 

developing these relationships 

(including, but not limited to, data and 

information sharing), and if there are 

any recommendations for how CMS can 

assist, as appropriate, with reducing 

barriers and enabling more robust data 

sharing. 

Comment: Many commenters were 

supportive of CMS’ request for 

comments on how Medicare ACOs, and 

specifically Shared Savings Program 

ACOs, and Part D sponsors could work 

together and be encouraged to improve 

the coordination of pharmacy care for 

Medicare FFS beneficiaries. Several 

commenters stated that improved 

collaboration between Medicare ACOs 

and Part D Plans (PDPs) would provide 

more comprehensive care and improve 

overall quality, by enhancing care 

coordination, medication adherence, 

potentially reducing the risk of adverse 

drug events, and offering pharmacy 

counseling services that could ensure 

that patients receive timely access to the 

most appropriate form of treatment for 

their given condition. A commenter 

suggested that the timing of data sharing 

between CMS, ACOs, and PDPs would 

be important for successful 

collaboration. Another commenter 

suggested that data sharing between 

PDPs and ACOs could create pathways 

for achieving efficiencies in drug 

expenditures and reduce burden. 

Another commenter suggested that CMS 

should provide Part D claims data that 

would assist ACOs in addressing crucial 

care management issues and improve 

outcomes. In addition, the commenter 

stated that they believed there should be 

financial incentives for PDPs and ACOs 

to coordinate and align care. 

Many commenters offered suggestions 

for improving the coordination between 

PDPs and ACOs. A few commenters 

suggested CMS should investigate ways 

to make pharmacy data more readily 

available to ACOs so they can share this 

information with their ACO providers/ 

suppliers. The commenters indicated 

that the use of enabling technology, 

such as secure data access portals and 

data sets accessible using Application 

Programming Interfaces, could provide 

ACOs timely access to claims data for 

their aligned beneficiaries. Commenters 

suggested that timely access to these 

data could allow ACOs to develop 

provider alert processes that could 

improve care. In addition, one 

commenter suggested that CMS should 

consider developing a Shared Savings 

Program voluntary demonstration that 

incorporates ACO accountability for 

Part D costs. Another commenter 

suggested CMS explore opportunities to 

allow waivers that would allow lower 

prescription drug copayments for ACO 

assigned beneficiaries. Another 

commenter suggested CMS incorporate 

community pharmacies that provide 

coordinated patient care into the Shared 

Savings Program to improve outcomes 

for patients who are high risk or are in 

underserved areas. Another commenter 

encouraged CMS to consider medication 

management as a critical potential 

modifier of health status, encourage the 

use of pharmacists as a primary point of 

intersection between ACOs and Part D 

plans, improve access to clinical and 

pharmacy data, and adopt performancebased payments to reflect pharmacists’ 

contributions to cost reduction and 

improved coordination. A few 

commenters expressed concerns about 

Shared Savings Program ACOs and 

PDPs working together to improve 

pharmacy coordination. One commenter 

expressed concern regarding the 

differences between Part D Medication 

Management Therapy (MTM) and 

medication management services 

provided through coordinated care 

models, and specifically noted variation 

in beneficiary eligibility for MTM 

services, depending on their Part D 

plan. The commenter asked that CMS 

address current barriers to beneficiary 

eligibility for MTM before making any 

additional changes to policies under the 

Shared Savings Program to improve care 

coordination with pharmacies. One 

commenter requested more details on 

CMS’ plan to promote information 

sharing, and along with another 

commenter, expressed concern 

regarding the capability of PDPs and 

ACOs to undertake information sharing 

and the costs that they believed would 

be incurred. 

Response: We thank the commenters 

for their input on the coordination of 

pharmacy care for ACO assigned 

beneficiaries. As we plan for any future 

updates and changes to the Shared 

Savings Program, we will consider this 

feedback from commenters before 

making any proposals related to the 

coordination of pharmacy care. 

F. Applicability of Final Policies to 

Track 1+ Model ACOs 

1. Background 

In section II.F. of the August 2018 

proposed rule (83 FR 41912), we 

discussed the applicability of our 

proposed policies to Track 1+ Model 

ACOs, and in the November 2018 final 

rule (83 FR 59988 through 59990) we 

described the applicability of certain 

policies adopted in that final rule to 

Track 1+ Model ACOs. 

In these earlier rules, we explained 

that the Track 1+ Model was established 

under the Innovation Center’s authority 

at section 1115A of the Act, to test 

innovative payment and service 

delivery models to reduce program 

expenditures while preserving or 

enhancing the quality of care for 

Medicare, Medicaid, and Children’s 

Health Insurance Program beneficiaries. 

We noted that 55 Shared Savings 

Program Track 1 ACOs entered into the 

Track 1+ Model beginning on January 1, 

2018. This includes 35 ACOs that 

entered the model within their current 

agreement period (to complete the 

remainder of their agreement period 

under the model) and 20 ACOs that 

entered into a new 3-year agreement 

under the model. 

To enter the Track 1+ Model, ACOs 

must be approved to participate in the 

model and are required to agree to the 

terms and conditions of the model by 

executing a Track 1+ Model 

Participation Agreement available at 

https://www.cms.gov/Medicare/ 

Medicare-Fee-for-Service-Payment/ 

sharedsavingsprogram/Downloads/ 

track-1plus-model-par-agreement.pdf. 

Track 1+ Model ACOs are also required 

to have been approved to participate in 

the Shared Savings Program (Track 1) 

and to have executed a Shared Savings 

Program Participation Agreement. As 

indicated in the Track 1+ Model 

Participation Agreement, in accordance 

with our authority under section 

1115A(d)(1) of the Act, CMS has waived 

certain requirements of the Shared 

Savings Program that otherwise would 


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be applicable to ACOs participating in 

Track 1 of the Shared Savings Program, 

as necessary for purposes of testing the 

Track 1+ Model, and established 

alternative requirements for the ACOs 

participating in the Track 1+ Model. 

We explained that, unless stated 

otherwise in the Track 1+ Model 

Participation Agreement, the 

requirements of the Shared Savings 

Program under 42 CFR part 425 

continue to apply. Consistent with 

§ 425.212, Track 1+ Model ACOs are 

subject to all applicable regulatory 

changes, including but not limited to, 

changes to the regulatory provisions 

referenced within the Track 1+ Model 

Participation Agreement, that become 

effective during the term of the ACO’s 

Shared Savings Program Participation 

Agreement and Track 1+ Model 

Participation Agreement, unless 

otherwise specified through rulemaking 

or amendment to the Track 1+ Model 

Participation Agreement. We also noted 

that the terms of the Track 1+ Model 

Participation Agreement permit the 

parties (CMS and the ACO) to amend 

the agreement at any time by mutual 

written agreement. 

2. Unavailability of Application Cycles 

for Entry Into the Track 1+ Model in 

2019 and 2020 

In the August 2018 proposed rule (83 

FR 41912 through 41913), we discussed 

the unavailability of application cycles 

for entry into the Track 1+ Model in 

2019 and 2020. We explained that an 

ACO’s opportunity to join the Track 1+ 

Model aligns with the Shared Savings 

Program’s application cycle. The 

original design of the Track 1+ Model 

included 3 application cycles for ACOs 

to apply to enter or, if eligible and if 

applicable, to renew their participation 

in the Track 1+ Model for an agreement 

period start date of 2018, 2019, or 2020. 

We noted that the 2018 application 

cycle had closed, and that 55 ACOs 

began participating in the Track 1+ 

Model on January 1, 2018. As discussed 

in section II.A.7. of the August 2018 

proposed rule (83 FR 41847) and section 

V.B.1.a of the November 2018 final rule 

(83 FR 59942 through 59946), we are not 

offering an application cycle for a 

January 1, 2019 start date for new 

agreement periods under the Shared 

Savings Program. Therefore, we 

explained that we would similarly not 

offer a start date of January 1, 2019, for 

participation in the Track 1+ Model. 

In the August 2018 proposed rule (83 

FR 41912 through 41913), we explained 

that we had re-evaluated the need for 

continuing the Track 1+ Model as a 

participation option for 2019 and 2020 

in light of the proposal to offer the 

BASIC track (including a glide path for 

eligible ACOs) as a participation option 

beginning in 2019. Like the Track 1+ 

Model, the BASIC track would offer 

relatively lower levels of risk and 

potential reward than Track 2 and the 

ENHANCED track. The BASIC track’s 

glide path would allow the flexibility 

for eligible ACOs to enter a one-sided 

model and to automatically progress 

through levels of risk and reward that 

end at a comparable level of risk and 

reward (Level E) to that offered in the 

Track 1+ Model and also to qualify as 

participating in an Advanced APM. 

ACOs in the glide path could also elect 

to more quickly enter higher levels of 

risk and reward within the BASIC track. 

We stated that if the proposed approach 

to adding the BASIC track were 

finalized and made available for 

agreement periods beginning in 2019 

and subsequent years, we would 

discontinue future application cycles for 

the Track 1+ Model. In that case, the 

Track 1+ Model would not accept new 

model participants for start dates of July 

1, 2019, or January 1, 2020, or in 

subsequent years. 

As described in section II.A.2. and 

II.A.3. of this final rule, we are 

finalizing the BASIC track to include 

Level E, with a level of risk and reward 

that is comparable to the Track 1+ 

Model. Therefore, we will forgo future 

application cycles for the Track 1+ 

Model, as we believe offering both the 

BASIC track and the Track 1+ Model 

would create unnecessary redundancy 

in participation options within CMS’ 

Medicare ACO initiatives. As we 

explained in the August 2018 proposed 

rule (83 FR 41912 through 41913), the 

high level of interest in the Track 1+ 

Model indicates a positive response to 

its design, and therefore we believe we 

have met an important goal of testing 

the Track 1+ Model. We have also 

incorporated lessons learned from our 

initial experience with the Track 1+ 

Model in the design of the BASIC track, 

including the levels of risk and reward 

under the BASIC track, and by allowing 

for potentially lower, and therefore less 

burdensome, repayment mechanism 

amounts for ACOs with relatively lower 

estimated ACO participant Medicare 

FFS revenue compared to estimated 

benchmark expenditures for their 

assigned Medicare FFS beneficiary 

population. Further, we will evaluate 

the quality and financial performance of 

the Track 1+ Model ACOs and consider 

the results of this evaluation in the 

development of future policies for the 

Shared Savings Program. 

Existing Track 1+ Model ACOs will be 

able to complete the remainder of their 

current agreement period in the model, 

or terminate their current participation 

agreements (for the Track 1+ Model and 

the Shared Savings Program) and apply 

to enter a new Shared Savings Program 

agreement period under either the 

BASIC track (Level E) or the 

ENHANCED track (as described in 

section II.A.5. of this final rule). 

Additionally, as discussed in section 

II.A.7.c.(1). of the August 2018 proposed 

rule (83 FR 41854 through 41855) and 

section V.B.1.c.(1). of the November 

2018 final rule (83 FR 59951), ACOs 

currently participating in the Track 1+ 

Model will not have the opportunity to 

apply to use a SNF 3-day rule waiver 

starting on January 1, 2019, as a result 

of our decision to forgo an annual 

application cycle for a January 1, 2019 

start date in the Shared Savings 

Program. However, as discussed in 

section II.A.7.c.(1). of this final rule, we 

are making an exception to the January 

1 start date for use of a SNF 3-day rule 

waiver to allow for a July 1, 2019 start 

date for eligible Track 1+ Model ACOs 

that apply for and are approved to use 

a SNF 3-day rule waiver. 

Comment: Some commenters 

supported the proposed approach to 

incorporating Level E into the Shared 

Savings Program under a new BASIC 

track, to make a participation option 

with the same level of risk and potential 

reward as the Track 1+ Model a 

permanent part of the program. 

However, a few commenters 

expressed concern about our plan to 

discontinue the Track 1+ Model if we 

finalize the BASIC track design to 

include a participation option with an 

equivalent level of risk and potential 

reward as the Track 1+ Model. For 

example, one commenter stated that 

some ACOs went into the Track 1+ 

Model in 2018 in the middle of their 

current agreement period with the 

expectation that Track 1+ would be 

available as a renewal option for a full 

3-year agreement period. Another 

commenter suggested, as an alternative 

approach to redesigning the program’s 

participation options, that CMS 

eliminate downside risk requirements 

for low revenue ACOs by retaining 

Track 1, eliminating the BASIC track, 

and allowing voluntary participation in 

the Track 1+ Model (among other 

suggestions). 

Response: We appreciate commenters’ 

support for the BASIC track design, 

which as discussed in section II.A.3. of 

this final rule, we are finalizing to 

include Level E that is comparable to 

the level of risk and reward as offered 

in the Track 1+ Model. We are therefore 

discontinuing future application cycles 

for the Track 1+ Model, and we will not 

accept new model participants for start 


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dates of July 1, 2019, or in subsequent 

years. Further, under our final policies 

for determining participation options, 

discussed in section II.A.5.c. of this 

final rule, an ACO with a first or second 

agreement period beginning in 2016 or 

2017 identified as a high revenue ACO 

and experienced with performancebased risk Medicare ACO initiatives 

based on prior participation in the Track 

1+ Model may renew for its next 

agreement period beginning on July 1, 

2019, or January 1, 2020 (respectively) 

under Level E of the BASIC track. 

Further, eligible ACOs identified as low 

revenue ACOs and experienced with 

performance-based risk Medicare ACO 

initiatives (including based on the 

participation of the ACO or its ACO 

participants in the Track 1+ Model) may 

also participate for up to two agreement 

periods under Level E of the BASIC 

track. 

3. Applicability of Final Policies To 

Track 1+ Model ACOs Through Revised 

Program Regulations or Revisions to 

Track 1+ Model Participation 

Agreements 

In section II.F. of the August 2018 

proposed rule (83 FR 41913 through 

41914), we provided a comprehensive 

discussion of the applicability of the 

proposed policies to Track 1+ Model 

ACOs to allow these ACOs to better 

prepare for their future years of 

participation in the program and the 

Track 1+ Model. We explained that 

there are two ways in which the 

proposed policies would become 

applicable to Track 1+ Model ACOs: (1) 

Through revisions to existing 

regulations that currently apply to Track 

1+ Model ACOs, and (2) through 

revisions to the ACO’s Track 1+ Model 

Participation Agreement. In the 

November 2018 final rule, we described 

the applicability of certain final policies 

adopted in that final rule to Track 1+ 

Model ACOs (83 FR 59988 through 

59990). 

Generally, comments regarding the 

application of specific proposals to 

Track 1+ Model ACOs have been 

addressed as part of the discussion of 

comments in the relevant section of this 

final rule. Accordingly, in this section of 

this final rule, we are not repeating 

comments related to the applicability of 

the proposed policies to ACOs 

participating in the Track 1+ Model. 

Therefore, unless specified otherwise, 

the changes to the program’s regulations 

finalized in this final rule that are 

applicable to Shared Savings Program 

ACOs within a current agreement period 

will apply to ACOs in the Track 1+ 

Model in the same way that they apply 

to ACOs in Track 1, so long as the 

applicable regulation has not been 

waived under the Track 1+ Model. 

Similarly, to the extent that certain 

requirements of the regulations that 

apply to ACOs under Track 2 or Track 

3 have been incorporated for ACOs in 

the Track 1+ Model under the terms of 

the Track 1+ Model Participation 

Agreement, any changes to those 

regulations as finalized in this final rule 

will also apply to ACOs in the Track 1+ 

Model in the same way that they apply 

to ACOs in Track 2 or Track 3. For 

example, the following final policies 

will apply to Track 1+ Model ACOs: 

• Changes to the repayment mechanism 

requirements (see section II.A.6.c. of this 

final rule). We believe these requirements are 

similar to the requirements under which 

Track 1+ Model ACOs established their 

repayment mechanisms, such that no 

revision to those arrangements will be 

required. Further, pursuant to the changes to 

the repayment mechanism requirements that 

we are adopting in this final rule, we note 

that any Track 1+ Model ACO that seeks to 

renew its Shared Savings Program 

participation agreement will be permitted to 

use its existing repayment mechanism 

arrangement to support its continued 

participation in the Shared Savings Program 

under a two-sided model in its next 

agreement period, provided that the amount 

and duration of the repayment mechanism 

arrangement are updated as specified by 

CMS. 

• For the performance year beginning on 

July 1, 2019 and each subsequent 

performance year, the requirement to notify 

Medicare FFS beneficiaries regarding 

voluntary alignment by providing each 

beneficiary with a standardized written 

notice prior to or at the first primary care 

visit of each performance year (section 

II.C.3.a.(2). of this final rule). 

We also intend to apply the following 

policies finalized in this final rule to Track 

1+ Model ACOs through an amendment to 

the Track 1+ Model Participation Agreement 

executed by CMS and the ACO: 

• Monitoring for and consequences of poor 

financial performance (section II.A.5.d. of 

this final rule). 

• Revising the MSR/MLR to address small 

population sizes (section II.A.6.b.(3). of this 

final rule). 

• Payment consequences of early 

termination for ACOs under performancebased risk (section II.A.6.d. of this final rule). 

• Certain requirements related to the 

furnishing of telehealth services beginning on 

January 1, 2020, as provided under section 

1899(l) of the Act (see section II.B.2.b.(2). of 

this final rule). As previously described, the 

Bipartisan Budget Act provides for coverage 

of certain telehealth services furnished by 

physicians and practitioners in ACOs 

participating in a model tested or expanded 

under section 1115A of the Act that operate 

under a two-sided model and for which 

beneficiaries are assigned to the ACO using 

a prospective assignment method. ACOs 

participating in the Track 1+ Model meet 

these criteria. We believe it is appropriate to 

apply the same requirements under the Track 

1+ Model with respect to telehealth services 

furnished under section 1899(l) of the Act 

that apply to other Shared Savings Program 

ACOs that are applicable ACOs for purposes 

of that subsection. This will ensure 

consistency across program operations, 

payments, and beneficiary protection 

requirements for Track 1+ Model ACOs and 

other Shared Savings Program ACOs with 

respect to telehealth services furnished under 

section 1899(l) of the Act. 

III. Provisions of the December 2017 

Interim Final Rule With Comment 

Period and Analysis of and Response to 

Public Comments 

A. Background 

In December 2017, we issued an 

interim final rule with comment period 

titled ‘‘Medicare Shared Savings 

Program: Extreme and Uncontrollable 

Circumstances Policies for Performance 

Year 2017’’ (hereinafter referred to as 

the December 2017 interim final rule 

with comment period’’), which 

appeared in the Federal Register on 

December 26, 2017 (82 FR 60912). In the 

December 2017 interim final rule with 

comment period, we established 

policies for assessing the financial and 

quality performance of Medicare Shared 

Savings Program (Shared Savings 

Program) Accountable Care 

Organizations (ACOs) affected by 

extreme and uncontrollable 

circumstances during performance year 

2017, including the applicable quality 

reporting period for the performance 

year. Under the Shared Savings 

Program, providers of services and 

suppliers that participate in ACOs 

continue to receive traditional Medicare 

FFS payments under Parts A and B, but 

the ACO may be eligible to receive a 

shared savings payment if it meets 

specified quality and savings 

requirements. ACOs in performancebased risk tracks may also share in 

losses. The December 2017 interim final 

rule with comment period established 

extreme and uncontrollable 

circumstances policies for the Shared 

Savings Program that applied to ACOs 

subject to extreme and uncontrollable 

events, such as Hurricanes Harvey, 

Irma, and Maria, and the California 

wildfires, during performance year 

2017, including the applicable quality 

data reporting period for the 

performance year. 

We received 11 timely pieces of 

correspondence in response to the 

December 2017 interim final rule with 

comment period. In the following 

sections of this final rule, we summarize 

and respond to these public comments. 


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B. Shared Savings Program Extreme and 

Uncontrollable Circumstances Policies 

for Performance Year 2017 

In the December 2017 interim final 

rule with comment period we expressed 

our agreement with stakeholders that 

the financial and quality performance of 

ACOs located in areas subject to 

extreme and uncontrollable 

circumstances could be significantly 

and adversely affected. We also agreed 

that due to the widespread disruptions 

that occurred during 2017 in areas 

affected by Hurricanes Harvey, Irma, 

and Maria, and the California wildfires, 

new policies were warranted for 

assessing quality and financial 

performance of Shared Savings Program 

ACOs in the affected areas. We believed 

it was appropriate to adopt policies to 

address stakeholder concerns that 

displacement of beneficiaries may make 

it difficult for ACOs to access medical 

record data required for quality 

reporting, and might reduce the 

beneficiary response rate on survey 

measures. In addition, medical records 

needed for quality reporting may have 

been inaccessible. We also believed it 

was appropriate to adopt policies to 

address stakeholders’ concerns that 

ACOs might be held responsible for 

sharing losses with the Medicare 

program resulting from catastrophic 

events outside the ACO’s control given 

the increase in utilization, migration of 

patient populations leaving the 

impacted areas, and the mandatory use 

of natural disaster payment modifiers 

making it difficult to identify whether a 

claim would otherwise have been 

denied under normal Medicare fee-forservice (FFS) rules. 

Prior to the issuance of the December 

2017 interim final rule with comment 

period, we did not have policies under 

the Shared Savings Program for 

addressing ACO quality performance 

scoring and the determination of the 

shared losses owed by ACOs 

participating under performance-based 

risk tracks in the event of an extreme or 

uncontrollable circumstance. In the 

interim final rule with comment period 

titled Medicare Program; Quality 

Payment Program: Extreme and 

Uncontrollable Circumstance Policy for 

the Transition Year that appeared in the 

Federal Register on November 16, 2017 

(hereinafter referred to as the Quality 

Payment Program IFC) (82 FR 53895), 

we established an automatic policy to 

address extreme and uncontrollable 

circumstances, including Hurricanes 

Harvey, Irma, and Maria, for the Meritbased Incentive Payment System (MIPS) 

for the 2017 performance year. (The 

specific regions identified as being 

affected by Hurricanes Harvey, Irma, 

and Maria for the 2017 MIPS 

performance year are provided in detail 

in section III.B.1.e. of the Quality 

Payment Program IFC (82 FR 53898)). In 

the Quality Payment Program IFC, we 

stated that should additional extreme 

and uncontrollable circumstances arise 

for the 2017 MIPS performance period 

that trigger the automatic extreme and 

uncontrollable circumstance policy 

under the Quality Payment Program, we 

would communicate that information 

through routine communication 

channels, including but not limited to 

issuing program memoranda, emails to 

stakeholders, and notices on the Quality 

Payment Program website, qpp.cms.gov 

(82 FR 53897). For example, in the 

December 2017 interim final rule with 

comment period we noted that we had 

recently issued guidance to stakeholders 

indicating that the MIPS Extreme and 

Uncontrollable Circumstance Policy 

would also apply to MIPS eligible 

clinicians affected by the California 

wildfires (see https://www.cms.gov/ 

Medicare/Quality-Payment-Program/ 

Resource-Library/Interim-Final-Rulewith-Comment-fact-sheet.pdf). 

In the December 2017 interim final 

rule with comment period, we 

expressed the belief that it was also 

appropriate to establish automatic 

extreme and uncontrollable 

circumstances policies under the Shared 

Savings Program for performance year 

2017 due to the urgency of providing 

relief to Shared Savings Program ACOs 

impacted by Hurricanes Harvey, Irma, 

and Maria, and the California wildfires, 

because their quality scores could have 

been adversely affected by these 

disasters and some ACOs could have 

been at risk for additional shared losses 

due to the costs associated with these 

extreme and uncontrollable events. 

Therefore, given the broad impact of the 

three hurricanes and the wildfires, and 

to address any additional extreme and 

uncontrollable circumstances that could 

have arisen during 2017 or the quality 

data reporting period for the 

performance year, we explained that we 

were establishing the policies described 

in the December 2017 interim final rule 

with comment period for the Shared 

Savings Program for performance year 

2017. 

For program clarity and to reduce 

unnecessary burdens on affected ACOs, 

we aligned the automatic extreme and 

uncontrollable circumstances policies 

under the Shared Savings Program with 

the policy established under the Quality 

Payment Program. Specifically, the 

Shared Savings Program extreme and 

uncontrollable circumstances policies 

would apply when we determine that an 

event qualifies as an automatic 

triggering event under the Quality 

Payment Program. We would use the 

determination of an extreme and 

uncontrollable circumstance under the 

Quality Payment Program, including the 

identification of affected geographic 

areas and applicable time periods, for 

purposes of determining the 

applicability of the extreme and 

uncontrollable circumstances policies 

with respect to both financial 

performance and quality reporting 

under the Shared Savings Program. 

These policies would also apply with 

respect to the determination of an 

ACO’s quality performance in the event 

that an extreme and uncontrollable 

event occurred during the applicable 

quality data reporting period for 

performance year 2017 and the 

reporting period was not extended. We 

believed it was appropriate to extend 

these policies to encompass the quality 

reporting period, unless the reporting 

period was extended, because we would 

not have the quality data necessary to 

measure an ACO’s quality performance 

for 2017 if the ACO was unable to 

submit its quality data as a result of a 

disaster occurring during the 

submission window. We noted, for 

example, that if an extreme and 

uncontrollable event were to occur in 

February 2018, which would be during 

the quality data reporting period for 

performance year 2017 that was then 

scheduled to end on March 16, 2018 at 

8 p.m. eastern daylight time, then the 

extreme and uncontrollable 

circumstances policies would apply for 

quality data reporting for performance 

year 2017, if the reporting period was 

not extended. We did not believe it was 

appropriate to extend this policy to 

encompass the quality data reporting 

period if the reporting period is 

extended because affected ACOs would 

have an additional opportunity to 

submit their quality data, enabling us to 

measure their quality performance in 

2017. However, we noted that, because 

a disaster that occurs after the end of the 

performance year would have no impact 

on the determination of an ACO’s 

financial performance for performance 

year 2017, we would make no 

adjustment to shared losses in the event 

an extreme or uncontrollable event 

occurred during the quality data 

reporting period. 

Comment: Almost all stakeholders 

that submitted a comment in response 

to the December 2017 interim final rule 

with comment period expressed general 

support for addressing extreme and 

uncontrollable circumstances in the 

Shared Savings Program, and no 


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commenters expressed general 

opposition. Most commenters also 

addressed one or more of the specific 

policies described in that rule. 

Response: We appreciate the 

comments that were offered and have 

since implemented the policies 

finalized in the December 2017 interim 

final rule with comment period when 

determining quality scores used in 

performance year 2017 financial 

reconciliation and in determining 

shared losses owed for performance year 

2017 by ACOs in two-sided models. 

We considered the comments 

received in response to the December 

2017 interim final rule with comment 

period in developing our proposals to 

extend the extreme and uncontrollable 

circumstances policies that were 

established for performance year 2017 to 

performance year 2018 and subsequent 

performance years. These proposals 

were included in the August 2018 

proposed rule (83 FR 41900–41906). In 

the November 2018 final rule (83 FR 

59968–59979), we adopted final policies 

for determining the quality performance 

of and mitigating shared losses owed by 

Shared Savings Program ACOs affected 

by extreme and uncontrollable 

circumstances in performance year 2018 

and subsequent performance years. 

In the remainder of this section, we 

will summarize and respond to public 

comments submitted in response to the 

December 2017 interim final rule with 

comment period. 

Comment: Several commenters 

supported aligning Shared Savings 

Program policies surrounding extreme 

and uncontrollable circumstances with 

the policies established under the 

Quality Payment Program for 

performance year 2017, including the 

identification of an automatic triggering 

event and affected geographic areas, 

with a commenter expressing the belief 

that such alignment should also apply 

for future performance years. A few 

commenters supporting alignment 

across these programs urged CMS to be 

more transparent and to improve 

communication to ACOs regarding 

affected areas and applicable time 

periods, as well as options available to 

affected ACOs. 

A commenter supported the goal of 

alignment across programs, but urged 

CMS to monitor, evaluate, and modify, 

if necessary, the policies included in the 

December 2017 interim final rule with 

comment period to ensure that Shared 

Savings Program participants do not 

experience unintended consequences 

from use of Quality Payment Program 

determinations regarding triggering 

events and affected counties. This 

commenter raised the possibility that a 

triggering event determined under 

Quality Payment Program could have a 

different impact in terms of scope and 

severity on ACOs participating in the 

Shared Savings program. A commenter 

did not opine on whether program 

policies should be aligned with the 

Quality Payment Program but expressed 

the belief that any determination of 

affected counties should include both 

Federal Emergency Management Agency 

(FEMA)-designated ‘‘Public Assistance’’ 

and FEMA-designated ‘‘Individual 

Assistance’’ areas. Another commenter 

recommended that the determination of 

the time period for an extreme and 

uncontrollable event be made consistent 

with the timelines for the emergency 

declarations by the Federal government. 

Response: We appreciate the 

comments supporting the alignment of 

the extreme and uncontrollable 

circumstances policies under the Shared 

Savings Program with policies under the 

Quality Payment Program with respect 

to identifying automatic triggering 

events and the affected geographic 

areas. We continue to believe, as we 

described in the December 2017 interim 

final rule with comment period, that 

this approach avoids confusion and 

reduces unnecessary burdens on 

affected ACOs. Accordingly, we 

finalized the extension of this policy for 

performance year 2018 and future years 

in the November 2018 final rule (83 FR 

59969–59973). 

In the Quality Payment Program IFC 

we explained that we anticipated that 

the types of events that could trigger the 

extreme and uncontrollable 

circumstances policies would be events 

designated by a FEMA major disaster or 

a public health emergency declared by 

the Secretary, although we indicated 

that we would review each situation on 

a case-by-case basis (82 FR 53897). 

While we favor alignment across the 

two programs for the aforementioned 

reasons and expect to consider 

declarations made by other Federal 

government agencies, we continue to 

believe that it is important to maintain 

a degree of flexibility to best respond to 

the circumstances of an individual 

emergency and decline to adopt fixed 

criteria for determining triggering events 

and affected areas. We note that for 

performance year 2017 information on 

triggering events and affected areas was 

made available through publicly 

available QPP fact sheets (for example: 

https://www.cms.gov/Medicare/QualityPayment-Program/Resource-Library/ 

Interim-Final-Rule-with-Comment-factsheet.pdf). Additionally, we used the 

time periods associated with public 

health emergencies declared by the 

Secretary. Following the declaration of 

a public health emergency, the Secretary 

may temporarily modify or waive 

certain Medicare requirements to 

support the ability of health care 

providers to provide timely care to 

people impacted by an emergency or 

disaster to the maximum extent feasible. 

For consistency, we believe that it is 

appropriate to use the same time 

periods when implementing the Shared 

Savings Program extreme and 

uncontrollable circumstances policies. 

We also believe that this approach is 

transparent as the dates of such 

emergencies are publicly available on 

the CMS Emergency Response and 

Recovery website (now renamed the 

Emergency Preparedness & Response 

Operations website, https://

www.cms.gov/About-CMS/AgencyInformation/Emergency/EPRO/EPROHome.html). Accordingly, we anticipate 

continuing to follow this approach 

going forward. 

1. Determination of Quality Performance 

Scores for ACOs in Affected Areas 

ACOs and their ACO participants and 

ACO providers/suppliers are frequently 

located across several different 

geographic regions or localities, serving 

a mix of beneficiaries who may be 

differentially impacted by hurricanes, 

wildfires, or other triggering events. 

Therefore, we needed to establish a 

policy for determining when an ACO, 

which may have ACO participants and 

ACO providers/suppliers located in 

multiple geographic areas, should 

qualify for the automatic extreme and 

uncontrollable circumstance policies for 

the determination of quality 

performance. We explained that we 

would determine whether an ACO had 

been affected by an extreme and 

uncontrollable circumstance by 

determining whether 20 percent or more 

of the ACO’s assigned beneficiaries 

resided in counties designated as an 

emergency declared area in performance 

year 2017, as determined under the 

Quality Payment Program as discussed 

in section III.B.1.e. of the Quality 

Payment Program IFC (82 FR 53898) or 

the ACO’s legal entity was located in 

such an area. An ACO’s legal entity 

location would be based on the address 

on file for the ACO in CMS’ ACO 

application and management system. 

We used 20 percent of the ACO’s 

assigned beneficiary population as the 

minimum threshold to establish an 

ACO’s eligibility for the policies 

regarding quality reporting and quality 

performance scoring included in the 

December 2017 interim final rule with 

comment period because we believed 

the 20 percent threshold provided a 

reasonable way to identify ACOs whose 


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quality performance may have been 

adversely affected by an extreme or 

uncontrollable circumstance, while 

excluding ACOs whose performance 

would not likely be significantly 

affected. The 20 percent threshold was 

selected to account for the effect of an 

extreme or uncontrollable circumstance 

on an ACO that has the minimum 

number of assigned beneficiaries to be 

eligible for the program (5,000 

beneficiaries), and in consideration of 

the average total number of unique 

beneficiaries for whom quality 

information is required to be reported in 

the combined CAHPS survey sample 

(860 beneficiaries) and the CMS web 

interface sample (approximately 3,500 

beneficiaries). (There may be some 

overlap between the CAHPS sample and 

the CMS web interface sample.) 

Therefore, we estimated that an ACO 

with an assigned population of 5,000 

beneficiaries typically would be 

required to report quality information 

on a total of 4,000 beneficiaries. Thus, 

we believed that the 20-percent 

threshold would ensure that an ACO 

with the minimum number of assigned 

beneficiaries would have an adequate 

number of beneficiaries across the 

CAHPS and CMS web interface samples 

in order to fully report on these 

measures. However, we also understood 

that some ACOs that have fewer than 20 

percent of their assigned beneficiaries 

residing in affected areas have a legal 

entity that is located in an emergency 

declared area. Consequently, their 

ability to quality report may have been 

equally impacted since the ACO legal 

entity may have been unable to collect 

the information from the ACO 

participants or may have experienced 

infrastructure issues related to 

capturing, organizing and reporting the 

data to CMS. If less than 20 percent of 

the ACO’s assigned beneficiaries resided 

in an affected area and the ACO’s legal 

entity was not located in a county 

designated as an affected area, then we 

noted that we believed that there was 

unlikely to be a significant impact upon 

the ACO’s ability to report or on the 

representativeness of the quality 

performance score that would be 

determined for the ACO. 

We noted that we would determine 

what percentage of the ACO’s 

performance year assigned population 

was affected by a disaster based on the 

final list of beneficiaries assigned to the 

ACO for the performance year. Although 

beneficiaries are assigned to ACOs 

under Track 1 and Track 2 based on 

preliminary prospective assignment 

with retrospective reconciliation after 

the end of the performance year, we 

noted that these ACOs would be able to 

use their quarterly assignment lists, 

which include beneficiaries’ counties of 

residence, for early insight into whether 

they are likely to meet the 20 percent 

threshold. For purposes of the December 

2017 interim final rule with comment 

period, we used preliminary 

information on beneficiary assignment 

for the 2017 performance year to 

estimate the number of ACOs that were 

affected by the hurricanes and the 

California wildfires in 2017. We 

estimated that 105 of the 480 ACOs 

(approximately 22 percent) would meet 

the minimum threshold of having 20 

percent or more of their assigned 

beneficiaries residing in an area 

designated as impacted by Hurricanes 

Harvey, Irma, and Maria, and the 

California wildfires or have their legal 

entity located in one of these areas. Of 

the ACOs that we originally estimated 

would be impacted by the disasters in 

2017, 92 percent had more than 20 

percent of their assigned beneficiaries 

residing in emergency declared areas. 

For purposes of determining quality 

performance scoring for performance 

year 2017, we noted that if 20 percent 

or more of an ACO’s assigned 

beneficiaries resided in an area 

impacted by the disaster or the ACO’s 

legal entity was located in such an area, 

the ACO’s minimum quality score 

would be set to equal the mean Shared 

Savings Program ACO quality score for 

all ACOs for performance year 2017. We 

would set the minimum quality score 

equal to the mean quality score for all 

Shared Savings Program ACOs 

nationwide, because the mean reflects 

the full range of quality performance 

across all ACOs in the Shared Savings 

Program. More specifically, the mean 

ACO quality score is equal to the 

combined ACO quality score for all 

ACOs meeting the quality performance 

standard for the performance year 

divided by the total number of ACOs 

meeting the quality performance 

standard for the performance year. To 

illustrate, we noted that the mean 

Shared Savings Program ACO quality 

performance score for all participating 

ACOs for performance year 2016 was 

approximately 95 percent. We also 

explained that in the event an affected 

ACO is able to complete quality 

reporting for performance year 2017, 

and the ACO’s calculated quality score 

is higher than the mean Shared Savings 

Program ACO quality score, we would 

apply the higher score. 

In earlier rulemaking, we finalized a 

policy under which ACOs that 

demonstrate quality improvement on 

established quality measures from yearto-year will be eligible for up to 4 bonus 

points per domain (79 FR 67927 through 

67931, § 425.502(e)(4)). To earn bonus 

points, an ACO must demonstrate a net 

improvement in performance on 

measures within a domain. We noted in 

the December 2017 interim final rule 

with comment period that if an ACO 

was not able to complete quality 

reporting for performance year 2017, it 

would not be possible for us to assess 

the ACO’s improvement on established 

quality measures since performance 

year 2016. Therefore, if an ACO receives 

a quality score for performance year 

2017 based on the mean quality score, 

the ACO would not be eligible for bonus 

points awarded based on quality 

improvement. 

We noted our belief that it was 

appropriate to adjust the quality 

performance scores for ACOs in affected 

areas because we anticipated that these 

ACOs would likely be unable to collect 

or report the necessary information to 

CMS as a result of the extreme and 

uncontrollable circumstance, and/or the 

ACO’s quality performance score would 

be significantly and adversely affected. 

Section 1899(b)(3)(C) of the Act gives us 

the authority to establish the quality 

performance standards used to assess 

the quality of care furnished by ACOs. 

Accordingly, we modified the quality 

performance standard specified under 

§ 425.502 by amending paragraph (e)(4) 

and adding a new paragraph (f) to 

address potential adjustments to the 

quality performance score for 

performance year 2017 of ACOs 

determined to be affected by extreme 

and uncontrollable circumstances. We 

stated that for performance year 2017, 

including the applicable quality data 

reporting period for the performance 

year if the reporting period is not 

extended, in the event that we 

determined that 20 percent or more of 

an ACO’s final list of assigned 

beneficiaries for the performance year, 

as determined under subpart E of the 

Shared Savings Program regulations, 

resided in an area that is affected by an 

extreme and uncontrollable 

circumstance as determined under the 

Quality Payment Program, or that the 

ACO’s legal entity was located in such 

an area, we would use the following 

approach to calculate the ACO’s quality 

performance score instead of the 

methodology specified in § 425.502(a) 

through (e). 

• The ACO’s minimum quality score 

would be set to equal the mean Shared 

Savings Program ACO quality score for 

performance year 2017. 

• If the ACO is able to completely and 

accurately report all quality measures, 

we would use the higher of the ACO’s 


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quality score or the mean Shared 

Savings Program ACO quality score. 

• If the ACO receives a quality score 

based on the mean, the ACO would not 

be eligible for bonus points awarded 

based on quality improvement. 

We would apply determinations made 

under the Quality Payment Program 

with respect to whether an extreme and 

uncontrollable circumstance has 

occurred and the affected areas. We 

would have sole discretion to determine 

the time period during which an 

extreme and uncontrollable 

circumstance occurred, the percentage 

of the ACO’s assigned beneficiaries 

residing in the affected areas, and the 

location of the ACO legal entity. 

We also stated that, for purposes of 

the MIPS APM scoring standard, MIPS 

eligible clinicians in Medicare Shared 

Savings Program ACOs that did not 

completely report quality for 2017; and 

therefore, received the mean ACO 

quality score under the Shared Savings 

Program would receive a score of zero 

percent in the MIPS quality 

performance category. However, these 

MIPS eligible clinicians would receive a 

score of 100 percent in the improvement 

activities (IAs) performance category, 

which would be sufficient for them to 

receive a 2017 MIPS final score above 

the performance threshold. This would 

result in at least a slight positive MIPS 

payment adjustment in 2019. 

Additionally, if the ACO participants 

were able to report advancing care 

information (ACI) (now referred to as 

the promoting interoperability category), 

the MIPS eligible clinicians in the ACO 

would receive an ACI performance 

category score under the APM scoring 

standard, which would further increase 

their final score under MIPS. 

Comment: Several commenters 

supported considering ACOs to be 

impacted by an extreme and 

uncontrollable circumstance if 20 

percent or more of their assigned 

beneficiaries reside in an affected area 

or if the ACO’s legal entity is located in 

such an area. However, a commenter 

requested that CMS continue to monitor 

the effects of this policy for each new 

triggering event to determine whether 

the 20 percent threshold is appropriate. 

The commenter explained that it could 

be necessary to lower the threshold if it 

is observed that ACOs with a smaller 

percentage of beneficiaries residing in 

an affected area display significantly 

reduced performance compared to prior 

years. Another commenter 

recommended that CMS analyze test 

cases to determine if quality 

performance could be affected at lower 

thresholds. The same commenter also 

suggested that CMS apply the extreme 

and uncontrollable circumstance policy 

to ACOs for which 50 percent of NPIs 

billing under the ACO are located in an 

impacted area. Another commenter 

noted it was unclear whether 20 percent 

is the appropriate threshold and 

believes that CMS should observe the 

effect of the 2017 events on ACOs and 

develop more flexible permanent 

policies to fully capture ACOs for which 

quality performance might have been 

affected. Another commenter, while 

agreeing with the criteria described in 

the December 2017 interim final rule 

with comment period, urged CMS to 

also provide an option for ACOs that do 

not meet the criteria to submit a 

hardship request if they believe that 

they were significantly affected by an 

extreme and uncontrollable event. They 

explained that CMS could review and 

approve such requests on a case-by-case 

basis. 

Response: We continue to believe that 

the criteria that we adopted for 

performance year 2017 in the December 

2017 interim final rule with comment 

period, and which we used for 

determining performance year 2017 

quality scores, are reasonable and offer 

predictability. We believe that using a 

threshold that may change with each 

triggering event would provide less 

certainty, especially if such a threshold 

could not be determined until after the 

disaster has occurred. We believe that 

the 20 percent threshold, which was 

influenced by population size 

considerations, remains a reasonable 

level. At this level, the threshold helps 

to ensure that an ACO with the 

minimum number of assigned 

beneficiaries to be eligible to participate 

in the program (5,000 beneficiaries) 

would still have an adequate number of 

non-affected beneficiaries on which to 

report on CAHPS and CMS web 

interface measures. Furthermore, based 

on our experience from performance 

year 2017, we do not believe that this 

threshold is too high as we observed 

that over 40 percent of ACOs with more 

than 20 percent of beneficiaries residing 

in disaster-affected areas received their 

own quality score because it was higher 

than the average score. We will continue 

to monitor this statistic for events 

occurring in future performance years to 

gauge whether the threshold remains 

appropriate. 

In the November 2018 final rule, we 

modified the policy adopted in the 

December 2017 interim final rule with 

comment period of using an ACO’s final 

assigned beneficiary list for performance 

year 2017 to determine the percentage of 

assigned beneficiaries residing in an 

affected area, and finalized a policy for 

performance year 2018 and subsequent 

performance years of using an ACO’s 

assignment list used for the Web 

Interface sample (typically the quarter 3 

assignment list) to determine the 

percentage of assigned beneficiaries 

residing in an affected area. This 

refinement to our approach, which was 

based on our experience in applying the 

extreme and uncontrollable 

circumstances policies for performance 

year 2017, will allow ACOs to 

determine before the end of the quality 

reporting period whether they meet this 

criterion based on triggering events that 

have occurred up until that time. Given 

the timing of December 2017 interim 

final rule with comment period, this 

type of advance notice was not feasible. 

This modification of the policy for 

future performance years was also 

influenced by comments that we 

received in response to the December 

2017 interim final rule with comment 

period, described earlier in this section, 

which requested that CMS provide 

better communication to affected ACOs 

regarding their options. 

While we considered a commenter’s 

suggestion to expand the criteria for 

determining impacted ACOs to include 

those ACOs for which 50 percent or 

more of the NPIs billing under the TINs 

of the ACO participants are located in 

an impacted area, we believed that 

including this additional criterion 

would create additional operational 

complexity and less transparency as we 

do not currently provide information on 

the location of ACO providers/suppliers 

in program reports. We therefore elected 

not to propose this option in the August 

2018 proposed rule and, in response to 

a similar recommendation from a 

commenter, declined to adopt this 

approach in the November 2018 final 

rule (83 FR 59972). In response to the 

commenters that suggested we create a 

hardship exceptions process, we note 

that in the December 2017 interim final 

rule with comment period and the 

November 2018 final rule, we have 

elected to adopt automatic policies to 

address extreme and uncontrollable 

circumstances in lieu of hardship 

requests that must be considered on a 

case-by-case basis in order to increase 

certainty and reduce administrative 

burden for both ACOs and CMS. 

Comment: We received several 

comments that supported using the 

higher of the ACO’s own quality score 

or the mean quality score. A commenter 

agreed that an ACO should not be 

eligible for bonus points based on 

quality improvement if the ACO 

receives the mean quality score. A few 

others that supported using the higher 

of the ACO’s own score or the national 

mean were concerned that there would 


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be no way for ACOs receiving the mean 

score to demonstrate quality 

improvement or receive bonus points. 

They recommended that CMS consider 

alternative mechanisms by which these 

ACOs could demonstrate quality 

improvement with a commenter 

suggesting that CMS recognize and 

account for quality improvement efforts 

made by ACOs outside the time period 

affected by an extreme and 

uncontrollable event. Another 

commenter did not opine on the use of 

the mean quality score but requested 

clarification on how bonus points 

would be determined when a state of 

emergency crossed years. 

Response: We implemented the policy 

of using the higher of the ACO’s own 

quality score or the mean quality score 

that was finalized in the December 2017 

interim final rule with comment period 

in determining quality performance for 

affected ACOs for performance year 

2017. In the August 2018 proposed rule 

(83 FR 41900–41903), we proposed to 

extend this policy for performance year 

2018 and subsequent performance years, 

and in the November 2018 final rule (83 

FR 59969–59974), we finalized this 

proposal. We appreciate the support 

offered for this policy among 

stakeholders that submitted comments 

in response to the December 2017 

interim final rule with comment period. 

In the November 2018 final rule, we 

also adopted for performance year 2018 

and subsequent performance years the 

policy under which an ACO that 

receives the mean Shared Savings 

Program quality performance score for a 

given performance year will not be 

eligible for bonus points awarded based 

on quality performance during that year. 

However, it is worth noting that in 

calculating the mean quality score we 

include the scores of ACOs that earned 

bonus points for quality improvement as 

well as the scores of 100 percent earned 

by ACOs in their first performance year 

for which the quality performance 

standard is based on complete and 

accurate reporting of all quality 

measures. ACOs that failed to meet the 

quality performance standard are 

excluded from the mean. 

In the November 2018 final rule (83 

FR 59969–59974) we finalized a policy 

under which, if an ACO receives the 

mean score for a performance year, in 

the next performance year for which the 

ACO reports quality data and receives a 

quality performance score based on its 

own performance, we will measure 

quality improvement based on a 

comparison between the ACO’s 

performance in that year and in the 

most recently available prior 

performance year in which the ACO 

reported quality. We explained that 

under this approach, the comparison 

will continue to be between consecutive 

years of quality reporting, but these 

years may not be consecutive calendar 

years. If an ACO reports quality data in 

a year in which it is affected by an 

extreme and uncontrollable 

circumstance, but receives the national 

mean quality score, we will use the 

ACO’s own quality performance to 

determine quality improvement bonus 

points in the following year. For 

example, if an ACO reported quality 

data in years 1, 2, and 3 of an agreement 

period, but received the national mean 

quality score in year 2 as the result of 

an extreme or uncontrollable 

circumstance, we would determine 

quality improvement bonus points for 

year 3 by comparing the ACO’s year 3 

quality performance with its year 2 

performance. In contrast, if the ACO 

received the mean score in year 2 

because it did not report quality, we 

would compare year 3 with year 1 to 

determine the bonus points for year 3. 

For events for which the applicable 

time period for includes multiple 

calendar years, we intend to treat the 

portion of the period falling within each 

year as if it were a separate event for 

purposes of identifying ACOs eligible 

for the alternative quality scoring 

methodology and for computing any 

adjustment to shared losses. Consider 

for example a hypothetical event for 

which the applicable time period 

spanned from September 2017 to March 

2018. An ACO would be deemed to be 

affected by this event in performance 

year 2017 for purposes of quality 

scoring if 20 percent or more of the 

ACO’s final performance year 2017 

assigned beneficiaries resided in an 

affected geographic area or the ACO’s 

legal entity was located in such an area, 

and we would use the alternative 

quality performance scoring policy 

finalized in the December 2017 interim 

final rule with comment period for 

performance year 2017 to determine its 

quality performance score for that 

performance year. The same ACO would 

be deemed affected by the disaster in 

performance year 2018 if 20 percent or 

more of the ACO’s quarter 3 assigned 

beneficiary population (that is, the 

population used for Web Interface 

sampling) resided in an affected area or 

the ACO’s legal entity was located in 

such an area. We would determine the 

quality performance score for the ACO 

for performance year 2018 using the 

alternative quality performance scoring 

policy adopted in the November 2018 

final rule for performance year 2018. An 

ACO receiving the mean quality score in 

either year would not be eligible for 

bonus points for quality improvement in 

that year although, as previously noted, 

the mean score would include the 

scores of ACOs that earned bonus points 

for quality improvement as well as 

scores of 100 percent earned by ACOs 

in their first performance year. If a 

disaster-affected ACO receives its own 

quality score for performance year 2017 

it would be eligible for bonus points 

based on a comparison of its 2017 

quality performance and 2016 quality 

performance. If the ACO receives its 

own quality score for performance year 

2018 it would be eligible for bonus 

points based on a comparison of its 

2018 quality performance and its quality 

performance in the most recent prior 

year in which it reported quality. 

Comment: A commenter believed that 

the quality performance scores for 

disaster-affected ACOs could be set to 

the mean, but these scores should not be 

used to calculate future benchmarks or 

subsequent year thresholds until 

complete and accurate reporting can be 

achieved. 

Response: We appreciate this 

commenter’s support of the policy to set 

an ACO’s quality score to the higher of 

its own calculated score or the national 

mean. We would like to clarify that 

ACOs’ quality performance scores are 

not used to calculate quality measure 

benchmarks. Rather, the quality 

measure benchmarks are calculating 

using actual ACO performance and all 

other available and applicable Medicare 

FFS data. 

Comment: A commenter expressed 

the belief that an ACO that achieved 

above-average quality performance in 

the prior performance year but is unable 

to report quality data due to an extreme 

and uncontrollable event in 2017, 

should not be penalized with a much 

lower quality score for 2017. They 

recommended that in instances where 

an ACO is unable to report quality data 

due to an extreme or uncontrollable 

event, CMS should use the higher of the 

ACO’s quality score from the prior 

performance year or the mean quality 

score for all Shared Savings Program 

ACOs for the current performance year. 

Response: We acknowledge that the 

mean quality score could be lower, or 

higher, than the score disaster-affected 

ACOs would have received in the 

absence of a disaster. However, we have 

concerns with the commenter’s 

recommendation that we apply the 

higher of the ACO’s quality score from 

the prior year or the mean quality score. 

ACO quality performance can vary from 

year-to-year and the fact that an ACO 

had a high quality score in prior years 

does not necessarily guarantee that the 


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ACO would have had an above average 

score in the affected year in the absence 

of the natural disaster. This is 

particularly true for ACOs in their early 

years of participation in the Shared 

Savings Program for which the prior 

year’s performance score may have 

included a higher number of pay-forreporting measures, thus making the 

quality scores incomparable. Lastly, we 

would remind stakeholders that the 

national mean quality score includes the 

quality scores of 100 percent earned by 

ACOs in their first performance year, 

thus increasing the mean. For these 

reasons, we did not employ this 

approach for performance year 2017 and 

neither proposed nor finalized this 

approach for performance year 2018 and 

subsequent years. 

Comment: A commenter sought 

clarification on whether an ACO would 

have the opportunity to either opt-in or 

opt-out of the finalized quality scoring 

policy for performance year 2019. 

Response: The final policies for 

determining an ACO’s quality 

performance score in the event of an 

extreme and uncontrollable 

circumstance are automatic, meaning 

that ACOs are not required to opt-in and 

are not permitted to opt-out. As noted 

elsewhere in this section, our intention 

in adopting automatic policies was to 

increase certainty and reduce burden 

associated with optional or casedependent policies. Additionally, the 

policies are designed such that ACOs 

can only benefit from the application of 

them. That is, if the ACO’s calculated 

quality score is higher than the mean 

quality score, the ACO’s higher 

calculated quality score will be used. 

Comment: A commenter noted that 

impacted ACOs that are unable to 

collect or report necessary quality 

information would also be very likely to 

trigger the audit process. This 

commenter recommended that any ACO 

for which quality performance was 

determined under the interim final rules 

established in the December 2017 

interim final rule with comment period 

should not be subject to the Quality 

Measures Validation (QMV) Audit 

Process if a high number of Medical 

Record Not Found (MRNF) ‘‘skips’’ are 

present. 

Response: For performance year 2017, 

we considered whether an ACO was 

affected by an extreme and 

uncontrollable circumstance when 

identifying which ACOs would be 

subject to a Quality Measures Validation 

Audit of their CMS Web Interface data 

and we did not include disaster-affected 

ACO that skipped an anomalously high 

number of beneficiaries in the audit 

sample. We anticipate taking a similar 

approach for performance year 2018 and 

future years. 

Comment: We received several 

comments related to the interaction of 

the extreme and uncontrollable 

circumstances policy for quality 

performance scoring and MIPS. We 

explained in the December 2017 interim 

final rule with comment period that 

MIPS eligible clinicians in Medicare 

Shared Savings Program ACOs that do 

not completely report quality for 2017 

and therefore receive the mean ACO 

quality score would receive a score of 

zero percent in the MIPS quality 

performance category. However, these 

MIPS eligible clinicians would receive a 

score of 100 percent in the improvement 

activities (IAs) performance category, 

which would be enough for them to 

receive a 2017 MIPS final score above 

the performance threshold. This would 

result in at least a slight positive MIPS 

payment adjustment in 2019. We 

explained further that if the ACO 

participants were able to report 

advancing care information (ACI), the 

MIPS eligible clinicians in the ACO 

would receive an ACI performance 

category score under the APM scoring 

standard, which would further increase 

their final score under MIPS. 

A commenter strongly opposed this 

approach and recommended that CMS 

instead use the higher of the mean 

quality performance category score or 

the organization’s performance year 

2016 quality performance category score 

to determine the ACO’s quality 

performance category score under the 

MIPS APM scoring standard. They went 

on to note that this would be 

particularly important in future years 

when the MIPS minimum performance 

threshold will increase. A few other 

commenters also expressed the belief 

that the approach used for performance 

year 2017 should not be used for future 

performance years. For example, a 

commenter supported the approach 

used for performance year 2017 because 

it would still allow MIPS eligible 

clinicians to receive a final score above 

the performance threshold, but noted 

that, in future years, receiving 100 

percent for the improvement activities 

performance category would not be 

sufficient to allow MIPS eligible 

clinicians in the ACO to avoid a 

negative payment adjustment. They 

recommended that, in this case, CMS 

should set the MIPS score equal to the 

performance threshold. Another 

commenter suggested that CMS consider 

redistributing the weights of the 

performance categories under the MIPS 

program as an alternative, nothing that 

that under the Quality Payment 

Program, CMS has policies allowing for 

redistribution of the weights of the 

performance categories when warranted. 

A third commenter encouraged CMS to 

automatically assign a neutral payment 

adjustment to eligible clinicians in a 

MIPS APM ACO that is unable to report 

due to extreme and uncontrollable 

circumstances. This commenter also 

recommended that in a case in which 

the ACO is unable to report but the 

component eligible clinician or TIN 

reports separately, CMS apply the 

higher of the two scores. 

Response: As we described in the 

December 2017 interim final rule with 

comment period, and as commenters 

noted, for performance year 2017, for 

purposes of the APM scoring standard, 

MIPS eligible clinicians in a disasteraffected ACO that did not report quality 

for the performance year, and therefore 

received the mean quality score under 

the Shared Savings Program, received a 

score of zero percent in the MIPS 

quality performance category. In the 

August 2018 proposed rule (83 FR 

41902) and in the November 2018 final 

rule (83 FR 59974), we clarified that for 

performance year 2018 and subsequent 

years, such clinicians, would have the 

MIPS quality performance category 

reweighted to zero percent, regardless of 

whether or not any of the ACO 

participant TINs reported quality 

outside the ACO. This reweighting 

under MIPS results in MIPS 

performance category weighting of 75 

percent for the Promoting 

Interoperability (PI) performance 

category and 25 percent for 

Improvement Activities performance 

category consistent with our policy at 

§ 414.1370(h)(5)(i)(B). If, for any reason, 

the PI performance category is also 

reweighted to zero, which could be 

more likely when there is a disaster, 

there would be only one performance 

category, triggering the policy under 

which the ACO would receive a neutral 

(threshold) MIPS score, as provided in 

§ 414.1380(c). However, if any of the 

ACO participant TINs do report PI, then 

the ACO participant TIN or TINs’ PI 

performance category scores would be 

used to score the ACO under the MIPS 

scoring standard, the PI performance 

category would not be reweighted, and 

the policy of assigning a neutral 

(threshold) MIPS score would not be 

triggered. We believe that this approach 

should mitigate the concerns raised by 

commenters as MIPS eligible clinicians 

in a disaster-affected ACO receiving the 

mean quality score under the Shared 

Savings Program will no longer receive 

a zero percent score in the MIPS quality 

performance category as they would 

have done under the performance year 


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2017 policy. Instead, this category 

would be reweighted to zero percent. 

2. Mitigating Shared Losses for ACOs 

Participating in a Performance-Based 

Risk Track 

In the December 2017 interim final 

rule with comment period, we also 

modified the payment methodology 

under Tracks 2 and 3 established under 

the authority of section 1899(i) of the 

Act to mitigate shared losses owed by 

ACOs affected by extreme and 

uncontrollable circumstances during 

performance year 2017. We explained 

that under this policy, we would reduce 

the ACO’s shared losses, if any, 

determined to be owed under the 

existing methodology for calculating 

shared losses in part 425, subpart G of 

the regulations by an amount 

determined by multiplying the shared 

losses by two factors: (1) The percentage 

of the total months in the performance 

year affected by an extreme and 

uncontrollable circumstance; and (2) the 

percentage of the ACO’s assigned 

beneficiaries who resided in an area 

affected by an extreme and 

uncontrollable circumstance. We would 

determine the percentage of the ACO’s 

performance year assigned beneficiary 

population that was affected by the 

disaster based on the final list of 

beneficiaries assigned to the ACO for 

the performance year. For example, 

assume that an ACO is determined to 

owe shared losses of $100,000 for 

performance year 2017, a disaster was 

declared for October through December 

during the performance year, and 25 

percent of the ACO’s assigned 

beneficiaries resided in the disaster 

area. In this scenario, we would adjust 

the ACO’s losses in the following 

manner: 

$100,000¥($100,000 × 0.25 × 0.25) = 

$100,000¥$6,250 = $93,750. 

We believed it was appropriate to 

adopt this policy to address 

stakeholders’ concerns that ACOs could 

be held responsible for sharing losses 

with the Medicare program resulting 

from catastrophic events outside the 

ACO’s control given the increase in 

utilization, difficulty of coordinating 

care for patient populations leaving the 

impacted areas, and the mandatory use 

of natural disaster payment modifiers 

making it difficult to identify whether a 

claim would otherwise have been 

denied under normal Medicare FFS 

rules. Absent this relief, we believed 

ACOs that were then participating in 

Tracks 2 and 3 might reconsider 

whether they would be able to continue 

their participation in the Shared Savings 

Program under a performance-based risk 

track. We noted that the approach we 

were adopting in the December 2017 

interim final rule with comment period 

would balance the need to offer relief to 

affected ACOs with the need to continue 

to hold those ACOs accountable for 

losses incurred during the months in 

which there was no applicable disaster 

declaration and for the assigned 

beneficiary population that was outside 

the area affected by the disaster. We also 

noted that these policies would not 

change the status of Track 2 or Track 3 

of the Shared Savings Program as an 

Advanced Alternative Payment Model 

(APM) for purposes of the Quality 

Payment Program or prevent an eligible 

clinician in a performance-based risk 

ACO from becoming a Qualifying APM 

Participant for purposes of the APM 

incentive under the Quality Payment 

Program. 

We also explored an alternative 

approach for mitigating the potential 

losses for ACOs in performance-based 

risk tracks that were affected by extreme 

and uncontrollable circumstances. 

Under this approach, we would remove 

claims for services furnished to assigned 

beneficiaries in the impacted areas by 

an ACO participant that are submitted 

with a natural disaster modifier before 

calculating financial performance. 

However, we believed that this 

alternative approach could, for some 

affected ACOs, result in the exclusion of 

a significant amount of their total claims 

at financial reconciliation, making it 

very difficult to measure the ACOs’ 

financial performance. 

We also emphasized that all ACOs 

would continue to be entitled to share 

in any savings they may achieve for 

performance year 2017. The calculation 

of savings and the determination of 

shared savings payment amounts would 

not be affected by the policies to address 

extreme and uncontrollable 

circumstances. ACOs in all three tracks 

of the program would receive shared 

savings payments, if any, as determined 

under part 425 subpart G. 

We also considered the possible 

impact of extreme and uncontrollable 

circumstances on an ACO’s 

expenditures for purposes of 

determining the benchmark (§ 425.602 

and § 425.603). The additional costs 

incurred as a result of an extreme or 

uncontrollable circumstance would 

likely impact the benchmark 

determined for the ACO’s subsequent 

agreement period in the Shared Savings 

Program, as performance years of the 

current agreement period become the 

historical benchmark years for the 

subsequent agreement period. We noted 

our belief that the increase in 

expenditures for a particular calendar 

year would result in a higher benchmark 

value when the same calendar year is 

used to determine the ACO’s historical 

benchmark, and in calculating 

adjustments to the rebased benchmark 

based on regional FFS expenditures 

(§ 425.603). We also noted our belief 

that any effect of including these 

additional expenditures in determining 

the ACO’s benchmark for the 

subsequent agreement period could be 

mitigated somewhat because the ACO’s 

expenditures during the three base years 

included in the benchmark are weighted 

equally, and regional expenditures 

would also increase as a result of the 

disaster. Therefore, we anticipated the 

effect on the regional adjustment under 

§ 425.603(c)(9) would be minimal. 

Although we did not modify the 

program’s historical benchmark 

methodology in the December 2017 

interim final rule with comment period, 

we noted that we planned to observe the 

impact of the 2017 hurricanes and 

wildfires on ACO expenditures, and that 

we might revisit the need to make 

adjustments to the methodology for 

calculating the benchmark in future 

rulemaking. 

We explained that to exercise our 

authority under section 1899(i)(3) of the 

Act to use other payment models, we 

must demonstrate that the payment 

model—(1) does not result in program 

expenditures that are higher than those 

that would have resulted under the 

statutory payment model under section 

1899(d) of the Act and (2) will improve 

the quality and efficiency of items and 

services furnished under Medicare. In 

assessing the impacts of the policy for 

mitigating shared losses for Track 2 and 

Track 3 ACOs affected by extreme and 

uncontrollable circumstances in 2017, 

we considered: The impact of the 

potential loss of participation in the 

program by ACOs affected by disasters 

should we not implement the policy 

described in the December 2017 interim 

final rule with comment period, and the 

anticipated minimal impact of adjusting 

losses for ACOs affected by disasters, as 

described in the regulatory impact 

statement for the December 2017 

interim final rule with comment period. 

On the basis of this assessment, we 

believed that incorporating this extreme 

and uncontrollable circumstances 

policy for performance year 2017 into 

the payment methodologies for Tracks 2 

and 3 would meet the requirements of 

section 1899(i) of the Act by not 

increasing expenditures above the costs 

that would be incurred under the 

statutory payment methodology under 

section 1899(d) of the Act and by 

encouraging affected ACOs to remain in 

the program, which we believed would 


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increase the quality and efficiency of the 

items and services furnished to the 

beneficiaries they serve. We also noted 

that to the extent the policies in the 

December 2017 interim final rule with 

comment period constituted a change to 

the Shared Savings Program payment 

methodology for 2017 after the start of 

the performance year, we believed that, 

consistent with section 1871(e)(1)(A)(ii) 

of the Act, and for reasons discussed in 

section III of the IFC, it would be 

contrary to the public interest not to 

adjust the shared losses calculated for 

ACOs in Tracks 2 and 3 to reflect the 

impact of the extreme and 

uncontrollable circumstances during 

2017. 

We invited comments on the policies 

being finalized in the December 2017 

interim final rule with comment period 

for performance year 2017, including 

the applicable quality data reporting 

period for performance year 2017 under 

the Shared Savings Program. We noted 

our belief that these automatic extreme 

and uncontrollable circumstance 

policies would reduce burden and 

financial uncertainty for ACOs, ACO 

participants, and ACO providers/ 

suppliers affected by catastrophes, 

including ACOs affected by Hurricanes 

Harvey, Irma, and Maria, and the 

California wildfires, and would also 

align with existing Medicare policies 

under the Quality Payment Program for 

2017. 

We also noted that in future 

rulemaking, we intended to propose 

permanent policies under the Shared 

Savings Program to address extreme and 

uncontrollable circumstances in future 

performance years. Therefore, we also 

invited public comment on policies and 

issues that we should consider when 

developing proposals for these 

permanent policies. 

We also welcomed comments on how 

to address the impact of extreme and 

uncontrollable events on historical 

benchmark calculations, which we 

would consider in developing any 

future proposals. In particular, we 

sought comments as to whether and 

how the historical benchmark should be 

adjusted to reflect extreme and 

uncontrollable events that occur during 

a benchmark year, how to establish the 

threshold for determining whether a 

significant change in expenditures 

occurred, whether and how to account 

for changes in expenditures that have an 

aggregate positive or negative impact on 

the historical benchmark, and whether 

and how to reweight the benchmark 

years when calculating the historical 

benchmark if one or more benchmark 

years is impacted by an extreme and 

uncontrollable event. 

Comment: The majority of 

stakeholders that submitted comments 

in response to the December 2017 

interim final rule with comment period 

expressed support for the concept of 

mitigating shared losses for ACOs in 

two-sided models that were affected by 

extreme and uncontrollable 

circumstances, though several offered 

suggestions for modifying the approach 

finalized for performance year 2017 or 

expanding its scope. For example, a 

commenter recommended that should 

extreme and uncontrollable 

circumstances affect ACOs in future 

years, CMS should compare the 

expenditures for Track 2 and Track 3 

ACOs in impacted areas to the 2017 

benchmarks to determine an approach 

that is fair and statistically reliable; 

however, it was unclear whether the 

commenter was suggesting that CMS 

compare expenditures to the historical 

benchmarks computed for purposes of 

Shared Savings Program financial 

calculations or to some other measure of 

expected 2017 spending. A commenter 

noted that extreme and uncontrollable 

circumstances can result in long-term 

disruptions in care beyond the time 

period during which an area is declared 

a natural disaster area and 

recommended that CMS consider a 

process for establishing a time period 

beyond the timeframe of the disaster 

declaration during which CMS will 

continue to mitigate an ACO’s losses. 

Several commenters expressed the belief 

that the policy adopted in the December 

2017 interim final rule with comment 

period did not go far enough and 

suggested that CMS consider waiving 

shared losses completely or allowing 

two-sided ACOs to temporarily convert 

to a one-sided model for affected years. 

One of these commenters noted that this 

alternative would likely affect an ACO’s 

status as participating in an advanced 

APM but could prevent organizations 

from terminating their participation in 

the Shared Savings Program altogether 

and could provide an incentive for more 

providers to take on downside risk. 

Another commenter also suggested 

using a modifier to adjust shared losses 

but did not provide further details on 

this approach. Another commenter 

agreed with CMS’ decision not to 

exclude claims submitted with a natural 

disaster modifier when mitigating 

shared losses, noting that it is uncertain 

whether providers submit claims with a 

modifier. This same commenter 

questioned what would happen for 

shared losses mitigation in the event 

that a state of emergency spans two 

calendar years. 

Response: We appreciate the support 

commenters offered for taking steps to 

mitigate the impacts of extreme and 

uncontrollable circumstances on ACOs 

in two-sided models. We implemented 

the policy finalized in the December 

2017 interim final rule with comment 

period for performance year 2017. There 

were 11 ACOs with shared losses for the 

performance year. Because ACOs are not 

required to meet a minimum threshold 

number of assigned beneficiaries in an 

affected area to qualify for this policy, 

all eleven ACOs received an adjustment 

to their shared losses ranging from $980 

to over $400,000. While we are 

sympathetic to the challenges faced by 

ACOs impacted by natural disasters, we 

decline at this time to consider 

eliminating shared losses for impacted 

ACOs or allowing ACOs to temporarily 

switch to a one-sided model as we still 

believe that it is important for ACOs 

that have taken on risk to be held 

accountable for shared losses incurred 

during months in which there was no 

applicable disaster declaration and for 

the assigned beneficiary population that 

was outside the area affected by the 

disaster. 

We also decline to adopt the other 

suggestions made by commenters, such 

as continuing to mitigate shared losses 

over a longer time period or to use 

payment modifier codes to adjust shared 

losses. For performance year 2017, we 

used the time periods associated with 

public health emergencies declared by 

the Secretary in applying the adjustment 

to shared losses and we expect to 

continue this practice moving forward. 

As described earlier in this section, we 

believe this approach provides 

consistency with the time periods 

during which waivers of other Medicare 

requirements are in place, as well as 

transparency. We are concerned that an 

approach that would mitigate shared 

losses over an extended period beyond 

the public health emergency declaration 

would potentially need to be applied on 

a case-by-case basis to account for the 

circumstances surrounding individual 

disasters. We wish to avoid this type of 

policy as we are concerned that it would 

lead to delays in determining whether 

relief would be available and create 

uncertainty for ACOs. With respect to 

the suggestion that we use payment 

modifier codes to adjust shared losses, 

as we describe later in this section, we 

have concerns that, in practice, the 

payment modifier codes are not used 

consistently and therefore would not 

provide an appropriate means for 

adjusting shared losses. 

In the November 2018 final rule, we 

extended the policy used to mitigate 

shared losses for performance year 2017 


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to performance year 2018 and 

subsequent years. Accordingly, we 

would like to clarify what would 

happen if the applicable time period for 

an extreme and uncontrollable event 

spans two calendar years. Consider an 

event with an applicable time period 

that spans from October in Year 1 

through January in Year 2. In 

determining the adjustment to shared 

losses in Year 1, we would use the 

percentage of the final Year 1 assigned 

beneficiary population residing in the 

affected area and the percentage of Year 

1 that was affected (2 of 12 months). In 

determining the adjustment to shared 

losses in Year 2, we would use the 

percentage of the Year 2 final assigned 

beneficiary population residing in the 

affected area and the percentage of Year 

2 that was affected (1 out of 12 months). 

Comment: Several commenters 

encouraged CMS to also address the 

financial impact of extreme and 

uncontrollable circumstances on the 

determination of shared savings for 

ACOs in all tracks. A few noted that all 

ACOs have invested significant 

resources to participate in the Shared 

Savings Program and they are at risk of 

not being able to recoup their 

investment if a natural disaster 

jeopardizes their opportunity to share in 

savings. 

Response: We appreciate the 

comments regarding the potential 

impacts of extreme and uncontrollable 

circumstances on shared savings 

payments. Some of the policies we have 

considered, such as using natural 

disaster payment modifiers to identify 

and remove claims for beneficiaries in 

affected areas when computing ACO 

expenditures, would have the potential 

to address adverse impacts on both 

shared savings and shared losses. 

However, based an analysis we 

performed of 2017 claims data for ACO 

assigned beneficiaries (see the 

November 2018 final rule (83 FR 59976) 

for more details), we are concerned that 

natural disaster payment modifier codes 

would not serve as a useful means for 

comprehensively identifying relevant 

claims. We also have concerns that 

removing claims for affected 

beneficiaries and time periods would 

add considerable complexity and could 

lead to biased expenditure estimates. 

Although we did not adopt an explicit 

adjustment to the shared savings 

payment for disaster-affected ACOs in 

either the December 2017 interim final 

rule with comment period or the 

November 2018 final rule, we note that 

our alternative methodology for quality 

scoring can indirectly increase an ACO’s 

shared savings payment. In performance 

year 2017, 62 of 117 disaster-affected 

ACOs received the national mean 

quality score, as it was higher than the 

score the ACO would have received in 

the absence of the policy. A higher 

quality score increases the final sharing 

rate that is applied to an ACO’s total 

savings, and thus can increase the 

ACO’s shared savings payment. 

Comment: A few stakeholders offered 

comments on whether or how CMS 

should account for extreme and 

uncontrollable circumstances when 

setting financial benchmarks for ACOs. 

A commenter supported the policy of 

not making any changes to the 

benchmark but requested that CMS 

continually monitor the impact of 

triggering events on an ACO’s 

benchmark for subsequent agreement 

periods, noting that it was possible that 

some ACOs may have much lower costs 

in benchmark years as the result of 

certain types of events and it would be 

unfair to penalize these ACOs. Another 

commenter acknowledged the 

challenges of appropriately adjusting 

benchmarks to reflect numerous 

possible situations and the potential for 

unintended consequences. This 

commenter requested that CMS provide 

more data on affected ACOs to allow for 

the evaluation of potential benchmark 

adjustments. Another commenter 

requested an example to demonstrate 

our view that the anticipated effect of 

extreme and uncontrollable 

circumstances on benchmarks that 

incorporate regional factors would be 

minimal. The same commenter 

requested clarification of how 

benchmark calculations would be 

affected in cases where an emergency 

spans two calendar years. 

Response: We appreciate the 

comments and questions raised by 

stakeholders regarding possible 

approaches for addressing extreme and 

uncontrollable circumstances when 

calculating ACOs’ historical 

benchmarks. In the December 2017 

interim final rule with comment period, 

we declined to modify the program’s 

historical benchmark methodology for 

extreme and uncontrollable 

circumstances. In the August 2018 

proposed rule (83 FR 41904–41906), we 

explained that we believed our proposal 

to incorporate regional trend factors in 

our calculations to establish and update 

the historical benchmark for all ACOs 

would provide an inherent adjustment 

to the benchmark for expenditure 

variations related to extreme and 

uncontrollable circumstances. In section 

II.D. of this final rule, we are finalizing 

our proposals to incorporate regional 

expenditures into the calculation of 

benchmark trend and update factors for 

all ACOs, including those in their first 

agreement period. We continue to 

believe that this methodology will 

provide an inherent adjustment to the 

benchmark to account for the impact of 

extreme and uncontrollable 

circumstances on ACO expenditures 

without suffering from the drawbacks of 

some of other methods considered, such 

as removing claims with disaster 

payment modifiers or claims for 

beneficiaries in affected areas and time 

periods. However, we will continue to 

monitor this approach and would 

propose adjustments, if needed, through 

future rulemaking. 

Comment: A commenter requested 

that CMS consider the impact on ACOs 

when a triggering event reduces the 

number of assigned beneficiaries below 

5,000. The commenter suggested that 

CMS establish policies ensuring that an 

ACO whose assigned beneficiary 

population decreases below the 

threshold of 5,000 as the result of an 

extreme and uncontrollable event be 

given adequate time to rebuild its 

patient population prior to the next 

agreement period. Another commenter 

questioned whether ACOs falling below 

the threshold as the result of a disaster 

would be subject to a penalty. The same 

commenter requested clarification on 

how the percentage of ACO population 

affected by a disaster would be 

determined for a Track 3 ACO when 

assigned beneficiaries have moved out 

of the area. 

Response: ACOs that are subject to the 

prospective beneficiary assignment 

methodology will continue to be held 

accountable for their prospectively 

assigned population for the performance 

year, regardless of whether the 

beneficiaries remain in the same 

geographic area, as long as they 

continue to reside in the United States, 

do not enroll in Medicare Advantage, 

and have at least one month of Parts A 

and B coverage and no months of Part 

A only or Part B only coverage. Thus, 

for an ACO that is subject to the 

prospective assignment methodology, 

the impact of a disaster on the size of 

its beneficiary population for the 

performance year should be small. 

However, we appreciate the fact that 

extreme and uncontrollable events 

could lead to out-migration from the 

affected area, which could, in turn, have 

negative effects on an ACO’s 

prospectively assigned beneficiary 

population for future periods or on the 

current performance year (or future 

benchmark year) assignment for an ACO 

that is subject to preliminary 

prospective assignment with 

retrospective reconciliation. 

Under section 1899(b)(2)(D) of the 

Act, in order to be eligible to participate 


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in the Shared Savings Program an ACO 

must have at least 5,000 beneficiaries. 

CMS deems an ACO to have initially 

satisfied the requirement to have at least 

5,000 assigned beneficiaries if 5,000 or 

more beneficiaries are historically 

assigned to the ACO participants in 

each of the 3 benchmark years as 

calculated using the program’s 

assignment methodology (§ 425.110(a)). 

We decline to modify our policy for 

determining whether a renewing ACO 

has satisfied the statutory requirement 

to make a special exception for ACOs 

that have been affected by an extreme 

and uncontrollable circumstance as we 

cannot be certain whether a belowthreshold population during the 

benchmark years is due to out-migration 

resulting from the disaster or to other 

factors. Furthermore, there would be no 

assurance that an ACO’s assigned 

beneficiary population would 

sufficiently increase during the 

performance period to comply with the 

statutory requirement. We note that as 

part of their application to renew their 

participation in the program for a new 

agreement period, all ACOs can modify 

their ACO participant list to try to 

expand their assigned beneficiary 

population to meet the threshold. ACOs 

that are unable to meet the 5,000 

assigned beneficiary threshold would 

have the opportunity to re-enter the 

program after the size of their patient 

population has recovered. 

Furthermore, we want to note that 

ACOs that fall below the 5,000 assigned 

beneficiary threshold during an 

agreement period are not automatically 

terminated from the program. As 

specified in § 425.110(b), if at any time 

during the performance year an ACO’s 

assigned population falls below 5,000, 

the ACO may be subject to the 

predetermination actions described in 

§ 425.216 and termination of the 

participation agreement by CMS under 

§ 425.218. Because ACOs have the 

opportunity to modify their ACO 

participant lists prior to the start of each 

performance year, such ACOs may have 

time to sufficiently rebuild their 

assigned population before they must be 

terminated from the program, and in 

time for renewal. We also note that 

under the policies being finalized in 

section II.A.5.c. of this final rule, ACOs 

that are involuntarily terminated from 

the program under § 425.218 or that 

voluntarily terminate under § 425.220 

may apply to re-enter without the 

previously required ‘‘sit-out’’ period. 

Following consideration of the 

comments received in response to the 

December 2017 interim final rule with 

comment period, we are not making any 

changes to the extreme and 

uncontrollable circumstances policies 

that were adopted for performance year 

2017. In the November 2018 final rule, 

we finalized policies for providing relief 

for ACOs impacted by extreme and 

uncontrollable circumstances in 

performance year 2018 and subsequent 

years. In that final rule, we amended the 

provisions at §§ 425.502(e)(4) and (f); 

425.606(i) and 425.610(i) that were 

originally adopted in the December 

2017 interim final rule with comment 

period in order to reflect these revised 

policies. 

IV. Collection of Information 

Requirements 

As stated in section 3022 of the 

Affordable Care Act, Chapter 35 of title 

44, United States Code, shall not apply 

to the Shared Savings Program. 

Consequently, the information 

collection requirements contained in 

this final rule need not be reviewed by 

the Office of Management and Budget. 

V. Regulatory Impact Analysis 

A. Statement of Need 

This final rule is necessary in order to 

make certain payment and policy 

changes to the Medicare Shared Savings 

Program established under section 1899 

of the Social Security Act. The Shared 

Savings Program promotes 

accountability for a patient population, 

fosters the coordination of items and 

services under Parts A and B, and 

encourages investment in infrastructure 

and redesigned care processes for high 

quality and efficient service delivery. 

The need for the policies is 

summarized in the statement of the 

rule’s purpose in section I. of this final 

rule and described in greater detail 

throughout the discussion of the 

policies in section II. of this final rule. 

As we have previously explained in this 

final rule, ACOs in two-sided models 

have shown significant savings to the 

Medicare program and are advancing 

quality. However, the majority of ACOs 

remain under a one-sided model. Some 

of these ACOs are increasing Medicare 

spending (and therefore generating 

losses) while benefiting from waivers of 

certain federal requirements in 

connection with their participation in 

the program. These ACOs may also be 

encouraging consolidation in the market 

place and reducing competition and 

choice for Medicare FFS beneficiaries. 

Under the redesign of the Shared 

Savings Program we are adopting in this 

final rule, ACOs of different 

compositions, and levels of experience 

with the accountable care model may 

continue to participate in the program, 

but the provisions included in this final 

rule will put the program on a path 

towards achieving a more measureable 

move to value and lead to savings for 

the Medicare program, while promoting 

a competitive and accountable 

marketplace. 

In summary, this final rule will 

redesign the participation options, 

including the payment models, 

available to Shared Savings Program 

ACOs to encourage their transition to 

performance-based risk. As part of this 

approach, CMS will extend the length of 

ACOs’ agreement periods from 3 to 5 

years as well as make changes to the 

program’s benchmarking methodology 

to allow for benchmarks that better 

reflect the ACO’s regional service area 

expenditures beginning with its first 

agreement period, while also mitigating 

the effects of factors based on regional 

FFS expenditures on ACO benchmarks 

more generally. These policies are 

necessary to improve the value 

proposition of the program for currently 

participating ACOs considering 

continuing their participation, as well as 

for organizations considering entering 

the program. Further, these changes are 

timely as large cohorts of the program’s 

early entrants, the vast majority of 

which are currently participating in the 

program’s one-sided model (Track 1), 

face a required transition to 

performance-based risk at the start of 

their next agreement period. 

Other key changes to the program’s 

regulations are also necessary, including 

to implement new requirements 

established by the Bipartisan Budget 

Act, which generally allow for 

additional flexibilities in payment and 

program policies for ACOs and their 

participating providers and suppliers. 

Specifically, we are finalizing policies 

to implement provisions of the 

Bipartisan Budget Act that allow certain 

ACOs to establish CMS-approved 

beneficiary incentive programs to 

provide incentive payments to assigned 

beneficiaries who receive qualifying 

primary care services; permit payment 

for expanded use of telehealth services 

furnished by physicians or other 

practitioners participating in an 

applicable ACO that is subject to a 

prospective assignment methodology; 

and provide greater flexibility in the 

assignment of Medicare FFS 

beneficiaries to ACOs by allowing ACOs 

in tracks under a retrospective 

beneficiary assignment methodology a 

choice of prospective assignment for the 

agreement period. Additionally, this 

final rule will extend the availability of 

the program’s existing SNF 3-day rule 

waiver to all ACOs participating under 

performance-based risk to support these 

ACOs in coordinating care across 


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24The first performance year for the program 

concluded December 31, 2013, which included a 

21-period for April 2012 starters, an 18-month 

period for July 2012 starters, and a 12-month period 

for January 2013 starters. Thereafter, results have 

been determined for the calendar year performance 

year for 2014 through 2017 for all ACOs that 

participated in the program for the relevant year. 

The study conducted for this rule reviewed results 

through 2016. 

settings to meet the needs of their 

patient populations. 

To provide ACOs time to consider the 

new participation options and prepare 

for program changes, make investments 

and other business decisions about 

participation, obtain buy-in from their 

governing bodies and executives, and 

complete and submit a Shared Savings 

Program application for a performance 

year beginning in 2019, we elected to 

forgo the application cycle in 2018 for 

an agreement start date of January 1, 

2019, and instead in the November 2018 

final rule (83 FR 59946) we finalized a 

voluntary 6-month extension for ACOs 

with a participation agreement ending 

on December 31, 2018, to allow these 

ACOs an opportunity to extend their 

current agreement period for an 

additional 6-month performance year. 

Under the policies we are adopting in 

this final rule, these ACOs will be able 

to apply for a new agreement period 

under the BASIC track or ENHANCED 

track beginning on July 1, 2019. ACOs 

entering a new agreement period on July 

1, 2019, will have the opportunity to 

participate in the program under an 

agreement period spanning 5 years and 

6 months, where the first performance 

year is the 6-month period between July 

1, 2019, and December 31, 2019. This 

final rule includes the methodology for 

determining ACO financial performance 

for the 6-month performance year from 

July 1, 2019, through December 31, 

2019. 

B. Overall Impact 

We examined the impacts of this final 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011), Executive Order 13771 on 

Reducing Regulation and Controlling 

Regulatory Costs (January 30, 2017), the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354), 

section 1102(b) of the Social Security 

Act, section 202 of the Unfunded 

Mandates Reform Act of 1995 (March 

22, 1995; Pub. L. 104–4), Executive 

Order 13132 on Federalism (August 4, 

1999), and the Congressional Review 

Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Section 3(f) of Executive Order 

12866 defines a ‘‘significant regulatory 

action’’ as an action that is likely to 

result in a rule: (1) Having an annual 

effect on the economy of $100 million 

or more in any 1 year, or adversely and 

materially affecting a sector of the 

economy, productivity, competition, 

jobs, the environment, public health or 

safety, or state, local or tribal 

governments or communities (also 

referred to as ‘‘economically 

significant’’); (2) creating a serious 

inconsistency or otherwise interfering 

with an action taken or planned by 

another agency; (3) materially altering 

the budgetary impacts of entitlement 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof; or (4) raising novel legal or 

policy issues arising out of legal 

mandates, the President’s priorities, or 

the principles set forth in the Executive 

Order. Executive Order 13771 directs 

agencies to categorize all impacts which 

generate or alleviate costs associated 

with regulatory burden and to 

determine the action’s net incremental 

effect. 

1. Medicare Program; Medicare Shared 

Savings Program; Accountable Care 

Organizations—Pathways to Success 

(CMS–1701–F2) 

A regulatory impact analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million or more in any 1 year). We 

estimate that this rulemaking is 

‘‘economically significant’’ as measured 

by the $100 million threshold, and 

hence also a major rule under the 

Congressional Review Act. Accordingly, 

we have prepared a RIA, which to the 

best of our ability presents the costs and 

benefits of the rulemaking. 

In keeping with our standard practice, 

the main analysis presented in this RIA 

compares the expected outcomes under 

the policies included in this final rule 

to the expected outcomes under current 

regulations. We provide our analysis of 

the expected costs of the final payment 

model under section 1899(i)(3) of the 

Act to the costs that would be incurred 

under the statutory payment model 

under section 1899(d) of the Act in 

section V.E. of this final rule. 

2. Medicare Program; Medicare Shared 

Savings Program; Accountable Care 

Organizations—Extreme and 

Uncontrollable Circumstances Policies 

(CMS–1701–F) 

We noted in the December 2017 IFC 

(82 FR 60918) that the policies for 

addressing extreme and uncontrollable 

circumstances are unlikely to have a 

significant economic impact on the 

Shared Savings Program. For purposes 

of the December 2018 interim final rule 

with comment, we estimated the impact 

of these policies by simulating their 

effect on actual 2016 financial and 

quality performance results, the most 

recent available reconciled financial and 

quality results, for the ACOs 

participating in the program in 

performance year 2017 that were 

potentially impacted by these policies. 

The total increase in shared savings 

payments and total reduction in shared 

loss payments anticipated for ACOs 

impacted by the policies in this rule in 

2017 was estimated to be approximately 

$3.5 million. Performance year 2017 

results were available in August of 2018, 

and we found that all 11 of the 

performance-based risk ACOs that owed 

shared losses received an adjustment, 

reducing aggregate shared losses by 

$640,000 to reflect the impact of 

extreme and uncontrollable 

circumstances. In addition, 31 ACOs 

received the mean ACO quality score of 

92 percent as a result of having at least 

20 percent of their assigned 

beneficiaries or the ACO’s legal entity in 

a county designated as a natural disaster 

emergency area. 

C. Anticipated Effects 

1. Effects on the Medicare Program 

a. Background 

The Shared Savings Program is a 

voluntary program operating since 2012 

that provides financial incentives for 

demonstrating quality of care and 

efficiency gains within FFS Medicare. In 

developing the policies finalized in this 

rule, we evaluated the impact of the 

quality and financial results of the first 

4 performance years of the program. We 

also considered our earlier projections 

of the program’s impacts as described in 

the November 2011 final rule (see Table 

8, 76 FR 67963), the June 2015 final rule 

(80 FR 32819), and June 2016 final rule 

(81 FR 38002). 

(1) ACO Performance 2012 Through 

2016 

We have analyzed financial 

performance from the first four 

performance years for the Shared 

Savings Program.24 Table 14 describes 

performance year 2016 results for ACOs 

segmented by track. These results show 

that in performance year 2016, the 410 

Track 1 ACOs spent more on average 


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relative to their financial benchmarks, 

resulting in a net loss of $49 million, or 

$7 per beneficiary. Because these ACOs 

were in a one-sided shared savings only 

model, CMS did not recoup any portion 

of these losses. Further, in performance 

year 2016, the 6 Track 2 and 16 Track 

3 ACOs spent less on average relative to 

their financial benchmarks. Track 2 

ACOs produced net savings of $18 

million or $308 per beneficiary, and 

Track 3 ACOs produced net savings of 

$14 million or $39 per beneficiary. 

These results (albeit from a relatively 

small sample of ACOs that in a number 

of cases moved to a performance-based 

risk track only after showing strong 

performance in a first agreement period 

under Track 1) indicate that ACOs 

under performance-based risk were 

more successful at lowering 

expenditures in performance year 2016 

than ACOs under Track 1. 

The same performance year 2016 data 

also show that ACOs produce a higher 

level of net savings and more optimal 

financial performance results the longer 

they have been in the Shared Savings 

Program and with additional 

participation experience. In 

performance year 2016, 42 percent of 

ACOs that started participating in the 

Shared Savings Program in 2012 and 

remained in the program in 2016 shared 

in savings and 36 percent of both 2013 

and 2014 starters shared in savings. In 

contrast, 26 percent of 2015 starters 

shared in savings and 18 percent of 

2016 starters shared in savings in 

performance year 2016. 

Table 15 indicates that when 

analyzing the performance of ACOs in 

Track 1, which is the track in which the 

majority of Shared Savings Program 

ACOs participated as of performance 

year 2016, it becomes clear that low 

revenue ACOs are saving CMS money 

while high revenue ACOs are resulting 

in additional spending by CMS before 

accounting for market-wide and 

potential spillover effects. Low revenue 

Track 1 ACOs produced net savings of 

$182 million relative to their 

benchmarks or $73 per beneficiary, and 

high revenue Track 1 ACOs produced a 

net loss of $231 million or $46 per 

beneficiary. For the purpose of this 

analysis, an ACO whose ACO 

participants’ Medicare FFS revenue for 

assigned beneficiaries was less than 10 

percent of the ACO’s assigned 

beneficiary population’s Parts A and B 

expenditures, was identified as a ‘‘low 

revenue ACO,’’ while an ACO whose 

ACO participants’ Medicare FFS 

revenue for assigned beneficiaries was 

at least 10 percent of the ACO’s assigned 

beneficiary population’s Parts A and B 

expenditures, was identified as a ‘‘high 

revenue ACO’’. Nationally, evaluation 

and management spending accounts for 

about 10 percent of total Parts A and B 

per capita spending. Because ACO 

assignment focuses on evaluation and 

management spending, applying a 10 

percent limit to identify low revenue 

ACOs will capture all ACOs that 

participated in the Shared Savings 

Program in performance year 2016 that 

were solely comprised of providers and 

suppliers billing for physician fee 

schedule services and generally exclude 

ACOs with providers and suppliers that 

bill for inpatient services for their 

assigned beneficiaries. The use of a 

threshold of 10 percent of the Parts A 

and B expenditures for the ACO’s 

assigned beneficiary population to 

classify ACOs as either ‘‘low revenue’’ 

or ‘‘high revenue’’ also showed the most 

significant difference in performance 

between the two types of ACOs. We 

note that this approach differs from the 

definitions for low revenue ACO and 

high revenue ACO discussed in section 

II.A.5.b. and finalized in this final rule. 

However, our analysis has confirmed 

that the simpler and more practical 

policy that we are adopting in this final 

rule of identifying low revenue ACOs 

using a 35-percent threshold in terms of 

the ratio of ACO participants’ total 

Medicare Parts A and B FFS revenue 

relative to total Medicare Parts A and B 

expenditures for the ACO’s assigned 

beneficiary population produces a 

comparable subgroup of ACOs with 

similarly-elevated average financial 

performance and ACO participant 

composition as the methods used in this 

study, as well as the lower 25 percent 

threshold proposed in the August 2018 

proposed rule. 


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68046 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 

With respect to ACO quality, the 

Shared Savings Program’s quality 

measure set includes both process and 

outcome measures that evaluate 

preventive care, clinical care for at-risk 

populations, patient experience of care, 

and care coordination. ACOs have 

consistently achieved higher average 

performance rates compared to group 

practices reporting similar quality 

measures. In addition, ACOs that have 

participated in the program over a 

longer time period have shown greater 

improvement in quality performance. 

For example, across all Shared Savings 

Program ACOs that reported quality in 

both performance year 2013 and 

performance year 2016, average quality 

performance improved by 15 percent 

across 25 measures used consistently 

across the performance years. Further, 

for performance year 2016, 93 percent of 

Shared Savings Program ACOs received 

bonus points for improving quality 

performance in at least one of the four 

quality measure domains with an 

average quality score increase for the 

applicable domain of 3 percentage 

points. 

Comment: Several commenters 

expressed support for Track 1 of the 

Shared Savings Program and the value 

of one-sided models. Several 

commenters cited the positive 

performance of Track 1 ACOs during 

performance year 2017 and past 

performance years referencing 

publically available CMS data and other 

publically available studies and citing 

the wide range of potential savings 

generated by Track 1 ACOs. Several 

commenters expressed their belief that 

Shared Savings Program performance 

should not be measured against ACO 

benchmarks, as financial benchmarks do 

not serve as valid counterfactuals and 

also fail to account for spillover effects, 

leading to misinterpretations of the 

value of one-sided models. 

A few commenters stated that they 

believed there is limited evidence 

available that shows downside risk 

elicits stronger performance, and one 

commenter suggested CMS should 

revise its statements that suggest ACOs 

participating in Track 1 of the Shared 

Savings Program have increased 

spending. A few commenters indicated 

that as ACOs gain experience with 

participation in the Shared Savings 

Program, these experienced ACOs also 

have demonstrated greater rates of 

savings, suggesting that ACOs should 

continue to have additional time to 

participate in one-sided models and the 

opportunity for slower transitions to 

performance-based risk. 

Response: We agree with commenters’ 

suggestions that there is value in onesided models, and we want to reiterate 

this belief for those commenters who 

suggested we have not recognized the 

benefits of participation in a one-sided 

model. As discussed in detail in this 

Regulatory Impact Analysis, the 

program results indicate that ACOs in 

one-sided models have indeed 

contributed to significant overall net 

program savings. We also agree with 

commenters, that performance in onesided models should be evaluated using 

a variety of performance measures, such 

as comparing ACO markets to non-ACO 

markets. This type of comparison has 

shown spending trend reductions 

supporting the benefits of ACO 

participation in one-sided models, 

implying gross savings are likely several 

times the magnitude measured by 

program benchmarks. We also agree that 

ACOs need an opportunity to 

participate in a one-sided model to gain 

experience in the Shared Savings 

Program before moving to performancebased risk, and we believe the glide path 

provided in the BASIC Track offers the 

flexibility needed for ACOs to gain 

experience in the program, while also 

offering options for ACOs that are ready 

to accelerate their move to higher risk 

within an agreement period. 

We disagree with commenters that 

suggested that ACOs should have more 

time and a slower transition to twosided models, as we have found ACOs 

in two-sided models consistently have 

generated greater savings and have 

shown higher performance than ACOs 

in one-sided models, and we believe the 

glide path provided in the BASIC track 

strikes the appropriate balance in 

incentives to improve performance and 

appropriately transitions ACOs to 

greater levels of risk and reward. 

Comment: Several commenters agreed 

with the discussion in the August 2018 

proposed rule regarding the data that 

show physician-led ACOs are more 

successful in producing savings. Some 

other commenters disagreed with CMS’ 

conclusion that low revenue ACOs 

(typically physician-led ACOs) perform 

better than high revenue ACOs 

(typically ACOs that include a hospital). 

MedPAC commented that although the 

August 2018 proposed rule described 

greater savings relative to benchmarks 

for low revenue ACOs in 2016, this 

analysis may not present the full picture 

because it did not take into account the 

fact that physician-only ACOs are more 

common in markets where service use 

per beneficiary has been historically 

high. According to MedPAC, even if 

physician-only ACOs generate some 

small degree of additional savings on 

average compared to hospital-based 

ACOs, the magnitude of these additional 

savings is not large enough for the 

Medicare program to favor physicianonly ACOs over integrated physicianhospital ACOs for payment purposes. 

Rather, Medicare should be neutral with 

respect to the specific configuration of 

ACOs and their ACO participants and 

ACO providers/suppliers, and instead 

design and implement policies to 

reward the most effective ACOs in a 

given market. 

A few commenters argued that one of 

CMS’ premises for distinguishing 

between hospital-based and physicianled ACOs is flawed, explaining based on 

a commenter’s own analysis, that at 

least 20 percent of health system-led 

ACOs would be designated as 


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Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 68047 

‘‘physician led,’’ and more generally 

that some of the highest performing 

individual ACOs are hospital-based 

ACOs. 

Response: We believe that factors 

related to ACO composition, including 

the relationship between ACO 

participant revenues and the ACO’s 

benchmark, are reflected in program 

participation trends and program 

results, including results from 

performance years 2016 and 2017. 

Financial results vary at the ACO level 

and there are both significant savings 

and losses represented in the subsets of 

low and high revenue ACOs, but the 

finding that low revenue ACOs have 

higher mean savings is generally 

consistent even when filtering for 

specific cohorts of ACOs, specific years 

of performance, and track selection. 

Furthermore, the changes we are 

finalizing in this rule will not preclude 

high revenue ACOs from succeeding in 

the program, but instead they will 

require such ACOs to take a more 

aggressive path toward performancebased risk—a path that is naturally 

better suited to entities with higher 

revenue, as evidenced by the successful 

participation of high revenue ACOs in 

Track 2 and Track 3. While early 

adopters of performance-based risk have 

included both low revenue ACOs and 

high revenue ACOs, a larger percentage 

of high revenue ACOs have elected to 

participate in two-sided models. For 

example, in performance year 2017, 

there were 6 percent more high revenue 

ACOs participating in Track 2 and Track 

3 than in Track 1. However, analyses of 

performance year 2017 results show that 

low revenue ACOs continue to have 

stronger performance overall than high 

revenue ACOs, and low revenue ACOs 

in two-sided risk models outperform all 

other ACOs. While high revenue ACOs 

with greater experience in the program 

participating under two-sided models 

outperformed ACOs with these 

characteristics in Track 1, high revenue 

ACOs in two-sided models in their first 

performance year in the program 

showed a net loss. Generally, the vast 

majority of ACOs in two-sided models 

that have owed shared losses have been 

high revenue ACOs. 

We believe this experience and the 

program results to date demonstrate that 

high revenue ACOs generally have a 

greater capacity to take on higher risk 

and that higher levels of risk can help 

serve as catalyst for these organizations 

to improve quality of care and lower 

growth in FFS expenditures for their 

assigned beneficiary populations even 

more quickly. Further, high revenue 

ACOs that have not already moved to 

two-sided risk are not performing as 

well as low revenue ACOs, although we 

believe they have the financial means to 

move to greater risk, and may be taking 

advantage of program flexibilities that 

can lead to increased program spending 

or are not serious about redesigning 

their care processes to improve quality 

and lower expenditure growth. As a 

consequence, we believe high revenue 

ACOs without a sufficient incentive to 

change their practice patterns, including 

through the transition to performancebased risk, may not only lead to higher 

Medicare spending, but also pose a risk 

of crowding out participation by low 

revenue ACOs with stronger potential to 

improve the quality and efficiency of 

care delivery. 

(2) ACO Market-Wide Effects and 

Potential Spillover 

Analysis of wider program claims 

data indicates Medicare ACOs have 

considerable market-wide impact, 

including significant spillover effects 

not directly measurable by ACO 

benchmarks. Whereas spending relative 

to benchmark (Tables 14 and 15) 

indicates Shared Savings Program ACOs 

as a group are not producing net savings 

for the Medicare FFS program, a study 

of wider claims data indicates 

significant net savings are likely being 

produced. Table 16 includes data 

through performance year 2016 on the 

cumulative per capita Medicare FFS 

expenditure trend (on a pricestandardized and risk-adjusted basis) in 

markets that include Medicare ACOs, 

including ACOs participating in the 

Shared Savings Program as well as in 

the Pioneer and Next Generation ACO 

Models. Table 16 illustrates that, 

compared to the results in relation to 

ACOs’ historical benchmarks discussed 

previously (see Table 14), more savings 

are likely being generated when both the 

spillover effects on related populations 

and the feedback effect of growing ACO 

participation on the national average 

FFS program spending growth, which in 

turn has been used to update ACO 

benchmarks, are factored in. Table 16 

expresses combined market average per 

capita spending growth since 2011 

relative to a baseline FFS per capita 

trend observed for hospital referral 

regions continuing to have less than 10 

percent of total assignable FFS 

beneficiaries assigned to Medicare 

ACOs through 2016. Markets that have 

been ‘‘ACO active’’ longer (defined by 

the year a market first reached at least 

10 percent assignment of assignable FFS 

beneficiaries to Medicare ACOs) show 

the greatest relative reduction in average 

adjusted growth in per capita Medicare 

FFS spending. Markets that have 

included Medicare ACOs since 2012, 

particularly the relatively small subset 

of 10 hospital referral regions reaching 

significant ACO participation in risk 

(defined as at least 30 percent 

assignment by 2016 to ACOs 

participating in a Shared Savings 

Program track or Medicare ACO model 

with performance-based risk), show the 

most significant reductions in Medicare 

FFS spending through 2016. 


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68048 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 

25McWilliams JM, et al. Changes in Postacute 

Care in the Medicare Shared Savings Program. 

JAMA Intern Med. 2017; 177(4):518–526. 

doi:10.1001/jamainternmed.2016.9115. 

26Winblad U, et al. ACO-Affiliated Hospitals 

Reduced Rehospitalizations from Skilled Nursing 

Facilities Faster than Other Hospitals. Health 

Affairs. 2017 January; 36(1): 67–73. doi:10.1377/ 

hlthaff.2016.0759. 

27Hsu J, et al. Bending The Spending Curve By 

Altering Care Delivery Patterns: The Role Of Care 

Management Within A Pioneer ACO. Health 

Affairs. 2017 May 1; 36(5):876–884. doi:10.1377/ 

hlthaff.2016.0922. 

Based on an analysis of Medicare 

Shared Savings Program and Pioneer 

ACO Model performance data, we 

observe that the sharpest declines in 

spending are for post-acute facility 

services (particularly skilled nursing 

facility services), with smaller rates of 

savings (but more dollars saved overall) 

from prevented hospital admissions and 

reduced spending for outpatient 

hospital episodes. These findings 

become apparent when assessing 

hospital referral regions both with (>10 

percent of assignable Medicare FFS 

beneficiaries assigned to ACOs in 2012) 

and without (<10 percent through 2016) 

a significant portion of assignable 

Medicare FFS beneficiaries assigned to 

ACOs. Comparing price-standardized 

per capita changes in spending from 

2011 to 2016, regions with significant 

ACO penetration yielded larger declines 

in expenditures in the following areas 

relative to those without significant 

ACO penetration: Post-acute care 

facilities (relative decrease of 9.0 

percent), inpatient (1.6 percent relative 

decrease), and outpatient (3.5 percent 

relative decrease). These relative 

decreases were accompanied by 

declines in evaluation and management 

services (2.5 percent relative decrease), 

emergency department (ED) utilization 

(1.6 percent relative decrease), hospital 

admissions (1.9 percent decrease), and 

hospital readmissions (3.5 percent 

decrease). There also appears to be 

substitution of higher cost services with 

lower cost services. For example, during 

the same period, home health 

expenditures increased by 5.0 percent 

and ambulatory surgery center 

expenditures increased by 1.4 percent, 

indicating that some beneficiaries could 

be forgoing care in institutional and 

inpatient settings in favor of lower cost 

sites of care. 

These findings are supported by 

outside literature and research. For 

example, a study conducted by J. 

Michael McWilliams and colleagues 

(JAMA, 2017) found that Shared Savings 

Program ACOs that began participating 

in 2012 reduced post-acute care 

spending by 9 percent by 2014.25

Another study by Ulrika Winblad and 

colleagues (Health Affairs, 2017) 

determined that ACO-affiliated 

hospitals reduced readmissions from 

skilled nursing facilities at a faster rate 

than non-ACO-affiliated hospitals 

through 2013.26 In addition, a study by 

John Hsu and colleagues (Health Affairs, 

2017) concluded that using care 

management programs, large Pioneer 

ACOs generated 6 percent fewer ED 

visits, 8 percent fewer hospitalizations, 

and overall 6 percent less Medicare 

spending relative to a comparison group 

through 2014.27

Assuming Medicare ACOs were 

responsible for all relative deviations in 

trend from non-ACO markets produces 

an optimistic estimate that total 

combined Medicare ACO efforts 

potentially reduced total FFS Medicare 

Parts A and B spending in 2016 by 

about 1.2 percent, or $4.2 billion (after 

accounting for shared savings payments 

but before accounting for the potential 

impact on MA plan payment). However, 

it is likely that ACOs are not the only 

factor responsible for lower spending 

growth found in early-ACO-active 

markets. Health care providers in such 

markets are likely to be more receptive 

to other models and/or interventions, 

potentially including the following, for 

example: (1) Health Care Innovation 

Award payment and service delivery 

models funded by the Innovation 

Center; (2) advanced primary care 

functionality promoted by other payers, 

independent organizations like the 

National Committee for Quality 

Assurance, and/or through Innovation 

Center initiatives including the MultiPayer Advanced Primary Care Practice 

Demonstration and Comprehensive 

Primary Care Initiative; and (3) care 

coordination funded through other 

Medicare initiatives, including, for 

example, the Community-based Care 

Transitions Program. Furthermore, the 

markets making up the non-ACO 

comparison group only cover about 10 

percent of the national assignable FFS 

population in 2016 and may offer an 

imperfect counterfactual from which to 

estimate ACO effects on other markets. 

An alternative (and likely more 

precise) estimate for the overall 

Medicare ACO effect on spending 

through 2016 involves assuming a 

spillover multiplier mainly for savings 

on non-assigned beneficiaries whose 

spending is not explicitly included in 

benchmark calculations and combining 

primary and spillover effects to estimate 

the degree to which ACO benchmarks 

were reduced by the feedback such 

efficiency gains would have had on 


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Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 68049 

28McWilliams JM. Changes in Medicare Shared 

Savings Program Savings From 2013 to 2014. JAMA. 

2016; 316(16):1711–1713. doi:10.1001/ 

jama.2016.12049. 

29McWilliams JM, et al. Changes in Health Care 

Spending and Quality for Medicare Beneficiaries 

Associated With a Commercial ACO Contract. 

JAMA. 2013; 310(8):829–836. doi:10.1001/ 

jama.2013.276302. 

30 Dobson, A, et al. Estimates of Savings by 

Medicare Shared Savings Program Accountable 

Care Organizations. (August 30, 2018); available at 

https://www.naacos.com/assets/docs/pdf/Study_of_

MSSP_Savings_2012-2015.pdf 

31Madeleine Phipps-Taylor & Stephen M. 

Shortell. ACO Spillover Effects: An Opportunity 

Not to Be Missed, NEJM Catalyst (September 21, 

2016); available at https://catalyst.nejm.org/acospillover-effects-opportunity-not-missed/. 

32See for example, Brady Post, Tom 

Buchmueller, and Andrew M. Ryan. Vertical 

Integration of Hospitals and Physicians: Economic 

Theory and Empirical Evidence on Spending and 

Quality. Medical Care Research and Review. August 

2017. https://doi.org/10.1177/1077558717727834. 

See also, Liaw WR, et al. Solo and Small Practices: 

A Vital, Diverse Part of Primary Care. Ann Fam 

Med. 2016;14(1):8–15. doi:10.1370/afm.1839. 

33Neprash HT, Chernew ME & McWilliams JM. 

Little Evidence Exists to Support the Expectation 

That Providers Will Consolidate to Enter New 

Payment Models. Health Affairs. 2017; 36(2): 346– 

354. doi:10.1377/hlthaff.2016.0840. 

34See for example, Mostashari, F. The Paradox of 

Size: How Small, Independent Practices Can Thrive 

in Value-Based Care. Ann Fam Med. 2016; 14(1):5– 

7. doi:10.1370/afm.1899. 

national average spending growth. 

Analysis of claims data indicates an 

average ACO’s providers and suppliers 

provide services to roughly 40 to 50 

percent more beneficiaries than are 

technically assigned to the ACO in a 

given year. In addition, savings will 

potentially extend to spending greater 

than the large claims truncation amount, 

IME payments, DSH payments, and 

other pass-through payments that are 

excluded from ACO financial 

calculations. Assuming proportional 

savings accrue for non-assigned 

beneficiaries and the excluded spending 

categories, as previously described, 

supports a spillover savings assumption 

of 1.6 (that is, 60 cents of savings on 

non-benchmark spending for every 

dollar of savings on benchmark 

spending). Total implied savings, 

including the assumed spillover 

savings, suggest that Medicare ACOs 

were responsible for about 50 percent of 

the lower spending growth in ACO 

markets (after becoming ACO active), or 

roughly 0.5 percent lower total FFS 

Parts A and B spending in 2016 after 

accounting for shared savings payments. 

The latest results recently published 

for ACOs participating in a 2017 

performance year show continued 

overall progress in terms of the 

magnitude of combined program savings 

relative to combined benchmarks and 

relative to the net combined dollars 

returned to ACOs as shared savings 

payments net of shared loss receipts. 

For the first time in 2017, ACOs in 

Track 1 showed combined savings 

relative to benchmark exceeding the 

combined dollars returned to such 

ACOs via shared savings payments. 

However, the greatest difference in 

terms of gross savings relative to 

benchmark outpacing shared savings 

payments continues to be exhibited by 

the subgroup of low-revenue ACOs in 

performance based risk. 

There are several other key takeaways 

from the available evidence and 

literature regarding the performance of 

Medicare ACOs, including the 

following: 

Independent Research Finds ACOs 

Reduce Medicare Trust Fund Outlays. 

The implications from studying marketlevel trends described in the previous 

section are compatible with findings 

reported by independent researchers. J. 

Michael McWilliams (JAMA, 2016) 

found that in 2014, Shared Savings 

Program ACOs generated estimated 

program savings of $628 million, or 

about 2.5 times higher than the savings 

in relation to participating ACOs’ 

historical benchmarks and nearly twice 

the total shared savings payments of 

$341 million.28 Another study by 

McWilliams and colleagues (JAMA, 

2013) on a commercial ACO initiative, 

the Alternative Quality Contract, 

estimated a net 3.4 percent reduction in 

spending on Medicare beneficiaries due 

to spillover from a commercial nonMedicare ACO initiative.29 A study 

funded by the National Association of 

Accountable Care Organizations 

estimated that Shared Savings Program 

ACOs generated savings of $1.84 billion 

during through the 2015 performance 

year, or roughly double the gross 

savings measured relative to the ACOs’ 

combined benchmark over such 

period.30 This research supports the 

hypothesis that changes in care delivery 

implemented by Medicare ACO 

clinicians will, in turn, cause efficiency 

gains in the wider Medicare FFS 

population. In another study supporting 

this hypothesis, Madeleine PhippsTaylor and Stephen Shortell (NEJM, 

2016) conducted a set of case studies 

which concluded that ACOs were 

making system and process changes that 

will improve the value of services 

provided to all patients, regardless of 

payer.31

Low revenue ACOs (including small 

and physician-only ACOs) have 

produced stronger average benchmark 

savings to date than high revenue ACOs 

(likely including institutional providers). 

We also find lower spending growth in 

the handful of markets that happen to be 

virtually exclusively populated by low 

revenue ACOs; however, the sample 

size of such markets is too small for us 

to confidently estimate relative 

performance but does offer some 

corroboration of the stronger results 

observed for low revenue ACOs on 

average relative to their historical 

benchmarks. Further, evidence suggests 

that overall payment reform has been 

associated with little acceleration in 

consolidation of health care providers 

that surpasses trends already underway 

(Post et al., 2017),32 although there is 

some evidence of potential defensive 

consolidation in response to new 

payment models (Neprash et al., 

2017).33 Anecdotally, ACOs provide 

physician practices with a way to stay 

independent and offer a viable 

alternative to merging with a hospital 

(Mostashari, 2016).34

Generating savings is difficult for 

ACOs. It may take time as well as trial 

and error for ACOs to build more 

efficient care delivery infrastructure. 

Small absolute savings compound over 

time in an incremental fashion. This 

gradual change is evidenced by ACOs’ 

financial performance results to date, 

which indicate that ACOs produce more 

net savings the longer they participate 

in programs such as the Shared Savings 

Program. 

Shared savings are not profits. 

Program experience since 2012 

indicates that ACOs make upfront 

investments in care delivery 

infrastructure, including data analytics 

and staffing, with the intent of saving 

money through improvements in care 

management and coordination. ACOs 

that do not achieve savings must still 

fund these operational costs. 

Sustainably rewarding attained 

efficiency and continued improvement 

is the central challenge. Therefore, 

optimizing program design elements for 

ACO initiatives such as the Shared 

Savings Program is key to ensuring that 

both of these goals are attained. Such 

elements include the methodology used 

to set and reset the ACO’s historical 

benchmark, the approach used to 

calculate the ACO’s shared savings and/ 

or shared losses, the level of 

performance-based risk for ACOs, and 

the methodology for assigning 

beneficiaries to the ACOs. Striking this 

balance correctly will foster increased 

participation in ACO initiatives, which 

is required to produce higher levels of 

net savings. 

Comment: Several commenters 

suggested CMS incorporate a broader set 

of measurement approaches to 


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68050 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 

35See for example, Brady Post, Tom 

Buchmueller, and Andrew M. Ryan. Vertical 

Integration of Hospitals and Physicians: Economic 

Theory and Empirical Evidence on Spending and 

Quality. Medical Care Research and Review. August 

2017. https://doi.org/10.1177/1077558717727834. 

See also, Liaw WR, et al. Solo and Small Practices: 

A Vital, Diverse Part of Primary Care. Ann Fam 

Med. 2016;14(1):8–15. doi:10.1370/afm.1839. 

36Neprash HT, Chernew ME & McWilliams JM. 

Little Evidence Exists to Support the Expectation 

That Providers Will Consolidate to Enter New 

Payment Models. Health Affairs. 2017; 36(2): 346– 

354. doi:10.1377/hlthaff.2016.0840. 

37See for example, Mostashari, F. The Paradox of 

Size: How Small, Independent Practices Can Thrive 

in Value-Based Care. Ann Fam Med. 2016; 14(1):5– 

7. doi:10.1370/afm.1899. 

determine ACO and Shared Savings 

Program performance, to better identify 

spillover and other effects on non-ACO 

assigned populations. A few 

commenters believed that improved 

accuracy in identifying and measuring 

spillover effects would improve 

determinations of the overall 

performance of the Shared Savings 

Program and better identify actual 

savings to the Medicare Trust Funds. 

Response: We agree with commenters 

that reviewing the wider impacts and 

accounting for the spillover effects 

related to ACO participation in the 

Shared Savings Program is important, 

and this was discussed in detail in the 

Regulatory Impact Analysis for the 

August 2018 proposed rule. Our 

analysis of wider program claims data 

indicates that Medicare ACOs have 

considerable market-wide impact, 

including significant spillover effects 

not directly measurable by ACO 

benchmarks. Table 16 includes data 

through PY 2016 on the cumulative per 

capita Medicare FFS expenditure trend 

(on a price-standardized and riskadjusted basis) in markets that include 

Medicare ACOs, including ACOs 

participating in the Shared Savings 

Program as well as in the Pioneer and 

Next Generation ACO Models. Table 16 

illustrates that more savings are likely 

being generated when both the spillover 

effects on related populations and the 

feedback effect of growing ACO 

participation on the national average 

FFS program spending growth are 

factored in. Additionally, analysis of 

markets that have been ‘‘ACO active’’ 

longer (defined by the year a market first 

reached at least 10 percent assignment 

of assignable FFS beneficiaries to 

Medicare ACOs) shows that these 

markets have the greatest relative 

reduction in average adjusted growth in 

per capita Medicare FFS spending. CMS 

will continue to use a variety of 

methods to evaluate the impact of 

Shared Savings Program participation in 

future years. 

Comment: Several commenters 

suggested that CMS’ statements that 

ACOs are a potential driver of 

consolidation in the healthcare industry 

are not supported by studies or 

publically available data. One 

commenter described their belief that 

consolidation had been occurring before 

the Shared Savings Program and has 

generally continued for other reasons, 

and that the Shared Savings Program 

may even contribute to greater 

competition in provider markets, as long 

as its incentive structure continues to 

favor lower-revenue organizations. One 

commenter suggests ACOs provide 

physician practices with a way to stay 

independent and offer an alternative to 

merging with a hospital. One 

commenter described the program 

redesign outlined in the August 2018 

proposed rule as more complex and 

expensive than the existing program 

requirements, and was concerned that it 

would potentially limit opportunities 

for smaller companies, such that larger 

entities will prevail. 

Response: As explained earlier in this 

impact analysis, evidence suggests that 

overall payment reform has been 

associated with little acceleration in 

consolidation of health care providers 

that surpasses trends already underway 

(Post et al., 2017) 35, but there is some 

evidence of potential defensive 

consolidation in response to new 

payment models (Neprash et al., 

2017) 36. Anecdotally, ACOs provide 

physician practices with a way to 

remain independent and offer a viable 

alternative to merging with a hospital 

(Mostashari, 2016).37 However, we also 

agree with commenters that additional 

investigation and research on 

consolidation is needed. 

We disagree with the commenter’s 

suggestion that the program redesign 

under the ‘‘Pathways to Success’’ will 

encourage larger entities to form, as our 

incentives for low revenue ACOs will 

likely continue to support smaller 

physician-driven organizations to 

participate in the Shared Savings 

Program and reduce incentives for 

consolidation. Rather, we believe that 

the redesign of the Shared Savings 

Program offers ACOs of different 

compositions opportunities to move to 

value and achieve savings for the 

Medicare program, while promoting a 

competitive and accountable 

marketplace. 

Comment: Two commenters disputed 

CMS’ assertion that Shared Savings 

Program ACOs are not generating 

significant savings due to ACOs’ 

reluctance to undertake risk. These 

commenters believe that Shared Savings 

Program ACOs are improving quality 

and achieving significantly higher 

savings for Medicare than CMS 

originally calculated. One commenter 

requested that CMS re-examine its data 

and re-evaluate the effectiveness of the 

Shared Savings Program. Other 

commenters expressed disappointment 

with ACO progress toward significantly 

improving efficiency of care 

Response: We disagree with the 

assertions made by these commenters 

that we have underestimated the overall 

impact of the program. As discussed in 

detail in this Regulatory Impact 

Analysis, our analysis of the program 

indicates that ACOs (the majority of 

which participated in one-sided Track 1 

during our study period) have produced 

significant overall net program savings 

as evidenced by reductions in spending 

trends in ACO markets compared to 

non-ACO markets, which imply that 

gross savings from ACO participation in 

the program are likely at least several 

times the magnitude measured by 

program benchmarks. We also note, 

however, that high revenue ACOs on 

average are not showing positive net 

savings relative to their benchmarks. We 

believe replacing Track 1 with a BASIC 

track featuring a more gradual, but 

ultimately quicker, transition to 

performance-based risk, in conjunction 

with benchmark refinements, will 

promote stronger performance by both 

high revenue and low revenue ACOs 

remaining in or joining the program. 

b. Assumptions and Uncertainties 

The changes to the Shared Savings 

Program finalized in this rule could 

result in a range of possible outcomes. 

In assessing the impact of these changes, 

we considered a number of 

uncertainties related to determining 

future participation and performance by 

ACOs in the Shared Savings Program. 

Changes to the existing benchmark 

calculations described previously will 

benefit program cost savings by 

producing benchmarks with improved 

accuracy (most notably by limiting the 

effect of the regional benchmark 

adjustment to positive or negative 5 

percent of the national per capita 

spending amount). However, such 

savings will be partly offset by increased 

shared savings payments to ACOs that 

will benefit from the changes to our 

benchmarking methodology to 

incorporate factors based on regional 

FFS expenditures beginning with the 

ACO’s first agreement period, revise risk 

adjustment to include up to a 3 percent 

increase in average HCC risk score over 

the course of an agreement period, and 

blend national trend with regional trend 

when calculating ACO benchmarks. 

Such trade-offs reflect our intention to 

strengthen the balance between 


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rewarding ACOs for attainment of 

efficiency in an absolute sense in 

tandem with incentivizing continual 

improvement relative to an ACO’s 

recent baseline. 

More predictable relationships, that 

is, an ACO’s knowledge of its costs 

relative to the FFS expenditures in its 

region used to adjust its benchmark, can 

allow risk-averse ACOs to successfully 

manage significant exposure to 

performance-based risk. However, the 

policies we are adopting in this final 

rule will limit regional adjustments so 

that they still incentivize low cost ACOs 

to take on risk while mitigating 

excessive windfall payments to ACOs 

that, for a variety of reasons, may be 

very low cost at baseline. The finalized 

policies—notably the reduction in the 

weight used to determine the regional 

adjustment for high cost ACOs to 15 

percent and 25 percent, respectively, in 

the first 2 agreement periods in which 

the regional adjustment is applied—also 

increase the possibility that higher cost 

ACOs will find a reasonable business 

case to remain in the program and 

thereby continue to lower their cost over 

time. 

We also considered the possibility 

that providers and suppliers will have 

differing responses to changing financial 

incentives offered by the program, 

including for example the varying levels 

of savings sharing rates and/or loss 

sharing limits defined for the BASIC 

and ENHANCED tracks. Participation 

decisions are expected to continue to be 

based largely on an ACO’s expectation 

of the effect of rebasing and the regional 

adjustment on its ability to show 

spending below an expected future 

benchmark. We also considered the 

incentive for ACOs to participate under 

the highest level of risk and reward in 

the BASIC track or in the ENHANCED 

track in order to participate in an 

Advanced APM for purposes of the 

Quality Payment Program. Eligible 

clinicians in an ACO that is 

participating in an Advanced APM may 

become Qualifying APM Participants for 

a year if they receive a sufficient 

percentage of their payments for Part B 

covered professional services or a 

sufficient percentage of Medicare 

patients through the ACO. 

We also gave consideration to the 

effect on program entry and renewal as 

a result of discontinuing Track 1 and 

Track 2, and offering instead the BASIC 

track (including the glide path for 

eligible ACOs) and ENHANCED track, 

including the option for ACOs currently 

under 3-year agreements for 

participation in Track 1, Track 2, and 

Track 3 to terminate their agreement to 

quickly enter a new agreement period 

under the BASIC track or the 

ENHANCED track. For example, if 2014 

starters complete a second 3-year 

agreement period under Track 1 and are 

eligible to enter the BASIC track’s glide 

path under a one-sided model in 2020, 

these ACOs could have 7 performance 

years under a one-sided model. 

Modeling indicates that while such 

allowance could slow the transition to 

risk for some ACOs that might otherwise 

have enough of a business case to make 

an immediate transition to performancebased risk, the longer glide path will 

likely result in greater overall program 

participation by the end of the 

projection period and marginally 

increase overall program savings. We 

also considered the effect on 

participation from the final policies that 

will permit ACOs to change their 

beneficiary assignment method 

selection prior to the start of each 

performance year, and allow ACOs in 

the BASIC track’s glide path the option 

annually to elect to transition to a 

higher level of risk and reward within 

the glide path. 

We also considered the potential 

effects of the final policies to promote 

participation by low revenue ACOs. By 

allowing new, low revenue ACOs to 

enter the BASIC track with several 

options for progressing under the BASIC 

track (for example taking 3 years with 

up to 40 percent sharing in savings 

without performance-based risk or 

immediately entering the maximum 

level of risk and potential reward under 

such track) and to continue their 

participation in the BASIC track for a 

subsequent agreement period (under the 

highest level of risk and potential 

reward), the new participation options 

that we are adopting in this final rule 

will offer low revenue ACOs a longer 

period under a more acceptable degree 

of risk given their revenue constraints, 

before transitioning to more significant 

risk exposure under the ENHANCED 

track. 

Low revenue ACOs can still choose to 

enter the ENHANCED track, and take on 

additional downside risk in exchange 

for the opportunity to share in a higher 

percentage of any savings. Such 

migration is likeliest for low revenue 

ACOs expecting a favorable regional 

adjustment to their rebased historical 

benchmark. The finalized policy of 

including the regional adjustment in the 

methodology for determining an ACO’s 

benchmark for its first agreement period 

should help provide such ACOs the 

degree of certainty necessary for earlier 

election of performance-based risk, 

while capping the amount of the 

regional adjustment at positive or 

negative 5 percent of national per capita 

expenditures for Parts A and B services 

for assignable beneficiaries will help 

CMS to avoid unnecessarily large 

windfall payments for ACOs that have 

already been properly incentivized to 

aggressively participate with a regional 

adjustment set at the level of the cap. 

In addition, we considered related 

impacts of the changes to the program’s 

benchmarking methodology, as used to 

establish, adjust, update and reset the 

ACO’s benchmark. For renewing 

ACOs—especially ACOs that are 

concerned about competition from 

operating in a highly competitive ACO 

market or ACOs that make up a large 

portion of their market—several changes 

are likely to help mitigate concerns 

about the long term business case of the 

model. Most notably, the use of a 

regional/national blend to determine the 

growth rates for the trend and update 

factors should reduce the degree to 

which ACO savings (and/or neighboring 

ACO savings) affect an ACO’s own 

benchmark updates. Furthermore, the 

final policy of using full HCC risk ratios 

(with any increase capped at positive 3 

percent but uncapped for decreases) 

regardless of the assignment status of a 

beneficiary should help to assuage 

concerns that risk adjustment could 

adversely affect an ACO that 

increasingly serves a higher morbidity 

population in its market. 

To best reflect these uncertainties, we 

continue to utilize a stochastic model 

that incorporates assumed probability 

distributions for each of the key 

variables that will impact participation, 

changes in care delivery, and the overall 

financial impact of the Shared Savings 

Program. The model continues to 

employ historical baseline variation in 

trends for groups of beneficiaries 

assigned using the program’s claimbased assignment methodology to 

simulate the effect of benchmark 

calculations as described in the June 

2016 final rule (81 FR 38005 through 

38007). We used several unique 

assumptions and assumption ranges in 

the updated model. 

To estimate the number of ACOs that 

will participate in the program, we 

assumed that up to approximately 250 

existing 2018 ACOs will be affected by 

the changing policies starting with a 

potential third agreement period 

beginning on July 1, 2019, or in 2020 or 

2021. We also assumed that up to 

approximately 300 existing 2018 ACOs 

will be affected by the changing policies 

starting with a potential second 

agreement period beginning on July 1, 

2019, in 2020, or 2021. In addition, 

between 20 and 50 new ACOs were 

assumed to form annually from 2019 

through 2028. 


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We assumed ACO decision making 

regarding participation will reflect each 

ACO’s updated circumstances including 

prior year performance as well as 

expected difference in spending in 

relation to future anticipated adjusted 

benchmark spending. Specific related 

assumptions are as follows: 

For one, the potential that existing 

ACOs will renew under the policies in 

this final rule are related to expectations 

regarding the effect of the changes to the 

regional adjustment on the ACO’s 

rebased benchmark. ACOs expecting 

adjusted historical benchmarks from 2 

to 10 percent higher than actual per 

capita cost are assumed to select the 

highest-risk option (Track 3 in the 

baseline or the ENHANCED track under 

this final rule); such range is reduced for 

second or later rebasing under the 

policies in the final rule to 1 to 5 

percent higher than actual per capita 

cost. Otherwise, ACOs expecting 

adjusted rebased benchmarks from 0 to 

3 percent higher than actual per capita 

cost are assumed to select the Track 1+ 

Model (baseline) or Level E of the 

BASIC track (final rule). ACOs 

expecting adjusted rebased historical 

benchmarks from 0 to 5 percent lower 

than actual per capita cost are expected 

not to renew unless another agreement 

in Track 1 is allowed (baseline), or are 

assumed to have between 15 and 65 

percent chance of electing the BASIC 

track (final rule). 

Second, all other renewal decisions 

are expected to follow the same 

assumptions as the preceding 

description except for the following 

cases. For the baseline scenario, a Track 

1 ACO eligible for a second Track 1 

agreement period during the projection 

period that does not otherwise select 

renewal in Track 3 or the Track 1+ 

Model will only renew in Track 1 if the 

ACO had earned shared savings in 

either of the first 2 years of the existing 

agreement period or if the ACO 

anticipates an adjusted historical 

benchmark no lower than 3 percent 

below actual cost. For the final rule 

scenario, an ACO not otherwise 

choosing the ENHANCED track will 

only renew in the BASIC track if the 

following conditions were met: (1) The 

ACO expects an adjusted historical 

benchmark no lower than 0 to 3 percent 

below actual cost; (2) the ACO did not 

experience a loss in the existing 

agreement period; and (3) the ACO is 

low revenue (as high revenue ACOs will 

be precluded from renewing for a 

second agreement period in the BASIC 

track). 

Third, we used the following 

approach to make assumptions about 

participation decisions for ACOs 

encountering a shared loss. An adjusted 

shared loss (L) was calculated by netting 

out the total expected incentive 

payments that will be made under the 

Quality Payment Program to ACO 

providers/suppliers who are Qualifying 

APM Participants during the payment 

year that is 2 years after the performance 

year for which the ACO is accountable 

for shared losses. In each trial a random 

variable (X) was chosen from a skewed 

distribution ranging from zero to 3 

percent of benchmark (mode 1 percent 

of benchmark) for determining 

participation decisions affecting years 

prior to 2023 (alternatively X was 

sampled from the range zero to 2 

percent of benchmark with mode of 0.5 

percent of benchmark for participation 

decisions for 2023 and subsequent years 

when the incentive to participate in an 

Advanced APM as a Qualifying APM 

Participant is reduced). If L>X then the 

ACO is assumed to drop out. Otherwise, 

if L>X/2 then the ACO is assumed to 

have a 50 to 100 percent chance of 

leaving the program. Otherwise, the 

ACO has a relatively smaller loss 

(L<X/2) and the ACO is assumed to 

have roughly double the chance of 

persisting relative to the prior scenario. 

Fourth, we used the following 

approach to make assumptions about 

the potential that ACOs in the BASIC 

track will elect early transition to Level 

E of the BASIC track. An adjusted 

shared savings (S) was calculated by 

adding the total potential incentive 

payments expected under the Quality 

Payment Program (2 years after the 

potential transition to Level E) to ACO 

providers/suppliers who will expect to 

become Qualifying APM Participants 

(due to the transition to Level E) to the 

ACO’s most recent shared savings—with 

such sum expressed as a percentage of 

benchmark. In each trial a random 

variable (Y) was chosen from a skewed 

distribution ranging from 1 to 4 percent 

of benchmark (mode 2 percent of 

benchmark). If S>Y, then the ACO is 

assumed to elect immediate transition to 

Level E of the BASIC track for the 

following performance year. 

Assumptions for ACO effects on 

claims costs reflect a combination of 

factors. First, ACO revenue is assumed 

to be inversely proportional to historical 

savings achieved prior to 

implementation of the provisions of this 

final rule. This is because, as noted 

earlier, low revenue ACOs (that tend to 

have low ACO participant Medicare FFS 

revenue relative to the ACO’s 

benchmark spending) have generally 

shown stronger financial performance 

over the first 5 years of the program than 

high revenue ACOs. For existing low 

revenue ACOs, baseline savings 

immediately prior to renewal under the 

policies in this final rule are estimated 

to range from 1 to 4 percent of spending 

accounted for by the program 

benchmark, with an additional spillover 

effect on extra-benchmark spending 

accounting for an additional 25 to 75 

percent savings relative to the directly 

assumed savings on benchmark 

spending. Conversely, existing high 

revenue ACOs are assumed to have 

baseline savings of only 25 percent of 

the assumed baseline savings for low 

revenue ACOs, as previously 

enumerated. 

Residual baseline savings are then 

potentially assumed to gradually 

diminish if participation ends. 

Specifically, zero to 100 percent of 

baseline savings are assumed to erode 

by the fifth year after an existing ACO 

drops out of participation as a Medicare 

ACO. 

Alternatively, future savings for each 

type of ACO are assumed to scale 

according to the incentive presented by 

each potential track of participation. 

Future savings in Track 3 or the 

ENHANCED track during the projection 

period for low revenue ACOs are 

assumed to range from zero to 4 percent 

of benchmark spending for existing 

ACOs and 1 to 5 percent of benchmark 

spending for new ACOs. High revenue 

ACOs are assumed to have zero to 100 

percent of the savings assumed for low 

revenue ACOs. Ultimate savings are 

assumed to phase in over 5 to 10 years 

for all types of ACOs. Savings for the 

Track 1+ Model or the BASIC track, 

Levels with downside risk, are assumed 

to be 50 to 100 percent of the savings 

assumed for Track 3/ENHANCED track 

(as previously described). Savings for 

the BASIC track performance years 

without downside risk, or Track 1 are 

assumed to be 30 to 70 percent of the 

savings assumed for Track 3/ 

ENHANCED track. 

We also assumed that selection effects 

will implicitly include the renewal 

decisions of ACOs simulated in the 

model. Further assumptions included 

the following: (1) The adoption in this 

final rule of full HCC adjustment 

(capped at positive 3 percent) allows 

each ACO to increase its benchmark 

according to a skewed distribution from 

¥0.5 to 3 percent with mode 0.5 

percent (where the lower bound has 

been marginally decreased to ¥0.5 

percent from the proposed rule 

assumption of a 0.0 percent to account 

for our decision not to finalize the 

proposed floor on downward HCC 

adjustment in this final rule); and (2) for 

both the baseline and final rule 

scenarios, each ACO is assumed to be 

able to influence its comparable 


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spending to region by zero to 5 percent 

(skewed with mode 1 percent) for 

example via changes in ACO participant 

TIN composition or other methods to 

direct assignment in a favorable manner 

given the financial incentive from the 

regional adjustment to the benchmark. 

Comment: A few commenters stated 

that CMS has provided no citations or 

other details as to the source of the data 

used in the proposed rule. One 

commenter suggested that in the future 

CMS should conduct a formal 

evaluation of the Shared Savings 

Program, and share the evaluation with 

stakeholders in advance of rulemaking 

to aid in the preparation of comments. 

Response: CMS makes data publically 

available on CMS websites in several 

formats to provide ACOs, providers, and 

researchers with information to evaluate 

the Shared Savings Program. CMS 

provides Public Use Files describing 

Shared Savings Program Quality and 

Finance Performance, ACO 

participation, and Regional FFS 

expenditures, assignment, and CMSHierarchical Condition Category (HCC) 

prospective risk scores. CMS also makes 

Research Identifiable Files that include 

information for every beneficiary 

assigned to a Shared Savings Program 

ACO and for all providers participating 

in a Shared Savings Program ACO, 

available for a fee through the Research 

Data Assistance Center 

(www.resdac.org) to researchers who 

have obtained an appropriate Data Use 

Agreement. CMS also included 

summaries of several program 

evaluations in the Regulatory Impact 

Analysis for the August 2018 proposed 

rule. We will continue to consider 

making additional data and evaluation 

results publically available during 

future rulemaking and at such other 

times as may be appropriate. 

c. Detailed Stochastic Modeling Results 

A simulation model involving the 

assumptions and assumption ranges 

described in the previous section was 

constructed and a total of 1,000 

randomized trials were produced. Table 

17 summarizes the annual projected 

mean impact (projected differences 

under the changes to the program 

finalized in this rule relative to the 

current baseline program) on ACO 

participation, federal spending on Parts 

A and B claims, ACO earnings from 

shared savings net of shared losses, and 

the net federal impact (effect on claims 

net of the change in shared savings/ 

shared losses payments). The overall 

average projection of the impact of the 

final program changes is approximately 

$2.9 billion in lower overall federal 

spending over 10 years from 2019 

through 2028 relative to a baseline that 

assumes the prior program regulations 

remain in effect through this ten year 

period. The 10th and 90th percentiles 

from the range of projected 10-year 

impacts range from ¥$5.14 billion to 

¥$680 million in lower spending, 

respectively. The mean impact is 

comprised of about ¥$950 million in 

lower claims spending, $2.43 billion in 

reduced shared savings payments, net of 

shared loss receipts, and approximately 

$490 million in additional incentive 

payments made under the Quality 

Payment Program to additional ACO 

providers/suppliers expected to become 

Qualifying APM Participants (mainly for 

performance years prior to 2023 where 

the Quality Payment Program incentive 

made during the corresponding 

payment year is 5 percent of Physician 

Fee Schedule revenue). 


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The overall drop in expected 

participation is mainly due to the 

expectation that the program will be less 

likely to attract new ACO formation in 

future years as the number of risk-free 

years available to new ACOs will be 

reduced from 6 years (two, 3-year 

agreement periods in current Track 1) to 

up to 3 years for low revenue ACOs or 

2 years for high revenue ACOs in the 

BASIC track. However, the changes are 

expected to increase continued 

participation from existing ACOs, 

especially those currently facing 

mandated transition to risk in a third 

agreement period starting in 2019, 2020, 

or 2021 under the existing regulations, 

as well as certain other higher cost 

ACOs for which the moderated capped 

regional adjustment will not reduce 

their benchmark as significantly as 

prescribed by current regulation. 

Relatively small increases in spending 

in years 2019 through 2021 are largely 

driven by expectations for more 

favorable risk adjustment to ACOs’ 

updated benchmarks and a temporary 

delay in migration of certain existing 

ACOs to performance-based risk. 

Savings grow significantly in the out 

years as a greater share of existing ACOs 

eventually transition to higher levels of 

risk and the savings from capping the 

regional adjustment to the benchmark 

grow because ACOs would increasingly 

have become eligible for higher 

uncapped adjustments under the 

baseline in the later years of the 

projection period. 

This final rule includes changes from 

the proposed rule that improve the 

business case for certain ACOs to renew 

or join the program. Such changes 

include higher shared savings rates in 

certain years of the BASIC track, 

reduced weights on regional 

adjustments to benchmarks for ACOs 

with per capita spending above their 

region, and the option for new lowrevenue ACOs to participate in 3 riskfree years under the BASIC track before 

moving to BASIC level E for the last 2 

years of their first agreement period. 

Relative to the proposed rule projection, 

these changes are estimated to increase 

participation by existing and new ACOs 

and thereby increase the projected 

savings on claims to a greater extent 

than we anticipate overall shared 

savings payments will grow. Such 

changes account for most of the 

difference (roughly $500 million greater 

net program savings) between the 

proposed rule projection of $2.24 billion 

in net savings and the final rule 

projected net savings of $2.9 billion. 

The remainder of the difference (about 

$150 million in increased net program 

savings) results from our decision not to 

finalize the proposed negative 3 percent 

cap on risk adjustment if an ACO’s 

assigned population average HCC risk 

score declined beyond such point over 

the course of its agreement period. 

The mean projection of $2.9 billion 

reduced overall federal spending is a 

reasonable point estimate of the impact 

of the changes to the Shared Savings 

Program included in this final rule 

during the period between 2019 through 

2028. However, we emphasize the 

possibility of outcomes differing 

substantially from the median estimate, 

as illustrated by the estimate 


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distribution. Accordingly, this RIA 

presents the costs and benefits of this 

final rule to the best of our ability. As 

further data emerges and is analyzed, 

we may improve the precision of future 

financial impact estimates. 

To the extent that the changes to the 

Shared Savings Program being made 

through the final rule will result in net 

savings or costs to Part B of Medicare, 

revenues from Part B beneficiary 

premiums will also be correspondingly 

lower or higher. In addition, because 

MA payment rates depend on the level 

of spending within traditional FFS 

Medicare, savings or costs arising from 

these changes to the Shared Savings 

Program will result in corresponding 

adjustments to MA payment rates. 

Neither of these secondary impacts has 

been included in the analysis shown. 

Comment: A number of comments 

highlighted the proposed reduced 25 

percent maximum savings sharing rates 

in certain performance years under the 

glide path in the BASIC track and/or the 

use of regional spending to adjust ACO 

benchmarks in their first agreement 

period as problematic for generating 

optimal program participation. 

Response: The proposed changes were 

intended to move more ACOs into 

performance-based risk and thereby 

promote stronger efforts to improve the 

efficiency of care delivery. We have 

noted other proposed (and now final) 

changes that many commenters support, 

like the change in the risk adjustment 

methodology and the extended 5-year 

agreement periods, as changes that are 

expected to help many ACOs to manage 

such transition successfully. 

Furthermore, the final rule increases the 

sharing rate in one-sided models under 

the BASIC track to 40 percent and in all 

two-sided models under the BASIC 

track to 50 percent, thereby improving 

the incentive for ACOs to begin such 

transition along the glide path under the 

BASIC track. Additionally, the final rule 

moderates the regional adjustment 

applied in the first and second 

agreement periods when determining 

the benchmark for ACOs with average 

spending higher than their region by 

reducing the applicable adjustment 

weight from 25 percent to 15 percent in 

the first agreement period and from 35 

percent to 25 percent in the second 

agreement period. This change is also 

anticipated to improve the likelihood a 

wider mix of ACOs will successfully 

make the transition to performancebased risk. 

Comment: One commenter was 

concerned by projections that many 

ACOs would leave the program, and 

fewer would choose to enter it. 

Response: The final rule includes 

changes that are expected to improve 

the likelihood of participation from 

ACOs that may not otherwise have 

joined the program or renewed their 

participation, including ACOs already 

reaching the end of their 6 years of 

Track 1 participation that would, 

without the changes in this rule, face 

higher risk in Track 2 or Track 3 than 

what will be required under the BASIC 

track glide path. Other changes 

including implementing HCC risk 

adjustment with a 3 percent cap on 

increases, reducing the weight of the 

regional adjustment for ACOs that are 

higher cost than their region, and 

extending the agreement period from 3 

years to 5 years, are expected to offer a 

more appealing business case for certain 

ACOs to participate. As a result we are 

now projecting only 36 fewer ACOs 

participating by the end of the 10 year 

projection period compared to the 

projection of 109 fewer in the proposed 

rule, and we actually expect higher 

overall participation in the first half of 

the projection period when many 

existing ACOs would have already faced 

the end of their available time in the 

one-sided model under Track 1 under 

the prior participation options. 

2. Effects on Beneficiaries 

Earlier in this analysis we describe 

evidence for the Shared Savings 

Program’s positive effects on the 

efficiency of care delivered by ACO 

providers/suppliers over the first 5 years 

of the program. Reduced unnecessary 

utilization can lead to financial benefits 

for beneficiaries by way of lower Part B 

premiums or reduced out of pocket cost 

sharing or both. Certain beneficiaries 

may also benefit from the provision of 

in-kind items and services by ACOs that 

are reasonably connected to the 

beneficiary’s medical care and are 

preventive care items or services or 

advance a clinical goal for the 

beneficiary. The value of care delivered 

to beneficiaries also depends on the 

quality of that care. Evidence indicates 

there have been incremental 

improvements in quality of care 

reported for ACO providers/suppliers. 

As previously noted in the Background 

section of this RIA, for all ACOs that 

participated during performance year 

2016 that had four or more years of 

experience in the program, average 

quality performance improved by 15 

percent across the 25 measures used 

consistently across PYs 2013 to 2016. 

As explained in more detail 

previously, we believe the changes we 

are making in this final rule will 

provide additional incentives for ACOs 

to improve care management efforts and 

maintain program participation. In 

addition, ACOs with low baseline 

expenditures relative to their region are 

more likely to transition to and sustain 

participation in a risk track (either the 

BASIC track (Level E) or the 

ENHANCED track) in future agreement 

periods. Consequently, the changes in 

this rule will also benefit beneficiaries 

through greater beneficiary engagement 

and active participation in their care 

(via beneficiary incentives) and broader 

improvements in accountability and 

care coordination (such as through 

expanded use of telehealth services and 

extending eligibility for the waiver of 

the SNF 3-day rule to all ACOs 

accepting performance-based risk) than 

would occur in the absence of these 

changes. Lastly, we estimate that the net 

impacts on federal spending, as 

previously detailed, will correspond to 

savings to beneficiaries in the form of 

reductions in Part B premium payments 

of approximately $380 million over the 

10 year projection period through 2028. 

We intend to continue to analyze 

emerging program data to monitor for 

any potential unintended effect that the 

use of a regional adjustment (as 

modified in this final rule) to determine 

the historical benchmarks for additional 

cohorts of ACOs could potentially have 

on the incentive for ACOs to serve 

vulnerable populations (and for ACOs to 

maintain existing partnerships with 

providers and suppliers serving such 

populations). 

3. Effects on Providers and Suppliers 

As noted previously, the changes in 

this final rule aim to improve the ability 

for ACOs to transition to performancebased risk and provide higher value 

care. We believe the contemporaneous 

growth of ACO agreements with other 

payers is sufficiently mature (and 

invariably heterogeneous in structure) 

that it will not be materially affected by 

the changes to specific features of the 

Shared Savings Program that we are 

adopting in this final rule. Although the 

elimination of Track 1 is expected to 

ultimately reduce the overall number of 

ACOs participating in the program, this 

change might also create opportunities 

for more effective ACOs to step in and 

serve the beneficiaries who were 

previously assigned to other ACOs that 

leave the program. In addition, other 

new policies (including changes to HCC 

risk adjustment, longer 5-year agreement 

periods, gradual expansion of exposure 

to risk in the BASIC track, and allowing 

eligible low revenue ACOs to renew for 

a second agreement period in Level E of 

the BASIC track) are expected to 

increase the number of existing and new 

ACOs that ultimately make a sustained 


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transition to performance-based risk. 

Such transition is expected to help 

ACOs more effectively engage with their 

ACO participants and ACO providers/ 

suppliers in transforming care delivery. 

Changes to the methodology for 

making regional adjustments to the 

historical benchmark are expected to 

affect ACOs differently depending on 

their circumstances. Similar to 

observations described in the June 2016 

final rule, certain ACOs that joined the 

program from a high expenditure 

baseline relative to their region and that 

showed savings under the first and/or 

second agreement period benchmark 

methodology that did not include a 

regional adjustment will likely expect 

lower benchmarks and greater 

likelihood of shared losses under a 

methodology that includes a 15 percent 

weight on the regional expenditure 

adjustment in the first agreement period 

in which the adjustment is applied, and 

higher weights in subsequent agreement 

periods. Additionally, certain ACOs that 

joined the program with relatively low 

expenditures relative to their region 

might expect significant shared savings 

payments even if they failed to generate 

shared savings in their first agreement 

period prior to the application of the 

regional adjustment to the benchmark. 

Limiting the weight of the regional 

adjustment to the benchmark to 50 

percent, reducing the weight for high 

cost ACOs to 15 percent in the first 

agreement period and 25 percent in the 

second agreement period, and capping 

the adjustment at positive or negative 5 

percent of national average per capita 

FFS spending for assignable 

beneficiaries, will serve to preserve the 

incentive for low cost ACOs to maintain 

participation and accept performancebased risk while also improving the 

business case for high cost ACOs to 

continue to participate and drive their 

costs down toward parity with or even 

below their regional average. Therefore, 

the changes to the regional adjustment 

are expected to increase participation by 

ACOs in risk tracks by broadening the 

mix of ACOs with plausible business 

cases for participation without creating 

excessive residual windfall payments to 

ACOs with very low baseline costs or 

unreasonably punitive decreases to 

benchmarks for ACOs serving very high 

cost populations at baseline. The 

increase in sustained participation in 

performance-based risk is evidenced by 

the projection of $490 million in 

increased incentive payments under the 

Quality Payment Program to ACO 

providers/suppliers achieving status as 

Qualifying APM Participants due to 

increased ACO participation in riskbased tracks of the Shared Savings 

Program. Conversely, the projected 

$2.43 billion in lower overall 10-year 

shared savings payments to ACOs 

reflects the prudent limitations that will 

be placed on the regional adjustment to 

the benchmark for ACOs that are very 

low cost relative to their region prior to 

rebasing. 

Several other changes are expected to 

provide certain ACOs with stronger 

business cases for participating in the 

program. Transition to full HCC risk 

adjustment (capped at positive 3 

percent) regardless of beneficiary 

assignment status is expected to 

increase the resulting adjusted updated 

benchmark for the average ACO and 

better reflect actual shifts in assigned 

patient morbidity. Blending national 

with regional trend for ACO benchmark 

calculations is also expected to mitigate 

some ACOs’ concerns regarding the 

problem of hyper competition against 

other ACOs in highly-saturated markets, 

as well as the potential that large ACOs 

will drive the regional trend they are 

ultimately measured against. These 

factors contribute to the expanded 

participation expected in performancebased risk and the resulting increase in 

savings on claims through more efficient 

care delivery. In this final rule we are 

making modifications to certain 

elements of the proposed rule, including 

increasing the shared savings rates in 

certain years of the BASIC track and 

reducing the weight on the regional 

adjustment for high cost ACOs; such 

changes are estimated to increase 

overall program net savings by 

bolstering participation and thereby 

reducing claims costs more significantly 

than the resulting increases in overall 

shared savings payments to ACOs. 

We have made program data available 

that can help stakeholders evaluate the 

impact the final rule changes, as 

previously described, may have on 

individual ACOs in various markets. 

The Center for Medicare (CM) has 

created standard analytical files 

incorporating factors based on regional 

FFS expenditures (currently available 

for CYs 2014, 2015, 2016, and 2017) that 

specifically tabulate—(1) aggregate 

expenditure and risk score data for 

assignable beneficiaries by county; and 

(2) the number of beneficiaries assigned 

to ACOs, by county. These public use 

files can be obtained at the following 

website https://www.cms.gov/ResearchStatistics-Data-and-Systems/ 

Downloadable-Public-Use-Files/ 

SSPACO/SSP_Benchmark_

Rebasing.html. 

CM has also created standard 

analytical files that contain ACOspecific metrics as well as summarized 

beneficiary and provider information for 

each performance year of the Shared 

Savings Program. These files include 

ACO-specific annual data on financial 

and quality performance, person years 

and demographic characteristics of 

assigned beneficiaries, aggregate 

expenditure and utilization, and 

participant composition of the ACO. 

The public use files for 2013 through 

2017 can be obtained at the following 

website https://www.cms.gov/ResearchStatistics-Data-and-Systems/ 

Downloadable-Public-Use-Files/ 

SSPACO/index.html. 

Comment: Several commenters 

expressed concern about the potential 

negative impact on Medicare 

beneficiaries and entire communities 

that depend on hospitals and health 

systems to treat all patients, including 

uninsured and underinsured 

populations, of the proposed 

requirement that high revenue ACOs 

participate under an accelerated path to 

performance-based risk. In particular, 

one commenter explained that not-forprofit providers may be challenged to 

provide the same level of charity care to 

their indigent patients under this 

approach. 

Response: We acknowledge the 

particular challenges faced by safety net 

providers and the considerations these 

organizations must weigh in assessing 

their readiness for program participation 

in general, and participation under 

performance-based risk more 

specifically. We note that all ACO 

providers/suppliers continue to receive 

traditional Medicare FFS payments 

under Parts A and B, and may receive 

from additional payments the ACO if 

the ACO meets specified quality and 

savings requirements of the Shared 

Savings Program. We have observed that 

ACOs that serve high rates of dual 

eligible Medicare and Medicaid 

beneficiaries have shared savings at 

higher rate than other ACOs. As a result, 

we believe the dually eligible Medicare 

and Medicaid population represents a 

significant opportunity for ACOs to 

generate savings through care 

coordination and quality improvement. 

We also note that clinicians, including 

safety net clinicians that participate in 

Advanced APMs may qualify for 

incentive payments, which could 

provide additional resources to safety 

net providers. 

We believe that the combination of 

policies included as part of the redesign 

of the Shared Savings Program we are 

finalizing with this final rule will 

support ACOs, including ACOs that 

serve the most complex patients and 

ACOs with safety net providers as ACO 

participants, as they transition to 


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performance-based risk. In particular, 

we believe the availability of the BASIC 

track’s glide path for ACOs 

inexperienced with performance-based 

risk Medicare ACO initiatives, longer 

agreement periods (of at least 5 years 

instead of 3-year agreements) which 

could allow for more predictable 

historical benchmarks and therefore 

greater opportunity for ACOs to achieve 

savings against these benchmarks, a new 

coding intensity adjustment that permits 

moderate risk score growth, and lower 

regional adjustments to historical 

benchmarks for ACOs that are 

determined to be higher spending 

compared to their regional service area 

will support ACOs as they transition to 

performance-based risk. Further, 

additional program flexibilities we are 

finalizing with this final rule, such as 

broader access to a SNF 3-day rule 

waiver and expanded use of telehealth 

services for eligible ACOs under a twosided model (see section II.B. of this 

final rule) could also support care 

coordination and the delivery of care by 

safety net providers and the populations 

they serve. 

4. Effect on Small Entities 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

physician practices, hospitals, and other 

providers are small entities either by 

virtue of their nonprofit status or by 

qualifying as a small business under the 

Small Business Administration’s size 

standards (revenues of less than $7.5 to 

$38.5 million in any 1 year; NAIC 

Sector–62 series). States and individuals 

are not included in the definition of a 

small entity. For details, see the Small 

Business Administration’s website at 

http://www.sba.gov/content/smallbusiness-size-standards. For purposes of 

the RFA, approximately 95 percent of 

physicians are considered to be small 

entities. There are over 1 million 

physicians, other practitioners, and 

medical suppliers that receive Medicare 

payment under the Physician Fee 

Schedule. 

Although the Shared Savings Program 

is a voluntary program and payments for 

individual items and services will 

continue to be made on a FFS basis, we 

acknowledge that the program can affect 

many small entities and have developed 

our rules and regulations accordingly in 

order to minimize costs and 

administrative burden on such entities 

as well as to maximize their opportunity 

to participate. (For example: Networks 

of individual practices of ACO 

professionals are eligible to form an 

ACO; the use of an MSR under Level A 

and Level B of the BASIC track, and, if 

elected by the ACO, under the 

ENHANCED track and Levels C through 

E of the BASIC track, that varies by the 

size of the ACO’s population and is 

calculated based on confidence intervals 

so that smaller ACOs have relatively 

lower MSRs; and low revenue ACOs 

may remain under reduced downside 

risk in a second agreement period under 

Level E of the BASIC track). 

Small entities are both allowed and 

encouraged to participate in the Shared 

Savings Program, provided the ACO has 

a minimum of 5,000 assigned 

beneficiaries, thereby potentially 

realizing the economic benefits of 

receiving shared savings resulting from 

the utilization of enhanced and efficient 

systems of care and care coordination. 

Therefore, a solo, small physician 

practice or other small entity may 

realize economic benefits as a function 

of participating in this program and the 

utilization of enhanced clinical systems 

integration, which otherwise may not 

have been possible. We believe the 

policies included in this final rule may 

further encourage participation by small 

entities in existing ACOs that may 

otherwise not find it possible to quickly 

assume the much higher exposure to 

downside risk required under the 

ENHANCED track. Specifically, we 

believe our policy of allowing eligible 

low revenue ACOs up to 2 agreement 

periods in the BASIC track (with the 

second agreement period at the highest 

level of risk and potential reward) 

where downside risk exposure is 

limited to a percentage of ACO 

participants’ Medicare FFS revenue 

(capped at a percentage of the ACO’s 

benchmark), and the option for new, 

low revenue ACOs to participate under 

one-sided risk for 3 performance years 

(or 4 performance years in the case of 

ACOs entering an agreement period 

beginning on July 1, 2019) in exchange 

for moving to the highest level of risk 

and potential reward under the BASIC 

track for the final two performance years 

in the agreement period, will support 

low revenue ACOs by permitting a 

gradual transition to performance-based 

risk. 

As detailed in this RIA, total expected 

incentive payments made under the 

Quality Payment Program to Qualifying 

APM Participants are expected to 

increase by $490 million over the 2019 

to 2028 period as a result of changes 

that will increase participation in the 

Shared Savings Program by certain 

ACOs and therefore increase the average 

small entity’s earnings from such 

incentives. We also note that the final 

policy under which each agreement 

period will be extended to 5 years (or 

6 years for ACOs entering a new 

agreement period on July 1, 2019) offers 

greater certainty to ACOs, including 

small entities, regarding their 

benchmark as they approach the higher 

levels of risk required in the higher 

levels of the BASIC track and under the 

ENHANCED track. 

5. Effect on Small Rural Hospitals 

Section 1102(b) of the Act requires us 

to prepare a regulatory impact analysis 

if a rule may have a significant impact 

on the operations of a substantial 

number of small rural hospitals. This 

analysis must conform to the provisions 

of section 603 of the RFA. For purposes 

of section 1102(b) of the Act, we define 

a small rural hospital as a hospital that 

is located outside of a metropolitan 

statistical area and has fewer than 100 

beds. Although the Shared Savings 

Program is a voluntary program, this 

final rule will have a significant impact 

on the operations of a substantial 

number of small rural hospitals. In the 

proposed rule, we sought comment from 

small rural hospitals on the proposed 

changes, with special focus on the 

impact of the proposed changes to the 

adjustment to the benchmark to reflect 

regional FFS expenditures. (We noted 

that the data currently available on the 

CMS website, as described in the Effects 

on Providers and Suppliers section, may 

be useful for commenters to estimate the 

effects of the proposed changes for their 

particular ACO and/or market.) We 

discuss comments related to the phasein of regional adjustment weights in 

section II.D.3 of this final rule. 

As discussed in section II.D of this 

final rule, we are finalizing changes to 

our regulations such that benchmark 

adjustments for regional spending are 

limited to at most a 50 percent weight, 

with reduced weights in initial 

agreement periods for ACOs that are 

high cost relative to their region. The 

amount of the regional adjustment will 

be capped for all ACOs at positive or 

negative 5 percent of national average 

per capita FFS spending for assignable 

beneficiaries. Given the variation that 

can exist across regions, the schedule of 

weights we are finalizing should 

recognize efficient rural providers, 

while providing more time for those 

rural providers and suppliers that care 

for high risk patients to come into line 

with regional spending and move to 

shared savings. Additionally, in this 

final rule we are revising our risk 

adjustment methodology to allow for 

full HCC risk adjustment (with a 


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38Occupational Employment Statistics available 

online at https://www.bls.gov/oes/current/oes_

nat.htm. 

positive 3 percent cap) regardless of 

beneficiary assignment status and 

making changes to the benchmarking 

methodology to provide for the use of a 

blend of national and regional trends in 

benchmark calculations. Such changes 

could help to provide a stronger 

business case for ACOs built around 

rural hospitals that may have otherwise 

been concerned about serving a higherrisk population in their region or 

driving the local trends in the region 

against which they will be compared. 

In this final rule, we are also making 

revisions to our original proposal for 

determining ACO participation options 

based on a combination of factors (ACO 

participants’ Medicare FFS revenue, and 

the ACO’s experience with 

performance-based risk Medicare ACO 

initiatives) to allow use of a higher 

percentage in determining whether an 

ACO is a low revenue ACO versus high 

revenue ACO. As we discuss in section 

II.A.5.b of this final rule, under this 

approach we believe more ACOs will be 

identified as low revenue ACOs and 

therefore potentially eligible to remain 

in lower risk for longer, specifically to 

participate in the BASIC track for up to 

two, 5-year agreement periods, with the 

second agreement period in Level E. We 

believe these changes, in addition to the 

alternative participation option we are 

finalizing under which low revenue 

ACOs, that are legal entities without 

prior experience in the Shared Savings 

Program, may elect an additional year 

under a one-sided model of the BASIC 

track’s glide path prior to transitioning 

to Level E (the highest level of risk and 

potential reward in the BASIC track), 

will provide a gentler pathway to 

performance-based risk for small, rural 

and physician-only ACOs. 

6. Unfunded Mandates 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2018, that is 

approximately $150 million. This final 

rule does not include any mandate that 

will result in spending by state, local or 

tribal governments, in the aggregate, or 

by the private sector in the amount of 

$150 million in any 1 year. Further, 

participation in this program is 

voluntary and is not mandated. 

7. Regulatory Review Cost Estimation 

We assume all 561 ACOs that 

participated in the Medicare Shared 

Savings Program during performance 

year 2018 will review on average half of 

this final rule. For example, it is 

possible that certain ACOs may limit 

review to issues related only to the 

BASIC track and not the ENHANCED 

track or rely on a partnership with a 

management company, health plan, 

trade association or other entity that 

reviews the final rule and advises 

multiple ACO partners. We used a 

similar approach to estimate the burden 

of reviewing the proposed rule. 

However, we acknowledged that this 

approach may understate or overstate 

the costs of reviewing this rule. We 

welcomed comments on the approach in 

estimating the number of entities 

reviewing the rule and the scope of the 

average review, but did not receive any 

comments on this issue. 

Using the wage information from the 

Bureau of Labor Statistics for medical 

and health service managers (Code 11– 

9111), we estimate that the cost of 

reviewing this rule is $107.38 per hour, 

where the assumed hourly wage of 

$53.69 has been increased by a factor of 

2 to account for fringe benefits.38

Assuming an average reading speed of 

250 words per minute, we estimate it 

will take approximately 9 hours for the 

staff to review half of this final rule. For 

each ACO the estimated cost is $966 (9 

hours × $107.38 per hour). Therefore, 

we estimate the total cost of reviewing 

this final regulation is approximately 

$542,000 ($966.42 × 561 ACOs). 

8. Other Impacts on Regulatory Burden 

We estimate that extending the 

agreement period to 5 years may reduce 

certain administrative costs incurred by 

ACOs. In its review of the Physician 

Group Practice demonstration, GAO 

estimated the average entity spent 

$107,595 on initial startup for 

administrative processes. We assume 

roughly one-tenth of such total startup 

amount will represent the 

administrative expenses of renewal for 

an ACO entering a renewed agreement 

period ($10,760 per ACO). Therefore, 

we estimate extending the agreement 

period to 5 years will reduce ACO 

administrative burden by approximately 

$6 million over 10 years ($10,760 × 561 

ACOs). 

As we explained in the Regulatory 

Impact Analysis for the proposed rule, 

we did not believe that the proposed 

policies would otherwise materially 

impact the burden on ACOs for 

compliance with the requirements of the 

Shared Savings Program. We stated that 

the annual certification and application 

process would remain comparable to the 

existing program requirements (setting 

aside the change to 5-year agreement 

periods as noted in the previous 

paragraph). We also anticipate at most a 

modest additional burden for the 

modified beneficiary notification 

requirements under § 425.312, because 

ACOs and ACO participants will be able 

to utilize low cost options for 

notification, including, for example, 

email or electronic patient portals. To 

the extent that individual beneficiary 

notification causes additional 

beneficiaries to request personalized 

explanations from ACO representatives 

or participating providers and suppliers 

(beyond any such questions that would 

have arisen under the prior notification 

requirement), we assume on average 10 

percent of assigned beneficiaries, once 

per agreement period, require five 

minute conversations that involve an 

ACO or ACO provider/supplier 

employee with hourly wage averaging 

$20, implying a total net added burden 

of approximately $3.3 million over ten 

years. We sought comment if 

stakeholders had reason to believe the 

proposed changes would materially 

change the burden of participation in 

the program that surpassed what we 

have estimated, as described previously. 

Comment: Some comments cited the 

reduced sharing rates (as low as 25 

percent) that were proposed for certain 

performance years in the BASIC track as 

problematic for ACOs estimating 

whether the cost of participation would 

be worth the potential return. Also cited 

as a barrier for continued participation 

was the cost of taking on performancebased risk for ACOs that may not have 

the experience or capital available for 

such transition. 

Response: Elements of the proposed 

program redesign that were intended to 

help ACOs manage the transition to 

performance-based risk are bolstered by 

modifications to our original proposals 

that we are making in this final rule, 

including increasing the BASIC track 

maximum sharing rate percentages to 40 

percent (Level A and B) and 50 percent 

(Level C, D, E), respectively, and 

allowing new legal entities that are 

determined to be low revenue ACOs 

participating in the BASIC track’s glide 

path, to elect to remain in a one-sided 

model for up to 3 performance years (or 

4 performance years in the case of ACOs 

entering an agreement period beginning 

on July 1, 2019) before transitioning to 

Level E for the final 2 performance years 

of their agreement period. Additionally, 

in this final rule we have increased the 

threshold used to determine low 

revenue ACOs (by comparing ACO 

participants’ total Medicare Parts A and 

B FFS revenue to total Medicare Parts A 


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and B FFS expenditures for the ACO’s 

assigned beneficiaries) from 25 to 35 

percent. Increasing the threshold will 

allow additional ACOs the option to 

remain in lower levels of performancebased risk for a second agreement 

period. Additionally, as described in 

section II.A.6.c. of this final rule, we are 

finalizing our proposed requirements 

regarding repayment mechanism 

arrangement amounts with 

modifications that are designed to 

reduce the burden of these arrangements 

on ACOs participating in Level C, Level 

D, or Level E of the BASIC track and the 

ENHANCED track, including any lowrevenue ACOs in those tracks. Lastly, 

the benchmarks for ACOs that are high 

cost in relation to their region will not 

be reduced as quickly as originally 

proposed because a lower regional 

adjustment weight of 15 percent 

(compared to the 25 percent weight 

originally proposed) will be used to 

calculate the historical benchmark for 

such an ACO in the first agreement 

period in which the regional adjustment 

applies. 

Comment: We received several 

comments suggesting that CMS does not 

fully recognize the administrative and 

upfront investment required to 

participate in the Shared Savings 

Program. One commenter urged CMS to 

allow ACOs additional time under a 

one-sided model in order to ensure that 

they have an opportunity in which to 

earn a return on their initial 

investments. One commenter suggested 

CMS place a proportionate emphasis on 

both quality and financial 

improvements when evaluating when 

ACOs are ready to undertake additional 

risk and allow time for ACOs to 

experience a return on initial 

investments. 

Response: We acknowledge that ACOs 

make upfront investments such as in 

care delivery infrastructure, data 

analytics and staffing, with the intent of 

saving money through improvements in 

care management and coordination. In 

developing our policies for the Shared 

Savings Program, including the new 

policies we are adopting in this final 

rule, we have sought to minimize costs 

and administrative burden as well as to 

maximize opportunities to participate. 

For example, we estimate that extending 

the agreement period to 5 years may 

reduce certain administrative costs 

incurred by ACOs. Additionally, we 

expect certain other policies will help to 

offset upfront investments and bolster 

the business case for ACOs to continue 

participation in the Shared Savings 

Program, including the ability for ACO 

providers/suppliers to qualify for 

Advanced APM incentive payments, the 

application of a positive adjustment to 

the ACO’s benchmark if its spending is 

below regional spending, and the use of 

risk adjustment methodology that 

allows for limited upward adjustments 

if the average HCC risk score rises for 

the ACO assigned population. 

D. Alternatives Considered 

A particularly significant element of 

the changes to the benchmarking 

methodology included in this final rule 

is the final policy that limits the effect 

of regional adjustments on rebased ACO 

historical benchmarks via a cap of 

positive or negative 5 percent of 

national average per capita FFS 

expenditures for assignable 

beneficiaries. If the final policy were 

amended to remove this cap then shared 

savings payments to low cost ACOs and 

selective participation decisions would 

increase the cost of the final rule by 

roughly $4.4 billion such that the 

estimated $2.9 billion savings relative to 

current regulation baseline (as estimated 

for this final rule in the previous 

sections) would instead be projected as 

a $1.5 billion cost. 

Another alternative considered would 

have been to push back the first 

agreement periods under the proposed 

new participation options and all other 

applicable changes to a January 1, 2020 

start date. This would avoid the 

complexity of a July 1, 2019 midyear 

start date. ACOs otherwise eligible to 

renew their participation in the program 

in 2019 would be offered a 1-year 

extension under their current agreement 

periods. This alternative would have 

had differing impacts on federal 

spending. 

Forgoing the proposed July 1, 2019 

start date and providing for the next 

available start date of January 1, 2020, 

would have likely marginally increased 

spending on claims through a 

combination of factors. In addition, this 

approach would have delayed, by 6 

months, the transition into performancebased risk for certain ACOs whose 

current agreement periods will end on 

December 31, 2018. Forgoing the 

proposed July 1, 2019 start date likely 

also would have caused a temporary 

increase in overall shared savings 

payments to such ACOs during 2019 

because of the additional year lag 

between the historical baseline 

expenditures and the 2019 performance 

year expenditures under the extended 

agreement period. However, this 

alternative would also have had a 

slightly greater effect in reducing 

Federal spending in later years through 

a combination of factors. Under this 

approach, the third historical 

benchmark year of the subsequent 

agreement period for such ACOs would 

have been CY 2019 rather than CY 2018, 

as will be the case under the finalized 

July 1, 2019 start date. The use of 

historical expenditures from 2017 

through 2019, rather than 2016 through 

2018, to determine the benchmark for 

these ACOs would have marginally 

reduced the cumulative variation 

affecting benchmark accuracy in 2024, 

the final year of these ACOs’ first 

agreement period under the policies in 

this final rule. We would have also 

anticipated a reduction in incentive 

payments made under the Quality 

Payment Program in 2021 (which are 

based on participation by eligible 

clinicians in Advanced APMs during 

2019) by delaying the transition to 

performance-based risk for certain ACOs 

to 2020 instead of July 1, 2019. 

We also considered the potential 

impact of adopting the alternative 

beneficiary assignment methodology 

that was discussed in the proposed rule, 

under which ACOs would be allowed to 

elect a beneficiary opt-in based 

assignment methodology supplemented 

by a modified claims-based assignment 

methodology for beneficiaries who have 

received the plurality of their primary 

care and at least seven primary care 

services, from one or more ACO 

professionals in the ACO during the 

applicable assignment window and 

voluntary alignment. However, 

significant uncertainties potentially 

impacting the program in offsetting 

ways made projecting the impact 

difficult, and we chose not to adopt a 

beneficiary opt-in assignment 

methodology at this time. Although it is 

possible that ACOs electing such 

methodology could more effectively 

target care management to more engaged 

and/or needier subpopulations of 

patients, it is also possible that such 

targeting could deter ACOs from 

deploying more comprehensive care 

delivery reform across a wider mix of 

patients served by ACO providers/ 

suppliers. It is also unclear if many 

ACOs would see value in a more 

restrictive assignment approach as they 

may be hesitant to voluntarily reduce 

their overall number of assigned 

beneficiaries and consequently lower 

their total benchmark spending and the 

magnitude of potential shared savings. 

Furthermore, it is not currently 

empirically possible to determine if the 

potential method for adjusting 

benchmark expenditures that was 

described in the proposed rule would 

provide sufficient accuracy in setting 

spending targets or if it could be 

vulnerable to higher claims variation 

and/or bias because of the selective 


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nature of beneficiaries who opt in, 

voluntarily align, or meet the modified 

claims-based assignment criteria in 

order to be assigned to the ACO. Such 

uncertainties and challenges may be 

likely to dissuade ACOs from electing 

such alternative assignment 

methodology over the existing options 

rooted in a broader claims-based 

assignment methodology supplemented 

by voluntary alignment, which current 

experience shows generally duplicates 

assignment for a subset of beneficiaries 

that would have been assigned via the 

existing claims-based assignment 

methodology. We note that although 

some commenters supported a hybrid 

assignment approach using opt-in and 

claims-based assignment (often 

confusing opt-in with the current 

voluntary alignment process), most 

commenters disagreed with this 

approach. Most of the commenters 

raised operational and administrative 

concerns in recruiting beneficiaries and 

putting in place the systems (both IT 

support systems and personnel) to 

support this approach. If few ACOs 

were to elect this potential alternative 

assignment methodology then the 

impact on program spending would also 

be minimal. 

E. Compliance With Requirements of 

Section 1899(i)(3)(B) of the Act 

Certain policies, including both 

existing policies and the new policies 

we are adopting in this final rule, rely 

upon the authority granted in section 

1899(i)(3) of the Act to use other 

payment models that the Secretary 

determines will improve the quality and 

efficiency of items and services 

furnished to Medicare FFS beneficiaries. 

Section 1899(i)(3)(B) of the Act requires 

that such other payment model must not 

result in additional program 

expenditures. Policies falling under the 

authority of section 1899(i)(3) of the Act 

include—(1) performance-based risk; (2) 

refining the calculation of national 

expenditures used to update the 

historical benchmark to reflect the 

assignable subpopulation of total FFS 

enrollment; (3) updating benchmarks 

with a blend of regional and national 

trends as opposed to the national 

average absolute growth in per capita 

spending; (4) reconciling the two 6- 

month performance years during 2019 

based on expenditures for all of CY 

2019, and pro-rating any resulting 

shared savings or shared losses; and (5) 

adjusting performance year 

expenditures to remove IME, DSH, and 

uncompensated care payments. 

A comparison was constructed 

between the projected impact of the 

payment methodology that incorporates 

all changes and a hypothetical baseline 

payment methodology that excludes the 

elements described previously that 

require section 1899(i)(3) of the Act 

authority—most importantly 

performance-based risk in the 

ENHANCED track and Levels C, D, and 

E of the BASIC track and updating 

benchmarks using a blend of regional 

and national trends. The hypothetical 

baseline was assumed to include 

adjustments allowed under section 

1899(d)(1)(B)(ii) of the Act including the 

up to 50 percent weight used in 

calculating the regional adjustment to 

the ACO’s rebased historical 

benchmark, as finalized in this rule 

(depending on the number of rebasings 

and the direction of the adjustment), 

capped at positive or negative 5 percent 

of national average per capita FFS 

expenditures for assignable 

beneficiaries. The stochastic model and 

associated assumptions described 

previously in this section were adapted 

to reflect a higher range of potential 

participation given the perpetually 

sharing-only incentive structure of the 

hypothetical baseline model. Such 

analysis estimated approximately $4 

billion greater average net program 

savings under the alternative payment 

model that includes all policies that 

require the authority of section 

1899(i)(3) of Act than will be expected 

under the hypothetical baseline in total 

over the 2019 to 2028 projection period. 

The alternative payment model, as 

finalized in this rule, is projected to 

result in greater savings on benefit costs 

and reduced net payments to ACOs. In 

the final projection year, the alternative 

payment model is estimated to have 10 

percent greater savings on benefit costs, 

15 percent lower spending on net 

shared savings payments to ACOs, with 

39 percent reduced overall ACO 

participation compared to the 

hypothetical baseline model. 

Participation in performance-based 

risk in the ENHANCED track and the 

higher levels of the BASIC track is 

assumed to improve the incentive for 

ACOs to increase the efficiency of care 

for beneficiaries (similar to the 

assumptions used in the modeling of the 

impacts, described previously). Such 

added savings are partly offset by lower 

participation associated with the 

requirement to transition to 

performance-based risk. Despite the 

higher maximum sharing rate of 75 

percent in the ENHANCED track under 

the alternative payment model under 

section 1899(i)(3) of the Act, relative to 

the 50 percent maximum sharing rate 

assumed for the single one-sided risk 

track under the hypothetical baseline, 

shared savings payments are expected to 

be reduced relative to the hypothetical 

baseline because of lower expected 

participation resulting from the 

elimination of Track 1, more accurate 

benchmarks due to the incorporation of 

regional factors into the calculation of 

benchmark updates for all ACOs, and 

the cap on the regional benchmark 

adjustment of positive or negative 5 

percent of the national average per 

capita FFS spending amount for 

assignable beneficiaries. 

We will reexamine this projection in 

the future to ensure that the requirement 

under section 1899(i)(3)(B) of the Act 

that an alternative payment model not 

result in additional program 

expenditures continues to be satisfied. 

In the event that we later determine that 

the payment model established under 

section 1899(i)(3) of the Act no longer 

meets this requirement, we will 

undertake additional notice and 

comment rulemaking to make 

adjustments to the payment model to 

assure continued compliance with the 

statutory requirements. 

F. Accounting Statement and Table 

As required by OMB Circular A–4 

under Executive Order 12866, in Table 

18, we have prepared an accounting 

statement showing the change in—(1) 

net federal monetary transfers; (2) 

shared savings payments to ACOs net of 

shared loss payments from ACOs; and 

(3) incentive payments made under the 

Quality Payment Program to additional 

ACO providers/suppliers expected to 

become Qualifying APM Participants 

from 2019 to 2028 who would not have 

been expected to achieve such status 

absent the changes we are adopting in 

this final rule. 


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G. Regulatory Reform Analysis Under 

Executive Order 13771 

Executive Order 13771, entitled 

Reducing Regulation and Controlling 

Regulatory Costs (82 FR 9339), was 

issued on January 30, 2017. The 

modifications in this final rule are 

expected to primarily have effects on 

transfers via lower claims spending and 

shared savings outlays as described 

previously in this regulatory impact 

analysis. However these modifications 

are also anticipated to marginally 

reduce the administrative burden on 

participating ACOs by roughly $2.16 

million over 10 years (as detailed 

previously in this RIA) which 

corresponds to an annualized net cost 

savings of $126,000 when discounted at 

7 percent relative to year 2016; therefore 

this final rule, will be considered a 

deregulatory action under Executive 

Order 13771. 

H. Conclusion 

The analysis in this section, together 

with the remainder of this preamble, 

provides a regulatory impact analysis. 

As a result of this final rule, the median 

estimate of the financial impact of the 

Shared Savings Program for CYs 2019 

through 2028 will be net federal savings 

of $2.9 billion greater than the expected 

savings if no changes were made. 

Although this is the best estimate of the 

financial impact of the Shared Savings 

Program during CYs 2019 through 2028, 

a relatively wide range of possible 

outcomes exists. While a small fraction 

of trials projected significant increases 

in program spending, over 90 percent of 

the stochastic trials resulted in 

significant overall spending decreases 

over 10 years, with the 10th and 90th 

percentiles of the estimated distribution 

showing a net decrease in spending of 

$680 million and $5.14 billion, 

respectively. 

Overall, our analysis projects that 

faster transition from one-sided model 

agreements—tempered by the option for 

eligible ACOs of a gentler exposure to 

downside risk calculated as a 

percentage of ACO participants’ total 

Medicare Parts A and B FFS revenue 

and capped at a percentage of the ACO’s 

benchmark—can affect broader 

participation in performance-based risk 

in the Shared Savings Program and 

reduce overall claims costs. A second 

key driver of estimated net savings is 

the reduction in shared savings 

payments from the new limitation on 

the amount of the regional adjustment to 

the ACO’s historical benchmark. Such 

reduction in overall shared savings 

payments is projected to result despite 

the benefit of higher net adjustments 

expected for a larger number of ACOs 

from the use of a simpler HCC risk 

adjustment methodology, the blending 

of national and regional trends for 

benchmark calculations, and longer 5- 

year agreement periods that allow ACOs 

a longer horizon from which to benefit 

from efficiency gains before benchmark 

rebasing. 

Therefore, the final changes are 

expected to improve the incentive for 

ACOs to invest in effective care 

management efforts, increase the 

number of ACOs participating under 

performance-based risk by 

discontinuing Track 1 and Track 2, and 

offering instead a BASIC track (which 

includes a glide path from a one-sided 

model to performance-based risk for 

eligible ACOs) or the ENHANCED track 

(based on the current design of Track 3), 

reduce the number of ACOs with poor 

financial and quality performance (by 

eliminating Track 1, requiring faster 

transition to performance-based risk, 

limiting high revenue ACOs to 1 

agreement period in the BASIC track 

and low revenue ACOs to 2 agreement 

periods in the BASIC track (second 

agreement period at Level E), and 

increasing the monitoring of ACO 

financial performance), and result in 

greater overall gains in savings on FFS 

benefit claims costs while decreasing 

expected shared savings payments to 

ACOs. 

We intend to monitor emerging 

results for ACO effects on claims costs, 

changing participation (including risk 

for increased costs due to high 

performing ACOs selecting to 

participate in a track (or a payment 

model within a track) with greater 

rewards), and unforeseen bias in 

benchmark adjustments due to 

diagnosis coding intensity shifts. 

In accordance with the provisions of 

Executive Order 12866, this final rule 

was reviewed by the Office of 

Management and Budget. 

VI. Effective Date Exception 

According to 5 U.S.C. 801, a major 

rule may be effective 60 days after the 

date of publication in the Federal 

Register which allows for Congressional 

review, unless there is good cause for an 

earlier effective date under section 

808(2). Good cause can be found when 

the procedures within section 801 are 

impracticable, unnecessary, or contrary 

to the public interest, in which case the 

rule shall take effect at a time as 

determined by the Federal agency 

promulgating the rule. 

In this final rule we are finalizing a 

July 1, 2019 agreement start date for the 

redesigned participation options. This 

allows ACOs whose agreement periods 

expire December 31, 2018 and who 

extended their agreement for a 6-month 

performance year from January 1, 2019, 

through June 30, 2019, to renew for a 

new agreement period beginning July 1, 

2019 to continue their participation in 

the program without interruption. 

CMS will offer an application cycle 

for a one-time new agreement period 


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start date of July 1, 2019. To ensure 

ACOs have sufficient time to apply, and 

for CMS to adequately review these 

applications, the application cycle 

activities must begin in January 2019 

with a notice of intent to apply, and 

application submission must occur by 

February 22, 2019. 

Allowing for the final policies to 

become effective 60 days after the 

publication of this final rule would 

provide ACOs with less time to submit 

their applications and correct 

deficiencies, contract their provider 

networks, and establish repayment 

mechanisms. We may need to delay and 

shorten the application review period, 

allowing less time for applicants to 

correct deficiencies and bring their 

organizations into compliance with new 

program rules and requirements. This 

delay as a result of a March 1, 2019 

effective date would be impracticable 

because it could prevent ACOs whose 

agreement periods expire June 30, 2019 

from completing the renewal process 

and as a result may leave no other 

option for these organizations than to 

conclude their participation in the 

program. 

We also acknowledged that a delayed 

application due date for an agreement 

period beginning in 2019 could affect 

parties planning to participate in the 

Shared Savings Program for 

performance year 2019 and that are 

relying on the pre-participation waiver. 

As a result we find the delay in the 

effective date of the rule until March 1, 

2019 to be impracticable and 

unnecessary. We therefore find there is 

good cause for an exception to the 

effective date to be 45 days from the 

date of publication in the Federal 

Register. 

List of Subjects in 42 CFR Part 425 

Administrative practice and 

procedure, Health facilities, Health 

professions, Medicare, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR part 

425 as set forth below: 

PART 425—MEDICARE SHARED 

SAVINGS PROGRAM 

■ 1. The authority citation for part 425 

continues to read as follows: 

Authority: 42 U.S.C. 1302, 1306, 1395hh, 

and 1395jjj. 

■ 2. Section 425.20 is amended by 

adding in alphabetical order definitions 

for ‘‘Experienced with performancebased risk Medicare ACO initiatives’’, 

‘‘High revenue ACO’’, ‘‘Inexperienced 

with performance-based risk Medicare 

ACO initiatives’’, ‘‘Low revenue ACO’’; 

‘‘Performance-based risk Medicare ACO 

initiative’’, ‘‘Re-entering ACO’’, and 

‘‘Renewing ACO’’ to read as follows: 

§ 425.20 Definitions. 

* * * * * 

Experienced with performance-based 

risk Medicare ACO initiatives means an 

ACO that CMS determines meets the 

criteria in either paragraph (1) or (2) of 

this definition. 

(1) The ACO is the same legal entity 

as a current or previous ACO that is 

participating in, or has participated in, 

a performance-based risk Medicare ACO 

initiative as defined under this section, 

or that deferred its entry into a second 

Shared Savings Program agreement 

period under a two-sided model under 

§ 425.200(e). 

(2) Forty percent or more of the ACO’s 

ACO participants participated in a 

performance-based risk Medicare ACO 

initiative, as defined under this section, 

or in an ACO that deferred its entry into 

a second Shared Savings Program 

agreement period under a two-sided 

model under § 425.200(e), in any of the 

5 most recent performance years prior to 

the agreement start date. 

* * * * * 

High revenue ACO means an ACO 

whose total Medicare Parts A and B feefor-service revenue of its ACO 

participants based on revenue for the 

most recent calendar year for which 12 

months of data are available, is at least 

35 percent of the total Medicare Parts A 

and B fee-for-service expenditures for 

the ACO’s assigned beneficiaries based 

on expenditures for the most recent 

calendar year for which 12 months of 

data are available. 

* * * * * 

Inexperienced with performancebased risk Medicare ACO initiatives 

means an ACO that CMS determines 

meets all of the following: 

(1) The ACO is a legal entity that has 

not participated in any performancebased risk Medicare ACO initiative as 

defined under this section, and has not 

deferred its entry into a second Shared 

Savings Program agreement period 

under a two-sided model under 

§ 425.200(e). 

(2) Less than 40 percent of the ACO’s 

ACO participants participated in a 

performance-based risk Medicare ACO 

initiative, as defined under this section, 

or in an ACO that deferred its entry into 

a second Shared Savings Program 

agreement period under a two-sided 

model under § 425.200(e), in each of the 

5 most recent performance years prior to 

the agreement start date. 

Low revenue ACO means an ACO 

whose total Medicare Parts A and B feefor-service revenue of its ACO 

participants based on revenue for the 

most recent calendar year for which 12 

months of data are available, is less than 

35 percent of the total Medicare Parts A 

and B fee-for-service expenditures for 

the ACO’s assigned beneficiaries based 

on expenditures for the most recent 

calendar year for which 12 months of 

data are available. 

* * * * * 

Performance-based risk Medicare 

ACO initiative means, for purposes of 

this part, an initiative implemented by 

CMS that requires an ACO to participate 

under a two-sided model during its 

agreement period, including the 

following options and initiatives: 

(1) Participation options within the 

Shared Savings Program as follows: 

(i) BASIC track (Levels A through E). 

(ii) ENHANCED track. 

(iii) Track 2. 

(2) The Innovation Center ACO 

models under which an ACO accepts 

risk for shared losses as follows: 

(i) Pioneer ACO Model. 

(ii) Next Generation ACO Model. 

(iii) Comprehensive ESRD Care Model 

two-sided risk tracks. 

(iv) Track 1+ Model. 

(3) Other initiatives involving twosided risk as may be specified by CMS. 

* * * * * 

Re-entering ACO means an ACO that 

does not meet the definition of a 

renewing ACO and meets either of the 

following conditions: 

(1) Is the same legal entity as an ACO, 

as defined in this section, that 

previously participated in the program 

and is applying to participate in the 

program after a break in participation, 

because it is either— 

(i) An ACO whose participation 

agreement expired without having been 

renewed; or 

(ii) An ACO whose participation 

agreement was terminated under 

§ 425.218 or § 425.220. 

(2) Is a new legal entity that has never 

participated in the Shared Savings 

Program and is applying to participate 

in the program and more than 50 

percent of its ACO participants were 

included on the ACO participant list 

under § 425.118, of the same ACO in 

any of the 5 most recent performance 

years prior to the agreement start date. 

Renewing ACO means an ACO that 

continues its participation in the 

program for a consecutive agreement 

period, without a break in participation, 

because it is either— 

(1) An ACO whose participation 

agreement expired and that immediately 


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enters a new agreement period to 

continue its participation in the 

program; or 

(2) An ACO that terminated its 

current participation agreement under 

§ 425.220 and immediately enters a new 

agreement period to continue its 

participation in the program. 

* * * * * 

§ 425.100 [Amended] 

■ 3. Section 425.100 is amended— 

■ a. In paragraph (b) by removing the 

phrase ‘‘under § 425.604, § 425.606, 

§ 425.609 or § 425.610’’ and adding in 

its place the phrase ‘‘under § 425.604, 

§ 425.605, § 425.606, § 425.609 or 

§ 425.610’’; and 

■ b. In paragraph (c) by removing the 

phrase ‘‘under § 425.606, § 425.609 or 

§ 425.610’’ and adding in its place the 

phrase ‘‘under § 425.605, § 425.606, 

§ 425.609 or § 425.610’’. 

■ 4. Section 425.110 is amended by 

revising paragraph (b) to read as follows: 

§ 425.110 Number of ACO professionals 

and beneficiaries. 

* * * * * 

(b) If at any time during the 

performance year, an ACO’s assigned 

population falls below 5,000, the ACO 

may be subject to the actions described 

in §§ 425.216 and 425.218. 

(1) While under a CAP, the ACO 

remains eligible for shared savings and 

liable for shared losses. 

(2) If the ACO’s assigned population 

is not at least 5,000 by the end of the 

performance year specified by CMS in 

its request for a CAP, CMS terminates 

the participation agreement and the 

ACO is not eligible to share in savings 

for that performance year. 

(3) In determining financial 

performance for an ACO with fewer 

than 5,000 assigned beneficiaries, the 

MSR/MLR is calculated as follows: 

(i) For ACOs with a variable MSR and 

MLR (if applicable), the MSR and MLR 

(if applicable) are set at a level 

consistent with the number of assigned 

beneficiaries. 

(ii) For performance years starting 

before July 1, 2019, for ACOs with a 

fixed MSR/MLR, the MSR/MLR remains 

fixed at the level consistent with the 

choice of MSR and MLR that the ACO 

made at the start of the agreement 

period. 

(iii) For performance years starting on 

July 1, 2019 and in subsequent years, for 

ACOs that selected a fixed MSR/MLR at 

the start of the agreement period or prior 

to entering a two-sided model during 

their agreement period, the MSR/MLR is 

calculated as follows: 

(A) The MSR/MLR is set at a level 

based on the number of beneficiaries 

assigned to the ACO. 

(1) The MSR is the same as the MSR 

that would apply in a one-sided model 

under § 425.604(b) (for Track 2 ACOs) or 

§ 425.605(b)(1) (for BASIC track and 

ENHANCED track ACOs) and is based 

on the number of assigned beneficiaries. 

(2) The MLR is equal to the negative 

MSR. 

(B) The MSR and MLR revert to the 

fixed level previously selected by the 

ACO for any subsequent performance 

year in the agreement period in which 

the ACO’s assigned beneficiary 

population is 5,000 or more. 

§ 425.118 [Amended] 

■ 5. Section 425.118 is amended in 

paragraph (b)(1)(iii) by removing the 

phrase ‘‘screening performed under 

§ 425.304(b)’’ and adding in its place the 

phrase ‘‘screening performed under 

§ 425.305(a)’’. 

■ 6. Section 425.200 is amended— 

■ a. By revising the heading for 

paragraph (b)(3), and revising paragraph 

(b)(3)(ii); 

■ b. By adding paragraphs (b)(4) and (5); 

■ c. By adding paragraph (c)(3); 

■ d. By redesignating paragraphs 

(e)(1)(i) through (v) as paragraphs 

(e)(1)(ii) through (vi); and 

■ e. By adding a new paragraph (e)(1)(i). 

The revisions and additions read as 

follows: 

§ 425.200 Participation agreement with 

CMS. 

* * * * * 

(b) * * * 

(3) For 2017 and 2018.* * * 

(ii) The term of the participation 

agreement is 3 years, except for an ACO 

whose first agreement period in Track 1 

began in 2014 or 2015, in which case 

the term of the ACO’s initial agreement 

period under Track 1 (as described 

under § 425.604) may be extended, at 

the ACO’s option, for an additional year 

for a total of 4 performance years if the 

conditions specified in paragraph (e) of 

this section are met. 

(4) For 2019. (i) The start date is 

January 1, 2019, and the term of the 

participation agreement is 3 years for 

ACOs whose first agreement period 

began in 2015 and who deferred 

renewal of their participation agreement 

under paragraph (e) of this section; or 

(ii) The start date is July 1, 2019, and 

the term of the participation agreement 

is 5 years and 6 months. 

(5) For 2020 and subsequent years. (i) 

The start date is January 1 of that year; 

and 

(ii) The term of the participation 

agreement is 5 years. 

(c) * * * 

(3) For an ACO that entered an 

agreement period with a start date of 

July 1, 2019, the ACO’s first 

performance year of the agreement 

period is defined as the 6-month period 

between July 1, 2019, and December 31, 

2019. 

* * * * * 

(e) * * * 

(1) * * * 

(i) The ACO’s first agreement period 

in the Shared Savings Program under 

Track 1 began in 2014 or 2015. 

* * * * * 

■ 7. Section 425.202 is amended by 

adding introductory text after the 

heading of paragraph (b) to read as 

follows: 

§ 425.202 Application procedures. 

* * * * * 

(b) Condensed application form. For 

determining eligibility for agreement 

periods beginning before July 1, 2019: 

* * * * * 

■ 8. Section 425.204 is amended— 

■ a. By revising paragraph (f); and 

■ b. In paragraph (g) introductory text 

by removing the phrase ‘‘under 

§ 425.602’’ and adding in its place the 

phrase ‘‘under § 425.601, § 425.602, or 

§ 425.603’’. 

The revision reads as follows: 

§ 425.204 Content of the application. 

* * * * * 

(f) Assurance of ability to repay. (1) 

An ACO must have the ability to repay 

all shared losses for which it may be 

liable under a two-sided model. 

(2) An ACO that will participate in a 

two-sided model must establish one or 

more of the following repayment 

mechanisms in an amount and by a 

deadline specified by CMS in 

accordance with this section: 

(i) An escrow account with an insured 

institution. 

(ii) A surety bond from a company 

included on the U.S. Department of 

Treasury’s List of Certified Companies. 

(iii) A line of credit at an insured 

institution (as evidenced by a letter of 

credit that the Medicare program can 

draw upon). 

(3) An ACO that will participate 

under a two-sided model of the Shared 

Savings Program must submit for CMS 

approval documentation that it is 

capable of repaying shared losses that it 

may incur during its agreement period, 

including details supporting the 

adequacy of the repayment mechanism. 

(i) An ACO participating in Track 2 

must demonstrate the adequacy of its 

repayment mechanism at such times as 

requested by CMS. 


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(ii) An ACO entering an agreement 

period in Levels C, D, or E of the BASIC 

track or the ENHANCED track must 

demonstrate the adequacy of its 

repayment mechanism prior to the start 

of its agreement period and at such 

other times as requested by CMS. 

(iii) An ACO entering an agreement 

period in Level A or Level B of the 

BASIC track must demonstrate the 

adequacy of its repayment mechanism 

prior to the start of any performance 

year in which it either elects to 

participate in, or is automatically 

transitioned to a two-sided model, Level 

C, Level D, or Level E, of the BASIC 

track, and at such other times as 

requested by CMS. 

(iv) An ACO that has submitted a 

request to renew its participation 

agreement must submit as part of the 

renewal request documentation 

demonstrating the adequacy of the 

repayment mechanism that could be 

used to repay any shared losses incurred 

for performance years in the next 

agreement period. The repayment 

mechanism applicable to the new 

agreement period may be the same 

repayment mechanism currently used 

by the ACO, provided that the ACO 

submits documentation establishing that 

the amount and duration of the existing 

repayment mechanism have been 

revised to comply with paragraphs 

(f)(6)(i) and (ii) of this section. 

(4) CMS calculates the amount of the 

repayment mechanism as follows: 

(i) For a Track 2 ACO, the repayment 

mechanism amount must be equal to at 

least 1 percent of the total per capita 

Medicare Parts A and B fee-for-service 

expenditures for the ACO’s assigned 

beneficiaries, based on expenditures 

used to calculate the benchmark for the 

applicable agreement period, as 

estimated by CMS at the time of 

application. 

(ii) For a BASIC track or ENHANCED 

track ACO, the repayment mechanism 

amount must be equal to the lesser of 

the following: 

(A) One percent of the total per capita 

Medicare Parts A and B fee-for-service 

expenditures for the ACO’s assigned 

beneficiaries, based on expenditures for 

the most recent calendar year for which 

12 months of data are available. 

(B) Two percent of the total Medicare 

Parts A and B fee-for-service revenue of 

its ACO participants, based on revenue 

for the most recent calendar year for 

which 12 months of data are available. 

(iii) For agreement periods beginning 

on or after July 1, 2019, CMS 

recalculates the ACO’s repayment 

mechanism amount before the second 

and each subsequent performance year 

in the agreement period in accordance 

with this section based on the certified 

ACO participant list for the relevant 

performance year. 

(A) If the recalculated repayment 

mechanism amount exceeds the existing 

repayment mechanism amount by at 

least 50 percent or $1,000,000, 

whichever is the lesser value, CMS 

notifies the ACO in writing that the 

amount of its repayment mechanism 

must be increased to the recalculated 

repayment mechanism amount. 

(B) Within 90 days after receipt of 

such written notice from CMS, the ACO 

must submit for CMS approval 

documentation that the amount of its 

repayment mechanism has been 

increased to the amount specified by 

CMS. 

(iv) In the case of an ACO that has 

submitted a request to renew its 

participation agreement and wishes to 

use its existing repayment mechanism 

to establish its ability to repay any 

shared losses incurred for performance 

years in the new agreement period, the 

amount of the repayment mechanism 

must be equal to the greater of the 

following: 

(A) The amount calculated by CMS in 

accordance with paragraph (f)(4)(ii) of 

this section. 

(B) The repayment mechanism 

amount that the ACO was required to 

maintain during the last performance 

year of the participation agreement it 

seeks to renew. 

(5) After the repayment mechanism 

has been used to repay any portion of 

shared losses owed to CMS, the ACO 

must replenish the amount of funds 

available through the repayment 

mechanism within 90 days. 

(6) The repayment mechanism must 

be in effect for the duration of the ACO’s 

participation under a two-sided model 

plus 12 months following the 

conclusion of the agreement period, 

except as otherwise specified in this 

section. 

(i) For an ACO that is establishing a 

new repayment mechanism to meet this 

requirement, the repayment mechanism 

must satisfy one of the following 

criteria: 

(A) The repayment mechanism covers 

the entire duration of the ACO’s 

participation under a two-sided risk 

model plus 12 months following the 

conclusion of the agreement period. 

(B) The repayment mechanism covers 

a term of at least the first two 

performance years in which the ACO is 

participating under a two-sided model 

and provides for automatic, annual 12- 

month extensions of the repayment 

mechanism such that the repayment 

mechanism will eventually remain in 

effect for the duration of the agreement 

period plus 12 months following the 

conclusion of the agreement period. 

(ii) For a renewing ACO that wishes 

to use its existing repayment 

mechanism to establish its ability to 

repay any shared losses incurred for 

performance years in the new agreement 

period, the existing repayment 

mechanism must be amended to meet 

one of the following criteria. 

(A) The duration of the existing 

repayment mechanism is extended by 

an amount of time that covers the 

duration of the new agreement period 

plus 12 months following the 

conclusion of the new agreement 

period. 

(B) The duration of the existing 

repayment mechanism is extended, if 

necessary, to cover a term of at least the 

first two performance years of the new 

agreement period and provides for 

automatic, annual 12-month extensions 

of the repayment mechanism such that 

the repayment mechanism will 

eventually remain in effect for the 

duration of the new agreement period 

plus 12 months following the 

conclusion of the new agreement 

period. 

(iii) CMS may require the ACO to 

extend the duration of the repayment 

mechanism if necessary to ensure that 

the ACO fully repays CMS any shared 

losses for each of the performance years 

of the agreement period. 

(iv) The repayment mechanism may 

be terminated at the earliest of the 

following conditions: 

(A) The ACO has fully repaid CMS 

any shared losses owed for each of the 

performance years of the agreement 

period under a two-sided model. 

(B) CMS has exhausted the amount 

reserved by the ACO’s repayment 

mechanism and the arrangement does 

not need to be maintained to support 

the ACO’s participation under the 

Shared Savings Program. 

(C) CMS determines that the ACO 

does not owe any shared losses under 

the Shared Savings Program for any of 

the performance years of the agreement 

period. 

* * * * * 

§ 425.220 [Amended] 

■ 9. Section 425.220 is amended in 

paragraph (a) by removing the phrase 

‘‘60 days’’ and adding in its place the 

phrase ‘‘30 days’’. 

■ 10. Section 425.221 is amended by 

revising paragraph (b) to read as follows: 

§ 425.221 Close-out procedures and 

payment consequences of early 

termination. 

* * * * * 


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(b) Payment consequences of early 

termination. (1) Receipt of shared 

savings. (i) Except as set forth in 

paragraph (b)(3)(i) of this section, an 

ACO that terminates its participation 

agreement under § 425.220 is eligible to 

receive shared savings for the 

performance year during which the 

termination becomes effective only if all 

of the following conditions are met: 

(A) CMS designates or approves an 

effective date of termination of the last 

calendar day of the performance year. 

(B) The ACO has completed all closeout procedures by the deadline 

specified by CMS. 

(C) The ACO has satisfied the criteria 

for sharing in savings for the 

performance year. 

(ii) If the participation agreement is 

terminated at any time by CMS under 

§ 425.218, the ACO is not eligible to 

receive shared savings for the 

performance year during which the 

termination becomes effective. 

(2) Payment of shared losses. (i) 

Except as set forth in paragraph (b)(3)(i) 

of this section, for performance years 

beginning before July 1, 2019, an ACO 

under a two-sided model is not liable 

for any shared losses if its participation 

agreement is terminated effective before 

the last calendar day of a performance 

year. 

(ii) Except as set forth in paragraph 

(b)(3)(ii) of this section, for performance 

years beginning on July 1, 2019 and 

subsequent performance years, an ACO 

under a two-sided model is liable for a 

pro-rated share of any shared losses, as 

calculated in paragraph (b)(2)(iii) of this 

section, if its participation agreement is 

terminated effective before the last 

calendar day of a performance year. 

(A) An ACO under a two-sided model 

that terminates its participation 

agreement under § 425.220 with an 

effective date of termination after June 

30th of a 12-month performance year is 

liable for a pro-rated share of any shared 

losses determined for the performance 

year during which the termination 

becomes effective. 

(B) An ACO under a two-sided model 

whose participation agreement is 

terminated by CMS under § 425.218 is 

liable for a pro-rated share of any shared 

losses determined for the performance 

year during which the termination 

becomes effective. 

(iii) The pro-rated share of losses 

described in paragraph (b)(2)(ii) of this 

section is calculated as follows: 

(A) In the case of a 12-month 

performance year, the shared losses 

incurred during the 12 months of the 

performance year are multiplied by the 

quotient equal to the number of months 

of participation in the program during 

the performance year, including the 

month in which the termination was 

effective, divided by 12. 

(B) In the case of a 6-month 

performance year beginning July 1, 

2019, the shared losses incurred during 

CY 2019 are multiplied by the quotient 

equal to the number of months of 

participation in the program during the 

performance year, including the month 

in which the termination was effective, 

divided by 12. 

(3) Exceptions. (i) An ACO starting a 

12-month performance year on January 

1, 2019, that terminates its participation 

agreement with an effective date of 

termination of June 30, 2019, and that 

enters a new agreement period 

beginning on July 1, 2019, is eligible for 

pro-rated shared savings or liable for 

pro-rated shared losses for the 6-month 

period from January 1, 2019, through 

June 30, 2019, as determined in 

accordance with § 425.609. 

(ii) An ACO under a two-sided model 

that terminates its participation 

agreement under § 425.220 during the 6- 

month performance year beginning July 

1, 2019, with an effective date of 

termination prior to the last calendar 

day of the performance year is not liable 

for shared losses incurred during the 

performance year. 

■ 11. Section 425.222 is amended by 

revising the section heading and 

paragraphs (a), (b), and (c) introductory 

text to read as follows: 

§ 425.222 Eligibility to re-enter the 

program for agreement periods beginning 

before July 1, 2019. 

(a) For purposes of determining the 

eligibility of a re-entering ACO to enter 

an agreement period beginning before 

July 1, 2019, the ACO may participate 

in the Shared Savings Program again 

only after the date on which the term of 

its original participation agreement 

would have expired if the ACO had not 

been terminated. 

(b) For purposes of determining the 

eligibility of a re-entering ACO to enter 

an agreement period beginning before 

July 1, 2019, an ACO whose 

participation agreement was previously 

terminated must demonstrate in its 

application that it has corrected the 

deficiencies that caused it to be 

terminated from the Shared Savings 

Program and has processes in place to 

ensure that it remains in compliance 

with the terms of the new participation 

agreement. 

(c) For purposes of determining the 

eligibility of a re-entering ACO to enter 

an agreement period beginning before 

July 1, 2019, an ACO whose 

participation agreement was previously 

terminated or expired without having 

been renewed may re-enter the program 

for a subsequent agreement period. 

* * * * * 

■ 12. Section 425.224 is amended— 

■ a. By revising the section heading and 

paragraph (a); 

■ b. By revising paragraph (b) heading 

and paragraphs (b)(1) introductory text 

and (b)(1)(ii); 

■ c. By removing paragraphs (b)(1)(iv) 

and (v); 

■ d. By redesignating paragraphs 

(b)(1)(iii) and (vi) as paragraphs 

(b)(1)(iv) and (v); 

■ e. By adding a new paragraph 

(b)(1)(iii); 

■ f. By revising newly redesignated 

paragraphs (b)(1)(iv) and (v); 

■ g. In paragraph (b)(2) introductory text 

by removing the phrase ‘‘Renewal 

requests’’ and adding in its place the 

phrase ‘‘Applications’’; 

■ h. In paragraph (b)(2)(i) by removing 

the phrase ‘‘renewal request’’ and 

adding in its place the phrase 

‘‘application’’; and 

■ i. In paragraphs (c)(1) and (2) 

introductory text by removing the 

phrase ‘‘renewal request’’ and adding in 

its place the phrase ‘‘application’’. 

The revisions and addition read as 

follows: 

§ 425.224 Application procedures for 

renewing ACOs and re-entering ACOs. 

(a) General rules. A renewing ACO or 

a re-entering ACO may apply to enter a 

new participation agreement with CMS 

for participation in the Shared Savings 

Program. 

(1) In order to obtain a determination 

regarding whether it meets the 

requirements to participate in the 

Shared Savings Program, the ACO must 

submit a complete application in the 

form and manner and by the 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 

application is accurate, complete, and 

truthful. 

(3) An ACO that seeks to enter a new 

participation agreement under the 

Shared Savings Program and was newly 

formed after March 23, 2010, as defined 

in the Antitrust Policy Statement, must 

agree that CMS can share a copy of its 

application with the Antitrust Agencies. 

(4) The ACO must select a 

participation option in accordance with 

the requirements specified in § 425.600. 

Regardless of the date of termination or 

expiration of the participation 

agreement, a renewing ACO or reentering ACO that was previously under 

a two-sided model, or a one-sided 


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model of the BASIC track’s glide path 

(Level A or Level B), may only reapply 

for participation in a two-sided model. 

(b) Review of application. (1) CMS 

determines whether to approve a 

renewing ACO’s or re-entering ACO’s 

application based on an evaluation of all 

of the following factors: 

* * * * * 

(ii) The ACO’s history of 

noncompliance with the requirements 

of the Shared Savings Program, 

including, but not limited to, the 

following factors: 

(A)(1) For an ACO that entered into a 

participation agreement for a 3-year 

period, we consider whether the ACO 

failed to meet the quality performance 

standard during 1 of the first 2 

performance years of the previous 

agreement period. 

(2) For an ACO that entered into a 

participation agreement for a period 

longer than 3 years, we consider 

whether the ACO failed to meet the 

quality performance standard in either 

of the following: 

(i) In 2 consecutive performance years 

and was terminated as specified in 

§ 425.316(c)(2). 

(ii) For 2 or more performance years 

of the previous agreement period, 

regardless of whether the years are in 

consecutive order. 

(B) For 2 performance years of the 

ACO’s previous agreement period, 

regardless of whether the years are in 

consecutive order, whether the average 

per capita Medicare Parts A and B feefor-service expenditures for the ACO’s 

assigned beneficiary population 

exceeded its updated benchmark by an 

amount equal to or exceeding either of 

the following: 

(1) The ACO’s negative MSR, under a 

one-sided model. 

(2) The ACO’s MLR, under a twosided model. 

(C) Whether the ACO failed to repay 

shared losses in full within 90 days as 

required under subpart G of this part for 

any performance year of the ACO’s 

previous agreement period in a twosided model. 

(D) For an ACO that has participated 

in a two-sided model authorized under 

section 1115A of the Act, whether the 

ACO failed to repay shared losses for 

any performance year as required under 

the terms of the ACO’s participation 

agreement for such model. 

(iii) Whether the ACO has 

demonstrated in its application that it 

has corrected the deficiencies that 

caused any noncompliance identified in 

paragraph (b)(1)(ii) of this section to 

occur, and any other factors that may 

have caused the ACO to be terminated 

from the Shared Savings Program, and 

has processes in place to ensure that it 

remains in compliance with the terms of 

the new participation agreement. 

(iv) Whether the ACO has established 

that it is in compliance with the 

eligibility and other requirements of the 

Shared Savings Program to enter a new 

participation agreement, including the 

ability to repay losses by establishing an 

adequate repayment mechanism under 

§ 425.204(f), if applicable. 

(v) The results of a program integrity 

screening of the ACO, its ACO 

participants, and its ACO providers/ 

suppliers (conducted in accordance 

with § 425.305(a)). 

* * * * * 

■ 13. Section 425.226 is added to 

subpart C to read as follows: 

§ 425.226 Annual participation elections. 

(a) General. This section applies to 

ACOs in agreement periods beginning 

on July 1, 2019, and in subsequent 

years. Before the start of a performance 

year, an ACO may make elections 

related to its participation in the Shared 

Savings Program, as specified in this 

section, effective at the start of the 

applicable performance year and for the 

remaining years of the agreement 

period, unless superseded by a later 

election in accordance with this section. 

(1) Selection of beneficiary 

assignment methodology. An ACO may 

select the assignment methodology that 

CMS employs for assignment of 

beneficiaries under subpart E of this 

part. An ACO may select either of the 

following: 

(i) Preliminary prospective 

assignment with retrospective 

reconciliation, as described in 

§ 425.400(a)(2). 

(ii) Prospective assignment, as 

described in § 425.400(a)(3). 

(2) Selection of BASIC track level. An 

ACO participating under the BASIC 

track in the glide path may select a 

higher level of risk and potential 

reward, as provided in this section. 

(i) An ACO participating under the 

BASIC track’s glide path may elect to 

transition to a higher level of risk and 

potential reward within the glide path 

than the level of risk and potential 

reward that the ACO would be 

automatically transitioned to in the 

applicable year as specified in 

§ 425.605(d)(1). The automatic 

transition to higher levels of risk and 

potential reward within the BASIC 

track’s glide path continues to apply to 

all subsequent years of the agreement 

period in the BASIC track. 

(ii) An ACO transitioning to a higher 

level of risk and potential reward under 

paragraph (a)(2)(i) of this section must 

meet all requirements to participate 

under the selected level of performancebased risk, including both of the 

following: 

(A) Establishing an adequate 

repayment mechanism as specified 

under § 425.204(f). 

(B) Selecting a MSR/MLR from the 

options specified under § 425.605(b). 

(b) Election procedures. (1) All annual 

elections must be made in a form and 

manner and according to the timeframe 

established by CMS. 

(2) ACO executive who has the 

authority to legally bind the ACO must 

certify the elections described in this 

section. 

■ 14. Section 425.304 is revised to read 

as follows: 

§ 425.304 Beneficiary incentives. 

(a) General. (1) Except as set forth in 

this section, or as otherwise permitted 

by law, ACOs, ACO participants, ACO 

providers/suppliers, and other 

individuals or entities performing 

functions or services related to ACO 

activities are prohibited from providing 

gifts or other remuneration to 

beneficiaries as inducements for 

receiving items or services from or 

remaining in, an ACO or with ACO 

providers/suppliers in a particular ACO 

or receiving items or services from ACO 

participants or ACO providers/ 

suppliers. 

(2) Nothing in this section shall be 

construed as prohibiting an ACO from 

using shared savings received under this 

part to cover the cost of an in-kind item 

or service or incentive payment 

provided to a beneficiary under 

paragraph (b) or (c) of this section. 

(b) In-kind incentives. ACOs, ACO 

participants, ACO providers/suppliers, 

and other individuals or entities 

performing functions or services related 

to ACO activities may provide in-kind 

items or services to Medicare fee-forservice beneficiaries if all of the 

following conditions are satisfied: 

(1) There is a reasonable connection 

between the items and services and the 

medical care of the beneficiary. 

(2) The items or services are 

preventive care items or services or 

advance a clinical goal for the 

beneficiary, including adherence to a 

treatment regime, adherence to a drug 

regime, adherence to a follow-up care 

plan, or management of a chronic 

disease or condition. 

(3) The in-kind item or service is not 

a Medicare-covered item or service for 

the beneficiary on the date the in-kind 

item or service is furnished to the 

beneficiary. 


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(c) Monetary incentives—(1) General. 

For performance years beginning on July 

1, 2019 and for subsequent performance 

years, an ACO that is participating 

under Track 2, Levels C, D, or E of the 

BASIC track, or the ENHANCED track 

may, in accordance with this section, 

establish a beneficiary incentive 

program to provide monetary incentive 

payments to Medicare fee-for-service 

beneficiaries who receive a qualifying 

service. 

(2) Application procedures. (i) To 

establish or reestablish a beneficiary 

incentive program, an ACO must submit 

a complete application in the form and 

manner and by a deadline specified by 

CMS. 

(ii) CMS evaluates an ACO’s 

application to determine whether the 

ACO satisfies the requirements of this 

section, and approves or denies the 

application. 

(iii) If an ACO wishes to make a 

material change to its CMS-approved 

beneficiary incentive program, the ACO 

must submit a description of the 

material change to CMS in a form and 

manner and by a deadline specified by 

CMS. CMS will promptly evaluate the 

proposed material change and approve 

or reject it. 

(3) Beneficiary incentive program 

requirements. An ACO must begin to 

operate its approved beneficiary 

incentive program beginning on July 1, 

2019 or January 1 of the relevant 

performance year. 

(i) Duration. (A) Subject to the 

termination provision at paragraph 

(c)(7) of this section, an ACO must 

operate its approved beneficiary 

incentive program for an initial period 

of 18 months in the case of an ACO 

approved to operate a beneficiary 

incentive program beginning on July 1, 

2019, or 12 months in the case of an 

ACO approved to operate a beneficiary 

incentive program beginning on January 

1 of a performance year. 

(B) For each consecutive year that an 

ACO wishes to operate its beneficiary 

incentive program after the CMSapproved initial period, it must certify 

all of the following by a deadline 

specified by CMS: 

(1) Its intent to continue to operate the 

beneficiary incentive program for the 

entirety of the relevant performance 

year. 

(2) That the beneficiary incentive 

program meets all applicable 

requirements. 

(ii) Beneficiary eligibility. A fee-forservice beneficiary is eligible to receive 

an incentive payment under a 

beneficiary incentive program if the 

beneficiary is assigned to the ACO 

through either of the following: 

(A) Preliminary prospective 

assignment, as described in 

§ 425.400(a)(2). 

(B) Prospective assignment, as 

described in § 425.400(a)(3). 

(iii) Qualifying service. For purposes 

of this section, a qualifying service is a 

primary care service (as defined in 

§ 425.20) with respect to which 

coinsurance applies under Part B, if the 

service is furnished through an ACO by 

one of the following: 

(A) An ACO professional who has a 

primary care specialty designation 

included in the definition of primary 

care physician under § 425.20. 

(B) An ACO professional who is a 

physician assistant, nurse practitioner, 

or certified nurse specialist. 

(C) A FQHC or RHC. 

(iv) Incentive payments. (A) An ACO 

that establishes a beneficiary incentive 

program must furnish an incentive 

payment for each qualifying service 

furnished to a beneficiary described in 

paragraph (c)(3)(ii) of this section in 

accordance with this section. 

(B) Each incentive payment made by 

an ACO under a beneficiary incentive 

program must satisfy all of the following 

conditions: 

(1) The incentive payment is in the 

form of a check, debit card, or a 

traceable cash equivalent. 

(2) The value of the incentive 

payment does not exceed $20, as 

adjusted annually by the percentage 

increase in the consumer price index for 

all urban consumers (United States city 

average) for the 12-month period ending 

with June of the previous year, rounded 

to the nearest whole dollar amount. 

(3) The incentive payment is provided 

by the ACO to the beneficiary no later 

than 30 days after a qualifying service 

is furnished. 

(C) An ACO must furnish incentive 

payments in the same amount to each 

eligible Medicare fee-for-service 

beneficiary without regard to enrollment 

of such beneficiary in a Medicare 

supplemental policy (described in 

section 1882(g)(1) of the Act), in a State 

Medicaid plan under title XIX or a 

waiver of such a plan, or in any other 

health insurance policy or health benefit 

plan. 

(4) Program integrity requirements— 

(i) Record retention. An ACO that 

establishes a beneficiary incentive 

program must maintain records related 

to the beneficiary incentive program 

that include the following: 

(A) Identification of each beneficiary 

that received an incentive payment, 

including beneficiary name and HICN or 

Medicare beneficiary identifier. 

(B) The type and amount of each 

incentive payment made to each 

beneficiary. 

(C) The date each beneficiary received 

a qualifying service, the corresponding 

HCPCS code for the qualifying service, 

and identification of the ACO provider/ 

supplier that furnished the qualifying 

service. 

(D) The date the ACO provided each 

incentive payment to each beneficiary. 

(ii) Source of funding. (A) An ACO 

must not use funds from any entity or 

organization outside of the ACO to 

establish or operate a beneficiary 

incentive program. 

(B) An ACO must not directly, 

through insurance, or otherwise, bill or 

otherwise shift the cost of establishing 

or operating a beneficiary incentive 

program to a Federal health care 

program. 

(iii) Beneficiary notifications. An ACO 

or its ACO participants shall notify 

assigned beneficiaries of the availability 

of the beneficiary incentive program in 

accordance with § 425.312(b). 

(iv) Marketing prohibition. Except for 

the beneficiary notifications required 

under this section, the beneficiary 

incentive program is not the subject of 

marketing materials and activities, 

including but not limited to, an 

advertisement or solicitation to a 

beneficiary or any potential patient 

whose care is paid for in whole or in 

part by a Federal health care program 

(as defined at 42 U.S.C. 1320a–7b(f)). 

(5) Effect on program calculations. 

CMS disregards incentive payments 

made by an ACO under paragraph (c) of 

this section in calculating an ACO’s 

benchmarks, estimated average per 

capita Medicare expenditures, and 

shared savings and losses. 

(6) Income exemptions. Incentive 

payments made under a beneficiary 

incentive program are not considered 

income or resources or otherwise taken 

into account for purposes of either of 

the following: 

(i) Determining eligibility for benefits 

or assistance (or the amount or extent of 

benefits or assistance) under any 

Federal program or under any State or 

local program financed in whole or in 

part with Federal funds. 

(ii) Any Federal or State laws relating 

to taxation. 

(7) Termination. CMS may require an 

ACO to terminate its beneficiary 

incentive program at any time for either 

of the following: 

(i) Failure to comply with the 

requirements of this section. 

(ii) Any of the grounds for ACO 

termination set forth in § 425.218(b). 

■ 15. Section 425.305 is added to read 

as follows: 


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§ 425.305 Other program safeguards. 

(a) Screening of ACO applicants. (1) 

ACOs, ACO participants, and ACO 

providers/suppliers are reviewed during 

the Shared Savings Program application 

process and periodically thereafter with 

regard to their program integrity history, 

including any history of Medicare 

program exclusions or other sanctions 

and affiliations with individuals or 

entities that have a history of program 

integrity issues. 

(2) ACOs, ACO participants, or ACO 

providers/suppliers whose screening 

reveals a history of program integrity 

issues or affiliations with individuals or 

entities that have a history of program 

integrity issues may be subject to denial 

of their Shared Savings Program 

applications or the imposition of 

additional safeguards or assurances 

against program integrity risks. 

(b) Prohibition on certain required 

referrals and cost shifting. ACOs, ACO 

participants, and ACO providers/ 

suppliers are prohibited from doing the 

following: 

(1) Conditioning the participation of 

ACO participants, ACO providers/ 

suppliers, other individuals or entities 

performing functions or services related 

to ACO activities in the ACO on 

referrals of Federal health care program 

business that the ACO, its ACO 

participants, or ACO providers/ 

suppliers or other individuals or entities 

performing functions or services related 

to ACO activities know or should know 

is being (or would be) provided to 

beneficiaries who are not assigned to the 

ACO. 

(2) Requiring that beneficiaries be 

referred only to ACO participants or 

ACO providers/suppliers within the 

ACO or to any other provider or 

supplier, except that the prohibition 

does not apply to referrals made by 

employees or contractors who are 

operating within the scope of their 

employment or contractual arrangement 

to the employer or contracting entity, 

provided that the employees and 

contractors remain free to make referrals 

without restriction or limitation if the 

beneficiary expresses a preference for a 

different provider, practitioner, or 

supplier; the beneficiary’s insurer 

determines the provider, practitioner, or 

supplier; or the referral is not in the 

beneficiary’s best medical interests in 

the judgment of the referring party. 

■ 16. Section 425.308 is amended by 

revising paragraph (b)(6) and adding 

paragraph (b)(7) to read as follows: 

§ 425.308 Public reporting and 

transparency. 

* * * * * 

(b) * * * 

(6) Use of payment rule waivers under 

§ 425.612, if applicable, or telehealth 

services under § 425.613, if applicable, 

or both. 

(7) Information about a beneficiary 

incentive program established under 

§ 425.304(c), if applicable, including the 

following, for each performance year: 

(i) Total number of beneficiaries who 

received an incentive payment. 

(ii) Total number of incentive 

payments furnished. 

(iii) HCPCS codes associated with any 

qualifying service for which an 

incentive payment was furnished. 

(iv) Total value of all incentive 

payments furnished. 

(v) Total of each type of incentive 

payment (for example, check or debit 

card) furnished. 

* * * * * 

■ 17. Section 425.310 is amended by 

revising paragraph (c)(3) to read as 

follows: 

§ 425.310 Marketing requirements. 

* * * * * 

(c) * * * 

(3) Comply with § 425.304 regarding 

beneficiary incentives. 

* * * * * 

■ 18. Section 425.312 is amended by 

revising the section heading and 

paragraph (a) and adding paragraph (b) 

to read as follows: 

§ 425.312 Beneficiary notifications. 

(a) Notifications to fee-for-service 

beneficiaries. (1) An ACO shall ensure 

that Medicare fee-for-service 

beneficiaries are notified about all of the 

following in the manner set forth in 

paragraph (a)(2) of this section: 

(i) That each ACO participant and its 

ACO providers/suppliers are 

participating in the Shared Savings 

Program. 

(ii) The beneficiary’s opportunity to 

decline claims data sharing under 

§ 425.708. 

(iii) Beginning July 1, 2019, the 

beneficiary’s ability to, and the process 

by which, he or she may identify or 

change identification of the individual 

he or she designated for purposes of 

voluntary alignment (as described in 

§ 425.402(e)). 

(2) Notification of the information 

specified in paragraph (a)(1) of this 

section must be carried out through the 

following methods: 

(i) By an ACO participant posting 

signs in its facilities and, in settings in 

which beneficiaries receive primary care 

services, making standardized written 

notices available upon request. 

(ii) During the performance year 

beginning on July 1, 2019 and each 

subsequent performance year, by an 

ACO or ACO participant providing each 

beneficiary with a standardized written 

notice prior to or at the first primary 

care visit of the performance year in the 

form and manner specified by CMS. 

(b) Beneficiary incentive program 

notifications. (1) Beginning July 1, 2019, 

an ACO that operates a beneficiary 

incentive program under § 425.304(c) 

shall ensure that the ACO or its ACO 

participants notify assigned 

beneficiaries of the availability of the 

beneficiary incentive program, 

including a description of the qualifying 

services for which an assigned 

beneficiary is eligible to receive an 

incentive payment (as described in 

§ 425.304(c)). 

(2) Notification of the information 

specified in paragraph (b)(1) of this 

section must be carried out by an ACO 

or ACO participant during each relevant 

performance year by providing each 

assigned beneficiary with a 

standardized written notice prior to or 

at the first primary care visit of the 

performance year in the form and 

manner specified by CMS. 

* * * * * 

■ 19. Section 425.314 is amended by 

adding paragraph (a)(4) and revising 

paragraph (b)(1) to read as follows: 

§ 425.314 Audits and record retention. 

(a) * * * 

(4) The ACO’s operation of a 

beneficiary incentive program. 

(b) * * * 

(1) To maintain and give CMS, DHHS, 

the Comptroller General, the Federal 

Government or their designees access to 

all books, contracts, records, documents, 

and other evidence (including data 

related to Medicare utilization and 

costs, quality performance measures, 

shared savings distributions, 

information related to operation of a 

beneficiary incentive program, and 

other financial arrangements related to 

ACO activities) sufficient to enable the 

audit, evaluation, investigation, and 

inspection of the ACO’s compliance 

with program requirements, quality of 

services performed, right to any shared 

savings payment, or obligation to repay 

losses, ability to bear the risk of 

potential losses, and ability to repay any 

losses to CMS. 

* * * * * 

§ 425.315 [Amended] 

■ 20. Section 425.315 is amended in 

paragraph (a)(1)(ii) by removing the 

phrase ‘‘§ 425.604(f), § 425.606(h), 

§ 425.609(e) or § 425.610(h)’’ and adding 

in its place the phrase ‘‘§ 425.604(f), 

§ 425.605(e), § 425.606(h), § 425.609(e) 

or § 425.610(h)’’. 


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■ 21. Section 425.316 is amended by 

adding paragraph (d) to read as follows: 

§ 425.316 Monitoring of ACOs. 

* * * * * 

(d) Monitoring ACO financial 

performance. (1) For performance years 

beginning on July 1, 2019 and 

subsequent performance years, CMS 

determines whether the Medicare Parts 

A and B fee-for-service expenditures for 

the ACO’s assigned beneficiaries for the 

performance year exceed the ACO’s 

updated benchmark by an amount equal 

to or exceeding either the ACO’s 

negative MSR under a one-sided model, 

or the ACO’s MLR under a two-sided 

model. 

(2) If the Medicare Parts A and B feefor-service expenditures for the ACO’s 

assigned beneficiaries for the 

performance year exceed the ACO’s 

updated benchmark as specified in 

paragraph (d)(1) of this section, CMS 

may take any of the pre-termination 

actions set forth in § 425.216. 

(3) If the Medicare Parts A and B feefor-service expenditures for the ACO’s 

assigned beneficiaries for the 

performance year exceed the ACO’s 

updated benchmark as specified in 

paragraph (d)(1) of this section for 

another performance year of the 

agreement period, CMS may 

immediately or with advance notice 

terminate the ACO’s participation 

agreement under § 425.218. 

■ 22. Section 425.400 is amended— 

■ a. By revising the headings for 

paragraphs (a)(2) and (3); 

■ b. In paragraph (a)(3)(i) by removing 

the phrase ‘‘under Track 3’’; and 

■ c. By adding paragraph (a)(4). 

The revisions and addition read as 

follows: 

§ 425.400 General. 

(a) * * * 

(2) Preliminary prospective 

assignment with retrospective 

reconciliation. * * * 

(3) Prospective assignment. * * * 

(4) Assignment methodology applied 

to ACO. (i) For agreement periods 

beginning before July 1, 2019, the 

applicable assignment methodology is 

determined based on track as specified 

in § 425.600(a). 

(A) Preliminary prospective 

assignment with retrospective 

reconciliation as described in paragraph 

(a)(2) of this section applies to Track 1 

and Track 2 ACOs. 

(B) Prospective assignment as 

described in paragraph (a)(3) of this 

section applies to Track 3 ACOs. 

(ii) For agreement periods beginning 

on July 1, 2019 and in subsequent years, 

an ACO may select the assignment 

methodology that CMS employs for 

assignment of beneficiaries under this 

subpart. 

(A) An ACO may select either of the 

following: 

(1) Preliminary prospective 

assignment with retrospective 

reconciliation, as described in 

paragraph (a)(2) of this section. 

(2) Prospective assignment, as 

described in paragraph (a)(3) of this 

section. 

(B) This selection is made prior to the 

start of each agreement period, and may 

be modified prior to the start of each 

performance year as specified in 

§ 425.226. 

* * * * * 

§ 425.401 [Amended] 

■ 23. Section 425.401 is amended in 

paragraph (b) introductory text by 

removing the phrase ‘‘or at the end of 

CY 2019 as specified in 

§ 425.609(b)(1)(ii)’’ and adding in its 

place the phrase ‘‘or at the end of CY 

2019 as specified in § 425.609(b)(1)(ii) 

and (c)(1)(ii)’’. 

■ 24. Section 425.402 is amended by 

revising paragraph (e)(3)(i) to read as 

follows: 

§ 425.402 Basic assignment methodology. 

* * * * * 

(e) * * * 

(3) * * * 

(i) Offering anything of value to the 

Medicare beneficiary as an inducement 

to influence the Medicare beneficiary’s 

decision to designate or not to designate 

an ACO professional as responsible for 

coordinating their overall care under 

paragraph (e) of this section. Any items 

or services provided in violation of 

paragraph (e)(3) of this section are not 

considered to have a reasonable 

connection to the medical care of the 

beneficiary, as required under 

§ 425.304(b)(1). 

* * * * * 

§ 425.502 [Amended] 

■ 25. Section 425.502 is amended in 

paragraph (e)(4)(v) by removing the 

phrase ‘‘in the third year of the previous 

agreement period’’ and adding in its 

place the phrase ‘‘in the last year of the 

previous agreement period’’. 

■ 26. Section 425.600 is amended— 

■ a. In paragraph (a) introductory text by 

removing the phrase ‘‘For its initial 

agreement period, an ACO’’ and adding 

in its place ‘‘An ACO’’; 

■ b. By revising paragraphs (a)(1), (2) 

and (3); 

■ c. By adding paragraph (a)(4); 

■ d. By revising paragraphs (b) 

introductory text and (c); and 

■ e. By adding paragraphs (d), (e) and 

(f). 

The revisions and additions read as 

follows: 

§ 425.600 Selection of risk model. 

(a) * * * 

(1) Track 1. For agreement periods 

beginning before July 1, 2019, an ACO 

in Track 1 operates under the one-sided 

model (as described under § 425.604) for 

the agreement period. 

(2) Track 2. For agreement periods 

beginning before July 1, 2019, an ACO 

in Track 2 operates under a two-sided 

model (as described under § 425.606), 

sharing both savings and losses with the 

Medicare program for the agreement 

period. 

(3) ENHANCED track. An ACO in the 

ENHANCED track operates under a twosided model (as described under 

§ 425.610), sharing both savings and 

losses with the Medicare program for 

the agreement period. For purposes of 

this part, all references to the 

ENHANCED track are deemed to 

include Track 3. 

(4) BASIC track. For agreement 

periods beginning on July 1, 2019, and 

in subsequent years, an ACO in the 

BASIC track operates under either a 

one-sided model or a two-sided model 

(as described under § 425.605), either 

sharing savings only or sharing both 

savings and losses with the Medicare 

program, as specified in this paragraph 

(a)(4). 

(i) Levels of the BASIC track’s glide 

path—(A) Phase-in of levels of the risk 

and reward. Under the BASIC track’s 

glide path, the level of risk and potential 

reward phases in over the course of the 

agreement period in the following order: 

(1) Level A. The ACO operates under 

a one-sided model as described under 

§ 425.605(d)(1)(i). 

(2) Level B. The ACO operates under 

a one-sided model as described under 

§ 425.605(d)(1)(ii). 

(3) Level C. The ACO operates under 

a two-sided model as described under 

§ 425.605(d)(1)(iii). 

(4) Level D. The ACO operates under 

a two-sided model as described under 

§ 425.605(d)(1)(iv). 

(5) Level E. The ACO operates under 

a two-sided model as described under 

§ 425.605(d)(1)(v). 

(B) Glide path progression. (1) 

Experience in Track 1. (i) Except for an 

ACO that previously participated in 

Track 1 under paragraph (a)(1) of this 

section or a new ACO identified as a reentering ACO because more than 50 

percent of its ACO participants have 

recent prior experience in a Track 1 

ACO, an ACO eligible to enter the 

BASIC track’s glide path as determined 


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under paragraphs (d)(1)(i) and (d)(2)(i) 

of this section may elect to enter its 

agreement period at any of the levels of 

risk and potential reward available 

under paragraphs (a)(4)(i)(A)(1) through 

(5) of this section. 

(ii) An ACO that previously 

participated in Track 1 under paragraph 

(a)(1) of this section or a new ACO 

identified as a re-entering ACO because 

more than 50 percent of its ACO 

participants have recent prior 

experience in a Track 1 ACO may elect 

to enter its agreement period at any of 

the levels of risk and potential reward 

available under paragraphs 

(a)(4)(i)(A)(2) through (5) of this section. 

(2) Automatic advancement. Unless 

the ACO elects to transition to a higher 

level of risk and potential reward within 

the BASIC track’s glide path as provided 

in § 425.226(a)(2)(i), the ACO is 

automatically advanced to the next level 

of the BASIC track’s glide path at the 

start of each subsequent performance 

year of the agreement period, if a higher 

level of risk and potential reward is 

available under the BASIC track. 

(i) Exception for ACO entering the 

BASIC track’s glide path for an 

agreement period beginning on July 1, 

2019. The automatic advancement does 

not apply at the start of the second 

performance year for an ACO entering 

the BASIC track’s glide path for an 

agreement period beginning on July 1, 

2019. For performance year 2020, the 

ACO remains in the same level of the 

BASIC track’s glide path that it entered 

for the July 1, 2019 through December 

31, 2019 performance year, unless the 

ACO chooses to advance more quickly 

in accordance with § 425.226(a)(2)(i). 

The ACO is automatically advanced to 

the next level of the BASIC track’s glide 

path at the start of performance year 

2021 and all subsequent performance 

years of the agreement period. 

(ii) Exception for new legal entity 

identified as a low revenue ACO. An 

exception is available for a low revenue 

ACO that is a new legal entity and is not 

identified as a re-entering ACO that 

enters the BASIC track’s glide path at 

Level A under paragraph (a)(4)(i)(A)(1) 

of this section, and is automatically 

advanced to Level B under paragraph 

(a)(4)(i)(A)(2) of this section for 

performance year 2 (or performance 3 in 

the case of ACOs entering an agreement 

period beginning on July 1, 2019). Prior 

to the automatic advancement of the 

ACO to Level C under paragraph 

(a)(4)(i)(A)(3) of this section, the ACO 

may elect to remain in Level B under 

paragraph (a)(4)(i)(A)(2) of this section 

for performance year 3 (performance 

year 4 in the case of ACOs entering an 

agreement period beginning on July 1, 

2019). In the case of an ACO that elects 

to remain in Level B for an additional 

performance year pursuant to the 

second sentence of paragraph 

(a)(4)(i)(B)(2)(ii) of this section, the ACO 

is automatically advanced to Level E 

under paragraph (a)(4)(i)(A)(5) of this 

section at the start of performance year 

4 (or performance year 5 in the case of 

ACOs entering an agreement period 

beginning on July 1, 2019). 

(iii) Prior to entering performancebased risk, an ACO must meet all 

requirements to participate under 

performance-based risk, including 

establishing an adequate repayment 

mechanism as specified under 

§ 425.204(f) and selecting a MSR/MLR 

from the options specified under 

§ 425.605(b). 

(3) If the ACO fails to meet the 

requirements to participate under 

performance-based risk under paragraph 

(a)(4)(i)(B)(2)(iii) of this section, the 

agreement is terminated. 

(4) If, in accordance with 

§ 425.226(a)(2)(i), the ACO elects to 

transition to a higher level of risk and 

reward available under paragraphs 

(a)(4)(i)(A)(3) through (5) of this section, 

then the automatic transition to levels of 

higher risk and reward specified in 

paragraph (a)(4)(i)(B)(2) of this section 

applies to all subsequent performance 

years of the agreement period. 

(ii) Agreement period under Level E of 

the BASIC track. If an ACO enters the 

BASIC track and is ineligible to 

participate under the glide path 

described in paragraph (a)(4)(i) of this 

section, as determined under paragraph 

(d) of this section, Level E as described 

in paragraph (a)(4)(i)(A)(5) of this 

section applies to all performance years 

of the agreement period. 

(b) For agreement periods beginning 

before July 1, 2019, ACOs may operate 

under the one-sided model for a 

maximum of 2 agreement periods. An 

ACO may not operate under the onesided model for a second agreement 

period unless the— 

* * * * * 

(c) For agreement periods beginning 

before July 1, 2019, an ACO 

experiencing a net loss during a 

previous agreement period may reapply 

to participate under the conditions in 

§ 425.202(a), except the ACO must also 

identify in its application the cause(s) 

for the net loss and specify what 

safeguards are in place to enable the 

ACO to potentially achieve savings in 

its next agreement period. 

(d) For agreement periods beginning 

on July 1, 2019, and in subsequent 

years, CMS determines an ACO’s 

eligibility for the Shared Savings 

Program participation options specified 

in paragraph (a) of this section as 

follows: 

(1) If an ACO is identified as a high 

revenue ACO, the ACO is eligible for the 

participation options indicated in 

paragraph (a) of this section as follows: 

(i) If the ACO is determined to be 

inexperienced with performance-based 

risk Medicare ACO initiatives, the ACO 

may enter either the BASIC track’s glide 

path at any of the levels of risk and 

potential reward available under 

paragraphs (a)(4)(i)(A)(1) through (5) of 

this section, except as provided in 

paragraph (a)(4)(i)(B) of this section, or 

the ENHANCED track under paragraph 

(a)(3) of this section. 

(ii) If the ACO is determined to be 

experienced with performance-based 

risk Medicare ACO initiatives: 

(A) The ACO may enter the 

ENHANCED track under paragraph 

(a)(3) of this section except as provided 

in paragraph (d)(1)(ii)(B) of this section. 

(B) An ACO in a first or second 

agreement period beginning in 2016 or 

2017 identified as experienced with 

performance-based risk Medicare ACO 

initiatives based on participation in the 

Track 1+ Model may renew for a 

consecutive agreement period beginning 

on July 1, 2019, or January 1, 2020 

(respectively), under either the BASIC 

track Level E under paragraph 

(a)(4)(i)(A)(5) of this section, or the 

ENHANCED track under paragraph 

(a)(3) of this section. 

(2) If an ACO is identified as a low 

revenue ACO, the ACO is eligible for the 

participation options indicated in 

paragraph (a) of this section as follows: 

(i) If the ACO is determined to be 

inexperienced with performance-based 

risk Medicare ACO initiatives, the ACO 

may enter either the BASIC track’s glide 

path at any of the levels of risk and 

potential reward available under 

paragraphs (a)(4)(i)(A)(1) through (5) of 

this section, except as provided in 

paragraph (a)(4)(i)(B) of this section, or 

the ENHANCED track under paragraph 

(a)(3) of this section. 

(ii) If the ACO is determined to be 

experienced with performance-based 

risk Medicare ACO initiatives, the ACO 

may enter under either the BASIC track 

Level E under paragraph (a)(4)(i)(A)(5) 

of this section, except as provided in 

paragraph (d)(3) of this section, or the 

ENHANCED track under paragraph 

(a)(3) of this section. 

(3) Low revenue ACOs may 

participate under the BASIC track for a 

maximum of two agreement periods. A 

low revenue ACO may only participate 

in the BASIC track for a second 

agreement period if it satisfies either of 

the following: 


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(i) The ACO is the same legal entity 

as a current or previous ACO that 

previously entered into a participation 

agreement for participation in the 

BASIC track only one time. 

(ii) For a new ACO identified as a reentering ACO, the ACO in which the 

majority of the new ACO’s participants 

were participating previously entered 

into a participation agreement for 

participation in the BASIC track only 

one time. 

(e) CMS monitors low revenue ACOs 

identified as experienced with 

performance-based risk Medicare ACO 

initiatives, during an agreement period 

in the BASIC track, for changes in the 

revenue of ACO participants that would 

cause the ACO to be considered a high 

revenue ACO and ineligible for 

participation in the BASIC track. If the 

ACO meets the definition of a high 

revenue ACO (as specified in 

§ 425.20)— 

(1) The ACO is permitted to complete 

the remainder of its current performance 

year under the BASIC track, but is 

ineligible to continue participation in 

the BASIC track after the end of that 

performance year if it continues to meet 

the definition of a high revenue ACO; 

and 

(2) CMS takes compliance action as 

specified in §§ 425.216 and 425.218, up 

to and including termination of the 

participation agreement, to ensure the 

ACO does not continue in the BASIC 

track for subsequent performance years 

of the agreement period if it continues 

to meet the definition of a high revenue 

ACO. 

(f) For agreement periods beginning 

on July 1, 2019, and in subsequent 

years, CMS determines the agreement 

period an ACO is entering for purposes 

of applying program requirements that 

phase-in over multiple agreement 

periods, as follows: 

(1) An ACO entering an initial 

agreement period is considered to be 

entering a first agreement period in the 

Shared Savings Program. 

(2) A re-entering ACO is considered to 

be entering a new agreement period in 

the Shared Savings Program as 

follows— 

(i) An ACO whose participation 

agreement expired without having been 

renewed re-enters the program under 

the next consecutive agreement period 

in the Shared Savings Program; 

(ii) An ACO whose participation 

agreement was terminated under 

§ 425.218 or § 425.220 re-enters the 

program at the start of the same 

agreement period in which it was 

participating at the time of termination 

from the Shared Savings Program, 

beginning with the first performance 

year of that agreement period; or 

(iii) A new ACO identified as a reentering ACO enters the program in an 

agreement period that is determined 

based on the prior participation of the 

ACO in which the majority of the new 

ACO’s participants were participating. 

(A) If the participation agreement of 

the ACO used in this determination 

expired without having been renewed or 

was terminated, the agreement period of 

the re-entering ACO is determined in 

accordance with paragraph (f)(2)(i) or 

(ii) of this section, as applicable. 

(B) If the ACO used in this 

determination is currently participating 

in the program, the new ACO is 

considered to be entering into the same 

agreement period as this currently 

participating ACO, beginning with the 

first performance year of that agreement 

period. 

(3) A renewing ACO is considered to 

be entering the next consecutive 

agreement period in the Shared Savings 

Program. 

(4) For purposes of this paragraph (f), 

program requirements that phase in over 

multiple agreement periods are as 

follows: 

(i) The quality performance standard 

as described in § 425.502(a). 

(ii) The weight used in calculating the 

regional adjustment to the ACO’s 

historical benchmark as described in 

§ 425.601(f). 

(iii) The use of equal weights to 

weight each benchmark year as 

specified in § 425.601(e). 

■ 27. Section 425.601 is added to read 

as follows: 

§ 425.601 Establishing, adjusting, and 

updating the benchmark for agreement 

periods beginning on July 1, 2019, 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 July 1, 2019, 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 

§ 425.226(a)(1). 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. 

(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. 


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(B) Determine the ACO’s regional 

expenditures as specified under 

paragraphs (c) and (d) 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. 

(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 countylevel 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 

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. CMS does all of 

the following: 

(i) Calculates an average per capita 

amount of expenditures for the ACO’s 

regional service area as follows: 

(A) Determines the counties included 

in the ACO’s regional service area based 

on the ACO’s BY3 assigned beneficiary 

population. 

(B) Determines the ACO’s regional 

expenditures as specified under 

paragraphs (c) and (d) of this section for 

BY3. 

(C) Adjusts for differences in severity 

and case mix between the ACO’s 

assigned beneficiary population and the 

assignable beneficiary population for 

the ACO’s regional service area 

identified for the 12-month calendar 

year that corresponds to BY3. 

(ii) Calculates the adjustment as 

follows: 

(A) Determines the difference between 

the average per capita amount of 

expenditures for the ACO’s regional 

service area as specified under 

paragraph (a)(8)(i) of this section and 

the average per capita amount of the 

ACO’s historical benchmark determined 

under paragraphs (a)(1) through (7) of 

this section, for each of the following 

populations of beneficiaries: 

(1) ESRD. 

(2) Disabled. 

(3) Aged/dual eligible for Medicare 

and Medicaid. 

(4) Aged/non-dual eligible for 

Medicare and Medicaid. 

(B) Applies a percentage, as 

determined in paragraph (f) of this 

section. 

(C) 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 (a)(8)(ii)(B) of this 

section at a dollar amount equal to 5 

percent of national per capita 

expenditures for Parts A and B services 

under the original Medicare fee-forservice 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. 

(1) 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. 

(2) For negative adjustments, the per 

capita dollar amount for a Medicare 

enrollment type is capped at negative 5 

percent of the national per capita 

expenditure amount for the enrollment 

type for BY3. 

(9) For the second and each 

subsequent performance year during the 

term of the agreement period, the ACO’s 

benchmark is adjusted in accordance 

with § 425.118(b) for the addition and 

removal of ACO participants or ACO 

providers/suppliers, for a change to the 

ACO’s beneficiary assignment 

methodology selection under 

§ 425.226(a)(1), or both. To adjust the 

benchmark, CMS does the following: 

(i) Takes into account the 

expenditures of beneficiaries who 

would have been assigned to the ACO 

under the ACO’s most recent beneficiary 

assignment methodology selection in 

any of the 3 most recent years prior to 

the start of the agreement period using 

the most recent certified ACO 

participant list for the relevant 

performance year. 

(ii) Redetermines the regional 

adjustment amount under paragraph 

(a)(8) of this section, according to the 

ACO’s assigned beneficiaries for BY3 

resulting from the ACO’s most recent 

certified ACO participant list, the ACO’s 

beneficiary assignment methodology 

selection under § 425.226(a)(1) for the 

relevant performance year, or both. 

(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), 425.609(c), and 

425.610(a). 

(b) Updating the benchmark. For all 

agreement periods beginning on July 1, 

2019, and in subsequent years, CMS 

updates the historical benchmark 

annually for each year of the agreement 

period using a blend of national and 

regional growth rates. 

(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) National growth rates are 

computed 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. 

(3) Regional growth rates are 

computed using expenditures for the 

ACO’s regional service area for BY3 and 

the performance year, computed as 

follows: 

(i) Determine the counties included in 

the ACO’s regional service area based on 

the ACO’s assigned beneficiary 

population for the year. 

(ii) Determine the ACO’s regional 

expenditures as specified under 

paragraphs (c) and (d) of this section. 

(4) The national and regional growth 

rates are blended together by taking a 

weighted average of the two. The weight 

applied to the— 

(i) 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 (a)(5)(v) of this 

section; and 


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(ii) Regional growth rate is equal to 1 

minus the weight applied to the 

national growth rate. 

(c) Calculating county expenditures. 

For all agreement periods beginning on 

July 1, 2019, and in subsequent years, 

CMS does all of the following to 

determine risk adjusted county fee-forservice expenditures for use in 

calculating the ACO’s regional fee-forservice expenditures: 

(1)(i) Determines average county feefor-service expenditures based on 

expenditures for the assignable 

population of beneficiaries in each 

county in the ACO’s regional service 

area, where assignable beneficiaries are 

identified for the 12-month calendar 

year corresponding to the relevant 

benchmark or performance year. 

(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 feefor-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 

(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-forservice 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. 

(d) Calculating regional expenditures. 

For all agreement periods beginning on 

July 1, 2019, 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 (c) 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 (d)(1) of this section for 

each population of beneficiaries 

(according to Medicare enrollment type) 

across all counties within the ACO’s 

regional service area; and 

(3) Weighting the aggregate 

expenditure values determined for each 

population of beneficiaries (according to 

Medicare enrollment type) under 

paragraph (d)(2) of this section by a 

weight reflecting the proportion of the 

ACO’s overall beneficiary population in 

the applicable Medicare enrollment type 

for the relevant benchmark or 

performance year. 

(e) 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 July 1, 

2019, and in subsequent years, CMS 

establishes, adjusts, and updates the 

rebased historical benchmark in 

accordance with paragraphs (a) through 

(d) of this section with the following 

modifications: 

(i) 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. 

(ii) For a renewing ACO or re-entering 

ACO whose prior agreement period 

benchmark was calculated according to 

§ 425.603(c), to determine the weight 

used in the regional adjustment 

calculation described in paragraph (f) of 

this section, CMS considers the 

agreement period the ACO is entering 

into according to § 425.600(f) in 

combination with either of the 

following— 

(A) 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 

(B) For a new ACO identified as a reentering 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. 

(f) 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 


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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 either paragraph 

(a)(8)(ii)(A) or (e) of this section by the 

applicable proportion of the ACO’s 

assigned beneficiary population (ESRD, 

Disabled, Aged/dual eligible Medicare 

and Medicaid beneficiaries, Aged/nondual eligible Medicare and Medicaid 

beneficiaries) for BY3 of the historical 

benchmark. 

(ii) Sums the amounts determined in 

paragraph (f)(4)(i) of this section across 

the populations of beneficiaries (ESRD, 

Disabled, Aged/dual eligible Medicare 

and Medicaid beneficiaries, Aged/nondual 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 CMS adjusts the ACO’s 

benchmark for the addition or removal 

of ACO participants or ACO providers/ 

suppliers during the term of the 

agreement period or a change to the 

ACO’s beneficiary assignment 

methodology selection as specified in 

paragraph (a)(9) of this section, 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 (f)(1) and (2) of this section 

used in calculating the adjustment 

under either paragraph (a)(8) or (e) of 

this section. 

(g) July 1, 2019 through December 31, 

2019 performance year. In determining 

performance for the July 1, 2019 through 

December 31, 2019 performance year 

described in § 425.609(c), CMS does all 

of the following: 

(1) When adjusting the benchmark 

using the methodology set forth in 

paragraph (a)(10) of this section and 

§ 425.609(c), CMS adjusts for severity 

and case mix between BY3 and CY 

2019. 

(2) When updating the benchmark 

using the methodology set forth in 

paragraph (b) of this section and 

§ 425.609(c), CMS updates the 

benchmark based on growth between 

BY3 and CY 2019. 

■ 28. Section 425.602 is amended— 

■ a. By revising the section heading and 

paragraph (a) introductory text; 

■ b. In paragraph (a)(1)(ii)(B) by 

removing the phrase ‘‘For agreement 

periods beginning in 2018 and 

subsequent years’’ and adding in its 

place the phrase ‘‘For agreement periods 

beginning in 2018’’; and 

■ c. In paragraphs (a)(4)(ii) and (a)(5)(ii) 

by removing the phrase ‘‘For agreement 

periods beginning in 2017 and 

subsequent years’’ and adding in its 

place the phrase ‘‘For agreement periods 

beginning in 2017 and 2018’’. 

The revisions read as follows: 

§ 425.602 Establishing, adjusting, and 

updating the benchmark for an ACO’s first 

agreement period beginning on or before 

January 1, 2018. 

(a) Computing per capita Medicare 

Part A and Part B benchmark 

expenditures. For agreement periods 

beginning on or before January 1, 2018, 

in computing an ACO’s fixed historical 

benchmark that is adjusted for historical 

growth and beneficiary characteristics, 

including health status, 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 agreement 

period using the ACO participants’ TINs 

identified at the start of the agreement 

period. CMS does all of the following: 

* * * * * 

■ 29. Section 425.603 is amended— 

■ a. By revising the section heading; 

■ b. In paragraph (c) introductory text 

by removing the phrase ‘‘For second or 

subsequent agreement periods 

beginning in 2017 and subsequent 

years’’ and adding in its place the 

phrase ‘‘For second or subsequent 

agreement periods beginning in 2017, 

2018 and on January 1, 2019’’; 

■ c. In paragraph (c)(1)(ii)(B) by 

removing the phrase ‘‘For agreement 

periods beginning in 2018 and 

subsequent years’’ and adding in its 

place the phrase ‘‘For agreement periods 

beginning in 2018 and on January 1, 

2019’’; 

■ d. In paragraphs (d) introductory text 

and (e) introductory text by removing 

the phrase ‘‘For second or subsequent 

agreement periods beginning in 2017 

and subsequent years’’ and adding in its 

place the phrase ‘‘For second or 

subsequent agreement periods 

beginning in 2017, 2018 and on January 

1, 2019’’; 

■ e. In paragraph (e)(2)(ii)(B) by 

removing the phrase ‘‘For agreement 

periods beginning in 2018 and 

subsequent years’’ and adding in its 

place the phrase ‘‘For agreement periods 

beginning in 2018 and on January 1, 

2019’’; and 

■ f. In paragraph (f) introductory text by 

removing the phrase ‘‘For second or 

subsequent agreement periods 

beginning in 2017 and subsequent 

years’’ and adding in its place the 

phrase ‘‘For second or subsequent 

agreement periods beginning in 2017, 

2018, and on January 1, 2019’’. 

The revision reads as follows: 

§ 425.603 Resetting, adjusting, and 

updating the benchmark for a subsequent 

agreement period beginning on or before 

January 1, 2019. 

* * * * * 

■ 30. Section 425.604 is amended— 

■ a. In paragraph (a) introductory text by 

removing the phrase ‘‘under § 425.602’’ 

and adding in its place the phrase 

‘‘under § 425.602 or § 425.603’’; 

■ b. In paragraph (a)(3) introductory text 

by removing the phrase ‘‘described in 

§ 425.602(a)’’ and adding in its place the 

phrase ‘‘described in § 425.602(a) or 

§ 425.603(c)’’; and 

■ c. In paragraph (b) by revising the 

table. 

The revision reads as follows: 

§ 425.604 Calculation of savings under the 

one-sided model. 

* * * * * 

(b) * * * 


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* * * * * 

■ 31. Section 425.605 is added to read 

as follows: 

§ 425.605 Calculation of shared savings 

and losses under the BASIC track. 

(a) General rules. For each 

performance year, CMS determines 

whether the estimated average per 

capita Medicare Parts A and B fee-forservice expenditures for Medicare feefor-service beneficiaries assigned to the 

ACO are above or below the updated 

benchmark determined under § 425.601. 

In order to qualify for a shared savings 

payment under the BASIC track, or to be 

responsible for sharing losses with CMS, 

an ACO’s average per capita Medicare 

Parts A and B fee-for-service 

expenditures for its assigned beneficiary 

population for the performance year 

must be below or above the updated 

benchmark, respectively, by at least the 

minimum savings or loss rate under 

paragraph (b) of this section. 

(1) CMS uses an ACO’s prospective 

HCC risk score to adjust the benchmark 

for changes in severity and case mix in 

the assigned beneficiary population 

between BY3 and the performance year. 

(i) Positive adjustments in prospective 

HCC risk scores are subject to a cap of 

3 percent. 

(ii) This cap is the maximum increase 

in risk scores for each agreement period, 

such that any positive adjustment 

between BY3 and any performance year 

in the agreement period cannot be larger 

than 3 percent. 

(2) In risk adjusting the benchmark as 

described in § 425.601(a)(10), CMS 

makes separate adjustments 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. 

(3) To minimize variation from 

catastrophically large claims, CMS 

truncates an assigned beneficiary’s total 

annual Medicare Parts A and B fee-forservice per capita expenditures at the 

99th percentile of national Medicare 

Parts A and B fee-for-service 

expenditures as determined for the 

applicable performance year for 

assignable beneficiaries identified for 

the 12-month calendar year 

corresponding to the performance year. 

(4) CMS uses a 3-month claims run 

out with a completion factor to calculate 

an ACO’s per capita expenditures for 

each performance year. 

(5) Calculations of the ACO’s 

expenditures include the payment 

amounts included in Medicare Parts A 

and B fee-for-service claims. 

(i) These calculations exclude indirect 

medical education (IME) and 

disproportionate share hospital (DSH) 

payments. 

(ii) These calculations take into 

consideration individually beneficiary 

identifiable final payments made under 

a demonstration, pilot or time limited 

program. 

(6) In order to qualify for a shared 

savings payment, the ACO’s average per 

capita Medicare Parts A and B fee-forservice expenditures for the 

performance year must be below the 

applicable updated benchmark by at 

least the minimum savings rate 

established for the ACO under 

paragraph (b) of this section. 

(b) Minimum savings or loss rate. (1) 

For ACOs under a one-sided model of 

the BASIC track’s glide path, as 

specified under paragraphs (d)(1)(i) and 

(ii) of this section, CMS uses a sliding 

scale, based on the number of 

beneficiaries assigned to the ACO under 

subpart E of this part, to establish the 

MSR for the ACO as follows: 


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(2) Prior to entering a two-sided 

model of the BASIC track, the ACO 

must select the MSR/MLR. For an ACO 

making this selection as part of an 

application for, or renewal of, 

participation in a two-sided model of 

the BASIC track, the selection applies 

for the duration of the agreement period 

under the BASIC track. For an ACO 

making this selection during an 

agreement period, as part of the 

application cycle prior to entering a 

two-sided model of the BASIC track, the 

selection applies for the remaining 

duration of the applicable agreement 

period under the BASIC track. 

(i) The ACO must choose from the 

following options for establishing the 

MSR/MLR: 

(A) Zero percent MSR/MLR. 

(B) Symmetrical MSR/MLR in a 0.5 

percent increment between 0.5 and 2.0 

percent. 

(C) Symmetrical MSR/MLR that 

varies, based on the number of 

beneficiaries assigned to the ACO under 

subpart E of this part. The MSR is the 

same as the MSR that would apply 

under paragraph (b)(1) of this section for 

an ACO under a one-sided model of the 

BASIC track’s glide path, and is based 

on the number of assigned beneficiaries. 

The MLR under the BASIC track is 

equal to the negative MSR. 

(ii) The ACO selects its MSR/MLR as 

part of one the following: 

(A) Application for, or renewal of, 

program participation in a two-sided 

model of the BASIC track. 

(B) Election to participate in a twosided model of the BASIC track during 

an agreement period under § 425.226. 

(C) Automatic transition from Level B 

to Level C of the BASIC track’s glide 

path under § 425.600(a)(4)(i). 

(D) Automatic transition from Level B 

to Level E of the BASIC track’s glide 

path under § 425.600(a)(4)(i)(B)(2)(ii). 

(3) To qualify for shared savings 

under the BASIC track, an ACO’s 

average per capita Medicare Parts A and 

B fee-for-service expenditures for its 

assigned beneficiary population for the 

performance year must be below its 

updated benchmark costs for the year by 

at least the MSR established for the 

ACO. 

(4) To be responsible for sharing 

losses with the Medicare program, an 

ACO’s average per capita Medicare Parts 

A and B fee-for-service expenditures for 

its assigned beneficiary population for 

the performance year must be above its 

updated benchmark costs for the year by 

at least the MLR established for the 

ACO. 

(c) Qualification for shared savings 

payment. To qualify for shared savings, 

an ACO must meet the minimum 

savings rate requirement established 

under paragraph (b) of this section, meet 

the minimum quality performance 

standards established under § 425.502, 

and otherwise maintain its eligibility to 

participate in the Shared Savings 

Program under this part. 

(d) Levels of risk and potential 

reward. (1) The following levels of risk 

and potential reward apply to an ACO 

in the BASIC track, as permitted under 

§ 425.600(d). 

(i) Level A (one-sided model)—(A) 

Final sharing rate. An ACO that meets 

all the requirements for receiving shared 

savings payments under the BASIC 

track, Level A, receives a shared savings 

payment of up to 40 percent of all the 

savings under the updated benchmark, 

as determined on the basis of its quality 

performance under § 425.502 (up to the 

performance payment limit described in 

paragraph (d)(1)(i)(B) of this section). 

(B) Performance payment. (1) If an 

ACO qualifies for savings by meeting or 

exceeding the MSR, the final sharing 

rate specified in paragraph (d)(1)(i)(A) of 

this section applies to an ACO’s savings 

on a first dollar basis. 

(2) The amount of shared savings an 

eligible ACO receives under the BASIC 

track, Level A, may not exceed 10 

percent of its updated benchmark. 

(ii) Level B (one-sided model)—(A) 

Final sharing rate. An ACO that meets 

all the requirements for receiving shared 

savings payments under the BASIC 

track, Level B, receives a shared savings 

payment of up to 40 percent of all the 

savings under the updated benchmark, 

as determined on the basis of its quality 

performance under § 425.502 (up to the 

performance payment limit described in 

paragraph (d)(1)(ii)(B) of this section). 

(B) Performance payment. (1) If an 

ACO qualifies for savings by meeting or 

exceeding the MSR, the final sharing 

rate specified in paragraph (d)(1)(ii)(A) 

of this section applies to an ACO’s 

savings on a first dollar basis. 

(2) The amount of shared savings an 

eligible ACO receives under the BASIC 

track, Level B, may not exceed 10 

percent of its updated benchmark. 

(iii) Level C (two-sided model)—(A) 

Final sharing rate. An ACO that meets 

all the requirements for receiving shared 

savings payments under the BASIC 

track, Level C, receives a shared savings 

payment of up to 50 percent of all the 

savings under the updated benchmark, 


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as determined on the basis of its quality 

performance under § 425.502 (up to the 

performance payment limit described in 

paragraph (d)(1)(iii)(B) of this section). 

(B) Performance payment. (1) If an 

ACO qualifies for savings by meeting or 

exceeding the MSR, the final sharing 

rate specified in paragraph (d)(1)(iii)(A) 

of this section applies to an ACO’s 

savings on a first dollar basis. 

(2) The amount of shared savings an 

eligible ACO receives under the BASIC 

track, Level C may not exceed 10 

percent of its updated benchmark. 

(C) Shared loss rate. For an ACO that 

is required to share losses with the 

Medicare program for expenditures over 

the updated benchmark, the amount of 

shared losses is determined based on a 

fixed 30 percent loss sharing rate. 

(D) Loss recoupment limit. (1) Except 

as provided in paragraph (d)(1)(iii)(D)(2) 

of this section, the amount of shared 

losses for which an eligible ACO is 

liable may not exceed 2 percent of total 

Medicare Parts A and B fee-for-service 

revenue of the ACO participants in the 

ACO. 

(2) Instead of the revenue-based loss 

recoupment limit determined under 

paragraph (d)(1)(iii)(D)(1) of this section, 

the loss recoupment limit for the ACO 

is 1 percent of the ACO’s updated 

benchmark as determined under 

§ 425.601, if the amount determined 

under paragraph (d)(1)(iii)(D)(1) of this 

section exceeds the amount that is 1 

percent of the ACO’s updated 

benchmark as determined under 

§ 425.601. 

(iv) Level D (two-sided model)—(A) 

Final sharing rate. An ACO that meets 

all the requirements for receiving shared 

savings payments under the BASIC 

track, Level D, receives a shared savings 

payment of up to 50 percent of all the 

savings under the updated benchmark, 

as determined on the basis of its quality 

performance under § 425.502 (up to the 

performance payment limit described in 

paragraph (d)(1)(iv)(B) of this section). 

(B) Performance payment. (1) If an 

ACO qualifies for savings by meeting or 

exceeding the MSR, the final sharing 

rate specified in paragraph (d)(1)(iv)(A) 

of this section applies to an ACO’s 

savings on a first dollar basis. 

(2) The amount of shared savings an 

eligible ACO receives under the BASIC 

track, Level D, may not exceed 10 

percent of its updated benchmark. 

(C) Shared loss rate. For an ACO that 

is required to share losses with the 

Medicare program for expenditures over 

the updated benchmark, the amount of 

shared losses is determined based on a 

fixed 30 percent loss sharing rate. 

(D) Loss recoupment limit. (1) Except 

as provided in paragraph (d)(1)(iv)(D)(2) 

of this section, the amount of shared 

losses for which an eligible ACO is 

liable may not exceed 4 percent of total 

Medicare Parts A and B fee-for-service 

revenue of the ACO participants in the 

ACO. 

(2) Instead of the revenue-based loss 

recoupment limit determined under 

paragraph (d)(1)(iv)(D)(1) of this section, 

the loss recoupment limit for the ACO 

is 2 percent of the ACO’s updated 

benchmark as determined under 

§ 425.601, if the amount determined 

under paragraph (d)(1)(iv)(D)(1) of this 

section exceeds the amount that is 2 

percent of the ACO’s updated 

benchmark as determined under 

§ 425.601. 

(v) Level E (two-sided model)—(A) 

Final sharing rate. An ACO that meets 

all the requirements for receiving shared 

savings payments under the BASIC 

track, Level E, receives a shared savings 

payment of up to 50 percent of all the 

savings under the updated benchmark, 

as determined on the basis of its quality 

performance under § 425.502 (up to the 

performance payment limit described in 

paragraph (d)(1)(v)(B) of this section). 

(B) Performance payment. (1) If an 

ACO qualifies for savings by meeting or 

exceeding the MSR, the final sharing 

rate specified in paragraph (d)(1)(v)(A) 

of this section applies to an ACO’s 

savings on a first dollar basis. 

(2) The amount of shared savings an 

eligible ACO receives under the BASIC 

track, Level E, may not exceed 10 

percent of its updated benchmark. 

(C) Shared loss rate. For an ACO that 

is required to share losses with the 

Medicare program for expenditures over 

the updated benchmark, the amount of 

shared losses is determined based on a 

fixed 30 percent loss sharing rate. 

(D) Loss recoupment limit. (1) Except 

as provided in paragraph (d)(1)(v)(D)(2) 

of this section, the amount of shared 

losses for which an eligible ACO is 

liable may not exceed the percentage, as 

specified in § 414.1415(c)(3)(i)(A) of this 

chapter, of total Medicare Parts A and 

B fee-for-service revenue of the ACO 

participants in the ACO. 

(2) Instead of the revenue-based loss 

recoupment limit determined under 

paragraph (d)(1)(v)(D)(1) of this section, 

the loss recoupment limit for the ACO 

is 1 percentage point higher than the 

percentage, as specified in 

§ 414.1415(c)(3)(i)(B) of this chapter, 

based on the ACO’s updated benchmark 

as determined under § 425.601, if the 

amount determined under paragraph 

(d)(1)(v)(D)(1) of this section exceeds 

this percentage of the ACO’s updated 

benchmark as determined under 

§ 425.601. 

(2) Level E risk and reward as 

specified in paragraph (d)(1)(v) of this 

section applies to an ACO eligible to 

enter the BASIC track that is determined 

to be experienced with performancebased risk Medicare ACO initiatives as 

specified under § 425.600(d). 

(e) Notification of savings and losses. 

(1) CMS notifies an ACO in writing 

regarding whether the ACO qualifies for 

a shared savings payment, and if so, the 

amount of the payment due. 

(2) CMS provides written notification 

to an ACO of the amount of shared 

losses, if any, that it must repay to the 

program. 

(3) If an ACO has shared losses, the 

ACO must make payment in full to CMS 

within 90 days of receipt of notification. 

(f) Extreme and uncontrollable 

circumstances. The following 

adjustment is made in calculating the 

amount of shared losses, after the 

application of the shared loss rate and 

the loss recoupment limit. 

(1) CMS determines the percentage of 

the ACO’s performance year assigned 

beneficiary population affected by an 

extreme and uncontrollable 

circumstance. 

(2) CMS reduces the amount of the 

ACO’s shared losses by an amount 

determined by multiplying the shared 

losses by the percentage of the total 

months in the performance year affected 

by an extreme and uncontrollable 

circumstance, and the percentage of the 

ACO’s assigned beneficiaries who reside 

in an area affected by an extreme and 

uncontrollable circumstance. 

(i) For an ACO that is liable for a prorated share of losses under 

§ 425.221(b)(2)(ii), the amount of shared 

losses determined for the performance 

year during which the termination 

becomes effective is adjusted according 

to this paragraph (f)(2). 

(ii) [Reserved] 

(3) CMS applies determinations made 

under the Quality Payment Program 

with respect to— 

(i) Whether an extreme and 

uncontrollable circumstance has 

occurred; and 

(ii) The affected areas. 

(4) CMS has sole discretion to 

determine the time period during which 

an extreme and uncontrollable 

circumstance occurred and the 

percentage of the ACO’s assigned 

beneficiaries residing in the affected 

areas. 

(g) July 1, 2019 through December 31, 

2019 performance year. Shared savings 

or shared losses for the July 1, 2019 

through December 31, 2019 performance 

year are calculated as described in 

§ 425.609. 

■ 32. Section 425.606 is amended— 


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■ a. In paragraph (a) introductory text by 

removing the phrase ‘‘under § 425.602’’ 

and adding in its place the phrase 

‘‘under § 425.602 or § 425.603’’; 

■ b. In paragraph (a)(3) introductory text 

by removing the phrase ‘‘described in 

§ 425.602(a)’’ and adding in its place the 

phrase ‘‘described in § 425.602(a) or 

§ 425.603(c)’’; 

■ c. In paragraph (g) introductory text by 

removing the phrase ‘‘under § 425.602’’ 

and adding in its place the phrase 

‘‘under § 425.602 or § 425.603’’; and 

■ d. By adding paragraph (i)(2)(i), and 

reserved paragraph (i)(2)(ii). 

The additions read as follows: 

§ 425.606 Calculation of shared savings 

and losses under Track 2. 

* * * * * 

(i) * * * 

(2) * * * 

(i) For an ACO that is liable for a prorated share of losses under 

§ 425.221(b)(2)(ii) or (b)(3)(i), the 

amount of shared losses determined for 

the performance year during which the 

termination becomes effective is 

adjusted according to this paragraph 

(i)(2). 

(ii) [Reserved] 

* * * * * 

■ 33. Section 425.609 is amended by: 

■ a. Revising the section heading and 

paragraphs (b) introductory text and 

(b)(2); 

■ b. Adding paragraph (c); and 

■ c. Revising paragraphs (d)(1), and (e). 

The revisions and addition read as 

follows: 

§ 425.609 Determining performance for 6- 

month performance years during CY 2019. 

* * * * * 

(b) January 2019 through June 2019. 

For ACOs participating in a 6-month 

performance year from January 1, 2019, 

through June 30, 2019, under 

§ 425.200(b)(2)(ii)(B) and for ACOs 

eligible for pro-rated shared savings or 

liable for pro-rated shared losses in 

accordance with § 425.221(b)(3)(i) for 

the performance period from January 1, 

2019, through June 30, 2019, CMS 

reconciles the ACO for the period from 

January 1, 2019, through June 30, 2019, 

after the conclusion of CY 2019, based 

on the 12-month calendar year and prorates shared savings or shared losses to 

reflect the ACO’s participation from 

January 1, 2019, through June 30, 2019. 

CMS does all of the following to 

determine financial and quality 

performance: 

* * * * * 

(2) Uses the ACO’s quality 

performance for the 2019 reporting 

period to determine the ACO’s quality 

performance score as specified in 

§ 425.502. 

(i) The ACO participant list finalized 

for the first performance year of the 

ACO’s agreement period beginning on 

July 1, 2019, is used to determine the 

quality reporting samples for the 2019 

reporting year for the following ACOs: 

(A) An ACO that extends its 

participation agreement for a 6-month 

performance year from January 1, 2019, 

through June 30, 2019, under 

§ 425.200(b)(2)(ii)(B), and enters a new 

agreement period beginning on July 1, 

2019. 

(B) An ACO that participates in the 

program for the first 6 months of a 12- 

month performance year during 2019 

and is eligible for pro-rated shared 

savings or liable for pro-rated shared 

losses in accordance with 

§ 425.221(b)(3)(i). 

(ii) The ACO’s latest certified ACO 

participant list is used to determine the 

quality reporting samples for the 2019 

reporting year for an ACO that extends 

its participation agreement for the 6- 

month performance year from January 1, 

2019, through June 30, 2019, under 

§ 425.200(b)(2)(ii)(B), and does not enter 

a new agreement period beginning on 

July 1, 2019. 

* * * * * 

(c) July 2019 through December 2019. 

For ACOs entering an agreement period 

beginning on July 1, 2019, the ACO’s 

first performance year is from July 1, 

2019, through December 31, 2019, as 

specified in § 425.200(c)(3). CMS 

reconciles the ACO for the period from 

July 1, 2019, through December 31, 

2019, after the conclusion of CY 2019, 

based on the 12-month calendar year 

and pro-rates shared savings or shared 

losses to reflect the ACO’s participation 

from July 1, 2019, through December 31, 

2019. CMS does all of the following to 

determine financial and quality 

performance: 

(1) Uses the ACO participant list in 

effect for the performance year 

beginning on July 1, 2019, to determine 

beneficiary assignment, using claims for 

the entire calendar year, consistent with 

the methodology the ACO selected at 

the start of its agreement period under 

§ 425.400(a)(4)(ii). 

(i) For ACOs under preliminary 

prospective assignment with 

retrospective reconciliation the 

assignment window is CY 2019. 

(ii) For ACOs under prospective 

assignment— 

(A) The assignment window is the 

same as the assignment window that 

applies under paragraph (b)(1)(ii)(A) of 

this section for ACOs under prospective 

assignment for the 6-month performance 

year from January 1, 2019, through June 

30, 2019; and 

(B) Beneficiaries remain prospectively 

assigned to the ACO at the end of CY 

2019 if they do not meet any of the 

exclusion criteria under § 425.401(b) 

during the calendar year. 

(2) Uses the ACO’s quality 

performance for the 2019 reporting 

period to determine the ACO’s quality 

performance score as specified in 

§ 425.502. The ACO participant list 

finalized for the first performance year 

of the ACO’s agreement period 

beginning on July 1, 2019, is used to 

determine the quality reporting samples 

for the 2019 reporting year for all ACOs. 

(3) Uses the methodology for 

calculating shared savings or shared 

loses applicable to the ACO for its first 

performance year under its agreement 

period beginning on July 1, 2019. 

(i) The ACO’s historical benchmark is 

determined according to § 425.601 

except as follows: 

(A) The benchmark is adjusted for 

changes in severity and case mix 

between BY3 and CY 2019 based on 

growth in prospective HCC risk scores, 

subject to a cap of positive 3 percent as 

described under § 425.605(a)(1) or 

§ 425.610(a)(2). 

(B) The benchmark is updated to CY 

2019 according to the methodology 

described under § 425.601(b). 

(ii) The ACO’s financial performance 

is determined based on the track the 

ACO is participating under during the 

performance year starting on July 1, 

2019 (§ 425.605 (BASIC track) or 

§ 425.610 (ENHANCED track)), unless 

otherwise specified. In determining 

ACO financial performance, CMS does 

all of the following: 

(A) Average per capita Medicare Parts 

A and B fee-for-service expenditures for 

CY 2019 are calculated for the ACO’s 

performance year assigned beneficiary 

population identified in paragraph (c)(1) 

of this section. 

(B) Expenditures calculated in 

paragraph (c)(3)(ii)(A) of this section are 

compared to the ACO’s updated 

benchmark determined according to 

paragraph (c)(3)(i) of this section. 

(C)(1) The ACO’s performance year 

assigned beneficiary population 

identified in paragraph (c)(1) of this 

section is used to determine the MSR for 

ACOs in BASIC track Level A or Level 

B, and the variable MSR/MLR for ACOs 

in a two-sided model that selected this 

option at the start of their agreement 

period. In the event a two-sided model 

ACO selected a fixed MSR/MLR at the 

start of its agreement period, and the 

ACO’s performance year assigned 

population identified in paragraph (c)(1) 

of this section is below 5,000 

beneficiaries, the MSR/MLR is 

determined based on the number of 


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assigned beneficiaries as specified in 

§ 425.110(b)(3)(iii). 

(2) To qualify for shared savings an 

ACO must do all of the following: 

(i) Have average per capita Medicare 

Parts A and B fee-for-service 

expenditures for its assigned beneficiary 

population for CY 2019 below its 

updated benchmark costs for the year by 

at least the MSR established for the ACO 

based on the track the ACO is 

participating under during the 

performance year starting on July 1, 

2019 (§ 425.605 or § 425.610) and 

paragraph (c)(3)(ii)(C)(1) of this section. 

(ii) Meet the minimum quality 

performance standards established 

under § 425.502 and according to 

paragraph (c)(2) of this section. 

(iii) Otherwise maintain its eligibility 

to participate in the Shared Savings 

Program under this part. 

(3) To be responsible for sharing 

losses with the Medicare program, an 

ACO’s average per capita Medicare Parts 

A and B fee-for-service expenditures for 

its assigned beneficiary population for 

CY 2019 must be above its updated 

benchmark costs for the year by at least 

the MLR established for the ACO based 

on the track the ACO is participating 

under during the performance year 

starting on July 1, 2019 (§ 425.605 or 

§ 425.610) and paragraph (c)(3)(ii)(C)(1) 

of this section. 

(D) For an ACO that meets all the 

requirements to receive a shared savings 

payment under paragraph (c)(3)(ii)(C)(2) 

of this section— 

(1) The final sharing rate, determined 

based on the track the ACO is 

participating under during the 

performance year starting on July 1, 

2019 (§ 425.605 or § 425.610), is applied 

to all savings under the updated 

benchmark specified under paragraph 

(c)(3)(i) of this section, not to exceed the 

performance payment limit for the ACO 

based on its track; and 

(2) After applying the applicable 

performance payment limit, CMS prorates any shared savings amount 

determined under paragraph 

(c)(3)(ii)(D)(1) of this section by 

multiplying the amount by one-half, 

which represents the fraction of the 

calendar year covered by the July 1, 

2019 through December 31, 2019 

performance year. 

(E) For an ACO responsible for shared 

losses under paragraph (c)(3)(ii)(C)(3) of 

this section— 

(1) The shared loss rate, determined 

based on the track the ACO is 

participating under during the 

performance year starting on July 1, 

2019 (§ 425.605 or § 425.610), is applied 

to all losses under the updated 

benchmark specified under paragraph 

(c)(3)(i) of this section, not to exceed the 

loss recoupment limit for the ACO 

based on its track; and 

(2) After applying the applicable loss 

recoupment limit, CMS pro-rates any 

shared losses amount determined under 

paragraph (c)(3)(ii)(E)(1) of this section 

by multiplying the amount by one-half, 

which represents the fraction of the 

calendar year covered by the July 1, 

2019 through December 31, 2019 

performance year. 

(d) * * * 

(1) In calculating the amount of 

shared losses owed, CMS makes 

adjustments to the amount determined 

in paragraph (b)(3)(ii)(E)(1) or 

(c)(3)(ii)(E)(1) of this section, as 

specified in § 425.605(f), § 425.606(i), or 

§ 425.610(i), as applicable; and 

* * * * * 

(e) Notification of savings and losses. 

(1) CMS notifies the ACO of shared 

savings or shared losses separately for 

the January 1, 2019 through June 30, 

2019 performance year (or performance 

period) and the July 1, 2019 through 

December 31, 2019 performance year, 

consistent with the notification 

requirements specified in §§ 425.604(f), 

425.605(e), 425.606(h), and 425.610(h), 

as applicable: 

(i) CMS notifies an ACO in writing 

regarding whether the ACO qualifies for 

a shared savings payment, and if so, the 

amount of the payment due. 

(ii) CMS provides written notification 

to an ACO of the amount of shared 

losses, if any, that it must repay to the 

program. 

(iii) If an ACO has shared losses, the 

ACO must make payment in full to CMS 

within 90 days of receipt of notification. 

(2) If an ACO is reconciled for both 

the January 1, 2019 through June 30, 

2019 performance year (or performance 

period) and the July 1, 2019 through 

December 31, 2019 performance year, 

CMS issues a separate notice of shared 

savings or shared losses for each 

performance year (or performance 

period), and if the ACO has shared 

savings for one performance year (or 

performance period) and shared losses 

for the other performance year (or 

performance period), CMS reduces the 

amount of shared savings by the amount 

of shared losses. 

(i) If any amount of shared savings 

remains after completely repaying the 

amount of shared losses owed, the ACO 

is eligible to receive payment for the 

remainder of the shared savings. 

(ii) If the amount of shared losses 

owed exceeds the amount of shared 

savings earned, the ACO is accountable 

for payment of the remaining balance of 

shared losses in full. 

■ 34. Section 425.610 is amended— 

■ a. By revising the section heading; 

■ b. In paragraph (a) introductory text 

by removing the phrase ‘‘under 

§ 425.602’’ and adding in its place the 

phrase ‘‘under § 425.601, § 425.602 or 

§ 425.603’’ and by removing the phrase 

‘‘Track 3’’ and adding in its place the 

phrase ‘‘the ENHANCED track’’; 

■ c. By revising paragraph (a)(1) through 

(3); 

■ d. In paragraph (b)(1)(iii) by removing 

the phrase ‘‘Track 3’’ each time it 

appears and adding in its place the 

phrase ‘‘the ENHANCED track’’ and by 

removing the phrase ‘‘§ 425.604(b)’’ and 

adding in its place the phrase ‘‘either 

§ 425.604(b) (for ACOs entering an 

agreement period on or before January 1, 

2019) or § 425.605(b)(1) (for ACOs 

entering an agreement period on July 1, 

2019, and in subsequent years)’’; 

■ e. In paragraphs (b)(2), (d), (e)(2) by 

removing the phrase ‘‘Track 3’’ and 

adding in its place the phrase ‘‘the 

ENHANCED track’’; 

■ f. In paragraph (g) by removing the 

phrase ‘‘under § 425.602’’ and adding in 

its place the phrase ‘‘under § 425.601, 

§ 425.602 or § 425.603’’; 

■ g. By adding paragraph (i)(2)(i), and 

reserved paragraph (i)(2)(ii); and 

■ h. By adding paragraph (k). 

The revisions and additions read as 

follows: 

§ 425.610 Calculation of shared savings 

and losses under the ENHANCED track. 

(a) * * * 

(1) Risk adjustment for ACOs in 

agreement periods beginning on or 

before January 1, 2019. CMS does the 

following to adjust the benchmark each 

performance year: 

(i) Newly assigned beneficiaries. CMS 

uses an ACO’s prospective HCC risk 

score to adjust the benchmark for 

changes in severity and case mix in this 

population. 

(ii) Continuously assigned 

beneficiaries. (A) CMS uses 

demographic factors to adjust the 

benchmark for changes in the 

continuously assigned beneficiary 

population. 

(B) If the prospective HCC risk score 

is lower in the performance year for this 

population, CMS adjusts the benchmark 

for changes in severity and case mix for 

this population using this lower 

prospective HCC risk score. 

(2) Risk adjustment for ACOs in 

agreement periods beginning on July 1, 

2019, and in subsequent years. CMS 

uses an ACO’s prospective HCC risk 

score to adjust the benchmark for 

changes in severity and case mix in the 

assigned beneficiary population 

between BY3 and the performance year. 


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(i) Positive adjustments in prospective 

HCC risk scores are subject to a cap of 

3 percent. 

(ii) This cap is the maximum increase 

in risk scores for each agreement period, 

such that any positive adjustment 

between BY3 and any performance year 

in the agreement period cannot be larger 

than 3 percent. 

(3) In risk adjusting the benchmark as 

described in §§ 425.601(a)(10), 

425.602(a)(9) and 425.603(c)(10), CMS 

makes separate adjustments 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. 

* * * * * 

(i) * * * 

(2) * * * 

(i) For an ACO that is liable for a prorated share of losses under 

§ 425.221(b)(2)(ii) or (b)(3)(i), the 

amount of shared losses determined for 

the performance year during which the 

termination becomes effective is 

adjusted according to this paragraph 

(i)(2). 

(ii) [Reserved] 

* * * * * 

(k) July 1, 2019 through December 31, 

2019 performance year. Shared savings 

or shared losses for the July 1, 2019 

through December 31, 2019 performance 

year are calculated as described in 

§ 425.609. 

■ 35. Section 425.612 is amended— 

■ a. By revising paragraphs (a)(1) 

introductory text and (a)(1)(ii)(A); 

■ b. By redesignating paragraphs 

(a)(1)(ii)(B) through (G) as paragraphs 

(a)(1)(ii)(C) through (H); 

■ c. By adding new paragraph 

(a)(1)(ii)(B); 

■ d. By revising paragraphs (a)(1)(iii)(A), 

(a)(1)(iv), and (a)(1)(v) introductory text; 

■ e. Redesignating paragraphs 

(a)(1)(v)(A) through (C) as paragraphs 

(a)(1)(v)(C) through (E); 

■ f. Adding new paragraphs (a)(1)(v)(A) 

and (B); 

■ g. Revising newly redesignated 

paragraph (a)(1)(v)(D); and 

■ h. By adding paragraphs (a)(1)(vi) and 

(f). 

The revisions and additions read as 

follows: 

§ 425.612 Waivers of payment rules or 

other Medicare requirements. 

(a) * * * 

(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. 

* * * * * 

(ii) * * * 

(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. 

* * * * * 

(iii) * * * 

(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. 

* * * * * 

(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 noncovered 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 


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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. 

* * * * * 

(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. 

* * * * * 

(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. 

* * * * * 

(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. 

■ 36. Section 425.613 is added to 

subpart G to read as follows: 

§ 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. 

■ 37. Section 425.702 is amended by 

revising paragraphs (c)(1)(ii)(A) 

introductory text, (c)(1)(ii)(B) 

introductory text and (c)(1)(ii)(C) to read 

as follows: 

§ 425.702 Aggregate reports. 

* * * * * 

(c) * * * 

(1) * * * 

(ii) * * * 

(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 


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68082 Federal Register / Vol. 83, No. 249 / Monday, December 31, 2018 / Rules and Regulations 

claims for primary care services used to 

determine the ACO’s assigned 

population under subpart E of this part: 

* * * * * 

(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: 

* * * * * 

(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. 

* * * * * 

■ 38. Section 425.704 is amended by 

revising paragraph (d)(1) to read as 

follows: 

§ 425.704 Beneficiary-identifiable claims 

data. 

* * * * * 

(d) * * * 

(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. 

* * * * * 

■ 39. Section 425.800 is amended— 

■ a. In paragraph (a)(4) by removing the 

phrase ‘‘under §§ 425.602, 425.604, 

425.606, and 425.610’’ and adding in its 

place the phrase ‘‘in accordance with 

section 1899(d) of the Act, as 

implemented under §§ 425.601, 

425.602, 425.603, 425.604, 425.605, 

425.606, and 425.610’’; 

■ b. In paragraph (a)(5) by removing the 

phrase ‘‘established under §§ 425.604, 

425.606, and 425.610’’ and adding in its 

place the phrase ‘‘established under 

§§ 425.604, 425.605, 425.606, and 

425.610’’; and 

■ c. By adding paragraph (a)(7). 

The addition reads as follows: 

§ 425.800 Preclusion of administrative and 

judicial review. 

(a) * * * 

(7) The termination of a beneficiary 

incentive program established under 

§ 425.304(c). 

* * * * * 

Dated: December 14, 2018. 

Seema Verma, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: December 18, 2018. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2018–27981 Filed 12–21–18; 8:45 am] 

BILLING CODE 4120–01–P 


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