41786 Federal Register / Vol. 83, No. 160 / Friday, August 17, 2018 / Proposed Rules 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 414 and 425 

[CMS–1701–P] 

RIN 0938–AT45 

Medicare Program; Medicare Shared 

Savings Program; Accountable Care 

Organizations—Pathways to Success 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Proposed rule. 

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 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 

in savings and are accountable for 

repaying shared losses). These proposed 

policies are designed to increase savings 

for the Trust Funds and mitigate losses, 

reduce gaming opportunities, and 

promote regulatory flexibility and freemarket principles. The proposed rule 

also would 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. 

DATES: To be assured consideration, 

comments must be received at one of 

the addresses provided below, no later 

than 5 p.m. on October 16, 2018. 

ADDRESSES: In commenting, please refer 

to file code CMS–1701–P. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

Comments, including mass comment 

submissions, must be submitted in one 

of the following three ways (please 

choose only one of the ways listed): 

1. Electronically. You may submit 

electronic comments on this regulation 

to https://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1701–P, P.O. Box 8013, Baltimore, 

MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1701–P, Mail 

Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth November, (410) 786–8084 or 

via email at aco@cms.hhs.gov. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following 

website as soon as possible after they 

have been received: https://

www.regulations.gov. Follow the search 

instructions on that website to view 

public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

I. Executive Summary and Background 

A. Executive Summary 

1. Purpose 

Currently, 561 ACOs participate in 

the Medicare Shared Savings Program 

(Shared Savings Program). CMS 

continues 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 proposed 

rule would make 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 proposed 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). If these changes are finalized, 

we will continue to monitor the 

program’s ability to reduce healthcare 

spending and improve care quality to 

inform future program developments, 

including whether the program provides 

beneficiaries with the value and choice 

demonstrated by other Medicare options 

such as Medicare Advantage (MA). We 

also propose changes to address the new 

requirements of the Bipartisan Budget 

Act of 2018 (Pub. L. 115–123) (herein 

referred to as the Bipartisan Budget 

Act). 

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’s 

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 are 

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/shared

savingsprogram/ for information about 

the program, the program’s statutory 

authority, regulations and guidance, the 


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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. 

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 

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, a time-limited 

model, 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 benefit from 

waivers of certain federal requirements 

in connection with their participation in 

the Shared Savings Program. Even more 

concerning is the finding that one-sided 

model ACOs, which are not accountable 

for sharing in losses, have actually 

increased Medicare spending relative to 

their benchmarks. Further, the presence 

of an ‘‘upside-only’’ 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. 

We believe 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 are proposing 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 twosided 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. 

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. 

We believe 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 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. 

We believe it is necessary to carefully 

consider each of these factors to create, 

on balance, sufficient incentives for 

participation in a voluntary program, 


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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 

believe it is necessary 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. The 

goal of the proposed program redesign 

is 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 

would allow ACOs to gain experience 

with more modest levels of 

performance-based risk on their way to 

accepting greater levels of performancebased risk over time (as the proposed 

BASIC track’s maximum level of risk is 

the same as the Track 1+ Model, which 

is substantially less than the proposed 

ENHANCED track). As stakeholders 

have suggested, we would provide 

flexibility to allow ACOs that are ready 

to accelerate their move to higher risk 

within agreement periods, and enable 

such ACOs to qualify as Advanced APM 

entities for purposes of the Quality 

Payment Program. We would streamline 

the program and simplify the 

participation options by retiring Track 1 

and Track 2. We would 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 

would 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 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. 

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 aim 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 are 

proposing 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 would 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 

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. 

Currently, the regional adjustment 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 would reduce 

the maximum weight used in 

calculating the regional adjustment, and 

cap the adjustment amount for all 


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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 would also seek 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 

continue to express concerns that the 

current 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 would 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 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 recent 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 would 

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 

would 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 would also 

allow broader access to the program’s 

existing SNF 3-day rule waiver for 

ACOs under performance-based risk. 

Other timely modifications to the 

program’s regulations addressed in this 

proposed rule, include changes to the 

program’s claims-based assignment 

methodology and the process for 

allowing beneficiaries to voluntarily 

align to ACOs in which the physician or 

other practitioner they have designated 

as their primary clinician is an ACO 

professional, and extending the 

program’s recently finalized policy for 

addressing extreme and uncontrollable 

circumstances to performance year 2018 

and all subsequent performance years. 

Further, feedback from the public 

sought in this rule would inform 

development of the program’s quality 

measure set to support CMS’s 

Meaningful Measures initiative for 

reducing provider reporting burden and 

promoting positive outcomes, and help 

to identify ways to improve existing 

data sharing and the quality measure set 

to address the nation’s opioid 

emergency. Changes to the program’s 

requirements regarding the use of 

certified electronic health record 

technology would help ensure Shared 

Savings Program ACOs are held 

accountable for using technology that 

promotes more effective population 

management and sharing of data among 

providers, and will ultimately lead to 

value-based and better care for patients. 

Lastly, through this proposed rule we 

seek comment on how Medicare ACOs 

and the sponsors of stand-alone Part D 

prescription drug plans (PDPs) could be 

encouraged to collaborate so as to 

improve the coordination of pharmacy 

care for Medicare FFS beneficiaries. 

2. Summary of the Major Provisions 

This proposed rule would restructure 

the participation options for ACOs 

applying to participate in the program 

in 2019 by discontinuing Track 1 (onesided shared savings-only model), and 

Track 2 (two-sided shared savings and 

shared losses model) while maintaining 

Track 3 (renamed the ENHANCED track) 

and offering a new BASIC track. Under 

the proposed approach, the program’s 

two tracks would be: (i) A BASIC track, 

offering a path from a one-sided model 

for eligible ACOs to progressively higher 

increments of risk and potential reward 

within a single agreement period, and 

(ii) 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. This 

approach includes proposals for 

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. 

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 propose to 

offer a July 1, 2019 start date for the first 

agreement period under the proposed 

new participation options. This midyear 

start in 2019 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. We would forgo 

the application cycle in 2018 for an 

agreement start date of January 1, 2019. 

ACOs entering a new agreement period 

on July 1, 2019, would have the 

opportunity to participate in the 

program under agreement periods 

spanning 5 years and 6 months, with a 

6-month first performance year. 

Additionally, we would offer ACOs 

with a participation agreement ending 

on December 31, 2018 an opportunity to 

extend their current agreement period 

for an additional 6-month performance 

year (January 1, 2019–June 30, 2019). 

These ACOs would then have the 

opportunity to apply for a new 

agreement under the BASIC track or 

ENHANCED track beginning on July 1, 

2019. 

We propose modifications to the 

repayment mechanism arrangement 

requirements applicable to ACOs in 

performance-based risk tracks, 

including changes to update these 

policies to address new participation 

options under the BASIC track and, in 

certain circumstances, allow a renewing 


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ACO to extend the use of its current 

repayment mechanism into the next 

agreement period, which would reduce 

the financial burden of maintaining two 

concurrent repayment mechanisms. 

Repayment mechanism arrangements 

provide CMS assurance that an ACO can 

repay losses for which it may be liable. 

The proposed changes include: (1) 

Adding a provision that could lower the 

required repayment mechanism amount 

for BASIC track ACOs in Levels C, D, or 

E; (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) 

codifying the required duration of 

repayment mechanism arrangements; (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 it is 

sufficient 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 proposed rule would establish 

regulations in accordance with the 

Bipartisan Budget Act on the use of 

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 would allow for payment for 

telehealth services furnished to 

prospectively assigned beneficiaries 

receiving telehealth services in nonrural areas, and allow beneficiaries to 

receive certain telehealth services at 

their home, to support care coordination 

across settings. The proposed rule 

would also provide 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 would be prohibited, under 

certain circumstances, from charging 

beneficiaries for telehealth services, 

where CMS does not pay for those 

telehealth services under section 1899(l) 

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 propose 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 propose to amend 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 propose policies to expand the 

role of choice and incentives in 

engaging beneficiaries in their health 

care. First, we propose to establish 

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 would 

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 would 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, we 

propose modifications to the program’s 

existing policies on voluntary alignment 

in order to comply with the Bipartisan 

Budget Act, by allowing beneficiaries to 

designate a broader range of ACO 

professionals as their ‘‘primary 

clinician’’ responsible for coordinating 

their overall care, and providing that we 

will continue to use a beneficiary’s 

designation to align the beneficiary to 

the ACO in which their primary 

clinician participates even if the 

beneficiary does not continue to receive 

primary care services from an ACO 

professional in that ACO. We also seek 

comment on an alternative beneficiary 

assignment methodology to make the 

assignment methodology more patientcentered, and strengthen the 

engagement of beneficiaries in their 

health care. Under such an approach, a 

beneficiary would be assigned to an 

ACO if the beneficiary ‘‘opted-in’’ to the 

ACO. These selections would be 

supplemented by voluntary alignment 

and a modified claims-based assignment 

methodology. Third, to empower 

beneficiary choice and further program 

transparency, we are proposing to revise 

policies related to beneficiary 

notifications. Specifically, we propose 

that ACO participants be required to 

include information on voluntary 

alignment in the written notifications 

they must provide to beneficiaries. ACO 

participants would be required to 

provide such notifications during each 

beneficiary’s first primary care visit of 

each performance year, in addition to 

having such information posted in the 

ACO participant’s facility and available 

upon request (as currently required). 

We propose new policies for 

determining 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 propose to revise 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 propose 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 

participants’ experience with the 

program. We would 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. Under this proposal, we would 

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 that 

currently apply to particular 

performance years of a 3-year agreement 

period, to ensure applicability to ACOs 

with an agreement period that is not less 

than 5 years. We also seek to strengthen 

the program’s requirements for 

monitoring ACOs within an agreement 

period for poor financial performance 

and to ensure that ACOs with poor 

financial performance are not allowed to 

continue their participation in the 

program, or to re-enter the program after 

being terminated, without addressing 

the deficiencies that resulted in 

termination. 

We propose to update program 

policies related to termination of ACOs’ 

participation in the program. We 

propose to reduce the amount of notice 

an ACO must provide CMS of its 

decision to voluntarily terminate. We 

also address the timing of an ACO’s reentry into the program after termination. 


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Specifically, we seek to modify 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 participation agreement 

and immediately enter a new agreement 

period of not less than 5 years under 

one of the redesigned participation 

options proposed in this rule. We also 

propose policies that would 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 onesided model in a future agreement 

period under the BASIC track. 

Specifically, we propose to restrict 

eligibility for the BASIC track’s glide 

path to ACOs inexperienced with 

performance-based risk Medicare ACO 

initiatives, which we propose to define 

to include all levels of the BASIC track’s 

glide path. We also propose to 

differentiate between initial entrants 

(ACOs entering the program for the first 

time), ‘‘re-entering ACOs’’ (ACOs reentering 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 would impose payment 

consequences for early termination by 

proposing to hold ACOs in two-sided 

models liable for pro-rated shared 

losses. This approach would 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 would 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, although we would 

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. In these cases, we would 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 

propose 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 effects of excessive 

positive or negative regional adjustment 

used to establish and reset the 

benchmark by— 

++ Reducing the maximum weight 

used in calculating the regional 

adjustment from 70 percent to 50 

percent (within the existing phase-in 

schedule for applying increased weights 

in calculating the regional adjustment); 

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 and downward effects of 

these adjustments to positive or negative 

3 percent over the new agreement 

period. 

This rule also includes proposals for 

updating the program’s policies in a 

variety of subject areas. We propose to 

expand the definition of primary care 

services used in beneficiary assignment 

to add new codes and revise how we 

determine whether evaluation and 

management services were furnished in 

a SNF. We also propose to extend the 

policies to address quality performance 

scoring and determination of shared 

losses owed by ACOs participating 

under performance-based risk in the 

event of extreme or uncontrollable 

circumstances that were adopted for 

performance year 2017 to apply for 

performance year 2018 and subsequent 

years. We also discuss the potential 

effects of extreme and uncontrollable 

circumstances on benchmark year 

expenditures and the determination of 

the historical benchmark and seek 

comment on this issue. 

We seek comment on approaches to 

developing the program’s quality 

measure set in response to the agency’s 

Meaningful Measures initiative as well 

as to support ACOs and their 

participating providers/suppliers in 

addressing opioid utilization within the 

FFS population. We describe existing 

sources of program data that may be 

useful for ACOs to monitor trends in 

opioid utilization, and solicit comment 

on suggestions for providing additional 

aggregate data to ACOs. We also seek 

comment on quality measures that 

could be used to assess factors related 

to opioid utilization, including patient 

reported outcome measures. 

We propose to establish a new 

program requirement related to the 

adoption of Certified Electronic Health 

Record Technology (CEHRT) by eligible 

clinicians participating in the ACO. 

Specifically, we propose to require 

ACOs to certify, upon application to the 

program and annually thereafter, that 

the percentage of eligible clinicians 

participating in the ACO who use 

CEHRT to document and communicate 

clinical care to their patients or other 

health care providers meets or exceeds 

a specified threshold. For ACOs that are 

participating in a track (or payment 

model within a track) that meets the 

financial risk standard to be an 

Advanced APM, we further propose to 

align this requirement with the CEHRT 

use requirement for Advanced APMs 

under the Quality Payment Program. In 

conjunction with this proposal, we 

propose to discontinue the use of the 

double-weighted quality measure 

assessing the percentage of eligible 

clinicians that successfully meet the 

Promoting Interoperability Performance 

Category Base Score (Use of CEHRT, 

ACO–11) in order to reduce burden and 

align with the requirements of the 

Quality Payment Program. We also 

propose conforming revisions to the 

CEHRT requirement for Shared Savings 


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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). 

Program ACOs in the Quality Payment 

Program’s regulations under 42 CFR part 

414. 

Lastly, we seek 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 seek 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. 

3. Summary of Costs and Benefits 

As detailed in section IV of this 

proposed rule, the proposed 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 proposed 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 

saving payments to ACOs are projected 

to result in $2.24 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 calendar year (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 mandating that any such 

voluntary identification will supersede 

claims-based assignment, and allowing 

ACOs under certain two-sided models 


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to establish CMS-approved beneficiary 

incentive programs. 

II. Provisions of the Proposed 

Regulations 

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 payment under 

the original Medicare FFS program 

under Parts A and B in the same manner 

as they 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 also must 

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 our belief that 

this approach would have the advantage 

of providing an entry point for 

organizations with less experience with 

risk models, such as some physiciandriven 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 and 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 our belief that a onesided 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 

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, with some commenters suggesting 

that small, rural and physician-only 


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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.’’). 

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 our belief 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 our belief 

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 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 of this proposed 

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. 

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 


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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 

proposed 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.) 

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). 

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 believe 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. 

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, we believe a 

combination of factors affect ACOs’ 

transition to performance-based risk.5

These factors include: 

(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 proposed 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 

proposed 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 proposed 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 proposed 

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 proposed 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 

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 


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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=commentDueDate&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). 

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 

our belief that implementing 

prospective assignment only in a twosided model track may encourage Track 

1 ACOs that prefer this assignment 

methodology, and the other features of 

Track 3, to more quickly transition to 

performance-based 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 

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 


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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-SharedSavin/Performance-Year-2018-Medicare-SharedSavings-Prog/28n4-k8qs/data. 

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 our 

belief 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 1 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/ 

sharedsavingsprogram/Downloads/SSP2018-Fast-Facts.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. 

TABLE 1—ACOS BY TRACK AND NUMBER OF ASSIGNED BENEFICIARIES FOR PERFORMANCE YEAR 2018 

Track Number of 

ACOs 

Number of 

assigned 

beneficiaries 

Track 1 ..................................................................................................................................................................... 460 8,147,234 

Track 1+ Model ........................................................................................................................................................ 55 1,212,417 

Track 2 ..................................................................................................................................................................... 8 122,995 

Track 3 ..................................................................................................................................................................... 38 993,533 

Total .................................................................................................................................................................. 561 10,476,179 

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. Proposals for Modified Participation 

Options Under 5-Year Agreement 

Periods 

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 1). 

As discussed in detail in the 

Regulatory Impact Analysis (see section 

IV. of this proposed rule), our 

experience with the program indicates 


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that ACOs in two-sided models 

generally perform better than ACOs that 

participate under a one-sided 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 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 performance-based 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. We believe 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 

Regulatory Impact Analysis (see section 

IV. of this proposed rule), 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 believe 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 

conclude 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 

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 

proposed rule) for both tracks. We 

believe 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 


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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 note 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)). Further, 

as discussed in section II.D of this 

proposed rule, we believe 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 will 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 propose 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 propose 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 proposed 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 one-sided model to 

incrementally higher performance-based 

risk as described in section II.A.3 of this 

proposed rule. (Herein, we refer to this 

participation option for eligible ACOs 

entering the BASIC track as the BASIC 

track’s glide path, or simply the glide 

path.) 

We propose 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, we 

believe 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 (as discussed in section II.A.7 of 

this proposed rule) 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 propose to modify the regulations at 

§§ 425.600 and 425.610 to designate 

Track 3 as the ENHANCED track. We 

propose that all references to the 

ENHANCED track in the program’s 

regulations would be deemed to include 

Track 3. Within the preamble of this 

proposed rule, we intend references to 

the ENHANCED track to apply to Track 

3 ACOs, unless otherwise noted. 

As part of the redesign of the 

program’s participation options, we 

believe it is timely to provide the 

program’s tracks with more descriptive 

and meaningful names. We believe 

‘‘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 

financial model design 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 propose that for agreement 

periods beginning on July 1, 2019, the 

length of the agreement would be 5 

years and 6 months (as discussed in 

section II.A.7 of this proposed rule). For 

agreement periods beginning on January 

1, 2020, and in subsequent years, the 

length of the agreement would be 5 

years. 

Currently, under § 425.20, we define 

‘‘agreement period’’ to mean the term of 

the participation agreement, which is 3 

performance years unless otherwise 

specified in the participation agreement. 

We propose to revise this definition to 

more broadly mean the term of the 

participation agreement. Additionally, 

we propose to specify the term of 

participation agreements beginning on 

July 1, 2019 and in subsequent years in 


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revisions to § 425.200, which currently 

specifies the term of the participation 

agreement for each agreement start date 

since the beginning of the program. For 

consistency, we propose to revise 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. 

We also propose 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. In section II.A.5.c of 

this proposed rule, we discuss 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. 

For ACOs entering agreement periods 

beginning on July 1, 2019, and in 

subsequent years, we propose 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 proposed rule. 

For ACOs entering agreement periods 

beginning on July 1, 2019, and in 

subsequent years, we propose 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 discussion in 

section II.A.4.b. 

We propose to discontinue Track 1 as 

a participation option for the reasons 

described elsewhere in this section. We 

propose to amend § 425.600 to limit 

availability of Track 1 to agreement 

periods beginning before July 1, 2019. 

We propose to discontinue Track 2 as 

a participation option. We propose 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) 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 believe 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 1 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 proposed 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 propose to discontinue the policy 

that allows Track 1 ACOs in their first 

agreement period to defer renewal for a 

second agreement period in a two-sided 

model by 1 year, to remain in their 

current agreement period for a fourth 

performance year, and to also defer 

benchmark rebasing. We propose 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 and 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 propose 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 

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 believe 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 proposed rule, we are 

proposing to discontinue the ‘‘sit-out’’ 

period under § 425.222(a), which is 

cross-referenced 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 


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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. 

Modifying the participation options in 

the Shared Savings Program to offer a 

new performance-based risk track 

requires the use of our authority under 

section 1899(i)(3) of the Act. 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 two-sided models in the 

Shared Savings Program (see 76 FR 

67904 and 80 FR 32771), we believe that 

the BASIC track would provide an 

additional opportunity for organizations 

to enter a risk-sharing arrangement and 

accept greater responsibility for 

beneficiary care. 

This proposed restructuring of 

participation options, more generally, 

would help ACOs transition to 

performance-based risk more quickly 

than under the program’s current 

design. This proposed rule would 

eliminate Track 1 (under which a onesided 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. As described in 

section II.A.5.c. of this proposed rule, 

we propose that 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, 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). As described in section II.A.7. of 

this proposed rule, we propose a onetime 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 proposed 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 matches 

the lesser of either the revenue-based or 

benchmark-based loss sharing limit 

under the Track 1+ Model. 

Further, we believe a significant 

incentive for ACOs to transition more 

quickly to the highest level of risk and 

reward under the BASIC track is 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. 

As noted in the Regulatory Impact 

Analysis (section IV. of this proposed 

rule), 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, we do not believe that 

adding the BASIC track as a 

participation option under the Shared 

Savings Program would result in an 

increase in spending beyond the 

expenditures that would otherwise 

occur under the statutory payment 

methodology in section 1899(d) (as 

discussed in the Regulatory Impact 

Analysis in section IV. of this proposed 

rule). Further, we believe 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. 

This proposed rule includes 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 

discussed in the Regulatory Impact 

Analysis (see section IV. of this 

proposed rule). As described in the 

Regulatory Impact Analysis, the 

elimination of Track 2 as an on-going 

participation option, the addition of the 

BASIC track, the benchmarking changes 

described in section II.D. of this 

proposed rule, and the proposal in 

section II.A.7. of this proposed rule 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 calendar year 2019 and then prorating these amounts to reflect the 

shorter performance year, require the 

use of our authority under section 

1899(i) of the Act. These proposed 

changes to our payment methodology 

are not 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 will 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. 

3. Creating a BASIC Track With Glide 

Path to Performance-Based Risk 

a. Overview 

We propose that the BASIC track 

would be available as a participation 

option for agreement periods beginning 

on July 1, 2019 and in subsequent years. 


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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. and, as needed, 

throughout this preamble. 

In general, unless otherwise stated, 

we are proposing 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 proposed rule, we propose to 

specify in a new section of the 

regulations at § 425.601). Further, we 

propose 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 propose 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 propose 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 proposed rule, we are proposing 

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 proposed rule, we propose 

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 proposed rule, 

BASIC track ACOs under two-sided risk 

(Levels C, D, or E) would be allowed to 

apply for and, if approved, establish a 

CMS-approved beneficiary incentive 

program to provide incentive payments 

to eligible beneficiaries for qualifying 

services. 

We propose 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 proposed 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 proposed 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 performance-based 

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 this 

proposed rule, we are proposing 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 2018 and 

subsequent years. We propose 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 propose that 

the policies regarding the calculation of 

shared losses for ACOs under a twosided 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. We also 

propose to specify that policies to adjust 

shared losses for extreme and 

uncontrollable circumstances would 

also apply to BASIC track ACOs that are 

reconciled for a 6-month performance 

year under § 425.609 or a partial year of 

performance under § 425.221(b)(2) as a 

result of early termination as described 

in section II.E.4 and II.A.6.d of this 

proposed rule. 

b. Proposals for 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 

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 


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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 the ACO’s 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 for more 

detail. 

Since the start of the Shared Savings 

Program, we have heard a variety of 

concerns and suggestions from ACOs 

and other program stakeholders about 

the transition from a one-sided model to 

performance-based risk (see discussion 

in section II.A.1.). 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. We believe that 

our early experience with the design of 

the Track 1+ Model demonstrates that 

the availability of a lower-risk, twosided 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 propose the following 

participation options within the BASIC 

track. 

First, we propose 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 


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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 

beginning 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 (discussed in section 

II.A.7. of this proposed rule). 

We propose 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 

proposed 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 propose 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 propose 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 proposed 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 propose 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, see section 

II.A.7.). ACOs in the BASIC track’s glide 

path 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, 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 proposed rule). 

We believe 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. We believe the opportunity 

for eligible ACOs to participate in a onesided 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 believe the glide path should 

provide strong incentives for ACOs to 

quickly move along the progression 

towards higher performance-based risk, 

and therefore prefer 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 are proposing 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 propose 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+ 

Model, as discussed in more detail 

elsewhere in this section. In all years 

under performance-based risk, we 

propose 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, the 

phase-in schedule of levels of risk/ 

reward by year would be as follows, and 

are summarized in comparison to the 

ENHANCED track in Table 2. This 

progression assumes an ACO enters the 

BASIC track’s glide path under a onesided 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 

proposed 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 the 

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 


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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 

proposed 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 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 2 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. We believe 

this 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 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 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 furnishing 

telehealth services in accordance with 

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

waiver (as discussed in section II.B of 

this proposed rule), and the opportunity 

to implement a CMS-approved 

beneficiary incentive program (as 

discussed in section II.C of this 

proposed rule). 

We propose 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, 

BASIC track ACOs in the glide path 

would also be permitted to elect to 

advance more quickly to higher levels of 


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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/reward or 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 proposed rule). We 

propose 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 

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. 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 proposed 

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 6 and 7 

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. 

TABLE 2—COMPARISON OF RISK AND REWARD UNDER BASIC TRACK AND ENHANCED TRACK

BASIC Track’s Glide Path 

ENHANCED track 

Level A & Level B (current track 3) 

(one-sided model) 

Level C 

(risk/reward) 

Level D 

(risk/reward) 

Level E 

(risk/reward) 

Shared Savings (once 

MSR met or exceeded).

1st dollar savings at 

a rate of up to 25% 

based on quality 

performance; not to 

exceed 10% of updated benchmark.

1st dollar savings at 

a rate of up to 30% 

based on quality 

performance, not to 

exceed 10% of updated benchmark.

1st dollar savings at 

a rate of up to 40% 

based on quality 

performance, not to 

exceed 10% of updated benchmark.

1st dollar savings at a rate of up to 50% 

based on quality performance, not to exceed 10% of updated benchmark.

No change. 1st dollar 

savings at a rate of 

up to 75% based 

on quality performance, not to exceed 20% of updated benchmark. 

Shared Losses (once 

MLR met or exceeded).

N/A ........................... 1st dollar losses at a 

rate of 30%, not to 

exceed 2% of ACO 

participant revenue 

capped at 1% of 

updated benchmark.

1st dollar losses at a 

rate of 30%, not to 

exceed 4% of ACO 

participant revenue 

capped at 2% of 

updated benchmark.

1st dollar losses at a rate of 30%, not to 

exceed the percentage of revenue specified in the revenue-based nominal 

amount standard under the Quality Payment Program (for example, 8% of ACO 

participant revenue in 2019–2020), 

capped 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).

No change. 1st dollar 

losses at a rate of 

1 minus final sharing rate (between 

40%–75%), not to 

exceed 15% of updated benchmark. 

Annual choice of beneficiary assignment 

methodology? (see 

section II.A.4.c).

Yes ........................... Yes ........................... Yes ........................... Yes .............................................................. Yes. 

Annual election to enter 

higher risk? (see 

section II.A.4.b).

Yes ........................... Yes ........................... No; ACO will automatically transition 

to Level E at the 

start of the next 

performance year.

No; maximum level of risk/reward under 

the BASIC track.

No; highest level of 

risk under Shared 

Savings Program. 

Advanced APM status 

under the Quality 

Payment Program? 1 2.

No ............................. No ............................. No ............................. Yes .............................................................. Yes. 

Notes: 1To be an Advanced APM, an APM must meet the following three criteria: 1. CEHRT criterion: Requires participants to use certified electronic health record 

technology (CEHRT); 2. Quality Measures criterion: Provides payment for covered professional services based on quality measures comparable to those used in the 

quality performance category of the Merit-based Incentive Payment System (MIPS); and 3. Financial Risk criterion: Either (1) be a Medical Home Model expanded 

under CMS Innovation Center authority; or (2) require participating APM Entities to bear more than a nominal amount of financial risk for monetary losses. See, for 

example Alternative Payment Models in the Quality Payment Program as of February 2018, available at https://www.cms.gov/Medicare/Quality-Payment-Program/Resource-Library/Comprehensive-List-of-APMs.pdf. 2As proposed, BASIC track Levels A, B, C and D would not meet the Financial Risk criterion and therefore would not be Advanced APMs. BASIC track Level E 

and the ENHANCED track would meet all three Advanced APM criteria and thus would qualify as Advanced APMs. These preliminary assessments reflect the policies discussed in this proposed rule. CMS will make a final determination based on the policies adopted in the final rule. 


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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). 

We propose to codify these policies in 

a new section of the Shared Savings 

Program regulations governing the 

BASIC track, at § 425.605. We seek 

comment on these proposals. 

(3) Calculation of Loss Sharing Limit 

As we described earlier in this 

section, under the Track 1+ Model, 

either a revenue-based or a benchmarkbased loss sharing limit is applied based 

on the Track 1+ Model ACO’s selfreported composition of ACO 

participants as identified by TINs and 

CCNs, and the ownership of and 

operational interests in those ACO 

participants. We have 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. 

Based on CMS’s 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). 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 proposed 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 recognize 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 believe these 

observations from the Track 1+ Model 

support 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 this proposed 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 are proposing 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 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. 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. 


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We also believe 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, we believe 

that 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 claims-based 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 revenuebased loss sharing limit. 

To illustrate, Table 3 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). 

TABLE 3—DETERMINATION OF LOSS SHARING LIMIT BY SELF-REPORTED COMPOSITION VERSUS CLAIMS-BASED

APPROACH FOR TRACK 1+ MODEL APPLICANTS

Approach to determining loss liability 

Revenuebased loss 

sharing limit 

(%) 

Benchmarkbased loss 

sharing limit 

(%) 

Use of applicants’ self-reported composition (Track 1+ Model approach) ............................................................. 34 66 

Use of claims: percentage of ACO participant revenue compared to percentage of ACO benchmark ................. 38 62 

We believe that 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 selfreported 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’s 

concerns about the complexity of 

auditing the information reported by 

ACOs. 

We are proposing to establish the 

revenue-based 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 as described in section 

II.A.3.b.2 of this proposed rule. 

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 seek 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 propose 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 

APM incentive payment when the ACO 

is participating under Level E. For 

example, for performance years 2019 

and 2020, this would be 8 percent. 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 


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these revenue calculations at the ACO 

participant level. 

We propose 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 

proposed 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 4 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, 

for an ACO participating in BASIC track 

Level E 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. 

TABLE 4—HYPOTHETICAL EXAMPLE OF LOSS SHARING LIMIT AMOUNTS FOR ACO IN BASIC TRACK LEVEL E 

[A] ACO’s Total updated benchmark expenditures 

[B] ACO 

Participants’ total 

medicare parts A 

and B FFS revenue 

[C] 8 percent of 

ACO Participants’ 

total medicare 

parts A and B FFS 

revenue ([B] x .08) 

[D] 4 percent of 

ACO’s 

updated benchmark 

expenditures 

([A] x .04) 

$93,411,313 ................................................................................. $13,630,983 $1,090,479 $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/ 

sharedsavingsprogram/programguidance-and-specifications.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 revenuebased loss sharing limit, we believe it is 

important to 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 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 


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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 propose to codify these policies in 

a new section of the Shared Savings 

Program regulations governing the 

BASIC track, at § 425.605. We seek 

comment on these proposals. 

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 proposed rule. In 

this section, we propose 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. Proposals for Permitting Election of 

Differing Levels of Risk Within the 

BASIC Track’s Glide Path 

We are proposing to incorporate 

additional flexibility in participation 

options by allowing ACOs 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. We believe 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.) 

In developing this proposal, 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 to use 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 CMSapproved beneficiary incentive program 

(described in sections II.B and II.C of 

this proposed 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 believe it would be protective of 

the Trust Funds to restrict ACOs from 

moving from the BASIC track to the 

ENHANCED track within their 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 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 proposed 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 

(such as the ENHANCED track). 

We propose to add a new section of 

the Shared Savings Program regulations 

at § 425.226 to govern annual 

participation elections. Specifically, we 

propose 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 propose 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 propose 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 propose 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 for a detailed 

discussion of these requirements.) We 

propose 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 envision 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 

propose 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 

July 1, 2019 could elect to enter a higher 

level of risk/reward within the BASIC 


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track in advance of the performance 

year beginning 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 

does 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. 

c. Proposals for Permitting Annual 

Election of Beneficiary Assignment 

Methodology 

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

amended by section 50331 of the 

Bipartisan Budget Act of 2018, 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) 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 this 

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 

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 II.E.2 of this proposed 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 this proposed rule, we are 

proposing to implement this provision 

of the Bipartisan Budget Act to provide 

all ACOs with a choice of prospective 

assignment for agreement periods 

beginning July 1, 2019 and in 

subsequent years. We are also proposing 

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 


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additional flexibility to change 

beneficiary assignment methodologies 

more frequently during an agreement 

period. As summarized in section II.A.1 

of this proposed 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 are proposing 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. We believe we 

are able to begin offering all Shared 

Savings Program ACOs the opportunity 

to select their assignment methodology 

annually, starting with agreement 

periods beginning July 1, 2019, while 

meeting the requirements of the 

Bipartisan Budget Act. 

As an approach to meeting the 

requirements of the Bipartisan Budget 

Act while building on them to offer 

greater flexibility, we propose to 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 also 

propose to provide an opportunity for 

ACOs to switch their selection of 

beneficiary assignment methodology on 

an annual basis. 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, we believe 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 

proposed rule, we are proposing to 

discontinue Track 2. Finally, we believe 

it is appropriate and reasonable to start 

offering the choice of beneficiary 

assignment to ACOs in the BASIC track 

or ENHANCED track for agreement 

periods beginning July 1, 2019, in order 

to align with the availability of these 

two tracks under the proposed redesign 

of the Shared Savings Program. 

We propose 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 reenter 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 propose 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 July 1, 

2019, this methodology would apply in 

the ACO’s first performance year (6- 

month performance year from July 

2019–December 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 propose 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 proposed rule. We 

propose 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 propose 

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 propose to make 

conforming changes to regulations that 

currently identify assignment 

methodologies according to program 

track. Specifically, we propose to revise 

§§ 425.400 and 425.401 (assignment of 

beneficiaries), § 425.702 (aggregate 

reports) and § 425.704 (beneficiaryidentifiable 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 wish to clarify 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 


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agreement period, we also propose 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 is 

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). We continue to believe 

it is important to maintain symmetry 

between the benchmark and 

performance year calculations, and 

therefore believe it is 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 propose to 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 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 seek comment on these proposals. 

5. Determining Participation Options 

Based on Medicare FFS Revenue and 

Prior Participation 

a. Overview 

In this section, we describe 

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 

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 aim 

to strengthen the following 

programmatic areas by further policy 

development. 

First, we believe that 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 

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 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 aim 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 before transitioning 

to the ENHANCED track. 

Second, we believe that 

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 performance-based risk. 

Third, we believe it is 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 aim to provide a more 

consistent evaluation of these ACOs’ 

prior performance in the Shared Savings 

Program at the time of re-application. 

We also aim 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, reentering ACOs, and new program 

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Fourth, and lastly, we believe it is 

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 this section, we propose 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; (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; and (3) 

consideration of 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. 

(1) Identifying Low Revenue ACOs and 

High Revenue ACOs 

To define low revenue ACOs and high 

revenue ACOs for purposes of 

determining ACO participation options, 

we believe it is important to consider 

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 

performance-based risk. Elsewhere in 

this proposed rule, we explain 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 

(section IV. of this proposed rule), we 

describe an approach for differentiating 

low revenue 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 section IV, 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 

and high revenue ACOs. 

However, we are concerned 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 proposed 

design of the BASIC track. We believe 

it is 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 

this proposed rule) and the estimated 

repayment mechanism values for BASIC 

track ACOs (see section II.A.6.c of this 

proposed rule), include 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 propose 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 high revenue, while 

ACOs with a percentage less than the 

threshold amount would be considered 

low revenue. In determining the 

appropriate threshold, we considered 

our claims-based analysis comparing 

estimated revenue and benchmark 

values for Track 1+ Model applicants, as 

described in section II.A.3. of this 

proposed rule. We believe 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 highrevenue determinations made using the 

25 percent threshold were in agreement 


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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 believe 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 lowrevenue 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 believe these observations are 

generalizable and suggest 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 propose to use a 25 

percent threshold to determine low 

revenue 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 propose to add new 

definitions at § 425.20 for ‘‘low revenue 

ACO,’’ and ‘‘high revenue ACO.’’ 

We propose 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 propose 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 are 

concerned a lower threshold could 

categorize ACOs with more moderate 

revenue as high revenue, for example 

because of the presence of multispecialty physician practices or certain 

rural or safety net providers/suppliers 

(such as CAHs, FQHCs and RHCs). 

Categorizing these moderate revenue 

ACOs as high revenue, could require 

ACOs that have a smaller degree 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 are concerned 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 seek 

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 low revenue or high revenue is 

consistent with the proposed 12 month 

period for determining repayment 

mechanism amounts (as described in 

section II.A.6.c of this proposed rule). 

Such an 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 or high revenue ACO. 

Additionally, for ACOs with a 

participant agreement start date of July 

1, 2019, we also propose to determine 

whether the ACO is low revenue or high 

revenue using expenditure data from the 

most recent calendar year for which 12 

months of data are available. 

We note 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 or high 

revenue ACO. However, 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 


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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 seek 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 are especially 

concerned 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 propose 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 propose 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 propose 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 propose 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 propose 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 

participation under § 425.218. We 

propose 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 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 hospitalbased ACOs by ACO composition, 

determined based on the presence or 

absence of certain institutional 

providers as ACO participants. This 

approach 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 

(described elsewhere in this proposed 

rule) 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/Acute

InpatientPPS/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 


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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. As 

described in detail throughout this 

section of this proposed rule, we believe 

a revenue-based approach is 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 seek comment on the proposed 

definitions of ‘‘low revenue ACO’’ and 

‘‘high revenue ACO’’. We also seek 

comment on the alternatives considered. 

Specifically, we seek 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 seek comment on the 

second alternative of differentiating 

between ACOs based on the size of their 

assigned population (that is, small 

versus large ACOs). 

(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 this 

proposed rule, we propose 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. 

We also propose 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 believe 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 propose 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 believe an 

approach that allows high 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’ 


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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 propose 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 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 as described 

in section II.A.5.c of this proposed rule. 

Therefore, we propose 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 

proposed rule (as determined based on 

whether an ACO is low revenue versus 

high revenue and inexperienced 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 the 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 

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

proposed rule. 

We recognize 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 seek 

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 seek 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 seek 

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 believe 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’/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 seek 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 believe 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 propose to specify these proposed 

requirements for low revenue ACOs and 

high revenue ACOs in revisions to 

§ 425.600, along with other 

requirements for determining 

participation options based on the 

experience of the ACO and its ACO 

participants, as discussed in section 

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

propose 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 

propose 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 seek comment on these 

proposals. 

More generally, we note that the 

proposed approach to redesigning the 


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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. 

(3) Allowing Greater Potential for 

Reward for Low Revenue ACOs 

In this section, we describe and seek 

comment on several approaches to 

allowing for potentially greater access to 

shared savings for low revenue ACOs 

compared to high revenue ACOs, but do 

not make any specific proposals at this 

time. The approaches to rewarding low 

revenue ACOs discussed in this section 

recognize the performance trends of low 

revenue ACOs based on program results 

and the potential that low revenue 

ACOs would need additional capital, as 

a means of encouraging their continued 

participation in the program. 

Although low revenue ACOs 

generally have control over a smaller 

share of the total Medicare Parts A and 

B FFS expenditures for their assigned 

beneficiaries compared to high revenue 

ACOs, they have tended to perform 

better financially than high revenue 

ACOs, demonstrating their ability to 

more quickly meet the program’s aim of 

lowering growth in expenditures. High 

revenue ACOs, in comparison, despite 

having the advantage of generally 

controlling a greater share of total 

Medicare Parts A and B FFS 

expenditures for their assigned 

beneficiaries, and having more 

institutional capacity to affect care 

processes and better manage care across 

settings, have demonstrated 

comparatively poor financial 

performance. 

As previously described in section I of 

this proposed rule, using the 

methodology for identifying low 

revenue and high revenue ACOs 

described in the Regulatory Impact 

Analysis (section IV. of this proposed 

rule), program results for performance 

year 2016 show that low revenue ACOs 

outperformed high revenue ACOs, as 41 

percent of low revenue ACOs shared 

savings compared to 23 percent of high 

revenue ACOs. Among ACOs with four 

performance years of program results, 

low revenue ACOs in Track 1 

outperformed high revenue ACOs, 

generating average gross savings of 2.9 

percent compared to 0.5 percent for 

high revenue ACOs. Low revenue ACOs 

in Track 2 and Track 3 also 

outperformed high revenue ACOs. The 

four Track 3 ACOs that owed losses in 

performance year 2016 were all high 

revenue. These results suggest high 

revenue ACOs may be underperforming 

in containing growth in expenditures, 

while taking advantage of other aspects 

of program participation. 

We believe low revenue ACOs, 

identified as proposed previously in this 

section (that is, using a threshold of 25 

percent of Medicare Parts A and B FFS 

expenditures for assigned beneficiaries), 

which may tend to be small, physicianonly and rural ACOs, are likely less 

capitalized organizations and may be 

relatively risk-averse. These ACOs may 

be encouraged to participate and remain 

in the program under performancebased risk based on the availability of 

additional incentives, such as the 

opportunity to earn a greater share of 

savings. 

We believe that offering increased 

potential for low revenue ACOs to earn 

shared savings would support their 

success in meeting the program’s goals 

by allowing these organizations to 

maximize their return on investment, 

which may be needed to support startup and operational expenses, and to 

facilitate their participation in 

performance-based risk. For example, 

shared savings payments received by 

low revenue ACOs could be used to 

support funding of a repayment 

mechanism required for their 

participation in performance-based risk, 

support meeting the program’s quality 

reporting requirements, or support, 

when eligible, implementation of an 

approved beneficiary incentive program 

as discussed in section II.C.2 of this 

proposed rule. Any additional incentive 

would complement previously 

described proposals that would provide 

low revenue ACOs a longer pathway to 

participation under the highest level of 

risk and potential reward in the 

ENHANCED track. 

One approach we considered would 

be to allow for a lower MSR for low 

revenue ACOs in the BASIC track. In 

section II.A.6.b of this proposed rule, we 

propose that under Level A and Level B 

of the BASIC track, under a one-sided 

model, ACOs with at least 5,000 

assigned beneficiaries will have a MSR 

that varies between 2 percent and 3.9 

percent based on the size of the ACO’s 

assigned beneficiary population (which 

is the same MSR methodology currently 

used in Track 1). In performance years 

under a two-sided model of either the 

BASIC track or the ENHANCED track, 

we propose to apply a symmetrical 

MSR/MLR, as chosen by the ACO prior 

to entering into performance-based risk. 

As an alternative, to provide a greater 

incentive for low revenue ACOs, we 

considered applying a lower MSR 

during the one-sided model years (Level 

A and B) for low revenue ACOs that 

have 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 this 

proposed rule. 

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. This 

may be especially important for small 

ACOs, which would otherwise have 

MSRs towards the higher end of the 

range (closer to 3.9 percent, for an ACO 

with at least 5,000 assigned 

beneficiaries) for years in which the 

ACO participates under a one-sided 

model. However, we do not believe 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, their control 

over a significant percentage of the 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. 

Another approach we considered is to 

allow 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. 


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For any policies that would apply 

differing levels of potential reward to 

ACOs based on factors such as ACO 

participants’ revenue and expenditures 

for the ACO’s assigned beneficiaries, we 

prefer an approach under which we 

would annually re-evaluate whether an 

ACO is low revenue or high revenue, 

taking into consideration any changes to 

the ACO’s list of ACO participants or to 

the providers/suppliers billing through 

the TINs of the ACO participants that 

are made during the agreement period. 

This approach would help ensure, for 

example, that ACOs do not omit certain 

institutional providers or other high 

revenue providers/suppliers from their 

initial ACO participant list for the 

purpose of securing their participation 

in a more favorable financial model, 

only to subsequently add these 

organizations to their ACO in 

subsequent years of the same agreement 

period. 

We seek comment on these 

considerations. We will carefully 

consider the comments received 

regarding these options during the 

development of the final rule, and may 

consider adopting one or more of these 

options in the final rule. 

c. Determining Participation Options 

Based on Prior Participation of ACO 

Legal Entity and ACO Participants 

(1) Overview 

In this section of the proposed rule we 

describe 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 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 

their 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 

performance-based risk Medicare ACO 

initiatives and on whether the ACO is 

low revenue or high revenue. 

• 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. 

The regulatory background for the 

proposed policies in this section of the 

proposed rule includes 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 that are re-entering 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 


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continues to apply in all subsequent 

performance years (see § 425.502(a)). 

We believe 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 twosided model. These ACOs would 

effectively circumvent the requisite ‘‘sitout’’ 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 

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) Proposals for Streamlining 

Regulations 

We seek 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 seek 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 propose to define a renewing ACO 

and an ACO re-entering after 

termination or expiration of their 

participation agreement. 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 believe 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 

propose to define renewing ACO and reentering ACO in new definitions in 

§ 425.20. 

We propose 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 


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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, 

or the pay-for-performance quality 

performance standard that is phased in 

over an ACO’s first agreement period in 

the program). We are also concerned 

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 allows for 2 years 

under a one-sided model for new ACOs 

only. We are therefore interested in 

adopting an approach to better identify 

prior participation and to specify 

participation options and program 

requirements applicable to re-entering 

ACOs. 

We propose 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 note that a number of proposed 

policies depend on the prior 

participation of an ACO or the 

experience of its ACO participants. As 

discussed elsewhere in section II.A of 

this proposed rule, these include: (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 onesided 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 re-entering 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 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 believe 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, we 

believe that 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 proposed rule. We 

wish to clarify 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 


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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 recognize 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 we believe the 

most recent experience of the ACO 

participants in the new ACO is most 

relevant to determining the applicability 

of policies to the re-entering ACO. We 

therefore propose 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 we 

believe that it will 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 threshold 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 

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 we believe that 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 seek comment on these proposed 

definitions and on the alternatives 

considered. 

(b) Eligibility Requirements and 

Application Procedures for Renewing 

and Re-Entering ACOs 

We believe it would be useful to 

revise our regulations to clearly set forth 

the eligibility requirements and 

application procedures for renewing 

ACOs and re-entering ACOs. Therefore, 

we propose to revise § 425.222 to 

address limitations on the ability of reentering ACOs to participate in the 

Shared Savings Program for agreement 

periods beginning before July 1, 2019. In 

addition, we propose 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 

proposed in this rule. As discussed 

elsewhere in this section, we propose 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 proposed 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 

proposed rule), the ACO could apply for 

a SNF 3-day rule waiver (as proposed in 

section II.B.2.a. of this proposed rule), 

and the ACO could elect to offer 

incentive payments to beneficiaries 

under a CMS-approved beneficiary 

incentive program (as proposed in 

section II.C.2. of this proposed 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 propose to discontinue (as described 

in section II.A.2 of this proposed rule). 

Therefore, by eliminating the ‘‘sit-out’’ 

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 note 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 proposed rule), the 

effective termination date of its current 

agreement should be June 30, 2019. 


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We propose 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 propose 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. This includes 

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 two-sided model or 

a one-sided model of the 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 

address: (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 perform 

poorly or to be terminated. 

First, we propose modifications to the 

criterion governing our evaluation of 

whether the ACO has a history of 

compliance with the program’s quality 

performance standard. We propose 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 

propose 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 are concerned 

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 propose 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. 

In section II.A.7 we propose a 6-month 

performance year for ACOs that started 

a first or second agreement period on 

January 1, 2016, that elect an extension 

of their agreement period by 6 months 

from January 1, 2019 through June 30, 

2019, and a 6-month first performance 

year for ACOs entering agreement 

periods beginning on July 1, 2019. We 

have also proposed to 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, to June 

30, 2019, and from July 1, 2019, to 

December 31, 2019, as described in 

section II.A.7 of this proposed 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 propose would be determined 

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 believe it 

is 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 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 BASIC track’s 

glide path on July 1, 2019). 

We note 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. 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 re-entering ACOs that 

may have unpaid shared losses, as well 


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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 two-sided models 

authorized under section 1115A of the 

Act, including the Track 1+ Model, we 

also propose 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 propose 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 propose 

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 one-sided 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 proposed rule. 

Lastly, we propose 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 propose 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 propose 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 

(discussed in this section of this 

proposed rule) 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. As we discussed previously, 

we propose to discontinue use of 

§ 425.222. We believe adding a similar 

requirement to § 425.224 would allow 

us to more consistently apply policies to 

renewing and re-entering ACOs. 

Further, we believe 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 we believe 

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 (as 

discussed in this section of this 

proposed rule) in determining the 

eligibility of ACO A to enter a new 

participation agreement in the program. 

(5) Proposed Evaluation Criteria for 

Determining Participation Options 

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, we believe 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 risk 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. 

As discussed elsewhere in this section 

(II.A.5.c of this proposed rule), we are 

proposing to discontinue application of 

the policies in § 425.222(a). As a result 

of this change, we will 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 are 

concerned 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 are also concerned that existing 

and former Track 1 ACOs would have 


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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 agreement periods under 

a one-sided model before transitioning 

to a two-sided 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 onesided 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. We 

believe 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 we believe some restriction is 

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 believe it is important 

to prevent new ACOs identified as reentering 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 one-sided 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 Physician Group 

Practice (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 believe it is appropriate to 

propose 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, we believe that using prior 

participation by ACO participant TINs 

in Medicare ACO initiatives along with 

the prior participation of the ACO legal 

entity is important when gauging 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’s 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 our 

proposals to differentiate between low 

revenue and high revenue ACOs, as 

previously discussed in this section. 

Fourth, and lastly, we believe 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. 

We prefer an approach that would 

help to ensure that ACOs, whether they 

are initial applicants to the program, 

renewing ACOs or re-entering ACOs, 

would be treated comparably. 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 propose 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 propose 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 

propose 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. 


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We propose that CMS would 

determine that an ACO is experienced 

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 propose 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 propose 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 are proposing 

to use to identify ACOs as experienced 

or inexperienced with performancebased 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 propose 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 propose 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 propose 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 propose 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 

includes such other Medicare ACO 

initiatives involving two-sided risk as 

may be specified by CMS. 

We propose to 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. 

As we previously discussed, we are 

proposing 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 propose to 

identify all Track 1 ACOs that deferred 

renewal as being experienced with 

performance-based risk Medicare ACO 

initiatives. This includes 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 two-sided 

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 reenter the program after termination, it 

would need to apply for a two-sided 

model. We believe 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, is necessary to 

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 propose to 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. 

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 is 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 do not believe that the 

proposed parameters are 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 propose 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 


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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. 

We believe 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 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 are proposed to 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, we 

believe 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 the ACO’s ACO participant 

list remains relatively unchanged. 

Second, we believe 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, we believe 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 (if our proposal is 

finalized), 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 would 

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 is 

not to be overly restrictive, but rather to 

ensure that ACOs with significant 

experience with performance-based risk 

are appropriately placed. While we 

favor 40 percent for its consistency with 

the Track 1+ Model requirement, we 

also seek comment on other numeric 

thresholds. 

As previously discussed in this 

section, we believe some restriction is 

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 believe an approach that restricts 

the amount of time a former Track 1 

ACO or a new ACO, identified as a reentering 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 propose 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 


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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 

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

proposed 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 seek comment on this 

alternative approach. 

In summary, in combination with 

determining an whether ACOs are low 

revenue versus high revenue, we 

propose to add 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: 

• If an ACO is identified as high 

revenue, 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 re-entering 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. 

• If an ACO is identified as low 

revenue, 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 re-entering 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 enter the BASIC track Level E 

(highest level of risk and potential 

reward) or the ENHANCED track. As 

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

proposed rule, low revenue ACOs are 

limited to two agreement periods of 

participation under the BASIC track. 

We propose 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 seek 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 welcome commenters’ 

input on our proposal to assess ACO 

participants’ experience with 

performance-based risk Medicare ACOs 

using a 40 percent threshold, and the 

alternative of employing a threshold 

other than 40 percent, for example, 30 

percent. We welcome 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 welcome 

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. 

We also believe it is appropriate to 

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 


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accurate reporting of all quality 

measures in the first performance year 

of an ACO’s first agreement period to 

pay-for-performance 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 note that for 

purposes of this discussion, we consider 

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 propose 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 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) under the proposed 

approach to applying factors based on 

regional FFS expenditures beginning 

with the ACO’s first agreement period 

(see section II.D of this proposed rule). 

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 propose 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 propose 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 propose 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 believe 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 

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 propose 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 is 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 


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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 is considered to be entering into, 

for a subset of ACOs, as specified in the 

provision at § 425.222(c), which we are 

proposing to discontinue using. We 

believe this proposed approach ensures 

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 helps 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 we believe 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. 

We believe 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, mitigate 

our concerns regarding ACO gaming. 

We believe 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 the policies 

discussed elsewhere in this section of 

the proposed rule for identifying ACOs 

that are experienced with performancebased risk Medicare ACOs 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 the BASIC track Level 

E (if an otherwise eligible low revenue 

ACO) or the ENHANCED track. This 

mitigates our concerns about ACOs reforming 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 is 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 note that these ACOs’ 

benchmarks would be rebased, which 

we believe would help to mitigate this 

concern. We seek 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. 

In the June 2016 final rule, we 

established the phase-in of the weights 

used in calculating the regional 

adjustment to the ACO’s historical 

benchmark, for second or subsequent 

agreement periods beginning in 2017 

and subsequent years. As discussed in 

section II.D of this proposed rule, we 

propose to use factors based on regional 

FFS expenditures in calculating an 

ACO’s historical benchmark beginning 

with an ACO’s first agreement period for 

agreement periods beginning on July 1, 

2019, and in subsequent years. We 

would maintain the phase-in for the 

regional adjustment weights for ACOs 

with start dates in the program before 

July 1, 2019, according to the structure 

established in the earlier rulemaking 

(such as using these factors for the first 

time in resetting benchmarks for the 

third agreement period for 2012 and 

2013 starters). Table 5 includes 

examples of the phase-in of the 

proposed 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 proposed 

approach to differentiating initial 

entrants, renewing ACOs (including 

ACOs that renew early), and re-entering 

ACOs for purposes of policies that 

phase-in over time. 

TABLE 5—EXAMPLES OF PHASE-IN OF PROPOSED REGIONAL ADJUSTMENT WEIGHTS BASED ON AGREEMENT START DATE

AND APPLICANT TYPE

Applicant type 

First time regional adjustment 

used: 35 percent or 25 percent 

(if spending above region) 

Second time regional adjustment 

used: 50 percent or 35 percent 

(if spending above region) 

Third and subsequent time 

regional adjustment used: 

50 percent weight 

New entrant with start date on July 

1, 2019.

Applicable to first agreement period starting on July 1, 2019.Applicable to second agreement 

period starting in 2025.

Applicable to third agreement period starting in 2030 and all 

subsequent agreement periods. 

Renewing ACO for agreement period starting on July 1, 2019, 

with initial start date in 2012, 

2013, or 2016.

Applicable to third (2012/2013) or 

second (2016) agreement period starting on July 1, 2019.

Applicable to fourth (2012/2013) 

or third (2016) agreement period starting in 2025.

Applicable to fifth (2012/2013) or 

fourth (2016) agreement period 

starting in 2030 and all subsequent agreement periods. 


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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/. 

TABLE 5—EXAMPLES OF PHASE-IN OF PROPOSED REGIONAL ADJUSTMENT WEIGHTS BASED ON AGREEMENT START DATE

AND APPLICANT TYPE—Continued 

Applicant type 

First time regional adjustment 

used: 35 percent or 25 percent 

(if spending above region) 

Second time regional adjustment 

used: 50 percent or 35 percent 

(if spending above region) 

Third and subsequent time 

regional adjustment used: 

50 percent weight 

Early renewal for agreement period starting on July 1, 2019, 

ACO with initial start date in 

2014 that terminates effective 

June 30, 2019.

Currently applies to second 

agreement period starting in 

2017.

Applicable to third agreement period starting on July 1, 2019.Applicable to fourth agreement 

period starting in 2025 and all 

subsequent agreement periods. 

Re-entering ACO with initial start 

date in 2014 whose agreement 

expired December 31, 2016 (did 

not renew) and re-enters second 

agreement period starting on 

July 1, 2019.

Applicable to second agreement 

period starting on July 1, 2019 

(ACO considered to be re-entering a second agreement period).

Applicable to third agreement period starting in 2025.Applicable to fourth agreement 

period starting in 2030 and all 

subsequent agreement periods. 

Re-entering ACO with second 

agreement period start date in 

2017 terminated during performance year 2 (2018) and re-enters second agreement period 

starting on July 1, 2019.

Applicable to second agreement 

period starting on July 1, 2019 

(ACO considered to be re-entering a second agreement period).

Applicable to third agreement period starting in 2025.Applicable to fourth agreement 

period starting in 2030 and all 

subsequent agreement periods. 

As part of the development of these 

proposals, 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. 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 believe it is no longer 

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’s ACO 

participants 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 

described in this section, we 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 note 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 

believe that our proposal, as discussed 

in section II.D of this proposed rule, to 

apply factors based on regional FFS 

expenditures to ACOs’ benchmarks in 

their first agreement periods addresses 

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 

decline 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 prefer 

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 propose 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. 


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We seek comment on the proposals 

described in this section and the 

alternatives considered. The 

participation options available to ACOs 

based on the policies proposed in this 

section are summarized in Table 6 (low 

revenue ACOs) and Table 7 (high 

revenue ACOs). 

TABLE 6—PARTICIPATION OPTIONS FOR LOW REVENUE ACOS BASED ON APPLICANT TYPE AND EXPERIENCE WITH RISK

Applicant type 

ACO experienced 

or inexperienced 

with performancebased risk Medicare ACO 

initiatives 

Participation options 1

Agreement period for policies that 

phase-in over time (benchmarking 

methodology and quality 

performance) 

BASIC track’s 

glide path (option 

for incremental 

transition from 

one-sided to twosided models during agreement 

period) 

BASIC track’s 

Level E (track’s 

highest level of 

risk/reward applies 

to all performance 

years during 

agreement period) 

ENHANCED track 

(program’s highest 

level of risk/reward 

applies to all performance years during agreement 

period) 

New legal entity .... Inexperienced ...... Yes—glide path 

Levels A 

through E.

Yes ...................... Yes .......................... First agreement period. 

New legal entity .... Experienced ........ No ........................ Yes ...................... Yes .......................... First agreement period. 

Re-entering ACO .. Inexperienced— 

former Track 1 

ACOs 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.

Yes—glide path 

Levels B 

through E.

Yes ...................... Yes .......................... Either: (1) The next consecutive 

agreement period if the ACO’s 

prior agreement expired; (2) the 

same agreement period in which 

the ACO was participating at the 

time of termination; or (3) applicable agreement period for new ACO 

identified as re-entering because of 

ACO participants’ experience in the 

same ACO. 

Re-entering ACO .. Experienced—including former 

Track 1 ACOs 

that deferred renewal under a 

two-sided 

model.

No ........................ Yes ...................... Yes .......................... Either: (1) The next consecutive 

agreement period if the ACO’s 

prior agreement expired; (2) the 

same agreement period in which 

the ACO was participating at the 

time of termination; or (3) applicable agreement period for new ACO 

identified as re-entering because of 

ACO participants’ experience in the 

same ACO. 

Renewing ACO .... Inexperienced— 

former Track 1 

ACOs.

Yes—glide path 

Levels B 

through E.

Yes ...................... Yes .......................... Subsequent consecutive agreement 

period. 

Renewing ACO .... Experienced—including former 

Track 1 ACOs 

that deferred renewal under a 

two-sided 

model.

No ........................ Yes ...................... Yes .......................... Subsequent consecutive agreement 

period. 

Notes: 1 Low revenue ACOs may operate under the BASIC track for a maximum of two agreement periods. 

TABLE 7—PARTICIPATION OPTIONS FOR HIGH REVENUE ACOS BASED ON APPLICANT TYPE AND EXPERIENCE WITH RISK

Applicant type 

ACO experienced 

or inexperienced 

with performancebased risk Medicare ACO 

initiatives 

Participation Options 1

Agreement period for policies that 

phase-in over time (benchmarking 

methodology and quality 

performance) 

BASIC track’s 

glide path (option 

for incremental 

transition from 

one-sided to twosided models during agreement 

period) 

BASIC track’s 

Level E (track’s 

highest level of 

risk/reward applies 

to all performance 

years during 

agreement period) 

ENHANCED track 

(program’s highest 

level of risk/reward 

applies to all performance years during agreement 

period) 

New legal entity .... Inexperienced ...... Yes—glide path 

Levels A 

through E.

Yes ...................... Yes .......................... First agreement period. 

New legal entity .... Experienced ........ No ........................ No ........................ Yes .......................... First agreement period. 


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TABLE 7—PARTICIPATION OPTIONS FOR HIGH REVENUE ACOS BASED ON APPLICANT TYPE AND EXPERIENCE WITH

RISK—Continued 

Applicant type 

ACO experienced 

or inexperienced 

with performancebased risk Medicare ACO 

initiatives 

Participation Options 1

Agreement period for policies that 

phase-in over time (benchmarking 

methodology and quality 

performance) 

BASIC track’s 

glide path (option 

for incremental 

transition from 

one-sided to twosided models during agreement 

period) 

BASIC track’s 

Level E (track’s 

highest level of 

risk/reward applies 

to all performance 

years during 

agreement period) 

ENHANCED track 

(program’s highest 

level of risk/reward 

applies to all performance years during agreement 

period) 

Re-entering ACO .. Inexperienced— 

former Track 1 

ACOs 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.

Yes—glide path 

Levels B 

through E.

Yes ...................... Yes .......................... Either: (1) The next consecutive 

agreement period if the ACO’s 

prior agreement expired; (2) the 

same agreement period in which 

the ACO was participating at the 

time of termination; or (3) applicable agreement period for new ACO 

identified as re-entering because of 

ACO participants’ experience in the 

same ACO. 

Re-entering ACO .. Experienced—including former 

Track 1 ACOs 

that deferred renewal under a 

two-sided 

model.

No ........................ No ........................ Yes .......................... Either: (1) The next consecutive 

agreement period if the ACO’s 

prior agreement expired; (2) the 

same agreement period in which 

the ACO was participating at the 

time of termination; or (3) applicable agreement period for new ACO 

identified as re-entering because of 

ACO participants’ experience in the 

same ACO. 

Renewing ACO .... Inexperienced— 

former Track 1 

ACOs.

Yes—glide path 

Levels B 

through E.

Yes ...................... Yes .......................... Subsequent consecutive agreement 

period. 

Renewing ACO .... Experienced—including former 

Track 1 ACOs 

that deferred renewal under a 

two-sided 

model.

No ........................ No ........................ Yes .......................... Subsequent consecutive agreement 

period. 

Notes: 1 High revenue ACOs that have participated in the BASIC track are considered experienced with performance-based risk Medicare 

ACO initiatives and are limited to participating under the ENHANCED track for subsequent agreement periods. 

d. Monitoring for Financial Performance 

(1) Background 

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), (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 


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17For purposes of this proposed rule, an ACO is 

considered to have 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. 

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). 

Now that we have additional 

experience with monitoring ACO 

financial performance, we believe that 

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. 

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 believe 

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 propose to modify § 425.316 to 

add a provision for monitoring ACO 

financial performance. Specifically, we 

propose 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 propose 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 propose that we 

may immediately or with advance 

notice terminate the ACO’s participation 

agreement under § 425.218. 

We propose 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. 

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 

anticipate that the financial 

performance results for performance 

years beginning on January 1, 2019 and 

July 1, 2019, will be available for CMS 

review in the summer of 2020 and will 

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 

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, the 

2016 results do not take into account 

ACO participant list changes for these 

ACOs or rebasing of the ACOs’ 

historical benchmarks for their second 

agreement period. 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, while experience does 

not suggest that a large share of ACOs 

would be affected, we believe that the 

proposed policy, if adopted, will help to 

ensure that ACOs are not allowed 

multiple years of losses without being 

held accountable for their performance. 

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 prefer the 

proposed approach previously 

described, because the corridor (MLR 

threshold above the benchmark) is 

established to protect ACOs against 

sharing losses that result from random 

variation. 

As described briefly in section II.A.2 

of this proposed rule, ACOs that 


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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 

performance-based risk: The relatively 

lower levels of risk under the BASIC 

track, the additional features available 

to eligible ACOs under performancebased risk (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 CMSapproved beneficiary incentive 

program), and the opportunity to 

participate in an Advanced APM for 

purposes of the Quality Payment 

Program. We are concerned 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 believe 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 seek 

comment on this issue, and on ACOs’ 

use of reinsurance, including their 

ability to obtain viable reinsurance 

products covering a Medicare FFS 

population. 

We seek comment on these proposals 

and related considerations. 

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. 

We propose 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 

propose changes to the repayment 

mechanism requirement to update these 

policies to address the new 

participation options included in this 

proposed 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 propose 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 propose to add provisions to permit 

recalculation of the estimated amount of 

the repayment mechanism each 

performance year to account for changes 

in ACO participant composition, to 

codify 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. In this section, we also 

propose 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’s operations and establishes 

more equal footing between the risk 

models. ACOs applying to the Track 1+ 

Model are 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 onesided 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) Proposals for Timing and Selection 

of MSR/MLR 

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 

one-sided model and transitioning to a 

two-sided model during their agreement 

period under the BASIC track. 

We propose 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 believe 

these thresholds continue to have 

importance to protect against savings 

and losses resulting from random 

variation, although we describe in 

section II.A.5.b of this proposed rule our 

consideration of an alternate approach 


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that would lower the MSR for low 

revenue ACOs. Further, 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’s operations and establishing more 

equal footing between the risk models. 

Specifically, we propose 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 propose to apply the 

same variable MSR methodology as is 

used under § 425.604(b) for Track 1. We 

propose to specify this variable MSR 

methodology in a proposed new section 

of the regulations at § 425.605(b). We 

also propose to specify in § 425.605(b) 

the MSR/MLR options for ACOs under 

two-sided models of the BASIC track, 

consistent with 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 are proposing to 

discontinue Track 1, we believe it is 

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 propose 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 are also 

proposing to discontinue Track 2, 

concurrently with our proposal to 

discontinue Track 1, we do not believe 

it is necessary to revise the crossreference in § 425.606(b)(1)(ii)(C) to the 

variable MSR methodology under Track 

1. 

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 

two-sided 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 believe it 

is appropriate to allow ACOs to make 

their MSR/MLR selection during the 

application cycle preceding their first 

performance year in 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, although they will have the 

opportunity to gain experience with the 

program, prior to making this selection. 

This approach would be another means 

for BASIC ACOs in the glide path to 

control their level of risk exposure. 

Therefore, we propose 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). 

(3) Proposals for 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 

proposed rule, we are proposing that 

ACOs in a two-sided model of the new 

BASIC 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 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 § 425.110(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 


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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. 

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. Based on data 

available from fourth quarter 2017 

program reports, which tend to provide 

a close approximation of final 

performance year assignment counts, 

over 4 percent of ACOs participating in 

PY 2017 are likely to fall below 5,000 

assigned beneficiaries for the 

performance year, with several likely to 

be under 1,000. 

Consistent with overall program 

participation trends, most ACOs that 

have fallen below the 5,000-beneficiary 

threshold in prior performance years, or 

that are anticipated to do so for PY 

2017, have been 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 

below the 5,000-beneficiary threshold 

that have a fixed MSR/MLR of plus or 

minus 2 percent or less. 

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. 

While we continue to believe that 

ACOs operating under performancebased 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 static 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 note, 

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 8. As previously 

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 8. 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. 

TABLE 8—DETERMINATION OF MSR BY NUMBER OF ASSIGNED BENEFICIARIES

Number of beneficiaries 

MSR (low end of 

assigned beneficiaries) 

(percent) 

MSR (high end of 

assigned beneficiaries) 

(percent) 

1–499 ....................................................................................................................................... ≥12.2 

500–999 ................................................................................................................................... 12.2 8.7 

1,000–2,999 ............................................................................................................................. 8.7 5.0 

3,000–4,999 ............................................................................................................................. 5.0 3.9 

5,000–5,999 ............................................................................................................................. 3.9 3.6 

6,000–6,999 ............................................................................................................................. 3.6 3.4 

7,000–7,999 ............................................................................................................................. 3.4 3.2 

8,000–8,999 ............................................................................................................................. 3.2 3.1 

9,000–9,999 ............................................................................................................................. 3.1 3.0 

10,000–14,999 ......................................................................................................................... 3.0 2.7 

15,000–19,999 ......................................................................................................................... 2.7 2.5 

20,000–49,999 ......................................................................................................................... 2.5 2.2 

50,000–59,999 ......................................................................................................................... 2.2 2.0 


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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/shared

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

Mechanism Arrangements Guidance). 

TABLE 8—DETERMINATION OF MSR BY NUMBER OF ASSIGNED BENEFICIARIES—Continued 

Number of beneficiaries 

MSR (low end of 

assigned beneficiaries) 

(percent) 

MSR (high end of 

assigned beneficiaries) 

(percent) 

60,000 + ................................................................................................................................... 2.0 2.0 

Therefore, we are proposing 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 propose 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 believe this proposal would 

have a fairly limited reach in terms of 

number of ACOs impacted, we believe 

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. 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 propose 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 fall 

below the 5,000-beneficiaries threshold 

which are reconciled for shared savings 

or losses, as opposed to being limited to 

ACOs under a CAP as provided in the 

existing provision at § 425.110(b)(1). 

Specifically we propose 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 will also distinguish 

between the policies applicable to 

determining the MSR/MLR for 

performance years starting before 

January 1, 2019, and those that we are 

proposing to apply for performance 

years starting in 2019 and subsequent 

years. 

We propose 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 note these ranges are consistent 

with the program’s 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 MSR/MLR for performance year 

2017 and 2018. These ranges in 

§ 425.604(b) are cross-referenced 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 

proposed rule, we propose to specify 

under a new section of the regulations 

at § 425.605(b)(1) the range of MSR 

values that apply under the 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 seek 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 seek commenters’ 

feedback on whether the proposed 

approach described in this section could 

improve accountability of ACOs. 

We also note that the requirement of 

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

ACO to have at least 5,000 assigned 

beneficiaries, continues 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 

II.A.6.d of this proposed rule, we are 

proposing 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. 

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 

their use; and the duration of the 

repayment mechanism arrangement. 


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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. 

The 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. 

More generally, program stakeholders 

have continued to identify the 

repayment mechanism requirement as a 

potential barrier for some ACOs to enter 

into performance-based 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 revenuebased 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 believe this 

approach is 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 benchmarkbased loss sharing limit (that is, ACOs 

that include the types of ACO 

participants previously identified in this 

proposed 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 benchmarkbased 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 lower 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. As 

noted in our Repayment Mechanism 

Arrangements Guidance, we believe that 

this standard would be satisfied by an 

arrangement that terminates 24 months 

following the end of the agreement 

period. 

(2) Proposals Regarding 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. 

We propose 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 believe 

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 would calculate 

a revenue-based repayment mechanism 

amount and a benchmark-based 

repayment mechanism amount for each 

BASIC track ACO and require the ACO 

to obtain a repayment mechanism for 

the lower of the two amounts described 

previously. We believe this aligns 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 

proposed rule. In addition, this 

approach balances concerns about the 

ability of ACOs to take on performancebased 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 

applying to enter participation 


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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 propose 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 are proposing 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 

propose 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, 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 propose 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). 

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 providers/suppliers enrolled in 

the ACO 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, 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 propose 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 propose 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 propose 

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. If this 

amount has increased 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 solicit 

comments on whether a higher or lower 

change in the repayment mechanism 

estimate should trigger the ACO’s 

obligation to increase its repayment 

mechanism amount. 

However, unlike the Track 1+ Model, 

we propose that if the estimated amount 

decreases as a result of the ACO’s 


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change in composition, we will 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, we propose 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 

propose 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 propose 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. This proposal protects the 

financial integrity of the program by 

ensuring that a renewing ACO will 

remain capable of repaying losses 

incurred under its old agreement period. 

We propose 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 propose 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 

proposed rule. 

(3) Proposals Regarding 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 believe modifications 

to the existing repayment mechanism 

requirements are 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 believe 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 

are proposing 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 are proposing 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 seek comment on these proposals. 

(4) Proposal for Repayment Mechanism 

Duration 

We acknowledge that the proposed 

change to an agreement period of at 

least 5 years will 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 point 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 will 

remain 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 propose 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 


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participation in a two-sided model plus 

24 months after the conclusion of the 

agreement period. Based on our 

experience with repayment 

mechanisms, we believe ACOs will be 

able to work with financial institutions 

to establish repayment mechanism 

arrangements that will cover a 5-year 

agreement period plus a 24-month tail 

period. This proposed approach is 

consistent with the program’s current 

guidance. 

We propose some exceptions to this 

general rule. First, we propose 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 believe this may be 

necessary in rare circumstances to 

protect the financial integrity of the 

program. 

Second, we believe the duration 

requirement 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 previously noted, we propose 

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 propose at 

§ 425.204(f)(6) that the term of the 

existing repayment mechanism must be 

extended in these cases and that it must 

periodically be extended thereafter 

upon notice from CMS. 

We are considering 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 proposed rule, renewing ACOs 

(as we propose 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 recognize 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 are 

considering 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 solicit 

comment on whether we should require 

a longer or shorter extension. 

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 seek 

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 may specify in the 

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 may specify in the 

final rule). 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 

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 believe 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 

propose to include similar requirements 

at § 425.204(f)(6). Specifically, we 

propose 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 solicit 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. 

(5) Proposals Regarding Institutions 

Issuing Repayment Mechanism 

Arrangements 

We are also proposing 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. 


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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 

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 propose 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 anticipate 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 welcome 

commenters’ suggestions on these 

proposed requirements for ACOs 

regarding the issuing institution for 

repayment mechanism arrangements. 

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. 

The current regulations also do not 

impose any liability for shared losses on 

two-sided model ACOs that terminate 

from the program prior to December 31 

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. 

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 are concerned that under 

the current policy, ACOs in two-sided 

models that are projecting losses have 

an incentive to leave the program prior 


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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, these incentives could have 

a detrimental effect on the Medicare 

Trust Funds. 

(2) Proposals for Advance Notice of 

Voluntary Termination 

We are 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’s 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. 

We believe 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 are therefore proposing 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. 

(3) Proposals for Payment Consequences 

of Termination 

In this section, we discuss 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 believe 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 recognize that it 

may 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 do so 

by providing notice 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 and are also eligible 

to share in savings. 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 acknowledge the merit of reducing 

provider uncertainty around Quality 

Payment Program eligibility, we also 

recognize that in the early part of the 

performance year, ACOs have a limited 

amount of information on which to base 

termination decisions. 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 to facilitate care 

management, such as beneficiaryidentifiable claims data or payment rule 

waivers, such as 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 believe 

that 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, clinicians affiliated with 

ACOs that terminate with an effective 

date between March 31 and June 30 

would be captured in one or more QP 

determination snapshots. Clinicians 

determined to have QP status would 

lose their status as a result of the 

termination, and would instead be 

scored under MIPS using the APM 

scoring standard. 

We propose to conduct financial 

reconciliation for all ACOs in two-sided 

models that voluntarily terminate after 

June 30. We propose 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 

will 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 will 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 

one 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 


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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. 

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 are liable for a 

higher portion of any shared losses that 

are incurred. This approach also reflects 

the fact that later-terminating ACOs may 

have enjoyed 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. 

Further, 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 propose 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 

propose the same methodology as 

previously described for pro-rating 

shared losses for voluntarily terminated 

ACOs would also apply to 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 recognize 

that this approach may appear to favor 

CMS, we believe that ACOs expecting to 

generate savings are less likely to 

terminate early in the first place. 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 propose 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 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 

propose to apply this policy to ACOs in 

two-sided models for performance years 

beginning in 2019 and subsequent 

performance years. 

We also propose to specify in the 

regulations at § 425.221 the payment 

consequences of termination during 

calendar year 2019 for ACOs preparing 

to enter or participating under 

agreements beginning July 1, 2019 (see 

section II.A.7 of this proposed rule). 

First, as discussed in detail in section 

II.A.7 of this proposed rule, we would 

reconcile ACOs based on the respective 

6-month performance year methodology 

for their participation during a 6-month 

portion of 2019 in which they are either 

under a current agreement period 

beginning prior to 2019, or under a new 

agreement period beginning July 1, 

2019. We propose 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. That is, we 

would reconcile: ACOs that started a 

first or second agreement period 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 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, July 1, 2019 through 

December 31, 2019) we propose 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 calendar 

year 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 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. 

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 

enter a new agreement period beginning 

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). We 

propose that ACOs with an effective 

date of termination of June 30, 2019 that 

enter a new agreement period beginning 

July 1, 2019, are 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. 

We believe some ACOs may act 

quickly to enter one of the new 

participation options made available 

under the proposed redesign of the 

program (if finalized). 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, certain ACOs may 

ultimately realize they are not yet 

prepared to participate under a new 


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agreement beginning July 1, 2019 and 

seek to terminate quickly. 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 (if finalized), we also 

do not want to unduly bind ACOs that 

aggressively pursue these new options. 

We believe the proposed approach 

provides a means for ACOs to terminate 

their participation prior to renewing 

their participation for an agreement 

period beginning July 1, 2019 or to 

quickly terminate from a new agreement 

period beginning July 1, 2019 without 

the concern of liability for shared losses 

for a portion of the year. 

We also propose to revise the 

regulations at § 425.221 to streamline 

and reorganize the provisions in 

paragraph (b), which we believe is 

necessary to incorporate these proposed 

requirements. We seek comment on 

these proposals and the alternative 

policies discussed in this section. 

7. Participation Options for Agreement 

Periods Beginning in 2019 

a. Overview 

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 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). 

We believe the considerations that 

informed our decision to establish 

alternative start dates at the inception of 

the Shared Savings Program also are 

relevant in determining the timing for 

making the proposed new participation 

options available. We believe 

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 our proposals are 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 propose 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. We anticipate 

the application cycle for the July 1, 2019 

start date would begin in early 2019. We 

are forgoing the application cycle that 

otherwise would take place during 

calendar year 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 proposed rule), and 

entry into the Track 1+ Model (as 

further discussed in section II.F of this 

proposed rule). Although several ACOs 

that entered initial agreements 

beginning in 2015 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 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 propose the July 1, 2019 

start date as 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. We 

would therefore anticipate 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 are aware 

that a delayed application due date for 

an agreement period beginning in 2019 

could affect parties that plan to 

participate in the Shared Savings 

Program for performance year 2019 and 

are relying on the pre-participation 

waiver. Guidance for affected parties 

will be posted on the CMS website. 

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 

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 


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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 twelve 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. We are concerned 

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. 

Instead, we propose 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, as described 

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

this proposed rule for a detailed 

discussion of this methodology. 

Accordingly, our proposed approach 

for implementing the proposed July 1, 

2019 start date would include 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, may 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 is 

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. 

We propose that the ACO’s voluntary 

election to extend its agreement period 

must be made in the form and manner 

and according to the timeframe 

established by CMS, and that an ACO 

executive who has the authority to 

legally bind the ACO must certify the 

election. If finalized, we anticipate this 

election process would begin in 2018 

following the publication of the final 

rule, as part of the annual certification 

process in advance of 2019 (described in 

section II.A.7.c.2. of this proposed rule). 

We note that this optional 6-month 

agreement period extension is a onetime exception for ACOs with 

agreements expiring on December 31, 

2018 and would not be available to 

other ACOs that are currently 

participating in a 3-year agreement in 

the program, or to future program 

entrants. 

Under the existing provision at 

§ 425.210, the ACO must provide a copy 

of its participation agreement with CMS 

to all ACO participants, ACO providers/ 

suppliers, and other individuals and 

entities involved in ACO governance. 

Further, all contracts or arrangements 

between or among the ACO, ACO 

participants, ACO providers/suppliers, 

and other individuals or entities 

performing functions or services related 

to ACO activities must require 

compliance with the requirements and 

conditions of the program’s regulations, 

including, but not limited to, those 

specified in the participation agreement 

with CMS. An ACO that elects to extend 

its participation agreement by 6 months 

must notify its ACO participants, ACO 

providers/suppliers and other 

individuals or entities performing 

functions or services related to ACO 

activities of this continuation of 

participation and must require their 

continued compliance with the 

program’s requirements for the 6-month 

performance year from January 1, 2019 

through June 30, 2019. 

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 July 1, 2019. (As 

discussed in section II.A.5. of this 

proposed rule, 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 of 

this proposed rule, an ACO’s 

participation options for the July 1, 2019 

start date would depend on whether the 

ACO is a low revenue or high revenue 

ACO and the ACO’s experience with 

performance-based risk Medicare ACO 

initiatives. 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, 


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equal weighting of the benchmark years, 

and the quality performance standard). 

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

proposed rule, the proposed 

modifications to the definition of 

‘‘agreement period’’ in § 425.20 are 

intended to broaden the definition to 

generally refer to the term of the 

participation agreement. We propose 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, and this 

election is made in the form and manner 

and according to the timeframe 

established by CMS, and certified by an 

ACO executive who has the authority to 

legally bind the ACO. For consistency, 

we also propose minor formatting 

changes to the existing provision at 

§ 425.200(b)(2) to italicize the header 

text. We note that as described in 

section II.A.2. of this proposed rule, we 

are proposing modifications to 

§ 425.200(b)(3) as part of discontinuing 

the deferred renewal participation 

option. In addition, we propose to add 

a 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 propose to add 

a provision at § 425.200(b)(5) specifying 

that, for agreement periods beginning in 

2020 and subsequent years, the term of 

the participation agreement is 5 years. 

We also propose to revise 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. 

We therefore also propose revisions to 

§ 425.200(c) to make necessary 

formatting changes and specify 

additional exceptions to the definition 

of performance year as a 12-month 

period. Specifically, we propose 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. Similarly, we 

propose to add a provision 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. 

In light of the proposed modifications 

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

performance years during calendar year 

2019, we believe it is also appropriate 

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 

calendar year 2019. 

As an alternative to the proposal to 

offer an agreement period of 5 years and 

6 months beginning 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 

proposed rule in connection with our 

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 would 

result in more accurate benchmarks and 

mitigate the effects of reliance on 

increasingly older historical data as the 

agreement period progresses. We believe 

these considerations are 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. 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 

calendar year 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 mid2019. Further, 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 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 calendar year 2019. 

We seek comment on these proposals 

and the related considerations, as well 

as the alternatives considered. 

b. Methodology for Determining 

Financial and Quality Performance for 

the 6-Month Performance Years During 

2019 

(1) Overview 

In this section we describe the 

proposed methodology for determining 

financial and quality performance for 

the two 6-month performance years 

during calendar year 2019: The 6-month 

performance year from January 1, 2019, 

to June 30, 2019; and the 6-month 

performance year from July 1, 2019, to 

December 31, 2019. We propose to 

specify the methodologies for 

reconciling these 6-month performance 

years during 2019 in a new section of 

the regulations at § 425.609. Although 

we propose to use the same overall 

approach to determining ACO financial 

and quality performance for these two 

periods, 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). 

We note that ACOs in an agreement 

period that includes a 12-month 

performance year 2019 would have the 

option to terminate their current 

participation agreements with an 

effective date of termination of June 30, 

2019, and enter a new agreement period 

beginning on July 1, 2019. We propose 

to reconcile the performance of these 

ACOs during the first 6 months of 2019 

using the same approach that we are 

proposing to use to determine 

performance for the 6-month 

performance year from January 1, 2019, 


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through June 30, 2019, for ACOs that 

started a first or second agreement 

period on January 1, 2016, that elect to 

extend their current agreement periods 

for this 6-month performance year. We 

propose to specify this approach to 

determining performance for these 

ACOs in a new section of the 

regulations at § 425.609 and in revisions 

to § 425.221 describing the payment 

consequences of early termination for 

ACOs that terminate their participation 

agreement with an effective termination 

date of June 30, 2019, and enter a new 

agreement period beginning July 1, 

2019. 

After the conclusion of calendar year 

2019, CMS would reconcile the 

financial and quality performance of 

ACOs that participated in the Shared 

Savings Program during 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 as discussed 

elsewhere in this section, 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. We discuss these 

calculations in detail in section 

II.A.7.b.2. (for the 6-month period from 

January 1, 2019 through June 30, 2019) 

and section II.A.7.b.3. (for the 6-month 

period from July 1, 2019 through 

December 31, 2019). Further, we note 

that this proposed approach to 

reconciling ACO performance for a 6- 

month performance year (or 

performance period) during 2019 would 

not alter the methodology that would be 

applied to determine financial 

performance for ACOs that complete a 

12 month performance year 

corresponding to calendar year 2019. 

We note that in discussing these 6- 

month periods, we use two references, 

‘‘6-month performance year’’ and 

‘‘performance period.’’ According to our 

proposed revisions to § 425.200(c), 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 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’’. 

Under the proposed policies, we 

would calculate shared savings or 

shared losses applicable to an ACO, by 

comparing the expenditures for the 

ACO’s performance year assigned 

beneficiaries for calendar year 2019 to 

the ACO’s historical benchmark 

updated to calendar year 2019. If the 

difference is positive and is greater than 

or equal to the MSR and the ACO has 

met the quality performance standard, 

the ACO would be eligible for shared 

savings. If the ACO is in a two-sided 

model and the difference between the 

updated benchmark and assigned 

beneficiary expenditures is negative and 

is greater than or equal to the MLR (in 

absolute value terms), the ACO would 

be liable for shared losses. ACOs would 

share in first dollar savings and losses 

based on the applicable final sharing 

rate or loss sharing rate according to 

their track of participation for the 

applicable agreement period, and taking 

into account the ACO’s quality 

performance for 2019. We would adjust 

the amount of shared savings for 

sequestration. We would cap the 

amount of shared savings at the 

applicable performance payment limit 

for the ACO’s track and cap the amount 

of shared losses at the applicable loss 

sharing limit for the ACO’s track. We 

would then pro-rate shared savings or 

shared losses by multiplying by onehalf, which represents the fraction of the 

calendar year covered by the 6-month 

performance year (or performance 

period). This pro-rated amount would 

be the final amount of shared savings 

earned or shared losses owed by the 

ACO for the applicable 6-month 

performance year (or performance 

period). 

We believe this proposed approach 

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 calendar year 2019. 

Specifically, the proposed 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. Deviating from a 

12 month reconciliation calculation by 

using fewer than 12 months of 

performance year expenditures could 

interject actuarial biases relative to the 

benchmark expenditures, which are 

based on 12 month benchmark years. As 

a result, we believe this approach to 

reconciling ACOs based on a 12 month 

period would protect the actuarial 

soundness of the financial 

reconciliation methodology. We also 

believe 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 

will 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 anticipate results 

with respect to participation during 

calendar year 2019 would be made 

available to ACOs in summer 2020. This 

would allow those ACOs that are 

eligible to share in savings as a result of 

their participation in the program 

during calendar year 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. As 

discussed in detail in section II.A.7.c.6. 

of this proposed rule, we propose to 

provide separate reconciliation reports 

for each 6-month performance year (or 

performance period) and would pay 

shared savings or recoup shared losses 

separately for each 6-month 

performance year (or performance 

period) during 2019 based on these 

results. 

Furthermore, this approach would 

avoid a more burdensome interim 

payment process that could accompany 

an alternative proposal to instead 

implement, for example, an 18-month 

performance year from July 1, 2019 to 

December 31, 2020. Consistent with 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 required, 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 


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program participation if eligible for 

shared savings. 

We believe 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 calendar year 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 believe 

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 believe it is 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 

alternative payment methodology to 

calculate shared savings and shared 

losses for the proposed 6-month 

performance years (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. We believe 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 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, 

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 (section IV. 

of this proposed rule), we believe this 

approach would continue to allow for 

lower growth in Medicare FFS 

expenditures based on projected 

participation trends. Therefore, we do 

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 believe that the 

proposed approach to measuring ACO 

quality performance for a 6-month 

performance year (or performance 

period) based on quality data reported 

for calendar year 2019 maintains 

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 believe this 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. 

(2) Proposals for Determining 

Performance for the 6-Month 

Performance Year From January 1, 2019, 

Through June 30, 2019 

In this section, we describe our 

proposed approach to determining an 

ACO’s performance for the 6-month 

performance year from January 1, 2019, 

through June 30, 2019. These proposed 

policies would also apply to ACOs that 

begin a 12-month performance year on 

January 1, 2019, but 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 (early 

renewals). Our proposed policies 

address the following: (1) The ACO 

participant list that will be used to 

determine beneficiary assignment; (2) 

the approach to assigning beneficiaries; 

(3) the quality reporting period; (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. We propose 

to specify these policies for reconciling 

the 6-month period from January 1, 

2019, through June 30, 2019 in 

paragraph (b) of a new section of the 

regulations at § 425.609. 

We propose to use the ACO 

participant list for the performance year 

beginning January 1, 2019, to determine 

beneficiary assignment as specified in 

§§ 425.402 and 425.404, and according 

to the ACO’s track as specified in 

§ 425.400. As discussed in section 

II.A.7.c of this proposed rule, we 

propose to allow all ACOs, including 

ACOs entering a 6-month performance 

year, to make changes to their ACO 

participant list in advance of the 

performance year beginning January 1, 

2019. 

To determine beneficiary assignment, 

we propose 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 January 1, 

2019 through June 30, 2019, we propose 

to determine the assigned population 

using the following assignment 

windows: 

• For ACOs under preliminary 

prospective assignment with 

retrospective reconciliation, the 

assignment window would be calendar 

year 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. 

For example, in determining 

prospective beneficiary assignment for 

the January 1, 2019 through June 30, 

2019 performance year we could use an 

assignment window from October 1, 

2017, through September 30, 2018, to 

align with the off-set assignment 

window typically used to determine 

prospective assignment prior to the start 

of a calendar year performance year. 

Beneficiaries would remain 

prospectively assigned to the ACO at the 

end of calendar year 2019 unless they 


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meet any of the exclusion criteria under 

§ 425.401(b) during the calendar year. 

We note that this is the same 

approach that is used to determine 

assignment under the program’s current 

regulations. Therefore, it would also be 

used to determine assignment for the 

performance year beginning on January 

1, 2019, for ACOs that terminate their 

agreement effective June 30, 2019, and 

enter a new agreement period starting 

on July 1, 2019, for purposes of 

determining their performance during 

the performance period from January 1, 

2019 through June 30, 2019. 

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

this proposed rule, to determine ACO 

performance during a 6-month 

performance year, we propose 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. For early renewal 

ACOs that terminate their agreement 

effective June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019, 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 described 

in section II.A.7.c.4. of this proposed 

rule, we propose using a different 

quality measure sampling methodology 

depending on whether an ACO 

participates in both a 6-month 

performance year (or performance 

period) beginning January 1, 2019 and a 

6-month performance year beginning 

July 1, 2019, or only participates in a 6- 

month performance year from January 1, 

2019 through June 30, 2019. 

Consistent with current program 

policy, we would determine assignment 

for the benchmark years based on the 

most recent certified ACO participant 

list for the ACO effective for the 

performance year beginning January 1, 

2019. This would be the participant list 

the ACO certified prior to the start of its 

agreement period unless the ACO has 

made changes to its ACO participant list 

during its agreement period as provided 

in § 425.118(b). If the ACO has made 

subsequent changes to its ACO 

participant list, we would recalculate 

the historical benchmark using the most 

recent certified ACO participant list. See 

the 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. 

For the 6-month performance year 

from January 1, 2019, through June 30, 

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 would apply the 

methodology for establishing, updating 

and adjusting the ACO’s historical 

benchmark as specified in § 425.602 (for 

ACOs in a first agreement period) or 

§ 425.603 (for ACOs in a second 

agreement period), except that data from 

calendar year 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 calendar 

year 2019 using the methodology that 

accounts separately for newly and 

continuously assigned beneficiaries 

using prospective HCC risk scores and 

demographic factors as described under 

§§ 425.604(a)(1) through (3), 

425.606(a)(1) through (3), and 

425.610(a)(1) through (3). 

• The benchmark would be updated 

to calendar year 2019 according to the 

methodology for using growth in 

national Medicare FFS expenditures for 

assignable beneficiaries described under 

§ 425.602(b) (for ACOs in a first 

agreement period) and § 425.603(b) (for 

ACOs in a second agreement period 

beginning January 1, 2016), or the 

methodology for using growth in 

regional Medicare FFS expenditures 

described under § 425.603(d) (for ACOs 

in a second agreement period beginning 

January 1 of 2017, 2018, or 2019). 

We note this approach is already used 

to adjust and update the historical 

benchmark each performance year 

under the program’s current regulations. 

Therefore we would use this same 

approach to determine the benchmark 

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. 

For determining performance during 

the 6-month performance year (or 

performance period) from January 1, 

2019 through June 30, 2019, we would 

apply the methodology for determining 

shared savings and shared losses 

according to the approach specified for 

the ACO’s track under the terms of the 

participation agreement that was in 

effect on January 1, 2019: § 425.604 

(Track 1), § 425.606 (Track 2) or 

§ 425.610 (Track 3) and, as applicable, 

the terms of the ACO’s participation 

agreement for the Track 1+ Model 

authorized under section 1115A of the 

Act. (See discussion in section II.F of 

this proposed rule concerning 

applicability of proposed policies to 

Track 1+ Model ACOs). However, some 

exceptions to the otherwise applicable 

methodology are needed because we are 

proposing to calculate the expenditures 

for assigned beneficiaries over the full 

calendar year 2019 for purposes of 

determining shared savings and shared 

losses for the 6-month performance year 

(or performance period) from January 1, 

2019, through June 30, 2019. We 

propose to use the following steps to 

calculate shared savings and shared 

losses: 

• Average per capita Medicare 

expenditures for Parts A and B services 

for calendar year 2019 would be 

calculated for the ACO’s performance 

year assigned beneficiary population. 

• 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 January 1, 2019, would be 

used to determine the MSR for Track 1 

ACOs 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 twosided model ACO selected a fixed MSR/ 

MLR at the start of its agreement period, 

and the ACO’s performance year 

assigned population is 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 this proposed rule. 

++ To qualify for shared savings, the 

ACO’s average per capita Medicare 

expenditures for its performance year 

assigned beneficiaries during calendar 

year 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 calendar 

year 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 this 

section of this proposed rule, and 


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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 tracks 

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 

sequestration-adjusted 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 (or performance 

period). 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 

performance period) or the final amount 

of shared losses that would be owed by 

the ACO for the 6-month performance 

year (or performance period). 

We seek comment on these proposals. 

(3) Proposals for Determining 

Performance for the 6-Month 

Performance Year From July 1, 2019, 

Through December 31, 2019 

In this section, we describe 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 address 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 propose 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 note 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 described 

in section II.A.7.b.2 of this proposed 

rule for the 6-month performance year 

from January 1, 2019 through June 30, 

2019. However, 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 propose 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 this proposed rule, 

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 propose 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 

propose to determine the assigned 

population using the following 

assignment windows: 

• For ACOs under preliminary 

prospective assignment with 

retrospective reconciliation, the 

assignment window would be calendar 

year 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. For example, we could 

use an assignment window from April 

30, 2018, through March 31, 2019. 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 calendar year 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 of this 

proposed rule, to determine ACO 

performance during either 6-month 

performance year, we propose 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 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 would apply the 

methodology for establishing, updating 

and adjusting the ACO’s historical 

benchmark as specified in proposed 

§ 425.601, except that data from 

calendar year 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 calendar 

year 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 

discussion in section II.D.2 of this 

proposed rule. 

• The benchmark would be updated 

to calendar year 2019 according to the 

methodology described under proposed 

§ 425.601(b) using a blend of national 

and regional growth rates. 


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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, some exceptions 

to the otherwise applicable 

methodology are needed because we are 

proposing to calculate the expenditures 

for assigned beneficiaries over the full 

calendar year 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 propose to use the following 

steps to calculate shared savings and 

shared losses: 

• Average per capita Medicare 

expenditures for Parts A and B services 

for calendar year 2019 would be 

calculated for the ACO’s performance 

year assigned beneficiary population. 

Additionally, when calculating calendar 

year 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). 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 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 is 

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 this 

proposed rule. 

++ To qualify for shared savings, the 

ACO’s average per capita Medicare 

expenditures for its performance year 

assigned beneficiaries during calendar 

year 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 calendar 

year 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 this 

section of this proposed rule, 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 

sequestration-adjusted 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 seek comment on these proposals. 

c. Applicability of Program Policies to 

ACOs Participating in a 6-Month 

Performance Year 

In general, unless otherwise stated, 

we are proposing 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. This would allow routine program 

operations to continue to apply for 

ACOs participating under these shorter 

performance years. Further, it would 

ensure consistency in the applicability 

and implementation of our requirements 

across all program participants, 

including ACOs participating in 6- 

month performance years. As we 

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

proposed rule, limited exceptions to our 

policies for determining financial and 

quality performance are necessary to 

ensure calculations can continue to be 

performed on a calendar year basis and 

using the most relevant data. 

In this section, we describe our 

consideration of program participation 

options affected by our decision to forgo 

an application cycle in calendar year 

2018 for a January 1, 2019 start date, 

and the proposal to offer instead an 

application cycle in calendar year 2019 

for a July 1, 2019 start date. We discuss 

program policies that would need to be 

modified to allow for the proposed 6- 

month performance years within 

calendar year 2019, and related 

proposals to revise the program’s 

regulations to allow for these 

modifications. 

(1) Unavailability of an Application 

Cycle for Use of a SNF 3-Day Rule 

Waiver Beginning January 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, 

ACOs within a current agreement period 

under Track 3, or the Track 1+ Model 

as described in sections II.B.2.a and II.F 

of this proposed rule, may apply for a 

SNF 3-day rule waiver, which if 

approved would begin at the start of 

their next performance year. As 

discussed in section II.B.2.a of this 

proposed rule, we propose to allow the 


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SNF 3-day rule waiver under the Shared 

Savings Program to be more broadly 

available to BASIC track ACOs (under a 

two-sided model) and ENHANCED track 

ACOs, regardless of their choice of 

beneficiary assignment methodology. 

In light of our decision to forgo an 

application cycle in calendar year 2018 

for a January 1, 2019 agreement start 

date, we also would not offer 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 would be the next opportunity 

for eligible ACOs to begin use of a 

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 would extend to ACOs 

within existing agreement periods in 

Track 3 that would, under 12 month 

performance years, not otherwise have 

the opportunity to apply to begin use of 

the waiver until January 1, 2020. We 

believe 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 are not proposing any 

corresponding revisions to this 

provision at this time. 

(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. 

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. In 

the case of ACOs that participate for a 

portion of calendar year 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, to 

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, spanning July 1, 2019 

to December 31, 2019. 

Each ACO certifies 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). The 

addition of ACO participants must 

occur prior to the start of the 

performance year in which these 

additions become effective. ACO 

participant must be deleted from the 

ACO participant list within 30 days 

after termination of the ACO participant 

agreement, and such deletion is 

effective as of the termination date of 

the ACO participant agreement. 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, for example, 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. These policies would 

apply for ACOs participating in a 6- 

month performance year consistent with 

the terms of the existing regulations. 

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, would have the 

opportunity during 2018 to make 

changes to their ACO participant list to 

be effective for the 6-month 

performance year from January 1, 2019, 

to 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, would 

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 would 

remain in effect for the full performance 

year from July 1, 2019, to December 31, 

2019. These ACOs would have the 

opportunity to add or delete ACO 

participants prior to the start of the next 

performance year. Any additions to the 

ACO participant list that are approved 

by CMS would become effective at the 

start of performance year 2020. 

The program’s current regulations 

prevent duplication of shared savings 

payments. 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 

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, then: (i) CMS will not 

consider any services billed through the 

TIN of the ACO participant when 

performing assignment for the 

benchmark or performance year; and (ii) 

the ACO may be subject to the pretermination actions set forth in 

§ 425.216, termination under § 425.218, 

or both. 

We note the following examples, 

regarding ACO participants that submit 

claims for services that are used 

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, 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 


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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 July 1, 

2019. 

(3) Repayment Mechanism 

Requirements 

ACOs must demonstrate that they 

have in place an adequate repayment 

mechanism prior to entering a two-sided 

model. The repayment mechanism must 

be in effect for the duration of an ACO’s 

participation in a two-sided model and 

for 24 months following the conclusion 

of the agreement period. (See discussion 

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

We note that ACOs that started a first 

or second agreement period January 1, 

2016 in a two-sided model would have 

in place under current program policies 

a repayment mechanism arrangement 

that would cover the 3 years between 

January 1, 2016 and December 31, 2018 

plus a 24-month tail period until 

December 31, 2020. In the case of an 

ACO with an agreement period ending 

December 31, 2018, that extends its 

agreement for the 6-month performance 

year from January 1, 2019 through June 

30, 2019, we would require the ACO to 

extend the term of its repayment 

mechanism so that it would be in effect 

for the duration of the ACO’s 

participation in a two-sided model plus 

24 months following the conclusion of 

the agreement period (that is, until June 

30, 2021). This will allow us sufficient 

time to perform financial calculations 

for the 6-month performance year from 

January 1, 2019 through June 30, 2019 

and to use the arrangement to collect 

shared losses for that performance year, 

if necessary. This policy is consistent 

with the policy proposed in section 

II.A.6.c and at § 425.204(f)(6)(i), which 

provides that a repayment mechanism 

must be in effect for the duration of the 

ACO’s participation in a two-sided 

model plus 24 months following the 

conclusion of the agreement period. 

Consistent with our proposed policy 

described in section II.A.6.c and 

§ 425.204(f)(4)(iv), a renewing ACO that 

is under a two-sided model and entering 

a new agreement period beginning July 

1, 2019 would 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. As previously 

described, we would require the ACO to 

extend the term of the existing 

repayment mechanism by an amount of 

time specified by CMS and, if necessary, 

to increase the amount of the repayment 

mechanism to reflect the new 

repayment mechanism amount. 

We are proposing that, for agreement 

periods beginning on or after July 1, 

2019, we would recalculate the amount 

of the ACO’s repayment mechanism 

before the second and each subsequent 

performance year in the agreement 

period, based on the ACO’s certified 

ACO participant list for the relevant 

performance year. Therefore, for an 

ACO that enters a new agreement period 

beginning July 1, 2019, we would 

calculate the amount of the repayment 

mechanism for the new agreement 

period in accordance with our proposed 

regulation at § 425.204(f)(4). Before the 

start of performance year 2020, we 

would recalculate the amount of the 

ACO’s repayment mechanism. 

Depending on how much the 

recalculated amount exceeds the 

existing repayment mechanism amount, 

we would require the ACO to increase 

its repayment mechanism amount, 

consistent with our proposed approach 

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

proposed rule and § 425.204(f)(4)(iii). 

(4) Proposals for Quality Reporting and 

Quality Measure Sampling 

In order to determine an ACO’s 

quality performance during either 6- 

month performance year during 2019, 

we propose 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 calendar year. 

As we previously described in section 

II.A.7.b.2 of this proposed rule, 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. 

We believe 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 

calendar year 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. 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-Fee-for-ServicePayment/sharedsavingsprogram/ 

Downloads/2018-reporting-yearnarrative-specifications.pdf. Third, in 

light of our proposal to use 12 months 

of expenditures (based on calendar year 

2019) in determining shared savings and 

shared losses for a 6-month performance 

year, we believe it is also appropriate to 

hold ACOs accountable for the quality 

of the care furnished to their assigned 

beneficiaries during this same time 

frame. 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 

calendar year 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 described in section II.A.7.c.2. of 

this proposed rule, ACOs in either 6- 


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month performance year 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 ACO participant 

list as part of its renewal application for 

a July 1, 2019 start date). As discussed 

in sections II.A.7.b.2 (January 2019–June 

2019) and II.A.7.b.3 (July 2019– 

December 2019), 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 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 

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 propose 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 believe the 

use of the ACO’s most recent ACO 

participant list to assign beneficiaries 

according to the assignment 

methodology applicable based on the 

ACO’s most recent participation in the 

program during 2019 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 

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 believe this 

proposed approach to determining the 

ACO’s quality reporting samples is 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. 

We propose to specify the ACO 

participant lists 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. Specifically 

we propose to use the following 

approach to determine the ACO 

participant list, assignment 

methodology and assignment window 

that would be used to generate the 

quality reporting samples for measuring 

quality performance of ACOs 

participating in a 6-month performance 

year (or performance period) during 

2019. 

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, to 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 propose 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, 

to 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, to 

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 anticipate 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 it is 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 believe it is 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. 

If an ACO extends its participation to 

the first 6 months of 2019, but does not 

enter a new agreement period beginning 

on July 1, 2019, we propose to use the 

ACO’s latest certified participant list 

(the ACO participant list effective on 

January 1, 2019) to determine the 

quality reporting samples for the 2019 

reporting period. Beneficiary 

assignment for purpose of generating the 

quality reporting samples would be 

based on the assignment methodology 

applicable to the ACO during its 6- 

month performance year from January 1, 

2019, through June 30, 2019, under 

§ 425.400, either preliminary 

prospective assignment or prospective 

assignment, with excluded beneficiaries 

removed under § 425.401(b), as 

applicable. We anticipate the 

assignment windows for the quality 

reporting samples would be as follows 

based on our operational experience: (1) 

Samples for claims-based measures 


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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; and (3) the sample for the 

CAHPS for ACOs survey would be 

determined based on the assignment list 

for calendar year quarter 2. This 

approach maintains alignment with the 

assignment windows currently used for 

establishing quality reporting samples 

for these measures. 

(5) Proposals for Applicability of 

Extreme and Uncontrollable 

Circumstances Policies 

We propose in section II.E.4 of this 

proposed rule to extend the policies 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. As specified in section II.E.4, if 

this proposal is finalized, these policies 

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). We also 

propose that for ACOs that are 

involuntarily terminated during a 6- 

month performance year, pro-rated 

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 (according to section 

II.A.6.d of this proposed rule) and the 

impact of extreme and uncontrollable 

circumstances on the ACO (if 

applicable). 

(6) Proposals for Payment and 

Recoupment for 6-Month Performance 

Years 

We propose to provide separate 

reconciliation reports for each 6-month 

performance year, and we would pay 

shared savings or recoup shared losses 

separately for each 6-month 

performance year. Since we propose to 

perform financial reconciliation for both 

6-month performance years during 2019 

after the end of calendar year 2019, we 

anticipate 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). 

We propose to apply the same 

policies regarding notification of shared 

savings payment 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 propose 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 propose 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; (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 anticipate results for both 

6-month performance years would be 

available at approximately the same 

time, 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 withhold from 

shared savings. See 76 FR 67941 

through 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 

calendar year 2019. We propose 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 propose 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 believe 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 note 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 propose to specify these policies 

on payment and recoupment for ACOs 

in 6-month performance years within 

calendar year 2019 in a new section of 

the regulations at § 425.609(e). 

(7) Proposals for 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 

believe it is necessary to address how 

we would apply the policy for moving 


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ACOs along the glide path in an 

agreement period with a duration of 

more than 5 years. We propose a onetime 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 July 1, 

2019. For performance year 2020, the 

ACO would remain in the same level of 

the BASIC track’s glide path it entered 

for the 6-month performance year 

beginning 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. 

(8) Interactions With the Quality 

Payment Program 

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 using 

claims data for services furnished 

during those dates on which the 

Advanced APM is actively tested. This 

means that an 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)). 

We therefore believe 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. 

(9) Proposals for Sharing CY 2019 

Aggregate Data With ACOs in 6-month 

Performance Year From January 2019 

Through June 2019 

Under the program’s current 

regulations in § 425.702, we share 

aggregate data with ACOs during the 

agreement period. This includes 

providing data at the beginning of each 

performance year and quarterly during 

the agreement period. For ACOs that 

started a first or second agreement 

period on January 1, 2016, that extend 

their agreement for an additional 6- 

month performance year from January 1, 

2019, through June 30, 2019, and ACOs 

that participate in the first 6 months of 

a 12-month performance year 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 propose to continue to 

deliver aggregate reports for all four 

quarters of calendar year 2019 based on 

the ACO participant list in effect for the 

first 6 months of the year. This would 

allow ACOs a more complete 

understanding of the Medicare FFS 

beneficiary population that is the basis 

for reconciliation for the first 6 months 

of the year. This would allow ACOs to 

receive data including demographic 

characteristics and expenditure/ 

utilization trends for their assigned 

population. We believe 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 who are assigned to the 

ACO for the 6-month performance year 

(or 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 2019. Otherwise, we 

could be limited to providing ACOs 

with aggregate reports only for the first 

and second quarters of 2019, even 

though the proposed reconciliation 

would involve consideration of 

expenditures occurring outside this 

period during 2019. We propose to 

specify this policy in revisions to 

§ 425.702. 

(10) Proposals for Technical or 

Conforming Changes To Allow for 6- 

Month Performance Years 

We propose to make certain technical, 

conforming changes to the following 

provisions, including additional 

changes to provisions discussed 

elsewhere in this proposed rule, to 

reflect our proposal to add a new 

provision at § 425.609 to govern the 

calculation of the financial results for 6- 

month performance years within 

calendar year 2019. 

We propose that the policies on 

reopening determinations of shared 

savings and shared losses to correct 

financial reconciliation calculations 

(§ 425.315) would apply with respect to 

applicable program determinations for 

performance years within calendar year 

2019. We propose to amend § 425.315 to 

incorporate references to the 

methodology for determining 

performance for 6-month performance 

years within calendar year 2019, as 

specified in § 425.609. 

We propose to add a reference to 

§ 425.609 in § 425.100 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. 

In § 425.204(g), we propose to add a 

reference to § 425.609 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. 

In § 425.400(a)(1)(ii), describing the 

step-wise process for determining 

beneficiary assignment for each 

performance year, we propose to also 

specify that this process would apply to 

ACOs participating in a 6-month 

performance year within calendar year 

2019, and that assignment would be 

determined based on the beneficiary’s 

utilization of primary care services 

during the entirety of calendar year 

2019, as specified in § 425.609. 

In § 425.400(c)(1)(iv), on the use of 

certain Current Procedural Terminology 

(CPT) codes and Healthcare Common 

Procedure Coding System (HCPCS) 

codes in determining beneficiary 

assignment, as proposed to be revised in 

section II.E.3 of this proposed rule, we 

propose to further revise the provision 

to specify that it will be used in 

determining assignment for performance 

years starting on January 1, 2019, and 

subsequent years. 

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 propose to specify that these 

exclusions would occur at the end of 

calendar year 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. 


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As part of the proposed revisions to 

§ 425.402(e)(2), which, as described in 

section II.E.2 of this proposed rule, 

specifies that beneficiaries who have 

designated a provider or supplier 

outside the ACO as responsible for 

coordinating their overall care will not 

be added to the ACO’s list of assigned 

beneficiaries for a performance year 

under the claims-based assignment 

methodology, we propose to allow the 

same policy to apply to ACOs 

participating in a 6-month performance 

year during calendar year 2019. 

In § 425.404(b), on the special 

assignment conditions for ACOs 

including FQHCs and RHCs that are 

used determining beneficiary 

assignment, we propose to revise the 

provision to specify its applicability in 

determining assignment for performance 

years starting on January 1, 2019, and 

subsequent performance years. 

We also propose 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 

calendar year 2019. For clarity and 

simplicity, we propose 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 calendar 

year 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 calendar 

year 2019. 

We propose 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 

propose 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 

calendar year 2019 data in place of 

performance year data. 

B. Fee-for-Service Benefit Enhancements 

1. Background 

As discussed in earlier rulemaking 

(for example, 80 FR 32759) and 

previously in this proposed rule, we 

believe that models where ACOs bear a 

degree of financial risk have the 

potential to induce more meaningful 

systematic change than one-sided 

models. We believe that two-sided 

performance-based risk provides 

stronger incentives for ACOs to achieve 

savings and, as discussed in detail in 

the Regulatory Impact Analysis (see 

section IV. of this proposed rule), our 

experience with the program indicates 

that ACOs in two-sided models 

generally perform better than ACOs that 

participate under a one-sided model. 

We believe that 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. 

We believe that 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 this proposed rule, we propose 

modifications to the existing SNF 3-day 

rule waiver and propose 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 propose to 

use our authority under section 1899(f) 

to waive the requirements of section 

1834(m)(4)(C)(i) and (ii) 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 propose 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 discussed below. 

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 


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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). 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. We also continue to believe 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. However, we now 

believe 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 

expanded 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 

this proposed rule, we propose 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 this 

proposed rule, we propose that BASIC 

track ACOs entering the track’s glide 

path under a one-sided model will be 

automatically transitioned to a twosided model during their agreement 

period and may elect to enter two-sided 

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). 

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 now believe it would 

be appropriate to expand eligibility for 

the SNF 3-day rule waiver to include 

ACOs participating in a two-sided 

model under preliminary prospective 

assignment. As explained in this 

section, we originally excluded Track 2 

ACOs, which participate under twosided 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 now believe riskbearing 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 believe 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. We believe 

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 propose 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 note 

that under existing Medicare payment 

policies, services furnished to Medicare 

beneficiaries outside the U.S. are not 


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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 

methodology to include beneficiaries 

who are preliminarily prospectively 

assigned to a waiver-approved ACO. 

Rather, beneficiaries who are 

preliminarily prospectively assigned a 

to 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 propose 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 twosided 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, 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 


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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 

propose 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 

propose 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 are 

proposing 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 

are proposing 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 are proposing to add 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. We are not 

proposing to make the revisions to the 

SNF 3-day rule waiver applicable for 

Track 2 ACOs because we are proposing 

to phase out Track 2, as discussed at 

section II.A.2 of this proposed 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 

II.A.2 of this proposed 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 invite comments on 

these proposals and related issues. 

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, 


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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. 

Next Generation ACOs encouraged 

CMS to broaden the telehealth waiver 

under the Next Generation ACO Model 

to test the use of asynchronous 

technologies to increase access to care 

and further support coordination of care 

for certain dermatology and 

ophthalmology services. Therefore, 

effective for 2018, the Telehealth 

Expansion Benefit Enhancement under 

the Next Generation ACO Model has 

been amended to include a waiver of the 

requirement under section 1834(m)(1) 

and § 410.78(b) that telehealth services 

be furnished via a ‘‘interactive 

telecommunications system’’ as that 

term is defined under § 410.78(a)(3) in 

order to permit coverage of certain 

teledermatology and teleophthalmology 

services furnished using asynchronous 

technologies. 

(2) Provisions of the Bipartisan Budget 

Act for Telehealth in the Shared Savings 

Program 

Section 50324 of the Bipartisan 

Budget Act of 2018 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, 

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 propose 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 propose 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 propose 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 of this proposed rule, 

the Shared Savings Program offers two 

similar, but distinct, assignment 

methodologies, prospective assignment 

and preliminary prospective assignment 

with retrospective reconciliation. We 

propose to apply these policies 

regarding payment for telehealth 

services to ACOs under a two-sided 

model that participate under the 

prospective assignment method. We 

believe 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 welcome comments 

on our interpretation of this provision. 

We propose that the policies 

governing telehealth services furnished 

in accordance with section 1899(l) of 

the Act would be effective for telehealth 


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20https://www.cms.gov/Regulations-andGuidance/Guidance/Manuals/Downloads/clm104

c12.pdf. 

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 this 

proposed rule, we propose 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 

originating site requirements, under 

section 1834(m)(4)(C) of the Act. 

We propose 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 

propose that Medicare would not pay a 

facility fee when the originating site for 

a telehealth service is the beneficiary’s 

home. 

Further, we propose 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 propose 

to require that, consistent with section 

1899(l)(1)(B) of the Act, the originating 

site must comply with State licensing 

requirements. 

We propose 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 propose 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,20

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. 

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 


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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 are proposing 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 propose 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 propose 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 

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, we are concerned that 

there could be scenarios where a 

beneficiary could be charged for noncovered 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 

propose 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 propose 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 


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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. 

We note that we are not proposing at 

this time to establish any waiver of 

section 1834(m)(1) to permit payment 

for telehealth services delivered through 

asynchronous technologies because we 

do not have sufficient experience with 

the waiver that is being tested under the 

Next Generation ACO Model, to inform 

whether such a waiver would be 

necessary for purposes of implementing 

the Shared Savings Program. We may 

consider this issue further through 

future rulemaking after we gain 

additional experience with the use of 

asynchronous technologies through the 

Next Generation ACO Model. We 

welcome 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 use of telehealth 

services in accordance with section 

1899(l) of the Act by track are 

summarized in Table 9. 

TABLE 9—AVAILABILITY OF PROPOSED PAYMENT AND PROGRAM POLICIES TO ACOS BY TRACK

Policy Policy 

description 

Track 1 

(One-sided 

model; 

propose to 

discontinue) 

Track 2 

(Two-sided 

model; 

propose to 

discontinue) 

Track 1+ 

model 

(two-sided model) 

BASIC 

track 

(proposed 

new track) 

ENHANCED 

track 

(proposed; 

current 

track 3 

financial 

model) 

Telehealth Services furnished in 

accordance with 

§ 1899(l) of the 

Act.

Removes geographic limitations and allows 

the beneficiary’s home 

to serve as 

originating site 

for prospectively assigned 

beneficiaries.

N/A (because this 

is a one-sided 

model under 

preliminary prospective assignment).

N/A (because 

under preliminary prospective assignment).

Proposed requirements for performance year 

2020 and onward (prospective assignment) 1.

Proposed requirements for performance year 

2020 and onward, applicable for performance years 

under a twosided model 

(prospective assignment).

Proposed requirements for performance year 2020 

and onward (prospective assignment) 

SNF 3-Day Rule 

Waiver 2.

Waives the requirement for a 

3-day inpatient 

stay prior to admission to a 

SNF affiliate.

N/A (unavailable 

under current 

policy).

N/A (unavailable 

under current 

policy).

Current policy 

(prospective assignment).

Proposed for performance years 

beginning on 

July 1, 2019 

and subsequent 

years, eligible 

for performance 

years under a 

two-sided 

model (prospective or preliminary prospective assignment).

Proposed for performance years 

beginning on July 

1, 2019 and subsequent years 

(prospective or 

preliminary prospective assignment) 

Notes: 1An amendment to the Track 1+ Model Participation Agreement would be required to apply the proposed policies regarding the use of 

telehealth services under § 1899(l) to Track 1+ Model ACOs as described in section II.F of this proposed rule. 2As discussed in section II.A.7.c and II.F of this proposed rule, Track 3 ACOs and Track 1+ Model ACOs participating in a performance year 

beginning on January 1, 2019, may apply for a SNF 3-day rule waiver effective on July 1, 2019. We expect this application cycle would coincide 

with the application cycle for new agreement periods beginning on July 1, 2019. 

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 the agency’s 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, Congress recently passed 

section 50341 of the Bipartisan Budget 

Act of 2018, which amends section 1899 

of the Act, to allow 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 are proposing policies 

to allow any ACO in Track 2, levels C, 

D, or E of the BASIC track, or the 

ENHANCED track to establish a CMSapproved beneficiary incentive program 

to provide incentive payments to 


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eligible beneficiaries who receive 

qualifying services. 

Furthermore, we are proposing to 

revise policies related to beneficiary 

notifications. Specifically, we propose 

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 are 

seeking 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 ‘‘optedin’’ to assignment to the ACO. 

2. Beneficiary Incentives 

a. Overview 

We believe that patient engagement is 

an important part of motivating and 

encouraging more active participation 

by beneficiaries in their health care. We 

believe 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 note 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. 

We believe that the 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 § 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 § 425.304, 

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 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 selfmanagement, 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 mentioned 

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 

§ 425.304(a)(2). 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, 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 ‘‘in-kind items or 

services’’ that can be offered under 

§ 425.304(a)(2), provided that the 

requirements of § 425.304(a)(2) 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 § 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, 


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provided that all of the criteria set forth 

in § 425.304(c), as proposed, are 

satisfied. We emphasize 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 § 425.304(a)(2) 

(including the previously mentioned 

examples), stakeholders have advocated 

that ACOs be permitted to offer a more 

flexible, expanded range of beneficiary 

incentives that are not currently 

allowable under § 425.304. In particular, 

stakeholders seek 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, 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 adds 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 adds 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 adds 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 

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. 


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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. Proposals for Beneficiary Incentive 

Programs 

In order to implement the changes set 

forth in section 1899(b)(2) and (m) of the 

Act, we are proposing to add regulation 

text at § 425.304(c) that would allow 

ACOs participating under certain twosided models to establish beneficiary 

incentive programs to provide incentive 

payments to assigned beneficiaries who 

receive qualifying services. In 

developing our proposed policy, we 

have 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 address each of these 

considerations in this 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 

this proposed rule, we are proposing 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 risk 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. 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 

propose 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. 

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. The ACO could, however, start a 

beneficiary incentive program on 

January 1, 2020 (assuming it renews its 

agreement). 

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 

believe 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. For example, 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 

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, 

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 believe 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 propose 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 would provide additional 

information regarding the application 

on our website. 

We propose 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 propose 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. This 

would apply to ACOs that enter a twosided model at the start of an agreement 

period but that do not apply to establish 


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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 proposed 

rule). 

An ACO would be required to operate 

its beneficiary incentive program 

effective at the beginning of the 

performance year following CMS’s 

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). 

An ACO with an approved beneficiary 

incentive program application would be 

permitted to operate its beneficiary 

incentive program for any consecutive 

performance year if it complies with 

certain certification requirements. 

Specifically, an ACO that seeks to 

continue to offer its beneficiary 

incentive program beyond the initial 12- 

month or 18-month term (as previously 

discussed) would 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. 

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. CMS 

would provide further information 

regarding the annual certification 

process through subregulatory guidance. 

In addition to the application and 

certification requirements previously 

described, we are considering 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 

solicit comments on this issue. 

With respect to who may receive an 

incentive payment, 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 note 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 this proposed rule, we propose 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, 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 policy regarding which ACOs 

may establish a beneficiary incentive 

program, 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 may 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 mirror 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. This means that any 

service furnished by an ACO 

professional who is a physician but does 

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, 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 

propose to incorporate a $20 incentive 

payment limit into the regulation. We 

also propose 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 believe it is necessary to 

round the updated maximum incentive 

payment amount to the nearest whole 

dollar. We have reflected this policy in 

our proposed regulations text. We 

would post the updated maximum 

payment amount on the Shared Savings 

Program website and/or in a guidance 

regarding beneficiary incentive 

programs. 

We also propose 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, 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, an 

ACO may 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 are of 

equal monetary value. 

Furthermore, as required by section 

1899(m)(2)(D)(iii) of the Act, we propose 

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 propose 

to require that each incentive payment 

be ‘‘made no later than 30 days after a 

qualifying service is furnished to such a 

beneficiary.’’ 

We have considered the individuals 

and entities that should be permitted to 

offer incentive payments to beneficiaries 

under a beneficiary incentive program. 

We note that section 1899(m)(2)(D) of 

the Act, which addresses incentive 


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payments, contemplates that incentive 

payments be furnished directly by an 

ACO to a beneficiary. In addition, we 

believe this requirement is 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 are therefore 

proposing to require that the ACO legal 

entity, and not ACO participants or 

ACO providers/suppliers, furnish the 

incentive payments directly to 

beneficiaries. We seek 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 believe it is 

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 propose 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 have 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 believe 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 propose 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. An ACO that 

establishes a beneficiary incentive 

program would be required to maintain 

and make available such records in 

accordance with § 425.314(b). In 

addition to these record retention 

proposals, we expect any ACO that 

establishes a beneficiary incentive 

program to update its compliance plan 

(as required under § 425.300(b)(2)), to 

address any finalized regulations that 

address beneficiary incentive programs. 

Furthermore, we propose 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 

propose 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 

believe these requirements are necessary 

to reduce the likelihood of undue 

influence resulting in inappropriate 

steering of beneficiaries to specific 

products or providers/suppliers. We 

seek comments on this issue. 

We also propose 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 

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 propose 

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 propose 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 believe 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 seek 

comments on all of our proposed 

program integrity requirements. 

In addition, we are proposing 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 

are also proposing 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 propose 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 have included this 

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 

believe 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 are 

therefore proposing this policy at 

§ 425.304(c)(7). We solicit comment on 

whether it would be appropriate for the 

Secretary to terminate a beneficiary 


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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 propose 

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 are also 

proposing 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 note 

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 

welcome 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 

§ 425.304(c)(4)(i)) to support such an 

evaluation of beneficiary incentive 

programs. We note, however, that we do 

not want to discourage participation by 

imposing overly burdensome data 

management requirements on ACOs. We 

therefore seek comment on reporting 

requirements for ACOs that are 

approved to establish a beneficiary 

incentive program. 

In addition, we note 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). 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 are considering whether 

beneficiaries should be notified of the 

availability of a beneficiary incentive 

program. Because beneficiary incentives 

may be subject to abuse, we believe it 

is necessary, and we have proposed, to 

prohibit the advertisement of a 

beneficiary incentive program. We are 

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 by this proposed rule in section 

II.C.3.a., all ACO participants are 

required to notify beneficiaries that their 

ACO providers/suppliers are 

participating in the Shared Savings 

Program. We solicit 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 

seek 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 note 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 

propose 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 

on its public reporting web page. 

Specifically, we propose 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 note that this proposed policy 

would require reporting for the 6-month 

performance year that begins on July 1, 

2019. We seek 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 are proposing 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 10. 

TABLE 10—ABILITY OF ACOS TO ESTABLISH A PROPOSED BENEFICIARY INCENTIVE PROGRAM BY TRACK

Policy Policy description 

Track 1 

(one-sided 

model; propose to discontinue) 

Track 2 

(two-sided model; 

propose to 

discontinue) 

Track 1+ 

model 

(two-sided 

model) 

BASIC track 

(proposed new track) 

ENHANCED track 

(proposed; current 

track 3 financial 

model) 

Beneficiary 

Incentive 

Program.

Requires ACOs that establish a beneficiary incentive program to provide 

an incentive payment to 

each assigned beneficiary (prospective or 

preliminary prospective) 

for each qualifying service received.

N/A Proposed beginning 

July 1, 2019 and 

for subsequent 

performance years 

(preliminary prospective assignment).

N/A Proposed beginning 

July 1, 2019 and 

for subsequent 

performance years 

for ACOs in Levels 

C, D or E (prospective or preliminary prospective 

assignment).

Proposed beginning 

July 1, 2019 and 

for subsequent 

performance years 

(prospective or 

preliminary prospective assignment). 


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d. Clarification of Existing Rules 

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 propose a technical 

change to the title and structure of 

§ 425.304. Specifically, we are 

proposing 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 propose 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).’’ 

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 

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/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 previously discussed, 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 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 can login to 

MyMedicare.gov and select the primary 


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21Accountable Care Organizations & You, 

available at https://www.medicare.gov/Pubs/pdf/ 

11588-Accountable-Care-Organizations-FAQs.pdf. 

22Empowering 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. 

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, 

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-Fee-for-ServicePayment/sharedsavingsprogram/ 

index.html). This material includes 

resources designed to educate 

beneficiaries about the Shared Savings 

Program and ACOs,21 and specifically 

on the voluntary alignment process.22

(2) Proposed Revisions 

We are revisiting 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. We have also proposed 

changes in response to section 50331 of 

the Bipartisan Budget Act of 2018, 

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 addition, 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. While there are many 

sources of information on the program 

that are available to beneficiaries, 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. 

We also considered methods of 

notification that would better ensure 

that beneficiaries receive the 

comprehensive notification at the point 

of care. The current 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. 

Although standardized written notices 

must be made available upon request, 

we are concerned that few beneficiaries, 

or others who accompany beneficiaries 

to their medical appointments, may 

initiate request for this information. In 

turn, beneficiaries may not have the 

information they need to make informed 

decisions about their health care and 

their data. 

Finally, we considered how to 

minimize burden on the ACO providers/ 

suppliers that would provide the 

notification. We seek 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 are proposing to 

modify § 425.312(a) to require 

additional content for beneficiary 

notices. We propose 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 propose 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 this 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 

propose 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 propose to 

require ACO participants to use a 

template notice that we would prepare 

and make available to ACOs. 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, the 

template notice would provide details 

regarding how a beneficiary may select 

his or her primary care provider on 

MyMedicare.gov, and the step-by-step 

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. The CMS-developed 

template notice would also 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. 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 § 425.312(b)(2). 

We believe 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 believe 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 believe 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 seek 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 seek comment on whether 

a beneficiary should receive the written 

notice at the beneficiary’s first primary 

care visit of the performance year, or 


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during the beneficiary’s first visit of the 

performance year with any ACO 

participant. We also seek comment on 

whether there are alternative media for 

disseminating the beneficiary notice 

that may be less burdensome on ACOs, 

such as dissemination via email. 

In addition, we solicit comment on 

whether the template notice should 

include other information outlining 

ACO activities that may be related to or 

affect a Medicare FFS beneficiary. Such 

activities may 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 welcome feedback on the 

format, content, and frequency of this 

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 may place on ACO 

participants. More specifically, we 

welcome 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 are also taking this opportunity to 

add 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 seek 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 are also proposing 

technical changes to the title and 

structure of § 425.312. For example, we 

are proposing to replace the title of 

§ 425.312 with ‘‘Beneficiary 

notifications.’’ 

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, we believe that 

incorporating an opt-in based 

assignment methodology, and deemphasizing the claims-based 

assignment methodology, could have 

merit as a way to assign beneficiaries to 

ACOs. Therefore, 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.E.2, we have recently implemented a 

voluntary alignment process (which we 

are proposing to refine based on 

requirements in the Bipartisan Budget 

Act), 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, 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. We believe 

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 optin based methodology to assign 

beneficiaries to ACOs. These issues 


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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. These issues are addressed in 

the following discussion. 

We believe under an opt-in based 

assignment methodology, it would be 

important for ACOs to manage notifying 

beneficiaries, collecting beneficiary optin 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 opt-in 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 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/Medicare

MangCareEligEnrol/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 note 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 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.) 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 

opting-in 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 they 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 believe 

this provision would authorize CMS to 

conduct oversight regarding ACOs’ 

records documenting the beneficiaries 

who received such a notification and 

the beneficiary responses. 

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 optin 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 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 are 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. We 

believe it could be difficult for a new 

ACO to achieve 5,000 beneficiary optins prior to the start of its first 

performance year under the program, as 

required by the statute in order to be 


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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.6.b 

of this proposed 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 

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 is 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 on 

his or her opting-in 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. We note that 

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 

order to meet this requirement under an 

opt-in based assignment methodology, 

we are 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 are 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 the proposed 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 are 

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 believe 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, including the proposed revisions to 

provisions at §§ 425.400, 425.401, 

425.402 and 425.404 as discussed in 

sections II.E.2 and II.E.3 of this 

proposed rule (herein referred to as the 

‘‘existing assignment methodology’’ 

which would be comprised of a claimsbased 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 opt-ins 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 


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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 

are 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 claims-based assignment, and 

voluntary alignment). As described in 

this section, 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 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. 

For ACOs electing to participate 

under an opt-in based assignment 

methodology, we would assign 

beneficiaries to the ACO using a hybrid 

approach that would be 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 note that 

this threshold of seven primary care 

services is 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 believe it could be appropriate to 

establish such 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 seek 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 proposed in 

section II.A.4.c. of this proposed 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 believe that the 

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 that 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.6.3. of this proposed 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 


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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 believe that any minimum 

population requirement should be 

proportional to the size of ACO’s 

population, to recognize differences in 

the population sizes of 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 optin assigned beneficiaries. 

Under opt-in based assignment, we 

anticipate that 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 chose 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, beneficiary 

spends time in and receives care in 

different parts of the country during the 

year (sometimes referred to as being a 

‘‘snowbird’’), or the beneficiary receives 

care from a tertiary care facility that is 

geographically distant from his or her 

home. Further, this approach is in line 

with the expanded telehealth policies 

discussed in section II.B of this 

proposed rule under which certain 

geographic and other restrictions would 

be removed. We welcome 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. 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 proposed 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. 

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 what is 

proposed in section II.D 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 anticipate that beneficiaries who 

opt-in would likely be a subset of 

beneficiaries who would have been 

assigned under the existing claimsbased 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 


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visits annually. Similar to the trend we 

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 

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 presume this is 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 is 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 would monitor the effects of this 

policy to determine if it is effective in 

addressing the differences in 

characteristics between the population 

assigned for 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 were 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 

January 1, 2020 and concluding 

December 31, 2024, and a beneficiary 

opted in and was assigned for 2023 and 

remained opted in and assigned for 

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 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. 


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In section II.D. of this proposed rule, 

we propose 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 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 

are 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 opted-in 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 believe 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 note 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 (see section IV.D of this 

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. 

Although for some policies we can draw 

upon our initial experience with 

implementing voluntary alignment. We 

believe the approach to adjusting 

benchmarks to address an opt-in based 

assignment methodology, as discussed 

in this proposed rule, could address our 

concerns about the comparability of 

benchmark and performance year 

populations. If such a policy were 

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. 

If we were to establish an opt-in based 

assignment methodology, we anticipate 

that we would also 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 would emphasize 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 are soliciting 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 welcome 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 seek 

comment on whether this minimum 

threshold for use in determining 

modified claims-based assignment 

should be set at a higher or lower. We 

also welcome comments on an 

appropriate methodology for 

establishing and adjusting an ACO’s 

historical benchmark under an opt-in 

based assignment methodology. Further, 

we seek comment on how to treat optin beneficiaries when rebasing the 

historical benchmark for renewing 

ACOs. Additionally, we welcome 

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. 

We have 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 seek 

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 


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benchmarking methodology could help 

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. 

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 

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. 

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 


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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 

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 


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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, 

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 

wish to encourage ACOs to take on 

higher levels of risk, we considered the 

importance of adopting a balanced risk 

adjustment methodology that provides 

ACOs with some protection against 

decreases in risk scores. 

Our preferred approach would 

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 

each enrollment type would still be 

renormalized to the national assignable 

beneficiary population for that 

enrollment type before the cap is 

applied. Table 11 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: 

TABLE 11—HYPOTHETICAL DATA ON APPLICATION OF AGREEMENT PERIOD CAP ON PY TO BY3 RISK RATIO

Medicare enrollment type 

BY3 

renormalized 

CMS–HCC 

risk score 

PY 

renormalized 

CMS–HCC 

risk score 

Risk ratio 

before 

applying cap 

Final risk 

ratio 

ESRD ............................................................................................................... 1.031 1.054 1.022 1.022 

Disabled ........................................................................................................... 1.123 1.074 0.956 0.970 

Aged/dual eligible ............................................................................................ 0.987 1.046 1.060 1.030 

Aged/non-dual eligible ..................................................................................... 1.025 1.001 0.977 0.977 

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. 

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 suggests 

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, we 

believe 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 believe 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 

preferred approach would also limit 

large decreases in CMS–HCC 

prospective risk scores across all 

assigned beneficiaries. We believe that 

such a balanced approach would 

provide ACOs with a greater incentive 

to assume performance-based risk than 

under 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 believe that this approach, which 

mirrors one of the risk adjustment 

methodologies tested in the Next 

Generation ACO Model, has a 

significant advantage over the current 

Shared Savings Program policy in that 

it is 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 choice of 3 percent as the 

preferred level for the symmetrical cap 

is 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 


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the proposal discussed in section II.A.2 

of this proposed 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.7). 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 believe that a 3 

percent cap on changes in CMS–HCC 

risk scores is 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 are 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 are 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 are proposing 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 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 proposed rule, the cap would 

represent the maximum change in risk 

scores for the agreement period between 

BY3 and calendar year 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 seek comment on this proposal, 

including the level of the cap. 

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/nondual 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 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 regionallyadjusted 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 


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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 proposed 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 proposed 

rule, we discuss proposals designed to 

mitigate these concerns. 

b. Proposals To Apply 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 

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. 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 above reasons, we are 

proposing 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 will apply for 

ACOs in their second or subsequent 

agreement period, including all policies 

proposed in this proposed rule, should 

they be finalized, regarding establishing 

the historical benchmark at the start of 

the agreement period, adjusting the 

historical benchmark for each 


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performance year within an agreement 

period, and updating the benchmark for 

each performance year (or for calendar 

year 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 proposed in section II.A.7 of 

this proposed 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 favor maintaining the 

existing weights, which we believe are 

more accurate because they capture the 

ACO’s most recent experience in the 

benchmark period. 

We propose to add a new provision at 

§ 425.601 to the regulations that will 

describe how we will 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 seek comment 

on this proposal. 

c. Proposals for 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. 

We have revaluated the effects of the 

regional adjustment as part of the 

regulatory impact analysis required for 

this proposed rule (see section IV) and 

have also taken into consideration our 

experience in applying the regional 

adjustment under the policies 

established in the June 2016 final rule. 

While we continue 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 are concerned that, if 

unaltered, the regional adjustment will 

have unintended consequences and 

adverse effects on ACO incentives as 

discussed in the Regulatory Impact 

Analysis (section IV). 

By design, the regional adjustment 

results in more generous benchmarks for 

ACOs that spend below their regions. As 

noted in section II.D.3.b of this 

proposed rule, 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. Preliminary 

results for ACOs that renewed for a 

second agreement period starting in 

2018 show a similar share of ACOs 

receiving a positive adjustment and one 

ACO seeing an adjustment of over 10 

percent. As the weight applied to the 

regional adjustment increases, we are 

concerned that the benchmarks for the 

ACOs with the lowest spending relative 

to their region will become overly 

inflated to the point where they will 

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. 

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 show slightly smaller 

negative adjustments, on average, we are 

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, will 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 are proposing 

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 believe that 

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 are proposing 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 wish 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, 


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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 

proposed 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 reentry 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. 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 under 

the current benchmarking methodology 

that enters its third agreement period 

upon renewal would be subject to a 

weight of 50 or 35 percent. By contrast, 

if the same ACO had terminated during 

its second agreement period and 

subsequently re-enters the program, the 

ACO would continue to face a weight of 

35 or 25 percent until the start of its 

subsequent 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 

would 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. 

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 believe that using 50 percent as the 

maximum weight is 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 wish to note 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 new rebasing methodology, 

which were calculated using the lowest 

weights under the current phase-in 

schedule, we are 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 believe that limiting 

regional adjustments for ACOs that are 

particularly low- or high-cost relative to 

their regions, will 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 are thus also proposing 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 

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 believe that defining the cap 

based on national per capita 

expenditures offers 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 believe 

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, we believe 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. 

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 expenditure for that 

enrollment type in the same manner 

that we currently apply the uncapped 

regional adjustment. Table 12 provides 

an illustrative example of how the final 

adjustment would be determined. 


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TABLE 12—HYPOTHETICAL DATA ON APPLICATION OF CAP TO REGIONAL ADJUSTMENT AMOUNT

Medicare enrollment type Uncapped 

adjustment 

National 

assignable 

FFS 

expenditure 

5 percent of 

national 

assignable 

FFS 

expenditure 

Final 

adjustment 

ESRD ............................................................................................................... $4,214 $81,384 $4,069 $4,069 

Disabled ........................................................................................................... ¥600 11,128 556 ¥556 

Aged/dual eligible ............................................................................................ 788 16,571 829 788 

Aged/non-dual eligible ..................................................................................... ¥367 9,942 497 ¥367 

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 

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. This is 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. 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 will only reduce the magnitude of 

the adjustment for a particular 

enrollment type if the original uncapped 

value of the adjustment is relatively 

large. This is not necessarily the case 

under the aggregate approach, where 

adjustments for all enrollment types, 

large or small, will be reduced if the 

aggregate regional adjustment exceeds 

the aggregate cap. 

We believe 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, will help to 

reduce windfall gains to low-spending 

ACOs and will also help to reduce the 

incentive for higher spending ACOs to 

leave the program by limiting the 

negative adjustments these ACOs will 

experience. We anticipate that the 

proposed cap on the regional 

adjustment will 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 expect 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 

believe 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 are proposing 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 are proposing 

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 are 

proposing to apply weights of 50 

percent and 35 percent for lower and 


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higher spending ACOs, respectively. For 

the third or subsequent agreement 

period, we are proposing 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 are 

proposing 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 this section are included in 

the proposed new provision 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 are seeking 

comment on these proposals, as well as 

the alternative capping methodology 

considered. We are also seeking 

comment on the proposed timeline for 

application of these proposals. 

d. Proposals for 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, we 

acknowledge 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 (see 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 ACO-assigned and nonassigned 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, 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 MA 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 this 

section 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 

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 

proposed 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 because 

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 


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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 

are proposing 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 

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 


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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 suggests 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. 

We are also concerned 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 favor 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. One drawback of this 

approach relative to the blended 

approaches previously described is that 

it treats 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. 

As we have 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 propose to use 

a blend of national and regional trend 

factors (that is, the national-regional 

blend) to trend forward BY1 and BY2 to 

BY3 when determining the historical 

benchmark. We also propose to use a 

blend of national and regional update 

factors, computed as described in this 

section, to update the historical 

benchmark to the performance year (or 

to calendar year 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 this 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 wish to make 

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, 

should our proposal in section II.A.4.c 

be finalized, the weight that is 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. 

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, 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 this title and 

the alternative methodology would 

result in program expenditures equal to 

or lower than those that would result 

under the statutory payment model. 

By combining a national component 

that is more independent of an ACO’s 

own experience with a regional 

component that captures locationspecific trends, we believe that 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 

believe 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 

(section IV. of this proposed rule), we 

project that this proposed approach, in 

combination with other changes to the 

statutory payment model proposed 

elsewhere in this 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 propose 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 calendar year 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 this 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 this section 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 


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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 are included in the 

proposed new provision at § 425.601, 

which would govern the determination 

of historical benchmarks for all ACOs. 

We seek 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. 

4. Technical Changes To Incorporate 

References to Benchmark Rebasing 

Policies 

We are also proposing 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 are also proposing 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 propose 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. 

E. Updating Program Policies 

1. Overview 

This section addresses various 

proposed revisions to the Shared 

Savings Program designed to update 

program policies. We propose to revise 

our regulations governing the 

assignment process in order to align our 

voluntary alignment policies with the 

requirements of section 50331 of the 

Bipartisan Budget Act of 2018 and to 

update the definition of primary care 

services. We also propose to extend the 

policies that we recently adopted for 

ACOs impacted by extreme and 

uncontrollable circumstances during 

2017 to 2018 and subsequent 

performance years. We also solicit 

comment on considerations related to 

supporting ACOs’ activities to address 

the national opioid crisis and the 

agency’s meaningful measures initiative. 

We propose to discontinue use of the 

quality performance measure that 

assesses an ACO’s eligible clinicians’ 

level of adoption of CEHRT and propose 

instead that ACOs annually certify that 

the percentage of eligible clinicians 

participating in the ACO using CEHRT 

to document and communicate clinical 

care to their patients or other health care 

providers meets or exceeds certain 

thresholds. Lastly, we seek comment 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. 

2. Revisions to Policies on Voluntary 

Alignment 

a. Background 

Section 50331 of the Bipartisan 

Budget Act of 2018 amended section 

1899(c) of the Act (42 U.S.C. 1395jjj(c)) 

to add a new paragraph (2)(B) that 

requires the Secretary, for performance 

year 2018 and each subsequent 

performance year, to permit a Medicare 

FFS beneficiary to voluntarily identify 

an ACO professional as the primary care 

provider of the beneficiary for purposes 

of assigning such beneficiary to an ACO, 

if a system is available for electronic 

designation. A voluntary identification 

by a Medicare FFS beneficiary under 

this provision supersedes any claimsbased assignment otherwise determined 

by the Secretary. Section 50331 also 

requires the Secretary to establish a 

process under which a Medicare FFS 

beneficiary is notified of his or her 

ability to designate a primary care 

provider or subsequently to change this 

designation. An ACO professional is 

defined under section 1899(h) of the Act 

as a physician as defined in section 

1861(r)(1) of the Act and a practitioner 

described in section 1842(b)(18)(C)(i) of 

the Act. 

We believe that section 50331 

requires certain revisions to our current 

beneficiary voluntary alignment policies 

in § 425.402(e). Prior to enactment of the 

Bipartisan Budget Act of 2018, section 

1899(c) of the Act required that 

beneficiaries be assigned to an ACO 

based on their use of primary care 

services furnished by a physician as 

defined in section 1861(r)(1) of the Act, 

and beginning January 1, 2019, services 

provided in RHCs/FQHCs. In order to 

satisfy this statutory requirement, we 

currently require that a beneficiary 

receive at least one primary care service 

during the beneficiary assignment 

window from an ACO professional in 

the ACO who is a physician with a 

specialty used in assignment in order to 

be assigned to the ACO (see 

§ 425.402(b)(1)). As currently provided 

in § 425.404(b), for performance year 

2019 and subsequent performance years, 

for purposes of the assignment 

methodology in § 425.402, CMS treats a 

service reported on an FQHC/RHC claim 

as a primary care service performed by 

a primary care physician. After 

identifying the beneficiaries who have 

received a primary care service from a 

physician in the ACO, we use a twostep, claims-based methodology to 

assign beneficiaries to a particular ACO 

for a calendar year (see § 425.402(b)(2) 

through (4)). In the CY 2017 PFS final 

rule (81 FR 80501 through 80510), we 

augmented this 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’’ they believe is 

responsible for coordinating their 

overall care using MyMedicare.gov, a 

secure online patient portal. 

MyMedicare.gov contains a list of all of 

the Medicare-enrolled practitioners who 

appear on the Physician Compare 

website and beneficiaries may choose 

any practitioner present on Physician 

Compare as their primary clinician. 

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 


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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 as defined under 

§ 425.20 or a physician with one of the 

primary specialty designations included 

in § 425.402(c) (see § 425.402(e)). Such 

beneficiaries will be added 

prospectively to the ACO’s list of 

assigned beneficiaries for the 

subsequent performance year, 

superseding any assignment that might 

have otherwise occurred under the 

claims-based methodology. Further, 

beneficiaries may change their 

designation at any time through 

MyMedicare.gov; the new choice will be 

incorporated when we perform 

assignment for the subsequent 

performance year. Beneficiaries who 

designate a provider or supplier outside 

an ACO, who is a primary care 

physician, a physician with a specialty 

designation that is considered in the 

assignment methodology, or a nurse 

practitioner, physician assistant, or 

clinical nurse specialist, as responsible 

for coordinating their overall care will 

not be added to an ACO’s list of 

assigned beneficiaries, even if they 

would otherwise meet the criteria for 

claims-based assignment. 

b. Proposals 

Section 1899(c) of the Act, as 

amended by section 50331 of the 

Bipartisan Budget Act of 2018, requires 

the Secretary to permit a Medicare FFS 

beneficiary to voluntarily identify an 

ACO professional as their primary care 

provider for purposes of assignment to 

an ACO. Under our current 

methodology, a beneficiary may select 

any practitioner who has a record on the 

Physician Compare website as their 

primary clinician; however, we will 

only assign the beneficiary to an ACO if 

they have chosen a practitioner who is 

a primary care physician (as defined at 

§ 425.20), a physician with one of the 

primary specialty designations included 

in § 425.402(c), or a nurse practitioner, 

physician assistant, or clinical nurse 

specialist. Therefore, we propose to 

modify our current voluntary alignment 

policies at § 425.402(e)(2)(iii) to provide 

that we will assign a beneficiary to an 

ACO based upon their selection of any 

ACO professional, regardless of 

specialty, as their primary clinician. 

Under this proposal, a beneficiary may 

select a practitioner with any specialty 

designation, for example, a specialty of 

allergy/immunology or surgery, as their 

primary care provider and be eligible for 

assignment to the ACO in which the 

practitioner is an ACO professional. 

Specifically, we propose to revise 

§ 425.402(e)(2)(iii) to remove the 

requirement that the ACO professional 

designated by the beneficiary be a 

primary care physician as defined at 

§ 425.20, a physician with a specialty 

designation included at § 425.402(c), or 

a nurse practitioner, physician assistant, 

or clinical nurse specialist. In addition, 

the provision at § 425.402(e)(2)(iv) 

addresses beneficiary designations of 

clinicians outside the ACO as their 

primary clinician. The current policy at 

§ 425.402(e)(2)(iv) provides that a 

beneficiary will not be assigned to an 

ACO for a performance year if the 

beneficiary has designated a provider or 

supplier outside the ACO who is a 

primary care physician as defined at 

§ 425.20, a physician with a specialty 

designation included at § 425.402(c), or 

a nurse practitioner, physician assistant, 

or clinical nurse specialist as their 

primary clinician responsible for 

coordinating their overall care. 

Consistent with the proposed revisions 

to § 425.402(e)(2)(iii) to incorporate the 

requirements of section 50331 of the 

Bipartisan Budget Act, we propose to 

revise § 425.402(e)(2)(iv) to indicate that 

if a beneficiary designates any provider 

or supplier outside the ACO as their 

primary clinician responsible for 

coordinating their overall care, the 

beneficiary will not be added to the 

ACO’s list of assigned beneficiaries for 

a performance year. 

Section 1899(c) of the Act, as 

amended by section 50331 of the 

Bipartisan Budget Act of 2018, requires 

the Secretary to allow a beneficiary to 

voluntarily align with an ACO, and does 

not impose any restriction with respect 

to whether the beneficiary has received 

any services from an ACO professional 

(see section 1899(c)(2)(B)(i) of the Act). 

We also believe the requirement in 

section 1899(c)(2)(B)(iii) of the Act that 

a beneficiary’s voluntary identification 

shall supersede any claims-based 

alignment is consistent with eliminating 

the requirement that the beneficiary 

have received a service from an ACO 

professional in order to be eligible to be 

assigned an ACO. Therefore, we propose 

to remove the requirement at 

§ 425.402(e)(2)(i) that a beneficiary must 

have received at least one primary care 

service from an ACO professional who 

is either a primary care physician or a 

physician with a specialty designation 

included in § 425.402(c) within the 12 

month assignment window in order to 

be assigned to the ACO. Under this 

proposal, a beneficiary who selects a 

primary clinician who is an ACO 

professional, but who does not receive 

any services from an ACO participant 

during the assignment window, will 

remain eligible for assignment to the 

ACO. We believe this approach reduces 

burden on beneficiaries and their 

practitioners by not requiring 

practitioners to provide unnecessary 

care during a specified period of time in 

order for a beneficiary to remain eligible 

for assignment to the ACO. Consistent 

with this proposal, we propose to 

remove § 425.402(e)(2)(i) in its entirety. 

We note that, under this proposal, if 

a beneficiary does not change their 

primary clinician designation, the 

beneficiary will remain assigned to the 

ACO in which that practitioner 

participates during the ACO’s entire 

agreement period and any subsequent 

agreement periods under the Shared 

Savings Program, even if the beneficiary 

no longer seeks care from any ACO 

professionals. Because a beneficiary 

who has voluntarily identified a Shared 

Savings Program ACO professional as 

their primary care provider will remain 

assigned to the ACO regardless of where 

they seek care, this proposed change 

could also impact assignment under 

certain Innovation Center models in 

which overlapping beneficiary 

assignment is not permitted. Although 

we believe our proposed policy is 

consistent with the requirement under 

section 1899(c)(2)(B)(iii) of the Act that 

a voluntary identification by a 

beneficiary shall supersede any claimsbased assignment, we also believe it 

could be appropriate, in limited 

circumstances, to align a beneficiary to 

an entity participating in certain 

specialty and disease-specific 

Innovation Center models, such as the 

CEC Model. CMS implemented the CEC 

Model to test a new system of payment 

and service delivery that CMS believes 

will lead to better health outcomes for 

Medicare beneficiaries living with 

ESRD, while lowering costs to Medicare 

Parts A and B. Under the model, CMS 

is working with groups of health care 

providers, dialysis facilities, and other 

suppliers involved in the care of ESRD 

beneficiaries to improve the 

coordination and quality of care that 

these individuals receive. We believe 

that an ESRD beneficiary, who is 

otherwise eligible for assignment to an 

entity participating in the CEC Model, 

could benefit from the focused attention 

on and increased care coordination for 

their ESRD available under the CEC 

Model. Such a beneficiary could be 

disadvantaged if they were unable to 

receive the type of specialized care for 

their ESRD that would be available from 

an entity participating in the CEC 

Model. Furthermore, we believe it could 

be difficult for the Innovation Center to 

conduct a viable test of a specialty or 


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disease-specific model, if we were to 

require that beneficiaries who have 

previously designated an ACO 

professional as their primary clinician 

remain assigned to the Shared Savings 

Program ACO under all circumstances. 

Currently, the CEC Model completes its 

annual PY prospective assignment lists 

prior to the Shared Savings Program in 

order to identify the beneficiaries who 

may benefit from receiving specialized 

care from an entity participating in the 

CEC Model. Additionally, on a quarterly 

basis, a beneficiary may be assigned to 

the CEC Model who was previously 

assigned to a Track 1 or Track 2 ACO. 

As a result, we believe that in some 

instances it may be necessary for the 

Innovation Center to use its authority 

under section 1115A(d)(1) of the Act to 

waive the requirements of section 

1899(c)(2)(B) of the Act solely as 

necessary for purposes of testing a 

particular model. 

Therefore, we are proposing to create 

an exception to the general policy that 

a beneficiary who has voluntarily 

identified a Shared Savings Program 

ACO professional as their primary care 

provider will remain assigned to the 

ACO regardless of where they seek care. 

Specifically, we propose that we would 

not assign such a beneficiary to the ACO 

when the beneficiary is also eligible for 

assignment 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 

Secretary that a waiver under section 

1115A(d)(1) of the Act of the 

requirement in section 1899(c)(2)(B) of 

the Act is necessary solely for purposes 

of testing the model. Under this 

proposal, if a beneficiary selects a 

primary clinician who is a Shared 

Savings Program ACO professional and 

the beneficiary is also eligible for 

alignment to a specialty care or disease 

specific 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 that a 

waiver of the requirement in section 

1899(c)(2)(B) is necessary solely for 

purposes of testing the Model, the 

Innovation Center or its designee would 

notify the beneficiary of their alignment 

to an entity participating in the model. 

Additionally, although such a 

beneficiary may still voluntarily identify 

his or her primary clinician and may 

seek care from any clinician, the 

beneficiary would not be assigned to a 

Shared Savings Program ACO even if 

the designated primary clinician is a 

Shared Savings Program ACO 

professional. 

We would include a list of any 

models that meet these criteria on the 

Shared Savings Program website, to 

supplement the information already 

included in the beneficiary assignment 

reports we currently provide to ACOs 

(as described under § 425.702(c)), so 

that ACOs can know why certain 

beneficiaries, who may have designated 

an ACO professional as their primary 

clinician, are not assigned to them. 

Similar information would also be 

shared with 1–800–MEDICARE to 

ensure that Medicare customer service 

representatives are able to help 

beneficiaries who may be confused as to 

why they are not aligned to the ACO in 

which their primary clinician is 

participating. 

Section 1899(c)(2)(B)(ii) of the Act, as 

amended by section 50331 of the 

Bipartisan Budget Act, requires the 

Secretary to establish a process under 

the Shared Savings Program through 

which each Medicare FFS beneficiary is 

notified of the ability to identify an ACO 

professional as his or her primary care 

provider and informed of the process 

that may be used to make and change 

such identification. We intend to 

implement section 1899(c)(2)(B)(ii) of 

the Act under the beneficiary 

notification process at § 425.312. In 

addition, we plan to use the beneficiary 

notification process under § 425.312 to 

address the concern that beneficiary 

designations may become outdated. 

Specifically, we propose to require ACO 

participants to use a CMS-developed 

template notice that encourages 

beneficiaries to check their designation 

regularly and to update their 

designation when they change care 

providers or move to a new area. We 

discuss our beneficiary notification 

processes further in section II.C.3.a of 

this proposed rule. 

We propose to apply these 

modifications to our policies under the 

Shared Savings Program regarding 

voluntary alignment beginning for 

performance years starting on January 1, 

2019, and subsequent performance 

years. We propose to incorporate these 

new requirements in the regulations by 

redesignating § 425.402(e)(2)(i) through 

(iv) as § 425.402(e)(2)(i)(A) through (D), 

adding a paragraph heading for newly 

redesignated § 425.402(e)(2)(i), and 

including a new § 425.402(e)(2)(ii). 

We note that as specified in 

§ 425.402(e)(2)(ii) a beneficiary who has 

designated an ACO professional as their 

primary clinician must still be eligible 

for assignment to an ACO by meeting 

the criteria specified in § 425.401(a). 

These criteria establish the minimum 

requirements for a beneficiary to be 

eligible to be assigned to an ACO under 

our existing assignment methodology, 

and we believe it is appropriate to 

impose the same basic limitations on 

the assignment of beneficiaries on the 

basis of voluntary alignment. We do not 

believe it would be appropriate, for 

example, to assign a beneficiary to an 

ACO if the beneficiary does not reside 

in the United States, or if the other 

eligibility requirements are not met. 

We request comments on our 

proposals to implement the new 

requirements governing voluntary 

alignment under section 50331 of the 

Bipartisan Budget Act of 2018. We also 

seek comment on our proposal to create 

a limited exception to our proposed 

policies on voluntary alignment to allow 

a beneficiary to be assigned to an entity 

participating in a model tested or 

expanded under section 1115A of the 

Act when certain criteria are met. In 

addition, we welcome comments on 

how we might increase beneficiary 

awareness and further improve the 

electronic process through which a 

beneficiary may voluntarily identify an 

ACO professional as their primary care 

provider through My.Medicare.gov for 

purposes of assignment to an ACO. 

3. Revisions to the Definition of Primary 

Care Services Used in Beneficiary 

Assignment 

a. Background 

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

amended by the 21st Century Cures Act 

and the Bipartisan Budget Act of 2018, 

provides that for performance years 

beginning on or after January 1, 2019, 

the Secretary shall assign beneficiaries 

to an ACO based on their utilization of 

primary care services provided by a 

physician and all services furnished by 

RHCs and FQHCs. However, the statute 

does not specify which kinds of services 

may be considered primary care services 

for purposes of beneficiary assignment. 

We established the initial list of services 

that we considered to be primary care 

services in the November 2011 final rule 

(76 FR 67853). In that final rule, we 

indicated that we intended to monitor 

this issue and would consider making 

changes to the definition of primary care 

services to add or delete codes used to 

identify primary care services, if there 

were sufficient evidence that revisions 

were warranted. We have updated the 

list of primary care service codes in 

subsequent rulemaking to reflect 

additions or modifications to the codes 

that have been recognized for payment 

under the Medicare PFS, as summarized 

in the CY 2018 PFS proposed rule (82 


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FR 34109 and 34110). Subsequently, in 

the CY 2018 PFS final rule, we revised 

the definition of primary care services to 

include three additional chronic care 

management service codes, 99487, 

99489, and G0506, and four behavioral 

health integration service codes, G0502, 

G0503, G0504 and G0507 (82 FR 53212 

and 53213). These additions are 

effective for purposes of performing 

beneficiary assignment under § 425.402 

for performance year 2019 and 

subsequent performance years. 

Accounting for these recent changes, 

we define primary care services in 

§ 425.400(c) for purposes of assigning 

beneficiaries to ACOs under § 425.402 

as the set of services identified by the 

following HCPCS/CPT codes: 

CPT codes: 

(1) 99201 through 99215 (codes for 

office or other outpatient visit for the 

evaluation and management of a 

patient). 

(2) 99304 through 99318 (codes for 

professional services furnished in a 

Nursing Facility, excluding services 

furnished in a SNF which are reported 

on claims with place of service code 31). 

(3) 99319 through 99340 (codes for 

patient domiciliary, rest home, or 

custodial care visit). 

(4) 99341 through 99350 (codes for 

evaluation and management services 

furnished in a patients’ home). 

(5) 99487, 99489 and 99490 (codes for 

chronic care management). 

(6) 99495 and 99496 (codes for 

transitional care management services). 

HCPCS codes: 

(1) G0402 (the code for the Welcome 

to Medicare visit). 

(2) G0438 and G0439 (codes for the 

Annual Wellness Visits). 

(3) G0463 (code for services furnished 

in electing teaching amendment 

hospitals). 

(4) G0506 (code for chronic care 

management). 

(5) G0502, G0503, G0504 and G0507 

(codes for behavioral health integration). 

As discussed in the CY 2018 PFS final 

rule, a commenter recommended that 

CMS consider including the advance 

care planning codes, CPT codes 99497 

and 99498, in the definition of primary 

care services in future rulemaking (82 

FR 53213). We indicated that we would 

consider whether CPT codes 99497 and 

99498 or any additional existing 

HCPCS/CPT codes should be added to 

the definition of primary care services 

in future rulemaking for purposes of 

assignment of beneficiaries to ACOs 

under the Shared Savings Program. In 

addition, effective for CY 2018, the 

HCPCS codes for behavioral health 

integration G0502, G0503, G0504 and 

G0507 have been replaced by CPT codes 

99492, 99493, 99494, 99484 (82 FR 

53078). 

CPT codes 99304 through 99318 are 

used for reporting evaluation and 

management services furnished by 

physicians and other practitioners in a 

skilled nursing facility (reported on 

claims with POS code 31) or a nursing 

facility (reported on claims with POS 

code 32). Based on stakeholder input, 

we finalized a policy in the CY 2016 

PFS final rule (80 FR 71271 through 

71272) effective for performance year 

2017 and subsequent performance years, 

to exclude services identified by CPT 

codes 99304 through 99318 from the 

definition of primary care services for 

purposes of the beneficiary assignment 

methodology when the claim includes 

the POS code 31 modifier designating 

the services as having been furnished in 

a SNF. We established this policy to 

recognize that SNF patients are shorter 

stay patients who are generally 

receiving continued acute medical care 

and rehabilitative services. Although 

their care may be coordinated during 

their time in the SNF, they are then 

transitioned back into the community to 

the primary care professionals who are 

typically responsible for providing care 

to meet their true primary care needs. 

We continue to believe that it is 

appropriate for SNF patients to be 

assigned to ACOs based on care 

received from primary care 

professionals in the community 

(including nursing facilities), who are 

typically responsible for providing care 

to meet the true primary care needs of 

these beneficiaries. ACOs serving 

special needs populations, including 

beneficiaries receiving long term care 

services, and other stakeholders have 

recently suggested that we consider an 

alternative method for determining 

operationally whether services 

identified by CPT codes 99304 through 

99318 were furnished in a SNF. Instead 

of indirectly determining whether a 

beneficiary was a SNF patient when the 

services were furnished based on 

physician claims data, these 

stakeholders suggest we more directly 

determine whether a beneficiary was a 

SNF patient based on SNF facility 

claims data. These stakeholders have 

recommended that CMS use 

contemporaneous SNF Medicare facility 

claims to determine whether a 

professional service identified by CPT 

codes 99304 through 99318 was 

furnished in a SNF and thus should not 

be used for purposes of the beneficiary 

assignment methodology under 

§ 425.402. Specifically, these 

stakeholders suggest that we determine 

whether services identified by CPT 

codes 99304 through 99318 were 

furnished in a SNF by determining 

whether the beneficiary also received 

SNF facility services on the same date 

of service. 

In this rule we propose to make 

changes to the definition of primary care 

services in § 425.400(c) to add new 

codes and to revise how we determine 

whether services identified by CPT 

codes 99304 through 99318 were 

furnished in a SNF. 

b. Proposed Revisions 

Based on feedback from ACOs and 

our further review of the HCPCS and 

CPT codes currently recognized for 

payment under the PFS, we believe it 

would be appropriate to amend the 

definition of primary care services to 

include certain additional codes. 

Specifically, we propose to revise the 

definition of primary care services in 

§ 425.400(c) to include the following 

HCPCS and CPT codes: (1) Advance 

care planning service codes, CPT codes 

99497 and 99498, (2) administration of 

health risk assessment service codes, 

CPT codes 96160 and 96161, (3) 

prolonged evaluation and management 

or psychotherapy service(s) beyond the 

typical service time of the primary 

procedure, CPT codes 99354 and 99355, 

(4) annual depression screening service 

code, HCPCS code G0444, (5) alcohol 

misuse screening service code, HCPCS 

code G0442, and (6) alcohol misuse 

counseling service code, HCPCS code 

G0443. In addition, in the recent CY 

2019 PFS proposed rule (see 83 FR 

35841 through 35844) CMS proposed to 

create three new HCPCS codes to reflect 

the additional resources involved in 

furnishing certain evaluation and 

management services: (1) GPC1X add-on 

code, for the visit complexity inherent 

to evaluation and management 

associated with certain primary care 

services, (2) GCG0X add-on code, for 

visit complexity inherent to evaluation 

and management associated with 

endocrinology, rheumatology, 

hematology/oncology, urology, 

neurology, obstetrics/gynecology, 

allergy/immunology, otolaryngology, or 

interventional pain managementcentered care, and (3) GPRO1, an 

additional add-on code for prolonged 

evaluation and management or 

psychotherapy services beyond the 

typical service time of the primary 

procedure. We believe it would be 

appropriate to include these codes in 

the definition of primary care services 

under the Shared Savings Program 

because these codes are used to bill for 

services that are similar to services that 

are already included in the list of 

primary care codes at § 425.400(c). We 


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also expect that primary care 

physicians, nurse practitioners, 

physician assistants, and clinical nurse 

specialists frequently furnish these 

services as part of their overall 

management of a patient. As a result, we 

believe that including these codes 

would increase the accuracy of the 

assignment process by helping to ensure 

that beneficiaries are assigned to the 

ACO or other entity that is actually 

managing the beneficiary’s care. 

The following provides additional 

information about the HCPCS and CPT 

codes that we are proposing to add to 

the definition of primary care services: 

Advance care planning (CPT codes 

99497 and 99498): Effective January 1, 

2016, CMS pays for voluntary advance 

care planning under the PFS (80 FR 

70955 through 70959). See CMS, 

Medicare Learning Network, ‘‘Advance 

Care Planning’’ (ICN 909289, August 

2016), available at https://www.cms.gov/ 

Outreach-and-Education/MedicareLearning-Network-MLN/MLNProducts/ 

Downloads/AdvanceCarePlanning.pdf. 

Advance care planning enables 

Medicare beneficiaries to make 

important decisions that give them 

control over the type of care they 

receive and when they receive it. 

Medicare pays for advance care 

planning either as a separate Part B 

service when it is medically necessary 

or as an optional element of a 

beneficiary’s Annual Wellness Visit. We 

believe it would be appropriate to 

include both Advance Care Planning 

codes 99497 and 99498 in the definition 

of primary care services under the 

Shared Savings Program because the 

services provided as part of advance 

care planning include counseling and 

other evaluation and management 

services similar to the services included 

in Annual Wellness Visits and other 

evaluation and management service 

codes that are already included in the 

list of primary care codes. 

Administration of health risk 

assessment (CPT codes 96160 and 

96161): In the CY 2017 PFS final rule 

(81 FR 80330 through 80331), CMS 

added two new CPT codes, 96160 and 

96161, to the PFS, effective for CY 2017, 

to be used for payment for the 

administration of health risk 

assessment. These codes are ‘‘add-on 

codes’’ that describe additional resource 

components of a broader service 

furnished to the patient that are not 

accounted for in the valuation of the 

base code. For example, if a health risk 

assessment service were administered 

during a physician office visit, then the 

physician would bill for both the 

appropriate office visit code and the 

appropriate health risk assessment code. 

We believe it would be appropriate to 

include CPT codes 96160 and 96161 in 

the definition of primary care services 

because these add-on codes frequently 

represent additional practice expenses 

related to office visits for evaluation and 

management services that are already 

included in the definition of primary 

care services. 

Prolonged evaluation and 

management or psychotherapy 

service(s) beyond the typical service 

time of the primary procedure (CPT 

codes 99354 and 99355): These two 

codes are also ‘‘add-on codes’’ that 

describe additional resource 

components of a broader service 

furnished in the office or other 

outpatient setting that are not accounted 

for in the valuation of the base codes. 

Code 99354 is listed on a claim to report 

the first hour of additional face-to-face 

time with a patient and code 99355 is 

listed separately for each additional 30 

minutes of face-to-face time with a 

patient beyond the time reported under 

code 99354. Codes 99354 and 99355 

would be billed separately in addition 

to the base office or other outpatient 

evaluation and management or 

psychotherapy service. (See Medicare 

Claims Processing Manual Chapter 12, 

Sections 30.6.15.1 Prolonged Services 

With Direct Face-to-Face Patient Contact 

Service (Codes 99354–99357) available 

at https://www.cms.gov/Regulationsand-Guidance/Guidance/Manuals/ 

downloads/clm104c12.pdf; also see 

CMS, MLN Matters, Prolonged Services 

(Codes 99354–99359) (Article Number 

MM5972, Revised March 7, 2017), 

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

Outreach-and-Education/MedicareLearning-Network-MLN/MLNMatters

Articles/downloads/mm5972.pdf.) 

Although we do not currently include 

prolonged services codes CPT code 

99354 and 99355 on our list of primary 

care services, based on further review 

we believe it would be appropriate to 

include them on our list of primary care 

services to more accurately assign 

beneficiaries to ACOs based on all the 

allowed charges for the primary care 

services furnished to beneficiaries. We 

note that the definitions of codes 99354 

and 99355 also include prolonged 

services for certain psychotherapy 

services, which are not currently 

included on our list of primary care 

services. Therefore, we propose to 

include the allowed charges for CPT 

code 99354 and 99355, for purposes of 

assigning beneficiaries to ACOs, only 

when the base code is also on the list 

of primary care services. 

Annual depression screening (HCPCS 

code G0444), alcohol misuse screening 

(HCPCS code G0442), and alcohol 

misuse counseling (HCPCS code G0443): 

Effective October 14, 2011, all Medicare 

beneficiaries are eligible for annual 

depression screening and alcohol 

misuse screening. (See CMS Manual 

System, Screening for Depression in 

Adults (Transmittal 2359, November 23, 

2011) available at https://www.cms.gov/ 

Regulations-and-Guidance/Guidance/ 

Transmittals/downloads/R2359CP.pdf 

and see CMS, MLN Matters, Screening 

and Behavioral Counseling 

Interventions in Primary Care to Reduce 

Alcohol Misuse (Article Number 

MM7633, Revised June 4, 2012), 

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

Outreach-and-Education/MedicareLearning-Network-MLN/ 

MLNMattersArticles/downloads/ 

mm7633.pdf). Although these three 

codes have been in use since before the 

implementation of the Shared Savings 

Program in 2012, based on further 

review of these services, we believe that 

it would be appropriate to consider 

these services in beneficiary assignment. 

Annual depression screening may be 

covered if it is furnished in a primary 

care setting that has staff-assisted 

depression care supports in place to 

assure accurate diagnosis, effective 

treatment, and follow-up. Alcohol 

misuse screening and counseling are 

screening and behavioral counseling 

interventions in primary care to reduce 

alcohol misuse. All three of these codes 

include screening and counseling 

services similar to counseling and other 

evaluation and management services 

included in the codes already on the list 

of primary care codes. 

In the recent CY 2019 PFS proposed 

rule (see 83 FR 35841 through 35844)), 

CMS proposed to create three new 

HCPCS G-codes as part of a broader 

proposal to simplify the documentation 

requirements and to more accurately 

pay for services represented by CPT 

codes 99201 through 99215 (codes for 

office or other outpatient visit for the 

evaluation and management of a 

patient). All three of these codes are 

‘‘add-on codes’’ that describe additional 

resource components of a broader 

service furnished to the patient that are 

not accounted for in the valuation of the 

base codes. 

HCPCS code GPC1X is intended to 

capture the additional resource costs, 

beyond those involved in the base 

evaluation and management codes, of 

providing face-to-face primary care 

services for established patients. HCPCS 

code GPC1X would be billed in addition 

to the base evaluation and management 

code for an established patient when the 

visit includes primary care services. In 

contrast, new HCPCS code GCG0X is an 

add-on code intended to reflect the 


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complexity inherent to evaluation and 

management services associated with 

endocrinology, rheumatology, 

hematology/oncology, urology, 

neurology, obstetrics/gynecology, 

allergy/immunology, otolaryngology, 

cardiology, and interventional pain 

management-centered care. We believe 

it would be appropriate to include both 

proposed new HCPCS codes GCG0X and 

GPC1X in our definition of primary care 

services because they represent services 

that are currently included in CPT codes 

99201 through 99215, which are already 

included in the list of primary care 

codes in § 425.400(c). 

Finally, proposed new HCPCS code 

GPRO1 (prolonged evaluation and 

management or psychotherapy services 

beyond the typical service time of the 

primary procedure, in the office or other 

outpatient setting requiring direct 

patient contact beyond the usual 

service; 30 minutes) is modeled on CPT 

code 99354, a prolonged services code 

discussed earlier in this section which 

we are proposing to add to our list of 

primary care services. HCPCS code 

GPRO1 is intended to reflect prolonged 

evaluation and management or 

psychotherapy service(s) of 30 minutes 

duration beyond the typical service time 

of the primary or base service, whereas 

existing CPT code 99354 reflects 

prolonged services of 60 minutes 

duration. As is the case for code 99354, 

code GPRO1 would be billed separately 

in addition to the base office or other 

outpatient evaluation and management 

or psychotherapy service. We believe it 

would be appropriate to include 

proposed HCPCS code GPRO1 on our 

list of primary care services for the same 

reasons we are proposing to add CPT 

code 99354 to our list of primary care 

services. Because the proposed 

definition of HCPCS code GPRO1 also 

includes prolonged services for certain 

psychotherapy services, which are not 

currently included on our list of 

primary care services, we propose to 

include the allowed charges for HCPCS 

code GPRO1, for purposes of assigning 

beneficiaries to ACOs, only when the 

base code is also on the list of primary 

care services. 

We propose to include these codes in 

the definition of primary care services 

when performing beneficiary 

assignment under § 425.402, for 

performance years starting on January 1, 

2019, and subsequent years. We note, 

however, that our proposal to include 

the three proposed new ‘‘add-on codes’’, 

GPC1X, GCG0X, and GPRO1, is 

contingent on CMS finalizing its 

proposal to create these new codes for 

use starting in 2019. 

As previously discussed in section 

II.E.3.a, ACOs and other stakeholders 

have expressed concerns regarding our 

current policy of identifying services 

billed under CPT codes 99304 through 

99318 furnished in a SNF by using the 

POS modifier 31. We continue to 

believe it is appropriate to exclude from 

assignment services billed under CPT 

codes 99304 through 99318 when such 

services are furnished in a SNF. 

However, we agree with stakeholders 

that it might increase the accuracy of 

beneficiary assignment for these 

vulnerable and generally high cost 

beneficiaries if we were to revise our 

method for determining whether 

services identified by CPT codes 99304 

through 99318 were furnished in a SNF 

to focus on whether the beneficiary also 

received SNF facility services on the 

same day. We believe it would be 

feasible for us to directly and more 

precisely determine whether services 

identified by CPT codes 99304 through 

99318 were furnished in a SNF by 

analyzing our facility claims data files 

rather than by using the POS modifier 

31 in our professional claims data files. 

Operationally, we would exclude 

professional services claims billed 

under CPT codes 99304 through 99318 

from use in the assignment methodology 

when there is a SNF facility claim in our 

claims files with dates of service that 

overlap with the date of service for the 

professional service. Therefore, we 

propose to revise the regulation at 

§ 425.400(c)(1)(iv)(A)(2), effective for 

performance years starting on January 1, 

2019 and subsequent performance years, 

to remove the exclusion of claims 

including the POS code 31 and in its 

place indicate more generally that we 

would exclude services billed under 

CPT codes 99304 through 99318 when 

such services are furnished in a SNF. 

Under our current process, if CMS’s 

HCPCS committee or the American 

Medical Association’s CPT Editorial 

Panel modifies or replaces any of the 

codes that we designate as primary care 

service codes in § 425.400(c), we must 

revise the primary care service codes 

listed in § 425.400(c) as appropriate 

through further rulemaking before the 

revised codes can be used for purposes 

of assignment. As noted previously, 

effective for CY 2018, the HCPCS codes 

for behavioral health integration G0502, 

G0503, G0504 and G0507 have been 

replaced by CPT codes 99492, 99493, 

99494 and 99484. Therefore, consistent 

with our current process, we propose to 

revise the primary care service codes in 

§ 425.400(c)(1)(iv) to replace HCPCS 

codes G0502, G0503, G0504 and G0507 

with CPT codes 99492, 99493, 99494 

and 99484 for performance years 

starting on January 1, 2019, and 

subsequent performance years. 

We note that the regulations text at 

§ 425.400(c)(1)(iv) includes brief 

descriptions for the HCPCS codes that 

we have designated as primary care 

service codes, but does not include such 

descriptions for the CPT codes that we 

have designated as primary care service 

codes. For consistency, we are 

proposing a technical change to the 

regulations at § 425.400(c)(1)(iv)(A) to 

also include descriptions for the CPT 

codes. We also note that one of the 

Chronic Care Management (CCM) codes, 

CPT code 99490, is inadvertently listed 

in the regulations text at 

§ 425.400(c)(1)(iv)(A)(6) along with the 

codes for Transitional Care Management 

(TCM) services. We are proposing a 

technical change to the regulations to 

move CPT code 99490 up to 

§ 425.400(c)(1)(iv)(A)(5) with the other 

CCM codes. 

We welcome comments on the new 

codes we are proposing to add to the 

definition of primary care services used 

for purposes of assigning beneficiaries 

to Shared Savings Program ACOs. In 

addition, we seek comments on our 

proposal to revise our method for 

excluding services identified by CPT 

codes 99304 through 99318 when 

furnished in a SNF. We also seek 

comments on the other proposed 

technical changes to § 425.400(c)(1)(iv). 

We also welcome comments on any 

additional existing HCPCS/CPT codes 

that we should consider adding to the 

definition of primary care services in 

future rulemaking. 

4. Extreme and Uncontrollable 

Circumstances Policies for the Shared 

Savings Program 

a. Background 

Following the 2017 California 

wildfires and Hurricanes Harvey, Irma, 

Maria and Nate, stakeholders expressed 

concerns that the effects of these types 

of disasters on ACO participants, ACO 

providers/suppliers, and the assigned 

beneficiary population could undermine 

an ACO’s ability to successfully meet 

the quality performance standards, and 

adversely affect financial performance, 

including, in the case of ACOs under 

performance-based risk, increasing 

shared losses. To address these 

concerns, we published an interim final 

rule with comment period titled 

Medicare Program; Medicare Shared 

Savings Program: Extreme and 

Uncontrollable Circumstances Policies 

for Performance Year 2017 (hereinafter 

referred to as the Shared Savings 

Program IFC) that appeared in the 


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Federal Register on December 26, 2017 

(82 FR 60912). In the Shared Savings 

Program IFC, we established policies for 

addressing ACO quality performance 

scoring and the determination of the 

shared losses owed by ACOs 

participating under performance-based 

risk tracks for ACOs that were affected 

by extreme or uncontrollable 

circumstances during performance year 

2017. The policies adopted in the 

Shared Savings Program IFC were 

effective for performance year 2017, 

including the applicable quality data 

reporting period for the performance 

year. We have considered the comments 

received to date on the Shared Savings 

Program IFC in developing the policies 

in this proposed rule for 2018 and 

subsequent years. 

The extreme and uncontrollable 

circumstances policies established in 

the Shared Savings Program for 

performance year 2017 align with the 

policies established under the Quality 

Payment Program for the 2017 MIPS 

performance period and subsequent 

MIPS performance periods (see CY 2018 

Quality Payment Program final rule 

with comment, 82 FR 53780 through 

53783 and Quality Payment Program 

IFC, 82 FR 53895 through 53900). In 

particular, in the Shared Savings 

Program IFC (82 FR 60914), we 

indicated that we would determine 

whether an ACO has 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 or the ACO’s legal 

entity is located in such an area. 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 a Federal Emergency 

Management Agency (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). 

Because ACOs may face extreme and 

uncontrollable circumstances in 2018 

and subsequent years, we believe it is 

appropriate to propose to extend the 

policies adopted in the Shared Savings 

Program IFC for addressing ACO quality 

performance scoring and the 

determination of the shared losses owed 

for ACOs affected by extreme or 

uncontrollable circumstances to 

performance year 2018 and subsequent 

performance years. In addition, in the 

Shared Savings Program IFC, we 

indicated that we planned to observe 

the impact of the 2017 hurricanes and 

wildfires on ACOs’ expenditures for 

their assigned beneficiaries during 

performance year 2017, and might 

revisit the need to make adjustments to 

the methodology for calculating the 

benchmark in future rulemaking. We 

consider this issue further in the 

discussion that follows. 

b. Proposed Revisions 

The financial and quality performance 

of ACOs located in areas subject to 

extreme and uncontrollable 

circumstances could be significantly 

and adversely affected. Disasters may 

have several possible effects on ACO 

quality and financial performance. For 

instance, displacement of beneficiaries 

may make it difficult for ACOs to access 

medical record data required for quality 

reporting, as well as, reduce the 

beneficiary response rate on survey 

measures. Further, for practices 

damaged by a disaster, the medical 

records needed for quality reporting 

may be inaccessible. We also believe 

that disasters may affect the 

infrastructure of ACO participants, ACO 

providers/suppliers, and potentially the 

ACO legal entity itself, thereby 

disrupting routine operations related to 

their participation in the Shared Savings 

Program and achievement of program 

goals. The effects of a disaster could 

include challenges in communication 

between the ACO and its participating 

providers and suppliers and in 

implementation of and participation in 

programmatic activities. Catastrophic 

events outside the ACO’s control can 

also increase the difficulty of 

coordinating care for patient 

populations, and due to the 

unpredictability of changes in 

utilization and cost of services 

furnished to beneficiaries, may have a 

significant impact on expenditures for 

the applicable performance year and the 

ACO’s benchmark in the subsequent 

agreement period. These factors could 

jeopardize ACOs’ ability to succeed in 

the Shared Savings Program, and ACOs, 

especially those in performance-based 

risk tracks, may reconsider whether they 

are able to continue their participation 

in the program. 

Because widespread disruptions 

could occur during 2018 or subsequent 

performance years, we believe it is 

appropriate to have policies in place to 

change the way in which we assess the 

quality and financial performance of 

Shared Savings Program ACOs in any 

affected areas. Accordingly, we propose 

to extend the automatic extreme and 

uncontrollable circumstances policies 

under the Shared Savings Program that 

were established for performance year 

2017 to performance year 2018 and 

subsequent performance years. 

Specifically, we propose that the Shared 

Savings Program extreme and 

uncontrollable circumstances policies 

for performance year 2018 and 

subsequent performance years would 

apply when we determine that an event 

qualifies as an automatic triggering 

event under the Quality Payment 

Program. As we discussed in the Shared 

Savings Program IFC (82 FR 60914), we 

believe it is also appropriate to extend 

these policies to encompass the quality 

reporting period, unless the reporting 

period is extended, because if an ACO 

is unable to submit its quality data as a 

result of a disaster occurring during the 

quality data submission window, we 

would not have the quality data 

necessary to measure the ACO’s quality 

performance for the performance year. 

For example, if an extreme and 

uncontrollable event were to occur in 

February 2019, which we anticipate 

would be during the quality data 

reporting period for performance year 

2018, then the extreme and 

uncontrollable circumstances policies 

would apply for quality data reporting 

and quality performance scoring for 

performance year 2018, if the reporting 

period is not extended. We do not 

believe it is 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 

the applicable performance year. 

Accordingly, we also propose that the 

policies regarding quality reporting 

would apply with respect to the 

determination of the ACO’s quality 

performance in the event that an 

extreme and uncontrollable event 

occurs during the applicable quality 

data reporting period for a performance 

year and the reporting period is not 

extended. However, we note 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 that 

performance year, we do not believe it 

would be appropriate to make an 

adjustment to shared losses in the event 

an extreme or uncontrollable event 

occurs during the quality data reporting 

period. 

(1) Modification of Quality Performance 

Scores for all ACOs in Affected Areas 

As we explained in the Shared 

Savings Program IFC (82 FR 60914 

through 60916), ACOs and their ACO 


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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, for 2017, we 

established a policy for determining 

when an ACO, which may have ACO 

participants and ACO providers/ 

suppliers located in multiple geographic 

areas, would qualify for the automatic 

extreme and uncontrollable 

circumstance policies for the 

determination of quality performance. 

Specifically, we adopted a policy for 

performance year 2017 of determining 

whether an ACO has been affected by 

extreme and uncontrollable 

circumstances by determining whether 

20 percent or more of the ACO’s 

assigned beneficiaries resided in 

counties designated as an emergency 

declared area in the performance year, 

as determined under the Quality 

Payment Program as discussed in the 

Quality Payment Program IFC (82 FR 

53898) or the ACO’s legal entity is 

located in such an area. For 2017, we 

adopted a policy under which the 

location of an ACO’s legal entity is 

determined based on the address on file 

for the ACO in CMS’s 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 for 2017 because, 

as we stated in the Shared Savings 

Program IFC, we believe the 20 percent 

threshold provides a reasonable way to 

identify ACOs whose 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 indicated that 

we believe the 20 percent threshold 

ensures 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 noted that it is 

possible that some ACOs that have 

fewer than 20 percent of their assigned 

beneficiaries residing in affected areas 

may have a legal entity that is located 

in an emergency declared area. 

Consequently, their ability to quality 

report may be equally impacted because 

the ACO legal entity may be unable to 

collect the necessary information from 

the ACO participants or experience 

infrastructure issues related to 

capturing, organizing, and reporting the 

data to CMS. We stated that if less than 

20 percent of the ACO’s assigned 

beneficiaries reside in an affected area 

and the ACO’s legal entity is not located 

in a county designated as an affected 

area, then we believe that there is 

unlikely to be a significant impact upon 

the ACO’s ability to report or on the 

representativeness of the quality 

performance score that is determined for 

the ACO. For performance year 2017, 

we will 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, these ACOs 

will 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. 

In the Shared Savings Program IFC, 

we modified the quality performance 

standard specified under § 425.502 by 

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 also modified 

§ 425.502(e)(4) to specify that an ACO 

receiving the mean Shared Savings 

Program ACO quality score for 

performance year 2017 based on the 

extreme and uncontrollable 

circumstances policies is not eligible for 

bonus points awarded based on quality 

improvement in that year because 

quality data will not be available to 

determine if there was improvement 

from year to year. 

In the Shared Savings Program IFC, 

we established policies with respect to 

quality reporting and quality 

performance scoring for the 2017 

performance year. In anticipation of any 

future extreme and uncontrollable 

events, we believe it is appropriate to 

propose to extend these policies, with 

minor modifications, to subsequent 

performance years as well. In order to 

avoid confusion and reduce 

unnecessary burdens on affected ACOs, 

we propose to align our policies for 

2018 and subsequent years with policies 

established for the Quality Payment 

Program in final rule with comment 

period, entitled CY 2018 Updates to the 

Quality Payment Program (82 FR 

53568). Specifically, we propose to 

apply determinations made under the 

Quality Payment Program with respect 

to whether an extreme and 

uncontrollable circumstance has 

occurred and the identification of the 

affected geographic areas and the 

applicable time periods. Generally, in 

line with the approach taken for 2017 in 

the Quality Payment Program IFC (82 

FR 53897), we anticipate that the types 

of events that would be considered an 

automatic triggering event would be 

events designated as a Federal 

Emergency Management Agency 

(FEMA) major disaster or a public 

health emergency declared by the 

Secretary, but CMS will review each 

situation on a case-by-case basis. We 

also propose that CMS 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. Additionally, we propose to 

determine an ACO’s legal entity location 

based on the address on file for the ACO 

in CMS’s ACO application and 

management system. 

In the Shared Savings Program IFC, 

we established a policy for performance 

year 2017 under which we will 

determine the percentage of the ACO’s 

assigned population that was affected by 

a disaster based on the final list of 

beneficiaries assigned to the ACO for 

the performance year. We begin 

producing the final list of assigned 

beneficiaries after allowing for 3 months 

of claims run out following the end of 

a performance year. However, the 

quality reporting period ends before the 

3-month claims run out period ends. 

Therefore, we are concerned that if, for 

future performance years, we continue 

to calculate the percentage of affected 

beneficiaries based on the ACO’s final 


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23See, for example Alternative Payment Models 

in the Quality Payment Program as of February 

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

Quality-Payment-Program/Resource-Library/ 

Comprehensive-List-of-APMs.pdf. 

list of assigned beneficiaries, it would 

not be operationally feasible for us to 

notify an ACO as to whether it meets the 

20 percent threshold prior to the end of 

the quality reporting period because the 

final list of assigned beneficiaries is not 

available until after the close of the 

quality reporting period. We now 

believe it would be appropriate to base 

this calculation on the list of assigned 

beneficiaries used to generate the Web 

Interface quality reporting sample, 

which would be available with the 

quarter three program reports, generally 

in November of the applicable 

performance year (or calendar year for 

the 6-month performance year (or 

performance period) from January 1, 

2019, through June 30, 2019). Under this 

timeline, we would be able to notify 

ACOs earlier as to whether they exceed 

the 20 percent threshold, and ACOs 

could then use this information to 

decide whether to report quality data for 

the performance year. Therefore, for 

performance year 2018 and subsequent 

performance years, we are proposing to 

determine the percentage of an ACO’s 

assigned beneficiaries that reside in an 

area affected by an extreme and 

uncontrollable circumstance using the 

list of assigned beneficiaries used to 

generate the Web Interface quality 

reporting sample. We believe we can 

use this assignment list report regardless 

of the date(s) the natural disaster 

occurred. The assignment list report 

provides us with a list of beneficiaries 

who have received the plurality of their 

primary care services from ACO 

professionals in the ACO at a specific 

point in time. As this is the list that is 

used to determine the quality reporting 

sample, we believe it is appropriate to 

use the same list to determine how 

many of the ACO’s beneficiaries reside 

in an area affected by a disaster, such 

that the ACO’s ability to report quality 

data could be compromised. We 

propose to revise § 425.502(f) to reflect 

this proposal for performance year 2018 

and subsequent years. We welcome 

comments on this proposal 

In the Shared Savings Program IFC 

(82 FR 60916), we described the policies 

under the MIPS APM scoring standard 

that would apply for performance year 

2017 for MIPS eligible clinicians in an 

ACO that did not completely report 

quality. The existing tracks of the 

Shared Savings Program (Track 1, Track 

2 and Track 3), and the Track 1+ Model 

are MIPS APMs under the APM scoring 

standard.23 If finalized, we expect the 

proposed BASIC track and ENHANCED 

track (based on Track 3) would similarly 

be considered MIPS APMs under the 

APM scoring standard. For purposes of 

the APM scoring standard, MIPS eligible 

clinicians in an ACO that has been 

affected by an extreme and 

uncontrollable circumstance and does 

not report quality for a performance 

year, and therefore, receives the mean 

ACO quality score under the Shared 

Savings Program, would have the MIPS 

quality performance category 

reweighted to zero percent resulting in 

MIPS performance category weighting of 

75 percent for the Promoting 

Interoperability performance category 

and 25 percent for Improvement 

Activities performance category under 

the APM scoring standard per our 

policy at § 414.1370(h)(5)(i)(B). In the 

event an ACO that has been affected by 

an extreme and uncontrollable 

circumstance is able to completely and 

accurately report all quality measures 

for a performance year, and therefore 

receives the higher of the ACO’s quality 

performance score or the mean quality 

performance score under the Shared 

Savings Program, we would not 

reweight the MIPS quality performance 

category to zero percent under the APM 

scoring standard. Additionally, unless 

otherwise excepted, the ACO 

participants will receive a Promoting 

Interoperability (PI) (formerly called 

Advancing Care Information (ACI)) 

performance category score under the 

APM scoring standard based on their 

reporting, which could further increase 

their final score under MIPS. 

We propose to revise § 425.502(f) to 

extend the policies established for 

performance year 2017 to performance 

year 2018 and subsequent performance 

years. Specifically, we propose that for 

performance year 2018 and subsequent 

performance years, including the 

applicable quality data reporting period 

for the performance year if the reporting 

period is not extended, in the event that 

we determine that 20 percent or more of 

an ACO’s assigned beneficiaries, as 

determined using the list of 

beneficiaries used to generate the Web 

Interface quality reporting sample, 

reside 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 is 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 quality 

performance score for all Shared 

Savings Program ACOs for the 

applicable performance year. 

• If the ACO is able to completely and 

accurately report all quality measures, 

we would use the higher of the ACO’s 

quality performance score or the mean 

quality performance score for all Shared 

Savings Program ACOs. If the ACO’s 

quality performance score is used, the 

ACO would also be eligible for quality 

improvement points. 

• If the ACO receives the mean 

Shared Savings Program quality 

performance score, the ACO would not 

be eligible for bonus points awarded 

based on quality improvement during 

the applicable performance year. 

• If an ACO receives the mean Shared 

Savings Program ACO quality 

performance 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 

would 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. Under this approach, 

the comparison will continue to be 

between consecutive years of quality 

reporting, but these years may not be 

consecutive calendar years. 

Additionally, we propose to address 

the possibility that ACOs that have a 6- 

month performance year (or 

performance period) during 2019 may 

be affected by extreme and 

uncontrollable circumstances. As 

described in section II.A.7 of this 

proposed rule, we are proposing to use 

12 months of data, based on the 

calendar year, to determine quality 

performance for the two 6-month 

performance years during 2019 (from 

January 2019 through June 2019, and 

from July 2019 through December 2019). 

We are also proposing to use this same 

approach to determine quality 

performance for ACOs that start a 12- 

month performance year on January 1, 

2019, and then elect to voluntarily 

terminate their participation agreement 

with an effective termination date of 

June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019. Accordingly, we believe it is 

necessary to account for disasters 

occurring in any month(s) of calendar 

year 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 


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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. For 

example, assume that an ACO 

participates in the Shared Savings 

Program for a 6-month performance year 

from January 1, 2019, through June 30, 

2019, and does not continue its 

participation in the program for a new 

agreement period beginning July 1, 

2019. Further assume that we determine 

that 20 percent or more of the ACO’s 

assigned beneficiaries, as determined 

using the list of beneficiaries used to 

generate the Web Interface quality 

reporting sample, reside in an area that 

is affected by an extreme and 

uncontrollable circumstance, as 

determined under the Quality Payment 

Program, in September 2019. The ACO’s 

quality performance score for the 2019 

reporting period would be adjusted 

according to the policies in § 425.502(f). 

We propose to specify the 

applicability of the alternative scoring 

methodology in § 425.502(f) to the 6- 

month performance years (or the 6- 

month performance period) within 

calendar year 2019 in the proposed new 

section of the regulations at § 425.609 

that describes the methodology for 

determining an ACO’s financial and 

quality performance for the two 6- 

month performance years (or the 6- 

month performance period) during 

2019. 

(2) Mitigating Shared Losses for ACOs 

Participating in a Performance-Based 

Risk Track 

In the Shared Savings Program IFC 

(82 FR 60916) we modified the payment 

methodology for performance-based risk 

tracks for performance year 2017, 

established under the authority of 

section 1899(i) of the Act, to mitigate 

shared losses owed by ACOs affected by 

extreme and uncontrollable 

circumstances. Under this approach, we 

will reduce the ACO’s shared losses, if 

any, determined to be owed for 

performance year 2017 under the 

existing methodology for calculating 

shared losses in the Shared Savings 

Program regulations at 42 CFR part 425 

subpart G 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 

reside in an area affected by an extreme 

and uncontrollable circumstance. For 

performance year 2017, we will 

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 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. The 

policies for performance year 2017 are 

specified in paragraph (i) in § 425.606 

for ACOs under Track 2 and § 425.610 

for ACOs under Track 3. 

We believe it is appropriate to 

continue to apply these policies in 

performance year 2018 and subsequent 

years to address stakeholders’ concerns 

that ACOs participating under a 

performance-based risk track 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 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 believe ACOs that 

are participating in performance-based 

risk tracks may reconsider whether they 

are able to continue their participation 

in the Shared Savings Program under a 

performance-based risk track. The 

approach we adopted for performance 

year 2017 in the Shared Savings 

Program IFC, and which we are 

proposing to continue for performance 

year 2018 and subsequent years, 

balances 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 portion of their 

final assigned beneficiary population 

that was outside the area affected by the 

disaster. Consistent with the policy 

adopted for performance year 2017 in 

the Shared Savings Program IFC, we 

believe it is appropriate to continue to 

use the final assignment list report for 

the performance year for purposes of 

this calculation. This final assignment 

list report will be available at the time 

we conduct final reconciliation and 

provides the most complete information 

regarding the extent to which an ACO’s 

assigned beneficiary population was 

affected by a disaster. 

Additionally, we propose to also 

address the possibility that ACOs that 

have a 6-month performance year 

during 2019 may be affected by extreme 

and uncontrollable circumstances. As 

described in section II.A.7 of this 

proposed rule, we are proposing to use 

12 months of expenditure data, based on 

the calendar year, to perform financial 

reconciliation for the two 6-month 

performance years during 2019 (from 

January 2019 through June 2019, and 

from July 2019 through December 2019). 

Accordingly, for ACOs participating in 

a 6-month performance year during 

2019, we believe it is necessary to 

account for disasters occurring in any 

month(s) of calendar year 2019, 

regardless of whether the ACO is 

actively participating in the Shared 

Savings Program at the time of the 

disaster. This proposal applies to ACOs 

participating under a 6-month 

performance year during calendar year 

2019, that would be reconciled based on 

their financial performance during the 

entire 12-month calendar year 2019 (as 

described in section II.A.7 of this 

proposed rule and in the proposed 

provision at § 425.609). This proposal 

also applies to ACOs that start a 12- 

month performance year on January 1, 

2019, and then elect to voluntarily 

terminate their participation agreement 

with an effective termination date of 

June 30, 2019, and enter a new 

agreement period starting on July 1, 

2019. Consistent with § 425.221(b)(3)(i), 

we would reconcile these ACOs for the 

performance period from January 1, 

2019, through June 30, 2019, based on 

their financial performance during the 

entire 12-month calendar year 2019, 

according to the methodology in the 

proposed provision at § 425.609. 

For ACOs with a 6-month 

performance year (or performance 

period) that are affected by an extreme 

or uncontrollable circumstance during 

calendar year 2019, we propose 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. 

For example, assume that: A disaster 

was declared for October 2019 through 

December 2019; an ACO is being 

reconciled for its participation during 

the performance year (or performance 

period) from January 1, 2019, through 

June 30, 2019; the ACO is determined to 

have shared losses of $100,000 for 

calendar year 2019; and 25 percent of 


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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 × 0.5 = 

$46,875. 

This proposed approach to mitigate 

shared losses for ACOs that may be 

affected by extreme and uncontrollable 

circumstances would also apply 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 

(as described in section II.A.6 of this 

proposed rule and in the proposed 

revisions to § 425.221(b)(2)). We note 

that according to the proposed policies 

in section II.A.6.d of this proposed rule, 

an ACO under a two-sided model that 

voluntarily terminates its participation 

agreement under § 425.220 during a 6- 

month performance year 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. 

For ACOs that are involuntarily 

terminated from a 6-month performance 

year, pro-rated shared losses for the 6- 

month performance year would be 

determined based on assigned 

beneficiary expenditures for the full 

calendar year 2019 (as described in 

section II.A.7 of this proposed rule) and 

then pro-rated to account for the partial 

year of participation prior to 

involuntary termination. 

We acknowledge 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 may also be affected by 

extreme and uncontrollable 

circumstances. In this case, we propose 

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 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. 

Therefore, we propose to amend 

§§ 425.606(i) and 425.610(i) to extend 

the policies regarding extreme and 

uncontrollable circumstances that were 

established for performance year 2017 to 

performance year 2018 and subsequent 

years. In section II.A.3.a of this 

proposed rule, we discuss our proposal 

that these policies for addressing the 

impact of extreme and uncontrollable 

circumstances on ACO financial 

performance would also apply to BASIC 

track ACOs under performance-based 

risk. These proposals are reflected in the 

proposed new provision at § 425.605(f). 

We also propose 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 will 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 address 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)(3)(i). In addition, we are 

proposing to include a provision at 

§ 425.609(d) to provide that the policies 

on extreme and uncontrollable 

circumstances would apply to the 

determination of shared losses for ACOs 

participating in a 6-month performance 

year during 2019. 

We note that to the extent that our 

proposal to extend the policies adopted 

in the Shared Savings Program IFC to 

2018 and subsequent performance years 

constitutes a proposal to change the 

payment methodology for 2018 after the 

start of the performance year, we believe 

that consistent with section 

1871(e)(1)(A)(ii) of the Act, and for the 

reasons discussed in this section of this 

proposed rule, it would be contrary to 

the public interest not to propose to 

establish a policy under which we 

would have the authority adjust the 

shared losses calculated for ACOs in 

Track 2 and Track 3 for performance 

year 2018 to reflect the impact of any 

extreme or uncontrollable 

circumstances that may occur during 

the year. 

These proposed policies would not 

change the status of those payment 

models that meet the criteria to be 

Advanced APMs under the Quality 

Payment Program (see § 414.1415). Our 

proposed policies would reduce the 

amount of shared losses owed by ACOs 

affected by a disaster, but the overall 

financial risk under the payment model 

would not change and participating 

ACOs would still remain at risk for an 

amount of shared losses in excess of the 

Advanced APM generally applicable 

nominal amount standard. Additionally, 

these policies would not prevent an 

eligible clinician from satisfying the 

requirements to become a QP for 

purposes of the APM Incentive Payment 

(available for payment years through 

2024) or higher physician fee schedule 

updates (for payment years beginning in 

2026) under the Quality Payment 

Program. 

We also want to emphasize that all 

ACOs would continue to be entitled to 

share in any savings they may achieve 

for a performance year. ACOs in all 

tracks of the program will continue to 

receive shared savings payments, if any, 

as determined under subpart G of the 

regulations. The calculation of savings 

and the determination of shared savings 

payment amounts for a performance 

year would not be affected by the 

proposed policies to address extreme 

and uncontrollable circumstances, 

except that the quality performance 

score for an affected ACO may be 

adjusted as described in this section of 

this proposed rule. 

(3) Determination of Historical 

Benchmarks for ACOs in Affected Areas 

In the Shared Savings Program IFC, 

we sought comment on how to address 

the impact of extreme and 

uncontrollable circumstances on the 

expenditures for an ACO’s assigned 

beneficiary population for purposes of 

determining the benchmark (82 FR 

60917). As we explained in the Shared 

Savings Program IFC (82 FR 60913), the 

impact of disasters on an ACO’s 

financial performance could be 

unpredictable as a result of changes in 

utilization and cost of services 

furnished to the Medicare beneficiaries 

it serves. In some cases, ACO 


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participants might be unable to 

coordinate care because of migration of 

patient populations leaving the 

impacted areas. On the other hand, 

patient populations remaining in 

impacted areas might receive fewer 

services and have lower overall costs to 

the extent that healthcare providers are 

unable to reopen their offices because 

they lack power and water, or have 

limited access to fuel for operating 

alternate power generators. Significant 

changes in costs incurred, whether 

increased or decreased, as a result of an 

extreme or uncontrollable circumstance 

may 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. An 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. 

Likewise, a decrease in expenditures for 

a particular calendar year would result 

in a lower benchmark value when the 

same calendar year is used to determine 

the ACO’s historical benchmark. 

While considering options for 

adjusting ACOs’ historical benchmarks 

to account for disasters occurring during 

a benchmark year, we considered the 

effect that the proposed regional factors, 

that are discussed in section II.D.3 

might have on the historical 

benchmarks for ACOs located in a 

disaster area. After review, we believe 

that when regional factors are applied to 

an ACO’s historical benchmark, the 

regional factors would inherently adjust 

for variations in expenditures from year 

to year, and thus would also adjust for 

regional variations in expenditures 

related to extreme and uncontrollable 

circumstances. For example, assume 

that an ACO experienced a reduction in 

beneficiary expenditures in performance 

year 2017 because a portion of its 

assigned beneficiaries resided in 

counties that were impacted by a 

disaster. Then, also assume 

expenditures returned to their 

previously higher level in 2018 and this 

ACO subsequently renewed its ACO 

participation agreement in 2020. In 

2020, when the ACO’s historical 

benchmark would be reset (rebased), the 

expenditures for 2017 (now a historical 

benchmark year) would be subject to a 

higher regional trend factor because 

expenditures increased back to the 

expected level in 2018, which would 

increase the 2017 benchmark year 

expenditures. Additionally, this ACO 

could also have its historical benchmark 

increased even further as a result of its 

performance compared to others in its 

region, as reflected in the regional 

adjustment to the ACO’s historical 

benchmark. In contrast, consider an 

ACO that experienced an increase in 

beneficiary expenditures in performance 

year 2017 because a portion of its 

assigned beneficiaries resided in 

counties that were impacted by a 

disaster. Then, assume expenditures 

returned to their previously lower level 

in 2018 and this ACO renewed its ACO 

participation agreement in 2020. In 

2020, when the ACO’s historical 

benchmark would be reset, the 

expenditures for 2017 would be subject 

to a lower regional trend factor because 

expenditures decreased back to the 

expected level in 2018, which would 

decrease the 2017 benchmark year 

expenditures. Additionally, this ACO 

could also have its historical benchmark 

decreased further as a result of its 

performance compared to others in its 

region, as reflected in the regional 

adjustment to the ACO’s historical 

benchmark. 

Our expectation that the proposed 

regional factors that would be used to 

establish an ACO’s historical benchmark 

would also adjust for variations in 

expenditures related to extreme and 

uncontrollable circumstances is 

supported by a preliminary analysis of 

data for areas that were affected by the 

disasters that occurred in performance 

year 2017. Our analysis of the data 

showed that, as a result of the disasters 

in these areas, expenditure trends for 

the performance year appeared below 

projections. For these areas, the 

expenditures began to increase after the 

disaster incident period ended, but 

expenditures were still below 

expectations for the year. Based on the 

expenditure trends beginning to return 

to expected levels after the disaster 

period, it would be reasonable to expect 

that expenditures would continue to 

increase to expected levels in 2018. This 

difference between the lower than 

expected levels of expenditures in 2017 

and a return to expected expenditures in 

2018, would result in a higher regional 

trend factor being applied to 2017 

expenditures when they are used to 

determine an ACO’s historical 

benchmark. 

In considering whether it might be 

necessary to make an additional 

adjustment to ACOs’ historical 

benchmarks to account for expenditure 

variations related to extreme and 

uncontrollable circumstances, we 

considered an approach where we 

would adjust the historical benchmark 

by reducing the weight of expenditures 

for beneficiaries who resided in a 

disaster area during a disaster period 

and placing a correspondingly larger 

weight on expenditures for beneficiaries 

residing outside the disaster area during 

the disaster period. Such an approach 

would be expected to proportionally 

increase the historical benchmark for 

ACOs that experienced a decrease in 

expenditures, and conversely 

proportionally decrease the historical 

benchmark for ACOs that experienced 

an increase in expenditures for their 

assigned beneficiaries who were 

impacted by a disaster. Under this 

approach, for each of the historical 

benchmark years, we would identify 

each ACO’s assigned beneficiaries who 

had resided in a disaster area during a 

disaster period. The portion of 

expenditures for these assigned 

beneficiaries that was impacted by the 

disaster would be removed from the 

applicable historical benchmark year(s). 

The removal of these expenditures from 

the historical benchmark year(s) would 

allow the historical benchmark 

calculations to include only 

expenditures that were not impacted by 

the disaster. We believe this 

methodology for calculating benchmark 

expenditures would adjust for 

expenditure increases or decreases that 

may occur as a result of impacts related 

to a disaster. 

If we were to implement such an 

adjustment to the historical benchmark, 

we believe it would be appropriate to 

avoid making minor historical 

benchmark adjustments for an ACO that 

was not significantly affected by a 

disaster by establishing a minimum 

threshold for the percentage of an ACO’s 

beneficiaries located in a disaster area. 

Based on data from 2017, quarter 3, over 

80 percent of ACOs had less than 50 

percent of their assigned beneficiaries 

residing in disaster counties, with over 

75 percent having less than 10 percent 

of their assigned beneficiaries residing 

in disaster counties. Based on this data, 

we believe a minimum threshold of 50 

percent of assigned beneficiaries 

residing in disaster counties could be an 

appropriate threshold for the adjustment 

to historical benchmarks because 

historical benchmarks are calculated 

based on the ACO’s entire assigned 

beneficiary population in each 

benchmark year, rather than a sample as 

is used for quality reporting. 

However, we are concerned that this 

methodology for calculating an 

adjustment might not be as accurate as 

the inherent adjustment that would 

result from applying regional factors 

when resetting the benchmark and may 


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impact other expected expenditure 

variations occurring in the impacted 

areas. For example, if an additional 

disaster adjustment were to be applied, 

it might have unintended impacts when 

expenditure truncation is applied, it 

might inappropriately weight and not 

account for expected variations in 

expenditures between areas that were 

and were not impacted by the disaster, 

and it might compound effects that have 

already been offset by the regional 

adjustment. In addition, the 

expenditures, as adjusted, may not be 

representative of the ACO’s actual 

performance and aggregate assigned 

beneficiary population during the 

benchmark period. 

In summary, we believe the regional 

factors that we are proposing to apply as 

part of the methodology for determining 

an ACO’s historical benchmark would 

reduce the expenditures in a historical 

benchmark year when they are greater 

than expected (relative to other 

historical benchmark years) as a result 

of a disaster and conversely increase 

expenditures in a historical benchmark 

year when they are below the expected 

amount. For these reasons, we believe 

that the proposal in section II.D.3 of this 

proposed rule to apply regional factors 

when determining ACOs’ historical 

benchmarks, starting with an ACO’s first 

agreement period for agreement periods 

starting on July 1, 2019, and in 

subsequent years, would be sufficient to 

address any changes in expenditures 

during an ACO’s historical benchmark 

years as a result of extreme and 

uncontrollable circumstances, and an 

additional adjustment, such as the 

method discussed previously in this 

section would not appear to be 

necessary. However, we will continue to 

evaluate the impact of the 2017 disasters 

on ACOs’ assigned beneficiary 

expenditures, and we intend to continue 

to consider whether it might be 

appropriate to make an additional 

adjustment to the historical benchmark 

to account for expenditures that may 

have increased or decreased in a 

historical benchmark year as a result of 

an extreme or uncontrollable 

circumstance. 

We welcome comments on these 

issues, including whether it is necessary 

to adjust ACOs’ historical benchmarks 

to account for extreme and 

uncontrollable circumstances that might 

occur during a benchmark year, and 

appropriate methods for making such 

benchmark adjustments. We would also 

note that the proposal in section II.D.3 

of this proposed rule to apply regional 

factors to determine ACOs’ historical 

benchmarks would apply starting with 

an ACO’s first agreement period for 

agreement periods starting on July 1, 

2019, and in subsequent years and 

would therefore have no effect on 

benchmarks for ACOs in a first 

agreement period starting before July 1, 

2019. Accordingly, we welcome 

comments on whether and how an 

adjustment should be made for ACOs 

whose benchmarks do not reflect these 

regional factors. 

We invite comments on the policies 

being proposed for assessing the 

financial and quality performance of 

ACOs affected by an extreme or 

uncontrollable circumstance during 

performance year 2018 and subsequent 

years, including the applicable quality 

data reporting period for the 

performance year, unless the reporting 

period is extended. We believe these 

policies would reduce burden and 

financial uncertainty for ACOs, ACO 

participants, and ACO providers/ 

suppliers affected by future 

catastrophes, and will also align with 

existing Medicare policies in the 

Quality Payment Program. We also 

invite comments on any additional areas 

where relief may be helpful or other 

ways to mitigate unexpected issues that 

may arise in the event of an extreme and 

uncontrollable circumstance. 

5. Program Data and Quality Measures 

In this section, we solicit comments 

on possible changes to the quality 

measure set and modifications to 

program data shared with ACOs to 

support CMS’s Meaningful Measures 

initiative and respond to the nation’s 

opioid misuse epidemic. As part of the 

Meaningful Measures initiative, we are 

focusing the agency’s efforts on 

updating quality measures, reducing 

regulatory burden, and promoting 

innovation (see CMS Press Release, 

CMS Administrator Verma Announces 

New Meaningful Measures Initiative 

and Addresses Regulatory Reform; 

Promotes Innovation at LAN Summit, 

October 30, 2017, available at https://

www.cms.gov/Newsroom/MediaRelease

Database/Press-releases/2017-Pressreleases-items/2017-10-30.html). Under 

the Meaningful Measures initiative, we 

are working towards assessing 

performance on only those core issues 

that are most vital to providing highquality care and improving patient 

outcomes, with an emphasis on 

outcome-based measures, reducing 

unnecessary burden on providers, and 

putting patients first. When we 

developed the quality reporting 

requirements under the Shared Savings 

Program, we considered the quality 

reporting requirements under other 

initiatives, such as the Physician 

Quality Reporting System (PQRS) and 

Million Hearts Initiative, and consulted 

with the measures community to ensure 

that the specifications for the measures 

used under the Shared Savings Program 

are up-to-date and reduce reporting 

burden. 

Since the Shared Savings Program 

was first established in 2012, we have 

not only updated the quality measure 

set to reduce reporting burden, but also 

to focus on more meaningful outcomebased measures. The most recent 

updates to the Shared Savings Program 

quality measure set were made in the 

CY 2017 PFS Final Rule (81 FR 80484 

through 80489) to adopt the ACO 

measure recommendations made by the 

Core Quality Measures Collaborative, a 

multi-stakeholder group with the goal of 

aligning quality measures for reporting 

across public and private stakeholders 

in order to reduce provider reporting 

burden. Currently, more than half of the 

31 Shared Savings Program quality 

measures are outcome-based, including: 

• Patient-reported outcome measures 

collected through the CAHPS for ACOs 

Survey that strengthen patient and 

caregiver experience; 

• Outcome measures supporting care 

coordination and effective 

communication, such as unplanned 

admission and readmission measures; 

and 

• Intermediate outcome measures that 

address the effective treatment of 

chronic disease, such as hemoglobin 

A1c control for patients with diabetes 

and control of high blood pressure. 

It is important that the quality 

reporting requirements under the 

Shared Savings Program align with the 

reporting requirements under other 

Medicare initiatives and those used by 

other payers in order to minimize the 

need for Shared Savings Program 

participants to devote excessive 

resources to understanding differences 

in measure specifications or engaging in 

duplicative reporting. We seek 

comment, including recommendations 

and input on meaningful measures, on 

how we may be able to further advance 

the quality measure set for ACO 

reporting, consistent with the 

requirement under section 1899(b)(3)(C) 

of the Act that the Secretary seek to 

improve the quality of care furnished by 

ACOs by specifying higher standards, 

new measures, or both. 

One particular area of focus by the 

Department of Health and Human 

Services is the opioid misuse epidemic. 

The Centers for Disease Control and 

Prevention (CDC) reports that the 

number of people experiencing chronic 

pain lasting more than 3 months is 

estimated to include 11 percent of the 

adult population. According to a 2016 


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CDC publication, 2 million Americans 

had opioid use disorder (OUD) 

associated with prescription opioids in 

2014 (https://www.cdc.gov/ 

drugoverdose/prescribing/ 

guideline.html). Since the 

implementation of Medicare Part D in 

2006 to cover prescription medications, 

the Medicare program has become the 

largest payer for prescription opioids in 

the United States (Zhou et al, 2016; 

https://www.ncbi.nlm.nih.gov/pmc/ 

articles/PMC4955937/). Safe and 

effective opioid prescribing for older 

adults is of particular importance 

because misuse and abuse of opioids 

can lead to increased adverse events in 

this population (for example, increased 

falls, fractures, hospitalization, ER 

visits, mortality), especially given the 

high prevalence of polypharmacy in the 

elderly. Polypharmacy is the 

simultaneous use of multiple drugs by 

a single patient, for one or more 

conditions, which increases the risk of 

adverse events. For example, a study by 

MedPAC found that some beneficiaries 

who use opioids fill more than 50 

prescriptions among 10 drug classes 

annually (http://www.medpac.gov/docs/ 

default-source/reports/chapter-5- 

polypharmacy-and-opioid-use-amongmedicare-part-d-enrollees-june-2015- 

report-.pdf?sfvrsn=0, MedPAC, 2015). 

As part of a multifaceted response to 

address the growing problem of overuse 

and abuse of opioids in the Part D 

program, CMS adopted a policy in 2013 

requiring Medicare Part D plan sponsors 

to implement enhanced drug utilization 

review. Between 2011 through 2014, 

there was a 26 percent decrease or 7,500 

fewer Medicare Part D beneficiaries 

identified as potential opioid overutilizers which may be due, at least in 

part, to these new policies. On January 

5, 2017, CMS released its Opioid Misuse 

Strategy. This document outlines CMS’s 

strategy and the array of actions 

underway to address the national opioid 

misuse epidemic and can be found at 

https://www.cms.gov/Outreach-andEducation/Outreach/Partnerships/ 

Downloads/CMS-Opioid-MisuseStrategy-2016.pdf. 

We aim to align our policies under the 

Shared Savings Program with the 

priorities identified in the Opioid 

Misuse Strategy and to help ACOs and 

their participating providers and 

suppliers in responding to and 

managing opioid use, and are therefore 

considering several actions to improve 

alignment. Specifically, we are 

considering what information regarding 

opioid use, including information 

developed using aggregate Medicare 

Part D data, could be shared with ACOs. 

We are also considering the addition of 

one or more measures specific to opioid 

use to the ACO quality measures set. 

The potential benefits of such policies 

would be to focus ACOs on the 

appropriate use of opioids for their 

assigned beneficiaries and support their 

opioid misuse prevention efforts. 

First, we are considering what 

information, including what aggregated 

Medicare Part D data, could be useful to 

ACOs to combat opioid misuse in their 

assigned beneficiary population. We 

recognize the importance of available 

and emerging resources regarding the 

opioid epidemic at the federal, state, 

and local level, and intend to work with 

our federal partners to make relevant 

resources available in a timely manner 

to support ACOs’ goals and activities. 

We will also continue to share 

information with ACOs highlighting 

Federal opioid initiatives, such as the 

CDC Guideline for Prescribing Opioids 

for Chronic Pain (https://www.cdc.gov/ 

drugoverdose/prescribing/ 

guideline.html), which reviews the 

CDC’s recommended approach to opioid 

prescribing, and the Surgeon General’s 

report on Substance Use and Addiction, 

Facing Addiction in America: The 

Surgeon General’s Report on Alcohol, 

Drugs, and Health, (https://

addiction.surgeongeneral.gov/) which 

focuses on educating and mobilizing 

prescribers to take action to end the 

opioid epidemic by improving 

prescribing practices, informing patients 

about the risks of and resources for 

opioid addiction, and encouraging 

health care professionals to take a 

pledge to end the opioid crisis. We will 

also continue to highlight information 

about the opioid crisis and innovations 

for opioid treatment and prevention 

strategies in ACO learning system 

webinars. These webinars provide the 

forum for peer-to-peer sharing, such as 

the webinar held last year on 

Community Approaches to Preventing 

Opioid-Related Overdoses and Deaths, 

which included speakers from State and 

community organizations. 

Although we recognize that not all 

beneficiaries assigned to Shared Savings 

Program ACOs have Part D coverage, we 

believe a sufficient number do have Part 

D coverage to make aggregate Part D 

data regarding opioid use helpful for the 

ACOs. As an example, we have found 

the following information for 

performance year 2016: 

• Approximately 70 percent of 

beneficiaries assigned to ACOs 

participating in the Shared Savings 

Program had continuous Part D 

coverage. 

• For assigned beneficiaries with 

continuous Part D enrollment, almost 37 

percent had at least one opioid 

prescription. This percentage ranged 

from 10.6 percent to 58.3 percent across 

ACOs. 

• The mean number of opioid 

medications filled per assigned 

beneficiary (with continuous Part D 

coverage) varied across ACOs, ranging 

from 0.3 to 4.5 prescriptions filled, with 

an average of 2.1 prescriptions filled. 

• The number of opioid prescriptions 

filled for each assigned beneficiary with 

at least one opioid prescription filled 

varied across ACOs and ranged from 2.6 

to 8.4 prescriptions, with an average of 

5.5 opioid prescriptions filled. 

ACOs currently receive as part of the 

monthly claims and claims line feed 

data Part D prescription drug event 

(PDE) data on prescribed opioids for 

their assigned beneficiaries who have 

not opted out of data sharing. We 

encourage ACOs to use this beneficiarylevel data in their care delivery 

practices. 

We also seek suggestions for other 

types of aggregate data related to opioid 

use that could be added for 

informational purposes to the aggregate 

quarterly and annual reports CMS 

provides to ACOs. The aim would be for 

ACOs to utilize this additional 

information to improve population 

health management for assigned 

beneficiaries, including prevention, 

identifying anomalies, and coordinating 

care. The type of aggregate data should 

be highly relevant for a populationbased program at the national level and 

have demonstrated value in quality 

improvement initiatives. We are 

particularly interested in high impact 

aggregate data that would reflect gaps in 

quality of care, patient safety, multiple 

aspects of care, and drivers of cost. We 

aim to provide aggregate data that have 

validity for longitudinal analysis to 

enable both ACOs and the Shared 

Savings Program to trend performance 

across time and monitor for changes. 

Aggregate data on both processes and 

outcomes are appropriate, provided that 

the data are readily available. Types of 

aggregate data that we have begun to 

consider, based on the information 

available from prescription drug event 

records for assigned beneficiaries 

enrolled in Medicare Part D, include 

filled prescriptions for opioids 

(percentage of the ACO’s assigned 

beneficiaries with any opioid 

prescription, number of opioid 

prescriptions per opioid user), number 

of beneficiaries with a concurrent 

prescription of opioids and 

benzodiazepines; and number of 

beneficiaries with opioid prescriptions 

above a certain daily Morphine 

Equivalent Dosage threshold. Second, 

we are seeking comments on measures 


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24For more information, see: https://

www.healthit.gov/sites/default/files/understandingcertified-health-it-2.pdf. 

25See list of Alternative Payment Models in the 

Quality Payment Program as of February 2018, 

available at https://www.cms.gov/Medicare/QualityPayment-Program/Resource-Library/ 

Comprehensive-List-of-APMs.pdf. 

that can be added to the quality measure 

set for the purpose of addressing the 

opioid epidemic and addiction, more 

generally. We seek comment on 

measures related to various aspects of 

opioid use, such as prevention, pain 

management, or opioid use disorder 

treatment, and on measures related to 

addiction. In particular, we are 

considering the following relevant NQFendorsed measures, with emphasis on 

Medicare individuals with Part D 

coverage who are 18 years or older 

without cancer or enrolled in hospice: 

• NQF #2940 Use of Opioids at High 

Dosage in Persons Without Cancer: 

Analyzes the proportion (XX out of 

1,000) of Medicare Part D beneficiaries 

18 years or older without cancer or 

enrolled in hospice receiving 

prescriptions for opioids with a daily 

dosage of morphine milligram 

equivalent (MME) greater than 120 mg 

for 90 consecutive days or longer. 

• NQF #2950 Use of Opioids from 

Multiple Providers in Persons Without 

Cancer: Analyzes the proportion (XX 

out of 1,000) of Medicare Part D 

beneficiaries 18 years or older without 

cancer or enrolled in hospice receiving 

prescriptions for opioids from four (4) or 

more prescribers AND four (4) or more 

pharmacies. 

• NQF #2951 Use of Opioids from 

Multiple Providers and at High Dosage 

in Persons Without Cancer: Analyzes 

the proportion (XX out of 1,000) of 

Medicare Part D beneficiaries 18 years 

or older without cancer or enrolled in 

hospice with a daily dosage of morphine 

milligram equivalent (MME) greater 

than 120 mg for 90 consecutive days or 

longer, AND who received opioid 

prescriptions from four (4) or more 

prescribers AND four (4) or more 

pharmacies. 

In addition, we seek input on 

potential measures for which data are 

readily available, such as measures that 

might be appropriately calculated using 

Part D data, and that capture 

performance on outcomes of appropriate 

opioid management. Comments on 

measures that are not already NQF 

endorsed should include descriptions of 

reliability, validity, benchmarking, the 

population in which the measure was 

tested, along with the data source that 

was used, and information on whether 

the measure is endorsed and by what 

organization. We recognize that 

measures of the various aspects of 

opioid use may involve concepts related 

to integrated, coordinated, and 

collaborative care, including as 

applicable for co-occurring and/or 

chronic conditions, as well as measures 

that reflect the impact of interventions 

on patient outcomes, including direct 

and indirect patient outcome measures. 

We also seek comment on opioid-related 

measures that would support effective 

measurement alignment of substance 

use disorders across programs, settings, 

and varying interventions. 

6. Promoting Interoperability 

Consistent with the call in the 21st 

Century Cures Act for interoperable 

access, exchange, and use of health 

information, the final rule entitled, 2015 

Edition Health Information Technology 

(Health IT) Certification Criteria, 2015 

Edition Base Electronic Health Record 

(EHR) Definition, and ONC Health IT 

Certification Program Modifications 

(2015 Edition final rule) (80 FR 62601) 

under 45 CFR part 170 24 focuses on the 

2015 Edition of health IT certification 

criteria that support patient care, patient 

participation in care delivery, and 

electronic exchange of interoperable 

health information. The 2015 Edition 

final rule, which was issued on October 

16, 2015, is expected to improve 

interoperability by adopting new and 

updated vocabulary and content 

standards for the structured recording 

and exchange of health information and 

to facilitate the accessibility and 

exchange of data by including enhanced 

data export, transitions of care, and 

application programming interface 

capabilities. These policies are relevant 

to assessing the use of CEHRT under the 

Quality Payment Program and other 

value based payment initiatives. 

Under the Shared Savings Program, 

section 1899(b)(2)(G) of the Act requires 

participating ACOs to define processes 

to report on quality measures and 

coordinate care, such as through the use 

of telehealth, remote patient monitoring, 

and other such enabling technologies. 

Consistent with the statute, ACOs 

participating in the Shared Savings 

Program are required to coordinate care 

across and among primary care 

physicians, specialists, and acute and 

post-acute providers and suppliers and 

to have a written plan to encourage and 

promote the use of enabling 

technologies for improving care 

coordination, including the use of 

electronic health records and electronic 

exchange of health information 

(§ 425.112(b)(4)). Additionally, since the 

inception of the program in 2012, CMS 

has assessed the level of CEHRT use by 

certain clinicians in the ACO as a 

double-weighted quality measure (Use 

of Certified EHR Technology, ACO–11) 

as part of the quality reporting 

requirements for each performance year. 

For the 2018 performance year, we will 

use data derived from the Quality 

Payment Program’s Promoting 

Interoperability performance category to 

calculate the percentage of eligible 

clinicians participating in an ACO who 

successfully meet the Advancing Care 

Information Performance Category Base 

Score for purposes of ACO–11. Because 

the measure is used in determining an 

ACO’s quality score and for determining 

shared savings or losses under the 

Shared Savings Program, all eligible 

clinicians participating in Shared 

Savings Program ACOs must submit 

data for the Quality Payment Program’s 

Advancing Care Information 

performance category, including those 

eligible clinicians who are participating 

in Shared Savings Program tracks that 

have been designated as Advanced 

APMs and who have met the QP 

threshold or are otherwise not subject to 

the MIPS reporting requirements. 

In contrast, some alternative payment 

models tested by the Innovation Center, 

require all participants to use CEHRT 

even though certain tracks within those 

Models do not meet the financial risk 

standard for designation as Advanced 

APMs, such as the Oncology Care Model 

(one-sided risk arrangement track) and 

the Comprehensive End-Stage Renal 

Disease Care (CEC) Model (non-LDO 

one-sided risk arrangement track).25 The 

primary rationale for this requirement is 

to promote CEHRT use by eligible 

clinicians and organizations 

participating in APMs by requiring them 

to demonstrate a strong commitment to 

the exchange of health information, 

regardless of whether they are 

participating in an APM that meets the 

criteria to be designated as an Advanced 

APM. Additionally, under the Quality 

Payment Program, an incentive payment 

will be made to certain Qualifying APM 

Participants (QPs) participating in 

Advanced APMs. Beginning in 2017, an 

eligible clinician can become a QP for 

the year by participating sufficiently in 

an Advanced APM during the QP 

performance period. Eligible clinicians 

who are QPs for a year receive a lump 

sum APM incentive payment for 

payment years from 2019 through 2024, 

and are excluded from the MIPS 

reporting requirements for the 

performance year and the MIPS 

payment adjustment for the payment 

year. In the CY 2017 Quality Payment 

Program final rule (81 FR 77408) we 

finalized the criteria that define an 


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Advanced APM based on the 

requirements set forth in sections 

1833(z)(3)(C) and (D) of the Act. An 

Advanced APM is an APM that, among 

other criteria, requires its participants to 

use CEHRT. In the CY 2017 Quality 

Payment Program final rule, we 

established that Advanced APMs meet 

this requirement if the APM either (1) 

requires at least 50 percent of eligible 

clinicians in each participating APM 

Entity, or for APMs in which hospitals 

are the APM Entities, each hospital, to 

use CEHRT to document and 

communicate clinical care to their 

patients or other health care providers; 

or (2) for the Shared Savings Program, 

applies a penalty or reward to an APM 

Entity based on the degree of the use of 

CEHRT of the eligible clinicians in the 

APM Entity (§ 414.1415(a)(1)(i) and (ii)). 

In the CY 2017 PFS final rule, we 

updated the title and specifications of 

EHR quality measure (ACO–11) to align 

with the Quality Payment Program 

criterion on CEHRT use in order to 

ensure that certain tracks under the 

Shared Savings Program could meet the 

criteria to be Advanced APMs. 

Specifically, we revised the ACO–11 

measure to assess ACOs on the degree 

of CEHRT use by eligible clinicians 

participating in the ACO in order to 

align with the Quality Payment 

Program. Performance on the measure is 

determined by calculating the 

percentage of eligible clinicians 

participating in the ACO who 

successfully meet the Promoting 

Interoperability Performance Category 

Base Score. 

In light of our additional experience 

with the Shared Savings Program, our 

desire to continue to promote and 

encourage CEHRT use by ACOs and 

their ACO participants and ACO 

providers/suppliers, and our desire to 

better align with the goals of the Quality 

Payment Program and the criteria for 

participation in certain alternative 

payment models tested by the 

Innovation Center, as previously noted, 

we believe it would be appropriate to 

amend our regulations related to CEHRT 

use and the eligibility requirements for 

ACOs to participate in the Shared 

Savings Program. Specifically, we 

propose to add a requirement that all 

ACOs demonstrate a specified level of 

CEHRT use in order to be eligible to 

participate in the Shared Savings 

Program. Additionally, we propose that, 

as a condition of participation in a track, 

or a payment model within a track, that 

meets the financial risk standard to be 

an Advanced APM, ACOs must certify 

that the percentage of eligible clinicians 

participating in the ACO who use 

CEHRT to document and communicate 

clinical care to their patients or other 

health care providers meets or exceeds 

the threshold required for Advanced 

APMs as defined under the Quality 

Payment Program (§ 414.1415(a)(1)(i)). 

In conjunction with this proposed new 

eligibility requirement, we propose to 

retire the EHR quality measure (ACO– 

11) related to CEHRT use, thereby 

reducing reporting burden, effective for 

quality reporting for performance years 

starting on January 1, 2019, and 

subsequent performance years. In 

addition, consistent with our proposal 

to align with the Advanced APM 

criterion on use of CEHRT, we propose 

to apply the definition of CEHRT under 

the Quality Payment Program 

(§ 414.1305), including any subsequent 

updates to this definition, for purposes 

of the Shared Savings Program. 

First, we are proposing that for 

performance years starting on January 1, 

2019, and subsequent performance years 

ACOs in a track or a payment model 

within a track that does not meet the 

financial risk standard to be an 

Advanced APM must attest and certify 

upon application to participate in the 

Shared Savings Program, and 

subsequently, as part of the annual 

certification process, that at least 50 

percent of the eligible clinicians 

participating in the ACO use CEHRT to 

document and communicate clinical 

care to their patients or other health care 

providers. ACOs would be required to 

submit this certification in the form and 

manner specified by CMS. 

This proposed requirement aligns 

with the requirements regarding CEHRT 

use in many alternative payment models 

being tested by the Innovation Center 

(as previously noted). Additionally, we 

note that at the time of application, 

ACOs must have a written plan to use 

enabling technologies, such as 

electronic health records and other 

health IT tools, to coordinate care 

(§ 425.112(b)(4)(i)(C)). Over the years, 

successful ACOs have impressed upon 

us the importance of ‘‘hitting the ground 

running’’ on the first day of their 

participation in the Shared Savings 

Program, rather than spending the first 

year or two developing their care 

processes. We believe that requiring 

ACOs that are entering a track or a 

payment model within a track that does 

not meet the financial risk standard to 

be an Advanced APM to certify that at 

least 50 percent of the eligible clinicians 

participating in the ACO use CEHRT 

aligns with existing requirements under 

the Shared Saving Program and many 

Innovation Center alternative payment 

models and encourages participation by 

organizations that are more likely to 

meet the program goals. In addition, we 

believe such a requirement would also 

promote greater emphasis on the 

importance of CEHRT use for care 

coordination. Finally, we note that in 

the CY 2019 PFS proposed rule, we 

proposed to increase the threshold of 

CEHRT use required for APMs to meet 

criteria for designation as Advanced 

APMs under the Quality Payment 

Program to 75 percent (see 83 FR 

35990). Given the proposals for updates 

and modifications to the Shared Savings 

Program tracks found elsewhere in this 

proposed rule, as well as the proposals 

under the Quality Payment Program, we 

believe it is important that only those 

ACOs that are likely to be able to meet 

or exceed the threshold designated for 

Advanced APMs should be eligible to 

enter and continue their participation in 

the Shared Savings Program. Because of 

this, and also our desire to align 

requirements as explained in more 

detail later in this section, we also 

considered whether to propose to 

require all Shared Savings Program 

ACOs, including ACOs in tracks or 

payment models within tracks that 

would not meet financial criteria to be 

designated as Advanced APMs, to meet 

the 75 percent threshold proposed 

under the Quality Payment Program. 

We propose changes to the regulations 

at § 425.204(c) (to establish the new 

application requirement) and 

§ 425.302(a)(3)(iii) (to establish the new 

annual certification requirement). We 

also propose to add a new provision at 

§ 425.506(f)(1) to indicate that for 

performance years starting on January 1, 

2019, and subsequent performance 

years, all ACOs in a track or a payment 

model within a track that does not meet 

the financial risk standard to be an 

Advanced APM must certify that at least 

50 percent of their eligible clinicians 

use CEHRT to document and 

communicate clinical care to their 

patients or other health care providers. 

We note that this proposal, if finalized, 

would not affect the previouslyfinalized provisions for MIPS eligible 

clinicians reporting on the Promoting 

Interoperability (PI) performance 

category under MIPS. In other words, 

MIPS eligible clinicians who are 

participating in ACOs would continue 

to report as usual on the Promoting 

Interoperability performance category. 

We welcome comment on these 

proposed changes. We also seek 

comment on whether the percentage of 

CEHRT use should be set at a level 

higher than 50 percent for ACOs in a 

track or a payment model within a track 

that does not meet the financial risk 

standard to be an Advanced APM given 


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26This estimate is based on calculations of 

primary care physician CEHRT use prior to the 

changes made to ACO–11 to align with the Quality 

Payment Program, which became effective for 

quality reporting for performance year 2017. 

that average ACO performance on the 

Use of Certified EHR Technology 

measure (ACO–11) has substantially 

exceeded 50 percent, with ACOs 

reporting that on average roughly 80 

percent of primary care physicians in 

their ACOs meet meaningful use 

requirements,26 suggesting that a higher 

threshold may be warranted now or in 

the future. Additionally, a higher 

threshold percentage (such as 75 

percent) would align with the proposed 

changes to the CEHRT use requirement 

under the Quality Payment Program in 

the CY 2019 PFS proposed rule. 

Further, for ACOs in tracks or models 

that meet the financial risk standard to 

be Advanced APMs under the Quality 

Payment Program, we propose to align 

the proposed CEHRT use threshold with 

the criterion on use of CEHRT 

established for Advanced APMs under 

the Quality Payment Program. Although 

we believe it would be ideal for all 

ACOs to meet the same CEHRT 

thresholds to be eligible for 

participation in the Shared Savings 

Program, we recognize that there may be 

reasons why it may be desirable for 

ACOs in tracks or payment models 

within a track that do not meet the 

financial risk standard for Advanced 

APMs to have a different threshold 

requirement for CEHRT use than more 

sophisticated ACOs that are 

participating in tracks or payment 

models that qualify as Advanced APMs 

under the Quality Payment Program. For 

example, we note that in order for an 

APM to meet the criteria to be an 

Advanced APM under the Quality 

Payment Program, it must currently 

require at least 50 percent of eligible 

clinicians in each participating APM 

entity to use CEHRT to document and 

communicate clinical care to their 

patients or other health care providers 

(in addition to certain other criteria). 

However, we have proposed to increase 

this threshold level under the Quality 

Payment Program to 75 percent of 

eligible clinicians in each participating 

Advanced APM entity, as part of the CY 

2019 PFS proposed rule, as previously 

noted. Therefore, for performance years 

starting on January 1, 2019, and 

subsequent performance years for 

Shared Savings Program tracks (or 

payment models within tracks) that 

meet the financial risk standard to be an 

Advanced APM, we propose to align the 

CEHRT requirement with the Quality 

Payment Program Advanced APM 

CEHRT use criterion at 

§ 414.1415(a)(1)(i). Specifically, we 

propose that such ACOs would be 

required to certify that they meet the 

higher of the 50 percent threshold 

proposed for ACOs in a track (or a 

payment model within a track) that does 

not meet the financial risk standard to 

be an Advanced APM or the CEHRT use 

criterion for Advanced APMs under the 

Quality Payment Program at 

§ 414.1415(a)(1)(i). We believe that 

requiring these ACOs to meet the higher 

of the 50 percent threshold proposed for 

ACOs in a track (or a payment model 

within a track) that does not meet the 

financial risk standard to be an 

Advanced APM or the CEHRT use 

criterion for Advanced APMs will 

ensure alignment of eligibility 

requirements across all Shared Savings 

Program ACOs, while also ensuring that 

if the CEHRT use criterion for Advanced 

APMs is higher than 50 percent, those 

Shared Savings Program tracks (or 

payment models within a track) that 

meet the financial risk standard to be an 

Advanced APM would also meet the 

CEHRT threshold established under the 

Quality Payment Program. We 

anticipate that for performance years 

starting on January 1, 2019, the tracks 

(or payment models within tracks) that 

would be required to meet the CEHRT 

threshold designated at 

§ 414.1415(a)(1)(i) would include Track 

2, Track 3, and the Track 1+ Model, and 

for performance years starting on July 1, 

2019, they would include the BASIC 

track, Level E, and the ENHANCED 

track. ACOs in these tracks (or a 

payment model within such a track) 

would be required to attest and certify 

that the percentage of the eligible 

clinicians in the ACO that use CEHRT 

to document and communicate clinical 

care to their patients or other health care 

providers meets or exceeds the level of 

CEHRT use specified under the Quality 

Payment Program regulation at 

§ 414.1415(a)(1)(i). Although this 

proposal may cause Shared Savings 

Program ACOs in different tracks (or 

different payment models within the 

same track) to be held to different 

requirements regarding CEHRT use, we 

believe it is appropriate to ensure not 

only that ACOs that are still new to 

participation in the Shared Savings 

Program are not excluded from the 

program due to a requirement that a 

high percentage of eligible clinicians 

participating in the ACO use CEHRT, 

but also that eligible clinicians in ACOs 

further along the risk continuum have 

the opportunity to participate in an 

Advanced APM for purposes of the 

Quality Payment Program. 

We propose to add a new provision to 

the regulations at § 425.506(f)(2) to 

establish the CEHRT requirement for 

performance years starting on January 1, 

2019, and subsequent performance years 

for ACOs in a track or a payment model 

within a track that meets the financial 

risk standard to be an Advanced APM 

under the Quality Payment Program. 

These ACOs would be required to 

certify that the percentage of eligible 

clinicians participating in the ACO that 

use CEHRT to document and 

communicate clinical care to their 

patients or other health care providers 

meets or exceeds the higher of 50 

percent or the threshold for CEHRT use 

by Advanced APMs at 

§ 414.1415(a)(1)(i). We seek comment on 

this proposal. We also seek comment on 

whether we should apply the same 

standard regarding CEHRT use across all 

Shared Savings Program ACOs, 

including ACOs participating in tracks 

or payment models within tracks that do 

not meet the financial risk standard to 

be designated as Advanced APMs, 

specifically Track 1 and the proposed 

BASIC track, Levels A through D, or 

maintain the proposed 50 percent 

requirement for these ACOs as they gain 

experience on the glide path to 

performance-based risk. 

As a part of these proposals to require 

ACOs to certify that a specified 

percentage of their eligible clinicians 

use CEHRT, CMS reserves the right to 

monitor, assess, and/or audit an ACO’s 

compliance with respect to its 

certification of CEHRT use among its 

participating eligible clinicians, 

consistent with §§ 425.314 and 425.316, 

and to take compliance actions 

(including warning letters, corrective 

action plans, and termination) as set 

forth at §§ 425.216 and 425.218 when 

ACOs fail to meet or exceed the required 

CEHRT use thresholds. Additionally, we 

propose to adopt for purposes of the 

Shared Savings Program the same 

definition of ‘‘CEHRT’’ as is used under 

the Quality Payment Program. We 

propose to amend § 425.20 to 

incorporate a definition of CEHRT 

consistent with the definition at 

§ 414.1305, including any subsequent 

updates or revisions to that definition. 

Consistent with this proposal and to 

ensure alignment with the requirements 

regarding CEHRT use under the Quality 

Payment Program, we also propose to 

amend § 425.20 to incorporate the 

definition of ‘‘eligible clinician’’ at 

§ 414.1305 that applies under the 

Quality Payment Program. 

Additionally, if the proposal to 

introduce a specified threshold of 

CEHRT use as an eligibility requirement 

for participation in the Shared Savings 


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Program is finalized, we believe this 

new requirement should replace the 

current ACO quality measure that 

assesses the Use of Certified EHR 

Technology (ACO–11). The proposed 

new eligibility requirement, which 

would be assessed through the 

application process and annual 

certification, would help to meet the 

goals of the program and align with the 

approach used in other MIPS APMs. 

Moreover, the proposed new 

requirement would render reporting on 

the Use of Certified EHR Technology 

quality measure unnecessary in order 

for otherwise eligible tracks (and 

payments models within tracks) to meet 

the Advanced APM criterion regarding 

required use of CEHRT under 

§ 414.1415(a)(1)(i). As a result, 

continuing to require ACOs to report on 

this measure would introduce undue 

reporting burden on eligible clinicians 

that meet the QP threshold and would 

otherwise not be required to report the 

Promoting Interoperability performance 

category for purposes of the Quality 

Payment Program. Therefore, we are 

proposing to remove the Use of Certified 

EHR Technology measure (ACO–11) 

from the Shared Savings Program 

quality measure set, effective with 

quality reporting for performance years 

starting on January 1, 2019, and 

subsequent performance years. We 

propose corresponding changes to the 

regulation at § 425.506. As previously 

noted, the removal of the Use of 

Certified EHR Technology measure 

(ACO–11) from the quality measure set 

used under the Shared Savings Program, 

if finalized, would not affect policies 

under MIPS for reporting on the 

Promoting Interoperability performance 

category and scoring under the APM 

Scoring Standard for MIPS eligible 

clinicians in MIPS APMs. In other 

words, eligible clinicians subject to 

MIPS (such as eligible clinicians in 

BASIC track, Levels A through D, Track 

1, and other MIPS eligible clinicians 

who are required to report on the 

Promoting Interoperability performance 

category for purposes of the Quality 

Payment Program) would continue to 

report as usual on the Promoting 

Interoperability performance category. 

However, data reported for purposes of 

the Promoting Interoperability 

performance category under MIPS 

would not be used to assess the ACO’s 

quality performance under the Shared 

Savings Program. We welcome public 

comment on the proposal to remove the 

quality measure on Use of Certified EHR 

Technology (ACO–11) from the 

Medicare Shared Savings Program 

measure set, effective for quality 

reporting for performance years starting 

on January 1, 2019, and subsequent 

years. 

Finally, as discussed previously in 

this section, in the CY 2017 Quality 

Payment Program final rule, CMS 

finalized a separate Advanced APM 

CEHRT use criterion that applies for the 

Shared Savings Program at 

§ 414.1415(a)(1)(ii). To meet the 

Advanced APM CEHRT use criterion 

under the Shared Savings Program, a 

penalty or reward must be applied to an 

APM Entity based upon the degree of 

CEHRT use among its eligible clinicians. 

We believed that this alternative 

criterion was appropriate to assess the 

Advanced APM CEHRT use requirement 

under the Shared Savings Program 

because at the time a specific level of 

CEHRT use was not required for 

participation in the program (81 FR 

77412). 

We now believe that that our proposal 

to impose specific CEHRT use 

requirements on ACOs participating in 

the Shared Savings Program would 

eliminate the need for the separate 

CEHRT use criterion applicable to the 

Shared Savings Program APMs found at 

§ 414.1415(a)(1)(ii). If the previously 

described proposals are finalized, ACOs 

seeking to participate in a Shared 

Savings Program track (or payment 

model within a track) that meets the 

financial risk standard to be an 

Advanced APM would be required to 

demonstrate that the percentage of 

eligible clinicians in the ACO using 

CEHRT to document and communicate 

clinical care to their patients or other 

health care providers meets or exceeds 

the higher of 50 percent or the 

percentage specified in the CEHRT use 

criterion for Advanced APMs at 

§ 414.1415(a)(1)(i). As a result, a 

separate CEHRT use criterion for APMs 

under the Shared Savings Program 

would no longer be necessary. 

We therefore propose to revise the 

separate Shared Savings Program 

CEHRT use criterion at 

§ 414.1415(a)(1)(ii) so that it applies 

only for QP Performance Periods under 

the Quality Payment Program prior to 

2019. We seek comment on this 

proposal. 

7. 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 providers and 

Part D sponsors. 

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 

(HIPAA). 

We seek comment on how Medicare 

ACOs, and specifically Shared Savings 

Program ACOs, and Part D sponsors 


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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 seek 

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 seek 

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 seek 

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. 

F. Applicability of Proposed Policies to 

Track 1+ Model ACOs 

1. Background 

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 have previously noted that 55 

Shared Savings Program Track 1 ACOs 

entered into the Track 1+ Model 

beginning 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 a 3- 

year agreement in the Model. 

To enter the model, ACOs approved 

to participate are required to agree to the 

terms and conditions of the model by 

executing a Track 1+ Model 

Participation Agreement. See https://

www.cms.gov/Medicare/Medicare-Feefor-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 its authority under section 

1115A(d)(1) of the Act, CMS has waived 

certain provisions of law that otherwise 

would 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. 

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 note 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 

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 renew their 

participation in the Track 1+ Model for 

an agreement period start date of 2018, 

2019, or 2020. The 2018 application 

cycle is closed, and as discussed 

elsewhere in this proposed rule, 55 

ACOs began participating in the Track 

1+ Model on January 1, 2018. As 

discussed in section II.A.7 of this 

proposed rule, 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 would similarly not offer 

a start date of January 1, 2019, for 

participation in the Track 1+ Model. 

In addition, we have also 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) as offered in the Track 

1+ Model and to also 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. 

If the proposed approach to adding the 

BASIC track is 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. 

Existing Track 1+ Model ACOs would 

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, 

depending upon whether the ACO is 

low revenue or high revenue (as 

described in section II.A.5 of this 

proposed rule). Additionally, as 

discussed in section II.A.7.c.1 of this 

proposed rule, ACOs would not have 

the opportunity to apply to use a SNF 

3-day rule waiver starting on January 1, 

2019, under our decision to forgo an 

annual application cycle for a January 1, 

2019 start date in the Shared Savings 

Program and the proposal that the next 

available application cycle would occur 

in advance of a July 1, 2019 start date 

in the Shared Savings Program. An 

exception to the January 1 start date for 

use of a SNF 3-day rule waiver would 

similarly be made 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. 

In making this decision to discontinue 

future application cycles for the Track 

1+ Model, we considered the high level 

of participation in the Track 1+ Model 

in its first performance year. This high 

level of interest in the model indicates 

a positive response to its design, and 

therefore we believe we have met an 

important goal of testing the Track 1+ 

Model. As we previously described in 

section II.A.1 of this proposed rule, the 

availability of the Track 1+ Model 


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significantly increased the number of 

ACOs participating under a two-sided 

risk model in connection with their 

participation in the Shared Savings 

Program, with over half of the 101 

Shared Savings Program ACOs that have 

elected to take on performance-based 

risk opting to participate in the Track 1+ 

Model starting in 2018, the Model’s first 

year. We will evaluate the quality and 

financial performance of Track 1+ 

Model ACOs and consider the results of 

this evaluation in the development of 

future policies for the Shared Saving 

Program. 

Further, as discussed in section II.A of 

this proposed rule, we have 

incorporated lessons learned from our 

initial experience with the Track 1+ 

Model into the design of the proposed 

BASIC track. This includes offering a 

payment model within the BASIC track 

(Level E) that includes the same level of 

risk and potential reward as available 

under the Track 1+ Model. We have also 

proposed a repayment mechanism 

estimation methodology based on our 

experience with the Track 1+ Model, to 

allow 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. 

We believe offering both the BASIC 

track and the Track 1+ Model would 

create unnecessary redundancy in 

participation options within CMS’s 

Medicare ACO initiatives. 

3. Applicability of Proposed Policies to 

Track 1+ Model ACOs Through Revised 

Program Regulations or Revisions to 

Track 1+ Model Participation 

Agreements 

We believe a comprehensive 

discussion of the applicability of the 

proposed policies to Track 1+ Model 

ACOs would allow these ACOs to better 

prepare for their future years of 

participation in the program and the 

Track 1+ Model. 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. 

Unless specified otherwise, the 

proposed changes to the program’s 

regulations that are applicable to Shared 

Savings Program ACOs within a current 

agreement period would 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 proposed changes to 

those regulations would 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 

proposed policies would apply to Track 

1+ Model ACOs, if finalized: 

• Changes to the repayment 

mechanism requirements (other than the 

proposed provisions regarding 

calculation of the repayment 

mechanism amount at § 425.204(f)(4)), 

which would be applicable with the 

effective date of the final rule (section 

II.A.6.c). We believe these proposed 

requirements are similar to the 

requirements under which Track 1+ 

Model ACOs established their 

repayment mechanisms, such that no 

revision to these arrangements would be 

required, in the event the proposed 

policies are finalized. Further, 

consistent with the proposed changes to 

the repayment mechanism 

requirements, we note that Track 1+ 

Model ACOs that seek to renew their 

Shared Savings Program agreement 

would be permitted to use their existing 

repayment mechanism arrangement to 

support their continued participation in 

the Shared Savings Program under a 

two-sided model in their next agreement 

period, provided that the amount and 

duration of the repayment mechanism 

arrangement are updated as specified by 

CMS. 

• The requirement to notify 

beneficiaries regarding voluntary 

alignment and to provide a standardized 

written notice at the first primary care 

visit of each performance year (section 

II.C.3.a.2). If finalized, the proposed 

policy would be applicable for the 

performance year beginning on July 1, 

2019, and subsequent performance 

years. 

• Revisions to voluntary alignment 

policies (section II.E.2). If finalized, the 

proposed policies would be applicable 

for the performance year beginning on 

January 1, 2019, and subsequent 

performance years. 

• Revisions to the definition of 

primary care services used in 

beneficiary assignment (section II.E.3.b). 

If finalized, the proposed policy would 

be applicable for the performance year 

beginning on January 1, 2019, and 

subsequent performance years. 

• Discontinuation of quality measure 

ACO–11; requirement to attest at the 

time of application and as part of the 

annual certification that a specified 

percentage of the ACO’s eligible 

clinicians use CEHRT (section II.E.6). If 

finalized, the proposed policy would be 

applicable for the performance year 

beginning on January 1, 2019, and 

subsequent performance years. 

We would also seek to apply the 

following proposed policies to Track 1+ 

Model ACOs, although to do so would 

require 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). 

• Revising the MSR/MLR to address 

small population sizes (section 

II.A.6.b.3). 

• Payment consequences of early 

termination for ACOs under 

performance-based risk (section 

II.A.6.d). 

• Annual certification that the 

percentage of eligible clinicians 

participating in the ACO that use 

CEHRT to document and communicate 

clinical care to their patients or other 

health care providers meets or exceeds 

the higher of 50 percent or the threshold 

established under § 414.1415(a)(1)(i) 

(section II.E.6). This certification would 

be required to ensure the Track 1+ 

Model continues to meet the CEHRT 

criterion for qualification as an 

Advanced APM for purposes of the 

Quality Payment Program. 

• For ACOs that started a first or 

second Shared Savings Program 

participation agreement on January 1, 

2016, and entered the Track 1+ Model 

on January 1, 2018, and that elect to 

extend their Shared Savings Program 

participation agreement for the 6-month 

performance year from January 1, 2019 

through June 30, 2019 (as described in 

section II.A.7 of this proposed rule): 

++ Consistent with the policy 

proposed in section II.A.7.c.3 and 

§ 425.204(f)(6), the ACO would be 

required to extend its repayment 

mechanism so that it ends 24 months 

after the end of the agreement period 

(June 30, 2021). 

++ We would determine performance 

for the 6-month performance year from 

January 1, 2019 through June 30, 2019, 

according to the approach specified in 

a proposed new section of the 

regulations at § 425.609(b), applying the 

financial methodology for calculating 

shared losses specified in the ACO’s 

Track 1+ Model Participation 

Agreement. 

++ We would continue to share 

aggregate report data with the ACO for 

the entire calendar year 2019, consistent 

with the proposed approach described 

in section II.A.7.c.9, and the terms of the 


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ACO’s Track 1+ Model Participation 

Agreement. 

• Extreme and uncontrollable 

circumstances policies for determining 

shared losses for performance years 

2018 and subsequent years, consistent 

with the policies specified in 

§§ 425.610(i) (section II.E.4) and 

425.609(d) (section II.A.7.c.5) for ACOs 

that elect to extend their Shared Savings 

Program participation agreement for the 

6-month performance year from January 

1, 2019 through June 30, 2019. 

• Certain requirements related to the 

use of telehealth services beginning on 

January 1, 2020, as provided under 

section 1899(l) of the Act (section 

II.B.2.b.2). As previously described, the 

Bipartisan Budget Act of 2018 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 

would be appropriate to apply the same 

requirements under the Track 1+ Model 

with respect to the use of telehealth 

services that would apply to other 

Shared Savings Program ACOs that are 

applicable ACOs for purposes of section 

1899(l) of the Act. This would ensure 

consistency across program operations, 

payments, and beneficiary protection 

requirements for Track 1+ Model ACOs 

and other Shared Savings Program 

ACOs with respect to the use of 

telehealth services. 

We seek comment on these 

considerations, and any other issues 

that we may not have discussed related 

to the effect of the proposed policies on 

ACOs that entered the Track 1+ Model 

beginning in 2018. We note that these 

ACOs will complete their participation 

in the Track 1+ Model by no later than 

December 31, 2020 (for ACOs that 

entered the model at the start of a 3-year 

agreement period), or sooner in the case 

of ACOs that entered the model at the 

start of their second or third 

performance year within their current 3- 

year agreement period. 

G. Summary of Proposed Timing of 

Applicability 

Applicability or implementation dates 

may vary, depending on the policy, and 

the timing specified in the final rule. 

Unless otherwise noted, the proposed 

changes would be effective 60 days after 

publication of the final rule. Table 13 

lists the anticipated applicability date of 

key changes in this proposed 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. 

TABLE 13—APPLICABILITY DATES OF SELECT PROVISIONS OF THE PROPOSED RULE

Preamble 

section Section title/description Applicability date 

II.A.2 ............ Availability of an additional participation option under a 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.

Agreement periods starting on or after July 1, 

2019. 

II.A.2 ............ Discontinuing Track 1 and Track 2 .................................................................. No longer available for applicants for agreement 

periods starting in 2019 and subsequent years. 

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

agreement periods starting in 2019 and subsequent years. 

II.A.4.b ......... Permitting annual election of differing levels of risk and potential reward 

within the BASIC track’s glide path.

Performance year beginning on July 1, 2019, and 

subsequent years for eligible ACOs. 

II.A.4.c ......... Permitting annual election of beneficiary assignment methodology for ACOs 

in BASIC track or ENHANCED track.

Performance year beginning on July 1, 2019, and 

subsequent years. 

II.A.5.c ......... Evaluation criteria for determining participation 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 applicable).

Agreement periods starting on or after July 1, 

2019. 

II.A.5.d.2 ...... Monitoring for financial performance ............................................................... Performance years beginning in 2019 and subsequent years. 

II.A.6.b.2 ...... Timing of election of MSR/MLR ....................................................................... Agreement periods starting on or after July 1, 

2019. 

II.A.6.b.3 ...... Modifying the MSR/MLR to address small population sizes ........................... Performance years beginning in 2019 and subsequent years. 

II.A.6.c.3 ...... Annual recalculation of repayment mechanism amounts ................................ Agreement periods starting on or after July 1, 

2019. 

II.A.6.d ......... Payment consequences of early termination for ACOs under performancebased risk.Performance years beginning in 2019 and subsequent years. 

II.A.7 ............ Participation options for agreement periods beginning in 2019 ...................... January 1, 2019 effective date for extension of existing agreement period for a 6-month fourth 

performance year, if elected by ACOs that started a first or second agreement period on January 1, 2016. 

One-time, July 1, 2019 agreement start date; 6- 

month first performance year. 

II.B.2.a ......... Availability of the SNF 3-day rule waiver for eligible ACOs under performance-based risk under either prospective assignment or preliminary prospective assignment.July 1, 2019 and subsequent performance years, 

for eligible ACOs applying for, or currently approved for, a SNF 3-day rule waiver. Not available to Track 2 ACOs. 

II.B.2.a ......... Eligible CAHs and hospitals operating under a swing-bed agreements permitted to partner with eligible ACOs as SNF affiliates.July 1, 2019, and subsequent performance years. 


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TABLE 13—APPLICABILITY DATES OF SELECT PROVISIONS OF THE PROPOSED RULE—Continued 

Preamble 

section Section title/description Applicability date 

II.B.2.b ......... Telehealth services furnished under section 1899(l) ....................................... Performance year 2020 and subsequent years for 

services furnished by physicians and practitioners billing through the TIN of an ACO participant in an applicable ACO. 

II.C.2 ............ Implementation of approved beneficiary incentive programs .......................... July 1, 2019, and subsequent performance years. 

II.C.3.a.2 ...... New content and timing for beneficiary notifications ....................................... Performance year beginning on July 1, 2019, and 

subsequent years. 

II.D.2.b ......... Benchmarking Methodology Refinements: Risk adjustment methodology for 

adjusting historical benchmark each performance year.

Agreement periods starting on or after July 1, 

2019. 

II.D.3.b ......... Benchmarking Methodology Refinements: Application of regional factors to 

determine the benchmark for an ACO’s first agreement period.

Agreement periods starting on or after July 1, 

2019. 

II.D.3.c ......... Benchmarking Methodology Refinements: Modifying the regional adjustment..Agreement periods starting on or after July 1, 

2019. 

II.D.3.d ......... Benchmarking Methodology Refinements: Modifying the methodology for 

calculating growth rates used in establishing, resetting, and updating the 

benchmark.

Agreement periods starting on or after July 1, 

2019. 

II.E.2 ............ Modifications to voluntary alignment requirements ......................................... Performance years beginning in 2019 and subsequent years. 

II.E.3 ............ Revisions to the definition of primary care services used in beneficiary assignment.Performance years beginning in 2019 and subsequent years. 

II.E.4 ............ Extreme and uncontrollable circumstances policies for the Shared Savings 

Program.

Performance year 2018 and subsequent years. 

II.E.6 ............ Addition of an interoperability criterion (use of CEHRT) to determine eligibility for program participation.Performance years beginning in 2019 and subsequent years. 

II.E.6 ............ Discontinued use of quality measure ACO–11 ................................................ Performance years beginning in 2019 and subsequent years. 

III. 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 proposed rule need not be reviewed 

by the Office of Management and 

Budget. 

IV. Regulatory Impact Analysis 

A. Statement of Need 

This proposed rule is necessary in 

order to make certain payment and 

policy changes to the Medicare Shared 

Savings Program established under 

section 1899 of the 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 proposed policies is 

summarized in the statement of the 

rule’s purpose in section I of this 

proposed rule and described in greater 

detail throughout the discussion of the 

proposed policies in section II of this 

proposed rule. As we have previously 

explained in this proposed 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 generating losses (and 

therefore increasing Medicare spending) 

while receiving 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 

proposed redesign of the Shared Savings 

Program, ACOs of different 

compositions, and levels of experience 

with the accountable care model could 

continue to participate in the program, 

but the proposals included in this 

proposed rule would put the program 

on a path towards achieving a more 

measureable move to value and achieve 

savings for the Medicare program, while 

promoting a competitive and 

accountable marketplace. 

In summary, this proposed rule would 

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 proposes to extend the 

length of ACOs’ agreement periods from 

3 to 5 years as well as to 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 

mitigating the effects of factors based on 

regional FFS expenditures on ACO 

benchmarks more generally. These 

proposed 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 under the 

program’s current regulations. 

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 proposing 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; 


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27The 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 2016 for all ACOs that 

participated in the program for the relevant year. 

Performance year 2017 results are not available at 

the time of publication of this proposed rule. 

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; and offer the 

opportunity for Medicare FFS 

beneficiaries to voluntarily identify an 

ACO professional as their primary care 

provider with such a voluntary 

identification superseding claims-based 

assignment. Additionally, this proposed 

rule would expand 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 

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 intend to 

forgo the application cycle in 2018 for 

an agreement start date of January 1, 

2019, and instead propose to offer a July 

1, 2019 start date. This midyear start in 

2019 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. Additionally, 

ACOs with a participation agreement 

ending on December 31, 2018, would 

have an opportunity to extend their 

current agreement period for an 

additional 6-month performance year 

and 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, would 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 

proposed rule includes the proposed 

methodology for determining ACO 

financial performance for these two, 6- 

month performance years during CY 

2019. 

Further, this proposed rule would 

make other timely updates to the 

program’s regulations, for consistency 

with other changes in program policies 

or Medicare policies more generally, 

such as: (1) Modifying the definition of 

primary care services used in 

beneficiary assignment to add new 

codes and revising how we determine 

whether evaluation and management 

services were furnished in a SNF; (2) 

extending policies previously adopted 

for performance year 2017 to 

performance year 2018 and subsequent 

years to address quality performance 

scoring and the determination of shared 

losses (under two-sided models) in the 

event of extreme or uncontrollable 

circumstances; and (3) promoting 

interoperability in Medicare by 

establishing a new Shared Savings 

Program eligibility requirement related 

to adoption of CEHRT by an ACO’s 

eligible clinicians, while discontinuing 

use of the existing quality measure on 

use of CEHRT. 

B. Overall Impact 

We examined the impacts of this 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. 

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 if the 

full set of proposals in this rule were 

finalized to the expected outcomes 

under current regulations. We provide 

our analysis of the expected costs of the 

proposed 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 IV.E. of this proposed 

rule. 

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 proposed policies, 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 four performance years of 

financial performance results available 

for the Shared Savings Program.27 Table 

14 describes performance year 2016 


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results for ACOs segmented by track. 

These results show that in performance 

year 2016, the 410 Track 1 ACOs spent 

more on average 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 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 14—PY 2016 RESULTS BY SHARED SAVINGS PROGRAM TRACK

Track Two-sided 

risk? 

Number of 

ACOs 

reconciled 

Parts A and B 

spending 

above 

benchmark 

Parts A and B 

spending 

below 

benchmark 

Shared 

savings 

payments from 

CMS to ACOs 

Shared loss 

payments from 

ACOs to CMS 

Net effect in 

aggregate 

Net effect per 

beneficiary 

per year 

[A] [B] [C] [D] [A ¥ B + C ¥ D] 

Track 1 ..... No ............ 410 $1.021 billion $1.562 billion $590 million .... $0 ................... $49 million .......... $7 

Track 2 ..... Yes .......... 6 0 ..................... 42 million ....... 24 million ........ 0 ..................... ¥18 million ........ ¥308 

Track 3 ..... Yes .......... 16 25 million ....... 95 million ....... 64 million ........ 9 million .......... ¥14 million ........ ¥39 

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 enrollee, and 

high revenue Track 1 ACOs produced a 

net loss of $231 million or $46 per 

enrollee. 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 would capture all ACOs that 

participated in the Shared Savings 

Program in performance year 2016 that 

were solely comprised of providers and 

suppliers billing physician fee schedule 

services and generally exclude ACOs 

with providers and suppliers that bill 

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 

proposed definitions for low revenue 

ACO and high revenue ACO discussed 

in section II.A.5.b. of this proposed rule. 

However, our analysis has confirmed 

that the simpler and more practical 

proposed policy for identifying low 

revenue ACOs using a 25-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 physicianbased ACO participant composition. 

TABLE 15—PY 2016 RESULTS FOR LOW REVENUE AND HIGH REVENUE TRACK 1 ACOS

Track 1 ACO 

composition 

Number of 

ACOs 

(total 410) 

Parts A and B 

spending above 

benchmark 

Parts A and B 

spending below 

benchmark 

Shared savings 

payments from 

CMS to ACOs 

Shared loss 

payments 

from ACOs 

to CMS 

Net effect in 

aggregate 

[A ¥ B + C ¥ D] 

Net effect per 

beneficiary 

per year 

[A] [B] [C] [D] 

Low revenue ..... 188 $339 million ......... ¥$863 million ..... $343 million ......... $0 ¥$182 million ..... ¥$73 

High revenue ..... 222 682 million ........... ¥698 million ....... 247 million ........... 0 231 million ........... 46 

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 


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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. 

(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. 

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 


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28McWilliams 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. 

29Winblad 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. 

30Hsu 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. 

31McWilliams JM. Changes in Medicare Shared 

Savings Program Savings From 2013 to 2014. JAMA. 

2016; 316(16):1711–1713. doi:10.1001/ 

jama.2016.12049. 

32McWilliams 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. 33Madeleine 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/. 34See 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. 

35Neprash HT, Chernew ME & McWilliams JM. 

Little Evidence Exists to Support the Expectation 

That Providers Would Consolidate to Enter New 

Payment Models. Health Affairs. 2017; 36(2): 346– 

354. doi:10.1377/hlthaff.2016.0840. 

36See for example, Mostashari, F. The Paradox of 

Size: How Small, Independent Practices Can Thrive 

Continued 

spending by 9 percent by 2014.28

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 2013.29 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 2014.30

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 that ACO benchmarks were 

reduced by the feedback such efficiency 

gains would have on 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 would 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, would imply 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. 

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.31 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.32 This 

research supports the hypothesis that 

changes in delivery implemented by 

Medicare ACO clinicians would in turn 

cause efficiency gains in the wider 

Medicare FFS population. In another 

study supporting this hypothesis, 

Madeleine Phipps-Taylor and Stephen 

Shortell (NEJM, 2016) conducted a set of 

case studies which concluded that 

ACOs were making system and process 

changes that would improve the value 

of services provided to all patients, 

regardless of payer.33

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),34 although there is 

some evidence of potential defensive 

consolidation in response to new 

payment models (Neprash et al., 

2017).35 Anecdotally, ACOs provide 

physician practices with a way to stay 

independent and offer a viable 

alternative to merging with a hospital 

(Mostashari, 2016).36


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in Value-Based Care. Ann Fam Med. 2016; 14(1):5– 

7. doi:10.1370/afm.1899. 

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 would foster increased 

participation in ACO initiatives, which 

is required to produce higher levels of 

net savings. 

b. Assumptions and Uncertainties 

The changes to the Shared Savings 

Program proposed in this rule could 

result in a range of possible outcomes. 

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 would 

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 would be partly offset by 

increased shared savings payments to 

ACOs benefiting from our proposal to 

apply the methodology incorporating 

factors based on regional FFS 

expenditures beginning with the ACO’s 

first agreement period, revising risk 

adjustment to include up to a 3 percent 

increase in average HCC risk score over 

the course of an agreement period, and 

blending national trend with regional 

trend when calculating ACO 

benchmarks. Such trade-offs reflect the 

intention of our proposal to strengthen 

the balance between 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 

proposed policy would 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 

proposed policy also increases the 

possibility that higher cost ACOs would 

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 would 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 proposed 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 be considered an 

Advanced APM Entity for purposes of 

the Quality Payment Program. Eligible 

clinicians in an ACO that is an 

Advanced APM Entity 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 would 

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 proposals to 

permit ACOs to change their beneficiary 

assignment method selection prior to 

the start of each performance year, to 

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, and to 

offer a July 1, 2019 start date (including 

the proposed extension of an existing 

agreement period through June 30, 

2019). 

We also considered the potential 

effects of policies proposed to promote 

participation by low revenue ACOs as 

follows. By allowing low revenue ACOs 

to enter the BASIC track (potentially 

immediately entering the maximum 

level of risk and potential reward under 

such track) and continue their 

participation in the BASIC track for a 

subsequent agreement period (under the 

highest level of risk and potential 

reward), the proposal would 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 proposal to include 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 regional adjustment at positive or 

negative 5 percent of national per capita 

expenditures for Parts A and B services 

for assignable beneficiaries helps CMS 

avoid unnecessarily large windfall 

payments for ACOs that would have 


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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 proposed 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 

proposed 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 proposal to use full 

HCC risk ratios (capped at positive or 

negative 3 percent) 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 inside of 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 would 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 claim-based 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 

would participate in the program, we 

assumed that up to approximately 250 

existing 2018 ACOs would be affected 

by the proposed 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 

would be affected by the proposed 

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. 

We assumed ACO decision making 

regarding participation would 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 would renew under the policies 

in the proposed rule would be related to 

expectations regarding the effect of the 

proposed 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 highestrisk option (Track 3 in the baseline or 

the ENHANCED track under the 

proposed rule); such range is reduced 

for second or later rebasing under the 

policies in the proposed 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 BASIC track, Level 

E (proposed). ACOs expecting adjusted 

rebased historical benchmarks from zero 

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 zero and 50 percent chance of 

electing the BASIC track (proposed). 

Second, all other renewal decisions 

would 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 would 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 proposed 

scenario, an ACO not otherwise 

choosing the ENHANCED track would 

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 

would be precluded from renewing 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 would 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 would elect early transition to the 

BASIC track, Level E. 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 would 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 

the BASIC track, Level E 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 new 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 proposed 

rule are estimated to range from 1 to 4 

percent of spending accounted for by 

the program benchmark, with an 

additional spillover effect on extrabenchmark spending accounting for an 


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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, 

Level E, 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, Levels C and D, or Track 

1 are assumed to be 30 to 70 percent of 

the savings assumed for Track 3/ 

ENHANCED track. Lastly, savings for 

the BASIC track, Levels A and B, are 

assumed to be 20 to 60 percent of the 

savings assumed for Track 3/ 

ENHANCED track. 

We also assumed that selection effects 

would implicitly include the renewal 

decisions of ACOs simulated in the 

model. Further assumptions included 

the following: (1) The proposed 

adoption of full HCC adjustment 

(capped at positive or negative 3 

percent) allows each ACO to increase its 

benchmark according to a skewed 

distribution from zero to 3 percent 

(mode 0.5 percent); and (2) for both the 

baseline and proposed scenarios, each 

ACO is assumed to be able to influence 

its comparable 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. 

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 proposed changes to the 

program 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 proposed program changes 

is approximately $2.24 billion in lower 

overall federal spending over 10 years 

from 2019 through 2028. The 10th and 

90th percentile from the range of 

projected 10 year impacts range from 

¥$4.43 billion in lower spending to 

$0.09 billion in higher spending, 

respectively. The mean impact is 

comprised of about $0.51 billion in 

lower claims spending, $2.17 billion in 

reduced shared savings payments, net of 

shared loss receipts, and approximately 

$0.44 billion 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 would be 

reduced from 6 years (two, 3-year 

agreement periods in current Track 1) to 

2 years in the BASIC track, which also 

has reduced attractiveness with a lower 

25 percent maximum sharing rate 

during the 2 risk-free years. 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 capped regional 

adjustment would 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. 

The mean projection of $2.24 billion 

reduced overall federal spending is a 

reasonable point estimate of the impact 

of the proposed changes to the Shared 

Savings Program 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 distribution. Accordingly, 

this RIA presents the costs and benefits 

of this proposed rule to the best of our 

ability. To help further develop and 

potentially improve this analysis, we 

request comment on the aspects of the 

rule that may incentivize behavior that 

could affect participation in the program 

and potential shared savings payments. 

As further data emerges and is analyzed, 

we may improve the precision of future 

financial impact estimates. 

To the extent that proposed changes 

to the Shared Savings Program will 

result in net savings or costs to Part B 

of Medicare, revenues from Part B 

beneficiary premiums would 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 the proposed changes 

to the Shared Savings Program would 

result in corresponding adjustments to 

MA payment rates. Neither of these 

secondary impacts has been included in 

the analysis shown. 

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 five 

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 


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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 performance years 

2013 to 2016. 

As explained in more detail 

previously, we believe the proposed 

changes would 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 would 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 under current regulations. 

Lastly, we estimate that the net impacts 

on federal spending, as previously 

detailed, would correspond to savings to 

beneficiaries in the form of reductions 

in Part B premium payments of 

approximately $310 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 by the proposed 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, changes in this 

proposed 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 would not be materially affected 

by the proposed changes to specific 

features of the Shared Savings Program; 

however, we seek comment if 

stakeholders disagree with such 

assumption, as we would want to 

consider impacts on other payers and 

patient populations, if evidenced, as 

part of the development of the policies 

to be included in the final rule. 

Although the proposed elimination of 

Track 1 is expected to ultimately reduce 

the overall number of ACOs 

participating in the program, this 

proposed 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 proposed policies (including 

changes to HCC risk adjustment, longer 

five 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 the BASIC track 

under Level E) are expected to increase 

the number of existing and new ACOs 

that ultimately make a sustained 

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. 

Proposed 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 would likely expect lower 

benchmarks and greater likelihood of 

shared losses under a methodology that 

includes a 35 percent weight on the 

regional expenditure adjustment. 

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 and capping the adjustment at 

positive or negative 5 percent of 

national average per capita FFS 

spending for assignable beneficiaries 

would 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 proposed 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 cost 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 $440 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 

$2.17 billion in lower overall 10-year 

shared savings payments to ACOs 

reflects the prudent limitations that 

would 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 or 

negative 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 would drive 

the regional trend they are ultimately 

measured against. These factors 

contribute to the expanded participation 

expected in performance-based risk and 

the resulting increase in savings on 

claims through more efficient care 

delivery. 

We have made program data available 

that can help stakeholders evaluate the 

impact the proposed 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, and 2016) 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/ 


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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 

2016 can be obtained at the following 

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

Downloadable-Public-Use-Files/ 

SSPACO/index.html. 

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 BASIC track, 

Levels C through E, 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 

the BASIC track, Level E.) 

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 proposed rule, 

such as the proposal to allow low 

revenue ACOs up to 2 agreement 

periods in 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 

provider/supplier revenue (capped at a 

percentage of the ACO’s benchmark), 

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. 

As detailed in this RIA, total expected 

incentive payments made under the 

Quality Payment Program to Qualifying 

APM Participants are expected to 

increase by $440 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 

proposal to extend each agreement 

period to at least 5 years offers greater 

certainty to ACOs, including small 

entities, regarding their benchmark as 

they approach the higher levels of risk 

required in the later years 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 

proposed rule would have a significant 

impact on the operations of a substantial 

number of small rural hospitals. We 

have proposed changes to our 

regulations such that benchmark 

adjustments for regional spending are 

limited to at most a 50 percent weight 

and are capped at positive or negative 

5 percent of national average per capita 

FFS spending for assignable 

beneficiaries. Additionally we have 

proposed to blend national and regional 

trend in benchmark calculations, and 

have proposed allowing full HCC risk 

adjustment with a positive or negative 3 

percent cap regardless of beneficiary 

assignment status. Such changes could 

help provide a stronger business case for 

ACOs built around rural hospitals that 

may have otherwise been concerned 

about serving a higher-risk population 

in their region or driving the local 

trends against which they would be 

compared. We seek 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. (See the Effects on 

Providers and Suppliers section for a 

description of data currently available 

on the CMS website that may be useful 

for commenters to estimate the effects of 

such proposed changes for their 

particular ACO and/or market.) 

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 

proposed rule does not include any 

mandate that would 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 currently 

participating in the Medicare Shared 

Savings Program will review on average 

half of this proposed 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 proposed rule and advises 


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37Occupational Employment Statistics available 

online at https://www.bls.gov/oes/current/oes_

nat.htm. 

multiple ACO partners. However, we 

acknowledge that this assumption may 

understate or overstate the costs of 

reviewing this rule. We welcome any 

comments on the approach in 

estimating the number of entities 

reviewing the proposed rule and the 

scope of the average review. 

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 $107.39 per hour, 

where the assumed hourly wage of 

$53.69 has been increased by a factor of 

2 to account for fringe benefits.37

Assuming an average reading speed of 

200 words per minute, we estimate it 

would take approximately 6 hours for 

the staff to review half of this proposed 

rule. For each ACO the estimated cost 

is $644.34 (6 hours × $107.39 per hour). 

Therefore, we estimate the total cost of 

reviewing this proposed regulation is 

approximately $361,500 ($644.34 × 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 would 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 would reduce ACO 

administrative burden by approximately 

$6 million over 10 years ($10,760 × 561 

ACOs). 

We do not believe that the proposals 

included in this proposed rule would 

otherwise materially impact the burden 

on ACOs for compliance with the 

requirements of the Shared Savings 

Program. The annual certification and 

application process would remain 

comparable to the existing program 

(setting aside the change to five year 

agreement periods as noted in the 

previous paragraph). However, we seek 

comment if stakeholders have reason to 

believe the proposed changes would 

materially change the burden of 

participation in the program beyond 

what we have estimated, as described 

previously. 

D. Alternatives Considered 

A particularly significant element of 

the proposed changes to the 

benchmarking methodology included in 

this proposed rule is the proposal to 

limit 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 proposal were 

amended to remove this cap then shared 

savings payments to low cost ACOs and 

selective participation decisions would 

increase the cost of the proposed rule by 

roughly $5 billion such that the 

estimated $2.24 billion savings relative 

to current regulation baseline (as 

estimated for the proposed rule in the 

previous sections) would instead be 

projected as a $2.75 billion cost. 

Another alternative considered would 

be to push back the first agreement 

periods under the proposed new 

participation options and all other 

applicable proposed 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 

one year extension under their current 

agreement periods. This alternative 

would have 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 likely marginally increase 

spending on claims through a 

combination of factors. This approach 

would delay, by 6 months, the transition 

into performance-based risk for certain 

ACOs whose current agreement periods 

will end on December 31, 2018. We also 

would anticipate a temporary increase 

in overall shared savings payments to 

such ACOs during the one year 

extension in 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 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 

be CY 2019 rather than CY 2018, as 

would be the case under the proposed 

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 marginally reduce 

the cumulative variation affecting 

benchmark accuracy in 2024, the final 

year of these ACOs’ first agreement 

period under the policies in this 

proposed rule. We would also anticipate 

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. 

Overall, it is estimated that the shift 

to a January 1, 2020 start date for new 

agreement periods under the proposed 

changes, combined with a 1-year 

extension of the existing agreement 

period for most ACOs otherwise 

expected to enter a new agreement 

period in 2019, would reduce overall 

Federal spending by approximately an 

additional $100 million relative to the 

estimated $2.24 billion reduction in 

spending estimated for the proposal to 

offer a July 1, 2019 start date for new 

agreement periods under the proposed 

changes. 

We also considered the potential 

impact of the alternative of allowing 

ACOs 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 make projecting the impact of 

such proposal difficult. 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 is 

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 

regardless via the existing claims-based 

assignment methodology. 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 proposed new 

policies described in this proposed 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 proposed 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 $3 

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 would be 

expected under the hypothetical 

baseline in total over the 2019 to 2028 

projection period. The alternative 

payment model, as proposed 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 14 percent 

greater savings on benefit costs, 9 

percent lower spending on net shared 

savings payments to ACOs, with 46 

percent reduced overall ACO 

participation compared to the 

hypothetical baseline model. 

Participation in performance-based 

risk in the ENHANCED track and the 

later years 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 would 

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 proposed changes. 

TABLE 18—ACCOUNTING STATEMENT ESTIMATED IMPACTS

[CYs 2019–2028] 

Category Primary 

estimate 

Minimum 

estimate Maximum estimate Source citation (RIA, preamble, etc.) 

Transfers From the Federal Government to ACOs 

Annualized monetized: 

Discount rate: 7%.

¥168.9 million ............... 103.3 million .................. ¥427.6 million ............................... Table 17. 


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TABLE 18—ACCOUNTING STATEMENT ESTIMATED IMPACTS—Continued 

[CYs 2019–2028] 

Category Primary 

estimate 

Minimum 

estimate Maximum estimate Source citation (RIA, preamble, etc.) 

Annualized monetized: 

Discount rate: 3%.

¥199.8 million ............... 78.9 million .................... ¥466.0 million ...............................

Notes: Negative values reflect reduction in federal net cost resulting from care management by ACOs. Estimates may be a combination of

benefits and transfers. To the extent that the incentives created by Medicare payments change the amount of resources society uses in providing 

medical care, the more accurate categorization of effects would be as costs (positive values) or benefits/cost savings (negative values), rather 

than as transfers. 

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 

proposed modifications in this proposed 

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 $5.67 million over 10 years (as 

detailed previously in this RIA); 

therefore this proposed rule, if finalized, 

would 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 proposed rule, the 

median estimate of the financial impact 

of the Shared Savings Program for CYs 

2019 through 2028 would be net federal 

savings of $2.24 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 roughly 

89 percent of the stochastic trials 

resulted in an overall increase in net 

program savings over 10 years, the 10th 

and 90th percentiles of the estimated 

distribution show a net increase in costs 

by $0.09 billion and a net decrease in 

costs by $4.43 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 proposed 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 proposed 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 one 

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 cost due to selective changes in 

participation), and unforeseen bias in 

benchmark adjustments due to 

diagnosis coding intensity shifts. 

In accordance with the provisions of 

Executive Order 12866, this rule was 

reviewed by the Office of Management 

and Budget. 

V. Response to Comments 

Because of the large number of public 

comments we normally receive on 

Federal Register documents, we are not 

able to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, when we proceed 

with a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

List of Subjects 

42 CFR Part 414 

Administrative practice and 

procedure, Biologics, Drugs, Health 

facilities, Health professions, Kidney 

diseases, Medicare, Reporting and 

recordkeeping requirements. 

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 proposes to amend 

42 CFR parts 414 and 425 as set forth 

below: 

PART 414—PAYMENT FOR PART B 

MEDICAL AND OTHER HEALTH 

SERVICES 

■ 1. The authority citation for part 414 

continues to read as follows: 

Authority: Secs. 1102, 1871, and 1881(b)(l) 

of the Social Security Act (42 U.S.C. 1302, 

1395hh, and 1395rr(b)(l)). 

■ 2. Section 414.1415(a)(1)(ii) is revised 

to read as follows: 

§ 414.1415 Advanced APM criteria. 

(a) * * * 

(1) * * * 

(ii) For QP Performance Periods prior 

to 2019, for the Shared Savings Program, 

apply a penalty or reward to an APM 

Entity based on the degree of the use of 


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CEHRT of the eligible clinicians in the 

APM Entity. 

* * * * * 

PART 425—MEDICARE SHARED 

SAVINGS PROGRAM 

■ 1. The authority citation for part 425 

continues to read as follows: 

Authority: Secs. 1102, 1106, 1871, and 

1899 of the Social Security Act (42 U.S.C. 

1302, 1306, 1395hh, and 1395jjj). 

■ 2. Section 425.20 is amended— 

■ a. By revising the definition of 

‘‘Agreement period’’; 

■ b. By adding in alphabetical order 

definitions for ‘‘Certified Electronic 

Health Record Technology (CEHRT)’’, 

‘‘Eligible clinician’’, ‘‘Experienced with 

performance-based risk Medicare ACO 

initiatives’’, ‘‘High revenue ACO’’, 

‘‘Inexperienced with performance-based 

risk Medicare ACO initiatives’’, and 

‘‘Low revenue ACO’’; 

■ c. By revising the definition of 

‘‘Performance year’’; and 

■ d. By adding in alphabetical order 

definitions for ‘‘Performance-based risk 

Medicare ACO initiative’’, ‘‘Re-entering 

ACO’’, and ‘‘Renewing ACO’’. 

The revisions and additions read as 

follows: 

§ 425.20 Definitions. 

* * * * * 

Agreement period means the term of 

the participation agreement. 

* * * * * 

Certified Electronic Health Record 

Technology (CEHRT) has the same 

meaning given this term under 

§ 414.1305 of this chapter. 

* * * * * 

Eligible clinician has the same 

meaning given this term under 

§ 414.1305 of this chapter. 

* * * * * 

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 

25 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 

25 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 year means 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. 

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 

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 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 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: 


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§ 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 

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 January 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 in 

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 paragraph (a); 

■ b. By revising the heading of 

paragraph (b); 

■ c. By removing paragraph (b)(2) 

introductory text, adding a heading for 

paragraph (b)(2), and revising paragraph 

(b)(2)(ii); 

■ d. By removing paragraph (b)(3) 

introductory text, adding a heading for 

paragraph (b)(3), and revising paragraph 

(b)(3)(ii); 

■ e. By adding paragraphs (b)(4) and (5); 

■ f. By revising paragraphs (c) and (d); 

■ g. By redesignating paragraphs (e)(1)(i) 

through (v) as paragraphs (e)(1)(ii) 

through (vi); and 

■ h. By adding a new paragraph (e)(1)(i). 

The revisions and additions read as 

follows: 

§ 425.200 Participation agreement with 

CMS. 

(a) General. In order to participate in 

the Shared Savings Program, an ACO 

must enter into a participation 

agreement with CMS for a period of not 

less than the number of years specified 

in this section. 

(b) Agreement period. * * * 

(2) For 2013 and through 2016. * * * 

(ii) The term of the participation 

agreement is 3 years unless all of the 

following conditions are met to extend 

the participation agreement by 6 

months: 

(A) The ACO entered an agreement 

period starting on January 1, 2016. 

(B) The ACO elects to extend its 

agreement period until June 30, 2019. 

(1) The ACO’s election to extend its 

agreement period is made in the form 

and manner and according to the 

timeframe established by CMS; and 

(2) An ACO executive who has the 

authority to legally bind the ACO must 

certify the election described in 

paragraph (b)(2)(ii)(B) of this section. 

(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) Performance year. The ACO’s 

performance year under the 

participation agreement is the 12 month 

period beginning on January 1 of each 

year during the term of the participation 

agreement unless otherwise noted in its 

participation agreement, and except as 

follows: 

(1) For an ACO with a start date of 

April 1, 2012, or July 1, 2012, the ACO’s 

first performance year is defined as 21 

months or 18 months, respectively. 

(2) 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 under paragraph 

(b)(2)(ii)(B) of this section, the ACO’s 

fourth performance year is the 6-month 

period between January 1, 2019, and 

June 30, 2019. 

(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. 

(d) Submission of measures. For each 

performance year of the agreement 

period, ACOs must submit measures in 

the form and manner required by CMS 

according to § 425.500(c), and as 

applicable according to §§ 425.608 and 

425.609. 

(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 paragraph (b) introductory text 

to read as follows: 

§ 425.202 Application procedures. 

* * * * * 

(b) * * * For determining eligibility 

for agreement periods beginning before 

July 1, 2019: 

* * * * * 

■ 8. Section 425.204 is amended— 

■ a. By adding paragraph (c)(7); 

■ b. By revising paragraph (f); and 

■ c. In paragraph (g) introductory text by 

removing the phrase ‘‘under § 425.602,’’ 

and adding in its place the phrase 

‘‘under § 425.601, § 425.602, § 425.603 

or § 425.609,’’. 

The addition and revision read as 

follows: 

§ 425.204 Content of the application. 

* * * * * 

(c) * * * 

(7) The ACO must certify, in a form 

and manner specified by CMS, that the 


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percentage of eligible clinicians 

participating in the ACO that use 

CEHRT to document and communicate 

clinical care to their patients or other 

health care providers meets or exceeds 

the applicable percentage specified by 

CMS at § 425.506(f). 

* * * * * 

(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 or 

the ENHANCED track must demonstrate 

the adequacy of its repayment 

mechanism prior to the start of each 

agreement period in which it takes risk 

and at such other times as requested by 

CMS. 

(ii) An ACO entering an agreement 

period in Levels C, D, or E of the BASIC 

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)(4)(iv) and (f)(6)(ii) of this section. 

(4) CMS calculates the amount of the 

repayment mechanism as follows: 

(i) For a Track 2 or ENHANCED track 

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 for 

the most recent calendar year for which 

12 months of data are available. 

(ii) For a BASIC 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 10 percent or $100,000, whichever 

is the lesser value, CMS notifies the 

ACO 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 either paragraph 

(f)(4)(i) or (ii) of this section, as 

applicable. 

(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 in a two-sided model plus 

24 months following the conclusion of 

the agreement period, except as follows: 

(i) 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. 

(ii) In the case of 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 duration of the existing 

repayment mechanism must be 

extended by an amount of time 

specified by CMS and must be 

periodically extended thereafter upon 

notice from CMS. 

(iii) 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 one of 

the following: 

(1) December 31st for a 12-month 

performance year. 

(2) December 31st for a 6-month 

performance year starting on July 1, 

2019. 

(3) June 30th for a 6-month 

performance year starting on January 1, 

2019. 

(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. Except 

as set forth in paragraphs (b)(3)(i) and 

(ii) of this section, for performance years 

beginning in 2019 and subsequent 

performance years, an ACO under a 

two-sided model is liable for a pro-rated 

share of any shared losses as follows if 

its participation agreement is terminated 

effective before the last day of a 

performance year: 

(i) 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. 

(ii) 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 paragraphs (b)(2)(i) and (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 during 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 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 a 6- 

month performance year 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 425.302 is amended— 

■ a. In paragraph (a)(3)(i) by removing 

the phrase ‘‘requirements; and’’ and 

adding in its place the phrase 

‘‘requirements;’’; 

■ b. In paragraph (a)(3)(ii) by removing 

the phrase ‘‘owed to CMS.’’ and adding 

in its place the phrase ‘‘owed to CMS; 

and’’; and 

■ c. Adding paragraph (a)(3)(iii). 

The addition reads as follows: 

§ 425.302 Program requirements for data 

submission and certifications. 

(a) * * * 

(3) * * * 

(iii) That the percentage of eligible 

clinicians participating in the ACO that 

use CEHRT to document and 

communicate clinical care to their 

patients or other health care providers 

meets or exceeds the applicable 

percentage specified by CMS at 

§ 425.506(f). 

* * * * * 

■ 15. 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, 


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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. 

(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. 

(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 a 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 

both 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 with retrospective 

reconciliation, 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. 

(4) The incentive payment is not 

offered as part of 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)). 

(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. 

(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. 


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(ii) Any of the grounds for ACO 

termination set forth in § 425.218(b). 

■ 16. Section 425.305 is added to read 

as follows: 

§ 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. 

■ 17. 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. 

* * * * * 

■ 18. 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. 

* * * * * 

■ 19. 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) An ACO participant must notify 

Medicare fee-for-service beneficiaries at 

the point of care about all of the 

following: 

(1) Its ACO providers/suppliers are 

participating in the Shared Savings 

Program. 

(2) The beneficiary’s opportunity to 

decline claims data sharing under 

§ 425.708. 

(3) Beginning July 1, 2019, the 

beneficiary’s 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 (as described in § 425.402(e)). 

(b) Notification of the information 

specified in paragraph (a) of this section 

must be carried out by an ACO 

participant through all of the following 

methods: 

(1) Posting signs in its facilities and, 

in settings in which beneficiaries 

receive primary care services, making 

standardized written notices available 

upon request. 

(2) Beginning July 1, 2019, providing 

each beneficiary with a standardized 

written notice at the first primary care 

visit of each performance year in the 

form and manner specified by CMS. 

* * * * * 

■ 20. 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] 

■ 21. Section 425.315 is amended in 

paragraph (a)(1)(ii) by removing the 

phrase ‘‘§ 425.604(f), § 425.606(h) 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)’’. 

■ 22. 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 in 2019 and subsequent 

performance years, CMS determines 

whether 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 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. 


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(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. 

■ 23. Section 425.400 is amended— 

■ a. In paragraph (a)(1)(ii) by adding 

before the period, ‘‘and, with respect to 

ACOs participating in a 6-month 

performance year during CY 2019, 

during the entirety of CY 2019 as 

specified in § 425.609’’; 

■ b. By revising the headings for 

paragraphs (a)(2) and (3); 

■ c. In paragraph (a)(3)(i) by removing 

the phrase ‘‘under Track 3’’; 

■ d. By adding paragraph (a)(4); 

■ e. By revising paragraphs (c)(1)(iv) 

introductory text, (c)(1)(iv)(A), 

(c)(1)(iv)(B) introductory text, and 

(c)(1)(iv)(B)(5); and 

■ f. By adding paragraphs (c)(1)(iv)(B)(6) 

through (10). 

The revisions and additions 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 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. 

* * * * * 

(c) * * * 

(1) * * * 

(iv) For performance years starting on 

January 1, 2019, and subsequent 

performance years as follows: 

(A) CPT codes: 

(1) 99201 through 99215 (codes for 

office or other outpatient visit for the 

evaluation and management of a 

patient). 

(2) 99304 through 99318 (codes for 

professional services furnished in a 

nursing facility; services identified by 

these codes furnished in a SNF are 

excluded). 

(3) 99319 through 99340 (codes for 

patient domiciliary, rest home, or 

custodial care visit). 

(4) 99341 through 99350 (codes for 

evaluation and management services 

furnished in a patients’ home for claims 

identified by place of service modifier 

12). 

(5) 99487, 99489 and 99490 (codes for 

chronic care management). 

(6) 99495 and 99496 (codes for 

transitional care management services). 

(7) 99497 and 99498 (codes for 

advance care planning). 

(8) 96160 and 96161 (codes for 

administration of health risk 

assessment). 

(9) 99354 and 99355 (add-on codes, 

for prolonged evaluation and 

management or psychotherapy services 

beyond the typical service time of the 

primary procedure; when the base code 

is also a primary care service code 

under this paragraph (c)(1)). 

(10) 99484, 99492, 99493 and 99494 

(codes for behavioral health integration 

services). 

(B) HCPCS codes: 

* * * * * 

(5) G0444 (codes for annual 

depression screening service). 

(6) G0442 (code for alcohol misuse 

screening service). 

(7) G0443 (code for alcohol misuse 

counseling service). 

(8) GPC1X (add-on code, for visit 

complexity inherent to evaluation and 

management associated with primary 

medical care services). 

(9) GCG0X (add-on code, for visit 

complexity inherent to evaluation and 

management associated with 

endocrinology, rheumatology, 

hematology/oncology, urology, 

neurology, obstetrics/gynecology, 

allergy/immunology, otolaryngology, or 

interventional pain managementcentered care). 

(10) GPRO1 (add-on code, for 

prolonged evaluation and management 

or psychotherapy services beyond the 

typical service time of the primary 

procedure; when the base code is also 

a primary care service code under this 

paragraph (c)(1)). 

■ 24. Section 425.401 is amended by 

revising paragraph (b) introductory text 

to read as follows: 

§ 425.401 Criteria for a beneficiary to be 

assigned to an ACO. 

* * * * * 

(b) A beneficiary is excluded from the 

prospective assignment list of an ACO 

that is participating under prospective 

assignment under § 425.400(a)(3) at the 

end of a performance or benchmark year 

and quarterly during each performance 

year consistent with § 425.400(a)(3)(ii), 

or at the end of CY 2019 as specified in 

§ 425.609(b)(1)(ii) and (c)(1)(ii), if the 

beneficiary meets any of the following 

criteria during the performance or 

benchmark year: 

* * * * * 

■ 25. Section 425.402 is amended by 

revising paragraphs (e)(2) and (e)(3)(i) to 

read as follows: 

§ 425.402 Basic assignment methodology. 

* * * * * 

(e) * * * 

(2) Beneficiaries are added to the 

ACO’s list of assigned beneficiaries if all 

of the following conditions are satisfied: 

(i) For performance year 2018: 

(A) The beneficiary must have had at 

least one primary care service during 

the assignment window as defined 

under § 425.20 with a physician who is 

an ACO professional in the ACO who is 

a primary care physician as defined 

under § 425.20 or who has one of the 

primary specialty designations included 

in paragraph (c) of this section. 

(B) The beneficiary meets the 

eligibility criteria established at 

§ 425.401(a) and must not be excluded 

by the criteria at § 425.401(b). The 

exclusion criteria at § 425.401(b) apply 

for purposes of determining beneficiary 

eligibility for alignment to ACOs under 

all tracks based on the beneficiary’s 

designation of an ACO professional as 

responsible for coordinating their 

overall care under paragraph (e) of this 

section. 

(C) The beneficiary must have 

designated an ACO professional who is 

a primary care physician as defined at 

§ 425.20, a physician with a specialty 

designation included at paragraph (c) of 

this section, or a nurse practitioner, 

physician assistant, or clinical nurse 

specialist as responsible for 

coordinating their overall care. 

(D) If a beneficiary has designated a 

provider or supplier outside the ACO 

who is a primary care physician as 


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defined at § 425.20, a physician with a 

specialty designation included at 

paragraph (c) of this section, or a nurse 

practitioner, physician assistant, or 

clinical nurse specialist, as responsible 

for coordinating their overall care, the 

beneficiary is not added to the ACO’s 

list of assigned beneficiaries under the 

assignment methodology in paragraph 

(b) of this section. 

(ii) For performance years starting on 

January 1, 2019, and subsequent 

performance years: 

(A) The beneficiary meets the 

eligibility criteria established at 

§ 425.401(a) and must not be excluded 

by the criteria at § 425.401(b). The 

exclusion criteria at § 425.401(b) apply 

for purposes of determining beneficiary 

eligibility for alignment to an ACO 

based on the beneficiary’s designation of 

an ACO professional as responsible for 

coordinating their overall care under 

paragraph (e) of this section, regardless 

of the ACO’s assignment methodology 

selection under § 425.400(a)(4)(ii). 

(B) The beneficiary must have 

designated an ACO professional as 

responsible for coordinating their 

overall care. 

(C) If a beneficiary has designated a 

provider or supplier outside the ACO as 

responsible for coordinating their 

overall care, the beneficiary is not added 

under the assignment methodology in 

paragraph (b) of this section to the 

ACO’s list of assigned beneficiaries for 

a 12-month performance year or the 

ACO’s list of assigned beneficiaries for 

a 6-month performance year, which is 

based on the entire CY 2019 as provided 

in § 425.609. 

(D) The beneficiary is not assigned 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. 

(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). 

* * * * * 

§ 425.404 [Amended] 

■ 26. Section 425.404 is amended in 

paragraph (b) by removing the phrase 

‘‘For performance year 2019 and 

subsequent performance years’’ and 

adding in its place the phrase ‘‘For 

performance years starting on January 1, 

2019, and subsequent performance 

years’’. 

■ 27. Section 425.502 is amended— 

■ a. 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’’; 

■ b. In paragraph (e)(4)(vi) by removing 

the phrase ‘‘For performance year 2017’’ 

and adding in its place the phrase ‘‘For 

performance year 2017 and subsequent 

performance years’’; 

■ c. By adding a new paragraph 

(e)(4)(vii); 

■ d. By revising paragraph (f) 

introductory text; 

■ e. By redesignating paragraphs (f)(1) 

and (2) as paragraphs (f)(2)(i) and (ii); 

■ f. By adding a new paragraph (f)(1); 

■ g. By adding a new paragraph (f)(2) 

introductory text; 

■ h. In newly redesignated paragraph 

(f)(2)(i) by removing the phrase ‘‘for 

performance year 2017’’ and adding in 

its place the phrase ‘‘for the relevant 

performance year’’; 

■ i. By removing paragraph (f)(4); and 

■ j. By redesignating paragraph (f)(5) as 

paragraph (f)(4). 

The revisions and additions read as 

follows: 

§ 425.502 Calculating the ACO quality 

performance score. 

* * * * * 

(e) * * * 

(4) * * * 

(vii) For performance year 2017 and 

subsequent performance years, if an 

ACO receives the mean Shared Savings 

Program ACO quality score under 

paragraph (f) of this section, in the next 

performance year for which the ACO 

receives a quality performance score 

based on its own quality reporting, 

quality improvement is measured based 

on a comparison between the 

performance in that year and the most 

recently available prior performance 

year in which the ACO reported quality. 

(f) Extreme and uncontrollable 

circumstances. For performance year 

2017 and subsequent performance years, 

including the applicable quality data 

reporting period for the performance 

year if the quality reporting period is 

not extended, CMS uses an alternative 

approach to calculating the quality score 

for ACOs affected by extreme and 

uncontrollable circumstances instead of 

the methodology specified in 

paragraphs (a) through (e) of this section 

as follows: 

(1) CMS determines the ACO was 

affected by an extreme and 

uncontrollable circumstance based on 

either of the following: 

(i) Twenty percent or more of the 

ACO’s assigned beneficiaries reside in 

an area identified under the Quality 

Payment Program as being affected by 

an extreme and uncontrollable 

circumstance. 

(A) Assignment is determined under 

subpart E of this part. 

(B) In making this determination for 

performance year 2017, CMS uses the 

final list of beneficiaries assigned to the 

ACO for the performance year. For 

performance year 2018 and subsequent 

performance years, CMS uses the list of 

assigned beneficiaries used to generate 

the Web Interface quality reporting 

sample. 

(ii) The ACO’s legal entity is located 

in an area identified under the Quality 

Payment Program as being affected by 

an extreme and uncontrollable 

circumstance. An ACO’s legal entity 

location is based on the address on file 

for the ACO in CMS’ ACO application 

and management system. 

(2) If CMS determines the ACO meets 

the requirements of paragraph (f)(1) of 

this section, CMS calculates the ACO’s 

quality score as follows: 

* * * * * 

■ 28. Section 425.506 is amended— 

■ a. In paragraph (b) by removing the 

phrase ‘‘As part of the quality 

performance score’’ and adding in its 

place the phrase ‘‘For performance years 

2012 through 2018, as part of the quality 

performance score’’; 

■ b. In paragraph (c) by removing the 

phrase ‘‘Performance on this measure’’ 

and adding in its place the phrase ‘‘For 

performance years 2012 through 2018, 

performance on this measure’’; 

■ c. In paragraph (e) introductory text by 

removing the phrase ‘‘For 2017 and 

subsequent years’’ and adding in its 

place the phrase ‘‘For 2017 and 2018’’; 

and 

■ d. By adding paragraph (f). 

The addition reads as follows: 

§ 425.506 Incorporating reporting 

requirements related to adoption of certified 

electronic health record technology. 

* * * * * 

(f) For performance years starting on 

January 1, 2019, and subsequent 

performance years, ACOs in a track or 

a payment model within a track that— 

(1) Does not meet the financial risk 

standard to be an Advanced APM must 

certify annually and at the time of 

application that the percentage of 

eligible clinicians participating in the 


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ACO that use CEHRT to document and 

communicate clinical care to their 

patients or other health care providers 

meets or exceeds 50 percent; or 

(2) Meets the financial risk standard 

to be an Advanced APM must certify 

annually and at the time of application 

that the percentage of eligible clinicians 

participating in the ACO that use 

CEHRT to document and communicate 

clinical care to their patients or other 

health care providers meets or exceeds 

the higher of 50 percent or the threshold 

established under § 414.1415(a)(1)(i) of 

this chapter. 

■ 29. 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)(A) 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)(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 re-entering 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 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) 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, except as provided in 

paragraph (a)(4)(i)(B)(2)(i) of this 

section. 

(i) 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. 

(ii) 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). 

(iii) 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. 

(iv) 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)(ii) 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) 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 


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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 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 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: 

(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). 

■ 30. 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 


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at the 99th percentile of national 

Medicare fee-for-service expenditures 

for assignable beneficiaries identified 

for the 12-month calendar year 

corresponding to each benchmark year 

in order to minimize variation from 

catastrophically large claims. 

(5) Trends forward expenditures for 

each benchmark year (BY1 and BY2) to 

the third benchmark year (BY3) dollars 

using a blend of national and regional 

growth rates. 

(i) To trend forward the benchmark, 

CMS makes separate calculations for 

expenditure categories for each of the 

following populations of beneficiaries: 

(A) ESRD. 

(B) Disabled. 

(C) Aged/dual eligible Medicare and 

Medicaid beneficiaries. 

(D) Aged/non-dual eligible Medicare 

and Medicaid beneficiaries. 

(ii) National growth rates are 

computed using CMS Office of the 

Actuary national Medicare expenditure 

data for each of the years making up the 

historical benchmark for assignable 

beneficiaries identified for the 12-month 

calendar year corresponding to each 

benchmark year. 

(iii) Regional growth rates are 

computed using expenditures for the 

ACO’s regional service area for each of 

the years making up the historical 

benchmark as follows: 

(A) Determine the counties included 

in the ACO’s regional service area based 

on the ACO’s assigned beneficiary 

population for the relevant benchmark 

year. 

(B) Determine the ACO’s regional 

expenditures as specified under 

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 


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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 

(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 CMS–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 


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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 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 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. 

(3) The third 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. 

(4) 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 BY 3 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. 

■ 31. 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 on January 1, 

2019’’; 

■ 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, 2018 and on January 

1, 2019’’; and 

■ d. By adding paragraph (c). 

The revisions and addition read as 

follows: 

§ 425.602 Establishing, adjusting, and 

updating the benchmark for an ACO’s first 

agreement period beginning on or before 

January 1, 2019. 

(a) Computing per capita Medicare 

Part A and Part B benchmark 

expenditures. For agreement periods 

beginning on or before January 1, 2019, 

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: 

* * * * * 

(c) January 1, 2019 through June 30, 

2019 performance year. In determining 

performance for the January 1, 2019 

through June 30, 2019 performance year 

described in § 425.609(b) CMS does all 

of the following: 

(1) When adjusting the benchmark 

using the methodology set forth in 

paragraph (a)(9) of this section and 

§ 425.609(b), 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(b), CMS updates the 

benchmark based on growth between 

BY3 and CY 2019. 

■ 32. 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 


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place the phrase ‘‘For agreement periods 

beginning in 2018 and on January 1, 

2019’’; 

■ 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’’; and 

■ g. By adding paragraph (g). 

The revision and addition reads as 

follows: 

§ 425.603 Resetting, adjusting, and 

updating the benchmark for a subsequent 

agreement period beginning on or before 

January 1, 2019. 

* * * * * 

(g) In determining performance for the 

January 1, 2019 through June 30, 2019 

performance year described in 

§ 425.609(b) CMS does all of the 

following: 

(1) When adjusting the benchmark 

using the methodology set forth in 

paragraph (c)(10) of this section and 

§ 425.609(b), CMS adjusts for severity 

and case mix between BY3 and CY 

2019. 

(2) When updating the benchmark 

using the methodology set forth in 

paragraph (d) of this section and 

§ 425.609(b), CMS updates the 

benchmark based on growth between 

BY3 and CY 2019. 

■ 33. 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)’’; 

■ c. In paragraph (b) by revising the 

table; and 

■ d. By adding paragraph (g). 

The revision and addition read as 

follows: 

§ 425.604 Calculation of savings under the 

one-sided model. 

* * * * * 

(b) * * * 

Number of beneficiaries 

MSR 

(low end of 

assigned 

beneficiaries) 

(percent) 

MSR 

(high end of 

assigned 

beneficiaries) 

(percent) 

1–499 ........................................................................................................................................................... ≥12.2 

500–999 ....................................................................................................................................................... 12.2 8.7 

1,000–2,999 ................................................................................................................................................. 8.7 5.0 

3,000–4,999 ................................................................................................................................................. 5.0 3.9 

5,000–5,999 ................................................................................................................................................. 3.9 3.6 

6,000–6,999 ................................................................................................................................................. 3.6 3.4 

7,000–7,999 ................................................................................................................................................. 3.4 3.2 

8,000–8,999 ................................................................................................................................................. 3.2 3.1 

9,000–9,999 ................................................................................................................................................. 3.1 3.0 

10,000–14,999 ............................................................................................................................................. 3.0 2.7 

15,000–19,999 ............................................................................................................................................. 2.7 2.5 

20,000–49,999 ............................................................................................................................................. 2.5 2.2 

50,000–59,999 ............................................................................................................................................. 2.2 2.0 

60,000 + ....................................................................................................................................................... 2.0 2.0 

* * * * * 

(g) January 1, 2019 through June 30, 

2019 performance year. Shared savings 

for the January 1, 2019 through June 30, 

2019 performance year are calculated as 

described in § 425.609. 

■ 34. 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) Negative adjustments in 

prospective HCC risk scores are subject 

to a cap of negative 3 percent. 

(iii) These caps are the maximum 

change in risk scores for each agreement 

period, such that the adjustment 

between BY3 and any performance year 

in the agreement period cannot be larger 

than 3 percent in either direction. 

(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 


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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: 

Number of beneficiaries 

MSR 

(low end of 

assigned 

beneficiaries) 

(percent) 

MSR 

(high end of 

assigned 

beneficiaries) 

(percent) 

1–499 ........................................................................................................................................................... ≥12.2 

500–999 ....................................................................................................................................................... 12.2 8.7 

1,000–2,999 ................................................................................................................................................. 8.7 5.0 

3,000–4,999 ................................................................................................................................................. 5.0 3.9 

5,000–5,999 ................................................................................................................................................. 3.9 3.6 

6,000–6,999 ................................................................................................................................................. 3.6 3.4 

7,000–7,999 ................................................................................................................................................. 3.4 3.2 

8,000–8,999 ................................................................................................................................................. 3.2 3.1 

9,000–9,999 ................................................................................................................................................. 3.1 3.0 

10,000–14,999 ............................................................................................................................................. 3.0 2.7 

15,000–19,999 ............................................................................................................................................. 2.7 2.5 

20,000–49,999 ............................................................................................................................................. 2.5 2.2 

50,000–59,999 ............................................................................................................................................. 2.2 2.0 

60,000+ ........................................................................................................................................................ 2.0 2.0 

(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). 

(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) An ACO eligible to enter the 

BASIC track’s glide path as specified 

under § 425.600(d) may elect to enter its 

agreement period at any of the levels of 

risk and potential reward under 

paragraphs (d)(1)(i) through (v) of this 

section, with the exception that an ACO 

that previously participated in Track 1 

under § 425.600(a)(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, may elect 

to enter its agreement period at any of 

the levels of risk and potential reward 

available under paragraphs (d)(1)(ii) 

through (v) of this section. 

(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 25 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 25 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)(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 30 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)(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 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)(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), 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] 


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(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. 

■ 35. Section 425.606 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)’’; 

■ 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’’; 

■ d. In paragraph (i) introductory text by 

removing the phrase ‘‘For performance 

year 2017’’ and adding in its place the 

phrase ‘‘For performance year 2017 and 

subsequent performance years’’; 

■ e. In paragraph (i)(1) remove the 

phrase ‘‘2017’’; and 

■ f. By adding paragraph (i)(2)(i), 

reserved paragraph (i)(2)(ii), and 

paragraph (j). 

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) 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] 

* * * * * 

(j) January 1, 2019 through June 30, 

2019. Shared savings or shared losses 

for the January 1, 2019 through June 30, 

2019 performance year are calculated as 

described in § 425.609. 

■ 36. Section 425.609 is added to read 

as follows: 

§ 425.609 Determining performance for 6- 

month performance years during CY 2019. 

(a) General. An ACO’s financial and 

quality performance for a 6-month 

performance year during 2019 are 

determined as described in this section. 

(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 

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 

after the conclusion of CY 2019 for the 

period from January 1, 2019, through 

June 30, 2019, based on the 12-month 

calendar year and pro-rates 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: 

(1) Uses the ACO participant list in 

effect for the performance year 

beginning January 1, 2019, to determine 

beneficiary assignment, using claims for 

the entire calendar year, as specified in 

§§ 425.402 and 425.404, and according 

to the ACO’s track as specified in 

§ 425.400. 

(i) For ACOs under preliminary 

prospective assignment with 

retrospective reconciliation the 

assignment window is CY 2019. 

(ii) For ACOs under prospective 

assignment— 

(A) Medicare fee-for-service 

beneficiaries are 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; 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. 

(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 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. 

(3) Uses the methodology for 

calculating shared savings or shared 

losses applicable to the ACO under the 

terms of the participation agreement 

that was in effect on January 1, 2019. 

(i) The ACO’s historical benchmark is 

determined according to either 

§ 425.602 (first agreement period) or 

§ 425.603 (second agreement period) 

except as follows: 

(A) The benchmark is adjusted for 

changes in severity and case mix 

between BY 3 and CY 2019 using the 

methodology that accounts separately 

for newly and continuously assigned 

beneficiaries using prospective HCC risk 

scores and demographic factors as 

described under §§ 425.604(a)(1) 

through (3), 425.606(a)(1) through (3), 

and 425.610(a)(1) through (3). 

(B) The benchmark is updated to CY 

2019 according to the methodology 

described under § 425.602(b), 

§ 425.603(b), or § 425.603(d), based on 

whether the ACO is in its first or second 

agreement period, and for an ACO in a 

second agreement period, the date on 

which that agreement period began. 

(ii) The ACO’s financial performance 

is determined based on the track the 

ACO is participating under during the 

performance year starting on January 1, 

2019 (§ 425.604, § 425.606 or § 425.610), 

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 (b)(1) 

of this section. 

(B) Expenditures calculated in 

paragraph (b)(3)(ii)(A) of this section are 

compared to the ACO’s updated 

benchmark determined according to 

paragraph (b)(3)(i) of this section. 

(C)(1) The ACO’s performance year 

assigned beneficiary population 

identified in paragraph (b)(1) of this 

section is used to determine the MSR for 

Track 1 ACOs and the variable MSR/ 


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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 (b)(1) of this section is below 

5,000 beneficiaries, the MSR/MLR is 

determined based on the number of 

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 January 1, 

2019 (§ 425.604, § 425.606 or § 425.610) 

and paragraph (b)(3)(ii)(C)(1) of this 

section. 

(ii) Meet the minimum quality 

performance standards established 

under § 425.502 and according to 

paragraph (b)(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 January 1, 2019 (§ 425.606 or 

§ 425.610) and paragraph (b)(3)(ii)(C)(1) 

of this section. 

(D) For an ACO that meets all the 

requirements to receive shared savings 

payment under paragraph (b)(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 January 1, 

2019 (§ 425.604, § 425.606 or § 425.610), 

is applied to all savings under the 

updated benchmark specified under 

paragraph (b)(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 

(b)(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 period 

from January 1, 2019, through June 30, 

2019. 

(E) For an ACO responsible for shared 

losses under paragraph (b)(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 January 1, 

2019 (§ 425.606 or § 425.610), is applied 

to all losses under the updated 

benchmark specified under paragraph 

(b)(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 (b)(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 period 

from January 1, 2019, through June 30, 

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 after the conclusion 

of CY 2019 for the period from July 1, 

2019, through December 31, 2019, based 

on the 12-month calendar year and prorates 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) Medicare fee-for-service 

beneficiaries are 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; 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 BY 3 and CY 2019 based on 

growth in prospective HCC risk scores, 

subject to a symmetrical cap of positive 

or negative 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 

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 


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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 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) Extreme and uncontrollable 

circumstances. For ACOs affected by 

extreme and uncontrollable 

circumstances during CY 2019— 

(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 

(2) In determining the ACO’s quality 

performance score for the 2019 quality 

reporting period, CMS uses the 

alternative scoring methodology 

specified in § 425.502(f). 

(e) Notification of savings and losses. 

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: 

(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. 

(4) 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. 

■ 37. 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 

all instances of the phrase ‘‘Track 3’’ 

and, in each instance, 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. In paragraph (i) introductory text by 

removing the phrase ‘‘For performance 

year 2017’’ and adding in its place the 

phrase ‘‘For performance year 2017 and 

subsequent performance years’’; 

■ h. In paragraph (i)(1) by removing the 

phrase ‘‘2017’’; and 

■ i. By adding paragraph (i)(2)(i), 

reserved paragraph (i)(2)(ii), and 

paragraphs (j) and (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, 


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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. 

(i) Positive adjustments in prospective 

HCC risk scores are subject to a cap of 

3 percent. 

(ii) Negative adjustments in 

prospective HCC risk scores are subject 

to a cap of negative 3 percent. 

(iii) These caps are the maximum 

change in risk scores for each agreement 

period, such that the adjustment 

between BY3 and any performance year 

in the agreement period cannot be larger 

than 3 percent in either direction. 

(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) 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] 

* * * * * 

(j) January 1, 2019 through June 30, 

2019 performance year. Shared savings 

or shared losses for the January 1, 2019 

through June 30, 2019 performance year 

are calculated as described in § 425.609. 

(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. 

■ 38. 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: 


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(A) Prospective assignment under 

§ 425.400(a)(3), the beneficiary was not 

prospectively assigned to the ACO for 

the performance year in which they 

received the SNF services, or was 

prospectively assigned but was later 

excluded and the 90-day grace period, 

described in paragraph (a)(1)(iv)(A) of 

this section, has lapsed. 

(B) Preliminary prospective 

assignment with retrospective 

reconciliation under § 425.400(a)(2), the 

beneficiary was not identified as 

preliminarily prospectively assigned to 

the ACO for the performance year in the 

report provided under 

§ 425.702(c)(1)(ii)(A) at the beginning of 

the performance year or for the first, 

second, or third quarter of the 

performance year before the SNF 

services were provided to the 

beneficiary. 

* * * * * 

(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. 

■ 39. 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. 

■ 40. Section 425.702 is amended— 

■ a. By revising paragraphs (c)(1)(ii)(A) 

introductory text, (c)(1)(ii)(B) 

introductory text and (c)(1)(ii)(C); and 

■ b. By adding paragraph (d). 

The revisions and addition read as 

follows: 


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§ 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 

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. 

* * * * * 

(d) For an ACO eligible to be 

reconciled under § 425.609(b), CMS 

shares with the ACO quarterly aggregate 

reports as provided in paragraphs (b) 

and (c)(1)(ii) of this section for CY 2019. 

■ 41. 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. 

* * * * * 

■ 42. 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: June 11, 2018. 

Seema Verma, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: June 28, 2018. 

Alex M. Azar II, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2018–17101 Filed 8–9–18; 4:15 pm] 

BILLING CODE 4120–01–P 


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