67802 Federal Register / Vol. 76, No. 212 / Wednesday, November 2, 2011 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Part 425 

[CMS–1345–F] 

RIN 0938–AQ22 

Medicare Program; Medicare Shared 

Savings Program: Accountable Care 

Organizations 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule implements 

section 3022 of the Affordable Care Act 

which contains provisions relating to 

Medicare payments to providers of 

services and suppliers participating in 

Accountable Care Organizations (ACOs) 

under the Medicare Shared Savings 

Program. Under these provisions, 

providers of services and suppliers can 

continue to receive traditional Medicare 

fee-for-service (FFS) payments under 

Parts A and B, and be eligible for 

additional payments if they meet 

specified quality and savings 

requirements. 

DATES: These regulations are effective 

on January 3, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Rebecca Weiss, (410) 786–8084, 

Facsimile: (410) 786–8005, Email 

address: aco@cms.hhs.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

To assist readers in referencing 

sections contained in this preamble, we 

are providing a table of contents. 

I. Background 

A. Introduction and Overview of ValueBased Purchasing 

B. Statutory Basis for the Medicare Shared 

Savings Program 

C. Overview of the Medicare Shared 

Savings Program 

D. Public Comments Received on the 

Proposed Rule 

E. Reorganization of the Regulations Text 

II. Provisions of the Proposed Rule, Summary 

of and Responses to Public Comments, 

and Provisions of the Final Rule 

A. Definitions 

B. Eligibility and Governance 

1. General Requirements 

a. Accountability for Beneficiaries 

b. Agreement Requirement 

c. Sufficient Number of Primary Care 

Providers and Beneficiaries 

d. Identification and Required Reporting 

on Participating ACO Professionals 

2. Eligible Participants 

3. Legal Structure and Governance 

a. Legal Entity 

b. Distribution of Shared Savings 

c. Governance 

d. Composition of the Governing Body 

4. Leadership and Management Structure 

5. Processes To Promote Evidence-Based 

Medicine, Patient Engagement, 

Reporting, Coordination of Care, and 

Demonstrating Patient-Centeredness 

a. Processes To Promote Evidence-Based 

Medicine 

b. Processes To Promote Patient 

Engagement 

c. Processes To Report on Quality and Cost 

Measures 

d. Processes To Promote Coordination of 

Care 

6. Overlap With Other CMS Shared 

Savings Initiatives 

a. Duplication in Participation in Medicare 

Shared Savings Programs 

b. Transition of the Physician Group 

Practice (PGP) Demonstration Sites Into 

the Shared Savings Program 

c. Overlap With the Center for Medicare & 

Medicaid Innovation (Innovation Center) 

Shared Savings Models 

C. Establishing the Agreement With the 

Secretary 

1. Options for Start Date of the 

Performance Year 

2. Timing and Process for Evaluating 

Shared Savings 

3. New Program Standards Established 

During the Agreement Period 

4. Managing Significant Changes to the 

ACO During the Agreement Period 

5. Coordination With Other Agencies 

a. Waivers of CMP, Anti-Kickback, and 

Physician Self-Referral Laws 

b. IRS Guidance Relating to Tax-Exempt 

Organization Participating in ACOs 

c. Antitrust Policy Statement 

d. Coordinating the Shared Savings 

Program Application With the Antitrust 

Agencies 

D. Provision of Aggregate and Beneficiary 

Identifiable Data 

1. Data Sharing 

2. Sharing Aggregate Data 

3. Identification of Historically Assigned 

Beneficiaries 

4. Sharing Beneficiary Identifiable Claims 

Data 

5. Giving Beneficiaries the Opportunity To 

Decline Data Sharing 

E. Assignment of Medicare Fee-for-Service 

Beneficiaries 

1. Definition of Primary Care Services 

a. Consideration of Physician Specialties in 

the Assignment Process 

b. Consideration of Services Furnished by 

Non-Physician Practitioners in the 

Assignment Process 

c. Assignment of Beneficiaries to ACOs 

That Include FQHCs and/or RHCs 

(1) Identification of Primary Care Services 

Rendered in FQHCs and RHCs 

(2) Identification of the Type of 

Practitioner Providing the Service in an 

FQHC/RHC 

(3) Identification of the Physician Specialty 

for Services in FQHCs and RHCs 

2. Prospective vs. Retrospective Beneficiary 

Assignment To Calculate Eligibility for 

Shared Savings 

3. Majority vs. Plurality Rule for 

Beneficiary Assignment 

F. Quality and Other Reporting 

Requirements 

1. Introduction 

2. Measures To Assess the Quality of Care 

Furnished by an ACO 

a. General 

b. Considerations in Selecting Measures 

c. Quality Measures for Use in Establishing 

Quality Performance Standards That 

ACOs Must Meet for Shared Savings 

3. Requirements for Quality Measures Data 

Submission by ACOs 

a. General 

b. GPRO Web Interface 

c. Certified EHR Technology 

4. Quality Performance Standards 

a. General 

b. Performance Scoring 

(1) Measure Domains and Measures 

Included in the Domains 

(2) Methodology for Calculating a 

Performance Score for Each Measure 

Within a Domain 

(3) Methodology for Calculating a 

Performance Score for Each Domain 

(4) The Quality Performance Standard 

Level 

5. Incorporation of Other Reporting 

Requirements Related to the PQRS and 

Electronic Health Records Technology 

Under Section 1848 of the Act 

6. Aligning ACO Quality Measures With 

Other Laws and Regulations 

G. Shared Savings and Losses 

1. Authority for and Selection of Shared 

Savings/Losses Model 

2. Shared Savings and Losses 

Determination 

a. Overview of Shared Savings and Losses 

Determination 

b. Establishing the Benchmark 

c. Adjusting the Benchmark and Actual 

Expenditures 

(1) Adjusting Benchmark and Performance 

Year Average Per Capita Expenditures 

for Beneficiary Characteristics 

(2) Technical Adjustments to the 

Benchmark and Performance Year 

Expenditures 

(a) Impact of IME and DSH 

(b) Geographic and Other Payment 

Adjustments 

(3) Trending Forward Prior Year’s 

Experience To Obtain an Initial 

Benchmark 

(a) Growth Rate as a Benchmark Trending 

Factor 

(b) National Growth Rate as a Benchmark 

Trending Factor 

d. Updating the Benchmark During the 

Agreement Period 

e. Determining Shared Savings 

(1) Minimum Savings Rate 

(a) One-Sided Model 

(b) Two-Sided Model 

(2) Quality Performance Sharing Rate 

(3) Additional Shared Savings Payments 

(4) Net Sharing Rate 

(5) Performance Payment Limits 

f. Calculating Sharing in Losses 

(1) Minimum Loss Rate 

(2) Shared Loss Rate 

g. Limits on Shared Losses 

h. Ensuring ACO Repayment of Shared 

Losses 

i. Timing of Repayment 


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j. Withholding Performance Payments 

k. Determining First Year Performance for 

ACOs Beginning April 1 or July 1, 2012 

(1) Interim Payment Calculation 

(2) First Year Reconciliation 

(3) Repayment Mechanism for ACOs 

Electing Interim Payment Calculations 

3. Impact on States 

H. Additional Program Requirements and 

Beneficiary Protections 

1. Background 

2. Beneficiary Protections 

a. Beneficiary Notification 

b. ACO Marketing Guidelines 

3. Program Monitoring 

a. General Methods Used to Monitor ACOs 

b. Monitoring Avoidance of At-Risk 

Beneficiaries 

(1) Definition of At-Risk Beneficiaries 

(2) Penalty for Avoidance of At-Risk 

Beneficiaries 

c. Compliance With Quality Performance 

Standards 

4. Program Integrity Requirements 

a. Compliance Plans 

b. Compliance With Program Requirements 

c. Conflicts of Interest 

d. Screening of ACO Applicants 

e. Prohibition on Certain Required 

Referrals and Cost Shifting 

f. Record Retention 

g. Beneficiary Inducements 

5. Terminating an ACO Agreement 

a. Reasons for Termination of an ACO’s 

Agreement 

b. Corrective Action Plans 

6. Reconsideration Review Process 

III. Collection of Information Requirements 

IV. Regulatory Impact Analysis 

A. Introduction 

B. Statement of Need 

C. Overall Impact 

D. Anticipated Effects 

1. Effects on the Medicare Program 

a. Assumptions and Uncertainties 

b. Detailed Stochastic Modeling Results 

c. Further Considerations 

2. Impact on Beneficiaries 

3. Impact on Providers and Suppliers 

4. Impact on Small Entities 

E. Alternatives Considered 

F. Accounting Statement and Table 

G. Conclusion 

Regulations Text 

Acronyms 

ACO Accountable Care Organization 

AHRQ Agency for Healthcare Research and 

Quality 

BAA Business Associate Agreements 

BCBSMA Blue Cross Blue Shield of 

Massachusetts 

BIPA Benefits Improvement and Protection 

Act 

CAD Coronary Artery Disease 

CAHPS Consumer Assessment of Health 

Providers and Systems 

CAHs Critical Access Hospitals 

CBIC Competitive Bidding Implementation 

Contractor 

CBSA Core Based Statistical Area 

CHCs Community Health Centers 

CHIP Children’s Health Insurance Program 

CMP Civil Monetary Penalties 

CMS Centers for Medicare & Medicaid 

Services 

CNM Certified Nurse Midwife 

CMS–HCC CMS Hierarchal Condition 

Category 

COPD Chronic Obstructive Pulmonary 

Disease 

CP Certified Psychologist 

CSW Clinical Social Worker 

CWF Common Working File 

DHHS Department of Health and Human 

Services 

DOB Date of Birth 

DOJ Department of Justice 

DRA Deficit Reduction Act of 2005 (Pub. L. 

109–171) 

DSH Disproportionate Share Hospital 

DUA Data use Agreement 

E&M Evaluation and Management 

EHR Electronic Health Record 

ESRD End Stage Renal Disease 

eRx Electronic Prescribing Incentive 

Program 

FFS Fee-for-service 

FQHCs Federally Qualified Health Centers 

FTC Federal Trade Commission 

GAO Government Accountability Office 

GPCI Geographic Practice Cost Index 

GPRO Group Practice Reporting Option 

HAC Hospital Acquired Conditions 

HCAHPS Hospital Consumer Assessment of 

Health care Provider and Systems 

HCC Hierarchal Condition Category 

HCPCS Healthcare Common Procedure 

Coding System 

HHAs Home Health Agencies 

HICN Health Insurance Claim Number 

HIPAA Heath Insurance Portability and 

Accountability Act of 1996 

HIE Health Information Exchange 

HIT Health Information Technology 

HITECH Health Information Technology for 

Economic and Clinical Health 

HMO Health Maintenance Organization 

HRSA Health Resources and Services 

Administration 

HVBP Hospital Value Based Purchasing 

IME Indirect Medical Education 

IOM Institute of Medicine 

IPPS Inpatient Prospective Payment System 

IQR Inpatient Quality Reporting 

IRS Internal Revenue Service 

LTCHs Long-Term Acute Care Hospitals 

MA Medicare Advantage 

MAPCP Multipayer Advanced Primary Care 

Practice 

MedPAC Medicare Payment Advisory 

Commission 

MHCQ Medicare Health Care Quality 

MMA Medicare Prescription Drug, 

Improvement, and Modernization Act 

MS–DRGs Medicare Severity-Adjusted 

Diagnosis Related Groups 

MSP Minimum Savings Percentage 

MSR Minimum Savings Rate 

NCQA National Committee for Quality 

Assurance 

NCCCN North Carolina Community Care 

Network 

NP Nurse Practitioner 

NPI National Provider Identifier 

NQF National Quality Forum 

OIG Office of Inspector General 

OMB Office of Management and Budget 

PA Physician Assistant 

PACE Program of All Inclusive Care for the 

Elderly 

PACFs Post-Acute Care Facilities 

PCMH Patient Centered Medical Home 

PFS Physician Fee Schedule 

PGP Physician Group Practice 

PHI Protected health information 

POS Point of Service 

PPO Preferred provider organization 

PPS Prospective Payment System 

PQRI Physician Quality Reporting Initiative 

PQRS Physician Quality Reporting System 

PRA Paperwork Reduction Act 

PSA Primary Service Areas 

RFI Request for Information 

RHCs Rural Health Clinics 

RIA Regulatory Impact Analysis 

SNFs Skilled Nursing Facilities 

SSA Social Security Administration 

SSN Social Security Number 

TIN Taxpayer Identification Number 

I. Background 

A. Introduction and Overview of ValueBased Purchasing 

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. Collectively 

known as the Affordable Care Act, these 

public laws include a number of 

provisions designed to improve the 

quality of Medicare services, support 

innovation and the establishment of 

new payment models, better align 

Medicare payments with provider costs, 

strengthen program integrity within 

Medicare, and put Medicare on a firmer 

financial footing. 

Many provisions within the 

Affordable Care Act implement valuebased purchasing programs; section 

3022 requires the Secretary to establish 

the Medicare Shared Savings Program 

(Shared Savings Program), intended to 

encourage the development of 

Accountable Care Organizations (ACOs) 

in Medicare. The Shared Savings 

Program is a key component of the 

Medicare delivery system reform 

initiatives included in the Affordable 

Care Act and is a new approach to the 

delivery of health care aimed at: (1) 

Better care for individuals; (2) better 

health for populations; and (3) lower 

growth in Medicare Parts A and B 

expenditures. We refer to this approach 

throughout this final rule as the threepart aim. 

Value-based purchasing is a concept 

that links payment directly to the 

quality of care provided and is a strategy 

that can help transform the current 

payment system by rewarding providers 

for delivering high quality, efficient 

clinical care. In the April 7, 2011 

Federal Register (76 FR 19528), we 

published the Shared Savings Program 

proposed rule. In the proposed rule, we 


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discussed our experience implementing 

value based purchasing concepts. In 

addition to improving quality, valuebased purchasing initiatives seek to 

reduce growth in health care 

expenditures. 

We view value-based purchasing as 

an important step to revamping how 

care and services are paid for, moving 

increasingly toward rewarding better 

value, outcomes, and innovations 

instead of merely increased volume. For 

a complete discussion, including our 

goals in implementing value-based 

purchasing initiatives, please refer to 

section I.A. of the proposed rule (76 FR 

19530). 

B. Statutory Basis for the Medicare 

Shared Savings Program 

Section 3022 of the Affordable Care 

Act amended Title XVIII of the Social 

Security Act (the Act) (42 U.S.C. 1395 

et seq.) by adding new section 1899 to 

the Act to establish a Shared Savings 

Program that promotes accountability 

for a patient population, coordinates 

items and services under Parts A and B, 

and encourages investment in 

infrastructure and redesigned care 

processes for high quality and efficient 

service delivery. A detailed summary of 

the provisions within section 3022 of 

the Affordable Care Act is in section I.B. 

of the proposed rule (see 76 FR 19531). 

C. Overview of the Medicare Shared 

Savings Program 

The intent of the Shared Savings 

Program is to promote accountability for 

a population of Medicare beneficiaries, 

improve the coordination of FFS items 

and services, encourage investment in 

infrastructure and redesigned care 

processes for high quality and efficient 

service delivery, and incent higher 

value care. As an incentive to ACOs that 

successfully meet quality and savings 

requirements, the Medicare Program can 

share a percentage of the achieved 

savings with the ACO. Under the Shared 

Savings Program, ACOs will only share 

in savings if they meet both the quality 

performance standards and generate 

shareable savings. In order to fulfill the 

intent of the Shared Savings Program as 

established by the Affordable Care Act, 

we stated in the proposed rule that we 

will focus on achieving the three-part 

aim consisting of: (1) Better care for 

individuals; (2) better health for 

populations; and (3) lower growth in 

expenditures. 

In developing the Shared Savings 

Program, and in response to stakeholder 

suggestions, we have worked very 

closely with agencies across the Federal 

government to develop policies to 

encourage participation and ensure a 

coordinated and aligned inter- and 

intra-agency program implementation. 

The result of this effort is the release of 

several documents that potential 

participants are strongly encouraged to 

review. These documents are described 

in more detail in section II.C.5. of this 

final rule, and include: (1) A joint CMS 

and DHHS OIG interim final rule with 

comment period published elsewhere in 

this issue of the Federal Register 

entitled Medicare Program; Final 

Waivers in Connection With the Shared 

Savings Program; (2) IRS Notice 2011– 

20 and other applicable IRS guidance 

viewable on www.irs.gov; and (3) a 

Statement of Antitrust Enforcement 

Policy Regarding Accountable Care 

Organizations Participating in the 

Shared Savings Program issued by the 

FTC and DOJ (collectively, the Antitrust 

Agencies). 

In this final rule we have made 

significant modifications to reduce 

burden and cost for participating ACOs. 

These modifications include: (1) Greater 

flexibility in eligibility to participate in 

the Shared Savings Program; (2) 

multiple start dates in 2012; (3) 

establishment of a longer agreement 

period for those starting in 2012; (4) 

greater flexibility in the governance and 

legal structure of an ACO; (5) simpler 

and more streamlined quality 

performance standards; (6) adjustments 

to the financial model to increase 

financial incentives to participate; (7) 

increased sharing caps; (8) no downside risk and first-dollar sharing in 

Track 1; (9) removal of the 25 percent 

withhold of shared savings; (10) greater 

flexibility in timing for the evaluation of 

sharing savings (claims run-out reduced 

to 3 months); (11) greater flexibility in 

antitrust review; and (12) greater 

flexibility in timing for repayment of 

losses; and (13) additional options for 

participation of FQHCs and RHCs. 

D. Public Comments Received on the 

Proposed Rule 

We received approximately 1,320 

public comments on the April 7, 2011 

proposed rule (76 FR 19528). These 

public comments addressed issues on 

multiple topics and here, rather than 

throughout the regulation, we extend 

our great appreciation for the input. We 

received some comments that were 

outside the scope of the proposed rule 

and therefore not addressed in this final 

rule (for example, suggested changes to 

the physician fee schedule, or 

suggestions on other Affordable Care 

Act provisions). Summaries of the 

public comments that are within the 

scope of the proposals and our 

responses to those comments are set 

forth in the various sections of this final 

rule under the appropriate headings. In 

this final rule, we have organized the 

document by presenting our proposals, 

summarizing and responding to the 

public comment for the proposal(s), and 

describing our final policy. 

Comment: We received comments 

expressing support for the proposed 

design of the Shared Savings Program, 

as well as comments disagreeing with it. 

Those in disagreement generally found 

the proposed requirements to be too 

prescriptive and burdensome. Other 

commenters expressed their 

disagreement with a program they 

perceive as limiting access to necessary 

care. 

Response: We appreciate all the 

feedback we received. We have been 

encouraged by the level of engagement 

by stakeholders in this rulemaking 

process. We thank all of the commenters 

for helping us develop the Shared 

Savings Program. Where possible we 

have tried to reduce or eliminate 

prescriptive or burdensome 

requirements that could discourage 

participation in the Shared Savings 

Program. We have also been vigilant in 

protecting the rights and benefits of FFS 

beneficiaries under traditional Medicare 

to maintain the same access to care and 

freedom of choice that existed prior to 

the implementation of this program. 

These provisions can be found 

throughout this final rule. 

Comment: Two commenters 

encouraged CMS to make the PGP 

demonstration a national program. In 

contrast, a few commenters stated 

concern about insufficient testing of the 

Shared Savings Program as a 

demonstration program prior to this 

final rule. The commenters 

acknowledged the PGP demonstration 

as the precursor, but stated that our 

proposals deviated too far from the PGP 

demonstration. One commenter noted 

the PGP demonstration consisted of 

large health organizations that had 

access to $1.75 million in capital and 

while half of the participants shared in 

savings, none had a complete return on 

their investment. They suggested that 

CMS continue to create demonstration 

projects for shared savings initiatives 

and delay the implementation of the 

Shared Savings Program. One 

commenter suggested phasing in the 

program. Specifically, the commenter 

suggested that we start small and 

periodically assess the program’s 

requirements to determine which 

policies promote success and which 

create barriers. 

Response: The Shared Savings 

Program adopts many of the program 

aspects of the PGP demonstration, but 

some adjustments were necessary in 


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order to create a national program. We 

removed a few of the proposed 

deviations from the PGP demonstration 

from this final rule. For example, under 

the policies we are implementing in this 

final rule, Shared Savings Program 

participants may choose to enter a 

‘‘shared savings’’ only track that will not 

require repayment of losses. The statute 

does not authorize us to delay the 

establishment of the Shared Savings 

Program. But, it is important to note that 

the Shared Savings Program is a 

voluntary program. Organizations that 

are not ready to participate can begin 

the transition towards a more 

coordinated delivery system, 

incorporating policies that promote 

success for the early participants and 

join the program at such time as they are 

ready. Additionally, the Innovation 

Center will continue to test program 

models that may influence policies 

adopted for future agreement periods for 

the Shared Savings Program. We intend 

to assess the policies for the Innovation 

Center’s models and the Shared Savings 

Program to determine how well they are 

working and if there are any 

modifications that would enhance them. 

Comment: One commenter expressed 

concern that we appeared to be limiting 

participation in the Shared Savings 

Program to 5 million beneficiaries and 

100 to 200 ACOs. 

Response: We assume this commenter 

was referring to the Regulatory Impact 

Analysis section of our proposed rule 

where our Office of the Actuary 

estimated that up to 5 million 

beneficiaries would receive care from 

providers participating in ACOs. That 

figure was an estimate based on the 

proposed program requirements and the 

anticipated level of interest and 

participation of providers based on the 

requirements. After making 

programmatic changes based on 

commenter feedback, we believe the 

policies implemented in this final rule 

will be more attractive to participants 

and have a positive impact on those 

estimates. Please note that as a 

voluntary national program, any and all 

groups of providers and suppliers that 

meet the eligibility criteria outlined in 

this final rule are invited to participate. 

Comment: Many commenters 

requested CMS issue an interim final 

rule, rather than a final rule, in order to 

have flexibility to modify the proposals 

in the proposed rule. One commenter 

suggested the 60-day comment period 

did not provide enough time to analyze 

and comment on the proposed rule 

given the volume and complexity of the 

specific proposals as related to tribal 

health organizations and other public 

health providers. 

Response: In the proposed rule, we 

not only outlined our proposals for 

implementing the Shared Savings 

Program, but also provided detailed 

information on other alternatives we 

had considered and we sought comment 

on both our proposed policies and the 

other alternatives. The public comments 

submitted in response to the proposed 

rule have provided us with additional 

information and background regarding 

not only our proposed policies, but also 

the alternatives we considered. In 

response to the public comments, we 

have made significant changes to a 

number of our proposed policies. 

Nevertheless, we believe the policies in 

this final rule remain consistent with 

the overall framework for the program 

initially laid out in the proposed rule. 

As a result, we do not believe that there 

is any benefit to publishing this rule as 

an interim final rule rather than a final 

rule. We also believe 60 days 

represented a sufficient amount of time 

for interested parties to submit their 

comments on the proposed rule. We 

received many detailed comments in 

response to the proposed rule within the 

60-day comment period. We also note 

that a 60-day comment period is 

consistent with the requirements of 

section 1871(b)(1) of the Act and is the 

standard timeframe used for many of 

our proposed rules. 

Comment: Many commenters were 

concerned that the Shared Savings 

Program has similar characteristics to 

some forms of managed care where it is 

possible to achieve savings through 

inappropriate reductions in patient care. 

Some commenters, for example, 

asserted that the Shared Savings 

Program is a capitated model that is not 

in the best interest of patients. Other 

commenters, such as beneficiaries and 

beneficiary advocates, indicated that 

beneficiaries should retain their right to 

see any doctor of their choosing. We 

also received comments expressing 

concern that, as with some managed 

care approaches, the Shared Savings 

program essentially transfers the locus 

of responsibility for health care away 

from the patient, which is not as 

effective as more consumer-driven 

approaches. Another commenter 

expressed concern that assignment of 

beneficiaries to an ACO participating in 

the Shared Savings Program indicates 

that the program is a new version of 

managed care. One commenter 

suggested using the current Medicare 

Advantage (MA) structure to serve as 

the foundation of the Shared Savings 

Program. The commenter argued that 

MA plans are better suited to take on 

risk and provide care that meets many 

of the goals of the Shared Savings 

Program, and allowing these entities to 

participate will enable the program to 

reach a larger population. Additionally, 

a commenter requested information on 

why CMS is creating new policies for 

compliance, marketing and ownership 

instead of using policies already in 

place by MA plans. A few commenters 

claimed other countries tried this model 

and failed. 

Response: It is important to note that 

the Shared Savings Program is not a 

managed care program. Medicare FFS 

beneficiaries retain all rights and 

benefits under traditional Medicare. 

Medicare FFS beneficiaries retain the 

right to see any physician of their 

choosing, and they do not enroll in the 

Shared Savings Program. Unlike 

managed care settings, the Shared 

Savings Program ‘‘assignment’’ 

methodology in no way implies a lock 

in or enrollment process. To the 

contrary, it is a process based 

exclusively on an assessment of where 

and from whom FFS beneficiaries have 

chosen to receive care during the course 

of each performance period. The 

program is also not a capitated model; 

providers and suppliers continue to bill 

and receive FFS payments rather than 

receiving lump sum payments based 

upon the number of assigned 

beneficiaries. The design of the Shared 

Savings Program places the patient at 

the center. It encourages physicians, 

through the eligibility requirements, to 

include their patients in decision 

making about their health care. While 

we frequently relied on our experience 

in other Medicare programs, including 

MA, to help develop program 

requirements for the Shared Savings 

Program, there are often times when the 

requirements deviate precisely because 

the intent of this program is not to 

recreate MA. Unlike MA, this program’s 

design retains FFS flexibility and 

freedom of choice available under 

Medicare Parts A and B which 

necessitates different program 

requirements. Lastly, in order for an 

ACO to share in savings the ACO must 

meet quality standards and program 

requirements that we will be 

monitoring. We will monitor the ACO’s 

compliance with these requirements, as 

described in section II.H. of this final 

rule, with a special focus on ACOs that 

attempt to avoid at-risk patients. The 

purpose of the Shared Savings Program 

is to achieve savings through 

improvements in the coordination and 

quality of care, and not through 

avoiding certain beneficiaries or placing 

limits on beneficiary access to needed 

care. 


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Comment: One commenter suggested 

CMS provide funding to Regional 

Health Improvement Collaboratives to 

assist in educating Medicare 

beneficiaries about the program and to 

help enable the collection and reporting 

of data on patient experience. In 

addition, one commenter recommended 

the creation of a national surveillance 

database during ACOs implementation 

to guide osteoporosis prevention, 

intervention and treatment efforts. The 

commenter suggested that a national 

database would help reduce mortality 

and costs associated with preventable 

hip fractures due to osteoporosis. 

Response: Both are excellent 

suggestions. Unfortunately, we are not 

in a position to implement these 

recommendations for this program at 

this time. The comment suggesting 

funding for Regional Health 

Improvement Collaboratives is beyond 

the scope of the proposed rule. We note, 

however, that the Innovation Center is 

currently accepting innovative solutions 

aimed at improving care delivery at 

their Web site, Innovations.cms.gov. 

Comment: One commenter suggested 

CMS address the comments received 

from the November 17, 2010 RFI. 

Response: In the proposed rule, we 

summarized many of the comments we 

received in response to the RFI, and 

these comments informed many of the 

policy choices made in the proposed 

rule. In addition, the RFI comments are 

publicly available at regulations.gov. 

Accordingly, we will not be addressing 

the entirety of those comments in this 

final rule; however any RFI comments 

we determined pertinent to this final 

rule may appear. 

Comment: One commenter expressed 

concern over CMS’ example of reducing 

unnecessary hospital visits as one way 

that ACOs could improve care. The 

commenter explained that the excess 

revenue created by additional ER visits 

helps to sustain other services provided 

by a hospital that may not bring in as 

much revenue. The commenter 

concluded the reduction in visits would 

eventually lead to the closure of many 

small rural hospitals. A similar 

comment stated that encouraging 

coordination and reducing fragmented 

care will reduce hospital 

reimbursements. 

Response: The focus of the Shared 

Savings Program is to provide 

coordinated care to Medicare FFS 

beneficiaries. The program aims to 

provide higher quality care across the 

continuum of care; this may include 

additional office visits, as opposed to ER 

visits, for patients who do not require 

emergency services. Cost shifting is of 

great concern to us both within the 

Shared Savings Program and outside of 

the program. We believe it is in the 

patient’s best interest to receive care in 

the proper setting and to receive 

emergency services only in times of 

emergency. Incurring costs for 

unnecessary care, or care provided in an 

inappropriate care setting, can be 

harmful to beneficiaries and payers 

alike. For more information about cost 

shifting related to the Shared Savings 

Program refer to section II.H.4. of this 

final rule. 

E. Reorganization of the Regulations 

Text 

We have revised the proposed 

regulations text to reflect the final 

policies adopted in this final rule. We 

have also made significant revisions to 

the structure and organization of the 

regulations text in order to correspond 

more closely with the organization of 

the preamble to this final rule and to 

make it easier to locate specific 

provisions within the regulations text. 

II. Provisions of the Proposed Rule, 

Summary of and Responses to Public 

Comments, and the Provisions of the 

Final Rule 

A. Definitions 

For purposes of the proposed rule, we 

defined three terms used throughout the 

discussion: Accountable care 

organization (ACO), ACO participant, 

and ACO provider/supplier. We 

encourage the reader to review these 

definitions in § 425.20. We incorporated 

comments on these definitions into the 

discussion that follows. 

B. Eligibility and Governance 

1. General Requirements 

a. Accountability for Beneficiaries 

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

requires participating ACOs to ‘‘be 

willing to become accountable for the 

quality, cost, and overall care of the 

Medicare fee-for-service beneficiaries 

assigned to it.’’ To satisfy this 

requirement, we proposed that an ACO 

executive who has the authority to bind 

the ACO must certify to the best of his 

or her knowledge, information, and 

belief that the ACO participants are 

willing to become accountable for, and 

to report to us on, the quality, cost, and 

overall care of the Medicare FFS 

beneficiaries assigned to the ACO. We 

further proposed that this certification 

would be included as part of the ACO’s 

application and participation 

agreement. 

Comment: A commenter suggested 

that providers should not be held liable 

for unmanageable patients and/or those 

patients that refuse treatment altogether. 

Other commenters recommended that 

we not hold an ACO accountable for 

those patients who choose to decline to 

have CMS share their claims data with 

the ACO. Another commenter suggested 

that CMS require ACOs to state 

specifically in their applications the 

processes used to assure that Medicare 

patients have access to relatively costly 

but medically necessary procedures, 

such as transplantation. 

Response: In order to retain 

beneficiary freedom of choice under 

traditional FFS Medicare, the basis for 

beneficiary assignment to ACOs is 

where, and from whom, they choose to 

receive a plurality of their primary care 

services during the performance year. 

ACOs must be willing to become 

accountable for total quality, cost, and 

overall care of these Medicare FFS 

beneficiaries. An ACO will not receive 

an assignment of those beneficiaries that 

choose not to receive care from ACO 

providers. Beneficiaries who choose to 

receive care from ACO providers, 

regardless of whether they are 

‘‘unmanageable’’ or noncompliant with 

treatment recommendations may 

become part of the ACO’s assigned 

population. Since patient-centeredness 

is an integral part of this program, we 

believe such beneficiaries represent an 

excellent opportunity for ACOs to 

create, implement, and improve upon 

patient-centered processes that improve 

patient engagement. We note that 

avoidance of such beneficiaries, as 

described in more detail in section 

II.H.3. of this final rule, will result in 

termination of an ACO’s participation 

agreement. Similarly, in the interest of 

beneficiary engagement and 

transparency, we believe it is important 

to provide beneficiaries with an 

opportunity to decline data sharing. As 

discussed in greater detail in section 

II.B.4. of this final rule, a process for 

beneficiaries to decline data sharing 

provides an opportunity for ACOs to 

explain to patients how access to their 

personal health information will help 

the ACO improve the quality of its care. 

We believe that requiring an ACO 

executive who has the authority to bind 

the ACO to certify to the best of his or 

her knowledge, information, and belief 

that the ACO participants are willing to 

become accountable for, and to report to 

us on, the quality, cost, and overall care 

of the Medicare FFS beneficiaries 

assigned to the ACO provides sufficient 

assurance that the ACO will be 

accountable for its assigned 

beneficiaries. By allowing ACOs to 

determine how they will satisfy this 

requirement, we will afford ACOs the 

flexibility needed to demonstrate their 


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commitment to beneficiary 

accountability in a manner which is 

most suited to their own ACO model. 

Final Decision: We are finalizing our 

policy regarding certification of 

accountability for beneficiaries 

described in (76 FR 19544) as proposed 

without change (§ 425.100 and 425.204). 

b. Agreement Requirement 

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

requires participating ACOs to ‘‘enter 

into an agreement with the Secretary to 

participate in the program for not less 

than a 3-year period * * *.’’ For the 

first round of the Shared Savings 

Program, we proposed to limit 

participation agreements to a 3-year 

period. We sought comments on this 

proposal regarding the initial 

consideration of a longer agreement 

period. 

If the ACO is approved for 

participation, we proposed that an 

authorized executive—specifically, an 

executive who has the ability to bind 

the ACO must certify to the best of his 

or her knowledge, information, and 

belief that its ACO participants and its 

ACO providers/suppliers agree to the 

requirements set forth in the agreement 

between the ACO and us, and sign a 

participation agreement and submit the 

signed agreement to us. We proposed 

that the participation agreement would 

also include an acknowledgment that all 

contracts or arrangements between or 

among the ACO, ACO participants, ACO 

providers/suppliers, and other entities 

furnishing services related to ACO 

activities would require compliance 

with the ACO’s obligations under the 

agreement. Additionally, we expressed 

our intention that all ACOs, ACO 

participants, and ACO providers/ 

suppliers Shared Savings Program 

would be subject to the requirements of 

the agreement between the ACO and 

CMS and that all certifications 

submitted on behalf of the ACO in 

connection with the Shared Savings 

Program application, agreement, shared 

savings distribution or otherwise extend 

to all parties with obligations to which 

the particular certification applies. 

An authorized executive of the ACO 

would sign the participation agreement 

after its approval for participation. 

Finally, we proposed that the ACO 

would be responsible for providing a 

copy of the agreement to its ACO 

participants and ACO providers/ 

suppliers. We solicited comment on this 

proposal, including any additional 

measures or alternative means that we 

should consider to fulfill this 

requirement. 

Comment: Commenters requested that 

CMS define the term authorized 

executive when stating that an 

authorized executive of the ACO must 

sign the participation agreement. 

Response: As we stated in the 

proposed rule, an authorized executive 

is an executive of the ACO who has the 

ability to bind the ACO to comply with 

all of the requirements for participation 

in the Shared Savings Program. 

Final Decision: We are finalizing this 

proposal regarding agreements as 

described previously under § 425.208 

and § 425.210. 

Further, as described in § 425.200, the 

ACO’s agreement period will be for not 

less than 3 years, consistent with 

statute, although some agreement 

periods may be longer than 3 years. 

c. Sufficient Number of Primary Care 

Providers and Beneficiaries 

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

requires participating ACOs to ‘‘include 

primary care ACO professionals that are 

sufficient for the number of Medicare 

FFS beneficiaries assigned to the ACO 

* * *’’ and that at a minimum, ‘‘the 

ACO shall have at least 5,000 such 

beneficiaries assigned to it * * *.’’ 

Physician patient panels can vary 

widely in the number of FFS Medicare 

beneficiaries served. In section II.E. of 

this final rule, we discuss our 

assignment methodology and how its 

use in the assignment of beneficiaries 

during the baseline years in order to 

establish a historical per capita cost 

benchmark against which the ACO’s 

evaluation during each year of the 

agreement period would take place. In 

the proposed rule, we stated we 

believed it would be reasonable to 

assume that if by using this assignment 

algorithm the ACO demonstrates a 

sufficient number of beneficiaries to 

fulfill this eligibility requirement for 

purposes of establishing a benchmark, 

then the ACO would also demonstrate 

that it contains a sufficient number of 

primary care professionals to provide 

care to these beneficiaries. We stated we 

believed it was also reasonable to 

assume the ACO would continue to 

approximate this number of 

beneficiaries in each year of the 

agreement period. Thus, we proposed 

that for purposes of eligibility under 

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

would be determined to have a 

sufficient number of primary care ACO 

professionals to serve the number of 

Medicare beneficiaries assigned to it if 

the number of beneficiaries historically 

assigned over the 3-year benchmarking 

period using the ACO participant TINs 

exceeds the 5,000 threshold for each 

year. We solicited comment on this 

proposal as well as any additional 

guidance to consider for meeting these 

requirements. 

We recognize that while an ACO 

could meet the requirements in section 

1899(b)(2) of the Act when it applies to 

participate in the Shared Savings 

Program, circumstances may change 

during the course of the agreement 

period. We discussed the importance of 

maintaining at least 5,000 assigned 

beneficiaries with respect to both 

eligibility of the ACO to participate in 

the program and the statistical stability 

for purposes of calculating per capita 

expenditures and assessing quality 

performance. Therefore, we considered 

what action, if any, should be taken in 

the event the number of beneficiaries 

assigned to the ACO falls below 5,000 

in a given performance year. 

Specifically, we considered whether an 

ACO’s participation in the program 

should be terminated or its eligibility for 

shared savings be deferred if the number 

of beneficiaries drops below 5,000. We 

considered several options including 

immediate termination, termination 

following a CAP, scaling shared savings 

payments to reflect the population 

change, or taking no action against the 

ACO. After weighting all these options, 

we concluded that a reasonable 

compromise would balance the 

statutory requirements and program 

incentives, while still recognizing 

expected variations in an ACO’s 

assigned population. Thus, if an ACO’s 

assigned population falls below 5,000 

during the course of the agreement 

period, we proposed to issue a warning 

and place the ACO on a corrective 

action plan (CAP). For the performance 

year for which we issued the warning to 

the ACO, we proposed that the ACO 

would remain eligible for shared 

savings. We further proposed 

termination of the ACO’s participation 

agreement if the ACO failed to meet the 

eligibility criterion of having more than 

5,000 beneficiaries by the completion of 

the next performance year. The ACO 

would not be eligible to share in savings 

for that year. We also reserved the right 

to review the status of the ACO while 

on the corrective action plan and 

terminate the agreement on the basis 

that the ACO no longer meets eligibility 

requirements. We requested comment 

on this proposal and on other potential 

options for addressing situations where 

the assigned beneficiary population falls 

below 5,000 during the course of an 

agreement period. 

Comment: Commenters generally 

agreed that an ACO must have a strong 

primary care foundation with a 

sufficient number of providers to meet 

the needs of the population it serves. 

Additionally, commenters suggested 


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that there must be strong collaboration 

among multidisciplinary team members 

to ensure care coordination and patient 

centered care. 

Some commenters recommended that 

ACOs should be required to 

demonstrate sufficiency in the number, 

type, and location of providers available 

to provide care to the beneficiaries. 

Other commenters noted that the 

proposed rule did not mention any 

requirement that the ACO demonstrate 

sufficiency in the number, type and 

location of all providers available to 

provide multi-disciplinary care to the 

beneficiaries. 

Some commenters recommended that 

the minimum threshold of beneficiaries 

be increased to as high as 20,000 

beneficiaries to reduce uncertainties in 

achieving program goals while other 

commenters believed that the 5,000 

beneficiary threshold will preclude 

smaller and rural entities from 

participating in the Shared Savings 

Program as forfeiture of any shared 

savings and termination in the year 

following the corrective action plan 

would be too financially risky when the 

initial start up costs are taken into 

account. 

One commenter suggested that rather 

than maintain a strict 5,000 beneficiary 

threshold requirement, we should 

provide leeway to ACOs to allow for a 

10 percent variation from the 

beneficiary minimum threshold. 

Response: Congress established the 

5,000 beneficiary requirement under 

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

minimum threshold is important with 

respect to both the eligibility of the ACO 

to participate in the program and to the 

statistical stability for purposes of 

calculating per capita expenditures and 

assessing quality performance as 

described in section II.D. of this final 

rule. However, the expanded 

assignment methodology discussed in 

section II.E. of this final rule should 

allow more beneficiaries to be assigned 

to those ACOs that might have initially 

been ‘‘too close’’ to the threshold, 

increasing the ability for smaller ACOs 

to participate. We do not believe this 

warrants an increase in the threshold 

number of assigned beneficiaries as that 

could prohibit the formation of ACOs in 

both smaller and rural health care 

markets, and possibly considered 

contrary to statutory intent. 

Additionally, the expanded assignment 

methodology discussed in section II.E. 

of this final rule should allow the 

assignment of more beneficiaries which 

should make the additional flexibility 

offered by allowing for a 10 percent 

variation in the assigned population 

unnecessary. 

We do not believe that we should be 

prescriptive in setting any requirements 

for the number, type, and location of the 

providers/suppliers that are included as 

ACO participants. Unlike managed care 

models that lock in beneficiaries to a 

network of providers, beneficiaries 

assigned to an ACO may receive care 

from providers and suppliers both 

inside and outside the ACO. ACOs 

represent a new model for the care of 

FFS beneficiaries and for practitioners 

to focus on coordination of care efforts. 

During the initial implementation of the 

Shared Savings Program, we believe that 

potential ACOs should have the 

flexibility to create an organization and 

design their models in a manner they 

believe will achieve the three-part aim 

without instituting specific 

requirements. 

Final Decision: We are finalizing our 

proposals without change (§ 425.110). 

d. Identification and Required Reporting 

on Participating ACO Professionals 

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

requires ACOs to ‘‘provide the Secretary 

with such information regarding ACO 

professionals participating in the ACO 

as the Secretary determines necessary to 

support the assignment of Medicare feefor-service beneficiaries to an ACO, the 

implementation of quality and other 

reporting requirements * * *, and the 

determination of payments for shared 

savings * * *.’’ As discussed in this 

section of the final rule, we are defining 

an ACO operationally as a legal entity 

that is comprised of a group of ACO 

participants as defined in § 425.20. 

Based on our experience, we 

recognized that the TIN level data alone 

would not be entirely sufficient for a 

number of purposes in the Shared 

Savings Program. In particular, National 

Provider Identifier (NPI) data would be 

useful to assess the quality of care 

furnished by an ACO. For example, NPI 

information would be necessary to 

determine the percentage of registered 

HITECH physicians and other 

practitioners in the ACO (discussed in 

section II.F. of this final rule). NPI data 

would also be helpful in our monitoring 

of ACO activities (which we discuss in 

section II.H. of this final rule). 

Therefore, we proposed to require that 

organizations applying to be an ACO 

must provide not only their TINs but 

also a list of associated NPIs for all ACO 

professionals, including a list that 

separately identifies physicians that 

provide primary care. 

We proposed that the ACO maintain, 

update, and annually report to us the 

TINs of its ACO participants and the 

NPIs associated with the ACO 

providers/suppliers. We believe that 

requiring this information offers the 

level of transparency needed to 

implement the Shared Savings Program. 

We welcomed comments on our 

proposal to require reporting of TINs 

along with information about the NPIs 

associated with the ACO. 

Additionally, as we discussed in the 

proposed rule, the first step in 

developing a method for identifying an 

ACO, ACO participants, and ACO 

providers/suppliers is to establish a 

clear operational method of identifying 

an ACO that correctly associates its 

health care professionals and providers 

with the ACO. The operational 

identification is critical for 

implementation of the program and for 

determining, for example, 

benchmarking, assignment of 

beneficiaries, and other functions. 

Section 1899(a)(1)(A) of the Act defines 

ACOs as ‘‘groups of providers of 

services and suppliers’’ who work 

together to manage and coordinate care 

for Medicare FFS beneficiaries. More 

specifically, the Act refers to group 

practice arrangements, networks of 

individual practices of ACO 

professionals, partnerships or joint 

venture arrangements between hospitals 

and ACO professionals, hospitals 

employing ACO professionals, or other 

combinations that the Secretary 

determines appropriate. 

We proposed to identify an ACO 

operationally as a collection of Medicare 

enrolled TINs, defined as ACO 

participants. More specifically, we 

proposed an ACO would be identified 

operationally as a set of one or more 

ACO participants currently practicing as 

a ‘‘group practice arrangement’’ or in a 

‘‘network’’ such as where ‘‘hospitals are 

employing ACO professionals’’ or where 

there are ‘‘partnerships or joint ventures 

of hospitals and ACO professionals’’ as 

stated under section 1899(b)(1)(A) 

through (E) of the Act. For example, 

Shared Savings Programs TIN would 

identify a single group practice that 

participates in the Shared Savings 

Program. The set of TINs of the practices 

would identify a network of 

independent practices that forms an 

ACO. We proposed to require that 

organizations applying to be an ACO 

provide their ACO participant Medicare 

enrolled TINs and NPIs. We can 

systematically link each TIN or NPI to 

an individual physician specialty code. 

We also proposed that ACO 

participants on whom beneficiary 

assignment is based, would be exclusive 

to one ACO agreement in the Shared 

Savings Program. Under our proposal, 

this exclusivity would only apply to 

ACO participants who bill Medicare for 

the services rendered by primary care 


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physicians (defined as physicians with 

a designation of internal medicine, 

geriatric medicine, family practice and 

general practice, as discussed later in 

this final rule). 

However, we acknowledged the 

importance of competition in the 

marketplace to improving quality of 

care, protecting access to care for 

Medicare beneficiaries, and preventing 

fraud and abuse. Therefore, under our 

proposal, ACO participants upon which 

beneficiary assignment was not 

dependent (for example, acute care 

hospitals, surgical and medical 

specialties, RHCs, and FQHCs) would be 

required to agree to participate in the 

Medicare ACO for the term of the 

agreement, but would not be restricted 

to participation in a single ACO. 

Comment: Several commenters 

recommended that CMS maintain the 

list of TINs and NPIs. Additionally, 

some commenters recommended that 

CMS allow ACOs to verify any data 

reported in association with the ACO 

prior to these data being made public. 

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

Act requires ACOs to ‘‘provide the 

Secretary with such information 

regarding ACO professionals 

participating in the ACO as the 

Secretary determines necessary to 

support the assignment of Medicare feefor-service beneficiaries to an ACO, the 

implementation of quality and other 

reporting requirements * * *, and the 

determination of payments for shared 

savings * * *.’’ As discussed 

previously, we will need both the TINs 

of all ACO participants and the NPIs 

associated with ACO providers/ 

suppliers in order to assign beneficiaries 

to ACOs appropriately and accurately. 

Because section 1899(b)(2)(E) of the Act 

requires ACOs to provide us with the 

information we determine is necessary 

to support assignment, we believe it is 

consistent with this statutory 

requirement to require that ACOs 

maintain, update, and annually report to 

us those TINs and NPIs that are 

participants of their respective ACO. 

Since ACOs will be maintaining, 

updating, and annually reporting these 

TINs and NPIs to us, they will have 

ultimate review capabilities and it will 

not be necessary for us to provide them 

an additional opportunity to verify the 

names of ACO participants and ACO 

providers/suppliers before making this 

information available to the public. We 

note that, in order to ensure the accurate 

identification of any ACO, its 

participants, and its providers/ 

suppliers, we may request additional 

information (for example, CMS 

Certification Numbers, mailing 

addresses, etc.) in the application 

process. We will identify any such 

additional information in the 

application materials. 

Comment: One commenter stated that 

our assessment of billing practices was 

incorrect because ‘‘beginning on May 

23, 2008, all health care providers, 

including those enrolled in the 

Medicare and Medicaid program, are 

required by the NPI Final Rule 

published on January 23, 2004, to 

submit claims using their NPI’’ but also 

notes that physicians participating in 

the Medicare program must enroll using 

their NPI and if they are billing through 

a group practice reassign their benefits 

to the group practice. 

Response: It is true that individuals 

and group practices must enroll in the 

Medicare program under unique NPIs. It 

is also true that NPIs (whether for an 

individual practitioner or a group 

practice for reassigned benefits) must be 

included on bills to the Medicare 

program. However, bills to the Medicare 

program must also include the TIN of 

the billing practitioner or group 

practice. As we stated in the proposed 

rule, not all physicians and practitioners 

have Medicare enrolled TINs. In the 

case of individual practitioners, 

however, their SSN may be their TIN. 

While providers are required to have an 

NPI for identification and to include the 

NPI in billing, billing is always through 

a TIN, whether that is an EIN or a SSN. 

We successfully employed TINs in the 

PGP demonstration for purposes of 

identifying the participating 

organizations, and the rules cited by the 

commenters did not pose any obstacle 

to doing so. We believe that we can 

operationally proceed on the same basis 

under the Shared Savings Program. 

Comment: Some commenters 

supported the proposal to use TINs as 

an organizing concept for ACOs. These 

commenters observed, for example, that 

this policy was consistent with the 

beginning of the PGP demonstration, 

under which the assignment of 

Medicare beneficiaries would start with 

the TIN of the organization providing 

the plurality of the visits with further 

assignment to a primary care provider. 

However, a number of other 

commenters requested that we 

reevaluate the proposal to employ TINs 

for identification of ACOs and 

assignment purposes. Some of these 

commenters suggested that the use of 

NPIs would recognize the realities of 

diverse systems, provide greater 

flexibility, and allow systems to 

designate those portions of the system 

which can most appropriately constitute 

an ACO. Other commenters similarly 

endorsed the use of NPIs as providing 

greater flexibility and more precision in 

identifying ACOs and assigning 

beneficiaries. One observed that using 

NPIs would also allow CMS and ACOs 

to track saving and quality 

improvements achieved by individual 

practitioners, as well as afford greater 

flexibility for systems to expand an ACO 

gradually to incorporate practitioners 

and components of the system. 

Response: We are finalizing our 

proposal to define the ACO 

operationally by its Medicare enrolled 

ACO participants’ TINs. Using TINs 

provides a direct link between the 

beneficiary and the practitioner(s) 

providing the services for purposes of 

beneficiary assignment. Using TINs also 

makes it possible for us to take 

advantage of infrastructure and 

methodologies already developed for 

group-level reporting and evaluation. 

We believe this option affords us the 

most flexibility and statistical stability 

for monitoring and evaluating quality 

and outcomes for the population of 

beneficiaries assigned to the ACO. In 

contrast, adopting NPIs would create 

much greater operational complexity 

because individual NPIs move much 

more frequently between different 

organizations and practices. TINs are 

much more stable, and thus provide 

much greater precision in identifying 

ACOs. Furthermore, identifying through 

TINs avoids the necessity of making the 

NPIs upon which assignment is based 

exclusive to one ACO, thus allowing 

these NPIs (although not TINs) to 

participate in more than one ACO. 

Comment: Several commenters 

requested clarification about the use of 

TINs in identifying ACOs and assigning 

beneficiaries. Some inquired about the 

establishment of parameters of an ACO 

across a large health system with 

diverse and sometimes geographically 

remote components. Some of these 

commenters noted that large systems 

often employ a single TIN, so that the 

use of TINs for identification purposes 

would require inclusion of all the 

members of the system in a single ACO, 

even if these members are 

geographically remote from each other 

and otherwise diverse. One observed: 

‘‘Such remote entities may have a 

limited opportunity to participate in 

care coordination, and may in fact be 

better suited to participate in another 

more local ACO.’’ A large clinic 

similarly observed that ‘‘the use of TINs 

could pose a problem for large health 

systems.’’ The owner of outpatient 

rehabilitation clinics in several States 

inquired how it would choose a single 

ACO in which to participate in order to 

serve the needs of patients in multiple 

States. Another asked whether it is 

permissible for some members of a 


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group practice to participate in the 

Shared Savings Program while others do 

not, adding their ‘‘strong belief’’ that 

participation in an ACO of some but not 

all providers in a group ‘‘must be 

allowed.’’ Another asked ‘‘how CMS 

will account for the alignment of the 

beneficiary, signed up/enrolled with the 

PCP if the NP or PA saw the patient and 

billed using their individual NPI (which 

is linked to the ‘‘PCP’ physician’s Tax 

ID), but the credit is not being assigned 

to the PCP physician because s/he isn’t 

billing for the services. This could 

create a big gap and problem in the 

allocation process.’’ Another commenter 

asked how the program would handle 

the situation in which a healthcare 

system has multiple TINs. 

Response: We proposed to define an 

ACO operationally as a collection of 

Medicare enrolled TINs (that is, ACO 

participants). Therefore, in cases in 

which a healthcare system has multiple 

TINs, the collection of the system’s TINs 

precisely identifies the ACO which 

consists of that health system. We 

understand the commenters’ interest in 

the greater flexibility of, for example, 

including only parts of a large system 

with one TIN in an ACO. However, 

some level of exclusivity is necessary in 

order for the assignment process to 

function correctly, and especially to 

ensure the accurate assignment of 

beneficiaries to one and only one ACO. 

Use of TINs rather than NPIs provides 

the greatest degree of flexibility 

consistent with this requirement. 

Therefore, we are unable to allow, for 

example, a large health system with one 

TIN to include only parts of the system 

in an ACO. Systems that extend over 

several States can similarly choose more 

than one ACO for parts of their system 

only if they have multiple TINs. In order 

for a beneficiary to be assigned to an 

ACO in which his or her primary care 

physician is participating, the physician 

would have to bill for primary care 

services furnished to the beneficiary 

under a TIN included in that ACO. 

Comment: Many commenters objected 

to the exclusivity of primary care 

physicians on the grounds that that such 

exclusivity could be disruptive of their 

current practice patterns, which may 

involve the assignment of patients to a 

number of ACOs. Some objected that the 

proposed lock in was unfair. 

Another commenter complained that 

we did not sufficiently address the 

reasons for the lock in. Some 

commenters suggested methods to avoid 

the potential confusions that could 

occur in assigning beneficiary without 

our proposed lock in. For example, one 

commenter observed potential 

avoidance of this problem by creating 

incentives (for example, no deductibles 

and reduced co-insurance for primary 

care physician services) for patients to 

prospectively identify a primary care 

physician in an ACO. The commenter 

maintained that patients need to be 

accountable as well as the participating 

physicians and providers. Furthermore, 

the commenter contended that 

identification of a primary care 

physician does not have to limit patient 

choice in any way, but simply provides 

an alternative method for identifying the 

population of patients for which the 

ACO is responsible while getting more 

engaged patients to think about having 

a usual source of care. Alternatively, the 

commenter recommended that CMS 

should prospectively allow patients to 

choose their own Medicare ACO. This 

would relieve CMS from the proposed 

and flawed beneficiary attribution 

method that currently limits primary 

care physicians to participate in only 

one Medicare ACO. 

Several other commenters opposed 

the lock in but suggested that, if we 

retain it, the final rule should— 

• Permit primary care physicians to 

elect consideration as specialists 

without taking into account their 

evaluation and management services for 

the purpose of aligning beneficiaries 

with an ACO; 

• Permit specialists to elect to be 

treated as primary care physicians 

whose evaluation and management 

services will be considered for 

beneficiary alignment; and 

• Permit primary care physicians to 

participate in ACOs on an individual 

basis, rather than through their group 

practice entities or employers. 

In either case, the final rule should 

encourage providers to work 

collaboratively to achieve savings and 

enhance care by allowing ACOs to 

arrange for medical services using 

contracted providers. 

Another commenter requested that we 

revisit this requirement and provide 

additional flexibility so that primary 

care providers could join more than one 

ACO or switch ACOs on an annual 

basis. Commenters suggested alternative 

assignment strategies that would allow 

participation in more than one ACO 

such as default assignment to 

practitioners who are only in one ACO 

or having practitioners assign patients to 

a particular ACO based on patient 

needs. Some commenters also argued 

for adopting a policy of voluntary 

beneficiary enrollment in an ACO, 

arguing in part that this policy would 

allow us to abandon the proposal 

restricting primary care physicians to 

participation in one ACO, which we 

proposed to prevent uncertainty in the 

assignment process. Other commenters 

specifically requested that rural 

physicians and ambulance providers be 

able to participate in multiple ACOs. 

Response: We regret that some of the 

language in the preamble about the 

exclusivity of ACO participants (defined 

by the Medicare-enrolled billing TIN) 

created unnecessary confusion about the 

proposal. The point of our proposal was 

that, for us to appropriately evaluate 

ACO performance, we must evaluate 

performance based on a patient 

population unique to the ACO. 

Therefore, some ACO participants, 

specifically those that bill for the 

primary care services on which we 

proposed to base assignment, would 

have to be exclusive to an ACO, for the 

purpose of Medicare beneficiary 

assignment, for the duration of an 

agreement period. In the absence of 

such exclusivity and in a situation 

where an ACO participant is associated 

with two or more ACOs, it would be 

unclear which ACO would receive an 

incentive payment for the participant’s 

efforts on behalf of its assigned patient 

population. Exclusivity of the 

assignment-based ACO participant TIN 

ensures unique beneficiary assignment 

to a single ACO. However, exclusivity of 

an ACO participant TIN to one ACO is 

not necessarily the same as exclusivity 

of individual practitioners (ACO 

providers/suppliers) to one ACO. We 

did state somewhat imprecisely in the 

preamble to the proposed rule that 

‘‘ACO professionals within the 

respective TIN on which beneficiary 

assignment is based, will be exclusive to 

one ACO agreement in the Shared 

Savings Program. This exclusivity will 

only apply to the primary care 

physicians.’’ This statement appears to 

be the basis of the concerns expressed 

by many commenters, and we 

understand the reasons for those 

concerns. However, we stated the policy 

(76 FR 19563) we intended to propose 

more precisely elsewhere in the 

preamble, when we stated that ‘‘[t]his 

exclusivity will only apply to primary 

care physicians (defined as physicians 

with a designation of internal medicine, 

geriatric medicine, family practice and 

general practice, as discussed later in 

this final rule) by whom beneficiary 

assignment is established when billing 

under ACO participant TINs. (Emphasis 

added). Similarly, in the proposed 

regulations text at § 425.5(c), we stated 

that ‘‘each ACO must report to CMS the 

TINs of the ACO participants 

comprising the ACO along with a list of 

associated NPIs, at the beginning of each 

performance year and at other such 

times as specified by CMS. For purposes 


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of the Shared Savings Program, each 

ACO participant TIN upon which 

beneficiary assignment is dependent is 

required to commit to a 3-year 

agreement with CMS and will be 

exclusive to one ACO. ACO participant 

TINs upon which beneficiary 

assignment is not dependent are 

required to commit to a 3 year 

agreement to the ACO, and cannot 

require the ACO participant to be 

exclusive to a single ACO.’’ 

Thus, the exclusivity necessary for the 

assignment process to work accurately 

requires a commitment of each 

assignment-based ACO participant to a 

single ACO for purposes of serving 

Medicare beneficiaries. It does not 

necessarily require exclusivity of each 

primary care physician (ACO provider/ 

supplier) whose services are the basis 

for such assignment. For example, 

exclusivity of an ACO participant leaves 

individual NPIs free to participate in 

multiple ACOs if they bill under several 

different TINs. Similarly, an individual 

NPI can move from one ACO to another 

during the agreement period, provided 

that he or she has not been billing under 

an individual TIN. A member of a group 

practice that is an ACO participant, 

where billing is conducted on the basis 

of the group’s TIN, may move during the 

performance year from one group 

practice into another, or into solo 

practice, even if doing so involves 

moving from one ACO to another. This 

degree of flexibility is, in fact, one 

reason for our preference to use TINs to 

identify ACO participants over NPIs: 

adopting NPIs in place of TINs would 

result in the much stricter exclusivity 

rules for individual practitioners to 

which so many commenters objected, 

than the use of TINs to identify ACOs. 

This flexibility is limited, once again, 

only in cases where the ACO participant 

billing TIN and individual TIN are 

identical, as in the case of solo 

practitioners. Even in those cases, 

moreover, it was not our intent (and it 

is no part of the policy that we are 

adopting in this final rule) that an 

individual practitioner may not move 

from one practice to another. But while 

solo practitioners who have joined an 

ACO as an ACO participant and upon 

whom assignment is based may move 

during the agreement period, they may 

not participate in another ACO for 

purposes of the Shared Savings Program 

unless they will be billing under a 

different TIN in that ACO. 

We are therefore finalizing our 

proposal that each ACO participant TIN 

is required to commit to an agreement 

with us. In addition, each ACO 

participant TIN upon which beneficiary 

assignment is dependent must be 

exclusive to one ACO for purposes of 

the Shared Savings Program. ACO 

participant TINs upon which 

beneficiary assignment is not dependent 

are not required to be exclusive to a 

single ACO for purposes for the Shared 

Savings Program. As we discuss in 

section E found later in this final rule 

we are also providing for consideration 

of the primary care services provided by 

specialist physicians, PAs, and NPs in 

the assignment process subsequent to 

the identification of the ‘‘triggering’’ 

physician primary care services. We are 

therefore also extending our exclusivity 

policy to these ACO participants. That 

is, the TINs under which the services of 

specialists, PAs, and NPs are included 

in the assignment process would have to 

be exclusive to one ACO for purposes of 

the Shared Savings Program. (We 

emphasize that we are establishing this 

policy for purposes of Shared Savings 

Program ACOs only: Commercial ACOs 

may or may not wish to adopt a similar 

policy for their purposes.) 

Comment: One commenter supported 

our use of primary care physicians for 

alignment and urged us to retain the 

policy of non-exclusivity for specialists 

in the final rule: ‘‘CMS’s use of primary 

care physicians to align beneficiaries 

with an ACO is an important design 

element and we urge the agency to 

retain this provision in the final rule. As 

constructed, an ACO participant upon 

which beneficiary assignment is not 

dependent must not be required to be 

exclusive to an ACO (§ 425.5(c)(3)). In 

the newly proposed Pioneer ACO 

regulation however, beneficiary 

assignment could be made on the basis 

of several categories of specialist 

physicians. Extending this Pioneer 

attribution scheme to the proposed 

Medicare Shared Savings/ACO program 

could result in decreased availability of 

specialist physicians and/or a 

reluctance of non-ACO providers to 

refer to those specialists who are 

concerned that patients will be diverted 

to other ACO providers. We urge CMS 

to maintain the current rules aligning 

beneficiaries solely on the basis of their 

use of primary care physicians.’’ 

Response: We appreciate the 

comment. However, in the light of our 

decision to employ a step-wise 

assignment process (as discussed in 

section II.E. of this final rule), this final 

exclusivity policy will also apply to 

ACO participants upon which 

assignment is based in either the first or 

second steps of the assignment process. 

As a result, this exclusivity will apply 

to ACO participants under which both 

primary care physicians and specialists 

bill for primary care services considered 

in the assignment process. However, we 

emphasize again that individual 

provider NPIs are not exclusive to one 

ACO, only the ACO participant TINs 

under which providers bill for services 

that are included in the assignment of 

beneficiaries. When providers whose 

services are the basis of assignment bill 

under two or more TINs, each TIN 

would be exclusive to only one ACO, 

assuming they have both joined as 

participants, but the provider (primary 

care physician or specialist) would not 

be exclusive to one ACO. 

Comment: Many commenters objected 

to our proposal that FQHCs and RHCs 

could not form independent ACOs, but 

only participate in ACOs that included 

other eligible entities (for example, 

hospitals, and physician group 

practices). However, one commenter 

welcomed the opportunity for FQHCs to 

participate in multiple ACOs. 

Response: As we discuss in section 

II.E. of this final rule, we are revising 

our proposed policy to allow FQHCs 

and RHCs to form independent ACOs. 

We have also revised our proposed 

assignment methodology in order to 

permit claims for primary care services 

submitted by FQHCs and RHCs to be 

considered in the assignment process 

for any ACO that includes an FQHC or 

RHC (whether as an independent ACO 

or in conjunction with other eligible 

entities). As a consequence of this 

revised policy, the exclusivity of the 

ACO participants upon which 

beneficiary assignment is dependent 

also extends to the TINs of FQHCs and 

RHCs upon which beneficiary 

assignment will be dependent under the 

new policies discussed in section II.E. of 

this final rule. 

Final Decision: We are finalizing our 

proposals regarding operational 

definition of an ACO as a collection of 

Medicare-enrolled TINs, the obligation 

of the ACO to identify their ACO 

participant TINs and NPIs on the 

application, the obligation of the ACO to 

update the list, and the required 

exclusivity of ACO participants upon 

whom assignment is based without 

change under sections 425.20, 

425.204(5), 425.302(d), 425.306, 

respectively. We clarify that ACO 

participants upon which beneficiary 

assignment is not dependent are not 

required to be exclusive to a single 

Medicare Shared Savings Program ACO. 

This final exclusivity policy extends to 

the ACO participant TINs of FQHCs, 

RHCs and ACO participants that include 

NP, PAs, and specialists upon which 

beneficiary assignment will be 

dependent under the revised assignment 

methodology discussed in section II.E. 

of this final rule. 


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2. Eligible Participants 

Section 1899(b) of the Act establishes 

eligibility requirements for ACOs 

participating in the Shared Savings 

Program. Section 1899(b)(1) of the Act 

allows several designated groups of 

providers of services and suppliers to 

participate as an ACO under this 

program, ‘‘as determined appropriate by 

the Secretary,’’ and under the condition 

that they have ‘‘established a 

mechanism for shared governance.’’ The 

statute lists the following groups of 

providers of services and suppliers as 

eligible to participate as an ACO: 

• ACO professionals in group practice 

arrangements. 

• Networks of individual practices of 

ACO professionals. 

• Partnerships or joint venture 

arrangements between hospitals and 

ACO professionals. 

• Hospitals employing ACO 

professionals. 

• Such other groups of providers of 

services and suppliers as the Secretary 

determines appropriate. 

Section 1899(h)(1) of the Act defines 

an ‘‘ACO professional’’ as a physician 

(as defined in section 1861(r)(1) of the 

Act, which refers to a doctor of 

medicine or osteopathy), or a 

practitioner (as defined in section 

1842(b)(18)(C)(i) of the Act, which 

includes physician assistants, nurse 

practitioners, and clinical nurse 

specialists). Section 1899(h)(2) of the 

Act also provides that, for purposes of 

the Shared Savings Program, the term 

‘‘hospital’’ means a subsection (d) 

hospital as defined in section 

1886(d)(1)(B) of the Act, thus limiting 

the definition to include only acute care 

hospitals paid under the hospital 

inpatient prospective payment system 

(IPPS). Other providers of services and 

suppliers that play a critical role in the 

nation’s health care delivery system, 

such as federally qualified health 

centers (FQHCs), rural health centers 

(RHCs), skilled nursing facilities (SNFs), 

nursing homes, long-term care hospitals 

(LTCHs), critical access hospitals 

(CAHs), nurse midwives, chiropractors, 

and pharmacists, among others, are not 

specifically designated as eligible 

participants in the Shared Savings 

Program under section 1899(b)(1) of the 

Act. Furthermore, while the statute 

enumerates certain kinds of provider 

and supplier groups that are eligible to 

participate in this program, it also 

provides the Secretary with discretion 

to tailor eligibility in a way that narrows 

or expands the statutory list of eligible 

ACO participants. Therefore, we 

explored several options: (1) Permit 

participation in the program by only 

those ACO participants that are 

specifically identified in the statute; (2) 

restrict eligibility to those ACO 

participants that would most effectively 

advance the goals of the program; or (3) 

employ the discretion provided to the 

Secretary under section 1899(b)(1)(E) of 

the Act to expand the list of eligible 

groups to include other types of 

Medicare-enrolled providers and 

suppliers identified in the Act. After 

evaluating the three alternatives, we 

decided to propose the third option. 

Since the statute requires that 

beneficiary assignment be determined 

on the basis of utilization of primary 

care services provided by ACO 

professionals that are physicians, we 

considered whether it would be feasible 

for CAHs, FQHCs, and RHCs to form an 

ACO or whether it would be necessary 

for these entities to join with one of the 

four groups specified in section 

1899(b)(1)(A)–(D) of the Act in order to 

meet statutory criteria. We especially 

considered the circumstances of CAHs, 

FQHCs, and RHCs because these entities 

play a critical role in the nation’s health 

care delivery system, serving as safety 

net providers of primary care and other 

health care and social services. At the 

same time, we noted that the specific 

payment methodologies, claims billing 

systems, and data reporting 

requirements that apply to these entities 

posed some challenges in relation to 

their independent participation in the 

Shared Savings Program. In order for an 

entity to be able to form an ACO, it is 

necessary that we obtain sufficient data 

in order to carry out the necessary 

functions of the program, including 

assignment of beneficiaries, 

establishment and updating of 

benchmarks, and determination of 

shared savings, if any. As we discuss in 

section II.E. of this final rule, section 

1899(c) of the Act requires the 

assignment of beneficiaries to an ACO 

based on their utilization of primary 

care services furnished by a physician. 

Thus, as required by the statute, the 

assignment methodology requires data 

that identify the precise services 

rendered (that is, primary care HCPCS 

codes), type of practitioner providing 

the service (that is, a MD/DO as opposed 

to NP, PA, or clinical nurse specialist), 

and the physician specialty in order to 

be able to assign beneficiaries to ACOs. 

We proposed that because of the 

absence of certain data elements 

required for assignment of beneficiaries, 

it would not be possible for FQHCs and 

RHCs to participate in the Shared 

Savings Program by forming their own 

ACOs. We stated that as the Shared 

Savings Program developed, we would 

continue to assess the possibilities for 

collecting the requisite data from 

FQHCs and RHCs, and in light of any 

such developments, we would consider 

whether it would be possible at some 

future date for Medicare beneficiaries to 

be assigned to an ACO on the basis of 

services furnished by an FQHC or RHC, 

thereby allowing these entities to have 

their Medicare beneficiaries included in 

the ACO’s assigned population. 

In the proposed rule, we further 

considered whether CAHs could 

participate in the Shared Savings 

Program by forming an independent 

ACO. We noted the situation is 

somewhat more complicated with 

regard to CAHs because section 1834(g) 

of the Act provides for two payment 

methods for outpatient CAH services. 

We described the payment methods in 

detail and determined that current 

Medicare payment and billing policies 

could generally support the formation of 

an ACO by a CAH billing under section 

1834(g)(2) (referred to as method II). 

In summary, we proposed that the 

four groups specifically identified in 

section 1899(b)(1)(A)–(D) of the Act 

(various combinations of physicians, 

nurse practitioners, physician assistants, 

clinical nurse specialists, and acute care 

hospitals), and CAHs billing under 

method II, would have the opportunity, 

after meeting the other eligibility 

requirements, to form ACOs 

independently. In addition, the four 

statutorily identified groups, as well as 

CAHs billing under method II, could 

establish an ACO with broader 

collaborations by including additional 

ACO participants that are Medicare 

enrolled entities such as FQHCs and 

RHCs and other Medicare-enrolled 

providers and suppliers not originally 

included in the statutory definition of 

eligible entities. 

We indicated in the proposed rule 

that we would consider whether it 

would be appropriate to expand the list 

of entities eligible to participate in the 

Shared Savings Program, either in the 

final rule or in future rulemaking, if we 

determined that it was feasible and 

consistent with the requirements of the 

program for more entities to participate 

as ACOs independently. In the interim, 

and until such time as FQHCs and RHCs 

would be eligible to form ACOs or have 

their patients assigned to an ACO, we 

proposed to provide an incentive for 

ACOs to include RHCs and FQHCs as 

ACO participants, by allowing ACOs 

that include such entities to receive a 

higher percentage of any shared savings 

under the program. We discuss our final 

policies regarding the determination of 

shared savings under the program in 

section II.G. of this final rule. 


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Comment: A large number of 

commenters requested an expansion of 

those entities eligible to participate in 

the Shared Savings Program. The 

commenters requested that entities such 

as, but not limited to, integrated 

delivery systems, emergency medical 

technicians (EMTs), paramedics, health 

plans, Medicare Advantage (MA) plans, 

Medicaid Managed Care Organizations, 

AEMTs, community based hospitals, 

DME Suppliers, home health agencies 

(HHAs), long-term care (LTC) facilities, 

in-patient rehabilitation facilities, 

hospice facilities, patient-centered 

medical homes, RHCs, FQHCs, and 

Method I CAHs be included as eligible 

entities. We received one comment 

inquiring whether non-PECOS (Provider 

Enrollment, Chain, and Ownership 

System) enrolled providers can 

participate as ACO providers/suppliers. 

PECOs is a directory containing the 

names, addresses, phone numbers, and 

specialties of physicians enrolled in 

Medicare. Other comments suggested 

that we establish ESRD and cancer care 

specific ACOs. We received a few 

comments in support of limiting those 

entities eligible to participate in the 

program. These comments suggested 

that implementation of the Shared 

Savings Program will demand 

significant changes to health care 

delivery, data sharing, and data 

integration among providers and 

disparate groups. Providing clear 

guidance on who can participate 

reduces confusion and uncertainty 

within the provider and hospital 

community. 

Response: We agree that limiting 

eligibility could potentially reduce 

confusion but also agree that the 

inclusion of some additional entities as 

eligible to independently participate in 

the program could significantly increase 

the opportunity for success. Although 

the entities referenced in the comment, 

with the exception of CAHs billing 

under method II, RHCs and FQHCs, are 

not able to independently form ACOs, 

these entities are not prohibited from 

participating in the Shared Savings 

Program so long as they join as an ACO 

participant in an ACO containing one or 

more of the organizations that are 

eligible to form an ACO independently 

and upon which assignment could be 

made consistent with the statute and the 

assignment methodology discussed in 

section II.E. of this final rule. Thus, 

although we do not see the need to 

design distinct ESRD or cancer specific 

ACOs, neither of these providers types 

are in any manner excluded from 

participation in an ACO. This allows for 

the four groups specifically identified in 

section 1899(b)(1)(A) through (D) of the 

Act, and CAHs billing under method II, 

RHCs, and FQHCs to form ACOs 

independently. In addition, the four 

statutorily identified groups, as well as 

CAHs billing under method II, RHCs, 

and FQHCs could establish an ACO 

with broader collaborations by 

including additional Medicare-enrolled 

entities defined in the Act as ACO 

participants. This will afford ACOs the 

flexibility to include all types of 

providers and suppliers as ACO 

participants, as long as the ACO can 

satisfy the required eligibility standards. 

Finally, enrollment in the PECOs 

system, at this time, is not a condition 

of eligibility to participate in the Shared 

Savings Program. 

Comment: Many commenters, 

including MedPAC and commenters 

representing rural health advocates and 

a wide range of beneficiary and provider 

groups, raised concerns about the 

proposal which would preclude FQHCs 

and RHCs from forming independent 

ACOs. The commenters raised this issue 

in reference to eligibility, beneficiary 

assignment, and benchmarking issues. 

There were also several comments that 

agreed with the additional sharing rates 

for ACOs that include FQHCs and 

RHCs. 

Commenters generally supported 

eligibility approaches that would allow 

FQHCs/RHCs to join ACOs formed by 

other entities. Some commenters also 

generally supported our proposal that 

FQHCs/RHCs would not be required to 

be exclusive to a single ACO. Although 

commenters were generally appreciative 

of the proposal to provide a higher 

sharing rate for ACOs that include 

FQHCs and RHCs, some commenters 

believed this approach was flawed, too 

weak to be effective, and could undercut 

the objectives of the Shared Savings 

Program. Most commenters expressed 

general concerns that the CMS 

interpretation of the statute was 

incorrect and that the statute allows the 

agency to promulgate policies that will 

allow for full participation of FQHCs in 

the Shared Savings Program. Some 

commenters focused their detailed 

comments on FQHCs, but the concerns/ 

issues they raised were generally similar 

to those commenters that also addressed 

RHCs. 

Several commenters stated that CMS’ 

conclusions are flawed and that the law 

allows the agency to promulgate 

policies that will allow for full FQHC 

participation in the Shared Savings 

Program. They believe that ‘‘a system 

that does not allow for meaningful 

FQHC involvement undercuts the 

Congressional intent in establishing the 

ACO/Shared Savings Program and the 

broader goal of assuring quality cost 

efficient health care services to 

Medicare beneficiaries.’’ They expressed 

fear that other payers such as Medicaid, 

CHIP and private health insurers will 

follow Medicare’s approach and policies 

in developing their own ACO rules, 

leading to disparities in care. Another 

commenter suggested our proposal 

would prevent or limit dually eligible 

patients from receiving integrated care 

at FQHCs in light of State Medicaid 

efforts to create ACOs and our definition 

of ‘‘at risk’’ beneficiaries. 

Other commenters argued that RHCs 

represent a particularly compelling case 

for ACO formation inclusion. They 

believe that the promise of better 

integrated outpatient care for rural 

Medicare beneficiaries must begin with 

RHCs. These commenters believe that 

the exclusion of RHCs from those 

eligible to form an ACO independently 

would only serve to exclude rural 

providers and the populations they 

serve from forming efficiency enhancing 

ACOs that might serve to 

counterbalance the inpatient servicefavoring skew that they believe has 

developed out of many rural preferential 

payment provisions. 

Response: In this final rule we are 

addressing the specific comments 

regarding beneficiary assignment and 

the establishment of benchmarks for 

ACOs that include FQHCs and/or RHCs 

in sections II.E. and II.G. (Assignment 

and Benchmark) of this final rule while 

general comments regarding the 

eligibility of FQHCs and RHCs to form 

ACOs independently are addressed 

here. In the proposed rule, we proposed 

to use discretion afforded by the statute 

under section 1899(b)(1)(E) to allow 

participation of any Medicare-enrolled 

provider/supplier as an ACO 

participant. Thus, entities such as 

FQHCs and RHCs were eligible to 

participate in the program under our 

original proposal. However, we agree 

that it is highly desirable to allow for 

FQHCs and RHCs to participate 

independently and to determine a way 

to include their beneficiaries in 

assignment. In order for this to be 

possible, in this final rule we are 

making modifications to the proposed 

assignment process to recognize the 

different payment methodologies and 

claims data that are used by FQHCs and 

RHCs as compared to the payment 

methodologies and claims data that are 

available for physician offices/clinics 

that are paid under the physician fee 

schedule. The discussion about 

assignment and benchmarking process 

is in sections II.E. (Assignment) and 

II.G. (Benchmarking) of this final rule. 

As a result, under the policies 


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established in this final rule, FQHCs 

and RHCs will be eligible to form ACOs 

and may also be ACO participants in 

ACOs formed by other entities. 

Additionally, Medicare enrolled entities 

may join independent FQHCs, RHCs, 

and method II billing CAH ACOs. 

Comment: Some commenters 

supported our proposal to allow CAHs 

billing under method II to form ACOs. 

A few commenters also recommended 

allowing CAHs billing under method I 

to form independent ACOs by 

supplementing their normal billing 

information with any additional 

information needed to assign 

beneficiaries. For example, a commenter 

indicated that because most rural 

facilities act as de facto sole providers 

for their communities, CAHs and SCH’s 

should be able to claim all beneficiaries 

in their primary catchment area. The 

commenter suggested doing so by 

having the rural providers submit the 

75th percentile zip codes from their 

patient demographic data. These zip 

codes could then be compared to the 

Medicare beneficiary claims data, and if 

the claims data also show that the 

beneficiaries in those zip codes receive 

>50 percent of their primary care 

services within the zip codes of the 

rural ACO, then all of the beneficiaries 

in those zip codes could be assigned to 

the rural ACO. 

Response: We do not agree with 

allowing CAHs billing under method I 

to independently form ACOs by simply 

claiming all beneficiaries in their 

primary catchment area. We do not 

believe that this would be consistent 

with the statutory requirement for 

assignment based on beneficiary 

utilization of primary care services 

furnished by a physician. Although we 

do not believe it would be appropriate 

for a CAH billing under method I to 

independently form an ACO, we would 

emphasize that we would encourage 

CAHs billing under method I to 

participate in the Shared Savings 

Program by establishing partnerships or 

joint venture arrangements with ACO 

professionals, just like other hospitals. 

Comment: Some commenters 

suggested using CMS’s demonstration 

authority to include FQHCs and RHCs 

in the Shared Savings Program or 

another Shared Savings Program. Others 

recommended that CMS should 

continue to work with providers and 

patients practicing and living in rural 

underserved areas to develop ACO 

models specifically designed to meet the 

unique healthcare delivery challenges 

facing rural underserved areas. 

Response: We appreciate the 

comments suggesting the development 

of ACO models to address the special 

needs of rural areas and have forwarded 

them to our colleagues in the Innovation 

Center. We will consider any additional 

demonstrations focused on ACOs as part 

of the regular process for establishing 

CMS demonstrations. We note, 

however, that as discussed previously, 

under the policies adopted in this final 

rule, FQHCs and RHCs will be eligible 

to form an ACO independently or to 

participate in an ACO formed by other 

eligible entities. 

Comment: A few commenters 

suggested that CMS should refine its 

strategies to facilitate development of 

practitioner-driven, rather than hospitaldriven ACO’s. Comments further 

suggested that at the very least, waiver 

authority should be established to 

enable the agency to waive hospitaloriented requirements for ACOs that 

consist solely of group practices. 

Response: There is no requirement 

that an ACO include a hospital. 

Similarly, we have not established any 

‘‘hospital-oriented’’ requirements. We 

have intentionally provided ACOs the 

flexibility to establish their 

organizations in such a manner that will 

most effectively define their preferred 

ACO model. 

Final Decision: We are finalizing our 

proposals for identifying groups of 

providers of services and suppliers that 

may join to form an ACO under 

§ 425.102. Specifically, the entities 

identified in section 1899(b)(1)(A) 

through (D) of the Act will be able to 

form ACOs, provided they meet all 

other eligibility requirements. 

Additionally, CAHs billing under 

method II, FQHCs, and RHCs may also 

form independent ACOs if they meet the 

eligibility requirements specified in this 

final rule. In addition, any Medicare 

enrolled entities not specified in the 

statutory definition of eligible entities in 

section 1899(b)(1)(A)–(D) of the Act can 

participate in the Shared Savings 

Program as ACO participants by joining 

an ACO containing one or more of the 

organizations eligible to form an ACO. 

Additionally, in response to comments 

and after further consideration of the 

available information, we have 

established a process by which primary 

care services furnished by FQHCs and 

RHCs will be included in the 

assignment process, as discussed in 

section II.E. of this final rule. As a 

result, FQHCs and RHCs will also be 

able to form ACOs independently, 

provided they meet all other eligibility 

requirements. 

3. Legal Structure and Governance 

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

requires an ACO to ‘‘have a formal legal 

structure that would allow the 

organization to receive and distribute 

payments for shared savings’’ to 

‘‘participating providers of services and 

suppliers.’’ As previously noted, section 

1899(b)(1) of the Act also requires ACO 

participants to have a ‘‘mechanism for 

shared governance’’ in order to be 

eligible to participate in the program. 

Operationally, an ACO’s legal structure 

must provide both the basis for its 

shared governance as well as the 

mechanism for it to receive and 

distribute shared savings payments to 

ACO participants and providers/ 

suppliers. 

a. Legal Entity 

In order to implement the statutory 

requirements that ACOs have a shared 

governance mechanism and a formal 

legal structure for receiving and 

distributing shared payments, we 

proposed that an ACO be an 

organization that is recognized and 

authorized to conduct its business 

under applicable State law and is 

capable of—(1) receiving and 

distributing shared savings; (2) repaying 

shared losses, if applicable; (3) 

establishing, reporting, and ensuring 

ACO participant and ACO provider/ 

supplier compliance with program 

requirements, including the quality 

performance standards; and (4) 

performing the other ACO functions 

identified in the statute. We explained 

that it is necessary for each ACO to be 

constituted as a legal entity 

appropriately recognized and 

authorized to conduct its business 

under applicable State law and that it 

must have a TIN. However, we did not 

propose to require ACO enrollment in 

the Medicare program. 

We did not propose that existing legal 

entities form a separate new entity for 

the purpose of participating in the 

Shared Savings Program. We stated that 

if the existing legal entity met the 

eligibility requirements to be an ACO, it 

may operate as an ACO in the Shared 

Savings Program. However, we 

proposed that if an entity, such as a 

hospital employing ACO professionals 

would like to include as ACO 

participants other providers/suppliers 

who are not already part of its existing 

legal structure, an ACO would have to 

establish a separate legal entity in order 

to provide all ACO participants a 

mechanism for shared governance. 

We also proposed that each ACO 

certify that it is recognized as a legal 

entity under State law and authorized 

by the State to conduct its business. In 

addition, an ACO with operations in 

multiple States would have to certify 

that it is recognized as a legal entity in 

the State in which it was established 


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and that it is authorized to conduct 

business in each State in which it 

operates. 

We solicited comment on our 

proposals regarding the required legal 

structure and other suitable 

requirements that we should consider 

adding in the final rule or through 

subsequent rulemaking. We also 

requested comment on whether 

requirements for the creation of a 

separate entity would create 

disincentives for the formation of ACOs 

and whether there were alternative 

approaches that could be used to 

achieve the aims of shared governance 

and decision making and provide the 

ability to receive and distribute 

payments for shared savings. 

Comment: Many commenters opposed 

requiring ACOs formed among multiple 

ACO participants to form a separate 

legal entity, because it was costly, 

inefficient, and wasteful to do so 

(especially for small and medium-sized 

physician practices). These commenters 

also contend that forming a separate 

entity places such ACOs at a 

competitive disadvantage relative to 

integrated delivery systems (for example 

single-entity ACOs), it will likely have 

a chilling effect on the willingness of 

such providers and suppliers to 

participate in the program, and it 

disadvantages hospitals in States with a 

prohibition on the corporate practice of 

medicine. 

Several commenters supported 

allowing multiple participant ACOs to 

form an entity by contract and not 

require a separate new entity. These 

commenters recommended that we 

permit ACOs comprised of multiple 

ACO participants to designate one of 

those ACO participants to function as 

the ‘‘ACO’’ for purposes of participation 

in the program, provided that such 

entity meets the criteria required of an 

ACO under the final rule. Another 

commenter suggested letting a division 

of an existing corporation serve as the 

legal entity for an ACO. Specifically, 

this comment noted that licenseexempt, medical foundation clinics in 

California are often formed as either a 

division of a nonprofit corporation that 

owns and operates a hospital or have as 

their sole corporate member a nonprofit 

hospital, such as a nonprofit, licenseexempt, medical foundation clinic. One 

commenter suggested that ACOs that 

have outcome-based contracts with 

private payers should have flexibility in 

forming their legal entities. 

Many commenters supported the 

proposal not to require creation of a new 

distinct legal entity if one is already in 

place that meets the proposed criteria. 

Commenters stated that such a 

requirement is unnecessary to meet the 

objectives of the Shared Savings 

Program. Some commenters suggested 

existing organizations should not be 

forced to create whole new 

bureaucracies just to add a few 

participants to form an ACO. 

Response: We continue to support our 

proposal that each ACO certify that it is 

recognized as a legal entity under State 

law. An ACO formed among two or 

more otherwise independent ACO 

participants (such as between a hospital 

and two physician group practices) will 

be required to establish a separate legal 

entity and to obtain a TIN. Although 

some comments opposed this 

requirement as burdensome, we 

continue to believe it is essential to 

protect against fraud and abuse and 

ensure that the ACO is accountable for 

its responsibilities under the Shared 

Savings Program by enabling us to audit 

and assess ACO performance. In 

addition, to the extent an ACO becomes 

liable for shared losses, we believe it is 

essential to be able to collect such 

monies from the ACO and its ACO 

participants. 

For existing legal entities that 

otherwise meet the eligibility 

requirements, we agree with 

commenters that requiring the creation 

of a new separate legal entity would be 

inefficient. Existing legal entities which 

are eligible to be ACOs are permitted to 

continue to use their existing legal 

structure as long as they meet other 

eligibility and governance requirements 

explained in this final rule. However, as 

we proposed, if an existing legal entity 

adds ACO participants that will remain 

independent legal entities (such as 

through a joint venture among hospitals 

or group practices), it would have to 

create a new legal entity to do so. As 

discussed later in this section, we 

believe that creation of a new legal 

entity would be important to allow the 

newly added ACO participants to have 

a meaningful voice on the ACO’s 

governing body. A separate legal entity, 

with such a governing body, is therefore 

essential to accomplish this policy 

objective. 

Although we recognize that it may be 

possible for ACOs to establish outcomebased contracts that reinforce some of 

the policy objectives discussed in the 

proposed rule, we believe that the 

proposed legal structure requirement is 

necessary to protect against fraud and 

abuse and ensure the goals of the Shared 

Savings Program, and does not impose 

too large a burden, especially in light of 

the flexible governance structure 

discussed later in this section. 

Comment: Several commenters 

suggested we address the interplay 

between Federal and State law 

governing ACO formation and 

operation. For example, commenters 

suggested we clarify whether the 

proposed legal entity requirements 

include requiring an ACO to obtain a 

certificate of authority if so required 

under State law. One commenter 

suggested that we clarify whether we are 

requiring that an ACO be recognized as 

an ACO under State law or whether we 

are requiring that the ACO be 

recognized to conduct business as a 

partnership, corporation, etc. under 

State law. 

Other commenters suggested that we 

preempt State law or regulation of ACOs 

that limit the number of ACOs in a 

State. By contrast, another comment 

suggested that the Affordable Care Act 

did not preempt or otherwise supersede 

State laws prohibiting the corporate 

practice of medicine or otherwise alter 

the choice of legal entities available to 

ACOs for formation in particular States. 

In addition, some commenters 

recommended that we require that if an 

ACO assumes insurance risk, it should 

meet all the consumer protection, 

market conduct, accreditation, solvency, 

and other requirements consistent with 

State laws. 

One commenter suggested that we 

require ACOs that operate in more than 

one State to attest that they operate 

under each State’s rules rather than a 

blend of multiple States’ rules for all 

business and other operational 

functions (including health information 

management, release of information, 

privacy/confidentiality, data quality, 

etc.). Some commenters suggested that 

the proposed definition of ‘‘ACO’’ 

would exclude entities organized 

pursuant to Federal and tribal law, and 

recommended that we also allow ACOs 

to be organized under Federal or tribal 

law as well. 

Response: We continue to believe that 

an ACO should be recognized as a legal 

entity under State law and authorized 

by the State to conduct its business. We 

intended this requirement to ensure the 

ACO would be licensed to do business 

in the State consistent with all 

applicable State law requirements. 

Consequently, we are finalizing our 

proposal that an ACO that participates 

in the Shared Savings Program meet 

State law requirements to operate in that 

State. We are not requiring an ACO be 

licensed as an ACO under State law 

unless, however, State law requires such 

licensure. 

We disagree with the commenters that 

participating in the Shared Savings 

Program ultimately involves insurance 

risk. ACO participants will continue to 

receive FFS payments for all services 


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furnished to assigned beneficiaries. It is 

only shared savings payments (and 

shared losses in the two-sided model) 

that will be contingent upon ACO 

performance. As a result, we believe 

that we will continue to bear the 

insurance risk associated with the care 

furnished to Medicare beneficiaries, but 

ACOs desiring to participate in Track 2 

should consult their State laws. 

To clarify, we are not preempting any 

State laws or State law requirements in 

this final rule. To the extent that State 

law affects an ACO’s operations, we 

expect the ACO to comply with those 

requirements as an entity authorized to 

conduct business in the State. We do 

not believe it is necessary to make ACOs 

attest to do what they otherwise would 

be required to do under State law. 

We agree with commenters that we do 

not want to exclude ACOs that are 

licensed under Federal or tribal law. 

Accordingly, we are modifying our 

original proposal to clarify that entities 

organized pursuant to Federal and tribal 

law will also be allowed to participate 

in the Shared Savings Program, as long 

as the entity is able to meet the 

participation requirements as outlined 

in this final rule. 

Final Decision: We are finalizing our 

proposal that an ACO must be a legal 

entity for purposes of all program 

functions identified in this final rule. 

We are also finalizing commenters’ 

suggestion that ACOs licensed under 

Federal or tribal law are eligible to 

participate in the Shared Savings 

Program. In addition, an ACO formed 

among multiple ACO participants must 

provide evidence in its application that 

it is a legal entity separate from any of 

its ACO participants. (§ 425.104) 

b. Distribution of Shared Savings 

As discussed previously, an ACO 

must be a legal entity appropriately 

recognized and authorized to conduct 

its business under State, Federal, or 

tribal law, and must be identified by a 

TIN. In the proposed rule we proposed 

to make any shared savings payments 

directly to the ACO as identified by its 

TIN, we noted that unlike the ACO 

participants and the ACO providers/ 

suppliers that form the ACO, the legal 

entity that is the ACO may or may not 

be enrolled in the Medicare program. 

We acknowledged the potential for this 

proposal to raise program integrity 

concerns, because allowing shared 

savings payments to be made directly to 

a non-Medicare-enrolled entity would 

likely impede the program’s ability to 

recoup overpayments as there would be 

no regular payments that could be 

offset. This is part of the rationale for 

requiring safeguards for assuring ACO 

repayment of shared losses described in 

section II.G. of this final rule. We 

solicited comment on our proposal to 

make shared savings payments directly 

to the ACO, as identified by its TIN. In 

addition, we solicited comment on our 

proposal to make shared savings 

payments to a non-Medicare-enrolled 

entity. 

We proposed to require ACOs to 

provide a description in their 

application of the criteria they plan to 

employ for distributing shared savings 

among ACO participants and ACO 

providers/suppliers, how any shared 

savings will be used to align with the 

three-part aim. As we stated in the 

proposed rule, we believe this 

requirement would achieve the most 

appropriate balance among objectives 

for encouraging participation, 

innovation, and achievement of an 

incentive payment while still focusing 

on the three-part aim. 

Comment: Several commenters 

recommended that CMS explicitly state 

that the ACO is required to demonstrate 

that ACO participants will be able to 

share in savings and that CMS outline 

exactly how the savings will be 

distributed while other commenters 

suggested that CMS work with the 

provider community to develop 

principles that ACOs should follow to 

ensure fair and equitable distribution of 

shared savings. Other commenters 

suggested that a requirement be 

established that some pre-determined 

portion of any shared savings be 

directed to improving patient care 

unless there is little room for 

improvement for ACOs in the final 

quality measures. A few commenters 

requested that standards be established 

regarding the length of time (ranging 

from 15 days to 90 days) an ACO has to 

actually share any savings generated 

with its respective providers. Finally, a 

commenter expressed concern that 

when partnering with a hospital-based 

system, primary care providers would 

not be rewarded for the significantly 

increased work that will be required on 

their part in order for an ACO to be 

successful. Instead this money would be 

used by the hospital system to replace 

lost revenue on the hospital side. 

Response: We will make any shared 

savings payments directly to the ACO as 

identified by its TIN. As explained in 

the proposed rule, the statute does not 

specify how shared savings must be 

distributed, only that the ACO be a legal 

entity so that the ACO can accept and 

distribute shared savings. We do not 

believe we have the legal authority to 

dictate how shared savings are 

distributed, however, we believe it 

would be consistent with the purpose 

and intent of the statute to require the 

ACO to indicate as part of its 

application how it plans to use potential 

shared savings to meet the goals of the 

program. Consistent with the discussion 

found later in this final rule regarding 

the shared governance of an ACO, we 

anticipate that ACO participants would 

negotiate and determine among 

themselves how to equitably distribute 

shared savings or use the shared savings 

to meet the goals of the program. 

Final Decision: We will finalize our 

proposals under § 425.204(d) without 

change. 

c. Governance 

Section 1899(b)(1) of the Act requires 

that an ACO have a ‘‘mechanism for 

shared governance’’ and section 

1899(b)(2)(F) of the Act requires that an 

‘‘ACO shall have in place a leadership 

and management structure that includes 

clinical and administrative systems.’’ 

However, the statute does not specify 

the elements that this shared 

governance mechanism or the 

accompanying leadership and 

management structures must possess. 

We proposed that such a governance 

mechanism should allow for 

appropriate proportionate control for 

ACO participants, giving each ACO 

participant a voice in the ACO’s 

decision making process, and be 

sufficient to meet the statutory 

requirements regarding clinical and 

administrative systems. 

We proposed that an ACO also must 

establish and maintain a governing body 

with adequate authority to execute the 

statutory functions of an ACO. The 

governing body may be a board of 

directors, board of managers, or any 

other governing body that provides a 

mechanism for shared governance and 

decision-making for all ACO 

participants, and that has the authority 

to execute the statutory functions of an 

ACO, including for example, to ‘‘define 

processes to promote evidenced-based 

medicine and patient engagement, 

report on quality and cost measures, and 

coordinate care.’’ We proposed that this 

body must be separate and unique to the 

ACO when the ACO participants are not 

already represented by an existing legal 

entity appropriately recognized and 

authorized to conduct its business 

under applicable State law. In those 

instances where the ACO is an existing 

legal entity that has a pre-existing board 

of directors or other governing body, we 

proposed that the ACO would not need 

to form a separate governing body. In 

this case, the existing entity’s governing 

body would be the governing body of 

the ACO, and the ACO would be 

required to provide in its application 


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evidence that its pre-existing board of 

directors or other governing body, meets 

all other criteria required for ACO 

governing bodies. We also proposed that 

the ACO have a conflicts of interest 

policy that applies to members of the 

governing body. The conflicts of interest 

policy must require members of the 

governing body to disclose relevant 

financial interests. Further, the policy 

must provide a procedure for the ACO 

to determine whether a conflict of 

interest exists and set forth a process to 

address any conflicts that arise. Such a 

policy also must address remedial 

action for members of the governing 

body that fail to comply with the policy. 

We requested comment on whether 

these requirements for the creation of a 

governing body as a mechanism for 

shared governance would create 

disincentives for the formation of ACOs 

and whether there were alternative 

requirements that could be used to 

achieve the aims of shared governance 

and decision making. We also 

acknowledged that allowing existing 

entities to be ACOs would complicate 

our monitoring and auditing of these 

ACOs, and sought comment on this 

issue. 

Comment: Although most comments 

supported the principle of ACO shared 

governance, many commenters opposed 

the separate governing body 

requirement. Some commenters stated 

that we exceeded our authority by 

imposing a separate governing body 

requirement. Other commenters 

suggested that the separate governing 

body requirement would discourage 

organizations from participating in the 

Shared Savings Program and increase 

their costs to do so. Commenters 

explained that existing entities already 

have relationships with commercial 

payers and it would not make sense for 

them to maintain multiple boards, 

because it is costly and organizationally 

complex to do so. 

Many commenters urged us to 

provide flexibility so that ACOs could 

use their current governance process, as 

long as they can demonstrate how they 

will achieve shared governance on care 

delivery policies. Some commenters 

explained that hospitals and other large 

physician groups have governing bodies 

designed specifically for quality and 

outcome reviews and oversight for 

clinical integration and performance 

appraisal, training and discipline. 

Commenters suggested that ACOs can 

be effectively governed by an operating 

committee within their existing 

governance and management structure, 

as is a hospital medical staff governed 

semi-autonomously within a hospital’s 

governance structure. Commenters also 

suggested that ACOs should be 

permitted to access existing assets and 

systems, such as advisory boards, so 

long as the ACO management committee 

exercises sufficient control over these 

processes with respect to ACO activities 

to generate ACO desired outcomes. 

Other commenters had specific 

concerns about how the separate entity 

requirement would apply to their 

current or planned organizational 

structure. One commenter, an 

integrated, State-wide health system, 

suggested that we permit it to operate as 

a State wide/multi-State ACO with 

various regional/local ACOs as its ACO 

participants. In this structure, the 

corporate organization would handle 

the claims processing, reporting, and 

distribution of savings and the financial 

backing for potential loss for the 

regional ACO healthcare operational 

units. The regional ACOs would have 

their own board and each regional ACO 

would be represented on the State-wide/ 

multi-State board. This commenter 

claimed that this type of structure 

would take advantage of the cost savings 

that result from economies of scale for 

administrative and other functions, but 

would keep health care delivery local. 

Another commenter suggested allowing 

an ACO governing body’s authority to 

be delegated from an existing governing 

body that possesses broad reserved 

powers. 

One commenter suggested we clarify 

the responsibilities of the board as 

distinct from those of management. In 

this commenter’s view, governing 

board’s role should be one of oversight 

and strategic direction, holding 

management accountable to meeting 

goals of ACO. Another commenter 

suggested that the governance structure 

be organized more like a scientific 

advisory board that will analyze the 

results of the particular ACO’s 

methodology for treating its patients. 

Response: Our proposal to require an 

ACO to have a separate governing body 

unless it is an existing legal entity that 

has a pre-existing governing body is 

consistent with the proposed and final 

requirements regarding legal entity 

requirements discussed previously. 

Thus, we disagree with the commenters 

that suggested that such a requirement 

would discourage participation in the 

Shared Savings Program or disrupt 

existing relationships with commercial 

payers. 

Moreover, for ACOs formed among 

otherwise independent ACO 

participants, we will finalize our 

proposal that these ACOs create an 

identifiable governing body. This 

requirement is consistent with our final 

rule that requires such ACOs to create 

a separate legal entity. Notwithstanding 

this requirement, we agree with 

commenters that ACOs formed among 

multiple otherwise independent ACO 

participants, should have flexibility to 

establish a mechanism for shared 

governance as required by statute. As 

discussed later in this section of this 

final rule, we are revising our specific 

proposals to provide ACO greater 

flexibility in the composition of their 

governing bodies. 

We also agree with commenters who 

suggested that we should clarify the 

governing body’s responsibilities. An 

ACO’s governing body shall provide 

oversight and strategic direction, 

holding management accountable for 

meeting the goals of the ACO, which 

include the three-part aim. This 

responsibility is broader than ‘‘care 

delivery processes’’ as suggested by 

numerous commenters and, in fact, 

encompasses not only care delivery, but 

also processes to promote evidencebased medicine, patient engagement, 

reporting on quality and cost, care 

coordination, distribution of shared 

savings, establishing clinical and 

administrative systems, among other 

functions. We believe that because of 

these broad responsibilities, the 

governing body is ultimately 

responsible for the success or failure of 

the ACO. 

We believe that an identifiable 

governing body is a reasonable 

prerequisite for eligibility to participate 

in the Shared Savings Program. As 

discussed previously, an existing legal 

entity is permitted to use its current 

governing body. An ACO formed among 

otherwise independent ACO 

participants must establish an 

identifiable governing body. A 

governing body that is identifiable can 

help insulate against conflicts of interest 

that could potentially put the interest of 

an ACO participant (in an ACO formed 

among otherwise independent ACO 

participants) before the interest of the 

ACO. In fact, we believe an identifiable 

governing body will facilitate 

accomplishing the ACO’s mission. 

Comment: Numerous commenters 

expressed support for the requirement 

that the governing body include all ACO 

participants. For example, one 

commenter supported the proposal, 

because such a requirement would also 

aid CMS, FTC, and DOJ in their efforts 

to thwart anti-competitive behavior 

among ACOs. 

By contrast, many commenters 

suggested it would be unwieldy to have 

representatives from each participant on 

the governing body, because the 

governing body would be difficult to 

operate effectively. Other commenters 


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stated that an ACO should not, for 

example, have to include each solopractitioner physician participant on the 

board. Some commenters suggested that 

a requirement for each ACO participant 

to be on the governing body would 

permit competitors to be on each other’s 

boards and, thus, could be 

anticompetitive. Many commenters 

indicated that we should be concerned 

with the outcome of the program, not 

with who is on an ACO’s board. One 

commenter suggested that ACO 

participants be shareholders, members, 

or other owners of the ACO, and the 

ACO participants would select the 

governing body members. Another 

commenter suggested that we require an 

ACO to demonstrate how ACO 

participants have a super-majority on a 

medical standards committee that has 

responsibility to define processes to 

promote evidenced-based medicine and 

patient engagement, report on quality 

and cost measures, and coordinate care. 

However, one commenter suggested that 

limiting a governance voice to 

physicians and hospitals reduces the 

chances that the aim CMS expresses of 

reduced dependence on inpatient care 

will be realized. Several commenters 

suggested that the requirement that all 

participants be on the governing body 

may conflict with State law 

requirements. 

Response: Although we believe that 

each ACO participant should have a 

voice in the ACO’s governance, we are 

convinced by the comments that there 

are many ways to achieve this objective 

without requiring that each ACO 

participant be a member of the ACO’s 

governing body. Thus, we will not 

finalize our proposal that each 

Medicare-enrolled ACO participant TIN, 

or its representative, be on the ACO’s 

governing body. We agree with 

commenters that the governing bodies 

could become unwieldy and lose their 

effectiveness if we were to finalize this 

proposal. Such a requirement, as the 

commenters explained, could conflict 

with State law requirements regarding 

governing body requirements. Instead 

we will require an ACO to provide 

meaningful participation in the 

composition and control of the ACO’s 

governing body for ACO participants or 

their designated representatives. We 

disagree, however, with the comment 

that ACO participants who may be 

competitors outside of the ACO’s 

activities necessarily raise competitive 

concerns when they jointly participate 

on the ACO’s governing body. The ACO 

requires an integration of economic 

activity by ACO participants, and 

participants’ participation in the 

governing body is in furtherance of that 

integration. Nonetheless, as explained 

in the final Antitrust Policy Statement, 

ACOs should refrain from, and 

implement appropriate firewalls or 

other safeguards against, conduct that 

may facilitate collusion among ACO 

participants in the sale of competing 

services outside the ACO. 

Comment: Commenters were divided 

in their support for the proportionate 

control requirement. Many commenters 

suggested that the proportionate share 

requirement is too rigid and inflexible. 

Several commenters stated that the 

concept of constituent or representative 

governance is antithetical to the most 

basic tenants of State corporation law, 

including the requirement of undivided 

loyalty applicable to members of a 

corporation’s board of directors and the 

right of the shareholders of the for-profit 

corporation and members of nonprofit 

corporations to elect the governing body 

that is otherwise responsible for 

overseeing and directing the 

management of the corporation. Other 

commenters explained that the 

requirements are unnecessary because 

fiduciary decisions should be made in 

the best interests of the ACO as an entire 

organization and should not represent 

the individual interests of the ACO 

participants or any specific agendas. 

Other comments suggested that they 

would have to reconstitute their boards 

if we applied such a requirement. By 

contrast, many commenters supported 

this requirement if it were applied on a 

per participant basis, while others 

supported it if it were based on capital 

contributions. 

Several commenters sought 

clarification as to how proportionate 

share should be assessed and suggested 

that we provide guidance to avoid 

tangled power struggles. Commenters 

suggested various methods, including: 

distribution of Medicare costs among 

the various participants in the ACO, 

capital contributions, per participant, 

equity dollars, dollars received, savings 

generated from operations, RVUs 

delivered, number of Medicare lives 

attributed, physicians within a TIN, or 

on any reasonable basis. One 

commenter suggested that proportionate 

control means representation of all 

specialists that provide care to an ACO’s 

beneficiaries. 

Response: In light of our decision to 

allow ACOs flexibility in how they 

establish their governing bodies, we will 

not finalize our proposal that each ACO 

participant have proportionate control 

of the ACO governing body. 

Comment: Several commenters 

suggested that we require specialty 

practitioner representatives on the 

governing body, including specialists 

who have experience and expertise in 

hospice and palliative care, hematology, 

cataract surgery, endocrinology, surgery, 

mental health. Other commenters 

suggested that we require governing 

body representation of home health care 

and long-term care providers, the allied 

professions, and community 

stakeholders. One commenter sought a 

specific role for nurses on the governing 

body. 

Another commenter suggested 

encouraging representation from local 

high-level public health officials on 

ACO governing bodies to help inform 

population health and cost-containment 

goals. One commenter suggested that at 

least one stakeholder on the board be a 

representative of a local hospital, 

regardless of whether any hospital is a 

participant in the ACO, because all care 

settings should be considered. One 

commenter suggested that we require 

ACO governing bodies to include local 

employers and multi-State large 

employer plan sponsors with experience 

in quality improvement and reporting 

and providing timely information to 

consumers on ACOs’ governance boards 

to successfully improve quality, reduce 

unnecessary costs and drive through 

transformational change. Other 

commenters urged us to state that every 

professional service involved with the 

ACO be represented on the governing 

body. 

Response: In light of our decision to 

allow ACOs flexibility in how they 

establish their governing bodies, we will 

not require representation of particular 

categories of providers and suppliers or 

other stakeholders. 

Comment: Several commenters 

suggested we provide broad guidance on 

desired ACO outcomes and processes 

without specifying how an ACO’s 

governing body achieves these 

outcomes. Other commenters suggested 

that we articulate the attributes of 

governance that we believe are 

important to ACOs (for example, 

importance of ACO participant input, 

the role of non-ACO participants in 

governance, or that ACOs that are taxexempt entities would be expected to 

comply with exemption requirements) 

and then require the ACO to include a 

description in its application on how 

governance of ACO would align with 

these attributes. Other commenters 

suggested similar approaches, such as 

requiring the ACO applicant to describe 

its governing body and general rationale 

for its composition, how ACO 

participants and providers will achieve 

shared governance and decision-making 

such that they have significant input 

and control over decisions about how 


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care will be delivered and beneficiaries’ 

voices heard. Commenters suggested 

that this flexibility would permit the 

ACO to determine the appropriate 

balance of incorporating direct 

participant involvement in the 

governance of the ACO, including board 

involvement, and also using operating 

committees where a more limited group 

of ACO participants would have 

significant input, direction and 

involvement in specific activities the 

ACO. Another commenter urged us to 

deem the governance structure of 

entities that are qualified for tax 

exemption under section 501(c)(3) of the 

Internal Revenue Code to meet the 

proposed governance requirements. 

One commenter recommended that 

we require all ACOs: (1) To enact 

policies and procedures to ensure that 

physicians who participate in the ACO 

are free to exercise independent medical 

judgment; and (2) to adopt a conflict-ofinterest disclosure policy to ensure that 

the governing body appropriately 

represents the interests of the ACO. One 

commenter suggested the ACO be 

governed by a Board of Directors that is 

elected by physicians in the ACO. 

Another commenter suggested in those 

cases where a hospital is part of an 

ACO, the governing board should be 

separate and independent of the 

hospital governing body. Several 

commenters urged us to require a 

majority of the ACO’s governing body to 

be approved by ACO participants. 

Response: We agree with commenters 

that we should articulate our views 

related to governance. We will finalize 

the requirement that the governing body 

provides oversight and strategic 

direction for the ACO, holding 

management accountable for meeting 

the goals of the ACO, which include the 

three-part aim. Members of the 

governing body shall have a fiduciary 

duty to put the ACO’s interests before 

the interests of any one ACO participant 

or ACO provider/supplier. The 

governing body also must have a 

transparent governing process to ensure 

that we are able to monitor and audit 

the ACO as appropriate. 

Final Decision: In sum, we are 

finalizing the requirement that an ACO 

must maintain an identifiable governing 

body with authority to execute the 

functions of the ACO as defined in this 

final rule, including but not limited to, 

the definition of processes to promote 

evidence-based medicine and patient 

engagement, report on quality and cost 

measures, and coordinating care. The 

governing body must have 

responsibility for oversight and strategic 

direction of the ACO, holding ACO 

management accountable for the ACO’s 

activities. The governing body must 

have a transparent governing process. 

The governing body members shall have 

a fiduciary duty to the ACO and must 

act consistent with that fiduciary duty. 

The ACO must have a conflicts of 

interest policy for the governing body. 

The ACO must provide for meaningful 

participation in the composition and 

control of the ACO’s governing body for 

ACO participants or their designated 

representatives. (§ 425.106). 

d. Composition of the Governing Body 

As we explained in the proposed rule, 

we believe that the ACO should be 

operated and directed by Medicareenrolled entities that directly provide 

health care services to beneficiaries. We 

acknowledged, however, that small 

groups of providers often lack both the 

capital and infrastructure necessary to 

form an ACO and to administer the 

programmatic requirements of the 

Shared Savings Program and could 

benefit from partnerships with nonMedicare enrolled entities. For this 

reason, we proposed that to be eligible 

for participation in the Shared Savings 

Program, the ACO participants must 

have at least 75 percent control of the 

ACO’s governing body. In addition, each 

of the ACO participants must choose an 

appropriate representative from within 

its organization to represent them on the 

governing body. We explained that 

these requirements would ensure that 

ACOs remain provider-driven, but also 

leave room for both non-providers and 

small provider groups to participate in 

the program. 

Additionally, we proposed that ACOs 

provide for patient involvement in their 

governing process. We proposed that in 

order to satisfy this requirement, ACOs 

must include a Medicare FFS 

beneficiary serviced by the ACO on the 

ACO governing body. In order to 

safeguard against any conflicts of 

interest, we proposed that any patients 

included on an ACO’s governing body, 

or an immediate family member, must 

not have a conflict of interest, and they 

must not be an ACO provider/supplier. 

We believed a conflict of interest 

standard was necessary to help 

effectuate our intent to ensure 

beneficiaries have a genuine voice in 

ACO governance. We sought comment 

on whether the requirement for 

beneficiary participation on the 

governing body should include a 

minimum standard for such 

participation. We also sought comment 

on the possible role of a Medicare 

beneficiary advisory panel to promote 

patient engagement in ACO governance. 

Comment: Numerous commenters 

supported the proposed 75 percent 

threshold requirement for ACO 

participants and suppliers because they 

believe ACOs should be provider 

driven. Other commenters supported 

the 75 percent threshold because they 

believed that more than 25 percent nonparticipant investment could lead to 

disparities among Shared Savings 

Program stakeholders, create a conflict 

of interest, and impede the goal of 

efficient care delivery. One commenter 

urged us to clarify that up to 25 percent 

of the board can be represented by 

health plans and management 

companies. Several commenters sought 

clarification about how to assess the 75 

percent requirement in the situation of 

hospital employment of providers, and 

whether it is the employer or the 

employee that must be represented. 

By contrast, several commenters 

urged us to eliminate the 75 percent 

threshold because it is overly 

prescriptive, will prevent many existing 

integrated systems from applying, fails 

to acknowledge that governing bodies 

will balance representation across all 

the populations it covers for multiple 

payers that may, for instance, encourage 

participation of local businesses on the 

governing body, and will be 

unnecessarily disruptive to many 

organizations, especially those with 

consumer-governed boards. Several 

commenters suggested that we should 

recognize that each governing body will 

need to be structured differently 

depending on its historical makeup, the 

interest in participation, and other 

market dynamics. One commenter 

suggested that requiring the exact same 

governance structure for all ACOs risks 

creating inefficient bureaucracy that 

does not improve quality or reduce 

costs. 

Several commenters also suggested 

that this restriction is likely to restrict 

ACO access to, and effective use of, 

multiple streams of capital for investing 

in high-value care. Other commenters 

argued that the restriction is likely to 

hinder formation of primary care 

physician-led organizations because 

they will not be able to implement 

effective care management and 

advanced information technology 

implementation, and lack the ability to 

negotiate and administer provider 

contracts without the participation of 

outside entities. Another commenter 

suggested the 75 percent requirement 

could have a chilling effect on the 

willingness of private payers to invest in 

and partner with ACOs. 

Some commenters stated that the 75 

percent requirement may conflict with 

IRS policy that requires governing 

bodies of tax-exempt entities to be 

comprised of a broad spectrum of 


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community members. Another 

commenter suggested that 501(c)(3) 

hospitals or health systems would find 

it difficult to form an ACO as a joint 

venture because the IRS requires those 

nonprofits to demonstrate that the joint 

venture is in the charity’s interest and 

that charitable assets are not used for 

private inurement. Other commenters 

noted that the 75 percent requirement 

could conflict with State law 

requirements such as ones requiring 

governing boards of public hospitals to 

be elected, or that in order for nonprofit 

health care entities to maintain an 

exemption from certain State’s business 

and occupation tax, paid employees 

cannot serve on the governing board. 

Other commenters suggested that we 

extend the same flexibility we proposed 

to provide to ACOs with regard to 

leadership and management structures 

to our governance requirements. 

Response: We continue to believe that 

the 75-percent control requirement is 

necessary to ensure that ACOs are 

provider driven, as requested by the 

comments. The implication of this 

requirement is that non-Medicare 

enrolled entities, such as management 

companies and health plans may have 

less than 25 percent voting control of 

the ACO governing body. For example, 

if a hospital, two physician groups, and 

a health plan formed an ACO, the 

hospital and two physician groups must 

control at least 75 percent of the ACO 

governing body. We decline, as 

previously discussed, to require how the 

voting control of the hospital and two 

physicians groups is apportioned among 

them. Although we recognize 

commenters’ concern that this threshold 

could reduce the amount of investment 

capital available to ACOs, we believe it 

strikes an appropriate balance to incent 

and empower ACO participants to be 

accountable for the success of the ACO’s 

operations. 

We also clarify that existing entity 

ACOs, such as a hospital employing 

ACO professionals, by definition, would 

have 100 percent control of the 

governing body, because the existing 

entity is the only member of the 

governing body. 

Notwithstanding this requirement, we 

also agree with commenters that we 

should provide ACOs with flexibility 

regarding the composition of the ACO’s 

governing body. This flexibility is 

discussed later in this section of this 

final rule and provides a means for an 

ACO to compose its governing body to 

involve ACO participants in innovative 

ways in ACO governance. We believe 

this flexibility obviates the commenters’ 

concerns that the 75 percent threshold 

would conflict with laws governing the 

composition of tax-exempt or Statelicensed entities. 

Comment: In response to our request 

for comments on whether our 

requirement that 75 percent control of 

the governing body be held by ACO 

participants was an appropriate 

percentage, commenters suggested a 

variety of different percentage 

requirements on the governing body for 

certain types of ACO physicians and 

other health care providers. 

Commenters suggested that physicians 

occupy at least one-third, one-half, or 

greater than one-half of governing body 

seats. Other commenters suggested that 

primary care physicians comprise at 

least 50 percent of the ACO governing 

body and independent practices have 

representation proportionate to their 

percentage of ACO physicians, while 

another commenter suggested that the 

governing body include an equal 

number of primary care and specialty 

physicians to guarantee that ACOs’ 

leadership structures focus on primary 

care, prevention, care coordination and 

disease management. Another 

commenter suggested that 50 percent of 

the governing body consist of 

physicians who have their own practice 

and not physicians who are employed 

directly or indirectly by a hospital 

system. 

By contrast, some commenters 

suggested that we require a more 

balanced composition, with 50 percent 

ACO participant representation, a 

majority of which should be primary 

care providers, and 50 percent key 

community stakeholders who do not 

derive livelihood from the ACO or one 

of its products. Some commenters 

suggested that the inclusion of employer 

and/or labor representatives in the 

community stakeholder portion would 

also serve as a way to help prevent costshifting to the private sector. Another 

commenter suggested a bare minimum 

of provider representation, because 

anything more may bring in members to 

the board who do not have the requisite 

skill and experience to function in a 

leadership role. 

Response: For the reasons previously 

discussed, we will finalize our proposal 

to require 75 percent control by ACO 

participants that are Medicare-enrolled 

TINs. We decline, as previously 

discussed, to require how the voting 

control will be apportioned among ACO 

participants. 

Comment: Some commenters 

supported the requirement that each 

ACO participant choose an appropriate 

representative from within its 

organization to represent them on the 

governing body. Several commenters 

sought clarification about the 

requirement. For example, one 

commenter sought clarification that an 

employee of an IPA (which is a member 

of an ACO) can be the representative on 

the board. Other commenters sought 

clarification about the word 

‘‘organization’’ in the phrase ‘‘from 

within its organization,’’ specifically 

whether organization meant each and 

every ACO participant’s organization or 

the ACO as an organization. 

Response: Under our proposal, we 

intended that a representative from each 

ACO participant would be included on 

the ACO’s governing body. But, as 

previously discussed, we believe that 

ACOs should have flexibility to 

construct their governing bodies in a 

way that allows them to achieve the 

three-part aim in the way they see fit. 

Accordingly, we will eliminate the 

requirement that each ACO participant 

choose an appropriate representative 

from within its organization to represent 

it on the governing body. 

Comment: Several commenters were 

unclear whether we were requiring that 

all entities with which an ACO 

contracts would be considered an ACO 

participant and therefore have a seat on 

the governing body. In particular, some 

commenters sought clarification about 

the interaction between an ACO and a 

third party that would develop the 

technology, systems, processes and 

administrative functions for the ACO. 

Other comments sought clarification of 

whether we will consider a provider 

system one ACO or multiple ACO 

participants, because the individuals 

within the system each have separate 

TINs that are eligible as ACOs in their 

own right. 

Response: We expect that ACOs, in 

some instances, will contract with third 

parties to provide technology, systems, 

processes, and administrative functions 

for the ACO. These entities are not ACO 

participants as that term is defined in 

§ 425.20 of these regulations. 

Accordingly, we are not requiring these 

third parties to be represented on the 

governing body. A provider system 

made up of multiple Medicare-enrolled 

TINs will have flexibility to use its 

existing governing body (assuming it is 

an existing legal entity with a preexisting governing body) or to structure 

a new governing body in a way that 

meets the requirements for meaningful 

representation of its ACO participants 

while also enabling it to accomplish the 

three-part aim. 

Comment: Many commenters strongly 

supported our proposal to require ACOs 

to include a beneficiary on the 

governing body so that the person 

would advocate for the local 

community, patient safety issues, 


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provide a strong, independent voice, 

and be part of ACO decision making. 

Other commenters suggested requiring 

even more consumer or communitybased organization representation such 

as a plurality of the board or 

proportional representation based on 

the number of Medicare beneficiaries, 

such as two Medicare beneficiary 

representatives for every 5,000 patients 

assigned to the ACO, but no less than 

15 percent beneficiary representation, or 

three beneficiaries and three local 

community organization 

representatives. 

Several commenters suggested that 

one beneficiary on the board is 

insufficient. Other commenters argued 

that together beneficiaries and consumer 

advocates must possess a sufficient 

number of seats on the governing body 

to enable them to substantively 

influence an ACO and its operations, 

because beneficiary representatives and 

consumer advocates bring distinct 

perspectives to the table. Other 

commenters suggested that the ACO 

describe in its application how it would 

have diverse, balanced, and effective 

consumer representation in the ACO’s 

governance. 

Other commenters objected to our 

proposal to deem ACOs as having met 

the requirement to partner with 

community stakeholders simply by 

including a community stakeholder on 

the governing board. These comments 

argue that ACOs will serve a diverse 

population with a range of needs, 

preferences, and values and, thus, one 

representative will not be able to speak 

for the entire community on all issues. 

These commenters urged us to require 

that ACOs develop partnerships with 

community-based organizations that— 

(1) operate within a single local or 

regional community; (2) are 

representative of a community or 

significant segments of a community; 

and (3) provide health, educational, 

personal growth, and improvement, 

social welfare, self-help for the 

disadvantaged or related services to 

individuals in the community. 

Several commenters expressed 

concern about how the beneficiary 

representative would be chosen. For 

example, one commenter sought 

clarification on how we would know 

that the chosen beneficiary is truly 

representative of the beneficiary 

population served by the ACO. Another 

commenter expressed concern about the 

potential influence of this board on the 

consumer representative. Some 

commenters stated it would make more 

sense for the beneficiary representative 

to have healthcare knowledge or 

business experience. One commenter 

suggested that non-medical oriented 

individuals will likely promote their 

special projects that they perceive as 

beneficial to their own goals and aims. 

One commenter sought clarification 

about whether beneficiary and/or 

community organization is counted 

toward the 75 percent threshold or if it 

is in the 25 percent non-participant 

group. 

By contrast, many comments stated 

our proposed requirement was too 

prescriptive. Commenters indicated that 

such a requirement could: (1) Mean that 

a clinically integrated physician 

network would have to restructure its 

bylaws and thus re-contract with its 

entire physician network; (2) place the 

beneficiary in an inappropriate position 

to be voting on decisions of the 

organization’s non-ACO lines of 

business; (3) conflict with State law 

which requires only licensed medical 

professionals to govern the professional 

corporation; (4) conflict with State and 

local laws that dictate composition of 

public hospital/health system boards 

and/or restrict the authority those 

boards may be able to delegate (given 

their authority over taxpayer funds); or 

(5) result in a potential HIPAA 

violation. 

These commenters suggested that 

there are more effective ways to obtain 

beneficiary representation such as 

through creation of a committee of 

participants and/or beneficiaries which 

could accomplish the same purpose 

without the necessity of a board role. 

They recommended creating non-voting 

and ongoing advisory groups of 

beneficiaries rather than requiring an 

ACO to include a single beneficiary on 

the governing body. One commenter 

suggested that we define lack of a 

‘‘conflict of interest.’’ 

Response: We continue to believe that 

a focus on the beneficiary in all facets 

of ACO governance will be critical for 

ACOs to achieve the three-part aim. 

Therefore, we finalize our proposal to 

require beneficiary representation on 

the governing body, with an option 

(discussed later in this final rule) to 

allow for flexibility for those ACOs that 

seek innovative ways to involve 

beneficiaries in ACO governance. 

We decline the suggestions to increase 

the beneficiary representation 

requirement, because we believe the 

proposal achieves our objective but still 

permits ACOs flexibility to structure 

their governing bodies appropriately. 

We encourage all ACOs to consider 

seriously how to provide other 

opportunities for beneficiaries to be 

involved further in ACO governance in 

addition to the seat on the governing 

body. We also clarify that, as we 

proposed, the beneficiary representative 

(like all members on the governing body 

as discussed previously) must not have 

a conflict of interest, such that he or she 

places his or her own interest, or an 

interest of an immediate family member, 

above the ACO’s mission. In addition, 

the beneficiary representative cannot be 

an ACO provider/supplier within the 

ACO’s network. 

We recognize commenters’ concerns 

that requiring a beneficiary on the 

governing body could conflict with 

State corporate practice of medicine 

laws or other local laws regarding, for 

instance, governing body requirements 

for public health or higher education 

institutions. In addition, there could be 

other reasons that beneficiary 

representation on an ACO’s governing 

body may not be feasible. For these 

reasons, we agree with commenters that 

it is appropriate to provide flexibility 

regarding the composition of ACO 

governing bodies. Accordingly, an ACO 

that seeks to compose its governing 

body in such a way that it does not meet 

either the requirement regarding 75 

percent ACO participant control or the 

requirement regarding beneficiary 

representation on the governing body 

would be able to describe in its 

application how the proposed structure 

of its governing body would involve 

ACO participants in innovative ways in 

ACO governance and provide a 

meaningful opportunity for beneficiaries 

to participate in the governance of the 

ACO. For example, this flexibility 

would allow ACOs that operate in States 

with Corporate Practice of Medicine 

restrictions to structure beneficiary 

representation accordingly and it also 

would allow for consumer-driven 

boards that have more than 25 percent 

consumer representation. This option 

could also be used by existing entities 

to explain why they should not be 

required to reconfigure their board if 

they have other means of addressing the 

consumer perspective in governance. 

Final Decision: In summary, we will 

finalize our proposals that at least 75 

percent control of the ACO’s governing 

body must be held by the ACO’s 

participants. The governing body of the 

ACO must be separate and unique to the 

ACO in the cases where the ACO 

comprises multiple, otherwise 

independent entities that are not under 

common control (for example, several 

independent physician group practices). 

However, the members of the governing 

body may serve in a similar or 

complementary manner for a participant 

in the ACO. Each ACO should provide 

for beneficiary representation on its 

governing body. In cases in which the 

composition of an ACO’s governing 


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body does not meet the 75 percent ACO 

participant control threshold or include 

the required beneficiary governing body 

representation, the ACO must describe 

why it seeks to differ from the 

established requirements and how the 

ACO will involve ACO participants in 

innovative ways in ACO governance 

and/or provide for meaningful 

participation in ACO governance by 

Medicare beneficiaries. (§ 425.106). 

4. Leadership and Management 

Structure 

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

requires an eligible ACO to ‘‘have in 

place a leadership and management 

structure that includes clinical and 

administrative systems.’’ In the 

proposed rule, we stated that we 

believed an ACO’s leadership and 

management structure should align with 

and support the goals of the Shared 

Savings Program and the three-part aim 

of better care for individuals, better 

health for populations, and lower 

growth in expenditures. 

We drew from two sources to develop 

our proposals for ACO leadership and 

management structures. We first 

highlighted those factors that 

participants in the PGP demonstration 

identified as critical to improving 

quality of care and the opportunity to 

share savings. Second, we discussed the 

criteria developed by the Antitrust 

Agencies to assess whether 

collaborations of otherwise competing 

health care providers are likely to, or do, 

enable their collaborators jointly to 

achieve cost efficiencies and quality 

improvements. We explained that the 

intent of the Shared Savings Program 

and the focus of antitrust enforcement 

are both aimed at ensuring that 

collaborations between health care 

providers result in improved 

coordination of care, lower costs, and 

higher quality, including through 

investment in infrastructure and 

redesigned care processes for high 

quality and efficient service delivery. 

We stated in the proposed rule that the 

Antitrust Agencies’ criteria provide 

insight into the leadership and 

management structures, including 

clinical and administrative systems, 

necessary for ACOs to achieve the threepart aim of better care for individuals, 

better health for populations, and lower 

growth in expenditures. 

We stated that it is in the public 

interest to harmonize the eligibility 

criteria for ACOs that wish to 

participate in the Shared Savings 

Program with the similar antitrust 

criteria on clinical integration, because 

competition between ACOs is expected 

to have significant benefits for Medicare 

beneficiaries. Further, because ACOs 

that operate in the Shared Savings 

Program are likely to use the same 

organizational structure and clinical 

care practices to serve both Medicare 

beneficiaries and consumers covered by 

commercial insurance, the certainty 

created by harmonizing our eligibility 

criteria with antitrust criteria will help 

to reduce the likelihood that an ACO 

organization participating in the Shared 

Savings Program will be challenged as 

per se illegal under the antitrust laws, 

which could prevent the ACO from 

fulfilling the term of its agreement 

under the Shared Savings Program. 

Thus, in order to meet the 

requirements in section 1899(b)(2)(F) of 

the Act that an ACO have a leadership 

and management structure that includes 

clinical and administrative systems, we 

proposed that an ACO meet the 

following criteria: 

• The ACO’s operations would be 

managed by an executive, officer, 

manager, or general partner, whose 

appointment and removal are under the 

control of the organization’s governing 

body and whose leadership team has 

demonstrated the ability to influence or 

direct clinical practice to improve 

efficiency processes and outcomes. 

• Clinical management and oversight 

would be managed by a senior-level 

medical director who is a boardcertified physician, licensed in the State 

in which the ACO operates, and 

physically present on a regular basis in 

an established location of the ACO. 

• ACO participants and ACO 

providers/suppliers would have a 

meaningful commitment to the ACO’s 

clinical integration program to ensure 

its likely success. 

• The ACO would have a physiciandirected quality assurance and process 

improvement committee that would 

oversee an ongoing quality assurance 

and improvement program. 

• The ACO would develop and 

implement evidence-based medical 

practice or clinical guidelines and 

processes for delivering care consistent 

with the goals of better care for 

individuals, better health for 

populations, and lower growth in 

expenditures. 

• The ACO would have an 

infrastructure, such as information 

technology, that enables the ACO to 

collect and evaluate data and provide 

feedback to the ACO providers/ 

suppliers across the entire organization, 

including providing information to 

influence care at the point of service. 

In order to determine an ACO’s 

compliance with these requirements, as 

part of the application process, we 

proposed that an ACO would submit all 

of the following: 

• ACO documents (for example, 

participation agreements, employment 

contracts, and operating policies) that 

describe the ACO participants’ and ACO 

providers/suppliers’ rights and 

obligations in the ACO, how the 

opportunity to receive shared savings 

will encourage ACO participants and 

ACO providers/suppliers to adhere to 

the quality assurance and improvement 

program and the evidenced-based 

clinical guidelines. 

• Documents that describe the scope 

and scale of the quality assurance and 

clinical integration program, including 

documents that describe all relevant 

clinical integration program systems 

and processes. 

• Supporting materials documenting 

the ACO’s organization and 

management structure, including an 

organizational chart, a list of committees 

(including the names of committee 

members) and their structures, and job 

descriptions for senior administrative 

and clinical leaders. 

• Evidence that the ACO has a boardcertified physician as its medical 

director who is licensed in the State in 

which the ACO resides and that a 

principal CMS liaison is identified in its 

leadership structure. 

• Evidence that the governing body 

includes persons who represent the 

ACO participants, and that these ACO 

participants hold at least 75 percent 

control of the governing body. 

Additionally, upon request, the ACO 

would also be required to provide 

copies of the following documents: 

• Documents effectuating the ACO’s 

formation and operation, including 

charters, by-laws, articles of 

incorporation, and partnership, joint 

venture, management, or asset purchase 

agreements. 

• Descriptions of the remedial 

processes that will apply when ACO 

participants and ACO providers/ 

suppliers fail to comply with the ACO’s 

internal procedures and performance 

standards, including corrective action 

plans and the circumstances under 

which expulsion could occur. 

We also proposed to allow ACOs with 

innovative leadership and management 

structures to describe an alternative 

mechanism for how their leadership and 

management structure would conduct 

the activities noted previously in order 

to achieve the same goals so that they 

could be given consideration in the 

application process. That is, an 

organization that does not have one or 

more of the following: An executive, 

officer, manager, or general partner; 

senior-level medical director; or 


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physician-directed quality assurance 

and process improvement committee, 

would be required in its application to 

describe how the ACO will perform 

these functions without such 

leadership. Additionally, we sought 

comment on the requirement for 

submission of certain documents as 

noted previously and whether an 

alternative method could be used to 

verify compliance with requirements. 

We also requested comment on the 

leadership and management structure 

and whether the compliance burden 

associated with these requirements 

would discourage participation, hinder 

innovative organizational structures, or 

whether there are other or alternative 

leadership and management 

requirements that would enable these 

organizations to meet the three-part aim. 

Comment: Some commenters 

suggested that we require that a 

physician or a surgeon licensed in the 

State in which the ACO is organized 

serve as either the CEO or president of 

the ACO and that a physician or a 

surgeon licensed in the State in which 

the ACO is organized serve as the Chair 

of the Board of Directors of the ACO. 

Other commenters recommended that 

CMS require that primary care 

physicians be in executive leadership 

positions of the ACO. Other commenters 

suggested that we require personnel 

with health information management 

experience to be part of the ACO’s 

leadership. 

Response: In light of our decision to 

allow ACOs flexibility in how they 

establish their governing bodies, we also 

believe that ACOs should have 

flexibility to determine their leadership 

and management structure. We 

understand commenters’ concerns, but 

we decline to specify additional 

requirements as suggested by the 

commenters for ACO leadership and 

management. 

Comment: Many commenters strongly 

supported the proposed requirement of 

senior-level medical director with 

responsibility for clinical management 

and oversight. Several commenters 

suggested removing the full-time 

requirement, because the ACO may not 

have the volume to support a full-time 

position, it is costly and inconsistent 

with the diverse needs of each ACO, 

and there is little evidence to suggest 

that a small to mid-size ACO is likely to 

need a full time senior-level medical 

director who is physically present on a 

regular basis at an established ACO 

location. 

Many commenters supported a parttime requirement, flexible time 

requirement, or no time requirement. 

One commenter suggested that the 

duties of a ‘‘full time medical director’’ 

include the provision of direct clinical 

care to patients. One commenter 

suggested eliminating the full time 

requirement, as long as the medical 

director devotes sufficient time to 

fulfilling their ACO related 

responsibilities. Another commenter 

suggested that the focus should be on 

whether the required coordination of 

care processes are in place and 

functional at a core level, rather than 

who is directing them. 

Several comments suggested 

removing the requirement that the 

medical director be a physician because 

the Act does not require physician 

leadership, nor is there evidence 

suggesting physician leadership is 

necessary. Several commenters 

suggested the medical director could be 

any qualified health care professional. 

A few comments suggested 

strengthening the requirements for 

clinical oversight and requiring that the 

director demonstrate an understanding 

of the core concepts of medical 

management or have managerial 

experience, advanced management 

degree, or certification in medical 

management and system leadership. 

One commenter suggested that 

physician leadership show that it has 

geriatric competencies, to ensure that 

patients with dementia and Alzheimer’s 

disease do not receive poorer care. 

A few comments suggested that we: 

(1) Not require the medical director to 

be licensed in the State because if a 

medical director has been effective in 

excelling in services in one State and 

seeks to expand those services into 

another State, CMS would be ill-advised 

to prevent this from occurring; and (2) 

not require board certification but 

instead allow a physician who has 

acquired certification in medical 

management or quality improvement to 

be the medical director. 

Some commenters sought clarification 

as to whether the medical director must 

be licensed in every State in which a 

multi-State ACO operates and whether 

the medical director must be on-site at 

each location at which the ACO 

provides services (if a multi-site ACO). 

Response: We believe physician 

leadership of clinical management and 

oversight is important to an ACO’s 

ability to achieve the three-part aim and 

we will finalize the proposed 

requirement that an ACO have a seniorlevel medical director who is a boardcertified physician. However, we 

understand that this requirement may 

pose an additional financial burden, 

particularly in small or rural ACOs. 

Therefore, we are modifying our original 

proposal to eliminate the full time 

requirement. Instead, we will require 

that clinical management and oversight 

be managed by a senior-level medical 

director who is one of the ACO’s 

physicians. We decline to require 

additional qualifications for the medical 

director, because such qualification may 

be burdensome for small and rural 

ACOs. However, we are maintaining the 

requirement that the medical director be 

board-certified and licensed in one of 

the States in which the ACO operates. 

We believe such certification and 

licensure are necessary to establish 

credibility among physicians in the 

ACO. Further, we clarify that an ‘‘on 

site’’ physician is one who is present at 

any clinic, office, or other location 

participating in the ACO. 

Comment: Some commenters 

supported the requirement for a 

physician-directed quality assurance 

and process improvement committee. 

Several comments stated that physicianled quality and clinical process 

improvement activities are crucial to 

building trust and credibility with 

physicians and beneficiaries, as well as 

necessary ingredients to achieving the 

quality and beneficiary satisfaction 

targets set by the program. 

By contrast, other commenters 

believed that such a physician-led 

committee would be onerous in rural 

areas and that safety net providers 

should have some flexibility in meeting 

these requirements. Several commenters 

suggested removing the requirement for 

physician leadership and instead 

requiring leadership by any qualified 

healthcare professional. Some 

comments suggested requiring the 

director to demonstrate special training 

or certification in quality improvement. 

Response: We acknowledge 

commenters’ concerns that a committee 

could be burdensome for certain ACOs 

and that quality improvement activities 

can be directed by non-physician 

leadership. In particular, we are 

persuaded by commenters who 

suggested that many existing and 

successful quality improvement efforts 

are not physician-led. Accordingly, we 

will eliminate the requirement for ACOs 

to establish such a committee. Instead, 

as part of its application, an ACO will 

be required to describe how it will 

establish and maintain an ongoing 

quality assurance and improvement 

program, led by an appropriately 

qualified health care professional. We 

believe these modifications will provide 

ACOs with greater flexibility to meet 

this requirement. 

Comment: Some commenters 

supported our proposal to learn from 

the Antitrust Agencies’ clinical 

integration requirements to help specify 


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the necessary ‘‘clinical and 

administrative systems’’ that are 

required to be part of the ACO’s 

leadership and management structure. 

These commenters recognized that 

‘‘success will be determined by the 

engagement and commitment of 

practicing physicians.’’ Indeed, one 

commenter explained that unregulated 

clinical integration was likely to lead to 

the greater vertical consolidation of 

provider markets, which in turn will 

fuel cost growth, making health care less 

affordable for private payers. 

By contrast, several commenters 

contended that the proposed rule’s 

decision to rely, in part, on the Antitrust 

Agencies’ clinical integration 

requirements for ‘‘clinical and 

administrative’’ systems was in error. 

These and other commenters opposed 

the proposed clinical integration 

requirements as overly prescriptive, 

unnecessary, likely to limit innovation 

in design and implementation of ACOs 

and unrelated to the three-part aim. 

However, many of these commenters 

acknowledge that it is a step forward 

that the proposed Antitrust Policy 

Statement states that an ACO that meets 

CMS criteria will be found to be 

sufficiently ‘‘integrated’’ to meet part of 

the test for avoiding antitrust 

enforcement actions. Several 

commenters also suggested that even if 

there are changes to the ACO program 

to make it more attractive financially, 

these barriers to clinical integration will 

impede a robust response to the ACO 

program. 

One commenter explained that real 

clinical integration is evidenced by 

patient coordination of care across 

health care settings, providers, and 

suppliers and is best shown when there 

is a structure in place that is patientfocused and where clinicians 

collaborate on best practices in an effort 

to furnish higher quality care that they 

likely would not achieve if working 

independently. This commenter and 

others suggested that we focus on the 

statutorily required processes regarding 

reporting quality measures, promoting 

evidence-based patient processes, and 

coordinating care, thus making separate 

clinical integration requirements moot. 

Several commenters suggested that we 

eliminate the requirements regarding 

clinical integration and instead 

describe, at a very high level, examples 

of possible ways an ACO could meet the 

three-part aim. Some commenters 

suggested that the Antitrust Agencies 

specify which criteria are related to 

antitrust issues and which are 

applicable to all clinically integrated 

health care organizations. One 

commenter suggested that CMS, as a 

purchaser of health care services, 

should negotiate targets for performance 

at a higher level and not place 

requirements on how ACOs achieve 

these targets. Several commenters 

suggested we work with the Antitrust 

Agencies to create more flexibility for 

physicians to join together to provide 

services. A commenter argued that 

participation in the Shared Savings 

Program, in itself, is an undertaking of 

meaningful financial integration, thus 

rendering the need for compliance with 

clinical integration unnecessary to avoid 

per se condemnation. 

Response: We disagree with the 

commenters’ suggestion that relying, in 

part, on the Antitrust Agencies’ clinical 

integration requirements for ‘‘clinical 

and administrative’’ systems is overly 

prescriptive, unnecessary, or likely to 

limit innovation in ACO design. As we 

explained in the proposed rule, the 

purposes of the Shared Savings Program 

and the Antitrust Agencies’ clinical 

integration requirements are 

complementary and, indeed, mutually 

reinforcing. The purposes of the Shared 

Savings Program are to promote 

accountability for a patient population, 

coordinate items and services furnished 

to beneficiaries under Medicare Parts A 

and B, and encourage investment in 

infrastructure and redesigned care 

processes for high quality and efficient 

service delivery. The Antitrust 

Agencies’ clinical integration criteria 

require participants to show a degree of 

interaction and interdependence among 

providers in their provision of medical 

services that enables them to jointly 

achieve cost efficiencies and quality 

improvements. We do not see how ACO 

participants and ACO providers/ 

suppliers could achieve the statutory 

goals of the Shared Savings Program 

without showing a degree of interaction 

and interdependence in their joint 

provision of medical services such that 

they provide high quality and efficient 

service delivery. Many commenters 

agreed with this conclusion and we 

disagree with the commenters that 

suggested otherwise. 

We also agree with commenters that 

the four statutorily required processes 

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

promote evidence-based medicine, 

report cost and quality metrics, promote 

patient engagement, and coordinate care 

overlap and are consistent with our 

proposed clinical integration criteria. 

Accordingly, we are aligning our final 

requirements regarding sufficient 

‘‘clinical and administrative systems’’ 

with our final requirements regarding 

these four required processes. These 

required processes are discussed later in 

this section of the final rule. 

We disagree with the commenter that 

participation in the Shared Savings 

Program is an undertaking of 

meaningful financial integration. 

Because ACO participants and ACO 

providers/suppliers will continue to 

receive FFS payments and are required 

only to have a mechanism to receive 

and distribute shared savings, they will 

not necessarily be sharing substantial 

financial risk, which is the hallmark of 

financial integration. 

Comment: Some commenters 

suggested that we provide concrete 

standards as to what a meaningful 

commitment is (especially a meaningful 

human investment). Another 

commenter suggested that those ACO 

providers/suppliers providing a 

meaningful financial commitment 

should receive increased shared savings. 

A commenter questioned whether it is 

sufficient to demonstrate a meaningful 

commitment if a provider agrees to 

participate contractually in an ACO and 

to comply with the ACO’s clinical, 

performance, and administrative 

standards. 

A commenter suggested we revise our 

interpretation of ‘‘meaningful 

commitment to the ACO’s clinical 

integration,’’ because financial and 

human capital are insufficient to show 

clinical integration; rather, real clinical 

integration is evidenced in patient 

coordination of care across health care 

settings, providers, and suppliers. 

Some commenters queried how a 

specialist or other health care 

professional can show ‘‘meaningful 

commitment’’ if they are in more than 

one ACO. Other commenters suggested 

that the level of observable commitment 

is neither a precursor to clinical activity 

nor the outcome. 

Response: We continue to believe that 

each ACO participant and ACO 

provider/supplier must demonstrate a 

meaningful commitment (for example, 

time, effort, or financial) to the ACO’s 

mission to ensure its likely success so 

that the ACO participant and/or ACO 

provider/supplier will have a stake in 

ensuring the ACO achieves its mission. 

Meaningful commitment may include, 

for example, a sufficient financial or 

human investment (for example, time 

and effort) in the ongoing operations of 

the ACO such that the potential loss or 

recoupment of the investment is likely 

to motivate the ACO participant or ACO 

provider/supplier to take the actions 

necessary to help the ACO achieve its 

mission. A meaningful commitment 

may be evidenced by, for example— 

• Financial investment such as 

capital contributions for ACO 

infrastructure information systems, 

office hardware, computer software, 


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ACO staff, training program, or any 

other aspect of the ACO’s operations 

where that investment provides the 

ACO participant or provider/supplier 

with a sufficient stake in the successful 

operation of the ACO such that the 

potential loss or recoupment of the 

investment is likely to motivate the 

participant or provider/supplier to 

achieve the mission of the ACO; and 

• Human investment such as serving 

on the ACO’s governing body; serving 

on committees relating to the 

establishment, implementation, 

monitoring or enforcement of the ACO’s 

evidence-based medical practice or 

clinical guidelines; or otherwise 

participating in other aspects of the 

ACO’s operations, such as definition of 

processes to promote patient 

engagement, care coordination, or 

internally reporting on cost and quality 

metrics, to a degree that evidences a 

personal investment in ensuring that the 

ACO achieves its goals. 

We also believe that a commitment 

can be meaningful when ACO 

participants and ACO providers/ 

suppliers agree to comply with and 

implement the ACO’s required 

processes and are accountable for 

meeting the ACO’s performance 

standards. By doing so, we believe that 

they will be motivated to achieve the 

ACO’s internal performance standards 

and to comply with the processes 

required by section 1899(b)(2)(G) of the 

Act (as discussed later in this section). 

Indeed, we fail to see how the required 

processes discussed later in this final 

rule could be effectuated unless ACO 

providers/suppliers meaningfully 

commit to implement, adhere to, and be 

accountable for the ACO’s evidencedbased medical guidelines, care 

coordination procedures, patient 

engagement processes, and reporting of 

cost and quality that are essential to 

meeting the three-part aim. 

We also clarify that an ACO provider/ 

supplier can contractually agree to work 

with one or more ACOs by agreeing to 

implement, adhere to, and be 

accountable for that ACO’s statutorily 

required processes. We disagree with 

the commenter’s suggestion that the 

level of observable commitment is 

neither a precursor to clinical activity 

nor to outcome. We do not see how an 

ACO could achieve its mission if its 

providers and suppliers do not agree to 

comply with and implement the ACO’s 

required processes. Such a commitment 

is necessary, although insufficient in 

and of itself, to ensure that an ACO 

achieves the three-part aim. 

Comment: Several commenters 

suggested that the requirement that 

ACOs include descriptions in their 

applications of how they will satisfy 

certain criteria and make documents 

available is too burdensome and creates 

a barrier to participation, especially for 

safety net providers and many smaller 

and non-hospital-based applicants. 

Some commenters asked what we will 

do with the information (for example, 

employment contracts). 

But several comments suggested we 

strengthen the application requirement. 

For example, these commenters stated 

that an ACO should be required to detail 

how it plans to partner with 

community-based organizations, and to 

detail the kinds of processes it will use 

to coordinate the care of Medicare 

beneficiaries with post-acute care 

providers. 

Another commenter suggested selfattestation for the many requested 

documents to show the leadership and 

management structures. Other 

commenters urged us to use NCQA’s 

ACO certification standards to deem an 

ACO as acceptable and to work with 

NCQA to eliminate duplicating 

requirements and aligning 

accreditations. 

Response: We acknowledge 

commenters’ concerns that the proposed 

documentation requests may be 

burdensome for certain ACOs. 

Accordingly, we have aligned our 

proposed documentation requests 

regarding clinical and administrative 

systems with the statutory processes 

that are described in this section. We 

believe that this streamlining of 

document requests addresses the 

commenters’ suggestions for additional 

detail regarding certain clinical and 

administrative processes. It also 

obviates the need to rely NCQA’s ACO 

certification standards. Notwithstanding 

this alignment, we continue to believe 

that ACOs should submit certain 

documentation regarding their clinical 

and administrative systems to ensure 

that the ACO meets the eligibility 

requirements, has the requisite clinical 

leadership, and has a reasonable chance 

of achieving the three-part aim. In 

addition, we will use the documents to 

assess whether ACO participants and 

ACO provider/supplier(s) have the 

requisite meaningful commitment to the 

mission of the ACO. 

Comment: Several commenters 

applauded our proposal to consider an 

innovative ACO with a management 

structure not meeting the proposed 

leadership and management 

requirements. As noted previously, 

many commenters suggested that the 

leadership and management 

requirements were overly prescriptive. 

Thus, many commenters supported the 

innovative option proposal. 

Response: We will finalize our 

proposal to allow ACO applicants to 

describe innovative leadership and 

management structures that do not meet 

the final rule’s leadership and 

management structures in order to 

encourage innovation in ACO 

leadership and management structures. 

Final Decision: We will finalize the 

requirement that the ACO’s operations 

be managed by an executive, officer, 

manager, or general partner, whose 

appointment and removal are under the 

control of the organization’s governing 

body and whose leadership team has 

demonstrated the ability to influence or 

direct clinical practice to improve 

efficiency, processes, and outcomes. In 

addition, clinical management and 

oversight must be managed by a seniorlevel medical director who is one of the 

ACO’s physicians, who is physically 

present on a regular basis in an 

established ACO location, and who is a 

board-certified physician and licensed 

in one of the States in which the ACO 

operates. 

As part of its application, an ACO will 

be required to describe how it will 

establish and maintain an ongoing 

quality assurance and improvement 

program, led by an appropriately 

qualified health care professional. ACO 

participants and ACO providers/ 

suppliers must demonstrate a 

meaningful commitment to the mission 

of the ACO. A meaningful commitment 

can be shown when ACO participants 

and ACO providers/suppliers agree to 

comply with and implement the ACO’s 

processes required by section 

1899(b)(2)(G) of the Act and are held 

accountable for meeting the ACO’s 

performance standards for each required 

process as defined later in this section. 

As part of their applications, ACOs 

must submit certain documentation 

regarding their leadership and 

management structures, including 

clinical and administrative systems, to 

ensure that the ACO meets the 

eligibility requirements. We are 

finalizing the following document 

requests to effectuate our leadership and 

management structure requirements: 

• ACO documents (for example, 

participation agreements, employment 

contracts, and operating policies) 

sufficient to describe the ACO 

participants’ and ACO providers/ 

suppliers’ rights and obligations in the 

ACO. 

• Supporting materials documenting 

the ACO’s organization and 

management structure, including an 

organizational chart, a list of committees 

(including names of committee 

members) and their structures, and job 


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descriptions for senior administrative 

and clinical leaders. 

Additionally, upon request, the ACO 

may also be required to provide copies 

of documents effectuating the ACO’s 

formation and operation, including 

charters, by-laws, articles of 

incorporation, and partnership, joint 

venture, management, or asset purchase 

agreements. 

We also will finalize our proposal to 

allow ACO applicants to describe 

innovative leadership and management 

structures that do not meet the final 

rule’s leadership and management 

requirements. (§ 425.108, § 425.112, and 

§ 425.204). 

5. Processes To Promote Evidence-Based 

Medicine, Patient Engagement, 

Reporting, Coordination of Care, and 

Demonstrating Patient-Centeredness 

Section 1899(b)(2) of the Act 

establishes a number of requirements 

which ACOs must satisfy in order to be 

eligible to participate in the Shared 

Savings Program. Specifically, section 

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

ACO to define processes to: Promote 

evidence-based medicine and patient 

engagement; report on quality and cost 

measures; and coordinate care, such as 

through the use of telehealth, remote 

patient monitoring, and other enabling 

technologies. 

We proposed that to meet the 

requirements under section 

1899(b)(2)(G) of the Act, the ACO must 

document in its application its plans to: 

(1) Promote evidence-based medicine; 

(2) promote beneficiary engagement; (3) 

report internally on quality and cost 

metrics; and (4) coordinate care. We 

proposed to allow ACOs the flexibility 

to choose the tools for meeting these 

requirements that are most appropriate 

for their practitioners and patient 

populations. In addition, we proposed 

that the required documentation present 

convincing evidence of concrete and 

effective plans to satisfy these 

requirements and that the 

documentation provide the specific 

processes and criteria that the ACO 

intends to use. This documentation was 

necessary because we wanted to ensure 

such processes would include 

provisions for internal assessment of 

cost and quality of care within the ACO, 

and that the ACO would employ these 

assessments in continuous improvement 

of the ACO’s care practices. We 

explained in the proposed rule that as 

we learn more about successful 

strategies in these areas, and as we have 

more experience assessing specific 

critical elements for success, the Shared 

Savings Program eligibility 

requirements with regard to section 

1899(b)(2)(G) of the Act may be revised. 

We also specifically solicited comment 

on whether more prescriptive criteria 

may be appropriate for meeting some or 

all of these requirements under section 

1899(b)(2)(G) of the Act for future 

rulemaking. 

In addition, section 1899(b)(2)(H) of 

the Act requires an ACO to 

‘‘demonstrate to the Secretary that it 

meets patient-centeredness criteria 

specified by the Secretary, such as the 

use of patient and caregiver assessments 

or the use of individualized care plans.’’ 

We explained that a patient-centered, or 

person-centered, orientation could be 

defined as care that incorporates the 

values of transparency, 

individualization, recognition, respect, 

dignity, and choice in all matters, 

without exception, related to one’s 

person, circumstances, and 

relationships in health care. We drew 

from the work of the Institute of 

Medicine and the principles articulated 

by the National Partnership for Women 

and Families to develop our proposals. 

We explained that the statutory 

requirement for ‘‘patient-centeredness 

criteria’’ means that patient-centered 

care must be promoted by the ACO’s 

governing body and integrated into 

practice by leadership and management 

working with the organization’s health 

care teams. 

We proposed that an ACO would be 

considered patient-centered if it has all 

of the following: 

• A beneficiary experience of care 

survey in place and a description in the 

ACO application of how the survey 

results will be used to improve care over 

time. 

• Patient involvement in ACO 

governance. The ACO would be 

required to have a Medicare beneficiary 

on the governing board. 

• A process for evaluating the health 

needs of the ACO’s assigned population, 

including consideration of diversity in 

its patient populations, and a plan to 

address the needs of its population. A 

description of this process must be 

included in the application, along with 

a description of how the ACO would 

consider diversity in its patient 

population and how it plans to address 

its population needs. 

• Systems in place to identify highrisk individuals and processes to 

develop individualized care plans for 

targeted patient populations, including 

integration of community resources to 

address individual needs. 

• A mechanism in place for the 

coordination of care (for example, via 

use of enabling technologies or care 

coordinators). In addition, the ACO 

should have a process in place (or clear 

path to develop such a process) to 

electronically exchange summary of 

care information when patients 

transition to another provider or setting 

of care, both within and outside the 

ACO, consistent with meaningful use 

requirements under the Electronic 

Health Records (EHR) Incentive 

program. 

• A process in place for 

communicating clinical knowledge/ 

evidence-based medicine to 

beneficiaries in a way that is 

understandable to them. This process 

should allow for beneficiary engagement 

and shared decision-making that takes 

into account the beneficiaries’ unique 

needs, preferences, values, and 

priorities. 

• Written standards in place for 

beneficiary access and communication 

and a process in place for beneficiaries 

to access their medical records. 

• Internal processes in place for 

measuring clinical or service 

performance by physicians across the 

practices, and using these results to 

improve care and service over time. 

We explained that this list provides a 

comprehensive set of criteria for 

realizing and demonstrating patientcenteredness in the operation of an 

ACO. We solicited comment on these 

criteria. 

We also noted that there is substantial 

overlap and alignment between the 

processes ACOs are required to define 

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

and both the proposed patientcenteredness criteria (as defined by the 

Secretary in accordance with section 

1899(b)(2)(H) of the Act) and the clinical 

and administrative systems that are to 

be in place in the ACO’s leadership and 

management structure as required by 

section 1899(b)(2)(F) of the Act. 

Accordingly the following comment and 

responses discussion includes a 

discussion of not only the required 

process, but also the patientcenteredness criteria and the necessary 

clinical and administrative systems. 

Comment: Commenters suggested that 

we require a sufficient level of detail on 

processes that ACOs are required to 

define. Several commenters suggested 

that we require ACOs to evaluate their 

own practices and make adjustments as 

necessary and hold ACOs accountable 

for adhering to their stated plans. Other 

commenters expressed concerns that 

ACOs will need clear and certain 

guidance, including technical support, 

on the processes to promote: Evidencebased medicine, patient engagement, 

reports on quality and cost measures, 

and the coordination of care. Other 

commenters explained that patient 

coordination of care across health care 


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settings, providers, and suppliers is best 

shown when there is a structure in place 

that is patient-focused and where 

clinicians collaborate on best practices 

in an effort to furnish higher quality 

care that they likely would not achieve 

if working independently. These 

commenters suggested that our 

requirements regarding the four 

statutorily required processes can help 

ensure that there is a structure in place 

to ensure the likelihood that an ACO 

can achieve the three-part aim. 

Response: Although we understand 

the request by some commenters that we 

develop a more prescriptive approach to 

define each of the four processes, we are 

concerned that such an approach would 

be premature and potentially impede 

innovation and the goals of this 

program. ACOs should retain the 

flexibility to establish processes that are 

best suited to their practice and patient 

population. 

Final Decision: We will finalize our 

proposal requiring that in order to be 

eligible to participate in the Shared 

Savings Program, the ACO must provide 

documentation in its application 

describing its plans to: (1) Promote 

evidence-based medicine; (2) promote 

beneficiary engagement; (3) report 

internally on quality and cost metrics; 

and (4) coordinate care. As part of these 

processes, an ACO shall adopt a focus 

on patient-centeredness that is 

promoted by the governing body and 

integrated into practice by leadership 

and management working with the 

organization’s health care teams. These 

plans must include how the ACO 

intends to require ACO participants and 

ACO providers/suppliers to comply 

with and implement each process (and 

sub element thereof), including the 

remedial processes and penalties 

(including the potential for expulsion) 

applicable to ACO participants and 

ACO providers/suppliers for failure to 

comply. In addition, these plans must 

describe how such processes will 

include provisions for internal 

assessment of cost and quality of care 

within the ACO and how the ACO 

would employ these assessments in 

continuous improvement of the ACO’s 

care practices. (§ 425.112). 

a. Processes To Promote Evidence-Based 

Medicine 

As stated previously, section 

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

ACO to ‘‘define processes to promote 

evidence-based medicine * * *.’’ We 

explained in the proposed rule that 

evidence-based medicine can be 

generally defined as the application of 

the best available evidence gained from 

the scientific method to clinical 

decision-making. We proposed that as 

part of the application, the ACO would 

describe the evidence-based guidelines 

it intends to establish, implement, and 

periodically update. 

Comment: Nearly all comments 

received supported processes to 

promote evidence-based medicine. 

Some commenters also suggested that 

the ACO’s evidence-based guidelines 

apply to a broad range of conditions that 

are found in the beneficiary population 

served by the ACO. In addition, some 

commenters suggested that we provide 

additional guidance on the development 

and implementation these guidelines 

and processes by: (1) Requiring 

sufficient level of detail on processes 

and tools that will be utilized; (2) 

requiring ACOs to evaluate the practices 

and make adjustments as necessary; (3) 

including measures that assess the 

intended outcomes of these practices in 

the quality reporting requirement; and 

holding ACOs accountable for adhering 

to their stated plans. 

Additionally, several commenters 

recommended that these processes be 

more prescriptive and include: 

Measures for improvement to functional 

status, suggested tools for monitoring 

decision support, and specifications for 

baseline evidence-based guidelines. 

Other commenters suggested that we 

establish guidelines for how ACOs 

should establish their evidence-based 

medicine. For example, one commenter 

explained why the organized medical 

staff of a hospital in which an ACO 

participates should review and approve 

all medical protocols and all other 

quality programs concerning inpatient 

care at that hospital. Other commenters 

suggested that we require specialist 

involvement in the development of 

these clinical guidelines and processes 

so that the guidelines reflect appropriate 

standards of care for their patients and 

so that new treatments are not 

discouraged or disadvantaged. Another 

commenter suggested we require that 

clinical practice guidelines used by 

ACOs located in the same geographical 

area be consistent so that specialists 

may be able to participate in more than 

one ACO. One comment suggested that 

we adopt a similar set of criteria to 

evaluate the evidence-based approaches 

of ACOs similar to the one the Institute 

of Medicine (IOM) recently released in 

its consensus report, ‘‘Clinical Practice 

Guidelines We Can Trust,’’ that details 

criteria that all evidence-based 

guidelines should meet. 

One commenter suggested broadening 

the definition of the term ‘‘evidencebased medicine’’ to include best 

practices regarding evidence-based 

psychosocial interventions not generally 

included as medicine. One commenter 

suggested that we require that the 

application specify how the leadership 

structure will assure linkage and 

involvement with local and State health 

agencies. 

One comment recommended that 

ACOs that have met requirements for 

NCQA Medical Home recognition be 

eligible to use the same ‘‘short form’’ of 

documentation of these capabilities that 

will be available to the PGP 

demonstration practices. 

Response: As discussed previously, 

we believe it is important that ACOs 

retain the flexibility to define processes 

that are best suited to their own 

practices and patient populations. Thus, 

for the requirements under section 

1899(b)(2)(G) of the Act, ACOs must 

provide documentation in their 

respective applications describing how 

they plan to define, establish, 

implement, and periodically update 

processes to promote evidence-based 

medicine applicable to ACO 

participants and ACO providers/ 

suppliers as opposed to the 

establishment of more prescriptive 

guidelines regarding the processes of 

evidence-based medicine. We agree 

with commenters that for these 

guidelines to have an impact they must 

cover diagnoses found in the beneficiary 

population assigned to the ACO. We 

believe that the guidelines should 

address diagnoses with significant 

potential for the ACO to achieve quality 

improvements, while also accounting 

for the circumstances of individual 

beneficiaries. For the reasons stated 

previously, we decline, however, to 

establish the processes by which ACOs 

should develop these evidence-based 

medicine guidelines. We would 

consider an ACO that has met the 

requirements for NCQA Medical Home 

recognition well on its way to 

demonstrating that it has processes in 

place that support evidence-based 

guidelines, but we will still need to 

evaluate them in the context of the 

Shared Savings Program eligibility 

requirements. 

Final Decision: As previously 

discussed, to be eligible to participate in 

the Shared Savings Program, the ACO 

must define, establish, implement, and 

periodically update its processes to 

promote evidence-based medicine. 

These guidelines must cover diagnoses 

with significant potential for the ACO to 

achieve quality improvements, taking 

into account the circumstances of 

individual beneficiaries. (§ 425.112). 


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b. Processes To Promote Patient 

Engagement 

Section 1899(b)(2)(G) of the Act also 

requires an ACO to ‘‘define processes to 

promote * * * patient engagement.’’ 

We described in the proposed rule that 

the term ‘‘patient engagement’’ is the 

active participation of patients and their 

families in the process of making 

medical decisions. We explained that 

measures for promoting patient 

engagement may include, but are not 

limited to, the use of decision support 

tools and shared decision making 

methods with which the patient can 

assess the merits of various treatment 

options in the context of his or her 

values and convictions. Patient 

engagement also includes methods for 

fostering ‘‘health literacy’’ in patients 

and their families. We proposed that as 

part of its application, the ACO would 

describe the patient engagement 

processes it intends to establish, 

implement, and periodically update. 

Related to the process to promote 

patient engagement, we also proposed 

that ACOs have a beneficiary experience 

of care survey in place and that the 

ACO’s application should describe how 

the ACO will use the survey results to 

improve care over time. We explained 

in the proposed rule that surveys are 

important tools for assessing beneficiary 

experience of care and outcomes. As 

part of the requirement to implement a 

beneficiary experience of care survey, 

we proposed to require ACOs to collect 

and report on measures of beneficiaries’ 

experience of care and to submit their 

plan on how they will promote, assess, 

and continually improve in weak areas 

identified by the survey. 

Specifically we proposed that ACOs 

will be required to use the CAHPS 

survey. We also proposed to require the 

adoption of an appropriate functional 

status survey module that may be 

incorporated into the CAHPS survey. As 

further discussed in section II.F. of this 

final rule, scoring on the patient 

experience of care survey would become 

part of the assessment of the ACO’s 

quality performance. 

Promoting patient engagement would 

also include a requirement that ACOs 

provide for patient involvement in their 

governing processes. We proposed that 

ACOs would be required to demonstrate 

a partnership with Medicare FFS 

beneficiaries by having representation 

by a Medicare beneficiary serviced by 

the ACO, in the ACO governing body. In 

order to safeguard against any conflicts 

of interest, we proposed that any 

patient(s) included in an ACO’s 

governing body, or an immediate family 

member, must not have any conflict of 

interest, and they may not be an ACO 

provider/supplier within the ACO’s 

network. Section II.B.3. of this final rule 

discusses these issues in full. 

In addition to these two proposals 

relating to processes for patient 

engagement, we proposed four other 

requirements relating to patientcenteredness that overlap substantially 

with our proposals regarding patient 

engagement. These processes include: 

(1) Evaluating the health needs of the 

ACO’s assigned population, including 

consideration of diversity in its patient 

populations, and a plan to address the 

needs of its population; 

(2) communicating clinical knowledge/ 

evidence-based medicine to 

beneficiaries in a way that is 

understandable to them; (3) engaging 

beneficiaries in shared decision-making 

that takes into account the beneficiaries’ 

unique needs, preferences, values, and 

priorities; and (4) having written 

standards in place for beneficiary 

communications and allowing 

beneficiary access to their medical 

record. 

As part of the application, we 

proposed that the ACO would describe 

the patient engagement processes it 

intends to establish, implement, and 

periodically update. 

Comment: Commenters supported our 

proposal requiring that an ACO 

describe, in its application, its process 

for evaluating the health needs of the 

population, including consideration of 

diversity in its patient populations, and 

a plan to address the needs of its 

Medicare population. Several comments 

suggest that certain populations, such as 

tribal populations, have a 

disproportionate share of diversity and 

recommended including specific 

measures to account for the diversity in 

their Medicare population. 

Response: We agree with the 

comments received that certain 

beneficiary populations will be more 

diverse than others, which is why we 

proposed to provide ACOs with the 

flexibility to describe the processes that 

will be most effective in evaluating their 

patient population as opposed to 

prescriptively identifying specific 

measures for all ACOs. 

Comment: Several commenters 

explained that ACOs must recognize 

that the needs of a diverse population 

are based on many factors, such as race, 

gender, gender identity or expression, 

sexual orientation, disability, income 

status, English proficiency, and others. 

These commenters, and others, 

suggested that we develop an objective 

set of criteria for the evaluation of 

population health needs and 

consideration of diversity. 

Response: We agree with commenters 

that true patient engagement requires 

sensitivity to the many diverse factors 

that can affect a specific patient 

population and the appropriate care to 

address the health needs of that 

population. We explained in the 

proposed rule that several institutions 

and associations such as the National 

Committee for Quality Assurance 

(NCQA) and AHRQ have made 

recommendations regarding evaluation 

of population health and diversity. 

Establishing partnerships with a State or 

local health department which performs 

community health needs assessments 

and applying these findings to the 

ACO’s population and activities may be 

another viable option for meeting this 

criterion. Given this broad range of 

available resources, we decline to 

develop a set of evaluation criteria to 

assess the health needs of an ACO’s 

patient population. 

Comment: Commenters supported 

requiring ACOs to demonstrate 

processes to promote patient 

engagement relating to communicating 

clinical knowledge, shared decision 

making, and beneficiary access to 

medical records. Some commenters 

expressed concern that we were 

allowing too much latitude in defining 

these processes. These commenters 

recommended more guidance in areas 

where there is evidence of best 

practices. Comments also recommended 

that in order for the benefits of 

adherence to processes to promote 

patient engagement to be realized, 

patients and families need to be 

incentivized to actively participate in 

their own health care. 

Response: We believe it is important 

that ACOs retain the flexibility to 

establish processes that are best suited 

to their own practices and patient 

populations. Additionally, the very act 

of educating and engaging patients in 

the decision making processes 

associated with their own health care 

needs should sufficiently incentivize 

patients to actively engage in 

prospective treatment approaches in the 

light of their own values and 

convictions. Therefore, we decline to 

impose additional requirements in this 

area. 

Final Decision: To be eligible to 

participate in the Shared Savings 

Program, the ACO must define, 

establish, implement, and periodically 

update processes to promote patient 

engagement. In its application an ACO 

must describe how it intends to address 

all of the following areas: (a) Evaluating 

the health needs of the ACO’s assigned 

population; (b) communicating clinical 

knowledge/evidence-based medicine to 


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beneficiaries; (c) beneficiary engagement 

and shared decision-making; and 

(d) written standards for beneficiary 

access and communication, and a 

process in place for beneficiaries to 

access their medical record. (§ 425.112). 

c. Processes To Report on Quality and 

Cost Measures 

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

requires an ACO to ‘‘define processes to 

* * * report on quality and cost 

measures.’’ We explained in the 

proposed rule that processes that may 

be used for reporting on quality and cost 

measures may include, but are not 

limited to, developing a population 

health data management capability, or 

implementing practice and physician 

level data capabilities with point-ofservice (POS) reminder systems to drive 

improvement in quality and cost 

outcomes. We stated that we expect 

ACOs to be able to monitor both costs 

and quality internally and to make 

appropriate modifications based upon 

their collection of such information. 

In our discussion of required clinical 

and administrative systems, we 

proposed that an ACO would have an 

infrastructure that enables the ACO to 

collect and evaluate data and provide 

feedback to the ACO providers/ 

suppliers across the entire organization, 

including providing information to 

influence care at the point of care. 

We proposed that as part of the 

application, the ACO would describe its 

process to report internally on quality 

and cost measures, and how it intends 

to use that process to respond to the 

needs of its Medicare population and to 

make modifications in its care delivery. 

Comment: Several commenters 

suggested that we outline quality 

reporting requirements for the Shared 

Savings Program. Other commenters 

suggested that an ACO detail its plans 

to manage information technology (IT) 

use and to identify personnel 

responsible for IT. 

Response: As discussed previously, 

we believe it is important that ACOs 

retain the flexibility to establish 

processes that are best suited to their 

own practices and patient populations. 

Thus, consistent with the requirements 

under section 1899(b)(2)(G) of the Act, 

Shared Savings Program, we will 

require that ACOs provide 

documentation in their applications 

describing their processes to internally 

report on quality and cost measures in 

order to be eligible to participate in the 

Shared Savings Program. 

Comment: Some comments expressed 

concerns that, in rural settings, hospitals 

will not be able to address, achieve, and 

implement quality measures for patients 

with specific chronic conditions and 

that use of these hospitals will interrupt 

the relationship between patients and 

their respective specialty provider that 

are participating in the Shared Savings 

Program. 

Response: We believe that the Shared 

Savings Program provides new 

incentives for providers in rural areas to 

develop the means to report on cost and 

quality of their patients with chronic 

conditions in ways that benefit their 

patient population. 

Final Decision: We will finalize our 

proposal that to be eligible to participate 

in the Shared Savings Program, the ACO 

must define, establish, implement and 

periodically update its processes and 

infrastructure for its ACO participants 

and ACO providers/suppliers to 

internally report on quality and cost 

metrics to enable the ACO to monitor, 

provide feedback, and evaluate ACO 

participant and ACO provider/supplier 

performance and to use these results to 

improve care and service over time. 

(§ 425.112). 

d. Processes To Promote Coordination of 

Care 

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

requires an ACO to ‘‘define processes to 

* * * coordinate care, such as through 

the use of telehealth, remote patient 

monitoring, and other such enabling 

technologies.’’ We explained in the 

proposed rule that coordination of care 

involves strategies to promote, improve, 

and assess integration and consistency 

of care across primary care physicians, 

specialists, and acute and post-acute 

providers and suppliers, including 

methods to manage care throughout an 

episode of care and during its 

transitions, such as discharge from a 

hospital or transfer of care from a 

primary care physician to a specialist. 

We also noted that the strategies 

employed by an ACO to optimize care 

coordination should not impede the 

ability of a beneficiary to seek care from 

providers that are not participating in 

the ACO, or place any restrictions that 

are not legally required on the exchange 

of medical records with providers who 

are not part of the ACO. We proposed 

to prohibit the ACO from developing 

any policies that would restrict a 

beneficiary’s freedom to seek care from 

providers and suppliers outside of the 

ACO. 

In addition, the process to promote 

coordination of care includes the ACOs 

having systems in place to identify highrisk individuals and processes to 

develop individualized care plans for 

targeted patient populations. We 

proposed that an individualized care 

plan be tailored to—(1) the beneficiary’s 

health and psychosocial needs; (2) 

account for beneficiary preferences and 

values; and (3) identify community and 

other resources to support the 

beneficiary in following the plan. This 

plan would be voluntary for the 

beneficiary, privacy protected, and 

would not be shared with Medicare or 

the ACO governing body; it would 

solely be used by the patient and ACO 

providers/suppliers for care 

coordination. If applicable, and with 

beneficiary consent, the care plan could 

be shared with the caregiver, family, 

and others involved in the beneficiary’s 

care. An ACO would have a process in 

place for developing, updating, and, as 

appropriate, sharing the beneficiary care 

plan with others involved in the 

beneficiary’s care, and providing it in a 

format that is actionable by the 

beneficiary. 

We requested comments on our 

proposal that ACOs be required to 

demonstrate the processes they have in 

place to use individualized care plans 

for targeted beneficiary populations in 

order to be eligible for the Shared 

Savings Program. We proposed that the 

individualized care plans should 

include identification of community 

and other resources to support the 

beneficiary in following the plan. We 

also stated that we believe that a process 

for integrating community resources 

into the ACO is an important part of 

patient-centeredness. 

For purposes of the application to 

participate in the Shared Savings 

Program, we proposed that an ACO 

would be required to submit a 

description of its individualized care 

program, along with a sample care plan, 

and explain how this program is used to 

promote improved outcomes for, at a 

minimum, their high-risk and multiple 

chronic condition patients. In addition, 

the ACO should describe additional 

target populations that would benefit 

from individualized care plans. We also 

proposed that ACOs describe how they 

will partner with community 

stakeholders as part of their application. 

ACOs that have a stakeholder 

organization serving on their governing 

body would be deemed to have satisfied 

this requirement. We requested 

comment on these recommendations. 

Comment: Comments received 

acknowledged that requiring ACOs to 

define processes to promote 

coordination of care is vital to the 

success of the Shared Savings Program. 

Commenters stressed the importance of 

health information exchanges in 

coordination of care activities and 

recommended that CMS allow ACOs the 

flexibility to use any standards-based 

electronic care coordination tools that 


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meet their needs while other comments 

suggested that the proposed rule 

anticipated a level of functional health 

information exchange and technology 

adoption that may be too aggressive for 

deployment in January 2012. 

Response: We agree that ACOs should 

coordinate care between all types of 

providers and across all services. We 

also agree that health information 

exchanges are of the utmost importance 

for both effective coordination of care 

activities and the success of the Shared 

Savings Program. We understand that 

there will be variable ability among 

ACOs to adopt the appropriate health 

information exchange technologies, but 

underscore the importance of robust 

health information exchange tools in 

effective care coordination. 

Additionally, as discussed in the 

Agreement section of this regulation, we 

will allow for two start dates in the first 

year of the agreement period. These 

additional start dates will provide an 

‘‘on ramp’’ for all ACOs to get the 

appropriate health information 

exchanges in place before they enter the 

program. 

Comment: Commenters supported our 

proposal to require an ACO to submit a 

description of its individualized care 

program, along with a sample care plan, 

and explain how this program is used to 

promote improved outcomes for, at a 

minimum, their high-risk and multiple 

chronic condition patients. Several 

comments recommended that CMS 

make a stronger case for the need to 

integrate community resources into the 

individualized care plans by requiring 

that ACOs have a contractual agreement 

in place with community-based 

organizations. 

Response: Although we agree with 

comments that the integration of 

community resources into the 

individualized care plans is important 

to the concept of patient-centeredness, 

we also believe it is important to afford 

ACOs the flexibility to accomplish this 

requirement in a manner that is most 

suited to their patient population. 

Final Decision: We will finalize our 

proposal requiring ACOs to define their 

care coordination processes across and 

among primary care physicians, 

specialists, and acute and post acute 

providers. The ACO must also define its 

methods to manage care throughout an 

episode of care and during its 

transitions. The ACO must submit a 

description of its individualized care 

program as part of its application along 

with a sample care plan and explain 

how this program is used to promote 

improved outcomes for, at a minimum, 

their high-risk and multiple chronic 

condition patients. The ACO should 

also describe additional target 

populations that would benefit from 

individualized care plans. In addition, 

we will finalize our proposal that ACOs 

describe how they will partner with 

community stakeholders as part of their 

application. ACOs that have stakeholder 

organizations serving on their governing 

body will be deemed to have satisfied 

this requirement. (§ 425.112). 

6. Overlap With Other CMS Shared 

Savings Initiatives 

a. Duplication in Participation in 

Medicare Shared Savings Programs 

The statute includes a provision that 

precludes duplication in participation 

in initiatives involving shared savings. 

Section 1899 of the Act states that 

providers of services or suppliers that 

participate in certain programs are not 

eligible to participate in the Shared 

Savings Program. Section 1899(b)(4) of 

the Act states these exclusions are ‘‘(A) 

A model tested or expanded under 

section 1115A [the Innovation Center] 

that involves shared savings under this 

title or any other program or 

demonstration project that involves 

such shared savings; (B) The 

independence at home medical practice 

pilot program under section 1866E.’’ 

In the proposed rule, we identified 

several programs or demonstrations that 

we believed included a shared savings 

component and would be considered 

duplicative. Specifically, we identified 

the Independence at Home Medical 

Practice Demonstration program, 

Medicare Health Care Quality (MHCQ) 

Demonstration Programs, Multipayer 

Advanced Primary Care Practice 

(MAPCP) demonstration, and the PGP 

Transition Demonstration. We also 

recognized that additional programs, 

demonstrations, or models with a 

shared savings component may be 

introduced in the Medicare program in 

the future. We recommended that 

interested parties check our Web site for 

an updated list. 

We further noted that the prohibition 

against duplication in participation in 

initiatives involving shared savings 

applies only to programs that involve 

shared savings under Medicare. 

Providers and suppliers wishing to 

participate in the Shared Savings 

Program would not be prohibited from 

participating if they are also 

participating in demonstrations and 

initiatives established by the Affordable 

Care Act that do not involve Medicare 

patients or do not involve shared 

savings, such as State initiatives to 

provide health homes for Medicaid 

enrollees with chronic conditions as 

authorized under section 2703 of the 

Affordable Care Act. 

As we explained in the proposed rule, 

we believe a principal reason 

underlying the prohibition against 

participation in multiple initiatives 

involving shared savings is to prevent a 

provider or supplier from being 

rewarded twice for achieving savings in 

the cost of care provided to the same 

beneficiary. Therefore, to ensure that a 

provider or supplier is rewarded only 

once with shared savings for the care of 

a beneficiary, an ACO participant may 

not also participate in another Medicare 

program or demonstration involving 

shared savings. However, in order to 

maintain as much flexibility as possible 

for ACO providers/suppliers to 

participate concurrently in multiple 

CMS initiatives involving shared 

savings, we do not believe it is 

appropriate to extend this prohibition to 

individual providers and suppliers. 

Accordingly, an ACO provider/supplier 

who submits claims under multiple 

Medicare-enrolled TINs may participate 

in both the Shared Savings Program 

under one ACO participant TIN and 

another shared savings program under a 

different non-ACO participant TIN if the 

patient population is unique to each 

program. 

Finally, we proposed a process for 

ensuring that savings associated with 

beneficiaries assigned to an ACO 

participating in the Shared Savings 

Program are not duplicated by savings 

earned in another Medicare program or 

demonstration involving shared savings. 

If such a program assigns beneficiaries 

based upon the TINs of health care 

providers from whom they receive care, 

we proposed to compare the 

participating TINs in the program or 

demonstration with those participating 

in the Shared Savings Program to ensure 

that TINs used for beneficiary 

assignment to an ACO participating in 

the Shared Savings Program are unique 

and that beneficiaries are assigned to 

only one shared savings program. If the 

other program or demonstration 

involving shared savings does not assign 

beneficiaries based upon the TINs of the 

health care providers from whom they 

receive care, but uses an alternate 

beneficiary assignment methodology, 

we proposed working with the 

developers of the respective 

demonstrations and initiatives to devise 

an appropriate method to ensure no 

duplication in shared savings payment. 

We proposed that applications to the 

Shared Savings Program that include 

TINs that are already participating in 

another program or demonstration 

involving shared savings would be 

rejected. 


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Comment: Commenters generally 

requested clarification on what 

programs and demonstrations would be 

considered overlapping and 

disqualifying for participating in the 

Shared Savings Program. Some 

commenters asked CMS to confirm that 

initiatives such as the New Jersey gain 

sharing demonstration are not 

considered to overlap with the Shared 

Savings Program. Another commenter 

asked CMS for an official opinion 

whether the MHCQ demonstrations, 

specifically, the Indiana Health 

Information Exchange (IHIE) 

demonstration and the North Carolina 

Community Care Network, and an ACO 

could coexist and, if so, how CMS 

would calculate the shared savings. 

Several commenters requested that 

CMS remove the MAPCP demonstration 

from the initiatives in which ACOs may 

not participate pointing out that the 

demonstration is not for shared savings, 

but rather one that is restricted to 

explicit payment for care coordination 

services to medical/health care homes. 

One commenter stated that it is possible 

to account for costs and payments in 

MAPCP and in an ACO so that CMS 

does not reward the same savings more 

than once. 

Some commenters asked CMS to 

provide guidance on whether 

participation in other value-based 

purchasing initiatives or demonstrations 

that do not involve shared savings, such 

as the Community-Based Care 

Transitions Programs, Hospital ValueBased Purchasing Programs, bundled 

payment programs, Maryland’s all-payer 

waiver, or other Innovation Center 

initiatives, would overlap with the 

Shared Savings Program. Other 

commenters wondered whether 

organizations participating in State 

shared savings initiatives involving 

Medicaid or dually eligible beneficiaries 

would be ineligible to participate in the 

Shared Savings Program. One 

commenter requested a comprehensive 

list of initiatives involving shared 

savings for which there would be 

overlap. 

Response: We have determined there 

are several ongoing demonstrations 

involving shared savings that would be 

considered overlapping. We have 

determined that currently two of the 

MHCQ demonstration programs, the 

IHIE and North Carolina Community 

Care Network (NCCCN), involve shared 

savings payments for a Medicare 

population, therefore, providers and 

suppliers who participate in the IHIE 

and NCCCN will not be permitted to 

also participate in the Medicare Shared 

Savings Program. However, once a 

Medicare enrolled TIN completes its 

participation in the IHIE or NCCCN, it 

may apply for the Shared Savings 

Program and would no longer be 

prohibited from participation because of 

duplication. 

At the time of publication of the 

proposed rule, the MAPCP 

demonstration offered several different 

payment arrangements to participating 

providers. Since then, we selected the 

States of Maine, Vermont, New York, 

Rhode Island, Pennsylvania, North 

Carolina, Michigan, and Minnesota for 

the MAPCP Demonstration. To the 

extent that any of the participating 

providers have chosen a shared savings 

arrangement, participation in both 

MAPCP and the Shared Savings 

Program will be prohibited. MAPCP 

participants who do not have shared 

savings arrangements under the 

demonstration would not be prohibited 

from participating in the Shared Savings 

Program. 

Subsequent to publication of the 

proposed rule, we have determined that 

the Care Management for High-Cost 

Beneficiaries Demonstrations authorized 

by 42 U.S.C. 1395b–1 is also a shared 

savings program, as well as the Pioneer 

ACO Model. 

After due consideration, we have 

determined that providers would be 

able to participate in both the Medicare 

Shared Savings Program and programs 

that focus on the integration of the 

Medicare and Medicaid programs for 

dually eligible individuals, specifically, 

State initiatives to integrate care for 

dually eligible individuals announced 

recently by the Medicare-Medicaid 

Coordination Office in partnership with 

the Innovation Center. Due to the 

unique design of these demonstrations 

as well as the relationship of States with 

providers in the Medicaid program, it is 

not necessary or reasonable to prohibit 

involvement in both programs. 

However, we will work closely with 

providers and States to prevent 

duplication of payment. Furthermore, 

we have also determined that 

demonstrations that do not involve 

shared savings, such as the New Jersey 

gain sharing demonstration and others 

would not be considered overlapping 

for purposes of participation in the 

Shared Savings Program. 

Comment: We received several 

comments regarding transitions from 

demonstrations to the Shared Savings 

Program. A member organization of the 

IHIE thanked CMS for acknowledging 

the demonstration as a worthwhile 

project. The commenter wrote that it 

would be counterproductive to halt the 

MHCQ demonstration after substantial 

investment in that program to make it a 

success, especially since the goals of the 

program and ACOs are consistent. 

One commenter indicated that the 

potential transition from the IHIE 

demonstration to the Shared Savings 

Program may be difficult because of the 

asynchronous performance years under 

the two programs. Several other 

commenters wrote in support of 

transitioning North Carolina’s 646 

demonstration program into an ACO 

and reported that Community Care of 

North Carolina is already taking steps to 

establish a North Carolina Accountable 

Care Collaborative. A commenter 

suggested that CMS clarify at what point 

a Medicare-enrolled TIN previously 

involved in another shared savings 

would be eligible for participation in an 

ACO under the Shared Savings Program. 

Response: We recognize that our 

initiatives may have different lengths of 

agreement periods or different start and 

end dates. In the Shared Savings 

Program, we sought to align with many 

programs that function on a calendar 

year basis, such as the Physician Quality 

Reporting System (PQRS). We do not 

believe this proposal should disrupt 

ongoing participation in other shared 

savings initiatives, and we encourage 

participants in ongoing demonstrations 

to complete the term of their agreement 

before entering the Shared Savings 

Program. We recognize that not all 

programs and demonstrations operate 

on a calendar year basis and that, as a 

result, there may be some providers and 

suppliers who will have gaps in time 

from the end of one program or 

demonstration to the beginning of 

participation in another. An entity must 

have terminated its involvement with 

another shared savings program prior to 

participation in the ACO Shared 

Savings Program. After an organization 

with a Medicare-enrolled TIN concludes 

an overlapping shared savings 

demonstration, its application to the 

Shared Savings Program would not be 

denied on the basis of duplication. 

Comment: Several commenters 

suggested that the restriction against 

participation in multiple initiatives 

involving shared savings would 

potentially stifle creation of other 

leading-edge initiatives that are wellaligned with best practices for patient 

quality of care. One commenter stated 

that CMS should not deter ACOs from 

investing in other delivery system 

innovations such as patient-centered 

medical homes and healthcare 

innovation zones that share objectives. 

One commenter asked if an ACO might 

not receive all of the potential savings 

if the organization or the same patients 

are also participating in another shared 

savings program. If so, the commenter 


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believed that this would be a significant 

deterrent to participation because an 

organization would have to decide 

between Shared Savings Program and 

other Innovation Center initiatives. 

Another commenter encouraged CMS, if 

it finds that the statute is creating too 

many barriers to entry for interested 

providers and suppliers, to approach 

Congress to request that the restriction 

be eased. One commenter suggested that 

the Secretary should consider a 

mechanism to provide waivers to 

organizations that are especially wellsuited to innovation in care delivery 

and that could provide substantial 

benefit to CMS to permit participation 

in multiple projects or trials. A 

commenter questioned if there are 

multiple TINs in a system, whether one 

TIN can participate in the Shared 

Savings Program and another in an 

Innovation Center program for example, 

the independence at home project, the 

State option to provide health homes 

and the use of community health teams. 

Several commenters recommended that 

for groups with multiple companies or 

subsidiaries, the separate divisions 

should be permitted to simultaneously 

seek ACO contracts. 

One commenter suggested that to 

ensure broad participation by Medicare 

providers and suppliers, CMS should 

read section 1899(b)(4) of the Act more 

narrowly than CMS has proposed. At a 

minimum, CMS should only restrict 

ACO participants from also 

participating in a program or 

demonstration project that is primarily 

intended to share savings. CMS should 

not read section 1899(b)(4) of the Act to 

preclude a provider or supplier’s 

participation in an ACO by virtue of the 

fact that the provider or supplier is also 

participating in another program that 

incidentally makes payments based on 

cost reductions. 

Another commenter stated that if a 

particular ACO provider/supplier only 

bills Medicare under one TIN, as is the 

case for some physician groups and 

other suppliers, and the TIN is an ACO 

participant, that individual ACO 

provider/supplier would be unable to 

participate in any other initiatives 

involving shared savings. This 

commenter suggested the prohibition 

would prevent such a group from 

successfully coordinating the care of 

Medicare beneficiaries who are not 

assigned to the ACO under the Shared 

Savings Program but are assigned to an 

organization under another shared 

savings model. 

Response: We believe there is 

opportunity for providers and suppliers 

to participate in multiple 

complementary initiatives. However, 

the statute clearly states that a provider 

that participates in any other program or 

demonstration project that involves 

shared savings under Medicare is 

ineligible to participate in an ACO 

under the Shared Savings Program. We 

believe our operational definition of an 

ACO as a collection of Medicare 

enrolled TINs, combined with our 

assignment methodology, discussed in 

section II.E of this final rule, helps 

ensure a unique patient population to 

an ACO on the basis of services billed 

by the ACO participant TINs. We 

recognize that health systems may be 

comprised of multiple TINs that bill 

Medicare. It may be appropriate for 

some of those TINs to apply to 

participate in the Shared Savings 

Program while others do not. We believe 

organizations should have flexibility to 

determine what TINs join together to 

form an ACO. 

To ensure that a provider or supplier 

is rewarded only once with shared 

savings for the care of a beneficiary, we 

proposed that an ACO participant TIN 

may not also participate in another 

Medicare program or demonstration 

involving shared savings. However, in 

order to maintain as much flexibility as 

possible for ACO providers/suppliers to 

participate concurrently in multiple 

CMS initiatives involving shared 

savings, we do not believe it is 

appropriate to extend this prohibition to 

individual providers and suppliers. 

Accordingly, an ACO provider/supplier 

who submits claims under multiple 

Medicare-enrolled TINs may participate 

in both the Shared Savings Program and 

another shared savings program if the 

patient population is unique to each 

program and if none of the relevant 

Medicare-enrolled TINs participate in 

both programs. For example, an ACO 

practitioner participating in the Shared 

Savings Program under an ACO 

participant practice TIN could also 

participate in the Independence at 

Home Demonstration under a non-ACO 

participant TIN since there would be no 

duplication in beneficiary assignment; 

and therefore, no duplication in shared 

savings. 

We believe our proposal identifying 

ongoing CMS initiatives that involve 

shared savings meets both the letter and 

spirit of the statutory prohibition against 

duplication of participation in 

initiatives involving shared savings. 

Furthermore, we do not believe the fact 

that the stated goal of a particular 

program is something other than to 

achieve shared savings lessens the 

potential for duplication in payment for 

the same beneficiaries or changes the 

applicability of the statutory prohibition 

against duplicative participation when 

the incentive for participation in the 

other program is the provision of shared 

savings. As noted previously, in 

developing our proposed policy, we 

carefully considered currently 

implemented programs and sought to 

provide as much flexibility as possible 

to potential Shared Savings Program 

participants while also ensuring there is 

no duplication in payments for savings 

achieved for the same Medicare 

beneficiaries. 

Further, we disagree with the 

conclusion that the prohibition against 

participating in duplicative initiatives 

involving shared savings would prevent 

a practice or an individual practitioner 

that bills under a single TIN from 

successfully coordinating the care of 

Medicare beneficiaries who are not 

assigned to the ACO under the Shared 

Savings Program but are assigned to an 

organization under another shared 

savings model. We believe that the 

Shared Savings Program assignment 

methodology, described in detail in 

section II.E of this final rule, provides 

an incentive for participating providers 

and suppliers to redesign care delivery 

to all their Medicare FFS beneficiaries. 

Finally, we note, as explained in 

section II.E of this final rule, that certain 

Shared Savings Program ACO 

participants have the opportunity to 

participate in more than one Medicare 

Shared Savings Program ACO, as long as 

assignment of beneficiaries is not 

dependent on the ACO participant TIN. 

We believe that participation in more 

than one ACO within the Shared 

Savings Program is separate and distinct 

from participating in multiple Medicare 

shared savings initiatives, and therefore 

would not be subject to the statutory 

prohibition. 

Comment: Many commenters 

suggested that CMS allow participation 

in multiple initiatives involving shared 

savings provided that such participation 

does not result in double counting 

achieved savings and providing that the 

same patients are not assigned to both 

demonstrations, for example, some large 

health systems suggested they should be 

able to participate in multiple programs 

so long as CMS ensures they are not 

being paid twice for the same care to the 

same patient. A commenter encouraged 

CMS to consider ways to prevent 

duplicative payments based on the 

beneficiary identification so that a 

provider or supplier to whom a 

particular beneficiary is assigned is only 

rewarded once for that beneficiary. 

Response: We believe our proposed 

methodology ensures no duplication in 

payment while adequately allowing 

provider flexibility. Further, the law 

states that a provider may not 


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participate in this program if they are 

already participating in another shared 

savings program, so for purposes of 

determining eligibility to participate in 

the Shared Savings Program, we will 

review the ACO participant TINs 

submitted on the application of a 

prospective ACO and determine 

whether or not those TINs are already 

participating in another shared savings 

program. Applications that have such an 

overlap will be rejected. Furthermore, 

despite this precaution, because 

assignment methodologies may differ 

from program to program, as noted 

previously in the case of the Pioneer 

ACO Model, we will work with other 

initiatives involving shared savings and 

demonstrations to prevent duplicative 

payments based on beneficiary 

identification where necessary. We 

would note that while participation in 

some demonstrations, for example, the 

Bundled Payment for Care Improvement 

Initiative, would not exclude ACO 

participants from participating in the 

Shared Savings Program, it is our 

intention to ensure duplicative 

payments are not being made within the 

design of the demonstration. 

Comment: A few commenters 

requested clarification that this 

prohibition does not apply to providers 

and suppliers upon whom assignment 

cannot be based or to non-Medicare 

enrolled participants. 

Response: We disagree that ACO 

participants upon whom assignment is 

not based may participate in multiple 

initiatives involving shared savings. We 

read section 1899(b)(4) of the Act to 

direct us to ensure that ACO 

participants are not also participating in 

another initiative involving shared 

savings. Furthermore, such an 

interpretation would be inconsistent 

with the intent of the law, which is to 

avoid duplicate incentive payments 

across initiatives. However, within the 

Shared Savings Program itself, we are 

able to prevent duplicate payments by 

ensuring unique assignment to each 

ACO. As described in section II.E of this 

final rule, ACO participants upon whom 

assignment is not based would have the 

opportunity to participate in more than 

one Medicare Shared Savings Program 

ACO, that is, they would not be required 

to be exclusive to a single Medicare 

Shared Savings Program ACO. In 

response to specific requests for 

clarification, we note that these final 

rules apply only to Medicare enrolled 

ACO participants and ACO providers/ 

suppliers. They do not apply to 

providers and suppliers that are not 

enrolled in Medicare. 

Comment: A commenter questioned 

whether a provider or supplier, for 

example, a pharmacy, could fill 

prescriptions and provide health 

screenings for more than one ACO. 

Response: We appreciate this 

question; however, we are unclear 

exactly what the commenter is asking. 

That is, it is unclear whether the 

commenter is wondering whether they 

can participate in more than one 

Medicare ACO or whether they are 

asking if, once in an ACO, the services 

they render would be limited to ACO 

assigned beneficiaries. We stress that 

the Medicare Shared Savings Program is 

not a managed care program and as such 

does not require lock in of beneficiaries 

nor does it require a participating 

provider or supplier to reassign their 

billing to the ACO or render services 

only on behalf of the ACO or only to 

beneficiaries assigned to the ACO. 

Medicare enrolled providers and 

suppliers that are participating in an 

ACO or whose beneficiaries are assigned 

to an ACO would continue to care for 

their beneficiaries and bill Medicare for 

services rendered under FFS as usual. 

However, for purposes of 

participation in the program, as 

described in more detail in section II.E 

of this final rule, ACO participants upon 

whom assignment is based must be 

exclusive to a single ACO. So providers 

and suppliers who do not bill for 

primary care services and upon whom 

assignment is not based, including 

pharmacies, would have the 

opportunity to participate in multiple 

ACOs in the Shared Savings Program. 

Final Decision: We have identified 

several current initiatives in which ACO 

participants receive shared savings such 

that they would be prohibited from 

participation in the Shared Savings 

Program: Independence at Home, the 

MHCQ IHIE and NCCCN 

demonstrations, MAPCP arrangements 

involving shared savings, PGP 

Transition demonstration, the Care 

Management for High-Cost Beneficiaries 

Demonstrations, and the Pioneer ACO 

Model through the Innovation Center. 

We recognize, however, that there may 

be other demonstrations or programs 

that will be implemented or expanded 

as a result of the Affordable Care Act, 

some in the near future. We will update 

our list of duplicative shared savings 

efforts periodically to inform 

prospective Shared Savings Program 

participants and as part of the 

application. 

Additionally, we are finalizing our 

proposal to implement a process for 

ensuring that savings associated with 

beneficiaries assigned to an ACO 

participating in the Shared Savings 

Program are not duplicated by savings 

earned in another Medicare program or 

demonstration involving shared savings. 

Specifically, applications for 

participation in the Shared Savings 

Program will be reviewed carefully to 

assess for overlapping TINs. TINs that 

are already participating in another 

Medicare program or demonstration 

involving shared savings will be 

prohibited from participating in the 

Medicare Shared Savings Program. An 

ACO application that contains TINs that 

are already participating in another 

Medicare program or demonstration 

involving shared savings will be 

rejected. 

If the other program or demonstration 

involving shared savings does not assign 

beneficiaries based upon the TINs of the 

health care providers from whom they 

receive care, but uses an alternate 

beneficiary assignment methodology, 

we will work with the developers of the 

respective demonstrations and 

initiatives to devise an appropriate 

method to ensure no duplication in 

shared savings payment. For example, 

billing TINs who are participating in the 

Pioneer ACO Model would be 

prohibited from also participating in the 

Shared Savings Program. Additionally, 

since the Pioneer ACO Model may begin 

before the Shared Savings Program and 

assigns beneficiaries prospectively, we 

will work with the Innovation Center to 

ensure no beneficiaries used to 

determine shared savings are assigned 

to both (§ 425.114). 

b. Transition of the Physician Group 

Practice (PGP) Demonstration Sites Into 

the Shared Savings Program 

The PGP demonstration, authorized 

under section 1866A of the Act, serves 

as a model for many aspects of the 

Shared Savings Program. The Affordable 

Care Act provided authority for the 

Secretary to extend the PGP 

demonstration. On August 8, 2011 we 

announced the PGP Transition 

Demonstration which will follow many 

of the same parameters from the original 

PGP Demonstration, with some 

modifications. The modifications 

include: shifting spending benchmarks 

to the national rather than regional 

level, aligning beneficiaries first with 

primary care physicians (PCPs) and then 

specialists, and implementing a patient 

experience of care survey. All 10 PGP 

demonstration participants have agreed 

to participate in the PGP Transition 

Demonstration. 

As discussed previously, consistent 

with section 1899(b)(4) of the Act, to be 

eligible to participate in the Shared 

Savings Program, a provider of services 

or supplier may not also be participating 

in a demonstration project that involves 

shared savings, such as the PGP 


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demonstration. Thus, the PGP sites will 

not be permitted to participate 

concurrently in the Shared Savings 

Program. Since assignment 

methodologies are similar between the 

Shared Savings Program and the PGP 

demonstration, we will provide for 

unique assignment of beneficiaries by 

ensuring there is no overlap in 

participating Medicare-enrolled TINs as 

mentioned previously. 

In the proposed rule, we discussed an 

appropriate transition in the event that 

a PGP site decides to apply for 

participation to the Shared Savings 

Program. We proposed to give the site 

the opportunity to complete a 

condensed application form. The 

condensed application form would 

require the applicant to provide the 

information that is required for the 

standard Shared Savings Program 

application but that was not already 

obtained through its application for or 

via its participation in the PGP 

demonstration and, if necessary, to 

update any information contained in its 

application for the PGP demonstration 

that is also required on the standard 

Shared Savings Program application. 

Comment: One commenter noted they 

thought that several innovative health 

care systems such as PGP demo sites 

have indicated that they will forego 

applying to the Shared Savings Program 

but would instead ‘‘apply for funding’’ 

through the Innovation Center. 

Response: We recognize there are 

many opportunities for organizations to 

participate in our programs involving 

shared savings as well as other 

Affordable Care Act demonstrations. We 

are pleased that all 10 of the original 

PGP demonstration sites have 

contracted to participate in the PGP 

Transition Demonstration which 

implements many of the same policies 

as the Shared Savings Program. 

Final Decision: We are finalizing our 

proposals without change (§ 425.202). 

c. Overlap With the Center for Medicare 

& Medicaid Innovation (Innovation 

Center) Shared Savings Models 

Section 1899(i) of the Act gives the 

Secretary the authority under the 

Shared Savings Program to use other 

payment models determined to be 

appropriate, including partial capitation 

and any additional payment model that 

the Secretary determines will improve 

the quality and efficiency of items and 

services furnished under Medicare. The 

purpose of the Innovation Center, 

established in section 1115A of the Act, 

is to test innovative payment and 

service delivery models to reduce 

expenditures under Medicare, 

Medicaid, and the CHIP, while 

preserving or enhancing the quality of 

care furnished to individuals under 

these programs. Preparations are 

currently underway to develop this 

capability. Within the Innovation 

Center, it may be possible to test 

different payment models, provide 

assistance to groups of providers and 

suppliers that wish to develop into an 

ACO, or enhance our understanding of 

different benchmarking methods. As the 

Innovation Center gains experience with 

different ACO payment models, we can 

use proven methods to enhance and 

improve the Shared Savings Program 

over time. 

The Innovation Center has recently 

implemented or is exploring several 

ACO-related initiatives: 

• Pioneer ACO Model—announced in 

a May 17, 2011 Request for Application. 

• Accelerated development learning 

sessions (ADLS)—to provide the 

executive leadership teams from 

existing or emerging ACO entities the 

opportunity to learn about essential 

ACO functions and ways to build 

capacity needed to achieve better care, 

better health, and lower costs through 

improvement. 

• Advance Payment Model— 

Subsequent to the publication of the 

proposed rule, the Innovation Center 

sought comment on providing an 

advance on the shared savings ACOs are 

expected to earn as a monthly payment 

for each preliminarily prospectively 

assigned Medicare beneficiary. 

As discussed previously, section 

1899(b)(4) of the Act restricts providers 

of services and suppliers from 

participating in both the Shared Savings 

Program and other Medicare shared 

savings programs and demonstrations. 

We intend to coordinate our efforts to 

ensure that there is no duplication of 

participation in shared savings 

programs through provider or supplier 

participation in both the Shared Savings 

Program and any Medicare shared 

savings models tested by the Innovation 

Center. Similarly, we will also take 

steps to ensure there is a methodology 

to avoid duplication of shared savings 

payments for beneficiaries aligned with 

providers and suppliers in both the 

Shared Savings Program and any 

current or future models tested by the 

Innovation Center. 

Further, we are looking forward to 

applying lessons learned in the Pioneer 

ACO Model that can help inform 

changes to the Shared Savings Program 

over time. 

Comment: Many commenters were 

supportive of the purpose of the 

Innovation Center, the concept of the 

Advance Payment Model, and the 

Pioneer Model ACO demonstration. 

Commenters applauded the use of 

lessons learned in the Pioneer program 

to inform the Shared Savings Program 

and noted that the Pioneer model may 

effectively test innovative models that 

may be more effective for certain types 

of providers. Some commenters made 

specific suggestions for improvement of 

the Pioneer model. 

Response: We appreciate the 

feedback, and have passed specific 

suggestions for improvements to the 

Pioneer ACO Model on to the 

Innovation Center. 

Comment: A number of commenters 

expressed concerns about the upfront 

costs to participate and urged CMS to 

address the need for startup funding in 

the final rule. 

Many commenters were generally 

supportive of providing advanced 

payments to ACOs through the 

Innovation Center. These commenters 

suggested that advance payments would 

make program participation more 

attractive to many ACOs, particularly 

those comprised of networks of smaller 

practices, providers that operate on 

small margins, or hospitals in specific 

regions of the country. Several 

commenters suggested that financial 

support from a program such as the 

Advance Payment Models alone may be 

insufficient to allay the very high 

startup costs for ACOs. Some suggested 

direct capital support was necessary and 

suggested alternatives to the Advance 

Payment Model. Some commenters 

asked for clarification or offered 

suggestions on specific aspects of the 

initiative, such as the structure of the 

incentive or eligibility criteria. 

Many urged CMS to provide upfront 

capital support to ACOs to defray startup and operational expenses and to 

encourage participation, and some 

suggested that based on PGP data, ACOs 

may require more than three years to 

recoup their start up investment. 

Several commenters concurred with the 

need for robust health information 

technology (HIT) in ACOs but stated 

that acquisition costs create a 

substantial barrier to physician ACOs. 

Numerous commenters urged CMS to 

create additional ways to help finance 

physicians’ acquisition of HIT. Several 

explained that shared savings alone will 

not assist practices with upfront costs 

nor provide assurance that they will 

recover their initial investments and 

that, as a result, transitional models are 

needed. A few commenters noted that 

providers should not have to divert 

resources to two similar initiatives (for 

example, electronic health records 

incentives and shared savings) with 

only technical differences. Groups 

identified by commenters that may be 


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especially challenged by the upfront 

costs of ACO formation and operations 

include: Private primary care 

practitioners, small to medium sized 

physician practices, small ACOs, 

MAPCP demonstration programs, 

minority physicians and physicians 

who see minority patients, safety net 

providers (that is, RHCs, CAHs, FQHCs, 

community-funded safety net clinics 

(CSNCs)), rural providers (that is, 

Method II CAHs, rural PPS hospitals 

designated as rural referral centers, sole 

community hospitals or Medicare 

dependent hospitals), and rural primary 

care providers. A few commenters 

suggested that CMS offer special 

funding or access to capital through 

grants or no-interest loans for ACOs 

formed by rural and safety-net 

providers, or other providers, such as 

home health or hospice providers, to 

enhance participation of these groups in 

the Shared Savings Program. A 

commenter suggested that CMS offer a 

rural primary care provider incentive, 

such as an enhanced FFS payment or 

other payment methods (for example, 

partial capitation), for joining a 

Medicare ACO to help fund the 

infrastructure requirements of a 

Medicare ACO, buffer risk, and 

stimulate further participation. 

Some commenters made specific 

suggestions for offsetting costs to the 

ACO, for example, a number of 

comments recommended that the final 

rule provide an additional financial 

incentive for the collection and 

reporting of patient satisfaction data or 

other quality data. 

On the other hand, some commenters 

noted that many high quality 

organizations are likely to have already 

made the capital investments to achieve 

high quality and efficient care delivery, 

and are therefore poised to become 

ACOs. 

Response: We recognize that a real 

commitment to improving care 

processes for Medicare beneficiaries 

will require financial investment on the 

part of the ACO, ACO participants, and 

ACO providers/suppliers. The Shared 

Savings Program is designed to provide 

an incentive for ACOs demonstrating 

high quality and improved efficiencies. 

We have passed along comments related 

to Advance Payment to our colleagues 

in the Innovation Center. 

In this final rule, we have made 

significant changes to reduce burden on 

participants and improve the 

opportunity to share in savings. In 

section II.F. of this final rule, we note 

our intent to provide funding for the 

patient experience of care survey for 

2012 and 2013, providing early adopters 

with additional upfront assistance. In 

section II.G (shared savings/losses) of 

this final rule, we describe changes to 

the financial model that benefit Shared 

Savings Program participants such as 

removal of the 25 percent withhold, 

removal of the net 2 percent 

requirement so that ACOs may share 

from first dollar savings once the MSR 

is overcome, and an increase to the 

shared savings cap. Additionally, in 

response to comments, we are reducing 

the claims run out period from 6 to 3 

months, allowing for earlier payment of 

shared savings. Finally, in section II.C. 

(Agreement) of this final rule, we 

discuss lengthening the agreement 

period for early adopters. Moreover, as 

noted, the Innovation Center is 

considering an Advance Payment model 

for certain ACOs, which would test 

whether pre-paying a portion of future 

shared savings could increase 

participation in the Shared Savings 

Program. 

Finally, we note there are also other 

public and private options to offset start 

up costs such as financing 

arrangements, grants from non-profit 

and existing government sources, as 

well as savings from non-Medicare 

patient populations. Other CMS 

initiatives, such as the EHR Incentive 

Program, provide incentives for HIT 

adoption. Potential participants will 

want to consider all options available. 

Comment: Several commenters 

suggested that CMS provide technical 

assistance to certain ACOs such as those 

comprised of safety net providers, or 

physician-only ACOs, or to ACOs in 

general. 

Response: In addition to ongoing 

technical assistance provided for 

specific program activities, such as 

quality measures reporting, we will 

consider ways in which additional 

assistance can be provided to Shared 

Savings Program ACOs. We note that 

the Innovation Center has held several 

well-received ADLS sessions designed 

to provide the executive leadership 

teams from existing or emerging ACO 

entities the opportunity to learn about 

essential ACO functions and ways to 

build capacity needed to achieve better 

care, better health, and lower costs 

through improvement. We will also 

explore other opportunities to assist 

Shared Savings Program ACOs. 

Final Decision: We are finalizing our 

proposal to exclude Pioneer ACO Model 

participants from participation in the 

Shared Savings Program. Additionally, 

since the Pioneer ACO Model may begin 

before the Shared Savings Program and 

will and assign beneficiaries 

prospectively, we will work with the 

Innovation Center to ensure no 

beneficiaries used to determine shared 

savings are assigned to both (§ 425.114). 

C. Establishing the Agreement With the 

Secretary 

1. Options for Start Date of the 

Performance Year 

Section 1899(a)(1) of the Act requires 

the Shared Savings Program to be 

established ‘‘not later than January 1, 

2012’’. This final rule establishes the 

Shared Savings Program. We will start 

accepting applications from prospective 

ACOs shortly after January 1, 2012. For 

information on the application process, 

please see our Notice of Intent which 

will appear shortly after publication of 

this final rule at https://www.cms.gov/ 

sharedsavingsprogram/. 

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

provides that an ‘‘ACO shall enter into 

an agreement with the Secretary to 

participate in the [Shared Savings 

Program] for no less than a 3-year period 

* * *’’ Section 1899(d)(1) of the Act 

provides that an ACO shall be eligible 

to receive shared savings payments for 

each ‘‘year of the agreement period,’’ if 

the ACO has met applicable quality 

performance standards and achieved the 

requisite savings. In establishing the 

requirement for a minimum 3-year 

agreement period, the statute does not 

prescribe a particular application period 

or specify a start date for ACO 

agreement periods. 

In the proposed rule we considered 

several options for establishing the start 

date of the agreement period: annual 

start dates; semiannual start dates; 

rolling start dates; and delayed start 

dates. Adopting an annual application 

period and start date would create 

cohorts of ACO applicants, which 

would allow for more streamlined 

processes related to evaluation of 

applications, agreement renewals, and 

performance analysis, evaluation, and 

monitoring. However, given the short 

timeframe for implementation of the 

program and our desire to permit as 

many qualified ACOs as possible to 

participate in the first year, we also gave 

a great deal of consideration to 

alternative approaches that would 

provide flexibility to program 

applicants. For instance, we considered 

allowing applicants to apply throughout 

the course of the year as they become 

ready and we could review and approve 

applications and begin agreement 

periods on a rolling basis. We noted 

however that, if ACO agreements begin 

more often than once a year, 

beneficiaries could be assigned to two 

ACOs for an overlapping period. As 

discussed in section II.E.3. of this final 

rule, we proposed that beneficiaries 


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would be assigned to ACOs based upon 

where they receive the plurality of their 

primary care services. Since the 

physician associated with the plurality 

of a beneficiary’s primary care services 

could vary from year to year, having 

multiple start dates could result in a 

beneficiary being assigned to multiple 

ACOs for an overlapping period. This 

scenario would result in confusion for 

beneficiaries and the potential for 

duplicate shared savings payments for 

care provided to a single beneficiary. 

Additionally, problems with patient 

assignment may cause unintended 

consequences for per capita costs, 

making it difficult to make comparisons 

of one ACO’s performance to another 

that has a different start date. 

After evaluating various options for 

start dates, we proposed to establish an 

application process with an annual 

application period during which a 

cohort of ACOs would be evaluated for 

eligibility to participate in the Shared 

Savings Program. We further proposed 

that the performance years would be 

based on the calendar year to be 

consistent with most CMS payment and 

quality incentive program cycles. 

Specifically, we proposed that: (1) ACO 

applications must be submitted by a 

deadline established by us; (2) we 

would review the applications and 

approve those from eligible 

organizations prior to the end of the 

calendar year; (3) the term of the 

participation agreement (‘‘agreement 

period’’) would begin on the January 1 

following approval of an application; 

and (4) the ACO’s performance years 

under the agreement would begin on 

January 1 of each year during the 

agreement period. Given our concern 

regarding the short time frame for 

implementing the Shared Savings 

Program in the first year of the program, 

we solicited comment on any 

alternatives to a January 1 start date for 

the first year of the Shared Savings 

Program, such as an additional start date 

of July 1, and allowing the term of the 

agreement for ACOs with a July 1, 2012 

start date to be increased to 3.5 years. 

Under this example, the first 

performance ‘‘year’’ of the agreement 

would be defined as 18 months in order 

that all of the agreement periods would 

synchronize with ACOs entering the 

program on January 1, 2013. We 

proposed that if adopted, this 

alternative would only be available in 

the first year of the program and for all 

subsequent years applications would be 

reviewed and accepted prior to the 

beginning of the applicable calendar 

year and the term of all subsequent 

agreements would be for 3 years. 

Comment: We received several 

comments that expressed concerns 

about the feasibility of a January 1, 2012 

start date. 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 suggested 

that only well organized and larger 

integrated health care systems would be 

able to meet the January 1, 2012 start 

date. Alternatively, comments suggested 

that the January 1 start date would 

preclude most small and rural health 

care systems from being able to 

participate in the Shared Savings 

Program. The majority of comments 

requested a delayed start date or offered 

support for a July 1 start date for the 

first year of the program. There were 

also some comments that requested a 1 

or 2 year delay in the start date of the 

program to allow prospective ACOs the 

opportunity to build their infrastructure. 

There were a few comments that 

requested that we accept applications 

on a ‘‘rolling’’ basis, allowing greater 

flexibility for the first year. 

Response: We agree with the 

comments requesting additional 

flexibility in the start date of the Shared 

Savings Program. Therefore, based upon 

public comment, we will provide for 

two application periods for the first year 

of the Shared Savings Program whereby 

we will accept applications for an April 

1, 2012 or July 1, 2012 start date. All 

ACOs that start in 2012 will have 

agreement periods that terminate at the 

end of 2015. We will provide subregulatory guidance to ACOs on the 

deadlines by which applications must 

be received in order to be considered for 

each respective start date. 

We summarize the application of our 

final policy as follows: 

ACO starts April 1, 2012: First 

performance year is 21 months, ending 

on December 31, 2013. Agreement 

period is 3 performance years, ending 

on December 31, 2015. 

ACO starts July 1, 2012: First 

performance year is 18 months, ending 

on December 31, 2013. Agreement 

period is 3 performance years, ending 

on December 31, 2015. 

Under this final rule, ACOs will begin 

receiving data immediately upon entry 

to the program (historical and quarterly 

aggregate reports along with rolling 

information on their preliminary 

prospective assigned beneficiary 

population as described in section II.D. 

of this final rule). After completing its 

first performance year, the ACO will be 

evaluated on its performance on the 

ACO quality metrics and a shared 

savings payment will be calculated. All 

ACOs will be eligible to receive the 

PQRS incentive payments for each 

calendar year in which they fully and 

completely report the Group Practice 

Reporting Option (GPRO) measures, 

regardless of their start date. This will 

provide ACOs that join the program in 

April or July 2012 with some working 

capital in advance of the completion of 

the first ACO performance year, 

regardless of their ability to generate 

shared savings. 

We believe this approach fulfills 

several desirable goals for the program 

including: (1) Establishment of the 

program by January 1, 2012; (2) 

flexibility for newly formed ACOs to 

apply when ready; (3) a partial year onramp for ACOs to gain experience with 

understanding the assigned population 

through receipt of data reports and to 

gain experience in reporting measures 

using the PQRS GPRO tool before 

entering into a period of performance 

assessment; and (4) assurance that no 

beneficiary will be double-counted for 

purposes of establishing ACO 

performance when there is more than 

one ACO in a geographic region. 

Comment: We received several 

comments requesting that we expand 

the agreement period. The majority of 

the comments surrounding the 

agreement period specifically requested 

that the agreement period be expanded 

to 5 years. The general consensus among 

comments was that a 3-year agreement 

period is too short and highlights the 

fact that the significant capital costs and 

the need to marshal necessary resources 

(for example, information technology 

infrastructure and appropriate 

management and leadership personnel) 

make success, in terms of savings, 

difficult in the early years, if not the 

entire proposed 3 year term. Comments 

suggested a 3-year agreement period, 

combined with our proposal to prohibit 

future participation of underperforming 

ACOs or participants after the original 

term of the agreement has lapsed, works 

against the small and rural markets that 

do not have the necessary basics in 

place to the same extent as larger more 

integrated health care systems. 

Commenters stated that the proposed 3- 

year agreement period increases the risk 

of loss before any chance of reward is 

available. 

Even those few comments that offered 

support for a 3-year agreement period 

recommended that ACOs should be able 

to withdraw from that agreement 

without penalty due to the challenges 

associated with realizing savings in a 3- 

year agreement. 

Response: As discussed previously, 

and based upon the review of public 


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comments, we will extend the 

agreement period to include an 

extended agreement for those ACOs 

beginning on April 1, 2012 and July 1, 

2012. We believe that extending the 

agreement period allows for those ACOs 

that are ready to begin their agreement 

on April 1, 2012 and July 1, 2012 will 

provide an on-ramp for organizations to 

gain experience with measures reporting 

and data evaluation in the early part of 

the program. As discussed in Section 

II.G. of this final rule, we are not 

finalizing our proposal to require a 25 

percent withhold of any shared savings 

realized to offset any future losses or to 

be forfeited if an ACO fails to complete 

the terms of its agreement. 

Final Decision: As specified in 

§ 425.200, for the first year of the Shared 

Savings Program (CY 2012), ACOs will 

be afforded the flexibility to submit to 

begin participation in the program on 

April 1 (resulting in an agreement 

period of 3 performance years with the 

first performance year of the agreement 

consisting of 21 months) or July 1 

(resulting in an agreement period of 3 

years with the first performance year of 

the agreement consisting of 18 months). 

During all calendar years of the 

agreement period, including the partial 

year associated with both the April 1, 

2012 and July 1, 2012 start dates, the 

eligible providers participating in an 

ACO that meets the quality performance 

standard but does not generate shareable 

savings will qualify for a PQRS 

incentive payment (as described in 

sections II.F. of this final rule and 

§ 425.504). 

2. Timing and Process for Evaluating 

Shared Savings 

Section 1899(d)(1) of the Act provides 

that an ACO shall be eligible to receive 

shared savings payments for each year 

of the agreement period, if the ACO has 

met the quality performance standards 

established under section 1899(b)(3) of 

the Act and has achieved the required 

percent of savings below its benchmark. 

However, the statute is silent with 

respect to when the shared savings 

determination should be made. 

Potential ACOs have indicated that they 

need timely feedback on their 

performance in order to develop and 

implement improvements in care 

delivery. In developing our proposals, 

we were attentive to the importance of 

determining shared savings payments 

and providing feedback to ACOs on 

their performance in a timely manner 

while at the same time not sacrificing 

the accuracy needed to calculate per 

capita expenditures. 

Our determination of an ACO’s 

eligibility to receive a payment for 

shared savings will be based upon an 

analysis of the claims submitted by 

providers and suppliers for services and 

supplies furnished to beneficiaries 

assigned to the ACO. There is an 

inherent lag between when a service is 

performed and when a claim is 

submitted to us for payment. 

Additionally, there is also a time lag 

between when the claim is received by 

us and when the claim is paid. 

From the perspective of the utilization 

and expenditure data that would be 

needed in order to determine an ACO’s 

eligibility to receive shared savings and 

to provide performance feedback 

reports, the longer the claims run-out 

period, the more complete and accurate 

the utilization and expenditure data 

would be for any given year. Higher 

completion percentages are associated 

with longer run-out periods and thus 

would necessitate a longer delay before 

we could determine whether an ACO is 

eligible to receive shared savings and 

provide performance feedback. 

Conversely, a lower completion 

percentage would be associated with a 

shorter run-out period and thus a 

quicker turnaround for the shared 

savings determination and for the 

provision of performance feedback. 

Based upon historical trends, a 3-month 

run-out would result in a completion 

percentage of approximately 98.5 

percent for physician services and 98 

percent for Part A services. A 6-month 

run-out of claims data results in a 

completion percentage of approximately 

99.5 percent for physician services and 

99 percent for Part A services. Since 

neither a 3-month nor a 6-month runout of claims data would offer complete 

calendar year utilization and 

expenditure data, we proposed to work 

with our Office of the Actuary to 

determine if the calculation of a 

completion percentage would be 

warranted. We proposed that if 

determined necessary, the completion 

percentage would be applied to ensure 

that the shared savings determination 

reflects the full costs of care furnished 

to assigned beneficiaries during a given 

calendar year. Thus, we must balance 

the need to use the most accurate and 

complete claims data as possible to 

determine shared savings with the need 

to provide timely feedback to ACOs 

participating in the Shared Savings 

Program. Additionally, regardless of 

whether we use a 3-month or 6-month 

claims run-out period, we are concerned 

that some claims (for example, high cost 

claims) may be filed after the claims 

run-out period which would affect the 

accuracy of the amount of the shared 

savings payment. We considered and 

sought comment on ways to address this 

issue, including applying an adjustment 

factor determined by CMS actuaries to 

account for incomplete claims, 

termination of the ACO’s agreement in 

cases where the ACO has been found to 

be holding claims back, or attributing 

claims submitted after the run-out 

period to the following performance 

year. 

We proposed using a 6-month claims 

run-out period to calculate the 

benchmark and per capita expenditures 

for the performance year. A 6-month 

claims run-out would allow for a 

slightly more accurate determination of 

the per capita expenditures associated 

with each respective ACO; however, it 

would also delay the computation of 

shared savings payments and the 

provision of feedback to participating 

ACOs. We also sought comment on 

whether there are additional 

considerations that might make a 3- 

month claims run-out more appropriate. 

Comment: Most of the comments 

received on this proposal supported a 3- 

month claims run-out period. Several 

other comments focused on the fact that 

ACOs will require significant start up 

investments to provide adequate 

infrastructure. These comments suggest 

that the shorter the turnaround period 

for feedback on both quality metrics and 

shared savings reconciliation, the more 

likely that cash flow distortions would 

not be created and the better the 

opportunity that ACOs will be able to 

continue to operate. We received no 

comments that supported a 6-month 

claims run-out. 

Response: As discussed previously, 

our initial analysis of this policy 

focused on balancing the need for 

timely feedback and the benefits of 

utilizing the most complete data in 

calculating both the quality metrics and 

the shared savings reconciliation. Based 

upon our review of the proposal and the 

input of public comments, we feel that 

the minimal increased accuracy 

associated with 6 months of claims runout does not justify the additional delay 

in the provision of quality metrics 

feedback and shared savings 

reconciliation. We agree that ACOs 

should receive quality metric feedback 

as soon as possible so they can focus 

their activities on potential problem 

areas. Additionally, public comments 

have made it clear that a 3-month runout of claims data, especially in the first 

year of the agreement, would aid in 

ensuring success for ACOs by allowing 

ACOs to offset the initial start up costs 

which would in turn allow the ACOs to 

remain financially viable. We agree with 

the comments that the decrease in the 

accuracy of the actual data between 6- 


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months of claims run-out and 3-months 

of claims run-out can be mitigated by 

the application of a completion 

percentage and should not delay the 

delivery of either the feedback on 

quality metrics or the reconciliation of 

any shared savings realized. 

Final Decision: Based upon our 

review of the public comments received 

on the proposed policy, we are 

finalizing a policy, under § 425.602, 

§ 425.604, and § 425.606 of using 3- 

months of claims run-out data, with the 

application of an appropriate 

completion percentage, to calculate the 

benchmark and per capita expenditures 

for the performance year. We will 

monitor ACO providers and suppliers 

for any deliberate delay in submission 

of claims that would result in an 

unusual increase in the claims incurred 

during the performance year, but 

submitted after, the 3 month run-out 

period immediately following each 

performance year, and as discussed in 

section II.H. of this final rule, will 

consider such deliberate behavior 

grounds for termination. 

3. New Program Standards Established 

During the Agreement Period 

In the proposed rule, we stated that as 

we continue to work with the 

stakeholder community and learn what 

methods and measures work most 

effectively for the Shared Savings 

Program, we would likely make changes 

and improvements to the Shared 

Savings Program over time. For 

example, we expect to integrate lessons 

learned from Innovation Center 

initiatives to shape and change the 

Shared Savings Program. Because we 

expect that these changes may occur on 

an ongoing basis, the question arises as 

to whether an ACO that has already 

committed to an agreement to 

participate in the Shared Savings 

Program should be subject to regulatory 

changes that become effective after the 

start of its agreement period. 

In the proposed rule, we weighed the 

pros and cons of requiring an ACO to 

comply with changes in regulations that 

become effective before the expiration of 

its agreement period. We recognized 

that creating an environment in which 

the continued eligibility of existing 

program participants is uncertain could 

be detrimental to the success of the 

program and could deter program 

participation. Conversely, the ability to 

incorporate regulatory changes into the 

agreements with ACOs would facilitate 

the administration of the program 

because all ACOs would be subject to 

the requirements imposed under the 

current regulations, rather than different 

sets of requirements, depending upon 

what regulations were in effect in the 

year in which the ACO entered the 

program. Additionally, requiring ACOs 

to adhere to certain regulatory changes 

related to quality measures, program 

integrity issues, processes for quality 

management and patient engagement, 

and patient-centeredness criteria that 

are up to date with current clinical 

practice ensures that ACO activities 

keep pace with changes in clinical 

practices and developments in 

evidence-based medicine. We noted that 

it is not unprecedented for Medicare 

agreements to include a provision 

requiring that the agreement is subject 

to changes in laws and regulations. For 

example, the contracts with Medicare 

Advantage organizations contain such a 

clause. However, these contracts are for 

a term of 1 year, as opposed to 3 or more 

years. As a result, there are more 

frequent opportunities for these 

organizations to reassess whether they 

wish to continue to participate in the 

program in light of changes to the laws 

and regulations governing the program. 

We proposed that ACOs would be 

subject to future changes in regulation 

with the exception of all of the 

following: 

• Eligibility requirements concerning 

the structure and governance of ACOs. 

• Calculation of sharing rate. 

• Beneficiary assignment. 

Thus, for example, ACOs would be 

subject to changes in regulation related 

to the quality performance standard. 

The language of the ACO agreement 

would be explicit to ensure that ACOs 

understand the dynamic nature of this 

part of the program and what specific 

programmatic changes would be 

incorporated into the agreement. We 

further proposed that in those instances 

where regulatory modifications 

effectuate changes in the processes 

associated with an ACO pertaining to 

design, delivery, quality of care, or 

planned shared savings distribution the 

ACO would be required to submit to us 

for review and approval, as a 

supplement to their original application, 

an explanation of how it will address 

key changes in processes resulting from 

these modifications. If an ACO failed to 

effectuate the changes needed to adhere 

to the regulatory modifications, we 

proposed that the ACO would be placed 

on a corrective action plan, and if after 

being given an opportunity to act upon 

the corrective action plan, the ACO still 

failed to come into compliance, it would 

be terminated from the program. For a 

more detailed discussion of the process 

for requiring and implementing a 

corrective action plan, please refer to 

the section II.H.5 of this final rule. We 

proposed that ACO participants would 

continue to be subject to all 

requirements applicable to FFS 

Medicare, such as routine CMS business 

operations updates and changes in FFS 

coverage criteria, as they may be 

amended from time to time. 

Comment: The commenters did not 

support establishing new standards 

during the agreement period. Many 

comments suggested that in order to 

create the certainty required prior to 

ACOs making investments in 

population health management 

infrastructure, CMS should withdraw 

any proposals that will afford the 

agency the ability to alter the terms or 

requirements to participate in the 

program during an agreement period. 

Commenters requested that if standards 

are established during the agreement 

period, ACOs should be allowed to 

either voluntarily terminate their 

agreements without penalty or should 

be afforded protections against any 

changes that negatively affect the ACOs’ 

ability to achieve their obligations under 

the agreement or that substantially alter 

the financial terms of their agreement. 

Other commenters specified that in 

those instances where standards are 

established during an agreement period, 

ACOs be afforded the opportunity to 

develop a real-time understanding of the 

new standards via a standard comment 

and response period. Finally, one 

commenter recommended that any 

program changes be introduced only at 

the start of a new agreement period. 

Response: To ensure that ACO 

activities keep pace with the ever 

evolving developments in clinical 

practices and evidence-based medicine, 

it is important to retain the ability to 

make changes to the Shared Savings 

Program on an on-going basis. However, 

based upon our review of the public 

comments received on this policy, we 

agree with allowing an ACO the choice 

of whether to terminate its agreement 

without penalty when there are 

regulatory changes to the Shared 

Savings Program that impact the ability 

of the ACO to continue to participate. 

We believe this policy allows the 

program flexibility to improve over time 

while also providing a mechanism for 

ACOs to evaluate how regulatory 

changes impact their ability to continue 

participation in the program and to 

terminate their agreement without 

penalty if regulatory changes occur that 

will negatively impact the ACO. 

Final Decision: Under § 425.212 we 

will finalize our proposal that ACOs be 

held responsible for all regulatory 

changes in policy, with the exception of: 

eligibility requirements concerning the 

structure and governance of ACOs, 

calculation of sharing rate, and 


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beneficiary assignment. However, we 

will modify our proposal to allow ACOs 

the flexibility to voluntarily terminate 

their agreement in those instances 

where regulatory standards are 

established during the agreement period 

which the ACO believes will impact the 

ability of the ACO to continue to 

participate in the Shared Savings 

Program. 

4. Managing Significant Changes to the 

ACO During the Agreement Period 

Aside from changes that may result 

from regulatory changes, the ACO itself 

may also experience significant changes 

within the course of its agreement 

period due to a variety of events, 

including the following: 

• Deviations from the structure 

approved in the ACO’s application, 

such as, if an ACO participant upon 

which assignment is based drops out of 

the program; changes in overall 

governing body composition or 

leadership; changes in ACO’s eligibility 

to participate in the program, including 

changes to the key processes pertaining 

to the design, delivery and quality of 

care (such as processes for quality 

management and patient engagement 

and patient centeredness) as outlined in 

the ACO’s application for acceptance 

into the program; or changes in planned 

distribution of shared savings. 

• A material change, as defined in the 

proposed rule [76 FR 19527], in the 

ACO’s provider/supplier composition, 

including the addition of ACO 

providers/suppliers. 

• Government- or court-ordered ACO 

reorganization, OIG exclusion of the 

ACO, an ACO participant, or an ACO 

provider/supplier for any reason 

authorized by law; CMS revoking an 

ACO, ACO participant or ACO provider/ 

supplier’s Medicare billing privileges 

under 42 CFR § 424.535, for 

noncompliance with billing 

requirements or other prohibited 

conduct; or reorganization or conduct 

restrictions to resolve antitrust 

concerns. 

Whenever an ACO reorganizes its 

structure, we must determine if the ACO 

remains eligible to participate in the 

Shared Savings Program. Under our 

proposal, we noted that since an ACO 

is admitted to the program based on the 

information contained in its application, 

adding ACO participants during the 

course of the agreement period may 

result in the ACO deviating from its 

approved application and could 

jeopardize its eligibility to participate in 

the program. We therefore proposed that 

the ACO may not add ACO participants 

during the course of the agreement. In 

order to maintain flexibility, however, 

we proposed that the ACO may remove 

ACO participants (TINs) or add or 

remove ACO providers/suppliers (NPIs). 

We requested comment on this proposal 

and how it might impact small or rural 

ACOs. 

In addition, we proposed that ACOs 

must notify us at least 30 days prior to 

any ‘‘significant change,’’ which we 

defined as an event that causes the ACO 

to be unable to comply with the terms 

of the participation agreement due to (1) 

deviation from its approved application, 

such as a reorganization of the ACO’s 

legal structure or other changes in 

eligibility; (2) a material change, which 

was defined in proposed § 425.14 to 

include ‘‘significant changes’’ as well as 

other changes that may affect ACO 

eligibility to participate in the program, 

including changes in governing body 

composition and the imposition of 

sanctions or other actions taken against 

the ACO by an accrediting organization 

or government organization, or (3) 

government or court-ordered 

reorganization as a result of fraud or 

antitrust concerns. We proposed that, in 

response to such a notification, we 

would make one of the following 

determinations: 

• The ACO may continue to operate 

under the new structure with savings 

calculations for the performance year 

based upon the updated list of ACO 

participants and ACO providers/ 

suppliers. 

• The remaining ACO structure 

qualifies as an ACO but is so different 

from the initially approved ACO 

structure that the ACO must start over 

as a new ACO with a new agreement. 

• The remaining ACO structure 

qualifies as an ACO but is materially 

different from the initially approved 

ACO structure because of the inclusion 

of additional ACO providers/suppliers 

that the ACO must obtain approval from 

a reviewing Antitrust Agency before it 

can continue in the program. 

• The remaining ACO structure no 

longer meets the eligibility criteria for 

the program, and the ACO would no 

longer be able to participate in the 

program, for example, if the ACO’s 

assigned population falls below 5,000 

during an performance year as 

discussed in section II.B. of this final 

rule. 

• CMS and the ACO may mutually 

decide to terminate the agreement. 

Comment: The proposals surrounding 

the management of significant changes 

to the ACO during the agreement period 

were the most commented upon 

proposals in section II.C. of the 

proposed rule. All comments received 

suggested that not being able to add 

ACO participants during the agreement 

period runs counter to the idea of 

encouraging more integrated models 

and thus greater coordination of care. 

Commenters offered a variety of 

alternatives to this proposal including 

the following: 

• Removal of this proposal altogether. 

• Allowing ACOs to add TINs on an 

monthly, quarterly, or annual basis as 

long as they notify CMS of the 

modifications to their structure. 

• One commenter recommended a 

‘‘slot’’ approach in rural areas whereby 

if a TIN leaves the system the ‘‘slot’’ 

may be filled with another TIN. 

• Allowing changes in ACO 

participants of up to 10 percent 

annually with additional changes in 

excess of 10 percent to be negotiated as 

an amendment to the ACO participation 

agreement. 

Response: Although it is imperative 

that we ensure that ACOs do not make 

changes to their approved structure that 

would affect their eligibility to 

participate in the program, we agree 

with those comments suggesting that 

there must be some mechanism to add 

ACO participants during an agreement 

period. Accordingly, we will finalize a 

policy that affords ACOs greater 

flexibility to deviate from the structure 

approved in their application. 

Specifically, we will modify this 

proposal such that ACO participants 

and ACO providers/suppliers may be 

added and subtracted over the course of 

the agreement period. ACOs must notify 

us of any additions/subtractions within 

30 days. Additionally, ACOs must 

notify us within 30 days of any 

significant changes, defined as an event 

that occurs resulting in an ACO being 

unable to meet the eligibility or program 

requirements of the Shared Savings 

Program. Such a change may cause the 

ACO to no longer meet the eligibility 

criteria, for example, losing a large 

primary care practice could cause the 

ACOs assigned patient population to fall 

below 5,000. Furthermore, such changes 

may necessitate adjustments to the 

ACO’s benchmark, or cause changes to 

risk scores and preliminary prospective 

assignment as described in sections II.G 

and II.E. of this final rule respectively, 

of this final rule. 

Comment: Some commenters also 

stated that our definitions of significant 

change and material change were 

circular. 

Response: In this final rule, we have 

removed the reference to ‘‘material 

change’’ and its accompanying 

definition. In response to general 

comments regarding the need to 

strengthen program requirements, we 

are finalizing our proposal to require 

ACOs to notify us within 30 days of any 


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‘‘significant change,’’ which is defined 

as an event that could cause an ACO to 

be unable to meet the eligibility or 

program requirements of the Shared 

Savings Program. For example, a 

significant change that affects 

compliance with eligibility 

requirements would include losing a 

large primary care practice that causes 

the ACO’s assigned patient population 

to fall below 5,000. 

Final Decision: Under § 425.214, we 

are modifying our proposal so that ACO 

participants and ACO providers/ 

suppliers may be added and subtracted 

over the course of the agreement period. 

ACOs must notify us of the change 

within 30 days of these additions/ 

subtractions of ACO participants or 

providers/suppliers. Additionally, in 

the event of ‘‘significant changes’’, 

which is defined as an event that occurs 

resulting in an ACO being unable to 

meet the eligibility or program 

requirements of the Shared Savings 

Program, the ACO must also notify us 

within 30 days. Such changes may 

necessitate, for example, adjustments to 

the ACO’s benchmark, but allow the 

ACO to continue participating in the 

Shared Savings Program. Such changes 

may also cause the ACO to no longer 

meet eligibility, for example, losing a 

large primary care practice could cause 

the ACO assignment to fall below 5,000, 

and result in termination of the 

agreement. 

5. Coordination With Other Agencies 

As mentioned previously, in 

developing our proposals for the Shared 

Savings Program, and in response to 

stakeholder concerns, we worked 

closely with agencies across the Federal 

Government to facilitate participation in 

the Shared Savings Program and to 

ensure a coordinated and aligned interand intra-agency effort in connection 

with the program. The result of this 

effort was the release of three 

documents, concurrently with the 

Notice of Proposed Rulemaking, 

including: (1) A joint CMS and DHHS 

Office of Inspector General (OIG) Notice 

with Comment Period on Waiver 

Designs in Connection with the 

Medicare Shared Savings Program and 

the Innovation Center addressing 

proposed waivers of the civil monetary 

penalties (CMP) law, Federal antikickback statute, and the physician selfreferral law; (2) an Internal Revenue 

Service (IRS) notice soliciting comments 

regarding the need for additional tax 

guidance for tax-exempt organizations, 

including tax-exempt hospitals, 

participating in the Shared Savings 

Program; (3) a proposed Statement of 

Antitrust Enforcement Policy Regarding 

Organizations Participating in the 

Medicare Shared Savings Program 

issued by the FTC and DOJ (collectively, 

the Antitrust Agencies). The comment 

periods for all of these documents have 

now closed. Some comments received 

on this proposed rule were in response 

to these concurrently released 

documents, and thus outside the scope 

of this final rule. We have shared 

relevant comments with the appropriate 

agencies. 

We have continued working with 

these agencies while drafting this final 

rule. As a result a joint CMS and OIG 

interim final rule with comment period 

will also be published in the Federal 

Register concurrently with this final 

rule. The Antitrust Agencies also will 

publish in the Federal Register a final 

Statement of Antitrust Enforcement 

Policy Regarding Accountable Care 

Organizations Participating in the 

Medicare Shared Savings Program. 

a. Waivers of CMP, Anti-Kickback, and 

Physician Self-Referral Laws 

Certain arrangements between and 

among ACOs, ACO participants, other 

owners, ACO providers/suppliers, and 

third parties may implicate the CMP law 

(section 1128A(b)(1) and (2) of the Act), 

the Federal Anti-kickback statute 

(section 1128B(b)(1) and (2) of the Act), 

and/or the physician self-referral 

prohibition (section 1877 of the Act). 

Section 1899(f) of the Act authorizes the 

Secretary to waive certain fraud and 

abuse laws as necessary to carry out the 

provisions of the Shared Savings 

Program. Accordingly, pursuant to 

section 1899(f) of the Act, CMS and OIG 

are jointly publishing an interim final 

rule with comment period describing 

waivers applicable to ACOs, ACO 

participants, and ACO providers/ 

suppliers in the Shared Savings 

Program. The interim final rule with 

comment period can be found elsewhere 

in this issue of the Federal Register. The 

waivers described in the interim final 

rule with comment period will also 

apply to the Innovation Center’s 

Advance Payment Model demonstration 

because ACOs participating in that 

model will also be participating in the 

Shared Savings Program. 

Comments received in response to the 

April 2011 proposed rule directed 

toward the joint CMS and DHHS OIG 

solicitation will be responded to in the 

interim final rule with comment period. 

We encourage reader review of the 

interim final rule. 

b. IRS Guidance Relating to Tax-Exempt 

Organizations Participating in ACOs 

Nonprofit hospitals and other health 

care organizations recognized by the IRS 

as tax-exempt organizations are likely to 

participate in the development and 

operation of ACOs in the Shared 

Savings Program. Accordingly, the IRS 

issued Notice 2011–20 soliciting public 

comment on whether existing guidance 

relating to the Internal Revenue Code 

provisions governing tax exempt 

organizations is sufficient for those taxexempt organizations planning to 

participate in the Shared Savings 

Program through ACOs and, if not, what 

additional guidance is needed. For 

additional information, tax-exempt 

organizations and ACOs should refer to 

Notice 2011–20 and other applicable 

IRS guidance available on www.irs.gov. 

We also received comments relating 

to the tax treatment of ACOs. Tax issues 

are within the jurisdiction of IRS, not 

CMS. Accordingly, those issues are not 

addressed in this Final Rule but we 

have shared the relevant comments with 

IRS. 

c. Antitrust Policy Statement 

Concurrently with the issuance of the 

Shared Savings Program proposed rule, 

the Antitrust Agencies issued a 

proposed Statement of Antitrust 

Enforcement Policy Regarding 

Accountable Care Organizations 

Participating in the Medicare Shared 

Savings Program (proposed Antitrust 

Policy Statement). The proposed 

Antitrust Policy Statement had several 

features relevant to the Shared Savings 

Program, including— 

• An antitrust ‘‘safety zone.’’ The 

Antitrust Agencies, absent extraordinary 

circumstances, would not challenge as 

anticompetitive ACOs that were within 

the safety zone. The safety zone also 

included a rural exception for ACOs 

operating in rural areas. 

• For ACOs outside the safety zone, 

guidance on the types of conduct to 

avoid that could present competitive 

concerns. 

• A mandatory Antitrust Agency 

review procedure for ACOs that met 

certain thresholds. The mandatory 

review would be triggered if two or 

more ACO participants that provide a 

common service (as defined in the 

proposed Antitrust Policy Statement) to 

patients from the same Primary Service 

Area (‘‘PSA’’) have a combined share of 

greater than 50 percent for that service 

in each ACO participant’s PSA. 

The proposed Antitrust Policy 

Statement described the methodology 

that ACO participants could use to 

determine whether the ACO was 

required to obtain an Antitrust Agency 

review. Some of the data to be used in 

this methodology are available at 

http://www.cms.gov/ 

sharesavingsprogram/ 


sroberts on DSK5SPTVN1PROD with RULES
Federal Register / Vol. 76, No. 212 / Wednesday, November 2, 2011 / Rules and Regulations 67841 

1Richard D. Raskin, Ben J. Keith, & Brenna E. 

Jenny, ‘‘Delegation Dilemma: Can HHS Required 

Medicare ACOs to Undergo Pre-Clearance by the 

Antitrust Agencies?,’’ 20 Health L. Rep. 961 (2011). 

35_Calculations.asp. The proposed 

Antitrust Policy Statement applied to 

collaborations among otherwise 

independent providers and provider 

groups, formed after March 23, 2010 

(the date on which the Affordable Care 

Act was enacted) and that have 

otherwise been approved to participate, 

or seek to participate, as ACOs in the 

Shared Savings Program. 

The Antitrust Agencies solicited and 

received comments on the proposed 

Antitrust Policy Statement. The 

Antitrust Agencies are releasing 

concurrently with this final rule a final 

Antitrust Policy Statement in response 

to the comments. Nothing in this final 

rule shall be construed to modify, 

impair, or supersede the applicability of 

any of the Federal antitrust laws. For 

further guidance on antitrust 

enforcement policy with respect to 

ACOs, ACOs should review the final 

Antitrust Policy Statement. 

Comment: Numerous commenters 

appreciated our work with the Antitrust 

Agencies to facilitate participation in 

the Shared Savings Program. However, 

several commenters suggested we 

provide additional flexibility to 

potential ACO applicants and modify 

the scope of the mandatory antitrust 

review. 

Response: The next section of this 

final rule discusses our proposals, and 

addresses all comments, relating to the 

proposed mandatory antitrust review. 

d. Coordinating the Shared Savings 

Program Application With the Antitrust 

Agencies 

We proposed to require that certain 

ACOs be subject to mandatory review by 

the Antitrust Agencies before we would 

approve their participation in the 

Shared Savings Program. Specifically, 

we proposed this mandatory review 

requirement would apply to any newly 

formed ACO with a PSA share above 50 

percent for any common service that 

two or more ACO participants provide 

to patients from the same PSA, and that 

did not qualify for the rural exception 

articulated in the proposed Antitrust 

Policy Statement. Those ACOs would be 

required to submit to us, as part of their 

Shared Savings Program applications, a 

letter from the reviewing Antitrust 

Agency confirming that it had no 

present intent to challenge or 

recommend challenging the proposed 

ACO. Absent such a letter, the proposed 

ACO would not be eligible to participate 

in the Shared Savings Program. 

In addition, the proposed Antitrust 

Policy Statement explained that ACOs 

that are outside the safety zone and 

below the 50 percent mandatory review 

threshold frequently may be procompetitive. The proposed Antitrust 

Policy Statement identified five types of 

conduct that an ACO could avoid to 

reduce significantly the likelihood of an 

antitrust investigation. An ACO in this 

category that desired further certainty 

regarding the application of the antitrust 

laws to its formation and planned 

operation also could seek an expedited 

review from the Antitrust Agencies, 

similar to the mandatory review 

described previously, and similarly 

would not be eligible to participate in 

the Shared Savings Program if the 

reviewing Antitrust Agency reviews the 

ACO and determines that it is likely to 

challenge or recommend challenging the 

ACO as anticompetitive. Finally, we 

proposed that an ACO that falls within 

the safety zone would not be required to 

obtain an Antitrust Agency review as a 

condition of participation. 

Additionally, we recognized in the 

proposed rule there may be instances 

during the agreement period where 

there is a material change (as discussed 

in section II.C.4. of this final rule) in the 

composition of an ACO. We proposed 

that when a material change occurred, 

the ACO must notify us of the change 

within 30 days and that the ACO must 

recalculate and report at that time its 

PSA shares for common services that 

two or more independent ACO 

participants provide to patients from the 

same PSA. We proposed that if any 

revised PSA share is calculated to be 

greater than 50 percent, the ACO would 

be subject to mandatory review or rereview by the Antitrust Agencies. If the 

ACO failed to obtain a letter from the 

reviewing Antitrust Agency confirming 

that it has no present intent to challenge 

or recommend challenging the ACO, we 

proposed that the ACO would be 

terminated from the Shared Savings 

Program. 

We explained in the proposed rule 

that the purpose of requiring Antitrust 

Agency confirmation that it had no 

present intent to challenge or 

recommend challenging the ACO as a 

condition of participation is two-fold. 

First, it would ensure that ACOs 

participating in the Shared Savings 

Program would not present competitive 

problems that could subject them to 

antitrust challenge that may prevent 

them from completing the term of their 

agreement with us. Second, it would 

maintain competition for the benefit of 

Medicare beneficiaries by reducing the 

potential for the creation of ACOs with 

market power. In this context market 

power refers to the ability of an ACO to 

reduce the quality of care furnished to 

Medicare beneficiaries and/or to raise 

prices or reduce the quality for 

commercial health plans and enrollees, 

thereby potentially increasing providers’ 

incentives to provide care for private 

enrollees of higher-paying health plans 

rather than for Medicare beneficiaries. 

We stated that competition in the 

marketplace benefits Medicare and the 

Shared Savings Program because it 

promotes quality of care for Medicare 

beneficiaries and protects beneficiary 

access to care. Furthermore, competition 

benefits the Shared Savings Program by 

allowing the opportunity for the 

formation of two or more ACOs in an 

area. Competition among ACOs can 

accelerate advancements in quality and 

efficiency. All of these benefits to 

Medicare patients would be reduced or 

eliminated if we were to allow ACOs to 

participate in the Shared Savings 

Program when their formation and 

participation would create market 

power. 

Comment: A significant number of 

commenters opposed mandatory review 

of ACOs, because an ACO is a new 

business model designed to encourage 

collaboration and coordination of care 

while still providing beneficiaries the 

freedom of choice of providers under 

FFS Medicare. The commenters made 

the following points: 

• The Social Security Act, as 

amended by the Affordable Care Act, 

does not authorize us either to issue 

regulations governing the application of 

the antitrust laws or to delegate to the 

Antitrust Agencies the authority to 

block participation in the Shared 

Savings Program by certain ACOs. 

These commenters cited a recent article 

suggesting that the proposed mandatory 

review confers unreviewable authority 

on the Antitrust Agencies to disqualify 

entities from participating in the Shared 

Savings Program and therefore violates 

the subdelegation doctrine.1

• It is bad public policy to change the 

nature of antitrust enforcement from law 

enforcement to a regulatory regime by 

requiring a mandatory review for ACO 

applicants with PSA shares greater than 

50 percent for common services. 

• The mandatory review should be 

modified such that an ACO’s actions, 

not its size, should be monitored, 

because if an ACO produces savings 

while maintaining quality and patient 

centeredness, market share is not an 

appropriate measure of anticompetitive 

behavior. 

• Require mandatory notice of the 

PSA shares, but do not require those 

ACOs with greater than a 50 percent 

PSA share to obtain a mandatory 

review. 


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• The mandatory review imposes 

substantial costs on every ACO 

applicant by requiring them to build 

their PSA calculations, with a larger 

burden falling on smaller physician or 

other physician groups that may not 

have the tools to do so, thus 

discouraging their participation. 

Commenters suggested that we calculate 

each ACO’s PSA shares. 

• The proposed antitrust review and 

CMS application review should occur 

simultaneously given the tight 

timeframes to get the program up and 

running. 

• The proposed rule and the 

proposed Antitrust Policy Statement are 

inconsistent because the proposed rule 

does not carve out entities formed 

before March 23, 2010 from the 

mandatory review (meaning all entities 

need a review), whereas the proposed 

Antitrust Policy Statement does not 

apply to entities formed before that date. 

By contrast, numerous commenters 

supported the mandatory review to 

ensure the Shared Savings Program does 

not become a vehicle for ACOs to obtain 

market power. Several commenters 

explained that the consolidation of ACO 

providers/suppliers into ACOs could 

have a significant impact on the 

commercial market. One commenter 

noted it was important for us to 

consider ‘‘the impact of competition (or 

the lack thereof) on quality of care and 

access to care.’’ Several commenters 

suggested that we lower the threshold 

for mandatory antitrust review to 40 

percent to ensure that there are 

sufficient providers to allow the 

formation of competing ACOs to serve 

Medicare beneficiaries. Another 

commenter suggested that we carefully 

consider favoring ACO applications 

from provider groups without market 

power while we calibrate and refine the 

Shared Savings Program. 

Response: Based on the comments 

received, we have reconsidered our 

approach to coordinating with the 

Antitrust Agencies. We believe that we 

can achieve the same two objectives 

identified in the proposed rule using a 

less burdensome approach that is 

consistent with antitrust law 

enforcement norms and does not raise 

subdelegation concerns. 

Accordingly, in this final rule we are 

adopting an approach that relies on 

three prongs to maintain competition 

among ACOs. First, the Antitrust 

Agencies will offer a voluntary 

expedited antitrust review to any newly 

formed ACO (as defined in the final 

Antitrust Policy Statement) before it is 

approved to participate in the Shared 

Savings Program. We strongly encourage 

newly formed ACOs that may present 

competitive issues or are uncertain 

about their legality under the antitrust 

laws to take advantage of this 

opportunity to obtain expedited 

antitrust review before participating in 

the Shared Savings Program. This 

voluntary review will enable ACOs to 

assess whether they are likely to present 

competitive concerns that could subject 

them to an antitrust challenge and 

prevent them from completing the term 

of their agreement with us. As noted in 

the final rule, CMS may terminate an 

ACO’s participation in the Shared 

Savings Program for, among other 

reasons, violation of the antitrust laws. 

Second, we will provide the Antitrust 

Agencies with aggregate claims data 

regarding allowable charges and fee-forservice payments, which will assist the 

Antitrust Agencies in calculating PSA 

shares for ACOs participating in the 

Shared Savings Program. We will share 

these data with the Antitrust Agencies 

as soon as the data become available. In 

addition, we will require ACOs formed 

after March 23, 2010, to agree, as part 

of their application to participate in the 

Shared Savings Program, to permit us to 

share a copy of their application with 

the Antitrust Agencies. Both the 

aggregate data and the information 

contained in these applications will 

help the Antitrust Agencies to assess 

and monitor ACOs’ effects on 

competition and take enforcement 

action, if appropriate. Third, the 

Antitrust Agencies will rely on their 

existing enforcement processes for 

evaluating concerns raised about an 

ACO’s formation or conduct and filing 

antitrust complaints when appropriate. 

Thus, we are not finalizing our 

proposal to require mandatory antitrust 

review and the submission of a letter 

from a reviewing Antitrust Agency 

confirming that it has no present intent 

to challenge, or recommend challenging, 

an ACO formed after March 23, 2010, 

that does not qualify for the rural 

exception articulated in the final 

Antitrust Policy Statement, and that has 

a PSA share above 50 percent for any 

common service that two or more ACO 

participants provide to patients from the 

same PSA. In other words, we will not 

condition Shared Savings Program 

eligibility on whether an ACO has 

obtained the requisite letter from the 

Antitrust Agencies. Rather, we will 

accept such an ACO into the Shared 

Savings Program regardless of whether 

it voluntarily obtains a letter from the 

Antitrust Agencies and regardless of the 

contents of any letter it may have 

voluntarily obtained from the Antitrust 

Agencies, assuming that the ACO meets 

the other eligibility requirements set 

forth in this final rule. We emphasize 

that the acceptance of an ACO into the 

Shared Savings Program represents no 

judgment by CMS about the ACO’s 

compliance with the antitrust laws or 

the ACO’s competitive impact in a 

commercial market. Moreover, we do 

not believe that allowing 

anticompetitive ACOs to operate in 

commercial markets is necessary for the 

Shared Savings Program to function 

effectively. 

Again, as noted previously, we 

encourage newly formed ACOs that 

desire greater antitrust guidance to seek 

a voluntary expedited review from the 

Antitrust Agencies before applying to 

the Shared Savings Program. All 

participants in the Shared Savings 

Program will remain subject to the 

antitrust laws. In addition, as discussed 

previously, we released in June 2011 

some of the information necessary for 

ACO applicants to identify common 

services and to help calculate the 

relevant PSA shares. The final Antirust 

Policy Statement describes the 

procedures for obtaining the voluntary 

expedited antitrust review. 

Although we are eliminating the 

proposed mandatory review 

requirement, we still intend to 

coordinate closely with the Antitrust 

Agencies throughout the application 

process and the operation of the Shared 

Savings Program to ensure that the 

implementation of the program does not 

have a detrimental impact upon 

competition. As discussed in the 

proposed rule, competition among 

ACOs participating in the Shared 

Savings Program will foster 

improvements in quality, innovation, 

and choice for Medicare FFS 

beneficiaries. Section 1899(a)(1)(A) of 

the Act, which states that ‘‘groups of 

providers and suppliers meeting criteria 

specified by the Secretary may work 

together * * * through an accountable 

care organization,’’ authorizes us to 

specify eligibility criteria for the ACOs 

that participate in the Shared Savings 

Program. As discussed previously, we 

are using that authority to specify that 

to be eligible to participate in the 

Shared Savings Program, an ACO newly 

formed after March 23, 2010 (as defined 

in the final Antitrust Policy Statement), 

must agree to permit us to share its 

Shared Savings Program application 

with the Antitrust Agencies. We believe 

this action is necessary to ensure 

appropriate monitoring of the 

competitive effects of ACOs that 

participate in the Shared Savings 

Program. 

Comment: Several comments 

recommended we monitor an ACO’s per 

capita health care cost, for both 

Medicare beneficiaries and commercial 


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patients. For example, several 

comments explained that the 

consolidation of providers to form ACOs 

could have a significant impact on the 

commercial market. These commenters 

explained that through the aggregation 

of market power, ACOs could have an 

enhanced incentive and ability to obtain 

shared savings payments by reducing 

Medicare expenditures to achieve 

‘‘savings’’ under the Shared Savings 

Program, while compensating for the 

reduced Medicare payments by charging 

higher rates and possibly reducing 

quality of care in the private market. 

This cost shifting could have the effect 

of raising premiums for enrollees of 

private and employer-based health 

plans. 

Many of these comments strongly 

urged us to collaborate with the 

Antitrust Agencies on data collection 

and analysis to detect any patterns of 

anti-competitive practices, including 

consolidation, that could harm 

Medicare beneficiaries and enrollees in 

private markets and threaten the 

viability of the Shared Savings Program. 

Other commenters urged us to 

implement requirements for ACOs to 

report publicly on the cost and price of 

care. 

Some comments urged us to add 

requirements to the Shared Savings 

Program to build a more robust 

monitoring system for costs. In 

particular, these comments suggested 

that we could do the following: 

• Require that all participating ACOs 

have a mechanism for assessing 

performance on private sector per capita 

costs by the second year of the program. 

• Gather data regarding current 

market shares, market entries and exits, 

and pricing trends for the ACOs during 

the agreement period. 

• Set expectations for resource 

stewardship and waste reduction, 

including public reporting of quality 

and cost metrics. 

• Specify a standardized set of 

measures for costs, with input from 

consumers, purchasers, and other 

stakeholders. 

• Hold ACOs in the Shared Savings 

Program to a maximum threshold of 

price increase with their commercial 

market clients. 

• Move to requiring ACOs to take part 

in all-payer claims databases (APCD) for 

added transparency. 

Response: We agree with commenters 

that suggested we provide the Antitrust 

Agencies the data and information to 

help identify potentially 

anticompetitive conduct, including 

consolidation, which could be related to 

implementation of the Shared Savings 

Program. Accordingly, we will provide 

the Antitrust Agencies aggregate claims 

data regarding allowable charges and 

fee-for-service payments for ACOs 

participating in the Shared Savings 

Program. In addition, we will share 

copies of applications submitted by 

ACOs formed after March 23, 2010, with 

the Antitrust Agencies. 

In addition, we have requested that 

the Antitrust Agencies conduct a study 

examining how ACOs participating in 

the Shared Savings Program have 

affected the quality and price of health 

care in private markets. We anticipate 

using the results of this study to 

evaluate whether we should, in the 

future, expand our eligibility criteria so 

that we consider competition concerns 

more explicitly in the Shared Savings 

Program application review process. 

Comment: Commenters stated that the 

proposed Antitrust Policy Statement 

does not mention a process for re-review 

of the ACO by the Antitrust Agencies for 

material changes in the ACO’s 

composition. Commenters also stated 

that the proposed rule’s language is 

circular about the conditions that trigger 

a ‘‘material’’ or ‘‘significant’’ change in 

composition, thus requiring a re-review 

by the Antitrust Agencies. 

Response: As discussed previously, 

we will no longer require an Antitrust 

Agency review, such that the 

commenters’ concerns about re-review 

based on antitrust issues are moot. 

Comment: Several commenters 

suggested that the Shared Savings 

Program will lead to increased hospital 

employment of physicians or it will lead 

to hospital purchases of physician 

practices, because start-up costs are so 

great only large entities will be able to 

afford to participate. As a result, there 

will be no competition and prices will 

increase in the commercial sector. Other 

commenters suggested that hospitals 

will employ specialist physicians so 

that they can have patient referrals to 

related facilities, regardless of price and 

quality. 

Other commenters indicated that 

hospital employment of physicians will 

exacerbate the inefficiency problem of 

physicians being paid a higher rate for 

performing the same procedures in 

certain settings. As a result, hospitals 

will use any market power they have to 

form hospital-based provider 

departments and obtain higher rates, 

through their continued fee-for-service 

payments, for the same services that 

could be provided in a less-expensive 

setting. These comments suggested we 

adopt policies to safeguard against these 

practices. 

Response: As we discussed in the 

proposed rule, we do not believe that 

mergers and acquisitions by ACO 

providers and suppliers are the only 

way for an entity to become an ACO. 

The statute permits ACO participants 

that form an ACO to use a variety of 

collaborative organizational structures, 

including collaborations short of 

merger. Indeed, we are also finalizing 

our proposal that entities that on their 

own are not eligible to form an ACO can 

participate in the Shared Savings 

Program by forming joint ventures with 

eligible entities. We reject the 

proposition that an entity under single 

control, that is an entity formed through 

a merger, would be more likely to 

achieve the three-part aim. Moreover, 

the increased flexibility regarding 

governing body composition and the 

leadership and management of an ACO 

that we are adopting in this final rule 

demonstrates our belief that different 

types of entities can be successful in 

this program. 

Comment: Multiple comments 

discussed the competitive aspects of 

ACO membership. For example, one 

commenter suggested that if an urban 

ACO wants to partner with providers in 

rural communities, it should be required 

to allow all providers in the rural 

community to participate in the ACO if 

they so choose. Other commenters 

suggested that an ACO should not be 

able to use its market power to require 

smaller providers or suppliers to 

participate in the ACO (or to prohibit 

them from participating in the Shared 

Savings Program as part of a competing 

ACO) and that we should coordinate 

with the FTC and DOJ to thwart anticompetitive behavior in the formation of 

ACOs. 

Some commenters requested that we 

monitor whether ACOs are using 

information technology requirements to 

prevent various allied health 

professionals from participating in an 

ACO. 

Response: We acknowledge the 

commenters’ concerns and remind them 

that the antitrust laws will continue to 

apply to the operations and conduct of 

all ACOs participating in the Shared 

Savings Program. In other words, if an 

entity believes that an ACO is engaging 

in anticompetitive conduct, it can 

pursue an appropriate private action or 

bring the conduct to the attention of the 

Antitrust Agencies. 

Final Decision: In sum, we are 

modifying our proposal. We believe that 

the voluntary expedited review 

approach discussed previously, coupled 

with the Antitrust Agencies’ traditional 

law enforcement authority and our 

collaborative efforts to share data and 

information with the Antitrust 

Agencies, will allow ACOs a reasonable 

opportunity to obtain guidance 


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regarding their antitrust risk in an 

expedited fashion, while also providing 

appropriate safeguards so that potential 

or actual anticompetitive harm can be 

identified and remedied. We are 

finalizing these policies at § 425.202. 

However, we will continue to review 

these policies and adjust them 

accordingly as we gain more experience 

with the Shared Savings Program. 

D. Provision of Aggregate and 

Beneficiary Identifiable Data 

1. Data Sharing 

Under section 1899(b)(2)(A) of the Act 

an ACO must ‘‘be willing to become 

accountable for the quality, cost, and 

overall care of the Medicare fee-forservice beneficiaries assigned to it.’’ 

Further, in order to be eligible to 

participate in the Shared Savings 

Program, section 1899(b)(2)(G) of the 

Act states an ‘‘ACO shall define 

processes to * * * report on quality and 

cost measures, and coordinate care 

* * *.’’ Section 1899 of the Act does 

not address what data, if any, we should 

make available to ACOs on their 

assigned beneficiary populations to 

support them in evaluating the 

performance of ACO participants and 

ACO providers/suppliers, conducting 

quality assessment and improvement 

activities, and conducting populationbased activities relating to improved 

health. In agreeing to become 

accountable for a group of Medicare 

beneficiaries, and as a condition of 

participation in the Shared Savings 

Program, we expect that ACOs will 

have, or are working towards having, 

processes in place to independently 

identify and produce the data they 

believe are necessary to best evaluate 

the health needs of their patient 

population, improve health outcomes, 

monitor provider/supplier quality of 

care and patient experience of care, and 

produce efficiencies in utilization of 

services. Moreover, this ability to selfmanage is a critical skill for each ACO 

to develop, leading to an understanding 

of the unique patient population that it 

serves. 

However, as we discussed in the 

proposed rule, although an ACO 

typically should have, or is moving 

towards having complete information 

for the services it provides to its 

assigned beneficiaries, we also 

recognize that the ACO may not have 

access to complete information about all 

of the services that are provided to its 

assigned beneficiaries by providers 

outside the ACO—information that 

would be key to its coordinating care for 

its beneficiary population. Therefore, 

we proposed to generate aggregate data 

reports, to provide limited identifying 

information about beneficiaries whose 

information serves as the basis for the 

aggregate reports (and who are 

preliminarily prospectively assigned), 

and to share beneficiary identifiable 

claims data with the ACO unless the 

beneficiary chooses to decline to share 

their data. As we stated in the proposed 

rule, we believe that access to this 

information would provide ACOs with 

a more complete picture about the care 

their assigned beneficiaries receive both 

within and outside the ACO. It would 

also enable the ACOs to ascertain their 

ACO participants and ACO providers’/ 

suppliers’ patterns of care, and could be 

used to assess their performance relative 

to their prior years’ performance. 

As noted in the proposed rule, the 

disclosure of this information in 

accordance with applicable privacy and 

security requirements would enable an 

ACO to be better able to identify how its 

ACO participants and ACO providers/ 

suppliers measure up to benchmarks 

and targets, how they perform in 

relation to peers internally, and to 

identify and develop a plan for 

addressing the specific health needs of 

its assigned beneficiary population. 

2. Sharing Aggregate Data 

In the proposed rule, we discussed 

supplementing the information ACOs 

will be gathering as part of their internal 

processes for monitoring and improving 

care furnished to its assigned 

beneficiary population with aggregated 

(de-identified) data on beneficiary use of 

health care services. 

We proposed to provide aggregate 

data reports at the start of the agreement 

period that would be based on data for 

those beneficiaries historically assigned 

(hereafter referred to as preliminary 

prospectively assigned beneficiaries), 

and included in the calculation of the 

ACO’s benchmark. These reports would 

include, when available, aggregated 

metrics on the beneficiary population 

and beneficiary utilization data at the 

start of the agreement period, based on 

the historical data used to calculate the 

benchmark. We further proposed to 

include these data in conjunction with 

the yearly financial and quality 

performance reports. Additionally, we 

proposed to provide quarterly aggregate 

data reports to ACOs based upon the 

most recent 12 months of data from 

potentially assigned beneficiaries. We 

requested comments on these proposals. 

For a comprehensive review of our 

proposals and rationale, see section 

II.C.4. of the proposed rule (76 FR 

19555). 

Comment: The comments received 

were supportive of the proposal to 

provide aggregate data to ACOs but 

suggested that this data would not be 

useful unless it was delivered in a 

timely manner. Recommendations 

included providing the aggregate data 

set prior to the submission of an 

application, quarterly, immediately 

following the reporting period, or in real 

time. A few commenters expressed 

concerns that aggregate reports based 

upon a historical population may not 

provide the ACO with sufficient 

information to make appropriate 

changes for its future fee-for-service 

population. 

Response: Although we intend to 

provide these aggregate data reports in 

a timely manner, it will not be possible 

to provide these reports to ACOs in 

‘‘real time.’’ The aggregate reports 

would be derived from provider and 

supplier claims data. Claims data are 

only available after they have been 

submitted and processed. As such, there 

is an inherent delay between when a 

service is performed and when a claim 

is processed. This process delay is in 

addition to the time it takes to prepare 

this claims level data to an aggregate 

level data set. Both of these factors make 

it impossible to provide aggregate data 

reports to ACOs in ‘‘real time.’’ 

It is also not possible to provide 

aggregate data reports prior to the 

submission and approval of an ACO 

application and the ACO signing its 

participation agreement. The aggregate 

data report is based upon the ACO 

application itself and the TINs and NPIs 

that enter into an agreement with the 

ACO. Until we have received and 

reviewed the applications, determined 

the eligibility of the ACO participants 

and ACO providers/suppliers to 

participate, and received a signed DUA 

from the ACO, we cannot begin to 

construct the aggregate data reports. 

Finally, in response to those who 

expressed concern about the utility of 

historic data, we note that we proposed 

to supply the aggregate data report 

historically for the benchmark, quarterly 

and in conjunction with the yearly 

financial and quality performance 

reports, the provision of this data in 

subsequent years of the agreement 

period is already a component of our 

proposed policy. 

Additionally, our experience with the 

PGP demonstration and modeling of our 

proposed methodology for identifying 

beneficiaries associated with the ACO 

suggests that a high percentage of 

patients who chose ACO participants 

and ACO providers/suppliers in the 

benchmark period will continue to 

receive care from these ACO 

participants and ACO providers/ 

suppliers. We believe knowing 


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individuals who would have been 

assigned in the past will help the ACO 

participants identify the kinds of 

interventions that are likely to improve 

care for their fee-for-service population 

going forward. 

Comment: Several commenters were 

concerned about the delivery, format, 

and content of the aggregate data report. 

Several commenters questioned the 

ability of CMS to deliver accurate, 

relevant, and comprehensive data to 

ACOs and suggested that CMS outline a 

detailed plan to improve its data 

delivery system. Commenters felt that 

the data should be standardized by CMS 

as aggregate data would be too complex 

for many organizations to analyze. 

Commenters also suggested that the 

aggregate data reports must include: 

Links to the beneficiary identifiable data 

and health quality indicators, 

comparative regional and national 

claims data, and separate aggregate data 

on patients that have chosen to ‘‘opt-out 

of the shared savings program.’’ A few 

comments suggested that we provide 

customized reports to each ACO. 

Finally, one commenter suggested that 

CMS should also supply aggregate 

savings/losses reports to ACOs 

quarterly. 

Response: We proposed to deliver 

aggregate data reports to ACOs at the 

start of the agreement period, quarterly, 

and in conjunction with the annual 

quality and financial reports. These data 

extractions would be standardized 

reports for all ACOs. It would not be 

administratively feasible to offer 

customized reports for each ACO. We 

expect that ACOs would be able to 

incorporate the aggregated data reports 

into their own data processing systems 

for use in developing population health 

management capabilities. By its nature, 

aggregate data cannot be linked to 

individual beneficiary identifiable data 

as the purpose of the aggregate data is 

to offer a broad view of the overall 

population of assigned beneficiaries and 

potential areas for improvement. 

Additionally, the aggregate data will not 

be linked to specific quality indicators 

as this is not the purpose of providing 

the standardized aggregate data reports. 

The ability to receive lists of 

beneficiaries whose data were used to 

compile the aggregate data reports and 

monthly beneficiary identifiable claims 

data, as discussed later in this final rule, 

in conjunction with the aggregate data 

reports, will afford ACOs the 

opportunity to use the lessons learned 

from the aggregate data reports to 

implement delivery system reforms 

appropriate for their own beneficiary 

populations. While we did not propose 

to offer regional or national aggregate 

data reports or include a report on 

beneficiaries that have declined to share 

their protected health information (PHI), 

we think these suggestions merit 

consideration and we will keep them in 

mind during future rulemaking cycles. 

For now, aggregate data reports will be 

provided on the assigned beneficiary 

population, including beneficiaries who 

may have declined to share their PHI 

data. 

Finally, due to the inherent delay in 

receiving and processing claims level 

data, it would not be feasible or accurate 

to supply shared savings/loss reports to 

ACOs quarterly. However, the quarterly 

reports will include information on per 

capita expenditures for assigned 

beneficiaries that ACOs can use to 

monitor and improve their performance. 

Final Decision: We will finalize 

without change our proposals related to 

sharing of aggregate data (see part 425 

subpart H in regulatory text of this final 

rule). 

3. Identification of Historically Assigned 

Beneficiaries 

Based on feedback from the PGP 

demonstration, the RFI comments on 

the Shared Savings Program, and the 

Shared Savings Program Open Door 

Forums, we proposed to make certain 

limited beneficiary identifiable 

information available to ACOs at the 

beginning of the first performance year. 

We believed ACOs would benefit from 

understanding which of their FFS 

beneficiaries were used to generate the 

aggregated data reports. Accordingly, we 

proposed to disclose the name, date of 

birth (DOB), sex and Health Insurance 

Claim Number (HICN) of the 

preliminary prospective assigned 

beneficiary population. We believed 

that knowing these data elements would 

be useful to the ACO in two ways: First, 

the ACO participants and ACO 

providers/suppliers could use the 

information to identify the preliminary 

prospective assigned beneficiaries, 

review their records, and identify care 

processes that may need to change. 

Second, experience with the PGP 

demonstration has suggested that a high 

percentage of preliminary prospective 

assigned beneficiaries will continue to 

receive care from the ACO participants 

and ACO providers/suppliers. 

We recognized that there are a 

number of issues and sensitivities 

surrounding the disclosure of 

individually-identifiable (patientspecific) health information, and noted 

that a number of laws place constraints 

on the sharing of individually 

identifiable health information. We 

analyzed these issues and legal 

constraints and concluded that the 

proposed disclosure of the four 

identifiers would be permitted under 

the applicable laws and address the 

issues raised, subject to the conditions 

described in detail in the proposed rule 

(76 FR 19555), and we sought comment 

on this proposal. 

Comment: Although the majority of 

comments supported our proposal to 

supply ACOs with the name, DOB, sex 

and HICN of the preliminary 

prospective assigned beneficiary 

population, we did receive a few 

comments that objected to this proposal. 

Of those comments that disagreed with 

our proposal, the concerns were related 

to the confusion that could result for 

ACO participants and ACO providers/ 

suppliers related to the provision of data 

on the preliminary prospective assigned 

beneficiaries who may not choose to see 

ACO participants or ACO providers/ 

suppliers going forward, the potential 

for ACOs to use the proposed data 

elements to avoid at-risk and/or high 

cost beneficiaries, and the legality of 

disclosing this type of data. Others 

suggested the four data points be 

expanded to include other beneficiary 

identifiable information. 

Response: We proposed providing 

limited beneficiary identifiable 

information to ACOs at the start of the 

agreement period in order to assist the 

ACO in conducting population-based 

activities related to improving health or 

reducing costs, protocol development, 

case management and care coordination. 

We believed that the ACO could use the 

information to identify the preliminary 

prospective assigned beneficiaries, 

review their records, and identify care 

processes within its organization that 

may need to change. Since a high 

percentage of beneficiaries who choose 

ACO participants and ACO providers/ 

suppliers in the benchmark period will 

continue to receive care from these ACO 

participants and ACO providers/ 

suppliers, we do not believe this data 

set will generate any confusion for 

ACOs. As we outlined in the proposed 

rule, we believe the agency has legal 

authority to provide this data to ACOs. 

As also discussed in the proposed rule, 

we believe these particular data 

elements will be useful to the ACO for 

two reasons: (1) The ACO participants 

and ACO providers/suppliers could use 

the information to identify the 

preliminary prospectively assigned 

beneficiaries, review their records, and 

identify care processes that may need to 

change, and (2) experience with the PGP 

demonstration has suggested that a high 

percentage of preliminary prospective 

assigned beneficiaries will continue to 

receive care from the ACO participants 

and ACO providers/suppliers. We 


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believe that the proposed four data 

points will be sufficient to aid ACOs in 

focusing their initial care redesign 

efforts going forward. We also believe 

these four data points are the minimum 

data necessary for providers to begin the 

process of developing care plans in an 

effort to provide better care for 

individuals and better health for 

populations. As described in section 

II.D.4 of this final rule, the ACO would 

have the additional opportunity to 

request claims data for these individuals 

after having given these beneficiaries 

the opportunity to decline such data 

sharing. Finally, we agree with the 

comment that while providing such 

information may be a benefit to both the 

beneficiary and the ACO, concerns 

remain that ACOs could use it to avoid 

at-risk beneficiaries or to stint on care. 

For this reason we have included in 

section II.H. of this final rule a detailed 

discussion of the safeguards and 

sanctions that have been incorporated 

into the program to guard against 

avoidance of at-risk beneficiaries. 

Comment: Several comments 

suggested that we provide the limited 

beneficiary identifiable data set in 

advance of ACOs signing agreements. 

Response: The limited beneficiary 

identifiable data set is constructed based 

upon the content of the ACO’s 

application, including the associated 

TINs that have been verified as part of 

the application process. The data would 

be comprised of information regarding 

the beneficiaries who would have met 

the criteria for assignment to the ACO 

during the benchmark period. Without a 

verified list of eligible TINs that will be 

associated with the ACO, we cannot 

construct this data set. Additionally, as 

discussed later in this final rule, we will 

require ACOs to enter into a Data Use 

Agreement (DUA) prior to receipt of any 

beneficiary identifiable claims data, and 

this agreement can only be executed 

after an applicant has been approved to 

participate in the Shared Savings 

Program as an ACO. 

Under HIPAA and the required 

business associate agreements, the ACO 

and its participants will not be able to 

use or disclose any individually 

identifiable health information it 

receives from us in a manner in which 

a HIPAA covered entity would be barred 

from doing. Furthermore, under the 

DUA, the ACO would be prohibited 

from sharing the Medicare claims data 

that we provide through the Shared 

Savings Program with anyone outside 

the ACO that has not co-signed the DUA 

as a contractor to the ACO. In addition, 

ACOs must comply with the limitations 

on use and disclosure that are imposed 

by HIPAA, the applicable DUA, and the 

ACO program’s statutory and regulatory 

requirements. Compliance with the 

DUA will be a condition of the ACO’s 

participation in the Shared Savings 

Program—non-compliance with this 

requirement would result in the ACO no 

longer being eligible to receive data, and 

could lead to termination from the 

Shared Savings Program or additional 

sanctions and penalties available under 

the law. 

For these reasons, we cannot disclose 

beneficiary identifiable information to 

an ACO until such time as any 

necessary Business Associate 

Agreements (BAAs) between an ACO 

and its ACO participants and ACO 

providers/suppliers are established in 

accordance with HIPAA and there is a 

signed DUA in place with us. 

Comment: Several comments 

requested that at the start of the 

agreement period, we provide more 

detailed and robust beneficiary 

identifiable data than the four data 

points identified and that we update 

and provide to ACOs the list of the 

potentially assigned beneficiary 

population monthly or quarterly. 

Response: Although we understand 

that ACOs would prefer to have more 

detailed beneficiary identifiable data at 

the start of the agreement period, in the 

proposed rule (76 FR 19555) we 

described the minimum necessary data 

elements we believed were essential to 

accomplish the health care operations 

described in the NPRM. As discussed in 

response to a previous comment, we 

believe that the proposed four data 

points will be sufficient to aid ACOs in 

focusing their care redesign efforts 

initially. As noted in section II.D.4. of 

this final rule, however, the ACO will 

have the opportunity to request 

additional claims data for these 

beneficiaries once the ACO has given 

them the opportunity to decline data 

sharing. 

As described in section II.E. of this 

final rule, we are modifying our 

proposed assignment methodology to 

provide ACOs preliminary prospective 

assignment of beneficiaries with 

retrospective reconciliation based on 

actual beneficiary utilization. We agree 

with commenters that providing 

quarterly aggregate reports on the 

preliminarily prospective assigned 

population would assist ACOs in 

conducting population-based activities 

relating to improving health or reducing 

costs, protocol development, case 

management and care coordination. 

Therefore, we will be providing ACOs 

with quarterly listings of preliminarily 

prospective assigned beneficiary names, 

DOB, sex, and HCINs that were to 

generate each quarterly aggregate data 

report. We believe that the provision of 

the quarterly aggregate reports and the 

limited identifiable information on 

beneficiaries used to generate the 

reports, combined with the opportunity 

to request monthly beneficiary 

identifiable claims data as discussed 

later in this final rule, and our 

modification to allow ACOs to request 

claims data of beneficiaries that appear 

on these reports, will provide sufficient 

information for treatment and health 

care operations activities with the 

Medicare FFS population for which it is 

accountable. 

Final Decision: We are finalizing our 

proposal to provide the ACO with a list 

of beneficiary names, dates of birth, sex, 

and HICN derived from the beneficiaries 

whose data was used to generate the 

preliminary prospective aggregate 

reports (Subsection H). We are 

modifying our proposal to provide 

similar information in conjunction with 

each quarterly aggregated data report, 

based upon the most recent 12 months 

of data, consistent with the time frame 

listed in the proposed rule. 

4. Sharing Beneficiary Identifiable 

Claims Data 

While the availability of aggregate 

beneficiary information and the 

identification of the beneficiaries used 

to determine the benchmark will assist 

ACOs in the overall redesign of care 

processes and coordination of care for 

their assigned beneficiary populations, 

we believe that more complete 

beneficiary-identifiable information 

would enable practitioners in an ACO to 

better coordinate and target care 

strategies towards the individual 

beneficiaries who may ultimately be 

assigned to them. There are recognized 

limits to our data, however, and to our 

ability to disclose it. 

After consideration of the legal 

limitations and policy considerations 

that would be applicable to disclosure 

of these data, which are discussed in 

detail in the proposed rule (76 FR 19557 

through 19559), we proposed to give the 

ACO the opportunity to request certain 

beneficiary identifiable claims data on a 

monthly basis, in compliance with 

applicable laws. We proposed to limit 

the available claims to those of 

beneficiaries who received a primary 

care service from a primary care 

physician participating in the ACO 

during the performance year, and who 

have been given the opportunity to 

decline to have their claims data shared 

with the ACO but have declined to do 

so. Furthermore, we proposed that 

beneficiary information that is subject to 

the regulations governing the 

confidentiality of alcohol and drug 


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abuse patient records (42 CFR Part 2) 

would only be made available if the 

beneficiary provided his or her prior 

written consent. Finally, we proposed to 

limit the content of the claims data to 

the minimum data necessary for the 

ACO to effectively coordinate care of its 

patient population. 

As a condition of receiving the data, 

the ACO would be required to submit a 

formal data request, either at the time of 

application or later in the agreement 

period, and explain how it intends to 

use these data to evaluate the 

performance of ACO participants and 

ACO providers/suppliers, conduct 

quality assessment and improvement 

activities, and conduct populationbased activities to improve the health of 

its assigned beneficiary population. 

Additionally, we proposed to require 

ACOs to enter into a DUA prior to 

receipt of any beneficiary-identifiable 

claims data. Under the DUA, the ACO 

would be prohibited from sharing the 

Medicare claims data that we provide 

through the Shared Savings Program 

with anyone outside the ACO. In 

addition, we proposed to require in the 

DUA that the ACO agree not to use or 

disclose the claims data, obtained under 

the DUA, in a manner in which a 

HIPAA covered entity could not without 

violating the HIPAA Privacy Rule. We 

proposed to make compliance with the 

DUA a condition of the ACO’s 

participation in the Shared Savings 

Program—non-compliance with this 

requirement would result in the ACO no 

longer being eligible to receive data, and 

could lead to its termination from the 

Shared Savings Program or additional 

sanctions and penalties available under 

the law. ACOs would be required to 

certify to their willingness to comply 

with the terms of the DUA in their 

application to participate in the program 

or at the time they request the claims 

data, we solicited comments on our 

analysis and proposals described 

previously. For a complete discussion of 

our analysis of our legal authority to 

disclose beneficiary-identifiable parts A, 

B, and D claims data to ACOs (see 76 

FR 19556 through 19559). 

Comment: The majority of comments 

supported the provision regarding 

beneficiary-identifiable data. However, 

some expressed concern about the 

ability of CMS to provide timely data to 

ACOs. The majority of comments 

supported the provision of this data on 

a monthly basis but some comments 

requested a more streamlined approach 

that would enable the provision of this 

data ‘‘real time’’ or weekly. 

One commenter believed that claimbased data simply cannot be timely, 

stating that by the time a claim for a 

service is submitted, processed and 

adjudicated, and compiled and 

extracted, significant time will have 

elapsed. Additionally, the commenter 

also contended that by the time the 

monthly transfer is received and 

properly ‘‘loaded’’ on an ACO’s system, 

and analyzed by the ACO’s or their 

consultant’s staff, several more months 

will have elapsed, rendering the data 

less than useful. Another commenter 

suggested these data would be useful on 

a quarterly basis. 

Response: Although we understand 

that ACOs would like to obtain data on 

a real time, or nearly real time basis, as 

we explained in the proposed rule, there 

is an inherent lag between when a 

service is performed and when the 

service is submitted for payment, for 

this reason it is not feasible to provide 

data in real time. As noted previously, 

however, we expect that ACOs will 

have, or will be working towards 

having, processes in place to 

independently identify and produce the 

data they believe are necessary to best 

evaluate the health needs of their 

patient population, improve health 

outcomes, monitor provider/supplier 

quality of care and patient experience of 

care, and produce efficiencies in 

utilization of services. A robust health 

information exchange infrastructure and 

improving communication among ACO 

participants and the ACO’s neighboring 

health care providers could assist in 

accessing data that is closer to ‘‘real 

time’’. 

In keeping with the ‘‘minimum 

necessary’’ provisions of the HIPAA 

Privacy Rule, ACOs are expected only to 

request data from us that will be useful 

to them for conducting the kinds of 

activities that are described in the 

proposed rule. ACOs may request data 

as frequently as each month but are not 

required to submit a request monthly. 

ACOs may submit requests less 

frequently if monthly reports are not 

necessary to suit their needs. 

Comment: Several comments were 

concerned about the ability of ACOs to 

convert a large volume of claims data 

into actionable information. Some 

requested that CMS standardize the 

monthly information in a way that is 

actionable for the ACO. 

Response: We agree that not all ACOs 

may have the capability, desire, or need 

to handle large volumes of claims data 

in a way that will complement the 

ACO’s activities to improve care 

processes. For that reason, we are not 

requiring all ACOs to submit DUAs or 

request monthly beneficiary identifiable 

claims data, as noted previously. 

Accordingly, as described previously, 

before receiving any data, the ACO will 

be required to explain how it intends to 

use these data to evaluate the 

performance of ACO participants and 

ACO providers/suppliers, conduct 

quality assessment and improvement 

activities, and conduct populationbased activities to improve the health of 

its assigned beneficiary population. 

Comment: A few comments requested 

that the data elements contained in the 

monthly beneficiary identifiable data be 

expanded. Commenters additionally 

suggested that the data elements should 

include detailed information on all 

services received by beneficiaries who 

have been treated by an ACO 

participant. One comment specifically 

requested that the claims data include 

both the NPI and TIN so they can drill 

their quality and cost containment 

efforts down to the individual provider 

level while another comment 

specifically requested that for suppliers, 

such as laboratories, the minimum 

necessary data set must include the 

Place of Service (POS) code as the 

supplier ID serves no real purpose for 

laboratories. 

Response: In the proposed rule, we 

stated that we believed the minimum 

necessary Parts A and B data elements 

would include data elements such as: 

Procedure code, diagnosis code, 

beneficiary ID, date of birth, gender, 

and, if applicable, date of death, claim 

ID, the form and thru dates of service, 

the provider or supplier type, and the 

claim payment type. (76 FR 19558). 

Similarly, we stated that the minimum 

necessary Part D data elements could 

include data elements such as: 

Beneficiary ID, prescriber ID, drug 

service date, drug product service ID, 

and indication if the drug is on the 

formulary. (76 FR 19559). We would 

like to clarify that these lists of data 

elements were provided in order to offer 

examples of the types of data elements 

that might be the minimum data 

necessary to permit an ACO to 

undertake evaluation of the performance 

of ACO participants and ACO 

providers/suppliers, conduct quality 

assessment and improvement activities 

with and on behalf of the ACO 

participants and ACO providers/ 

suppliers, and conduct populationbased activities relating to improved 

health for Medicare beneficiaries who 

have a primary care visit with a primary 

care physician used to assign patients to 

the ACO during a performance year. We 

did not, however, intend that these data 

elements would be the only data 

elements that an ACO could request. 

Rather, we intended that an ACO could 

request additional data elements 

provided it could demonstrate how the 

additional requested information would 


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be necessary to performing the functions 

and activities of the ACO, such that they 

would be the minimum necessary data 

for these purposes. Accordingly, in this 

final rule, we are clarifying that the 

minimum necessary data elements may 

include, but are not limited to, the list 

of Parts A and B data elements and the 

list of Part D data elements that were 

specifically included in the proposed 

rule. 

Furthermore, we agree with the 

request to include the provider’s 

identity, such as through the NPI or 

TIN. One of the important functions of 

the ACO is to coordinate care, and 

without the provider’s identity, the ACO 

would not able to make full use of the 

claims data to determine which other 

providers it will need to work with in 

order to better coordinate the 

beneficiary’s care. For the same reasons, 

the POS code will be useful. We do 

agree that in order to effectively 

evaluate the performance of ACO 

participants and ACO providers/ 

suppliers, conduct quality assessment 

and improvement activities, and 

conduct population-based activities to 

improve the health of its assigned 

beneficiary population the minimum 

necessary data set should be expanded 

to include TIN, NPI, and POS codes. 

Comment: Several commenters 

requested that beneficiary identifiable 

data be supplied to ACOs 6 months 

prior to their initial agreement start date 

while other comments did not specify a 

specific timeframe but generally 

requested that beneficiary identifiable 

data be provided to ACOs in advance of 

signing their agreements. 

Response: Similar to the response 

provided previously related to the 

provision of the four beneficiary 

identifiable data points associated with 

the aggregate data reports, the legal 

bases for the disclosure of beneficiaryidentifiable information would not be 

applicable prior to the start of the ACO’s 

participation in the Shared Savings 

Program. 

Comment: Several comments 

requested that we make Medicare claims 

data available to Regional Health 

Improvement Collaboratives as soon as 

possible so that they can help providers 

in their community identify successful 

strategies for forming ACOs and also 

develop other innovative payment and 

delivery reforms that the Innovation 

Center can support. 

Response: This comment is outside 

the scope of this rule. In the proposed 

rule, we proposed to share beneficiaryidentifiable claims data with the ACOs 

under the terms specified. We did not 

propose to make these data available to 

other entities. However, we note that 

under section 10332 of the Affordable 

Care Act certain qualified entities, 

which may include existing community 

collaboratives, that meet certain 

requirements for performance 

measurement and reporting can access 

beneficiary identifiable claims data for 

the purposes of evaluating the 

performance of providers and suppliers 

on measures of quality, efficiency, 

effectiveness and resource use. 

Comment: One comment 

recommended that ACOs should be 

required to assure that health data is bidirectional with State health agency 

registries. This bi-directional sharing of 

data is an important resource to draw on 

the expertise of governmental public 

health in using data to identify high risk 

populations. State health agencies can 

provide improvements in individual 

and population care, resulting in better 

health and reduced expenditures. 

Response: We recognize the 

importance of encouraging health 

information exchange with State health 

agency registries. Two of the objectives 

of our Medicare EHR Incentive Program 

for eligible professionals are related to 

sharing information with State health 

agencies, such as immunization data 

and syndromic surveillance data. More 

information about the Medicare EHR 

Incentive Program is available at 

https://www.cms.gov/ 

ehrincentiveprograms/ 

30_Meaningful_Use.asp. As discussed 

in section II.F. of this final rule, we have 

adopted a quality measure requiring 

ACOs to report the percentage of 

primary care providers who successfully 

qualify for an EHR Incentive Program 

payment. 

We anticipate that ACOs will 

participate in active health information 

exchange with their State health 

agencies as appropriate; however, we 

decline to require ACOs to send 

information to their State health 

agencies as a condition of participation 

in the Shared Savings Program. We are 

finalizing our proposal to share 

beneficiary identifiable data with ACOs 

that are qualified to participate in the 

program. 

Comment: Several commenters were 

concerned that the integrated design of 

ACOs could result in DUA and privacy 

law violations without appropriate 

monitoring and safeguards in place, and 

would request that CMS be more 

prescriptive in those policies addressing 

its sharing of data, the ACOs sharing of 

data internally, and the ACO’s 

suppression of inappropriate data 

flowing to sources (that is adolescent/ 

minor data to a parent/guardian, 

beneficiary data to an ex-spouse, etc.). 

Response: As discussed previously, 

we believe we have the legal authority 

to share beneficiary identifiable claims 

data under the conditions specified. 

While not required to do so under the 

applicable laws, we have also elected to 

bar redisclosure of any CMS claims data 

that are received by an ACO through the 

Shared Savings Program. Furthermore, 

the recipients of CMS claims data under 

this program are either HIPAA covered 

entities or business associates of HIPAA 

covered entities. The HIPAA Privacy 

and Security rules will provide added 

protections (and enforcement 

mechanisms) outside of the ACO 

program requirements. Additionally, we 

have proposed, and are finalizing robust 

monitoring protocols (described in 

section II.H. of this final rule) that will 

protect beneficiary privacy interests and 

penalize ACOs that misuse data. 

Comment: A comment stated that 

CMS must assure that all ACO 

participants have equal access to 

beneficiary identifiable data. Another 

commenter recommended that 

pharmacists specifically be allowed to 

be active partners in data sharing. 

Response: We believe it is in the best 

interest of all ACO participants to have 

a voice in the decision making and 

function of the ACO. As such, we have 

proposed that ACO participants 

(defined as any Medicare enrolled 

provider or supplier, including 

pharmacists) have a mechanism of 

shared governance. Shared governance 

ensures all ACO participants have the 

ability to jointly make decisions on how 

best to use and disseminate information 

derived from beneficiary identifiable 

claims in accordance with all applicable 

laws for purposes of the health care 

operations of the ACO participants, 

and/or effectively treating the assigned 

patient population of the ACO. 

Comment: Several comments 

expressed concerns regarding how the 

data for those patients that are 

ultimately not assigned to the ACO will 

be handled. One comment specifically 

requests that no beneficiary identifiable 

data be shared with any program until 

after the Medicare Advantage open 

season has concluded as this would 

ensure that a Medicare beneficiary has 

the option of electing a different health 

care delivery method without having 

their personal information shared with 

an organization through which they are 

not receiving health services. 

Response: We recognize that some 

beneficiaries will not continue to see the 

ACO participants because they may 

move or change providers. Some 

beneficiaries may change providers 

because they have enrolled in a 

Medicare Advantage plan that does not 


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include their existing provider. When 

beneficiaries stop receiving care from 

ACO participants, for whatever reason, 

the ACO no longer needs to receive 

claims data for these beneficiaries 

because the ACO would no longer be 

responsible for coordinating their care. 

Accordingly, consistent with 

§ 425.704(b), ACOs should not continue 

to request claims data from us for 

beneficiaries that the ACO knows are no 

longer being treated by ACO 

participants. 

We are finalizing our proposal to 

share these data with the ACO once the 

beneficiary has been notified and has 

not declined to have their data shared. 

We will also monitor the ACO’s 

compliance with the terms of the DUA. 

Comment: Several commenters 

recommended that we specify in the 

regulation that an ACO may transmit 

data to a vendor or designate a vendor 

to receive data from CMS on their 

behalf, and that this vendor may use 

this data in a manner that complies with 

HIPAA and their business associate 

agreements. 

Response: In the proposed rule, we 

discussed the ability under HIPAA for 

covered entities to share beneficiary 

identifiable data with business 

associates. We believe based on its work 

on behalf of covered entity ACO 

participants and ACO providers/ 

suppliers in conducting quality 

assessment and improvement activities, 

a vendor could qualify as a business 

associate or subcontractor of a business 

associate. Therefore, we believe an ACO 

may allow a vendor to receive claims 

information on its behalf, but it must 

assume responsibility for that vendor’s 

use and disclosures of the data. 

Comment: One comment suggested 

that the provision of beneficiary 

identifiable data on a monthly basis 

could undermine the movement to 

EHRs if ACOs instead invest in freestanding programs to analyze claims 

data. Other comments state that the 

ability to facilitate health information 

exchange among affiliated and 

unaffiliated providers through the use of 

both EHR and HIT interoperability 

standards is an important ingredient to 

the success of ACOs. 

Response: We disagree that the 

movement toward adopting EHRs will 

be somehow undermined by our 

provision of beneficiary identifiable 

claims data to the ACOs. As we have 

explained, the beneficiary identifiable 

claims data that will be furnished by us, 

although useful, is not ‘‘real time’’ and 

is not expected to supplant the 

expectation that ACOs are growing in 

their capability for internal analysis of 

data to improve quality as well as 

improving coordination of care by better 

communication between ACO 

participants and non-participant 

providers. Additionally, because the 

ACO will be held accountable for an 

assigned population of FFS Medicare 

beneficiaries, we expect that beneficiary 

identifiable claims data will be useful in 

identifying services and goods obtained 

from non-ACO providers and suppliers 

and in developing processes to improve 

communication with those practitioners 

to improve overall care delivery. The 

development of interoperable EHR and 

HIT among both affiliated and 

unaffiliated providers would be one way 

to facilitate communication with 

practitioners. 

5. Giving Beneficiaries the Opportunity 

To Decline Data Sharing 

Although we have the legal authority, 

within the limits described previously, 

to share Medicare claims data with 

ACOs without the consent of 

beneficiaries, we nevertheless believe 

that beneficiaries should be notified of, 

and have control over, who has access 

to their personal health information for 

purposes of the Shared Savings 

Program. Thus, we proposed to require 

that, as part of its broader activities to 

notify patients that its ACO provider/ 

supplier is participating in an ACO, the 

ACO must also inform beneficiaries of 

its ability to request claims data about 

them if they do not object. 

Specifically, we proposed that when a 

beneficiary has a visit with their 

primary care physician, their physician 

would inform them at this visit that he 

or she is an ACO participant or an ACO 

provider/supplier and that the ACO 

would like to be able to request claims 

information from us in order to better 

coordinate the beneficiary’s care. If the 

beneficiary objects to sharing their data, 

he or she would be given a form stating 

that they have been informed of their 

physician’s participation in the ACO 

and explaining how to decline having 

their personal data shared. The form 

could include a phone number and/or 

email address for beneficiaries to call 

and request that their data not be 

shared. Thus, we proposed that ACOs 

would only be allowed to request 

beneficiary identifiable claims data for 

beneficiaries who have: (1) Visited a 

primary care participating provider 

during the performance year; and (2) 

have not chosen to decline claims data 

sharing. We noted that it is possible that 

a beneficiary would choose not to have 

their data shared with the ACO but 

would want to continue to receive care 

from ACO participants or providers/ 

suppliers. We further noted that in such 

a case, the ACO would still be 

responsible for that beneficiary’s care, 

and as such, the beneficiary’s data 

would continue to be used to assess the 

performance of the ACO. To ensure a 

beneficiary’s preference is honored, we 

proposed to maintain a running list of 

all beneficiaries who have declined to 

share their data. We proposed to 

monitor whether ACOs request data on 

beneficiaries who have declined data 

sharing, and proposed to take 

appropriate actions against any ACO 

that has been to make such a request. 

For a complete discussion of our policy 

rationale for these proposals (see (76 FR 

19559 and 19560)). 

Comment: Some comments suggested 

that this proposal to permit beneficiaries 

to decline data sharing runs counter to 

the goal of coordinated care and will 

make it nearly impossible for ACOs to 

succeed. These comments offered 

various alternatives ranging from: 

Eliminating the opportunity for 

beneficiaries to decline data sharing, 

removing those beneficiaries who elect 

to decline to have their data shared from 

ACO performance assessment, requiring 

beneficiaries who choose to decline to 

participate in data sharing from 

continuing to seek care from an ACO 

participant, allowing ACOs to refuse 

care to beneficiaries who choose to 

decline data sharing, and making the 

beneficiary’s choice to receive care from 

an ACO provider/supplier an automatic 

opt-in for data sharing. 

Response: Although we have the legal 

authority, within the limits described 

previously, to share Medicare claims 

data with ACOs without the consent of 

the Medicare beneficiaries, we believe 

that beneficiaries should be notified of 

their provider’s participation in an ACO 

and have some control over who has 

access to their personal health 

information for purposes of the shared 

savings program. Furthermore, we 

believe that a beneficiary should not be 

subject to any penalties, such as being 

required to change their healthcare 

provider, if they decide that they do not 

want their information shared. The 

requirement that an ACO provider/ 

supplier engage patients in a discussion 

about the inherent benefits, as well as 

the potential risks, of data sharing 

provides an opportunity for true patientcentered care and will create incentives 

for ACOs, ACO participants, and ACO 

providers/suppliers to develop positive 

relationships with each beneficiary 

under their care. Additionally, this 

proposal will provide ACO participants 

and ACO providers/suppliers the 

opportunity to engage with beneficiaries 

by explaining the shared savings 

program and its potential benefits to 

both the beneficiaries and the health 


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care system as a whole. FFS 

beneficiaries will retain their right to 

seek care from any provider, including 

those participating in an ACO, even if 

they decline to share their data. 

Additionally, requiring that ACOs be 

accountable to all assigned beneficiaries 

will allow us to compare the quality 

metrics and costs between those 

beneficiaries who have declined to 

share their data and those beneficiaries 

who have allowed their data to be 

shared in order to evaluate the 

effectiveness of the data sharing 

provisions. We will monitor for any 

actions taken on the part of the ACO to 

steer patients away that have declined 

data sharing. 

Comment: A few comments 

recommend that for the elderly, less 

literate or tribal populations, that an 

opt-in approach would be more 

conducive to offering beneficiaries 

meaningful control over their personal 

health information. Commenters believe 

the advantage of an opt-in approach is 

that consent must be sought before 

which time any sharing of health 

information can occur. Obtaining 

affirmative written permission would 

also provide documentation of the 

beneficiary’s choice. A few other 

comments supported our policy to 

afford meaningful choice over their 

personal health information to 

beneficiaries but recommended that we 

make this less burdensome on the 

beneficiary. 

Response: We disagree that an opt-in 

approach would offer beneficiaries more 

control over their personal health 

information then an opt-out approach. 

We believe either approach, done well, 

offers equivalent control. As discussed 

previously, our opt-out approach 

coupled with notification of how 

protected health information will be 

shared and used affords beneficiaries 

choice and will offer ACOs, ACO 

participants, and ACO providers/ 

suppliers the opportunity to develop 

positive relationships with each 

beneficiary under their care. 

Additionally, our notification and opt 

out approach will provide ACOs, ACO 

participants, and ACO providers/ 

suppliers the opportunity to explain the 

shared savings program and its inherent 

benefits to both the beneficiaries and the 

health care system as a whole. We 

recognize that obtaining affirmative 

written permission would provide 

documentation of the beneficiary’s 

choice in an opt-in model. However, we 

believe that under this approach 

significant paperwork burdens arise as 

providers must track consents for the 

majority of their patient population. 

Comment: One comment stated that 

requiring beneficiaries to change their 

health care delivery in order to avoid 

having their personal health information 

shared among ACO providers is 

contrary to the message delivered 

during the health care debate that if a 

beneficiary was happy with their health 

care, nothing would change. Another 

comment was concerned that patients 

may be skeptical of or not understand 

the opt-out proposal and for this reason 

seek care outside the ACO, even if the 

beneficiary has an established 

relationship with the ACO participant. 

Response: We disagree with this 

comment and contend that the 

transparency provided by this proposal 

ensures the beneficiary may decline 

data sharing while also allowing the 

beneficiary to continue to receive care 

from an ACO provider if they are happy 

with the care he/she is providing. In this 

way, beneficiaries retain freedom under 

traditional FFS Medicare to choose their 

own health care providers while also 

affording them the option of whether or 

not to share their data. 

Comment: Several comments 

approved of our proposal to offer all 

beneficiaries the opportunity to decline 

to share their health data and especially 

liked that it would afford providers the 

opportunity to engage with patients to 

promote trust. Many of these comments 

also suggested that this policy would 

allow CMS to evaluate whether or not 

the sharing of beneficiary identifiable 

claims data is an important factor in 

improving health care delivery by 

comparing outcomes for beneficiaries 

who decline data sharing against those 

who do not. 

Response: We agree that evaluating 

the outcomes of beneficiaries who have 

declined data sharing versus those who 

have not could provide valuable 

information, and will investigate the 

possibility of conducting such a study. 

We believe comparative evaluations like 

this are important for identifying 

potential improvements to improving 

the Medicare program. We intend to 

study the effects of the Shared Savings 

Program over time, and expect to 

improve the program through lessons 

learned by participants and evaluations 

of similar initiatives, such as those 

undertaken through the Innovation 

Center. 

Comment: A few commenters 

recommended that CMS maintain the 

list of beneficiaries who have declined 

to share their data, and that CMS report 

to the ACOs the percentage of attributed 

beneficiaries who decline data sharing 

to the ACO since this will directly 

impact data integrity, risk assessment, 

validation, and potentially performance. 

Response: We agree that knowing the 

percentage of beneficiaries that have 

declined data sharing could be useful to 

ACOs. However, because the ACO will 

be compiling and submitting the list of 

beneficiaries who have not declined 

data sharing on a monthly basis, the 

ACO will already have sufficient data to 

assess the percentage of beneficiaries 

who decline data sharing. 

Comment: A few comments suggest 

that CMS explore alternative assignment 

methodologies that will facilitate a 

greater willingness by beneficiaries to 

share data. Additionally, one 

commenter recommended that the data 

sharing process proposed in the Pioneer 

ACO Model should be adopted for the 

general Shared Savings Program. 

Response: We appreciate these 

comments and are looking forward to 

lessons learned from testing different 

approaches in the Pioneer ACO Model. 

Comment: Several commenters were 

concerned that allowing ACOs access to 

beneficiary identifiable data only after: 

(1) The beneficiary has visited a primary 

care participating provider during the 

performance year; and (2) does not elect 

to decline to participate in data sharing, 

will result in a delay in the provision of 

claims data to ACOs, and may generate 

unnecessary office visits for the 

beneficiary population as providers 

might attempt to pull beneficiaries into 

the office for needless visits just in order 

to explain the Shared Savings Program 

to the beneficiaries. 

Response: We have considered these 

comments in light of our goal to 

promote better physician-patient 

relationships, program transparency and 

reduce administrative burden. We are 

modifying our proposed approach to 

providing beneficiary identifiable data 

to ACOs. We will continue to require 

ACOs to notify patients at the point of 

care that they are participating in an 

ACO, that they will be requesting PHI 

data, and that the beneficiary has the 

right to decline to share this data with 

the ACO. In addition, we will also 

provide a mechanism by which ACOs 

can notify beneficiaries and request 

beneficiary identifiable data in advance 

of the point of care visit using the lists 

of preliminary prospectively assigned 

patients provided to the ACO at the start 

of the agreement period and quarterly 

during the performance year. 

As discussed previously, upon 

signing participation agreements and a 

DUA, ACOs will be provided with a list 

of preliminary prospectively assigned 

set of beneficiaries that would have 

historically been assigned and who are 

likely to be assigned to the ACO in 

future performance years. ACOs may 

utilize this initial preliminary 


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prospectively assigned list along with 

the quarterly lists to provide 

beneficiaries with advance notification 

prior to a primary care service visit of 

their participation in the shared savings 

program and their intention to request 

their beneficiary identifiable data. 

Beneficiaries will be given the 

opportunity to decline this data sharing 

as part of this notification. After a 

period of 30 days from the date the ACO 

provides such notification, ACOs will 

be able to request beneficiary 

identifiable data from us absent an optout request from the beneficiary. 

Although we would expect providers/ 

suppliers to still actively engage 

beneficiaries in conversation about the 

Shared Savings Program and their 

ability to decline to share their own 

health data at the beneficiaries’ first 

primary care visit. 

We believe this modification will 

continue to afford beneficiaries with a 

meaningful choice about the sharing of 

their claims data, while also allowing 

practitioners to have more timely access 

to beneficiaries’ claims data in order to 

begin coordinating care for those 

beneficiaries as soon as possible. This 

additional flexibility may be 

particularly important in the case of 

beneficiaries who do not schedule an 

appointment with a primary care 

practitioner until later in the year or not 

at all in a given year. As noted 

previously, under § 425.704(b) ACOs 

should not continue to request claims 

data for beneficiaries that the ACO 

knows are no longer being treated by 

ACO participants or who have not been 

assigned to the ACO during the 

retrospective reconciliation. 

Final Decision: We will finalize our 

proposal in § 425.704, to allow ACOs to 

request beneficiary identifiable data on 

a monthly basis. 

Additionally, we are modifying this 

proposal in § 425.708 to allow the ACO 

the option of contacting beneficiaries 

from the list of preliminarily 

prospectively assigned beneficiaries in 

order to notify them of the ACO’s 

participation in the program and their 

intent to request beneficiary identifiable 

data. If, after a period of 30 days from 

the date the ACO provides such 

notification, neither the ACO nor CMS 

has received notification from the 

beneficiary to decline data sharing, the 

ACOs would be able to request 

beneficiary identifiable data. The ACO 

would be responsible for repeating the 

notification and opportunity to decline 

sharing information during the next 

face-to-face encounter with the 

beneficiary in order to ensure 

transparency, beneficiary engagement, 

and meaningful choice. 

We note that if a beneficiary declines 

to have their claims data shared with 

the ACO, this does not preclude 

physicians from sharing medical record 

information as allowed under HIPAA 

amongst themselves, for example, a 

referring primary care physician 

providing medical record information to 

a specialist. 

E. Assignment of Medicare Fee-forService Beneficiaries 

Section 1899(c) of the Act requires the 

Secretary to ‘‘determine an appropriate 

method to assign Medicare FFS 

beneficiaries to an ACO based on their 

utilization of primary care services 

provided under this title by an ACO 

professional described in subsection 

(h)(1)(A). Subsection 1899(h)(1)(A) 

constitutes one element of the definition 

of the term ‘‘ACO professional.’’ 

Specifically, this subsection establishes 

that ‘‘a physician (as defined in section 

1861(r)(1))’’ is an ‘‘ACO professional’’ 

for purposes of the Shared Savings 

Program. Section 1861(r)(1) of the Act in 

turn defines the term physician as 

‘‘* * * a doctor of medicine or 

osteopathy legally authorized to practice 

medicine and surgery by the State in 

which he performs such function or 

action’’. In addition, section 

1899(h)(1)(B) of the Act defines an ACO 

professional to include practitioners 

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

the Act, such as PAs and NPs. 

Assigning Medicare beneficiaries to 

ACOs also requires several other 

elements: (1) An operational definition 

of an ACO (as distinguished from the 

formal definition of an ACO and the 

eligibility requirements that we discuss 

in section II.B. of this final rule) so that 

ACOs can be efficiently identified, 

distinguished, and associated with the 

beneficiaries for whom they are 

providing services; (2) a definition of 

primary care services for purposes of 

determining the appropriate assignment 

of beneficiaries; (3) a determination 

concerning whether to assign 

beneficiaries to ACOs prospectively, at 

the beginning of a performance year on 

the basis of services rendered prior to 

the performance year, or retrospectively, 

on the basis of services actually 

rendered by the ACO during the 

performance year; and (4) a 

determination concerning the 

proportion of primary care services that 

is necessary for a beneficiary to receive 

from an ACO in order to be assigned to 

that ACO for purposes of this program. 

The term ‘‘assignment’’ in this context 

refers only to an operational process by 

which Medicare will determine whether 

a beneficiary has chosen to receive a 

sufficient level of the requisite primary 

care services from physicians associated 

with a specific ACO so that the ACO 

may be appropriately designated as 

exercising basic responsibility for that 

beneficiary’s care. Consistent with 

section 1899(b)(2)(A) of the Act, the 

ACO will then be held accountable ‘‘for 

the quality, cost, and overall care of the 

Medicare fee-for-service beneficiaries 

assigned to it.’’ The ACO may also 

qualify to receive a share of any savings 

that are realized in the care of these 

assigned beneficiaries due to 

appropriate efficiencies and quality 

improvements that the ACO may be able 

to implement. It is important to note 

that the term ‘‘assignment’’ for purposes 

of this provision in no way implies any 

limits, restrictions, or diminishment of 

the rights of Medicare FFS beneficiaries 

to exercise complete freedom of choice 

in the physicians and other health care 

practitioners and suppliers from whom 

they receive their services. 

Thus, while the statute refers to the 

assignment of beneficiaries to an ACO, 

we would characterize the process more 

as an ‘‘alignment’’ of beneficiaries with 

an ACO, that is, the exercise of free 

choice by beneficiaries in the physicians 

and other health care providers and 

suppliers from whom they receive their 

services is a presupposition of the 

Shared Savings Program. Therefore, an 

important component of the Shared 

Savings Program will be timely and 

effective communication with 

beneficiaries concerning the Shared 

Savings Program, their possible 

assignment to an ACO, and their 

retention of freedom of choice under the 

Medicare FFS program. The issues of 

beneficiary information and 

communications are further discussed 

in section II.H.2.a. of this final rule. 

Comment: A commenter noted that 

CMS experiences savings on Medicare 

Cost Contract products when 

admissions are avoided, but the value 

this generates is not currently shared by 

providers. The commenter noted that, in 

a Medicare Cost Contract, health plans 

assume risk for Part B services while 

CMS retains the risk for Part A services. 

In the PGP demonstration, the 

commenter’s organization created 

savings for both Medicare FFS and Cost 

Contract patients, and CMS received the 

benefit of reduced hospital admissions. 

These savings were not calculated into 

the gain sharing arrangement within the 

PGP demonstration program nor could 

they be recognized in cost plan 

contracts since the value accrued solely 

to CMS. The commenter believed that 

this disconnect makes it cost prohibitive 

to invest in technologies to improve care 

across our senior patient population. 

CMS should include these patients in 


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the performance calculations for ACOs 

with a significant Cost Contract 

population’’ 

Response: We assume that the 

commenter is referring to cost contracts 

which exist under section 1876 of the 

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

defines a ‘‘Medicare fee-for-service 

beneficiary’’ for purposes of the Shared 

Savings Program as ‘‘an individual who 

is enrolled in the original Medicare feefor-service program under parts A and B 

and is not enrolled in an MA plan under 

part C, an eligible organization under 

section 1876, or a PACE program under 

section 1894.’’ Therefore, the statute 

precludes assignment of cost contract 

beneficiaries to ACOs under the Shared 

Savings Program. 

Comment: Another commenter cited 

the definition of ‘‘Medicare fee-forservice beneficiary’’ under section 

1899(h)(3) of the Act, but then requested 

that Medicare beneficiaries that can 

participate in the ACO should include 

Seniorcare enrollees. The commenter 

describes ‘‘Seniorcare’’ as a product for 

Medicare beneficiaries which falls 

under section 1876 of the Act, and 

contends that their participation in an 

ACO should be permitted because they 

represent a small population that is 

‘‘important in rural areas.’’ Finally, the 

commenter contends that dual eligibles 

should be included in the program, 

observing that their participation in the 

Shared Savings Program would require 

coordination with the States, and 

suggesting that we gather data on the 

dual eligibles who participate during 

the first years of the MSSP in order to 

determine whether any issues arise with 

their participation. 

Response: As we have discussed 

previously, section 1899(h)(3) of the Act 

specifically excludes individuals 

‘‘enrolled in an eligible organization 

under section 1876’’ from the definition 

of ‘‘Medicare fee-for-service 

beneficiary’’ for purposes of the Shared 

Savings Program. The commenter stated 

that Seniorcare is a Medicare product 

offered under section 1876 of the Act. 

Seniorcare enrollees therefore may not 

be assigned to an ACO. Nothing in 

section 1899 of the Act, however, 

precludes assignment of dual eligibles 

enrolled in the original Medicare FFS 

program to ACOs participating in the 

Shared Savings Program. CMS’ goal is to 

promote complete integration of care 

provided and align incentives for all 

individuals whether under Medicare, 

Medicaid, or both. We agree with the 

commenter’s suggestion that we 

carefully monitor ACO care 

coordination, quality of care, and costs 

for dual eligibles including the impact 

on Medicaid and will implement this 

within our monitoring plans. In 

addition, we intend to study the effect 

of assignment of dually eligible 

individuals to ACOs in the MSSP on 

Medicaid expenditures, and may use 

this information in the development of 

future models for testing by the 

Innovation Center. 

Final Decision: We are finalizing our 

proposed policies concerning the 

eligibility of Medicare FFS beneficiaries 

for assignment to an ACO under the 

Shared Savings Program. Specifically, as 

required by the statute, and consistent 

with the definition of Medicare fee-forservice beneficiary in § 425.20, under 

§ 425.400(a) only individuals enrolled 

in the original Medicare fee-for-service 

program under parts A and B, and not 

enrolled in an MA plan under Part C, an 

eligible organization under section 1876 

of the Act, or a PACE program under 

section 1894 of the Act, can be assigned 

to an ACO. 

1. Definition of Primary Care Services 

Section 1899(c) of the Act requires the 

Secretary to assign beneficiaries to an 

ACO ‘‘based on their utilization of 

primary care services’’ provided by a 

physician. However, the statute does not 

specify which kinds of services should 

be considered ‘‘primary care services’’ 

for this purpose, nor the amount of 

those services that would be an 

appropriate basis for making 

assignments. We discuss issues 

concerning the appropriate proportion 

of such services later in the final rule. 

In this section of this final rule, we 

discuss how to identify the appropriate 

primary care services on which to base 

the assignment and our final policy for 

defining primary care services for this 

purpose. 

In the proposed rule, we proposed to 

define ‘‘primary care services’’ as a set 

of services identified by these HCPCS 

codes: 99201 through 99215; 99304 

through 99340; and 99341 through 

99350. Additionally, we proposed to 

consider the Welcome to Medicare visit 

(G0402) and the annual wellness visits 

(G0438 and G0439) as primary care 

services for purposes of the Shared 

Savings Program. 

Comment: One commenter expressed 

concern that an assignment 

methodology based on primary care 

services could lead to an unintended 

negative consequence: ‘‘An attribution 

model based on primary care utilization 

could result in a disproportionate 

number of high-risk beneficiaries, as 

compared to low-risk beneficiaries, 

being assigned to the ACO. Low-risk 

beneficiaries may be less likely to have 

visited a PCP or other physician, 

resulting in that patient not being 

assigned to an ACO. Therefore, the 

commenter encourages CMS to consider 

ways in which these beneficiaries can 

be encouraged to seek preventive care 

and become involved in an ACO. 

Response: We disagree that an 

attribution model based on primary care 

utilization could result in a 

disproportionate number of high-risk 

beneficiaries being assigned to the ACO. 

Many low risk beneficiaries still visit a 

PCP or other physician once or twice a 

year for routine check-ups and 

assessments. Furthermore, we are bound 

by the statutory requirement that 

assignment be based upon the 

utilization of primary care services 

rendered by a physician. Nevertheless, 

we will keep this concern in mind as we 

implement the Shared Savings Program 

and gain experience in its operation 

during its first few years. 

Comment: One commenter requested 

that the code sets used to determine 

assignment include inpatient evaluation 

and management (E&M) code: 

‘‘Observation—99218–99220/Initial, 

99224–99226/Subsequent; Hospital 

Inpatient—99221- 99223/Initial, 99231– 

99233/Subsequent; and Hospital 

Inpatient Consultation—99251–99255.’’ 

Another recommended excluding 

hospital emergency visits and urgent 

care visits. Another commenter noted 

that the proposed rule narrowly defines 

‘‘primary care services,’’ and expressed 

uncertainty about how we envision the 

organization of care such as 

occupational therapy within the 

proposed ACO framework. Specifically, 

the commenter asked whether only E&M 

codes will be used to determine the 

plurality of care, or whether the 

provision of other services will also be 

considered. Or will these other services 

only be considered in terms of savings? 

A national association recommended 

that certain CPT codes for remote 

monitoring and care coordination be 

used in the assignment process without 

being tied to a physician office visit. 

Another association expressed concern 

that the method for assigning 

beneficiaries should account for the 

patients receiving care in post-acute 

settings, where the providers may not 

fall within the proposed definition of 

primary care physician. One commenter 

argued that the inclusion of skilled 

nursing facility (SNF) and home visit 

CPT codes would be problematic for 

some systems because an ACO could 

potentially provide the plurality of 

outpatient care in an office setting to a 

beneficiary and yet the beneficiary still 

might not be assigned to that ACO. The 

commenter noted that this would 

happen in the case where a beneficiary 

is hospitalized and then discharged to a 


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nursing home not affiliated with the 

ACO physicians. In the view of the 

commenter, this method would not 

result in the alignment of the 

beneficiary with the correct provider. 

Another commenter noted that groups 

that have providers practicing in skilled 

nursing facilities are often assigned 

patients who have many visits over a 

short period of time in those facilities, 

but who are not their primary care 

patients. 

Response: We proposed the list of 

codes that would constitute primary 

services for two reasons. First, we 

believed the proposed list represented a 

reasonable approximation of the kinds 

of services that are described by the 

statutory language (which refers to 

assignment of ‘‘Medicare fee-for-service 

beneficiaries to an ACO based on their 

utilization of primary care services’’). In 

addition, we selected this list to be 

largely consistent with the definition of 

‘‘primary care services’’ in section 5501 

of the Affordable Care Act. That section 

establishes an incentive program to 

expand access to primary care services, 

and thus its definition of ‘‘primary care 

services’’ provides a compelling 

precedent for adopting a similar list of 

codes for purposes of the Shared 

Savings Program. We have slightly 

expanded the list in section 5501 of the 

Affordable Care Act to include the 

Welcome to Medicare visit (HCPCS code 

G0402) and the annual wellness visits 

(HCPCS codes G0438 and G0439) as 

primary care services for purposes of the 

Shared Savings Program. These codes 

clearly represent primary care services 

frequently received by Medicare 

beneficiaries, and in the absence of the 

special G codes they would be described 

by one or more of the regular office visit 

codes that we have adopted from 

section 5501 of the Affordable Care Act. 

Finally, the statute requires that 

assignment be based upon the 

utilization of primary care services by 

physicians. For this reason, only 

primary care services can be considered 

in the assignment process. Other 

services can, as one commenter noted, 

only be considered in terms of 

determining shared savings, if any. 

With regard to the comments about 

the inclusion or exclusion of certain 

codes, we would observe first that the 

codes for hospital emergency visits 

(99281 through 99288) and urgent care 

visits (we assume the commenter refers 

to 99291 and 99292, which represent 

critical care services) were not included 

in our proposed list of codes 

representing primary care services. We 

believe that the inclusion of the codes 

for SNF visits is appropriate because 

beneficiaries often stay for long periods 

of time in SNFs, and it is reasonable to 

conclude that these codes represent 

basic evaluation and management 

services that would ordinarily be 

provided in physician offices if the 

beneficiaries were not residing in 

nursing homes. Inpatient hospital visit 

codes (99221 through 99223), in 

contrast, are intrinsically related to the 

acute care treatment of the specific 

condition or conditions that required 

the inpatient hospital stay, and we 

therefore do not believe that these codes 

represent the kind of general evaluation 

and management of a patient that would 

constitute primary care. Finally, we 

would observe in general that it would 

be impossible to establish a list of 

primary care codes by considering all of 

the ways in which the inclusion, or 

exclusion, of certain codes or sets of 

codes would advantage or disadvantage 

different types of potential ACOs. The 

code set that we are adopting in this 

final rule represents the best 

approximation of primary care services 

based upon relevant precedents and the 

information we currently have available. 

However, we intend to monitor this 

issue and will consider making changes 

to add (or delete) codes, if there is 

sufficient evidence that revisions are 

warranted. 

Final Decision: We are finalizing our 

proposal to define ‘‘primary care 

services’’ in § 425.20 as the set of 

services identified by the following 

HCPCS codes: 99201 through 99215, 

99304 through 99340, 99341 through 

99350, the Welcome to Medicare visit 

(G0402), and the annual wellness visits 

(G0438 and G0439) as primary care 

services for purposes of the Shared 

Savings Program. In addition, as we will 

discuss later in this final rule, in this 

final rule we will establish a cross-walk 

for these codes to certain revenue center 

codes used by FQHCs (prior to January 

1, 2011) and RHCs so that their services 

can be included in the ACO assignment 

process. 

a. Consideration of Physician 

Specialties in the Assignment Process 

Primary care services can generally be 

defined based on the type of service 

provided, the type of provider specialty 

that provides the service, or both. 

In developing our proposal, we 

considered three options with respect to 

defining ‘‘primary care services’’ for the 

purposes of assigning beneficiaries 

under the Shared Savings Program: (1) 

Assignment of beneficiaries based upon 

a predefined set of ‘‘primary care 

services;’’ (2) assignment of 

beneficiaries based upon both a 

predefined set of ‘‘primary care 

services’’ and a predefined group of 

‘‘primary care providers;’’ and (3) 

assignment of beneficiaries in a stepwise fashion. Under the third option, 

beneficiary assignment would proceed 

by first identifying primary care 

physicians (internal medicine, family 

practice, general practice, geriatric 

medicine) who are providing primary 

care services, and then identifying 

specialists who are providing these 

same services for patients who are not 

seeing any primary care physician. 

We proposed to assign beneficiaries to 

physicians designated as primary care 

providers (internal medicine, general 

practice, family practice, and geriatric 

medicine) who are providing the 

appropriate primary care services to 

beneficiaries. As discussed previously, 

we proposed to define ‘‘primary care 

services’’ on the basis of the select set 

of HCPCS codes identified in the section 

5501 of the Affordable Care Act, 

including G-codes associated with the 

annual wellness visit and Welcome to 

Medicare visit. We made this proposal 

in the belief that this option best aligned 

with other Affordable Care Act 

provisions related to primary care by 

placing an appropriate level of emphasis 

on a primary care core in the Shared 

Savings Program. That is, we believed 

that the proposed option placed priority 

on the services of designated primary 

care physicians (for example, internal 

medicine, general practice, family 

practice, and geriatric medicine) in the 

assignment process. The option is also 

relatively straightforward 

administratively. 

However, we expressed our concern 

that this proposal might not adequately 

account for primary care services 

delivered by specialists, especially in 

certain areas with shortages of primary 

care physicians, and that it may make it 

difficult to obtain the minimum number 

of beneficiaries to form an ACO in 

geographic regions with such primary 

care shortages. Therefore, while we 

proposed to assign beneficiaries to 

physicians designated as primary care 

providers (internal medicine, general 

practice, family practice, and geriatric 

medicine) who are providing the 

appropriate primary care services to 

beneficiaries, we invited comment on 

this proposal and other options that 

might better address the delivery of 

primary care services by specialists, 

including a ‘‘step-wise approach’’ under 

which beneficiaries could be assigned to 

an ACO based upon primary care 

services furnished by a specialist if they 

do not have any visits with a primary 

care physician. 

Comment: We received some very 

strong comments supporting our 

exclusion of services provided by 


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specialists in the assignment process, 

especially from organizations 

representing primary care physicians 

and from individual primary care 

physicians. Some endorsed our proposal 

because it ‘‘supports the intent of the 

ACA for primary care practitioners to 

reduce the fragmentation of care and 

improve overall quality. Many 

specialists are not providing the 

primary, preventive services that are the 

building blocks for ACOs. Rather, 

specialists may tend to be quicker to 

refer patients to other specialists for 

problems outside the scope of their 

practice.’’ Several other comments even 

urged CMS to tighten the definition of 

primary care services by specifying 

‘‘general internal medicine’’ rather than 

‘‘internal medicine’’ to ensure that 

Medicare ACOs are truly based on 

primary care physicians. One 

commenter also noted the absence of 

‘‘measures of physician competence or 

capability’’ in a rule with an abundance 

of requirements in many areas. Another 

commenter urged that we include 

preventive medicine physicians under 

the definition of primary care or the 

definition of general practice. Another 

recommended that, rather than list 

‘‘primary care services,’’ CMS go further 

to state that the primary care 

professionals be limited to those eligible 

for Primary Care Incentive Payments 

under section 5501 of the Affordable 

Care Act as a matter of consistency and 

specificity across CMS policy. This 

commenter maintained that specialists 

are not providing continuing and 

comprehensive primary healthcare to 

their patients, and the commenter thus 

opposed any further expansion of the 

definition of ‘‘primary care 

professional’’ for purposes of assigning 

patients to ACOs. 

However, many commenters, 

including specialty societies, major 

medical centers, and others, strongly 

advocated inclusion of primary care 

codes from specialist physicians in the 

assignment process. Among other 

points, these commenters cited the 

shortages of primary care physicians in 

some areas. Others cited the fact that 

patients with certain chronic conditions 

(for example, diabetes, cardiac 

conditions, persons with disabilities, 

etc.) do receive most of their primary 

care from the specialist treating their 

conditions. One commenter raised the 

concern that the proposed definition of 

primary care services may not 

adequately represent services provided 

in post-acute care settings such as longterm care hospitals (LTCHs). The 

commenter noted that many LTCH 

patients are seen by teams of specialists 

who provide the bulk of the actual 

primary care services to these patients 

who often do not have a primary care 

physician. Other commenters also 

advocated including specialists in order 

to allow the formation of conditionspecific ACOs, such as ‘‘renal-focused 

ACOs.’’ One physician society 

advocated expanding the definition of 

primary care, but retaining some 

limitations related to the specialty of the 

physicians providing services 

designated by the HCPCS basic office 

visit codes, on the grounds that 

subspecialty physicians often fulfill the 

primary care needs of their patients. 

This commenter and others cited 

subspecialty areas such as nephrology, 

oncology, rheumatology, endocrinology, 

pulmonology, and cardiology that might 

frequently be providing primary care to 

their patients. 

Another commenter recommended 

that the specialties designated as 

providing primary care services be 

expanded to include certain specialties, 

but only if the ACO demonstrates, based 

on its own data of the assigned 

beneficiaries, that those specified 

specialist physicians are indeed 

providing primary care services on a 

regular and coordinated basis and the 

ACO is primary care focused and 

comprised of at least 30 percent primary 

care physicians and a maximum of 70 

percent specialists. The commenter also 

argued that specialist-only group 

practices should not be eligible to 

become an ACO. 

One commenter argued that the 

exclusion of specialists from the 

assignment process is contrary to the 

intent of the statute by noting that 

subsection 1899(h)(1)(A) of the Act 

defines an ‘‘ACO professional’’ for 

purposes of assignment as a physician 

as that term is defined in 1861(r)(1) of 

the Act—in other words, as an M.D. or 

a D.O. The commenter maintains that it 

is not an oversight that neither section 

1861(r)(1) or 1899(c) of the Act mention 

physician specialty. The commenter 

also cites the Ways & Means report on 

section 1301 of H.R. 3200, the House 

predecessor to section 3022 of the 

Affordable Care Act, which codified the 

Shared Saving Program at section 1899 

of the Act, which states: ‘‘The 

Committee believes that physicians, 

regardless of specialty, who play a 

central role in managing the care of their 

patient populations, and who are 

willing and able to be held accountable 

for the overall quality and costs of care 

for their patients across all care settings, 

should be allowed to form ACOs.’’ 

In order to account for the provision 

of many primary care services by 

specialists to chronically ill and other 

patients, one commenter suggested that 

the more appropriate method would be 

for the ACO to notify CMS who their 

‘‘Primary Care Providers’’ are for an 

intended population within the ACO. In 

this way CMS can understand how to 

assign a beneficiary and a patient can 

know who their primary care’ physician 

is within the ACO. Another commenter 

recommended allowing assignment to 

certain specialists (nephrology, 

rheumatology, endocrinology, 

pulmonology, neurology, and 

cardiology) provided the Medicare 

beneficiary has other primary care 

services for E&M Codes of less than 10 

percent. One specialty society offered 

this alternative definition of primary 

care in support of considering 

pediatricians as primary care physicians 

for purposes of assignment: ‘‘Primary 

health care is described as accessible 

and affordable, first contact, continuous 

and comprehensive, and coordinated to 

meet the health needs of the individual 

and the family being served.’’ 

But one commenter maintained that 

the definition of primary care services 

should be less focused on the specialty 

of the provider, recommending that we 

should define primary care services by 

the services themselves, and then define 

primary care practitioners as those 

practitioners who primarily bill those 

services. 

Of the commenters advocating 

inclusion of specialists in the 

assignment methodology, most 

recommend the option which assigns 

beneficiaries based on the plurality of 

primary care services regardless of 

specialty, although some would accept 

a variation that excludes those 

specialties that rarely provide primary 

care. One comment said that, while they 

do not believe it is ideal, they could also 

accept the hybrid model, in which the 

beneficiary is assigned to a specialist if 

not otherwise assigned to a primary care 

physician. The commenter emphasized 

that, if this option is selected, it would 

be important to ensure the primary care 

physician is in fact serving as the 

beneficiary’s principal care provider. A 

number of other commenters, including 

MedPAC, recommended that, in the 

final rule, we adopt the step-wise 

approach that we discussed as an option 

in the proposed rule. Another 

commenter agreed that beneficiaries 

with at least one visit with a primary 

care physician (general practice, 

internists, family medicine or 

geriatrician as defined by CMS) should 

be assigned to an ACO based on their 

utilization of primary care services. 

Response: We agree with the 

commenters who supported our 

proposal that the Shared Savings 


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Program should place a strong emphasis 

on primary care, which is consistent 

with the statutory requirement that 

assignment be based on the utilization 

of primary care services furnished by a 

physician. However, we cannot agree 

with those commenters who 

recommended that we tighten the 

definition of primary care services for 

purposes of the Shared Savings 

Program. For example, we do not agree 

with the recommendation of a few 

commenters that we include only 

‘‘general internal medicine’’ rather than 

‘‘internal medicine’’ under the proposed 

definition of primary care physician 

because the Medicare enrollment and 

billing systems contain a specialty code 

(specialty code 11) only for ‘‘internal 

medicine,’’ and we thus have no way to 

differentiate ‘‘internal medicine’’ from 

‘‘general internal medicine.’’ On the 

merits, we also doubt that the specialty 

designations of ‘‘internal medicine’’ and 

‘‘general internal medicine’’ selected by 

physicians reflect an adequate 

distinction between internal medicine 

specialists who primarily deliver 

primary care services and those who do 

not. (In addition, as we discuss later in 

this final rule, we have decided to 

include the primary care services 

provided by specialist physicians in the 

assignment process as part of the stepwise approach that we described in the 

proposed rule. As a result, to some 

degree, at least, the distinction between 

‘‘general internal medicine’’ and 

‘‘internal medicine’’ has become less 

significant, since both would be 

included in our new assignment 

methodology in any case.) We do not 

agree with the suggestion to add the 

designation of ‘‘preventive care 

specialist’’ to our list of primary care 

physicians, because as much as possible 

we are following the designations of 

primary care physicians established 

under section 5501 of the Affordable 

Care Act, which does not include this 

specialty. We also believe that it would 

be operationally complex, and perhaps 

overly onerous and restrictive to 

potential participants in the Shared 

Savings Program, to incorporate special 

competency standards into the 

definition of primary care physician. 

We do not agree with commenters 

who argued that our proposed 

restriction of primary care services to 

those provided by primary care 

physicians was contrary to the statute. 

Section 1899 of the Act does not 

specifically define the term ‘‘primary 

care services.’’ Furthermore, section 

1899(c) of the Act gives the Secretary 

discretion to determine ‘‘an appropriate 

method’’ to assign beneficiaries based 

on their utilization of primary care 

services furnished by a physician 

affiliated with the ACO, and thus allows 

the Secretary broad discretion in 

defining the term ‘‘primary care.’’ We 

would also note that our proposed 

definition largely followed the 

precedent established by section 5501(a) 

of the Affordable Care Act, the provision 

governing primary care incentive 

payments, and is thus clearly consistent 

with the overall intent of that Act, 

which also establishes the Shared 

Savings Program. 

However, in the proposed rule we 

also expressed some concerns about the 

possible effects of the proposed policy 

in eliminating certain genuine primary 

care services from consideration in the 

assignment process. In particular, we 

noted our concern about possibly 

excluding primary care services 

delivered by specialists, especially in 

some areas with shortages of primary 

care physicians, where specialists 

necessarily deliver the bulk of primary 

care services. We also noted that, 

especially for beneficiaries with certain 

conditions (for example, heart 

conditions and diabetes), specialist 

physicians often take the role of primary 

care physicians in the overall treatment 

of the beneficiaries. The commenters 

have confirmed these concerns, and 

persuaded us that, in the end, the 

Shared Savings Program should not 

restrict assignment purely to a defined 

set of primary care services provided 

only by the specialties that can be 

appropriately considered primary care 

physicians. We agree that our proposed 

assignment methodology would be 

unduly restrictive in areas with 

shortages of primary care physicians. 

We also agree that specialists do 

necessarily and appropriately provide 

primary care services for many 

beneficiaries with serious and/or 

chronic conditions. 

Therefore, in this final rule we are 

adopting a more balanced assignment 

process that simultaneously maintains 

the primary care-centric approach of our 

proposed approach to beneficiary 

assignment, while recognizing the 

necessary and appropriate role of 

specialists in providing primary care 

services. As we previously noted, in the 

proposed rule we discussed a step-wise 

approach to beneficiary assignment. 

Under this approach, after identifying 

all patients who had a primary care 

service with a physician at the ACO, 

beneficiary assignment would proceed 

by first identifying primary care 

physicians (internal medicine, family 

practice, general practice, geriatric 

medicine) who are providing primary 

care services, and then identifying 

specialists who are providing these 

same services for patients who are not 

seeing any primary care physician. We 

hesitated to propose this option because 

we were concerned that it would 

introduce a greater level of operational 

complexity compared to the two other 

options we considered. In addition, we 

were concerned that it could undermine 

our goal of ensuring competition among 

ACOs by reducing the number of 

specialists that can participate in more 

than one ACO, since the TINs of 

specialists to whom beneficiaries are 

assigned would be required to be 

exclusive to one ACO. (As noted in 

section II.B.1.d of this final rule, the 

TINs upon which assignment is based 

must be exclusive to one ACO for 

purposes of participation in the 

Medicare Shared Savings Program. 

However, exclusivity of an ACO 

participant to one ACO is not 

necessarily the same as exclusivity of 

individual practitioners to one ACO. For 

example, exclusivity of ACO 

participants leaves individual NPIs free 

to participate in multiple ACOs if they 

bill under several different TINs. The 

ability of individual specialists to 

participate in more than one ACO is 

especially important in certain areas of 

the country that might not have many 

specialists.) On the other hand, we 

acknowledged that a ‘‘step-wise 

approach’’ would reflect many of the 

advantages of the other two approaches 

we discussed in the proposed rule 

(including the option we proposed), 

balancing the need for emphasis on a 

primary care core with a need for 

increased assignment numbers in areas 

with primary care shortages. Despite our 

initial misgivings regarding this 

approach, we have come to agree with 

MedPAC and the other commenters who 

endorsed such an approach that it 

provides the best available balance of 

maintaining a strong emphasis on 

primary care while ultimately allowing 

for assignment of beneficiaries on the 

basis of how they actually receive their 

primary care services. 

Final Decision: Under § 425.402, after 

identifying all patients that had a 

primary care service with a physician 

who is an ACO provider/supplier in an 

ACO, we will employ a step-wise 

approach as the basic assignment 

methodology. Under this approach, 

beneficiaries are first assigned to ACOs 

on the basis of utilization of primary 

care services provided by primary care 

physicians. Those beneficiaries who are 

not seeing any primary care physician 

may be assigned to an ACO on the basis 

of primary care services provided by 

other physicians. This final policy thus 


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allows consideration of all physician 

specialties in the assignment process. 

We describe this step-wise approach in 

greater detail later in this final rule, after 

further addressing other related issues, 

including consideration of primary care 

services furnished by non-physician 

practitioners, such as NPs and PAs. As 

also discussed later in this final rule, we 

will also consider only the specific 

procedure and revenue codes 

designated in this final rule in the 

assignment process. 

b. Consideration of Services Furnished 

By Non-Physician Practitioners in the 

Assignment Process 

In the proposed rule we observed that, 

although the statute defines the term 

‘‘ACO professional’’ to include both 

physicians and non-physician 

practitioners, such as physician 

assistants (PAs), and nurse practitioners 

(NPs), for purposes of beneficiary 

assignment to an ACO, the statute also 

requires that we base assignment on 

beneficiaries’ utilization of primary care 

services provided by ACO professionals 

who are physicians. As we discussed 

previously, section 1899(c) of the Act 

requires the Secretary to ‘‘determine an 

appropriate method to assign Medicare 

FFS beneficiaries to an ACO based on 

their utilization of primary care services 

provided under this title by an ACO 

professional described in subsection 

(h)(1)(A).’’ Section 1899(h)(1)(A) of the 

Act constitutes one element of the 

definition of the term ‘‘ACO 

professional.’’ Specifically, this 

subsection establishes that ‘‘a physician 

(as defined in section 1861(r)(1))’’ is an 

‘‘ACO professional’’ for purposes of the 

Shared Savings Program. Section 

1861(r)(1) of the Act in turn defines the 

term physician as ‘‘* * * a doctor of 

medicine or osteopathy legally 

authorized to practice medicine and 

surgery by the State in which he 

performs such function or action’’. 

Therefore, for purposes of the Shared 

Savings Program, the inclusion of 

practitioners described in section 

1842(b)(18)(C)(i) of the Act, such as PAs 

and NPs, in the statutory definition of 

the term ‘‘ACO professional’’ is a factor 

in determining the entities that are 

eligible for participation in the program 

(for example, ‘‘ACO professionals in 

group practice arrangements’’ under 

section 1899(b)(1)(A) of the Act). 

However, we proposed that the 

assignment of beneficiaries to ACOs 

would be determined only on the basis 

of primary care services provided by 

ACO professionals who are physicians. 

Comment: We received numerous 

comments, especially from individual 

practitioners and organizations 

representing nurses, PAs, and others, 

objecting to the exclusion of primary 

care services provided by NPs, certified 

nurse midwives, other nursing 

practitioners, PAs and other nonphysician practitioners from the 

assignment process. Many NPs and 

nurse associations commented that the 

‘‘limitation will significantly impair the 

ability of patients to access primary care 

services. It will negatively affect not 

only access, but the cost and quality of 

the care provided by the ACOs.’’ The 

commenters emphasized that NPs have 

a long history of providing high quality, 

cost effective care and that their skills 

in the area of care coordination, chronic 

disease management, health promotion, 

and disease prevention could contribute 

significantly to the quality and cost 

savings of any shared saving program. 

Some commenters urged that CMS 

should take any opportunity it has to 

encourage the use of non-physician 

providers in the care of Medicare 

beneficiaries. 

Commenters advocated several 

approaches to dealing with the statutory 

language under which assignment turns 

on primary care services provided by 

‘‘an ACO professional described in 

subsection (h)(1)(A),’’ which specifies 

‘‘* * * a doctor of medicine or 

osteopathy legally authorized to practice 

medicine and surgery by the State in 

which he performs such function or 

action.’’ Some commenters argued that 

the reference to ‘‘subsection (h)(1)(A)’’ 

represents a drafting error, and that that 

we should proceed on the assumption 

that the reference should have been to 

‘‘subsection (h)(1),’’ which includes not 

only physicians, but also CNSs, NPs, 

and PAs. Other commenters argued that 

it is not necessary to interpret the 

requirement that beneficiaries be 

assigned based on primary care services 

‘‘provided’’ by a physician to mean that 

Medicare beneficiaries are to be 

assigned to ACOs solely based on 

services ‘‘directly provided’’ by a 

physician. These commenters 

maintained that the statute does not 

require that services be ‘‘directly 

provided’’ by a physician, but only that 

physicians provided care, which can be 

done directly or indirectly. 

A national nurses’ association and 

several other commenters acknowledged 

that the correct statutory reference 

concerning assignment is to ‘‘subsection 

(h)(1)(A),’’ which allows assignment 

only on the basis of physician services, 

but also argued that ‘‘CMS can abide by 

the statutory requirement by basing 

assignment on utilization of primary 

care services provided by an ACO 

physician without requiring a plurality. 

Any primary care service provided by 

an ACO primary care physician should 

be enough to trigger assignment, as long 

as some other ACO participant has 

provided the plurality of primary care 

services to that beneficiary.’’ 

PAs, their representative 

organizations, and some other 

commenters disagreed with the 

exclusion of PAs from the assignment 

process. One commenter was 

‘‘extremely disappointed’’ that PAs are 

not included in the definition of 

primary care professional. Some 

commenters suggest that the 

discretionary authority provided to the 

Secretary of Health and Human Services 

under section 1899(i) of the Act 

allowing for the utilization of other 

payment models under the Shared 

Savings Program could provide the 

means to include non-physician 

practitioners such as PAs and NPs. 

Another commenter recommended that 

the care provided by a PA, pursuant to 

the criteria outlined in the proposed 

rule, be used to determine assignment to 

an ACO. Since PAs practice in a 

collaborative nature with physicians, 

the commenter believed it appropriate 

that beneficiaries who receive a 

plurality of primary care services from 

a PA be assigned based upon these 

services. However, they would also 

restrict recognition of care provided by 

non-physician providers only to those 

who have a collaborative or supervisory 

agreement with physicians, excluding 

some NPs who practice independently. 

Response: We cannot agree with those 

commenters who maintained that the 

wording of section 1899(c) of the Act 

with respect to considering primary care 

services provided by physicians should 

be treated as a ‘‘drafting error.’’ We are 

unaware of any direct or indirect 

evidence that the reference to ‘‘an ACO 

professional described in subsection 

(h)(1)(A)’’ rather than to ‘‘an ACO 

professional described in subsection 

(h)(1)’’ was made in error. Even if there 

were convincing evidence to that effect, 

given the clarity of the plain language of 

the statute, it would not fall within our 

authority to correct that error. Therefore, 

in implementing the Shared Savings 

Program, the assignment methodology 

will be based on utilization of primary 

care services provided by physicians. At 

the same time, we agree with the many 

commenters who emphasized that NPs, 

PAs, and clinical nurse specialists 

(CNSs) have a well-established record of 

providing high quality and cost-effective 

care. We also agree that these 

practitioners can be significant assets to 

the ACO in the areas of quality and cost 

saving, and indeed that the appropriate 

use of NPs, PAs, and CNSs could be an 

important element in the success of an 


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ACO participating in the Shared Savings 

Program. As many commenters noted, 

the skills of these practitioners, 

especially in care coordination, chronic 

disease management, health promotion, 

and disease prevention certainly can 

contribute significantly to the quality 

and cost savings of any shared saving 

program. (We would note in this context 

that nothing in the statute precludes an 

ACO from sharing savings with NPs and 

other practitioners, whether or not their 

services are included in the assignment 

process.) 

We also cannot agree with the 

commenters who suggested that the 

statutory language may be read to allow 

assignment to be based on services 

provided ‘‘indirectly’’ by a physician. 

Although the statute does not include 

the word ‘‘directly,’’ it does require that 

assignment be based on services 

‘‘provided’’ by physicians. The statutory 

requirement that assignment be based 

on physician services, not services 

furnished by ACO professionals more 

generally, would be rendered 

meaningless if we were to adopt a 

reading of the statute that permits 

physician services to be furnished 

‘‘indirectly.’’ For example, under this 

reading, a beneficiary could be assigned 

to an ACO without ever having seen a 

physician in the ACO. We believe that 

such an interpretation is directly 

contrary to the intent of section 1899(c) 

of the Act, and in particular, contrary to 

the express statutory requirement that 

assignment be based on physician 

services rather than ACO professional 

services, more generally. 

However, we took special note of one 

comment cited previously, specifically 

the comment that: ‘‘Any primary care 

service provided by an ACO primary 

care physician should be enough to 

trigger assignment, as long as some 

other ACO participant has provided the 

plurality of primary care services to that 

beneficiary.’’ This commenter suggested 

that it may be possible to employ the 

discretion that is afforded to the 

Secretary under the statute to determine 

‘‘an appropriate method’’ for assigning 

beneficiaries to an ACO based on the 

utilization of primary care services 

furnished by a physician by considering 

the receipt of physician primary care 

services as a triggering factor in the 

assignment process, prior to considering 

where the beneficiary has received a 

plurality of primary care services 

provided by the full range of ACO 

professionals, so that the beneficiary is 

appropriately assigned to the ACO 

which bears the primary responsibility 

for his or her primary care. Specifically, 

we could implement the statutory 

requirement that assignment be based 

on physician services, by assigning a 

beneficiary to an ACO if, and only if, the 

beneficiary has received at least one 

primary care service from a physician 

who is an ACO provider/supplier in the 

ACO. Therefore, as required by the 

statute, we would be assigning 

beneficiaries to an ACO based upon the 

receipt of primary care from a physician 

in the ACO. However, we would apply 

this policy in the step-wise fashion that 

we have discussed previously, that is, 

basing assignment in a first step on the 

primary care services provided by 

primary care physicians (measured in 

terms of allowed charges) alone. Then, 

in a second step, we would assign 

patients who are not seeing any primary 

care physician either inside or outside 

the ACO if they have received at least 

one primary care service from an ACO 

physician (of any specialty) in the ACO, 

and taking into account the allowed 

charges for primary care services 

provided by all ACO professionals in 

the ACO. The beneficiary will be 

assigned to the ACO if the allowed 

charges for primary care services 

furnished to the beneficiary by all ACO 

professionals who are ACO providers/ 

suppliers in the ACO are greater than 

the allowed charges for primary care 

services furnished by ACO professionals 

who are ACO providers/suppliers in any 

other ACO and allowed charges for 

primary care services furnished by 

physicians, NPs, PAs, and CNSs, who 

are not affiliated with an ACO. This 

method would avoid, for example, 

assignment of beneficiaries on the basis 

of receiving a few primary care services 

from specialist physicians, even though 

the beneficiary may be receiving the 

plurality of primary care services from 

specialist physicians, NPs or PAs who 

are ACO providers/suppliers in a 

different ACO. 

In adopting this policy, we are also 

extending the policy regarding 

exclusivity of TINs on which 

assignment is based to one ACO: that is, 

the TINs under which the services of 

specialists, PAs, and NPs are included 

in the assignment process subsequent to 

the identification of the ‘‘triggering’’ 

physician primary care services would 

have to be exclusive to one ACO for 

purposes of the Shared Savings 

Program. (We emphasize that we are 

establishing this policy for purposes of 

Shared Savings Program ACOs only: 

commercial ACOs may or may not wish 

to adopt a similar policy.) 

Comment: We received many 

comments from chiropractors and 

chiropractor associations recommending 

that the definition of ACO professional 

for purposes of the Shared Savings 

Program should be expanded to include 

chiropractors. These commenters cited 

the quality and cost efficiency of 

chiropractic services, and many also 

cited other statutory definitions of 

‘‘physician’’ as precedents for including 

chiropractors within the definition of 

‘‘physician’’ under the Shared Savings 

Program. 

Response: We recognize that some 

other Federal and State laws include 

chiropractors within the definition of 

physician for various purposes. 

However, we are unable to consider 

services furnished by chiropractors in 

the assignment process under the 

Shared Savings Program. As previously 

explained, section 1899(c) of the Act 

requires that assignment be based upon 

‘‘utilization of primary care services 

provided * * * by an ACO professional 

described in subsection (h)(1)(A).’’ 

Section 1899(h)(1)(A) of the Act defines 

an ‘‘ACO professional’’ as a physician 

(as defined in section 1861(r)(1) of the 

Act), which includes ‘‘* * * a doctor of 

medicine or osteopathy legally 

authorized to practice medicine and 

surgery by the State in which he 

performs such function or action,’’ but 

does not include chiropractors. 

Therefore, because chiropractors are not 

ACO professionals under section 

1899(h)(1)(A) of the Act, we are unable 

to consider their services in the 

assignment process under the Shared 

Savings Program. However, it is 

important to note that this restriction 

certainly does not preclude Medicareenrolled chiropractors from 

participating in ACOs, or from sharing 

in the savings that an ACO may realize 

in part because of the quality and costeffective services they may be able to 

provide. 

Final Decision: Therefore, under 

§ 425.402 of this final regulation we are 

adopting the following step-wise 

process for beneficiary assignment. Our 

final step-wise assignment process takes 

into account the two decisions that we 

have just described: (1) Our decision to 

base assignment on the primary care 

services of specialist physicians in the 

second step of the assignment process; 

and (2) our decision also to take into 

account the plurality of all primary care 

services provided by ACO professionals 

in determining which ACO is truly 

responsible for a beneficiary’s primary 

care in second step of the assignment 

process. Our final step-wise assignment 

process will thus occur in the following 

two steps, after identifying all patients 

that received a primary care service 

from a physician who is a provider/ 

supplier in the ACO (and who are thus 

eligible for assignment to the ACO 

under the statutory requirement to base 


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assignment on ‘‘utilization of primary 

care services’’): 

Step 1: We will identify beneficiaries 

who had received at least one physician 

primary care service from a primary care 

physician who is a provider/supplier in 

an ACO. In this step, a beneficiary can 

be assigned to an ACO only if he or she 

has received at least one primary care 

service from a primary care physician 

who is an ACO provider/supplier in the 

ACO during the most recent year (for 

purposes of preliminary prospective 

assignment, as discussed later in this 

final rule), or the performance year (for 

purposes of final retrospective 

assignment). If this condition is met, the 

beneficiary will be assigned to the ACO 

if the allowed charges for primary care 

services furnished by primary care 

physicians who are providers/suppliers 

of that ACO are greater than the allowed 

charges for primary care services 

furnished by primary care physicians 

who are providers/suppliers of other 

ACOs, and greater than the allowed 

charges for primary care services 

provided by primary care physicians 

who are unaffiliated with any ACO 

(identified by Medicare-enrolled TINs or 

other unique identifiers, as appropriate). 

Step 2: This step would consider only 

beneficiaries who have not received any 

primary care services from a primary 

care physician either inside or outside 

the ACO. Under this step a beneficiary 

will be assigned to an ACO only if he 

or she has received at least one primary 

care service from any physician 

(regardless of specialty) in the ACO 

during the most recent year (for 

purposes of preliminary prospective 

assignment), or the performance year 

(for purposes of final retrospective 

assignment). If this condition is met, the 

beneficiary will be assigned to an ACO 

if the allowed charges for primary care 

services furnished by ACO professionals 

who are ACO providers/suppliers of 

that ACO (including specialist 

physicians, NPs, PAs, and CNSs), are 

greater than the allowed charges for 

primary care services furnished by ACO 

professionals who are ACO providers/ 

suppliers of each other ACO, and greater 

than the allowed charges for primary 

care services furnished by any other 

physician, NP, PA, or CNS, (identified 

by Medicare-enrolled TINs or other 

unique identifiers, as appropriate) who 

is unaffiliated with any ACO. 

c. Assignment of Beneficiaries to ACOs 

That Include FQHCs and/or RHCs 

In the proposed rule, we also 

considered the special circumstances of 

FQHCs and RHCs in relation to their 

possible participation in the Shared 

Savings Program. (For purposes of this 

discussion, all references to FQHCs 

include both section 330 grantees and 

so-called ‘‘look-alikes,’’ as defined 

under § 405.2401 of the regulations.) 

Our proposed methodology was to 

assign beneficiaries to an ACO if they 

receive a plurality of their primary care 

services (which we proposed to identify 

by a select set of E&M services defined 

as ‘‘primary care services’’ for other 

purposes in section 5501 of the 

Affordable Care Act, and including the 

G-codes associated with the annual 

wellness visit and Welcome to Medicare 

visit) from a primary care physician 

(defined as a physician with a primary 

specialty designation of general 

practice, family practice, internal 

medicine, or geriatric medicine) 

affiliated with the ACO. Thus, under the 

proposal, we would need data that 

identify the precise services rendered 

(that is, primary care HCPCS codes), 

type of practitioner providing the 

service (that is, a physician as opposed 

to NP or PA), and the physician 

specialty in order to be able to assign 

beneficiaries to the entities that wish to 

participate in the Shared Savings 

Program. 

In general, FQHCs and RHCs submit 

claims for each encounter with a 

beneficiary and receive payment based 

on an interim all-inclusive rate. These 

claims distinguish general classes of 

services (for example, clinic visit, home 

visit, mental health services) by revenue 

code, the beneficiary to whom the 

service was provided, and other 

information relevant to determining 

whether the all-inclusive rate can be 

paid for the service. The claims contain 

very limited information concerning the 

individual practitioner, or even the type 

of health professional (for example, 

physician, PA, or NP) who provided the 

service. (Starting in 2011, FQHC claims 

are required to include HCPCS codes 

that identify the specific service 

provided, in order for us to develop a 

statutorily required prospective 

payment system for FQHCs.) In the 

proposed rule, we indicated that we did 

not believe we had sufficient data in 

order to assign patients to ACOs on the 

basis of services furnished by FQHCs or 

RHCs. Instead, recognizing the 

important primary care role played by 

these entities, we proposed to provide 

an opportunity for an ACO to share in 

a greater percentage of any savings if 

FQHCs/RHCs are included as ACO 

participants. 

Comment: Many commenters 

disagreed with our interpretation of the 

statute’s assignment provision (section 

1899(c) of the Act) to require a patient 

to be assigned to an ACO based solely 

on that beneficiary’s use of services 

furnished by specific categories of 

primary care physicians. These 

commenters encouraged CMS to explore 

other approaches that would allow 

FQHCs and/or RHCs to independently 

form ACOs and to take on a more active 

role in the ACO by allowing assignment 

of beneficiaries and establishment of 

benchmarks to be based upon services 

furnished by these entities. 

MedPAC commented that it would be 

more straightforward to allow 

assignment of patients to RHCs and 

FQHCs and encourage their use directly 

rather than to introduce special 

provisions for the savings share and 

thresholds as the proposed rule does. 

They indicated that ‘‘these are primary 

care provider teams often associated 

with a physician and usually providing 

primary care services. Logically they 

should be allowed to participate in 

ACOs and patients should be assigned 

to them. In many rural areas, RHCs 

function as primary care physicians’ 

offices and, although they are paid 

differently under Medicare, they are still 

fulfilling the same function’’. MedPAC 

suggested that ‘‘CMS posit that all 

claims in RHCs and FQHCs are for 

primary care services and use them for 

assignment as it would any other 

primary care claim.’’ 

Similarly, other commenters 

requested that CMS simply deem all 

FQHC services as primary care services. 

Other commenters believed it is more 

than reasonable to—and detrimental to 

the program’s goals not to—interpret 

1899(c) of the Act to find that the 

‘‘provided under’’ language means not 

only services provided by the physician 

personally but also services provided by 

additional members of the health care 

team of an FQHC, with whom 

physicians supervise and collaborate. In 

short, they believed that the Secretary 

has the discretion to determine for 

purposes of patient assignment that 

patients who receive care from FQHCs 

can be treated as patients whose care is 

furnished by physicians since physician 

services are an integral part of the FQHC 

service definition, FQHC practice, and 

FQHC reimbursement. 

Other commenters suggested that 

CMS could assign FQHC beneficiaries to 

ACOs in other ways. Specifically, a 

commenter indicated that the UB–04 

billing form that FQHCs use to submit 

their claims contains sufficient 

information (for example, patient 

information, revenue codes, and 

‘‘attending physician’’ information) to 

establish a reasonable process for 

assigning FQHC beneficiaries to ACOs. 

This commenter also noted that these 

health centers have a limited set of 

services that are considered ‘‘FQHC 


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services’’ and that virtually all such 

services would be considered primary 

care services. 

Another commenter indicated that all 

FQHCs and RHCs should have the 

capability to provide additional 

information about their services beyond 

the information available on their 

claims. The commenter stated that to be 

covered for a malpractice claim, a health 

care center must be able to demonstrate 

(through appropriate documentation) 

that the services at issue were within 

the center’s scope of services, provided 

at a location that was in the scope of 

services, were delivered to an 

established patient of the health center, 

were documented in a permanent 

medical record and were properly 

billed. This commenter categorically 

stated that the necessary information is 

available, that it is electronic, and that 

it can be correlated with 

contemporaneous claims data. 

Other commenters suggested that 

CMS consider other assignment 

approaches, such as the methodology it 

is using to attribute Medicare patients to 

FQHCs in the Adirondack Regional 

Medical Home Pilot, an all-payer 

medical home demonstration project in 

upstate New York. 

Yet other commenters suggested that 

assignment could be made by an FQHC 

providing a list of patients for whom it 

considers itself accountable. CMS could 

then analyze the claims history for the 

identified patients and exclude those 

with a plurality of primary care services 

associated with a provider other than 

the FQHC. 

Regarding RHCs, a number of 

commenters agreed that when a clinic 

submits the claim form, it is not 

required to identify the specific 

provider who rendered the service. 

They conceded that the RHC service 

could have been provided by a 

physician, a PA or an NP (and in some 

circumstances, a nurse midwife). These 

commenters suggested various ways to 

address this: (1) Require RHCs that are 

part of an ACO to identify the rendering 

provider on their claim form using the 

NPI of the rendering provider, and 

provide any other information needed 

through various means (similar to how 

quality data are submitted; and/or (2) 

use a patient attestation method for 

attributing/assigning RHC patients to 

the ACO. 

Response: We agree with the many 

comments that FQHCs and RHCs should 

be allowed to participate in ACOs and 

have their patients assigned to such 

ACOs, provided that patients can be 

assigned in a manner that is consistent 

with the statute. 

We indicated in the proposed rule 

that we would continue to assess the 

possibilities for collecting the requisite 

data from FQHCs and RHCs, and 

consider whether it would be possible 

for Medicare beneficiaries to be assigned 

to an ACO on the basis of services 

furnished by an FQHC or RHC, thereby 

allowing these entities to have their 

Medicare beneficiaries included in the 

ACO’s assigned population. 

As indicated previously, MedPAC and 

some other commenters suggested that 

CMS posit or deem that all claims in 

RHCs and FQHCs are for primary care 

services and use them for assignment as 

it would any other primary care claim. 

We have not accepted these comments 

because they do not address the specific 

requirement in section 1899(c) of the 

Act which requires assignment of 

beneficiaries to an ACO based ‘‘on their 

utilization of primary care services 

* * * by an ACO professional described 

in subsection (h)(1)(A).’’ As discussed 

previously, section 1899(h)(1)(A) of the 

Act establishes that for the purposes of 

beneficiary assignment, an ‘‘ACO 

professional’’ is defined as a physician 

as defined in section 1861(r)(1) of the 

Act. 

Likewise, we have not accepted other 

commenter suggestions that assignment 

could be made by an FQHC providing 

a list of patients for whom it considers 

itself accountable. Such an approach 

would also not be consistent with the 

statutory requirement that we develop 

an assignment process that is based on 

utilization of primary care services by 

an ACO professional, defined by the 

statute as a physician. We have also not 

adopted commenter suggestions that 

CMS should adopt the assignment 

processes that are being used in certain 

demonstration programs because these 

demonstration programs are not subject 

to the same statutory requirements that 

apply to this Shared Savings Program. 

However, as explained later in this 

final rule, we are accepting suggestions 

from other commenters that, in 

combination, will enable us to adopt a 

policy in this final rule that will allow 

us to assign beneficiaries to ACOs on 

the basis of services furnished by 

FQHCs and/or RHCs. (As we have 

explained earlier in section II.B. 

(Eligible Entities) of this final rule, this 

will also allow FQHCs and RHCs to 

form an ACO independently, without 

the participation of other types of 

eligible entities. It will also allow the 

beneficiaries who receive primary care 

services from FQHCs and RHCs to count 

in the assignment process for any ACO 

that includes an FQHC and/or RHC as 

a provider/supplier.) As discussed 

previously, the assignment methodology 

we are adopting in this final rule is to 

assign beneficiaries to an ACO using a 

step-wise approach for assignment. 

Under this step-wise method, 

beneficiaries are first assigned to an 

ACO if they have received a primary 

care service from a primary care 

physician (defined as a physician with 

a primary specialty designation of 

general practice, family practice, 

internal medicine, or geriatric medicine) 

who is a provider/supplier in the ACO, 

and also receive a plurality of their 

primary care services (which we 

identify by a select set of E&M services 

defined as ‘‘primary care services’’ in 

section 5501 of the Affordable Care Act, 

and the G-codes associated with the 

annual wellness visit and the Welcome 

to Medicare visit) from primary care 

physicians who are providers/suppliers 

in the same ACO. Those beneficiaries 

who have not received any primary care 

services from a primary care physician 

can be assigned to an ACO in the second 

step if they have received a primary care 

service from a specialist physician (that 

is, a physician that does not meet the 

definition of a primary care physician) 

who is a provider/supplier in the ACO, 

and also receive a plurality of their 

primary care services from physicians 

and other ACO professionals who are 

ACO providers/suppliers in the ACO. 

Thus, under the final rule, in order to 

be able to align beneficiaries with the 

entities that wish to participate in the 

Shared Savings Program, in general we 

require data that identify all of the 

following: 

• Services rendered (that is, primary 

care HCPCS codes). 

• Type of practitioner providing the 

service (that is, a physician, NP, PA, or 

CNS). 

• Physician specialty. 

For services billed under the physician 

fee schedule, these data items are 

available on the claims submitted for 

payment. In contrast, as discussed in the 

proposed rule, FQHCs and RHCs submit 

claims for each encounter with a 

beneficiary and receive payment based 

on an interim all-inclusive rate. These 

FQHC/RHC claims distinguish general 

classes of services (for example, clinic 

visit, home visit, mental health services) 

by revenue code, the beneficiary to 

whom the service was provided, and 

other information relevant to 

determining whether the all-inclusive 

rate can be paid for the service. The 

claims contain very limited information 

concerning the individual practitioner, 

or even the type of health professional 

(for example, physician, PA, NP), who 

provided the service. 


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(1) Identification of Primary Care 

Services Rendered in FQHCs and RHCs 

Starting in 2011, FQHC claims are 

required to include HCPCS codes that 

identify the specific service provided, in 

order for us to develop a statutorily 

required prospective payment system 

for FQHCs. In addition, FQHCs were 

required to submit a HCPCS code to 

receive payment for the Welcome to 

Medicare visit (G0402) beginning in 

2009. Therefore, we can identify 

primary care services for FQHCs that are 

participating in an ACO by using their 

HCPCS codes for services furnished on 

or after January 1, 2011, and by using 

HCPCS code G0402 furnished on or 

after January 1, 2009. RHCs are 

generally not required to report HCPCS 

codes, except that: (1) For services 

furnished on or after January 1, 2009, 

RHCs may submit HCPCS code G0402 to 

receive payment for the Welcome to 

Medicare visit, and (2) for services 

furnished on or after January 1, 2011, 

RHCs may submit HCPCS codes to 

receive payment for the annual wellness 

visits (G0438 and G0439). However, for 

purposes of assigning patients and 

calculating the benchmark, we will also 

need to identify other primary care 

services that were furnished by FQHCs 

and RHCs. In order to identify primary 

care services rendered in FQHCs and 

RHCs that are primary care services, and 

that are not required to be reported by 

HCPCS codes, we are adopting the 

commenters’ suggestions to use the 

revenue center codes. We have reviewed 

these revenue center codes and agree 

that for purposes of the Shared Savings 

Program, the revenue center codes can 

be used as a substitute for the primary 

care HCPCS codes which RHCs do not 

report, and which FQHCs were not 

required to report prior to January 1, 

2011. Specifically, we believe that it is 

possible to employ these revenue codes 

to identify primary care services by 

constructing an appropriate cross-walk 

between the revenue center codes and 

the HCPCS primary care codes based on 

their definitions. 

In order to establish such a crosswalk, we compared the HCPCS codes 

that are considered as being primary 

care services for purposes of the Shared 

Savings Program with the revenue 

center codes that are reported on FQHC/ 

RHC claims. As discussed previously, 

the primary care HCPCs codes used for 

assignment are as follows: 

• 99201 through 99215; (office/ 

outpatient visits). 

• 99304 through 99340; (nursing 

facility visits/domiciliary home visits). 

• 99341 through 99350; (home visits). 

• Welcome to Medicare visit (G0402). 

• Annual wellness visits (G0438 and 

G0439). 

FQHCs and RHCs report services on 

their claims using the following revenue 

center codes: 

0521—Clinic visit by member to RHC/ 

FQHC 

0522—Home visit by RHC/FQHC 

practitioner 

0524—Visit by RHC/FQHC practitioner 

to a member, in a covered Part A stay 

at the SNF 

0525—Visit by RHC/FQHC practitioner 

to a member in an SNF (not in a 

covered Part A stay) or NF or ICF MR 

or other residential facility 

We are able to cross walk the ‘‘primary 

care’’ HCPCS codes to comparable 

revenue center codes based on their 

code definitions. For example, HCPCS 

codes 99201 through 99215 (office/ 

outpatient visits) will be cross-walked to 

revenue center code 0521. Because the 

focus of FQHCs and RHCs is on primary 

care, we believe these revenue center 

codes, when reported by FQHCs/RHCs, 

would represent primary care services 

and not more specialized care. This 

cross-walk will allow us to use the 

available revenue center codes as part of 

the beneficiary assignment process for 

FQHC/RHC services in place of the 

unavailable HCPCS codes which will be 

used more generally. We will establish 

and update this crosswalk through 

contractor instructions. For FQHCs, we 

will use the HCPCS codes which are 

included on their claims starting on 

January 1, 2011. 

(2) Identification of the Type of 

Practitioner Providing the Service in an 

FQHC/RHC 

Secondly, in order to be able to align 

beneficiaries with the entities that wish 

to participate in the Shared Savings 

Program, we also generally require data 

that identify the type of practitioner 

providing the service (that is, a 

physician, NP, PA, or CNS). This is 

because, as discussed previously, 

section 1899(c) of the Act requires that 

assignment must be based upon services 

furnished by physicians. As previously 

noted, FQHC/RHC claims contain 

limited information as to the type of 

practitioner providing a service because 

this information is not necessary to 

determine payment rates for services in 

FQHCs and RHCs. 

Based upon our review of the many 

helpful comments we received on these 

issues, we now agree that we can 

develop a process that will allow 

FQHCs and RHCs to fully participate in 

the Shared Savings Program. We can do 

this by using the limited provider NPI 

information on the FQHC/RHC claims 

in combination with a supplementary 

attestation requirement. This would be 

consistent with comments we received 

encouraging us to identify the provider 

that furnished services in FQHCs/RHCs 

by using the NPI of the attending 

provider, supplemented by additional 

information that the FQHCs/RHCs could 

separately submit. 

More specifically, from the FQHC/ 

RHC claims, we will use the Attending 

Provider NPI field data which is defined 

as being: ‘‘the individual who has 

overall responsibility for the patient’s 

medical care and treatment reported in 

this claim/encounter.’’ Although the 

attending provider NPI is used to report 

the provider who is responsible for 

overall care, it does not identify whether 

this provider furnished the patient care 

for the beneficiary. Therefore, to meet 

the requirement of section 1899(c) of the 

Act which requires that assignment 

must be based upon services furnished 

by physicians, we will supplement 

these limited claims data with an 

attestation that would be part of the 

application process for ACOs that 

include FQHCs/RHCs. We will require 

ACOs that include FQHCs/RHCs to 

provide to us, through an attestation, a 

list of their physician NPIs that provide 

direct patient primary care services, that 

is, the physicians that actually furnish 

primary care services in the FQHC or 

RHC. Other physician NPIs for FQHCs/ 

RHCs will be excluded from the 

assignment process, such as those for 

physicians whose focus is on a 

management or administrative role. The 

attestation must be submitted as part of 

the application for ACOs that include 

FQHCs/RHCs. Such ACOs will also be 

required to notify us of any additions or 

deletions to the list as part of the update 

process discussed in section II.C.4. of 

this final rule. The attestation by the 

ACO will better enable us to determine 

which beneficiaries actually received 

primary care services from an FQHC/ 

RHC physician. 

We will then use the combination of 

the ACO’s TINs (or other unique 

identifiers, where appropriate) and 

these NPIs provided to us through the 

attestation process to identify and assign 

beneficiaries to ACOs that include 

FQHCs/RHCs using the step-wise 

assignment methodology as previously 

explained. 

In this way, we would then be able to 

assign beneficiaries to ACOs on the 

basis of services furnished in FQHCs 

and RHCs in a manner consistent with 

how we will more generally assign 

primary care services performed by 

physicians as previously described. We 

believe this approach meets the 

statutory requirement in section 1899(c) 


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of the Act that assignment be based on 

the utilization of primary care services 

‘‘provided’’ by an ACO professional 

described as a physician in section 

1899(h)(1)(A) of the Act. 

(3) Identification of the Physician 

Specialty for Services in FQHCs and 

RHCs 

As previously explained, the third 

type of information we generally need 

under the step-wise assignment process 

discussed previously to assign 

beneficiaries with the entities that wish 

to participate in the Shared Savings 

Program is data that identify physician 

specialty. However, we agree with 

commenters who pointed out that the 

Medicare FQHC health benefit was 

established in 1991 to enhance the 

provision of primary care services in 

underserved urban and rural 

communities. Commenters pointed out 

that virtually all services provided 

under the Medicare FQHC benefit are 

primary care services. We also agree 

with commenters that RHCs 

predominantly provide primary care 

services to their populations. Therefore, 

when a physician provides a service in 

an FQHC or an RHC, we believe the 

physician is functioning as a primary 

care physician comparable to those 

physicians that define themselves with 

a primary specialty designation of 

general practice, family practice, 

internal medicine, or geriatric medicine. 

As a result, we do not believe it is 

necessary to obtain more detailed 

specialty information (either through 

the claims NPI reporting or as part of the 

attestation process) for the physicians 

that furnish services in FQHCs and 

RHCs. Longer term, we will consider 

establishing definitions for data fields 

on the claims submitted by FQHCs and 

RHCs, such as for attending NPI or other 

NPI fields, which could be used to 

identify the type of practitioner 

providing the service. This may enable 

us to eliminate the attestation which 

will part of the application process for 

ACOs that include FQHCs/RHCs. 

Final Decision: In § 425.404, we are 

modifying the policy that we proposed 

in response to comments to establish a 

beneficiary assignment process that will 

allow primary care services furnished in 

FQHCs and RHCs to be considered in 

the assignment process for any ACO that 

includes an FQHC and/or RHC. (These 

changes to the assignment process will 

also allow FQHCs and RHCs to form 

ACOs independently, without the 

participation of other types of eligible 

entities.) Operationally we will assign 

beneficiaries to ACOs that include 

FQHCs/RHCs in a manner consistent 

with how we will assign beneficiaries to 

other ACOs based on primary care 

services performed by physicians as 

previously described. 

We will require that an ACO that 

include FQHCs and/or RHCs to provide 

us, through an attestation, with a list of 

the physician NPIs that provide direct 

patient primary care services in an 

FQHC or RHC. This attestation will be 

part of the application process for all 

ACOs that include FQHCs and/or RHCs 

as ACO participants. We will then use 

the combination of the ACO’s TINs (or 

other unique identifiers, where 

appropriate) and these NPIs provided to 

us through the attestation process to 

identify beneficiaries who receive a 

primary care service in an FQHC or RHC 

from a physician, and to assign those 

beneficiaries to the ACO if they received 

the plurality of their primary care 

services, as determined based on 

allowed charges for the HCPCS codes 

and revenue center codes listed in the 

definition of primary care services, from 

ACO providers/suppliers. 

2. Prospective vs. Retrospective 

Beneficiary Assignment To Calculate 

Eligibility for Shared Savings 

Section 1899(d)(1) of the Act provides 

that an ACO may be eligible to share 

savings with the Medicare program if 

the ACO meets quality performance 

standards established by the Secretary 

(which we discuss in section II.F. of this 

final rule) and meets the requirements 

for realizing savings for its assigned 

beneficiaries against the benchmark 

established by the Secretary under 

section 1899(d)(1)(B) of the Act. Thus, 

for each performance year during the 

term of the ACO’s participation 

agreement, the ACO must have an 

assigned population of beneficiaries. 

Eligibility for shared savings will be 

based on whether the requirements for 

receiving shared savings payments are 

met for this assigned population. In the 

proposed rule, we discussed two basic 

options for assigning beneficiaries to an 

ACO for purposes of calculating 

eligibility for shared savings during a 

performance year. The first option is 

that beneficiary assignment could occur 

at the beginning of the performance 

year, or prospectively, based on 

utilization data demonstrating the 

provision of primary care services to 

beneficiaries in prior periods. The 

second option is that beneficiary 

assignment could occur at the end of the 

performance year, or retrospectively, 

based on utilization data demonstrating 

the provision of primary care services to 

beneficiaries by ACO physicians during 

the performance year. However, as we 

discuss later in this final rule, these two 

basic approaches could be combined in 

any number of ways in an attempt to 

realize the most positive aspects of each 

approach and/or avoid the major 

disadvantages of each. For example, 

prospective assignment of beneficiaries 

could be combined with a retrospective 

reconciliation process that adjusts for 

certain prospectively assigned 

beneficiaries who have moved or 

changed health care providers during a 

performance year. 

We proposed to adopt a retrospective 

approach for a number of reasons. First, 

the actual population served by a set of 

physicians changes significantly from 

year to year. Because Medicare FFS 

beneficiaries have the right to see any 

enrolled physician, there is typically 

more year-to-year variability in treating 

physicians for this population when 

compared to patients in managed care 

programs. Analysis of the PGP 

population did show approximately a 

25 percent variation in assignment from 

year to year. If population seen by an 

ACO changes by 25 percent during the 

year, a prospectively assigned 

beneficiary population would reflect 

some beneficiaries who did not actually 

receive the plurality of their care from 

physicians in the ACO during the 

performance year. Final retrospective 

assignment of the population, on the 

other hand, would include in the actual 

performance year expenditures for an 

ACO only for those beneficiaries who 

received a plurality of their care from 

the ACO during the performance year. 

Second, identifying an assigned 

beneficiary population prospectively 

may lead an ACO to focus only on 

providing care coordination and other 

ACO services to this limited population, 

ignoring other beneficiaries in their 

practices or hospitals. Given that the 

goal of the Shared Savings Program is to 

change the care experience for all 

beneficiaries, ACO participants and 

ACO providers/suppliers should have 

incentives to treat all patients equally, 

using standardized evidence-based care 

processes, to improve the quality and 

efficiency of all of the care they provide, 

and in the end they should see positive 

results in the retrospectively assigned 

population. 

In the proposed rule, we 

acknowledged that there are merits in 

both approaches. It does seem 

appropriate for an ACO to have 

information regarding the population it 

will likely be responsible for in order to 

target its care improvements to those 

patients who would benefit the most. At 

the same time, we expressed our 

concern that we did not want to 

encourage ACOs to limit their care 

improvement activities to the subset of 

their patients that they believe may be 


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assigned to them. Finally, we 

considered that it was important that 

the assessment of ACO performance be 

based on patients who received the 

plurality of their primary care from the 

ACO in that performance year. Even 

under a more prospective assignment 

approach, there is reason to believe that 

a final retrospective redefinition of the 

assigned population to account for 

changes from prior periods would be 

required to ensure that the ACO is not 

held accountable for patients for whom 

it was not possible to provide care 

during the performance year. Under a 

more prospective system, the 

assignment would have to be adjusted 

every performance year to account for 

beneficiaries entering and leaving FFS 

Medicare and for those patients who 

move in and out of the geographic area 

of the ACO, as well as potentially other 

adjustments. 

Considering the merits of both 

approaches, we took the position in the 

proposed rule that a retrospective 

approach to beneficiary assignment for 

purposes of determining eligibility for 

shared savings was preferable. We 

stated that the assignment process 

should accurately reflect the population 

that an ACO is actually caring for, in 

order to ensure that the evaluation of 

quality measures is fair and that the 

calculation of shared savings, if any, 

accurately reflects the ACO’s success in 

improving the quality and efficiency of 

the care provided to the beneficiaries for 

which it was actually accountable. 

However, we also acknowledged the 

potential advantages of a more 

prospective approach, especially in 

providing ACOs with information about 

the patient population that is necessary 

for purposes of more effectively 

planning and coordinating care. 

In the proposed rule, we also noted 

that in response to the November 17, 

2010 RFI, of the few commenters 

favoring retrospective assignment, a 

group of commenters suggested the use 

of retrospective assignment for 

determining utilization and shared 

savings, but prospective assignment for 

purposes of determining which 

beneficiary identifiable data we would 

share with ACOs. We agreed that, given 

appropriate safeguards for maintaining 

the confidentiality of patient 

information, providing ACOs with 

meaningful information about their 

‘‘expected assigned population’’ with 

the potential to identify an ‘‘estimated 

benchmark target’’ would be helpful. 

We discuss our policies regarding 

providing information to ACOs to help 

them understand their patient 

populations and better manage their 

care in section II.D. of this final rule. 

Therefore, we proposed the combined 

approach of retrospective beneficiary 

assignment for purposes of determining 

eligibility for shared savings balanced 

by the provision of aggregate beneficiary 

level data for the historically assigned 

population of Medicare beneficiaries 

during the benchmark period. As we 

discussed in section II.D. of the 

proposed rule, we also proposed to 

provide ACOs with a list of beneficiary 

names, dates of birth, sex, and HCIN 

derived from the assignment algorithm 

used to generate the historical 

benchmark. We concluded that 

providing data on those beneficiaries 

that were assigned to an ACO in the 

benchmark period would be a good 

compromise that would allow ACOs to 

have information on the population they 

will likely be responsible for in order to 

target their care improvements to that 

population while still holding ACOs 

accountable only for the beneficiaries 

for whom they actually provided 

services during the performance year. 

We believed that such a combined 

approach would provide the best of both 

approaches while minimizing the 

disadvantages of either. We solicited 

comment on this approach. 

Comment: The commenters were 

overwhelmingly in favor of prospective 

assignment. Many commenters, 

including MedPAC, argued that 

prospective assignment was important 

so that beneficiaries would have full 

knowledge of their inclusion in an ACO 

in advance and indeed that prospective 

assignment is necessary to engage 

beneficiaries effectively in the ACO 

process of more efficient and higher 

quality care. One commenter argued 

that retrospective assignment actually 

denies a beneficiary real choice, noting 

our observation in the proposed rule 

that under retrospective assignment it is 

not possible to inform beneficiaries of 

their assignment with an ACO in 

advance of the period in which they 

may seek services from the ACO. Most 

of these commenters also argued that 

prospective assignment is necessary to 

allow ACOs to plan care appropriately 

for the patients assigned to them. One 

commenter observed that a retrospective 

assignment method raises concerns 

about the ability of ACOs to manage 

population health in a way that 

generates savings. The commenter 

contended that providers need to know 

which patients for whom they are 

responsible in order to effectively 

coordinate care and implement care 

management program, and as a result, 

retrospective assignment could 

discourage participation in the Shared 

Savings Program. 

Many commenters in favor of 

prospective assignment either denied 

that prospective assignment would lead 

to higher quality care for ACO patients 

than for others, or contended that the 

Shared Savings Program quality 

measures and monitoring activities 

would prevent and/or correct such 

behavior. One commenter argued that 

professional ethics and standards 

require that physicians not provide a 

lower level of care to one group of 

patients compared to another; the 

profession’s commitment to its own 

ethics therefore will mitigate against 

ACO’s providing a lower level of care to 

patients not prospectively attributed to 

it. Another commenter, however, 

acknowledged that an ACO would have 

a built-in incentive to discourage 

particularly high cost patients from 

joining their ACO since it would put the 

potential savings they might recoup at 

the end of the performance year in 

jeopardy, unless there is adequate risk 

adjustment. 

A health care policy institute noted 

that 30 percent of beneficiaries 

attributed to an ACO in the current 

performance year were not attributed in 

the prior year. This suggests that basing 

attribution on data prior to the current 

performance year will lead to incorrect 

attribution of a substantial proportion of 

patients; using older years of data for 

attribution will lead to an even worse 

fit. Furthermore, 87.6 percent of patients 

seen by the ACO primary care 

physicians in a given performance year 

will be attributed to the ACO, so that the 

vast majority of patients utilizing 

services at an ACO will be attributed to 

the ACO. This commenter therefore 

recommended that we introduce a 

modified prospective methodology of 

attribution with current performance 

year data by adopting a near concurrent 

attribution model in which the ACO is 

held responsible only for the patients 

that received the plurality of their care 

from the ACO professionals within the 

ACO during a time period close enough 

to the performance year that it 

approximates the population seen 

during the year, and does not provide 

opportunities for gaming. Two 

commenters suggested alignment based 

on the prior 2 years weighted 50/50. 

One commenter asserted that 

retrospective assignment undermines 

quality and cost objectives, and is 

unnecessary to avoid adverse selection. 

Noting that our stated goal is to prevent 

avoidance behavior around high-risk 

beneficiaries, this commenter 

recommended that an ACO applicant 

submit a panel of participating 

providers, including specialists, to CMS. 

We would use this list to look back at 


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the previous year’s claims for primary 

care services provided by the primary 

care and/or specialty physician for the 

ACO beneficiaries. Patient assignment 

by CMS could be based on the plurality 

of primary care service visits provided. 

The ACO would then ensure that the 

individuals assigned by CMS were still 

the patients of the listed providers. One 

commenter argued that, by seeking to 

evaluate ACOs only on care actually 

rendered, we may be incentivizing 

ACOs to act directly contrary to the goal 

of having ACOs redesign care processes 

to improve care for all beneficiaries. 

Under the proposed rule, according to 

the commenter, ACOs will have every 

incentive not to redesign care processes 

so that high-risk, high-cost individuals 

are motivated to receive their care 

outside of the ACO. 

Another commenter specifically 

questioned whether retrospective 

assignment would be appropriate for 

high risk populations and beneficiaries 

with special needs. Specifically, the 

commenter acknowledged that the 

methodology we proposed might be 

effective for the general Medicare 

population, but questioned how 

effective it would be for a high-risk 

population with complex medical 

problems and other special needs, 

stating that special needs beneficiaries 

would be better served by a more 

targeted approach that identifies a 

specific population, develops a model of 

care around the target risk group and 

predefines shared savings criteria in 

advance. 

One commenter argued strongly for 

prospective assignment, but then stated: 

‘‘If CMS elects to use a retrospective 

patient assignment, then the Agency 

should consider providing the ACO 

with a list of ‘potential’ ACO patients 

prior to the beginning of the 

performance period.’’ In a follow-up 

comment, however, this same 

commenter came down firmly in favor 

prospective assignment: ‘‘We believe the 

final rule should include an option for 

an ACO to identify its population 

prospectively. With prospective 

assignment, ACOs can create systems to 

actively manage and engage patients 

* * * Restricting the beneficiary 

assignment to a retrospective 

methodology hampers ACOs’ abilities to 

manage their patients proactively and 

effectively.’’ 

A few commenters expressed 

conditional support for retrospective 

assignment. For example, one 

commenter stated that they understand 

the benefits and costs of both 

prospective and retrospective 

attribution. While recognizing the 

concerns that surround prospective 

attribution, including potential ‘‘cherrypicking’’ of patients, the commenter 

stated that patients have a legitimate 

interest in understanding which 

providers are in charge of their care and 

the incentives those providers have to 

provide quality care and reduce health 

care costs. Some of the commenters who 

argued for prospective assignment 

acknowledged that retrospective 

adjustments would be necessary to 

correct for changes such as beneficiaries 

that had moved out of the area, 

beneficiaries who had chosen to receive 

their services elsewhere, and for other 

similar matters. One commenter stated 

that the basic problem with ‘‘pure’’ 

prospective assignment (no 

reconciliation after the end of each 

performance year) in the Shared Savings 

Program is that it would: (1) Not give 

ACOs accountability for additional 

beneficiaries they take responsibility for 

during the performance year; and (2) 

give them accountability for 

beneficiaries they were no longer 

responsible for. A commenter also 

accepted retrospective assignment as 

manageable if the beneficiaries are 

assigned on a plurality of services 

provided, and if beneficiary data are 

shared prospectively during the 

benchmark period. Another commenter 

supported our hybrid approach to 

provide preliminary assignment 

information to ACOs combined with 

retrospective reconciliation, which will 

ensure ACOs are only assigned patients 

they provide care for during the 

performance year. Another commenter 

urged us ‘‘at a minimum * * * to move 

further down the continuum toward 

some hybrid approach between 

prospective assignment and 

retrospective attribution.’’ 

A few commenters recommended a 

hybrid approach combined with 

incentives for beneficiaries to enroll in 

an ACO, specifically, by modifying the 

patient assignment component of the 

rule to allow beneficiaries that 

prospectively enroll in an ACO to enjoy 

a portion of the savings that the ACO 

realizes, perhaps through a lower Part B 

premium. 

A much smaller number of 

commenters agreed with our proposal 

for retrospective assignment. One 

commenter stated that retrospective 

assignment, though imperfect, is the 

only way to assign savings based on 

actual performance, and will encourage 

unbiased treatment. However, this same 

commenter requested an exception for 

primary care physicians who see highrisk patients for a single encounter. The 

commenter believed that omitting such 

patients from retrospective assignment 

for purposes of the shared savings 

payment calculations would avoid 

discouraging primary care physicians 

from taking on new, high-risk 

beneficiaries. 

Another commenter was persuaded 

by the argument that retrospective 

assignment of beneficiaries to the ACO 

would create an environment where 

ACOs would be encouraged to provide 

effective care coordination for all 

beneficiaries with complex illnesses, 

but was nonetheless concerned that 

patient engagement would be more 

difficult when beneficiaries are not 

aware of the new delivery system. 

Another commenter strongly supported 

retrospective assignment as a more 

seamless approach, because prospective 

assignment would employ less reliable 

data, for example, data for patients who 

have moved or chosen a different 

provider. Another stated that early 

attribution may encourage providers to 

focus only on attributed beneficiaries 

and slow the implementation of wider 

scale changes. 

A physician society believed the 

combined approach of retrospective 

beneficiary assignment for purposes of 

determining eligibility for shared 

savings balanced by the provision of 

beneficiary data and aggregate 

beneficiary level data for the assigned 

population of Medicare beneficiaries 

during the benchmark period is optimal, 

because it would provide ACO 

physicians with the information needed 

to manage their patient population, yet 

encourages high quality services to all 

beneficiaries. Another commenter was 

satisfied that the benefits of 

retrospective beneficiary assignment 

will likely outweigh any the concerns 

about choice that might remain because 

of the beneficiary notification, 

education and claims data-sharing optout provided for under the proposed 

rule. ‘‘Retrospective assignment will 

likely encourage ACOs to provide the 

same level and type of services under 

consistent care delivery models to their 

entire beneficiary population.’’ 

A patients’ advocacy organization 

supported the agency’s decision to 

assign beneficiaries retrospectively, out 

of fear that that prospective assignment 

might carry some risk that providers 

would ‘‘cherry pick’’ and seek to avoid 

certain high-risk individuals. 

A physician society also supported 

our proposal: ‘‘Because of [our] 

concerns with risk avoidance and other 

means to reduce costs and therefore 

create greater shared savings, we agree 

with the CMS decision to provide 

retrospective assignment. The proposal 

to provide prospective patient data to 

the ACO should provide the entity with 

the general patient population and other 


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demographic data that could help the 

ACO to make necessary decisions.’’ 

A member of Congress also strongly 

supported our proposal for retrospective 

assignment: ‘‘I support CMS’ decision to 

assign Medicare beneficiaries 

retrospectively. I understand that many 

in the provider community would prefer 

prospective assignment, but fear it could 

create a two-tier system where assigned 

beneficiaries receive a heightened level 

of care and attention while the 

remainder of the patient population 

receives a lower level of care. Our intent 

in creating ACOs was to once again use 

Medicare to drive systematic, positive 

change in the delivery system. 

Retrospective assignment helps 

accomplish this goal by ensuring the 

best care for all.’’ 

Another commenter believed that the 

method of assignment is less important 

than ensuring that ACOs receive 

information sufficient to understand 

and target their patient populations. 

Therefore, the commenter commended 

us for proposing to combine 

retrospective assignment with extensive 

data sharing about beneficiaries 

historically assigned and likely to be 

assigned to the ACO. 

A few commenters suggested allowing 

ACOs a choice of prospective or 

retrospective assignment. One 

commenter would allow ACOs to elect 

either prospective or retrospective 

attribution of patients, adding that, if 

limited to one approach, prospective 

attribution is the only method 

compatible with population health 

management and its requirements. 

Response: We appreciate the 

commenters’ arguments about the 

advantages of a more prospective 

assignment methodology for purposes of 

patient care planning and other 

objectives. The intention of our proposal 

for retrospective assignment with 

prospective provision of beneficiary 

data was to strike an appropriate 

balance between the two approaches of 

prospective and retrospective 

assignment. In this final rule we 

similarly seek to strike an appropriate 

balance by accommodating the 

advantages of the prospective approach 

to a greater degree, moving, as one 

commenter suggested further down the 

continuum toward a more prospective 

approach, without abandoning our 

proposal to determine final assignment 

retrospectively. 

We continue to believe that we should 

avoid as much as possible outcomes in 

which ACOs could be held accountable 

for costs related to beneficiaries who 

received care from ACO physicians in a 

prior year, but later moved away and 

received no services from the ACO 

during the performance year. We believe 

that ACOs should not be held 

accountable for the costs of patients for 

whom they are no longer to provide 

primary care due, for example, to a 

patient moving out of area during a 

performance year. Similarly, we believe 

that ACOs should have the opportunity 

to share in any savings realized through 

the application of the ACO’s health 

planning, care coordination, and quality 

programs to patients who begin 

receiving primary care services from the 

ACO during a performance year. We 

took special note of the commenters 

who recommended prospective 

assignment with at least some 

retroactive adjustments to account for 

situations where prospective assignment 

would lead to negative or even unfair 

consequences for the ACO. We believe 

that the recommendations of these 

commenters amount to hybrid 

approaches that are not entirely 

dissimilar from our proposal, but that 

place a greater emphasis on the 

prospective elements of the hybrid than 

our proposal did. In light of the 

concerns raised by commenters, we 

agree that our proposal for a hybrid 

approach identifying a preliminary 

prospective population and then 

determining the final assignments at the 

end of the performance year should be 

modified in ways that further enhance 

its prospective aspects. 

Therefore, in this final rule, we are 

modifying the policy that we proposed 

in response to comments to adopt a 

preliminary prospective assignment 

methodology with final retrospective 

reconciliation. Under this model, we 

will create a list of beneficiaries likely 

to receive care from the ACO based on 

primary care utilization during the most 

recent periods for which adequate data 

are available, and provide a copy of this 

list to the ACO. During the performance 

year, we will update this list 

periodically on a rolling basis to allow 

the ACO to adjust to likely changes in 

its assigned population. (We describe 

the nature and timing of this updating 

in the discussion of data sharing in 

section II.D. of this final rule.) At the 

end of each performance year, we will 

reconcile the list to reflect beneficiaries 

who actually meet the criteria for 

assignment to the ACO during the 

performance year. Determinations of 

shared savings or losses for the ACO 

will be based on this final, reconciled 

population. We believe this preliminary 

prospective assignment model with 

retrospective reconciliation will provide 

the ACO adequate information to 

redesign care processes while also 

encouraging ACOs to standardize care 

for all Medicare FFS beneficiaries 

instead of a subset. At the same time, we 

also believe that a preliminary 

prospective model with retrospective 

reconciliation will provide adequate 

incentives for each ACO to provide 

quality care to its entire beneficiary 

population. 

It is important to note that the CMS 

Center for Medicare and Medicaid 

Innovation has announced a Pioneer 

ACO Model which will test alternative 

savings and alignment (the equivalent of 

assignment under the Shared Savings 

Program) () models as we proceed with 

implementing the Shared Savings 

Program. Under the Pioneer ACO 

Model, an ACO may select either 

prospective or retrospective alignment 

of beneficiaries. Under the prospective 

approach CMS will identify the 

population of Medicare beneficiaries for 

whom an ACO is accountable through 

analysis of the prior 3 years of fee-forservice claims data (weighted 60 percent 

for the most recent year, then 30 percent 

for the previous year, and 10 percent for 

the earliest year). The actual historical 

data for these beneficiaries will make up 

the benchmark spending. Pioneer ACOs 

that select prospective alignment will be 

accountable for the cost and quality 

outcomes of all their prospectively 

aligned beneficiaries at each end-ofperiod reconciliation, with certain 

exceptions. We will consider 

beneficiaries as no longer being in the 

ACO’s designated patient population for 

purposes of performance measurement 

and expenditure calculations if they: (1) 

Have any months of Medicare 

Advantage enrollment or enrollment in 

only Part A or only Part B at any point 

during the performance period; (2) 

transfer their Medicare address to a Core 

Based Statistical Area (CBSA) or rural 

county that is not adjacent to that of the 

ACO’s location (where the majority of 

its clinicians are located); or (3) receive 

more than 50 percent of their evaluation 

and management allowed charges in 

non-adjacent CBSAs or rural counties 

during the performance period. The 

adoption of this approach under the 

Pioneer ACO Model will provide us 

with an opportunity to gain experience 

and evaluate a more prospective hybrid 

model than the approach that we are 

adopting in this final rule. We will 

study the results of the Pioneer ACO 

Model very carefully, and will consider 

in our next rulemaking whether it is 

appropriate to revise our approach to 

assignment in the Shared Savings 

Program in the light of those interim 

results. 

Comment: Many commenters, 

including MedPAC, argued that 

beneficiaries should be allowed to opt 


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out of assignment to an ACO (not just, 

as we proposed, of data sharing), even 

if they want to continue receiving 

services from ACO participants. A 

number of commenters went further to 

argue that beneficiary choice should be 

the sole basis for assignment to an ACO, 

that is, that beneficiary assignment to 

ACOs should actually be more like a 

process of beneficiary enrollment in an 

ACO. For example, one insurance 

organization recommended a 

‘‘physician-of-choice solution.’’ A 

physician society recommended that 

CMS should prospectively allow 

patients to choose their own Medicare 

ACO. Other commenters referred to 

assignment based on the beneficiary’s 

identification of their ‘‘primary care 

provider or medical home.’’ A national 

organization of physicians 

recommended that, instead of 

retrospective attribution, CMS should 

adopt a prospective approach that 

allows patients to volunteer to be part 

of the ACO and permits the ACOs to 

know up-front those beneficiaries for 

whom the ACO will be responsible. 

Another commenter recommended 

that beneficiaries should opt in to the 

ACO (as the MA program is currently 

administered) rather than retrospective 

assignment. The commenter noted our 

statement in the proposed rule that the 

‘‘successful creation of this relationship 

is not possible when beneficiaries are 

not aware of the new delivery system 

available through ACOs and the 

possibility of being included in the 

population assigned to an ACO.’’ 

Yet another commenter argued that, 

since Medicare beneficiaries must elect 

to participate in a MA organization, we 

should explain why we are not giving 

Medicare eneficiaries the option or the 

opportunity to elect to participate in the 

Shared Savings Program. The 

commenter believes that, by forcing 

Medicare beneficiaries into a shared 

savings program, the savings projected 

in the regulatory impact statement are 

unrealistic unless ACOs reduce care for 

their assigned Medicare beneficiaries. 

These arguments were cast primarily 

in terms of giving beneficiaries the 

maximum opportunity for free choice 

about their participation in the Shared 

Savings Program. (Some of these 

commenters also contended that 

adopting this policy would allow us to 

abandon the proposal restricting 

primary care physicians to participation 

in one ACO, which we adopted to 

prevent uncertainty in the assignment 

process.) 

Response: In the proposed rule, we 

emphasized that the term ‘‘assignment’’ 

for purposes of the Shared Savings 

Program in no way implies any limits, 

restrictions, or diminishment of the 

rights of Medicare FFS beneficiaries to 

exercise freedom of choice in the 

physicians and other health care 

practitioners from whom they receive 

their services. Rather, the statutory term 

‘‘assignment’’ in this context refers only 

to an operational process by which 

Medicare will determine whether a 

beneficiary has chosen to receive a 

sufficient level of the requisite primary 

care services from a specific ACO so 

that the ACO may be appropriately 

designated as being accountable for that 

beneficiary’s care. We also emphasized 

that the continued exercise of free 

choice by beneficiaries in selecting the 

physicians and other health care 

practitioners from whom they receive 

their services is a presupposition of the 

Shared Savings Program, in the sense 

that assignment would be based on each 

beneficiary’s exercise of free choice in 

seeking primary care services. 

We appreciate that those commenters 

advocating freedom for beneficiaries to 

opt out of assignment to an ACO, as 

well as those advocating that 

assignment actually be based on 

voluntary choice or enrollment by 

beneficiaries, are advancing these 

recommendations as means of extending 

the principles of beneficiary free choice 

that we enunciated in the proposed rule. 

However, we do not believe that ACO 

enrollment is an ‘‘appropriate method to 

assign Medicare fee-for-service 

beneficiaries to an ACO’’ as required by 

the statute because enrollment is a 

process that fits better in the context of 

MA, and the Shared Savings Program is 

certainly not intended to be a managed 

care program in a new guise. One 

important distinction between an ACO 

and many MA organizations is that 

beneficiaries are not locked into 

receiving services from the ACO to 

which they are assigned, and may 

continue to seek care from any provider 

they choose. Furthermore, the statute 

specifies that ‘‘the methodology for 

assigning Medicare FFS beneficiaries to 

an ACO’’ must be ‘‘based on their 

utilization of primary care services 

provided under this title’’ by physicians 

who are providers/suppliers in the 

ACO. A prospective approach that 

allows patients to volunteer to be part 

of the ACO would completely sever the 

connection between assignment and 

actual utilization of primary care 

services. A patient could volunteer to be 

part of an ACO from which he or she 

had received very few services or no 

services at all. An attempt could be 

made to mitigate this concern under a 

voluntary enrollment process for 

assignment by requiring that a 

beneficiary receive a minimum number 

or proportion of services from the ACO 

for the enrollment to be effective. But 

such measures would begin to transform 

a ‘‘voluntary’’ selection process into 

something more like the kind of 

statistical attribution model that we 

proposed and that most commenters 

endorsed (whether they preferred 

prospective or retrospective statistical 

attribution). Similarly, we do not 

believe it is necessary to provide an 

opportunity for a beneficiary to opt out 

of an ACO in order to preserve adequate 

beneficiary free choice. Beneficiaries 

remain free to seek services wherever 

they wish, and assignment results only 

from a beneficiary’s exercise of that free 

choice by seeking and receiving services 

from ACO providers/suppliers. We 

understand the concerns of the 

commenters that beneficiaries may 

prefer leaving existing relationships 

with their provider in order to avoid 

being subject to the ACO’s 

interventions. However, for the reasons 

we just stated, we do not believe that an 

enrollment mechanism or voluntary 

beneficiary ‘‘opt-in’’ would be 

appropriate. 

Comment: Some other commenters 

argued for certain restrictions on 

beneficiary free choice. Some of these 

commenters argued that beneficiaries 

who opt out of data sharing should also 

be excluded from the ACO, on the 

grounds that it would not be fair to hold 

ACOs accountable for the care of 

patients unwilling to share the data 

necessary for planning efficient and 

high quality care. Another asserted that 

we had proposed ‘‘the worst of both 

worlds for both the beneficiary and the 

providers,’’ because beneficiaries can 

opt-out of data-sharing but not the 

program, which would prevent 

providers from having sufficient 

information to properly care for and 

manage the beneficiaries. The 

commenter argued that the best 

approach would be to allow 

beneficiaries the opportunity to fully 

withdraw from the program without 

having to seek care from another 

provider; structuring an opt-out option 

that prevents both data-sharing and 

attribution of that beneficiary to an ACO 

while allowing them to continue 

seeking care from their usual providers. 

A commenter supported the patient’s 

freedom to choose a provider and hoped 

that patients always have such a right. 

However, the commenter also argued 

that holding an ACO accountable for 

financial results of a patient who 

expressly chooses not to participate in 

critical elements of quality and care 

coordination is in conflict with the very 

purpose of an ACO. The commenter 


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therefore recommended that the 

experience and data for a beneficiary 

should be deleted for the entire year 

when the beneficiary chooses to ‘‘opt 

out’’ of the critical and core process of 

information sharing for quality 

improvement and care coordination, 

and would not be brought back in until 

the beneficiary has exercised an ‘‘optin’’ process or meets the criteria for 

assignment to a different ACO. 

Other commenters argued that some 

restrictions on assigned beneficiaries 

seeking services outside the ACO may 

be necessary and appropriate in order 

for the ACO’s measures to provide more 

cost-efficient care to be effective. One 

commenter suggested that unrestricted 

beneficiary choice poses a tremendous 

impediment to successful ACO 

operation, and that, while significant 

restrictions on beneficiary behavior may 

be undesirable, providing ACOs with 

the ability to more carefully direct and 

manage the care of high-cost patients 

would be a significant improvement to 

the Shared Savings Program. 

Another commenter objected that 

ACOs may not discourage patients from 

seeking care outside an ACO, yet are 

financially liable for unmanageable 

patient behavior. The commenter 

recommended that ACOs should not be 

held responsible for unmanageable 

patient behavior unless the patients are 

restricted to using ACO-providers/ 

suppliers, and that there should be some 

acceptable incentives to keep 

beneficiaries in the ACO, such as 

preferred provider rates. 

Another commenter recommended 

adopting such restrictions along with 

establishing a ‘‘gatekeeper’’ model for 

ACOs, under which primary care 

physicians who are ACO providers/ 

suppliers in an ACO would be in a 

position to identify the Medicare 

beneficiaries in the ACO and effectively 

coordinate care with efficient healthcare 

providers that are as equally focused 

(and incentivized) on both quality and 

cost. Without this control, the 

commenter believes that it would be 

difficult to hold the PCP accountable for 

the quality and cost of services received 

by the beneficiary. 

Yet another commenter contended 

that ACOs need the ability to require or 

incentivize a patient to use ACO 

providers otherwise it will be nearly 

impossible to be held accountable for 

cost and quality of a population’s health 

care. And another commenter argued 

that an ‘‘any willing provider’’ approach 

would prevent ACOs from developing 

specialty care focused networks and 

limiting network participation to 

providers that meet specific quality 

standards and other criteria that ACOs 

may wish to establish, thus 

compromising their’ ability to meet cost 

and quality standards that qualify 

providers for shared savings. 

On the other hand, some commenters 

urged us to confirm and/or emphasize 

certain basic beneficiary rights, such as 

the right ‘‘to receive care outside the 

Medicare ACO at no penalty to the 

patient.’’ A nursing organization 

recommended clear and explicit 

language to reassure beneficiaries about 

the process [of opting out] and its pros 

and cons, and that there is no limit, 

penalty, or modification to their services 

by choosing to opt out. Another 

commenter urged that we seek a 

mechanism to measure whether patients 

in an ACO are restricted by physician 

influence not to seek care outside the 

ACO and that patients are receiving 

necessary care in a timely manner, 

expressing the concern that primary 

care providers may try to manage a 

patient’s condition and not 

appropriately refer the patient to a 

specialist because the potential higher 

cost of specialty care will potentially 

decrease the ACO’s chances of meeting 

CMS benchmarks and achieving shared 

savings. 

Another commenter strongly 

supported our decision to allow 

beneficiaries to seek care outside of the 

ACO if they desire. The commenter 

noted that this policy provides 

important reassurance to Medicare 

beneficiaries who can be wary of change 

and who may react negatively if they 

believe they are being ‘‘locked in’’ to a 

new system without their consent. 

Another commenter agreed that a 

beneficiary’s freedom to choose 

providers is especially critical to 

Medicare beneficiaries who have 

multiple chronic conditions or other 

complex medical conditions. 

Furthermore, the commenter 

recommended that we should confirm 

that beneficiaries will also have the 

freedom to seek care for particularly 

complex medical conditions or 

treatments from experienced providers 

at recognized centers of excellence. 

Response: We strongly believe that it 

would be inappropriate for the Shared 

Savings Program to incorporate features 

such as a beneficiary ‘‘lock-in’’ to 

providers within the ACO, automatic 

exclusion of certain types of 

beneficiaries, or similar measures 

advocated by some commenters. An 

essential element of what distinguishes 

the Shared Savings Program from a 

managed care program is precisely the 

absence of any ‘‘lock-in’’ restrictions 

and financial or other penalties for 

beneficiaries that seek services from the 

specialist physicians and other 

practitioners of their choice. 

Beneficiaries who are assigned to ACOs 

under the Shared Savings Program 

remain Medicare fee-for-service 

beneficiaries, retaining their full 

freedom of choice regarding where to 

receive services. We therefore take this 

opportunity, as requested by a number 

of commenters, to confirm and 

emphasize that basic beneficiary rights 

are maintained under the Shared 

Savings Program, most especially (but 

not exclusively) the right to receive care 

from physicians and other medical 

practitioners of their choice outside the 

ACO at no penalty to the patient. 

Comment: A commenter 

recommended that ACOs should have 

the option of excluding from assignment 

certain patients, such as those patients 

expected, based on the most recent 

historical claims data, to get a very high 

percentage of their care from nonprimary care physicians (the ‘‘specialtymanaged patient’’ factor), and those 

permanently relocating away from the 

ACO’s service area early in the contract 

period, for example before the sixmonth mark each year (the ‘‘former 

patient’’ factor). 

Another commenter recommended a 

number of exclusions from assignment 

to ACOs, including Medicare 

beneficiaries older than age 75, 

Medicare beneficiaries living in a 

skilled nursing home or a nursing home, 

Medicare beneficiaries that receive 

Medicare based on end-stage renal 

disease, and Medicare beneficiaries who 

are diagnosed with AIDS, Alzheimer’s, 

cancer, heart disease, or a similar 

diagnosis. 

A commenter recommended that 

dialysis patients should be excluded 

from assignment to an ACO, on the 

grounds that there is a strong likelihood 

that ACOs will not want to assume the 

responsibility for patients on dialysis or 

at a high risk for initiating dialysis or 

receiving a kidney transplant. The 

commenter believes that this may have 

a negative effect on kidney patients’ 

access to the most appropriate care, 

especially in regions with just one ACO, 

an ACO with the minimal number of 

beneficiaries, or with nominal provider 

diversity. The commenter thus urged 

that, to ensure patient access to, and the 

quality of, dialysis care and 

transplantation options are not 

compromised as a result of the ACO 

program, dialysis and transplant 

patients should not be included as ACO 

beneficiaries. 

Response: We believe that adopting 

restrictions or exclusions on 

beneficiaries with certain conditions or 

utilization patterns from assignment to 

ACOs under the Shared Savings 


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Program would be inappropriate. The 

purpose of the Shared Savings Program 

is to promote accountability for a 

patient population and coordination of 

items and services under Parts A and B 

and to encourage investment in 

infrastructure and redesigned care 

processes for high quality and efficient 

service delivery. Because beneficiaries 

with serious conditions may receive the 

greatest benefits from greater 

accountability, enhanced coordination, 

and redesigned care processes, the goals 

of the program would be undercut if 

these beneficiaries were excluded from 

the program. The statute itself requires 

that we monitor ACOs to prevent 

avoidance of ‘‘at risk’’ beneficiaries. 

Specifically, section 1899(d)(3) of the 

Act provides that: ‘‘[i]f the Secretary 

determines that an ACO has taken steps 

to avoid patients at risk in order to 

reduce the likelihood of increasing costs 

to the ACO the Secretary may impose an 

appropriate sanction on the ACO, 

including termination from the 

program.’’ The statute thus clearly 

assumes that beneficiaries with severe 

and chronic conditions that may 

increase costs will and should be 

included in beneficiary population 

assigned to an ACO. Otherwise, there 

would be no need to monitor whether 

ACOs have taken steps to avoid 

assignment of such beneficiaries to the 

ACO. 

Comment: One commenter objected 

that Medicare beneficiaries do not get to 

pick their primary care physicians, but 

are assigned to them a year after they 

begin participating in the ACO based on 

who they used in the past. The 

commenter therefore asked: ‘‘How is 

Medicare going to determine how to 

assign the beneficiaries without 

overloading one doctor more than 

others?’’ 

Response: Beneficiaries are assigned 

to ACOs on the basis of services they 

actually receive from physicians in an 

ACO during a performance year. 

Assignment thus presupposes 

beneficiary choice of the specific 

physician or physicians from whom 

they receive services. Beneficiaries are 

assigned to ACOs for the purposes of 

holding the ACO accountable for the 

quality and cost of care provided to the 

beneficiary. However, beneficiaries are 

not assigned to a particular physician, 

and remain free to seek care from any 

physicians they choose. Similarly, 

physicians are not required to accept 

patients beyond the limits on patient 

loads that they establish for their 

practices. Therefore, the operation of the 

Shared Savings Program in no way 

threatens to overload some doctors more 

than others. 

Comment: One commenter 

recommended against exclusive 

attribution of beneficiaries to only one 

ACO, on the grounds that it is likely that 

more than one ACO will provide 

services to a beneficiary during a 

performance year. The commenter 

recommended shared attribution with 

savings shared in proportion to the total 

billed services of each ACO. 

Response: Section 1899(c) of the 

statute refers to the assignment of 

‘‘Medicare fee-for-service beneficiaries 

to an ACO.’’ (Emphasis supplied.) 

Therefore it is not clear the statute 

would permit shared assignment and 

shared attribution of savings to more 

than one ACO. We also note that 

adopting this policy would create a 

degree of operational complexity for 

both the Medicare program and for 

participating ACOs that we do not 

believe to be acceptable, especially in 

the early stages of the program. 

Final Decision: Under § 425.400 of 

this final regulation, we are revising our 

proposed policy to provide for 

prospective assignment of beneficiaries 

to ACOs in a preliminary manner at the 

beginning of a performance year based 

on most recent data available. 

Assignment will be updated quarterly 

based on the most recent 12 months of 

data. Final assignment is determined 

after the end of each performance year 

based on data from that year. We are 

also finalizing our proposal that 

beneficiary assignment to an ACO is for 

purposes of determining the population 

of Medicare FFS beneficiaries for whose 

care the ACO is accountable, and for 

determining whether an ACO has 

achieved savings, and in no way 

diminishes or restricts the rights of 

beneficiaries assigned to an ACO to 

exercise free choice in determining 

where to receive health care services. 

Beneficiaries assigned to ACOs under 

the Shared Savings Program retain their 

full rights as Medicare fee-for-service 

beneficiaries to seek and receive 

services from the physicians and other 

medical practitioners of their choice. No 

exclusions or restrictions based on 

health conditions or similar factors will 

be applied in the assignment of 

Medicare FFS beneficiaries. We are also 

finalizing our proposal to determine 

assignment to an ACO under the Shared 

Savings Program based on a statistical 

determination of a beneficiary’s 

utilization of primary care services, 

rather than on a process of enrollment 

or ‘‘voluntary selection’’ by 

beneficiaries. The specific methodology 

(the ‘‘step-wise’’ approach) is described 

in § 425.402. In that methodology, we 

are also finalizing our proposal to assign 

beneficiaries to no more than one ACO. 

3. Majority vs. Plurality Rule for 

Beneficiary Assignment 

Section 1899(c) of the Act requires 

that Medicare FFS beneficiaries be 

assigned to ‘‘an ACO based on their 

utilization of primary care services’’ 

furnished by an ACO professional who 

is a physician, but it does not prescribe 

the methodology for such assignment, 

nor criteria on the level of primary care 

services utilization that should serve as 

the basis for such assignment. Rather, 

the statute requires the Secretary to 

‘‘determine an appropriate method to 

assign Medicare FFS beneficiaries to an 

ACO’’ on the basis of their primary care 

utilization. 

An obvious general approach would 

be to make such an assignment on the 

basis of some percentage level of the 

primary care services a beneficiary 

receives from an ACO physician. In the 

proposed rule, we considered the more 

specific issue of whether to assign 

beneficiaries to an ACO when they 

receive a plurality of their primary care 

services from that ACO, or to adopt a 

stricter standard under which a 

beneficiary will be assigned to an ACO 

only when he or she receives a majority 

of their primary care services from an 

ACO. 

Under the PGP demonstration 

beneficiaries were assigned to a practice 

based on the plurality rule. By 

employing a plurality standard for 

primary care services, our analysis 

indicates that between 78 and 88 

percent of the patients seen for primary 

care services at the PGP during the year 

were subsequently assigned to that PGP 

group. As measured by allowed charges 

(evaluation and management CPT 

codes), the PGP provided on average 95 

percent of all primary care services 

provided to the assigned patients. 

We proposed to assign beneficiaries 

for purposes of the Shared Savings 

Program to an ACO if they receive a 

plurality of their primary care services 

from primary care physicians within 

that ACO. We believed that the plurality 

rule would provide a sufficient standard 

for assignment because it would ensure 

that beneficiaries will be assigned to an 

ACO when they receive more primary 

care from that ACO than from any other 

provider. This would result in a greater 

number of beneficiaries assigned to 

ACOs, which could enhance the 

viability of the Shared Savings Program, 

especially in its initial years of 

operation. 

Comment: Some commenters 

addressed the specific issue of 

employing a plurality versus majority 

standard as the basis for beneficiary 

assignment. One individual maintained 


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(without elaboration) that deciding 

upon assignment of patients to ACOs on 

the basis of plurality rather than 

majority provider provision of services 

enhances the likelihood of financial 

penalties upon ACOs. A number of 

commenters recommended majority 

assignment in place of a plurality 

standard. One of these commenters 

contended that a plurality could lead to 

the undesirable consequence of 

accountability without responsibility 

whenever the percentage is less than the 

majority. The commenter noted that, by 

definition, a plurality is simply more 

than any other, and the proposed rule 

did not recommend any minimum 

percentage. Another commenter 

criticized our attribution proposal on 

the grounds that it would produce many 

patients who have very loose, if any, 

true connection to [an] ACO and its 

providers. The commenter 

recommended a majority standard as 

one of several measures to provide a 

stricter attribution standard that would 

only assign patients with relatively 

strong relationships to an ACO. Yet 

another commenter would revise and 

simplify the basis for assignment to be 

beneficiaries’ receipt of a majority of 

their primary care visits, stating that the 

experience in local markets is that buyin is greatest when providers are 

assured their population reflects the 

patients for whom they provide the 

most care and thus have maximum 

ability to affect through quality/ 

efficiency improvements. This, 

according to the commenter, also helps 

to ensure the payment model will 

accurately reward (or penalize) their 

success (or deficiencies) in caring for 

their assigned population. 

Some commenters expressed support 

for the plurality standard. One noted 

that using a plurality standard takes into 

account the variability in utilizing 

primary care physicians. Other 

commenters stated that a plurality 

standard was at least ‘‘workable’’ or 

‘‘acceptable.’’ However, some of the 

commenters who expressed support for 

a plurality standard also endorsed 

adopting a minimum threshold for 

assignment 

Response: We are finalizing our 

proposal to adopt a plurality rule as the 

basis for assignment. Adoption of a 

majority standard for assignment would 

necessarily result in the assignment of 

fewer beneficiaries to each ACO. 

Adopting a stricter majority standard 

would not be conducive to assignment 

of enough beneficiaries to ACOs for the 

Shared Savings Program to be viable or 

to make a contribution to improving 

quality and promoting more costeffective care for Medicare beneficiaries. 

We also believe it is in the best interest 

of the participating ACOs to have more 

beneficiaries assigned to promote 

statistical stability. Moreover, we 

believe that use of a plurality standard 

creates a greater incentive for ACOs to 

redesign care processes for all FFS 

beneficiaries that receive care from the 

ACO and promotes accountability for 

patients that might otherwise fall 

through the cracks because they would 

not meet a majority standard. Finally, it 

is reasonable for an entity that provides 

more of a beneficiary’s primary care 

than any other provider, to coordinate 

care for that beneficiary. 

Comment: Several commenters were 

concerned about assignment of 

beneficiaries that received care outside 

of a reasonable geographic distance from 

the ACO. For example, a number of 

commenters expressed concern about 

the impact of ‘‘snowbirds,’’ beneficiaries 

who spend parts of each year in 

different locations, under the plurality 

standard for assignment. One noted that 

assigning patients to an ACO based on 

the plurality of primary care services 

provided will result in ACOs being 

responsible for patients who spend a 

significant portion of the year residing 

outside of the ACO service area, and 

that there is already great difficulty in 

trying to coordinate care for patients 

who split their residence between two 

locations. A number of these 

commenters cited the exclusion of 

‘‘snowbirds’’ from MA plans as a 

precedent. 

Another commenter also advocated a 

list of exclusions from assignment, 

including a geographic exclusion, 

noting that, by limiting the distance that 

the beneficiary may reside from the 

ACO participants, ACOs are more likely 

to be assigned beneficiaries who are able 

to seek other types of care from the 

ACO. 

Similarly, a health care provider 

recommended that we should exclude 

beneficiaries who receive more than 50 

percent of their evaluation and 

management allowed charges in nonadjacent communities during the 

performance year. 

Response: With regard to the issues 

concerning ‘‘snowbirds,’’ beneficiaries 

who travel frequently, and similar 

situations, we believe that such 

situations pose a much smaller problem 

in the Shared Savings Program than 

they do in other programs, such as the 

MA program. This is because the 

assignment methodology under the 

Shared Savings Program is essentially 

self-correcting for the effects of seasonal 

migrations and extensive travel, since it 

directly reflects where a beneficiary 

receives the plurality of his or her 

primary care services. A beneficiary 

who travels or resides in more than one 

location will not be assigned to an ACO 

unless he or she receives the plurality 

of primary care from that ACO. 

Furthermore, one reason for the 

exclusion of ‘‘snowbirds’’ from MA 

plans is that beneficiaries who make 

seasonal migrations cannot adhere to 

the network arrangements that are an 

intrinsic feature of managed care. The 

ACO model does not include the use of 

networks or any restrictions on where 

beneficiaries can receive care. It is true 

that ‘‘snowbirds’’ may be assigned to an 

ACO on the basis of receiving a plurality 

of primary care in one location, and that 

ACO will still be responsible for costs 

related to care in the alternate location. 

However, any beneficiary assigned to an 

ACO remains free to receive substantial 

amounts of care outside the ACO, even 

if they remain year-round within the 

geographical area of the ACO, and for 

reasons we have already discussed, we 

do not believe that it is appropriate to 

adopt restrictions and exclusions that 

hinder beneficiary freedom to choose 

where to receive care. We believe that 

this principle applies equally to the 

issue of seasonal migration 

(‘‘snowbirds’’) and other issues of 

geography (for example, distance from 

an ACO) that commenters raised. 

Therefore, we do not believe that it is 

appropriate to adopt restrictions or 

exclusions on assignment to account for 

seasonal migration or any other 

geographical factor in the Shared 

Savings Program 

Comment: A CAH requested a very 

different assignment methodology, 

specifically, that all the beneficiaries in 

their service area be assigned to their 

rural ACO. The commenter explained 

that, if we were not to allow this model, 

rural patients would be unable to be 

properly assigned to an ACO, and the 

CAH would have to join other rural 

providers to meet the 5,000 beneficiary 

requirement. 

Response: We believe that this 

suggestion is incompatible with the 

statute, which requires that assignment 

be based on the utilization of primary 

care services from a physician who is a 

provider/supplier in an ACO, not the 

location of beneficiaries within the area 

served by an ACO. 

Comment: A number of commenters 

recommended establishing a minimum 

threshold of primary care services for 

assignment to prevent providers from 

being evaluated on beneficiaries for 

whom they provide limited services and 

thus have limited opportunities to 

influence care or coordination. Other 

commenters supported a two-visit 

threshold as the minimum for 


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beneficiary assignment. Several major 

medical institutions recommended that 

we establish a threshold of at least three 

visits which would provide more 

assurance of continuity with the ACO 

and more patients who have continuing 

needs. A medical association urged that 

there must be a floor to the plurality of 

primary care charges used for that 

assignment, recommending a floor of 20 

percent—meaning that unless the ACO 

is responsible for at least 20 percent of 

a patient’s primary care charges, that 

patient would not be assigned to any 

ACO. Another commenter 

recommended 25 percent. Yet another 

commenter advocated a minimum 

percentage between thirty and forty. 

And still another recommended 50 

percent of primary care visits. 

MedPAC discussed the possibility of 

establishing a 10 percent threshold 

(citing the Pioneer ACO demonstration 

threshold of 10 percent or less of E&M 

charges) in the course of endorsing the 

step-wise method of assigning 

beneficiaries: ‘‘we would prefer the 

step-wise option which assigns 

beneficiaries first to primary care 

physicians if possible and then to 

certain specialty physicians if the share 

of evaluation and management visits (or 

charges) to primary care physicians falls 

below a threshold value. (The Pioneer 

ACO demonstration sets the threshold 

as 10 percent or less of E&M charges.)’’ 

Response: In this final rule, we have 

decided not to adopt a threshold for 

assignment for reasons similar to those 

which motivated our decision to 

maintain a plurality standard for 

assignment. Adoption of a threshold, 

like adoption of a majority standard for 

assignment, would necessarily result in 

the assignment of fewer beneficiaries to 

ACOs generally and to each ACO in 

particular. We believe it is in the general 

interest of the Shared Savings Program, 

and in the best interest of each ACO, to 

have more beneficiaries assigned to 

promote statistical stability. Moreover, 

we believe that use of a plurality 

standard without a threshold creates a 

greater incentive for ACOs to redesign 

care processes for all FFS beneficiaries 

that receive care from the ACO, and 

thus promotes accountability for 

patients that may fall through the cracks 

because they fail to meet a minimum 

threshold. 

Finally, in the proposed rule we 

considered the issue of how to 

determine when a beneficiary has 

received a plurality of primary care 

services from an ACO. We noted the 

plurality could be determined either on 

the basis of a simple service count or on 

the basis of the accumulated allowed 

charges for the services delivered. The 

method of using a plurality of allowed 

charges for primary care services would 

provide a greater weight to more 

complex primary care services in the 

assignment methodology, while a 

simple service count method would 

weigh all primary care encounters 

equally in determining assignment. We 

have previous experience with the 

method of using a plurality of allowed 

charges in the PGP demonstration. One 

advantage of this method is that it 

would have less need for tie-breaker 

rules, since it is unlikely that allowed 

charges by two different entities would 

be equal. On the other hand, this 

method does not necessarily assign the 

beneficiary to the entity that saw the 

patient most frequently, but rather to the 

entity that provided the highest 

complexity and intensity of primary 

care services. 

We proposed to implement the 

method of using a plurality of allowed 

charges for primary care services to 

assign beneficiaries to ACOs. Allowed 

charges are a reasonable proxy for the 

resource use of the underlying primary 

care services, so the method of using a 

plurality of allowed charges assigns 

beneficiaries to ACOs according to the 

intensity of their primary care 

interactions, not merely the frequency of 

such services. 

Comment: One commenter expressed 

concern that the method for determining 

from which primary care provider a 

patient received the ‘‘plurality of care’’ 

is problematic because it is measured by 

the ‘‘sum of allowed charges.’’ The 

commenter argued that this will tend to 

reward providers who may be paid more 

for the same service and providers who 

tend to provide higher priced 

procedures, and that while this does 

give the provider who generated the 

most costs the responsibility for 

containing costs, it may skew things if, 

for example, a patient gets one high cost 

procedure from one provider and the 

majority of their primary care 

somewhere else. The single procedure 

provider would generally be less able to 

improve care coordination and manage 

costs with respect to that patient than 

the ‘‘regular’’ provider. 

Another commenter suggested that we 

modify the methodology for beneficiary 

assignment from plurality of allowed 

charges to number of encounters by a 

provider. ‘‘If one of the goals of the 

Shared Savings Program is to achieve a 

healthier population, the greater the 

number of encounters, regardless of the 

allowed charges or the physician’s 

specialty, provides increased 

opportunities to educate and impact the 

patient and influence his/her behavior.’’ 

Another commenter also advocated 

using a visit-based standard to assessing 

majority, instead of the proposed 

allowed-charges approach. This 

commenter emphasized that the charges 

standard would skew patient attribution 

based on the illness severity of the 

patients. Another commenter cited the 

frequency of upcoding as a basis for 

using visit counts rather than charges. 

Another commenter objected that we 

seem to believe that charges are 

reasonable proxy for the resource use of 

the underlying primary care service. 

The commenter argued that the 

potential downside of using charges is 

that it may entrench the overutilization 

or up-coding that we otherwise wish to 

avoid. The commenter thus suggested 

that ‘‘a more balanced approach’’ could 

be the use of the plurality of visits 

combined with an adjustment factor to 

reflect intensity. 

A nursing association recommended, 

in conjunction with its proposal to 

count the services of NPs in the 

assignment process, an alternative to 

employing allowed charges as the basis 

for assignment. The commenter noted 

that, if non physicians such as NPs and 

PAs were to be included in the 

assignment process, they would be at a 

disadvantage if allowed charges are the 

basis for assignment. They explained: 

‘‘The problem here lies in the 

mandatory discount applied to 

approved charges from NPs and CNSs. 

Their approved charges for primary care 

services are set at 85 percent of the 

Medicare Physician Fee Schedule 

amount. This discounting of APRN 

primary care services can tip the 

balance as to whether the beneficiary is 

assigned to an ACO where he or she 

may have received primary care services 

from the ACO’s primary care physicians 

but in lesser amounts than provided by 

the advanced practice registered nurse. 

Our preferred remedy in this case would 

be to follow the recommendations of the 

Chair of the IOM Study on the Future 

of Nursing and pay according to the 

value of the service rather than the 

specialty of the provider. Failing that, 

ACO assignment should be based on the 

plurality of the work RVUs associated 

with primary care services.’’ 

Response: We considered most of the 

alternatives to the use of allowed 

charges in developing our proposal. We 

agree that the method of using a 

plurality of allowed charges would 

provide a greater weight to more 

complex primary care services in the 

assignment methodology, while a 

simple service method count would 

weigh all primary care encounters 

equally in determining assignment. 

However, we do not believe that a 

method of using allowed charges is 


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inappropriate. Although this method 

does not necessarily assign the 

beneficiary to the entity that saw the 

patient most frequently, the beneficiary 

will be assigned to the entity that 

provided the highest complexity and 

intensity of primary care services. This 

method also results in the assignment of 

the responsibility for containing costs to 

the provider who generates the most 

costs. Our previous experience with the 

PGP demonstration demonstrated an 

advantage of this method is that it does 

not require tie-breaker rules, since it is 

unlikely that allowed charges by two 

different entities would be equal. 

Assignment of beneficiaries on the basis 

of plurality in a simple service method 

count would require tie-breaker rules for 

those rare occasions when two or more 

entities delivered an equal number of 

services to a beneficiary. 

We considered the nursing 

association’s recommendation that we 

use RVUs rather than charges. Use of 

RVUs in place of allowed charges would 

retain many of the benefits of employing 

charges (for example, reduced need for 

a tie-breaker) while correcting for the 

effects of some factors in allowed 

charges that arguably should not affect 

assignment (for example, the 

application of GPCI values to the 

physician fee schedule payments). 

However, it is unclear whether it would 

be possible and how to include FQHC/ 

RHC services in the assignment process 

if we were to base assignment on RVUs 

for specific HCPCS codes rather than 

allowed charges since, as discussed 

previously, we have not required that 

RHCs include HCPCS codes on their 

claims, and FQHCs have been required 

to report HCPCS codes only since 

January 1, 2012. Moreover, the use of 

allowed charges has resulted in 

satisfactory assignment results under 

the PGP demonstration. Therefore, we 

will retain this proven method of using 

allowed charges. We note that for 

purposes of the Shared Savings 

Program, allowed charges for FQHC/ 

RHC services will be based on the 

interim payments, since any subsequent 

adjustments following settlement of 

their cost reports would not be available 

in time for assignment purposes. We 

will continue to consider the alternative 

of using RVUs as we gain experience 

under the Shared Savings Program. 

Comment: Several commenters 

expressed concern about potential 

unintended consequences of the 

plurality rule, specifically consequences 

related to care coordination and 

manipulation of Medicare beneficiary 

attribution, particularly for beneficiaries 

who require SNF or NF care during the 

attribution time period. These 

commenters noted that similar concerns 

were raised in the Medicare Advanced 

Primary Care Practice Demonstration. 

As a result, they recommend that CMS 

monitor the plurality rule to ensure that 

it does not adversely impact patient care 

coordination or encourage ACO gaming 

of Medicare beneficiary attribution in 

the SNF or NF setting. 

Response: We appreciate the 

commenters’ recommendation, and we 

will certainly monitor the impact of the 

plurality rule to ensure that it does not 

adversely impact patient care 

coordination or encourage ACO gaming 

in any way. We discuss our monitoring 

plans in detail in section II.H. of this 

final rule. 

Comment: One commenter had a 

technical comment about the plurality 

formula in the regulations text: ‘‘Section 

425.6(b) of the regulations provides the 

technical details of the assignment 

methodology in five steps. We have the 

following comments on the technical 

description: Step (3) calculates a single 

number—the total allowed charge for 

primary care services—for each 

beneficiary. The rule should clarify 

whether the intention for the plurality 

test is to calculate total allowed charges 

for each non-ACO provider or in 

aggregate for all non-ACO providers. 

Step (5) includes a plurality test but 

only references Step (4), which does not 

include non-ACO providers. Based on 

the rule, it appears that non-ACO 

providers are intended to be considered 

in the plurality test. Step (5), therefore, 

also should reference the total allowed 

charges for non-ACO providers in the 

plurality test.’’ 

Another commenter noted that we 

proposed to assign beneficiaries to an 

ACO if they receive a plurality of their 

primary care services from primary care 

physicians within an ACO. In this 

formula, primary care services provided 

by specialists would be included in the 

total primary care services for the 

beneficiary, but would not be included 

in the count of the primary care services 

the beneficiary receives from an ACO. 

The commenter recommended that we 

should compare the primary care 

services beneficiaries receive from an 

ACO’s primary care physicians only to 

the total primary care services 

beneficiaries receive from primary care 

providers, thereby excluding primary 

care services provided by specialists 

from the denominator in the plurality 

calculation. 

Response: We agree with the first 

commenter that the regulations text 

needs to be revised to reflect the 

intention for the plurality test to 

calculate total allowed charges for each 

non-ACO provider for purposes of 

determining where the beneficiary 

received the plurality of his or her 

primary care services. In addition, we 

believe that our decision to include 

specialists in the assignment 

methodology by way of a step-wise 

process addresses the commenters’ 

questions regarding whether primary 

care services furnished by specialists 

should be included in the computation 

of the plurality of allowed charges for 

primary care services. 

Final Decision: In § 425.402, we are 

finalizing our proposal to adopt a 

plurality of primary care services, 

defined in terms of allowed charges, as 

the basis for assignment. However, we 

are modifying the way in which we will 

calculate that plurality in order to apply 

it in the two-step assignment process, as 

described previously. 

F. Quality and Other Reporting 

Requirements 

1. Introduction 

In this section of the final rule, we 

discuss: Measures to assess the quality 

of care furnished by an ACO; 

requirements for data submission by 

ACOs; quality performance standards; 

the incorporation of reporting 

requirements under section 1848 of the 

Act for the Physician Quality Reporting 

System; and aligning ACO quality 

measures with other laws and 

regulations. 

2. Measures To Assess the Quality of 

Care Furnished by an ACO 

a. General 

Section 1899(b)(3)(A) of the Act 

requires the Secretary to determine 

appropriate measures to assess the 

quality of care furnished by the ACO, 

such as measures of clinical processes 

and outcomes; patient, and, wherever 

practicable, caregiver experience of care; 

and utilization (such as rates of hospital 

admission for ambulatory sensitive 

conditions). Section 1899(b)(3)(B) of the 

Act requires ACOs to submit data in a 

form and manner specified by the 

Secretary on measures that the Secretary 

determines necessary for the ACO to 

report in order to evaluate the quality of 

care furnished by the ACO. In the 

proposed rule, we indicated that we 

believe that the Secretary’s authority to 

determine the form and manner of data 

submission allows for establishing 

requirements for submission of data on 

measures the Secretary determines to be 

appropriate for evaluating the quality of 

care furnished by the ACO, without 

regard to whether the Secretary has 

established a specific quality 

performance standard with respect to 


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those measures that must be met in 

order to be eligible for shared savings. 

We proposed that an ACO be 

considered to have met the quality 

performance standard if it has reported 

quality measures and met the applicable 

performance criteria in accordance with 

the requirements detailed in rulemaking 

for each of the 3 performance years. We 

further proposed to define the quality 

performance standard at the reporting 

level for the first year of the Shared 

Savings Program and to define it based 

on measure scores in subsequent 

program years. We proposed the use of 

65 measures to establish quality 

performance standards that ACOs must 

meet in order to be eligible for shared 

savings for the first performance period 

(76 FR 19571). We stated that quality 

measures for the remaining 2 years of 

the 3-year agreement would be proposed 

in future rulemaking. 

Comment: While some commenters 

supported the 65 measures proposed 

without modification, the majority 

recommended that we adopt fewer, 

validated measures aligned with the 

three-part aim and currently in use in 

order to encourage participation, reduce 

reporting burden, and achieve more 

focused and meaningful improvements, 

particularly in the first agreement 

period. Commenters suggested paring 

down the number of quality measures in 

a number of ways, such as by using a 

more simplified framework and limiting 

measures to: A specific number; those 

that can be reported via a specific 

methodology such as claims; those 

currently reported through another 

program; only some of the proposed 

domains; outcomes measures; those 

related to the most prevalent and costly 

health conditions; or eliminating the 

measures that involve beneficiary 

compliance. Another commenter 

recommended having a ‘‘performance 

set’’ of measures that includes outcomeoriented, claims-based measures 

focused on utilization to determine 

eligibility for payment, and a ‘‘reporting 

set of measures’’ used for monitoring 

purposes only. A few commenters 

supported the number of measures 

proposed but were concerned about 

reporting burden. Another commenter 

noted that the proposed measure set 

may not be feasible initially but should 

be in the future, as it is in other sectors. 

Response: We considered the 

commenters’ recommendations 

carefully when determining the 33 final, 

required quality measures, which will 

be scored as 23 measures as discussed 

in section II.F.4. of this final rule. We 

are sensitive to the concerns raised by 

commenters regarding the 

administrative burden of the proposed 

measures, and we have modified our 

proposal by reducing the number of 

required measures by removing 

measures perceived as redundant, 

operationally complex, or burdensome 

and retaining those that would still 

demand a high standard of ACO quality, 

focus on priority areas and are areas of 

high prevalence and high cost in the 

Medicare population. We have also 

sought to finalize proposed measures or 

variations of proposed measures that 

align with the measures used in other 

quality programs and initiatives. We 

have also made certain adjustments to 

our proposed measures to align with 

updates in the measures, such as the 

retirement of certain measures. Further 

detail on the reasoning behind finalizing 

or removing specific measures is 

discussed in section II.F.2.c of this final 

rule. 

Comment: Several commenters 

expressed concern about unintended 

negative consequences related to the 

quality measures and patients’ role in 

improving quality of care outcomes. A 

number of commenters were concerned 

that ACOs might skimp or delay in 

providing specialty care, particularly 

high cost services or those not available 

within the ACO. Several commenters 

suggested a wider choice of measures 

for major illnesses in order to avoid 

underutilization. Another commenter 

was concerned that providers would 

treat patients based on the measures 

rather than on patients’ needs. Several 

commenters were concerned that 

measures would track how many 

services are provided rather than how 

well care is provided. 

One commenter suggested CMS 

consider patients’ responsibility, and 

another commenter noted the proposed 

measures make providers accountable 

for patient decisions. One commenter 

suggested CMS add measures or 

program requirements that encourage 

ACOs to promote patient accountability 

for health and wellness. A few 

commenters suggested the proposed 

measures were not those that would 

have the greatest impact on quality or 

address the urgent need to evaluate the 

efficient use of healthcare resources. 

One commenter recommended that 

measures focus on misuse and overuse 

as much as underuse and suggested 

targeting the areas for misuse identified 

by the National Priorities Partnership. 

Response: In addition to measuring 

quality for performance purposes, we 

also intend to monitor the quality of 

care furnished by ACOs in an effort to 

identify patterns of avoiding at-risk 

beneficiaries and misuse, underuse, and 

overuse of services over time. We will 

use data that we can calculate internally 

without requiring additional ACO 

reporting, such as claims and 

administrative data, to conduct this 

monitoring. Further information about 

program monitoring is addressed in 

section II.H of this final rule. 

b. Considerations in Selecting Measures 

We view value-based purchasing as 

an important step towards revamping 

how care and services are paid for, 

moving increasingly toward rewarding 

better value, outcomes, and innovations 

instead of volume. The Shared Savings 

Program is a critical element of our 

Medicare value-based purchasing 

initiative, in which we have sought to 

meet certain common goals, as 

described in the proposed rule (76 FR 

19569). 

Comment: Numerous commenters 

endorsed focusing measures around the 

three-part aim of better care, better 

health, and lower costs; some suggested 

that the proposed measures could go 

further in this regard. One commenter 

stated that the quality measures 

sufficiently address the care and 

improving health aims but do not 

address the reducing costs aim. Another 

commenter stated the proposed 

measures will add cost to providers and 

will not produce savings. Commenters 

also supported using tested, evidencebased and endorsed measures, and a 

number of commenters suggested that 

measures should: Be meaningful, 

improve patient outcomes, rely on 

clinically enriched administrative 

measures already in use and be 

consistent with measures used in other 

public programs, such as the PQRS, 

Electronic Health Record (EHR) 

Incentive Program, Medicare Advantage 

(MA), Hospital Value-Based Purchasing 

(HVBP), the Inpatient Prospective 

Payment System (IPPS), and others. 

Commenters also suggested a number of 

different measurement sets. One 

commenter was concerned that quality 

of care for individuals and populations 

are not genuine top priorities of the 

Shared Savings Program, since the 

proposed rule included only quality 

measures that cover the same patient 

populations, processes, and outcomes 

that are already addressed by existing 

measures used in other programs. A few 

commenters proposed only using PQRS 

measures initially. Many commenters 

suggested using only NQF-endorsed 

measures, while others asked that CMS 

not limit itself to NQF-measures. 

Response: We agree that the quality 

measures should be tested, evidencebased, target conditions of high cost and 

high prevalence in the Medicare 

population, reflect priorities of the 

National Quality Strategy, address the 


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continuum of care to reflect the 

accountability that ACOs accept for 

their patient populations, and align with 

existing quality programs and valuebased purchasing initiatives. At this 

time, we have concluded that it is most 

appropriate to focus on quality 

measures that directly assess the overall 

quality of care furnished to 

beneficiaries. We are adopting a 

measurement set that includes patient 

experience, outcomes, and evidencebased care processes. That said, we do 

not agree that specific measures 

addressing high cost services or 

utilization are necessary to incentivize 

ACOs to address these issues. We 

believe that the goal of lower cost 

growth will be achieved through 

improved coordination and quality and 

that the potential for shared savings will 

offer a sufficient incentive for ACOs to 

address utilization issues in a way that 

is most appropriate to their 

organization, patient population, and 

local healthcare environment. However, 

we may consider such measures in the 

future. Accordingly, the measures we 

are finalizing include a subset of the 

proposed measures that address the 

populations, processes, and outcomes 

that were the focus in the proposed rule. 

In the proposed rule, we stated that 

our principal goal in selecting quality 

measures for ACOs was to identify 

measures of success in the delivery of 

high-quality health care at the 

individual and population levels. We 

considered a broad array of process and 

outcome measures and accounted for a 

variety of factors, prioritizing certain 

measures according to principles 

described in the proposed rule. (76 FR 

19569) We believe endorsed measures 

have been tested, validated, and 

clinically accepted and have therefore 

selected the final measures with a 

preference for NQF-endorsed measures. 

However, the Act does not limit the 

Shared Savings Program to endorsed 

measures. As a result we have also 

exercised our discretion to include 

certain measures that we believe to be 

high impact but that are not currently 

endorsed. 

c. Quality Measures for Use in 

Establishing Quality Performance 

Standards That ACOs Must Meet for 

Shared Savings 

Based upon the principles described 

previously, we proposed 65 measures 

(76 FR 19571) for use in the calculation 

of the ACO Quality Performance 

Standard. We proposed that ACOs 

would submit data on these measures 

using the process described in the 

proposed rule and meet defined quality 

performance thresholds. We proposed 

that ACOs would be required to report 

quality measures and meet applicable 

performance criteria, as defined in 

rulemaking, for all years within the 

agreement period to be considered as 

having met the quality performance 

standard. Specifically, for the first year 

of the program, we proposed for the 

quality performance standard to be at 

the level of full and accurate measures 

reporting; for subsequent years, we 

proposed the quality performance 

standard would be based on a measures 

scale with a minimum attainment level. 

We proposed that ACOs that do not 

meet the quality performance thresholds 

for all measures would not be eligible 

for shared savings, regardless of how 

much per capita costs were reduced, 

which is discussed further in section 

II.F.4.b.2. of this final rule. 

Comment: One commenter requested 

clarification on whether care provided 

outside the ACO would count toward 

the ACO’s quality metrics. One 

commenter recommended we require 

measures reporting for all patients seen 

by the ACO, not just those assigned in 

order to simplify the reporting process 

and spur improvement across the ACO’s 

entire patient population. 

Response: Since ACOs will be 

accountable for all care received by their 

assigned beneficiary population, quality 

measures will reflect the care assigned 

beneficiaries receive from ACO 

providers and non-ACO providers. We 

will utilize claims data submitted by the 

ACO providers/suppliers as well as 

from providers outside the ACO in 

determining measure numerators and 

denominators. 

Comment: A few commenters asked 

CMS to clarify whether the reporting 

performance standard would be 

applicable to ACOs only during the first 

year of the Medicare Shared Savings 

Program (that is, 2012) or for the first 

year of the ACO’s agreement period and 

how this would affect a mid-year start 

date, if CMS decides to incorporate one. 

One of these commenters supported 

defining the quality performance 

standard at the reporting level for the 

first year of an ACO agreement period, 

regardless of whether this timeframe 

coincides with the calendar year. 

Response: In this final rule, we have 

finalized first year start dates for ACO 

participants in April and July of 2012, 

but not for January 2012, as discussed 

in section II.C.1. of this final rule. We 

have also outlined a performance 

standard for each 12-month, calendar 

year quality measure reporting period. 

We indicated that ACOs requesting an 

interim payment calculation as 

described in section II.G.2.k of this final 

rule must completely and accurately 

report the ACO GPRO measures for 

2012. We indicated that the final 

performance year 1 reconciliation for 

the first agreement period would be 

based on completely and accurately 

reporting all ACO quality measures— 

ACO GPRO, CAHPS and claims- and 

administrative-based measures—for CY 

2013. Recognizing that ACOs’ first 

performance year will be 18 to 21 

months and carry from 2012 into 2013 

if they start in the Shared Savings 

Program in April or July 2012, ACOs 

will need to comply with annual 

measures specifications updates 

detailed in subregulatory guidance. 

While we anticipate a relatively static 

set of quality measures for the first 

agreement period, ACOs will also be 

required to comply with any measures 

updates made in future rulemaking as 

clinical guidelines change and as other 

programs update their measure 

requirements. For instance, the EHR 

Incentive Program will release clinical 

quality measure requirements for Stage 

2 Meaningful Use, and we believe it is 

advantageous and more efficient for the 

provider community if we can align 

measures across programs. It may also 

be necessary to add or remove measures 

from the Shared Savings Program as 

CMS gains experience with ACOs and 

develops a better understanding of the 

types of measures that are most 

important to assess the quality of care 

furnished by this new type of entity. 

Quality measures requirements for each 

performance year are discussed in 

Tables 1 and 2 as well as in section 

II.F.4 of this final rule. 

ACOs that enter into an agreement 

period beginning in 2013 or subsequent 

years will be subject to the same rules 

unless they are revised in future 

rulemaking cycles. That is, absent some 

change to our policies, the quality 

performance standard for an ACO’s first 

performance year will be set at the level 

of complete and accurate measures 

reporting. We expect that the measures 

we are finalizing will be maintained in 

the early years of the program as both 

ACOs and CMS develop infrastructure 

and gain experience with the program. 

We believe having one quality 

performance standard and set of 

measures for all ACOs will make for 

better longitudinal comparisons and be 

operationally more feasible and less 

burdensome. 

In the proposed quality measures 

table (76 FR 19571), we categorized each 

of the measures into the goals of better 

care for individuals and better health for 

populations and included: The domain 

each of the proposed measures 

addresses, the measure title, a brief 

description of the data the measure 


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captures, applicable PQRS or EHR 

Incentive Program information, the 

measure steward or, if applicable, NQF 

measure number, the proposed method 

of data submission for each measure, 

and information on whether the quality 

performance standard for each measure 

is defined at the reporting or 

performance level for each year of the 

agreement period. We noted that while 

many of the proposed measures have 

NQF endorsement or are currently used 

in other CMS quality programs, the 

specifications for some of the proposed 

measures would need to be refined in 

order to be applicable to an ACO 

population. However, we proposed to 

align the quality measures specifications 

for the Shared Savings Program with the 

measures specifications used in our 

existing quality programs to the extent 

possible and appropriate for purposes of 

the Shared Savings Program. We also 

stated that we planned to make the 

specifications for the proposed 

measures available on our Web site 

prior to the start of the Shared Savings 

Program. We also acknowledged that we 

would expect to refine and expand the 

ACO quality measures in the future and 

expand measures reporting mechanisms 

to include those that are directly EHRbased. Specifically, we expect to expand 

the measures to include other highly 

prevalent conditions and areas of 

interest, such as frailty, mental health, 

substance abuse, including alcohol 

screening, as well as measures of 

caregiver experience. Finally, we also 

sought comment on a process for 

retiring or adjusting the weights of 

domains, modules, or measures over 

time. 

We received the following comments 

about the proposed measures in general. 

Comment: Many commenters 

expressed concern that few proposed 

measures were focused on outcomes as 

opposed to processes. One commenter 

who supported outcome measures wrote 

that a 3-year agreement period was too 

short to allow accurate outcomes 

assessment across diagnoses and 

expressed concern that the expectation 

that outcomes could be altered in this 

time frame might encourage 

gamesmanship and manipulation of 

data by ACOs. 

Response: In selecting the final set of 

measures, we have sought to include 

both process and outcome measures, 

including patient experience of care. 

Process measures are typically easier to 

calculate based on administrative data, 

such as claims, and would require less 

reporting effort by ACOs, while 

outcomes measures would provide a 

more complete picture of quality of care 

improvement but would require more 

ACO reporting effort, such as GPRO 

measures that tend to rely on a 

combination of both claims and clinical 

quality data. Since ACOs are charged 

with improving and coordinating care 

and delivering high quality care but also 

need time to form and ramp up, we 

believe it is important to start with a 

combination of both process and 

outcomes measures, but may move to 

more outcomes-based measures and 

fewer process measures over time. We 

have modified our proposed domain 

structure in this final rule by combining 

the care coordination and patient safety 

domains to better align with other CMS 

value-based purchasing initiatives and 

the National Quality Strategy and to 

emphasize the importance of 

ambulatory patient safety and care 

coordination. In addition, we are 

moving certain proposed claims-based 

measures, such as inpatient safety 

measures and ambulatory care sensitive 

condition (ACSC) admissions measures, 

to our monitoring program to prevent 

ACOs from engaging in gamesmanship 

and manipulation of at-risk patients. 

Comment: Many commenters 

suggested adopting a risk-adjustment 

strategy for measures that would 

account for beneficiary characteristics 

such as: geographic location, body mass 

index, socioeconomic status, education, 

severity or type of illness, race, 

ethnicity, gender, preferred language, 

disability status, or health literacy. One 

commenter recommended risk-adjusting 

outcomes measures in addition to 

process and patient experience 

measures. One of the commenters also 

noted that our proposed measure set 

provided no incentive for more accurate 

coding and failed to recognize that an 

aging population’s health status is 

expected to deteriorate over time, not 

remain stable. One commenter was 

concerned about factors outside of an 

ACO may affect an ACO’s quality 

measure performance, such as the 

patient’s right to decide whether he or 

she will follow recommendations of 

health care professionals. One 

commenter requested clarification on 

how CMS will apply risk-adjustments 

when calculating ACO performance on 

specific quality measures. 

Response: Risk adjustment is 

included for a number of the proposed 

measures, such as the ACSC measures, 

but is generally limited to age and 

gender. In addition, some measures 

include specific exclusions for patients, 

such as those in hospice, who may not 

benefit from an action targeted by the 

measure. Risk adjustment would also be 

used in the Risk-Standardized, All 

Condition Readmission measure, the 

details of which would be forthcoming 

in subregulatory guidance. We believe 

that our linkage of payment to accurate 

reporting requirements provides a 

strong incentive for complete and 

accurate reporting, since the quality 

performance standard must be met in 

order for an ACO to be considered 

eligible for shared savings. As discussed 

in section II.H.2. of this final rule, we 

may audit the quality measures data 

ACOs enter into the GPRO web interface 

by requiring the ACO to share 

beneficiary medical record information 

with CMS. As discussed in II.B. of this 

final rule, ACOs will also have to agree, 

as a condition of receiving any shared 

savings and participating in the 

program, that the quality data they 

submit to CMS is accurate, complete, 

and truthful. We believe that including 

a process to audit quality measures data 

and a certification requirement provides 

ACOs with an incentive to more 

accurately report quality measure data. 

In addition, we agree that the personal 

preferences of beneficiaries play an 

important role in their health behaviors. 

However, the lack of patient adherence 

may also represent a legitimate 

dimension of care, as it could be 

indicative of poor communication 

between ACO providers/suppliers and 

their patients. Beneficiary incentives are 

discussed further in section II.B. of this 

final rule. 

We also received a number of 

comments on the specific measures 

proposed. We received the following 

comments on proposed measures 1–7: 

Patient/Caregiver Experience. 

Comment: A number of commenters 

supported a prominent role for patient 

experience and health status in the 

measure set. One commenter applauded 

the inclusion of a measure on shared 

decision making while another 

advocated for additional shared 

decision making measures. One 

commenter was supportive of including 

measures of caregiver as well as patient 

experience. One commenter noted the 

importance of patient experience of care 

but cautioned that such measures are 

subjective, and do not always accurately 

measure the quality of care furnished 

and that ACO marketing materials could 

influence beneficiary responses. 

Response: While we recognize the 

concern about patient subjectivity to 

surveys, we believe patients’ perception 

of their care experience reflects 

important aspects of the quality of the 

care they receive, such as 

communication and patient engagement 

in decision-making, that are not 

adequately captured by other measures. 

As such, patient surveys are important 

complements to the other process of 

care and outcomes measures. For the 


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same reason, we intend to expand the 

quality measures over time to include 

more caregiver experience measures. In 

addition, we intend to retain some level 

of ACO marketing oversight, as 

discussed in section II.H.2 of this final 

rule, and will refine our processes over 

time as appropriate. 

Comment: Many commenters 

supported using Consumer Assessment 

of Healthcare Providers and Systems 

(CG–CAHPS) surveys to measure patient 

experience but varied in their 

recommendation of which version to 

use. One commenter stated that CG– 

CAHPS and Hospital CAHPS (HCAHPS) 

do not include the desired shared 

decision making modules that are 

included in the draft Patient Centered 

Medical Home CAHPS (PCMH–CAHPS) 

and the Surgical CAHPS. Others 

supported the use of CAHPS but 

recommended adding additional 

measures to the domain. A few 

commenters suggested adding more care 

coordination and specialty care 

constructs to the patient/caregiver 

experience domain. One commenter 

suggested adding the new CAHPS 

cultural competence modules. One 

commenter stated that CAHPS did not 

adequately capture the team care 

experience of an ACO and suggested 

adding specific supplemental questions 

to CG–CAHPS. 

Some commenters suggested other 

modifications to the proposed approach. 

One commenter suggested allowing 

ACOs to incorporate CAHPS constructs 

into existing surveys. Another 

commenter wrote that CMS should not 

allow ACOs to use existing experience 

tools because this approach would not 

produce comparable data and suggested 

that CMS require all ACOs to use the 

same, standardized tool, with the same 

sampling methodologies. Another 

commenter suggested a hybrid approach 

with some standardized measures but 

also with some flexibility for ACOs to 

replace survey items of no or limited 

relevance to their practice with other 

questions. One commenter recognized 

the importance of measures related to 

patient experience of care but 

recommended that they not be 

incorporated into the performance 

standard for the first agreement period. 

One commenter did not believe patient 

satisfaction should be used to assess 

ACO performance. 

A few commenters cautioned CMS 

that there is limited experience with the 

CG–CAHPS tool, making it unfeasible 

for setting benchmarks initially and 

raising possible issues of its reliability 

and validity for ACOs. A couple of 

commenters suggested that survey 

information not be used to assess ACO 

performance until validated. One 

commenter recommended that until 

more proven measures become 

available, survey measures should 

include a ‘‘control group’’ of non-ACO 

FFS beneficiaries in the ACO’s service 

area and be used for program 

monitoring and public information only. 

One commenter expressed doubt about 

whether the timeframe for 

implementing the survey and using the 

results to improve care would be 

feasible. One commenter stated that CG– 

CAHPS was not particularly actionable 

as many items included would not be 

under the control of ACOs and 

suggested visit-specific questions be 

used, such as those in the AMA Patient 

Experience Survey. A few commenters 

stated that CAHPS does not address 

communication, environmental factors, 

resource utilization, patient role in care, 

care coordination, or transition quality 

and suggested additional questions 

related to those areas. A few 

commenters found CAHPS both 

administratively burdensome and 

costly. One recommended CMS adopt a 

sampling approach to mitigate these 

factors, while another commenter 

recommended the survey be collected at 

CMS’ expense. One commenter was 

concerned about duplicative CAHPS 

reporting through this program, PQRS 

and HCAHPS. Several commenters 

suggested methods other than CAHPS, 

or patient surveys in general, for 

collecting patient experience data. One 

commenter recommended CMS permit 

the use of other validated instruments, 

such as the American Board of Internal 

Medicine’s condition specific patient 

surveys. Another commenter expressed 

concern that allowing ACOs to choose a 

survey instrument other than CG– 

CAHPS would limit the validity and 

utility of such data. One commenter 

recommended that the survey be 

tailored to the setting where care was 

received such as an inpatient 

rehabilitation unit or mental health. 

Response: We believe the CG–CAHPS 

is the most appropriate version of 

CAHPS for ACOs, given the Shared 

Savings Program’s primary care focus 

and the ambulatory care focus of the 

CG–CAHPS. We note, however, that our 

decision to require use of this survey 

instrument as part of the quality 

performance measures does not 

preclude an ACO from continuing to use 

other tools it may already have in place. 

We do not think HCAHPS is appropriate 

as a Shared Savings Program tool at this 

time, since not all ACOs will include a 

hospital. We recognize the PCMH– 

CAHPS currently in development may 

offer modules applicable to ACOs, so we 

may consider these modules, when 

available, in future rulemaking. While 

the CG–CAHPS is among the more 

recently developed CAHPS surveys, the 

modules have undergone field testing by 

a number of public and private 

organizations and are endorsed. There 

are already a number of users 

contributing experience with the CG– 

CAHPS, including regional 

collaboratives, member boards of the 

American Board of Medical Specialties, 

and a growing number of individual 

health plans and medical groups. In 

addition, national benchmark data are 

now available for the CAHPS Clinician 

& Group Survey through the National 

CAHPS Benchmarking Database. We 

also believe there is sufficient time to 

test the CG–CAHPS for ACO use. 

In response to comments 

recommending that we add a care 

coordination and specialty care 

construct, we intend to add an Access 

to Specialists module as we think it is 

responsive to comments, will emphasize 

the importance of specialty care for 

patients served by the ACO, and 

complements our program focus on care 

coordination and our monitoring 

activities to ensure ACOs are not 

engaged in practices to avoid at risk 

patients. It also will align with the twostep methodology for assigning 

beneficiaries to ACOs, discussed in 

section II.E, of this final rule, which 

considers primary care services 

furnished by providers other than 

primary care physicians and will ensure 

that the CAHPS survey meaningfully 

assesses patient experience with ACO 

providers other than primary care 

physicians. This would mitigate the risk 

of issuing a survey to beneficiaries that 

does not necessarily reflect their care 

experience, which could be perceived as 

confusing and/or unduly burdensome. 

Thus, we are finalizing the CAHPS 

modules listed in Table 1 for quality 

performance purposes as we believe 

they offer the best alternative for ACO 

patient experience of care measurement 

at this point in time. We are not 

finalizing the Helpful, Courteous, 

Respectful Office Staff module proposed 

for quality performance measurement 

and reporting or scoring purposes but 

note that this module is still a core part 

of the CAHPS survey to be collected and 

we will collect the data and feedback to 

ACOs for informational purposes only. 

We also believe there is evidence that 

CAHPS assesses important aspects of 

provider-patient interaction that can be 

influenced by an ACO’s level of 

organizational support, training and 

incentive structure. These items may be 

combined with existing data in devising 

appropriate quality improvement 


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interventions as demonstrated by case 

studies and a guide available on the 

CAHPS Web site. We recognize that not 

all relevant areas of the patient 

experience are covered and will 

consider additional items in future 

rulemaking. We are sensitive to the data 

collection issues related to the patient 

experience survey and we have taken 

the commenters’ implementation 

strategy suggestions under 

consideration. We will also consider the 

comments regarding adding additional 

CAHPS questions in the future. As 

described in section II.F.3. of this final 

rule CMS will fund and administer the 

survey for the first two calendar years of 

the Shared Savings Program, 2012 and 

2013. 

Comment: A number of commenters 

asked for clarification or made other 

specific comments regarding use of the 

CAHPS surveys for ACOs. One of these 

commenters recommended CMS: Use 

the six-point response scale, clarify if 

only the primary care CG-CAHPS 

should be used, and clarify how ACOs 

might add additional measures not 

included in the final measure set. One 

commenter expressed concern that 

various CAHPS tools do not recognize 

care provided by registered nurses and 

certified registered nurse anesthetists. 

One commenter stated that CAHPS data 

could include visits outside the ACO 

reporting period. 

Response: We will consider 

comments regarding which CAHPS 

response scale is most appropriate for 

the Shared Savings Program and 

concerns that CAHPS data could 

include visits outside the reporting 

period and will release detailed 

instructions subregulatorily, outside of 

rulemaking. In response to the request 

that we clarify whether only the primary 

care version of the CG–CAHPS should 

be used for those modules from the CG– 

CAHPS, we note that the core CAHPS 

items proposed are identical for the CG– 

CAHPS primary care and specialty 

versions. The shared decision-making 

module, a supplemental module for 

both adult primary care and adult 

specialty care versions, is also identical 

in both versions. However, the health 

promotion and education module is a 

supplemental module from the adult 

primary care version only. With respect 

to the comment recommending that the 

included CAHPS modules reflect care 

furnished by registered nurses and 

certified registered nurse anesthetists, 

we recommend the commenter contact 

the measure steward directly with this 

suggestion. 

Comment: Several commenters had 

varying recommendations about how 

the CAHPS data would be collected, 

including use of a web-based survey or 

cloud application and use of both mail 

and telephone as opposed to one or the 

other. A few commenters were 

concerned that mail and phone surveys 

would be unlikely to reach a large 

number of low-income beneficiaries 

with low English proficiency or with 

disabilities and urged us to allow on-site 

patient surveys. One commenter 

suggested providing detailed survey 

guidelines regarding the fielding of the 

patient/caregiver experience survey. 

One commenter noted that survey 

results are affected by survey mode and 

methodology; this commenter suggested 

CMS require ACOs to follow clear 

guidelines for survey administration in 

order to make data more comparable. A 

few commenters urged CMS to 

encourage patient surveys to be done by 

or under the supervision of the Regional 

Health Information Collaboratives. One 

commenter suggested oversampling to 

allow ACOs to internally report 

individual provider level feedback and 

to ensure that patients with chronic 

conditions, who would have the most 

ACO contact, are sufficiently 

represented. The commenter also 

suggested not restricting surveys to 

Medicare beneficiaries only, similar to 

HCAHPS. Finally, one commenter 

suggested a phased approach to 

implementing the survey. 

Response: Because of these and other 

comments described in this final rule, 

we have decided to pay for the first two 

years of the survey in 2012 and 2013. 

We agree that survey mode and 

methodology can affect survey results 

and believe that, at this juncture, 

standardized administration and 

comparable results will be best achieved 

through the use of trained and certified 

vendors as is done with other CAHPS 

surveys administered to the Medicare 

population. We, too, are concerned 

about reaching low-income 

beneficiaries, as well as beneficiaries 

with limited English proficiency, 

chronic disease, or disabilities and will 

take these populations (and other 

relevant considerations) into account as 

we develop the sampling methodology 

for the CAHPS surveys. We will review 

carefully the results of the ACO patient 

experience of care survey in 2012 and 

2013 to adjust and refine the sampling 

and/or survey methodology as we move 

forward. 

We received the following comments 

regarding proposed measure 7: Health 

Status/Functional Status. 

Comment: One commenter noted that 

this measure was appropriate for a 

survey item and recommended it be 

added to the CAHPS instrument. A few 

commenters thought patient survey 

tools should account for primary care 

services furnished by providers other 

than primary care physicians. A few 

commenters stated NQF #6, MA– 

CAHPS, was noted in the table, but NQF 

#6 is from the HP–CAHPS. Either way, 

the commenters expressed concern that 

while health status and functional status 

have been used for risk adjustment, 

these constructs are not currently used 

for accountability purposes in any pay 

for performance initiatives and may 

have limited value in determining high 

and low-performing physician group 

practices, particularly in small 

geographic areas, where patients have 

more limited choice in selecting 

providers. Many commenters advocated 

for stronger measures of functional 

status, including measures outside of 

CAHPS surveys, to help ensure 

providers with a higher proportion of 

patients for whom a cure is not available 

are not punished. A few commenters 

advocated adding functional status as a 

sixth domain. One commenter strongly 

supported measures of changes in 

functional status from admission and 

discharge but stated that the proposed 

measure is not measured from the 

patient or caregiver perspective and did 

not believe it is sufficiently objective. 

One commenter recommended 

development of ways to measure preand post-care health status of patients 

treated by ACOs. 

Response: To clarify our original 

proposal, we intended to propose NQF 

#6. Health Status is intended to be selfreported in order to adequately 

represent the patient or caregiver 

perspective. Patient-reported outcomes, 

although subjective, provide valuable 

information not captured by other 

means, and many are well established 

and widely used with demonstrated 

reliability and validity. That said, we 

will consider suggestions for 

alternatives in the future. 

We are also finalizing the health 

status survey as pay for reporting for all 

3 years of the agreement period. While 

we agree with commenters that the 

information is important for improving 

the overall health and functioning of a 

patient population, we also recognize 

that it is not currently used for 

accountability purposes in any pay for 

performance. Therefore we will keep the 

measure as pay for reporting for the 

entire agreement period in order for 

ACOs to gain experience with the 

measure and to provide important 

information to them on improving the 

outcomes of the population they serve. 

We received the following comments 

on proposed measures 8. to 23. Care 

Coordination. 


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Comment: Several commenters wrote 

in general support of the Care 

Coordination measures. One commenter 

supported the emphasis on care 

coordination but did not want this focus 

to be at the expense of specialty care. 

One commenter thought these measures 

were unclear and would be difficult to 

measure. One commenter suggested 

evaluating the incidence of ACSC 

admissions in each ACO. If the 

frequency of ACSC admissions in many 

ACOs is likely to be insufficient for 

statistical stability of admission rates, 

such instability should be considered 

before tying performance results to 

shared savings. One commenter 

believed CMS should reduce the 

number of measures until new and 

better care measures for this domain are 

developed and require reporting only 

(not performance) on all measures for 

the first 3-year agreement. However, 

another commenter recommended CMS 

add new quality measures to this 

category that define the responsibilities 

of both the sending and receiving 

provider and measure accountability 

and performance of these providers 

during patient care transitions. One 

commenter believed the proposed care 

coordination measures were inadequate 

to ensure that patient care is truly 

coordinated among providers and 

settings. 

Regarding proposed measures 8–10. 

Risk-Standardized, All Condition 

Readmission; 30 Day Post-Discharge 

Physician Visit; and Medication 

Reconciliation, one commenter believed 

these measures were all based primarily 

on hospital performance and should be 

dropped. One commenter appeared to 

support electronic capture of the 30 Day 

Post-Discharge Physician Visit and 

Medication Reconciliation, but 

cautioned that only would be possible 

for readmissions and discharge visits 

that occurred among entities connected 

to that particular electronic medical 

record. 

Response: We agree that care 

coordination is an important part of 

patient care and that sample size is an 

important consideration in measure 

selection. We also believe that 

accountability for patients, including 

knowledge of services rendered outside 

of an ACO, is important for achieving 

the three-part aim goals previously 

described. As a result, we note that all 

Shared Savings Program quality 

measures are intended to measure 

performance in relation to a defined set 

of assigned beneficiaries and not the 

performance of an individual entity, 

such as a hospital. Given the population 

focus of ACOs and refinements to the 

list of ACSC conditions, coupled with 

the phase in of these measures for 

performance, we believe that ACO 

assigned populations should be 

sufficient to reliably measure 

performance. We may consider 

including the additional measures 

suggested by commenters in the future. 

Comment: Proposed Measure 8. RiskStandardized, All Condition 

Readmission. A few commenters 

supported inclusion of measure 8 as 

proposed, but a few were not 

supportive. Some noted that this 

measure was not NQF-endorsed and 

that CMS had not provided 

specifications for this measure, making 

it impossible to evaluate the risk 

adjustment methodology or the measure 

exclusions, such as planned 

readmissions and transfers. A few 

commenters noted that there is already 

a readmission payment policy, and as a 

result, hospitals would potentially be 

penalized multiple times for the same 

readmission. Many commenters 

expressed support for a readmission 

measure but several of these 

commenters urged CMS to specify the 

measure to include only unplanned 

readmissions for heart attack, heart 

failure, and pneumonia. However, one 

commenter stated that CMS should not 

adopt the three CMS disease-specific 

all-cause readmission measures for heart 

attack, heart failure, and pneumonia 

currently reported to CMS because they 

leave out 85–90 percent of 

readmissions. One commenter stated 

that the proposed readmission measure 

lacked clinical credibility and could 

undermine quality improvement efforts. 

This commenter stated that the 

Affordable Care Act requires that 

readmission measures ‘‘have exclusions 

for readmissions that are unrelated to 

the prior discharge’’ and argued that the 

proposed measure failed to do this. This 

commenter also argued that certain 

readmissions related to the prior 

discharge are planned and unavoidable, 

such as planned chemotherapy. One 

commenter questioned how this 

measure would be used in an ACO 

context. Another commenter believed 

that review of patient medications 

within 24 hours of discharge/transition 

or communication with the patient 

within 72 hours of discharge/transition 

were better measures of care 

coordination. One commenter suggested 

the measure be changed to include 

readmission or admission to observation 

status within 30 days of discharge from 

an acute care hospital. 

Response: Readmissions is an area in 

which we believe an ACO’s 

coordination of care and accountability 

can have a significant impact in 

improving patient care and are 

finalizing this measure as proposed. 

While we recognize concerns that the 

measure has not been endorsed, this is 

one area in which we wish to exercise 

our discretion to include appropriate 

quality measures even if they have not 

been endorsed. We do not believe 

including this measure would be 

duplicative of any current readmission 

payment policy, since ACOs are a new 

concept and the Shared Savings 

Program is a new care model, and since 

this measure is not currently utilized in 

any other CMS quality reporting 

program. During the development of the 

proposed measures, we considered 

including the three disease-specific 

readmissions measures suggested by 

several commenters, but did not 

propose these measures for the reason 

another commenter noted: These types 

of readmissions represent only a small 

percentage of all readmissions. We 

recognize that certain readmissions are 

planned, unavoidable, and even 

advantageous to the patient, and will 

consider this prior to releasing 

specifications for this measure. That 

said, we also note that this measure has 

been under development and that 

finalization of this measure is 

contingent upon the availability of 

measures specifications before the 

establishment of the Shared Savings 

Program on January 1, 2012. We are also 

finalizing the measure as a pay for 

reporting measure for the first two years 

of the program to allow more time for 

ACOs to gain experience with the 

measure and to redesign care processes 

to improve outcomes and reduce 

avoidable readmissions. 

Comment: Proposed measure 9. 30– 

Day Post Discharge Provider Visit. One 

commenter suggested this measure 

could be captured through claims data, 

rather than through the GPRO web 

interface. A few commenters believed 

this measure should not only pertain to 

ACO providers. One commenter 

believed the 30-day period was too long 

and that a 5–7 day follow-up was 

necessary to avoid readmissions. 

Response: We have decided not to 

include the measure at this time in 

response to comments regarding 

duplicity and reporting burden, as the 

medication reconciliation measure we 

are finalizing includes both the act of 

post-discharge medication 

reconciliation and a post-discharge 

provider visit. However, we would like 

to clarify the original proposal to collect 

this measure through the GPRO web 

interface rather than via claims data. In 

our proposed measures set development 

process, we concluded that although 

claims data would capture many post 

discharge visits, the GPRO web interface 


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would allow visits not discernable from 

claims, such as those that may be 

included in a bundled hospital 

payment, to be included in this 

measure. Although we are not finalizing 

the measure at this time, we will 

consider the comments received and 

revisit the appropriateness of adding 

this measure at a future time during 

future rulemaking. 

Comment: Proposed measure 10. 

Medication Reconciliation. Several 

commenters commended including 

medication reconciliation in the 

measure set. One commenter stated that 

the 60-day time frame posthospitalization appears to be a 

typographical error as NQF Measure 

#554 calls for a 30 day timeframe. One 

commenter recommended variations of 

the proposed measure, because the 

proposed measure is a self-reported, 

unidirectional measure. Another 

commenter proposed a self-reported 

adherence assessment measure should 

be included as well as measures that 

identify other barriers to medication 

adherence. This commenter also 

believed medication behavior 

assessment should not be limited to 

post-discharge but would also be 

indicated for all patients on chronic 

maintenance therapy, particularly those 

with diabetes, hypertension, coronary 

artery disease, or heart failure. A few 

commenters recommended that 

discharges from inpatient rehabilitation 

hospitals and units, long term care 

hospitals, skilled nursing facilities, and 

any of the multiple post-acute care 

outpatient settings be included in the 

final rule. One commenter stated this 

measure should include verification that 

medication reconciliation was 

conducted and documented prior to 

hospital discharge. A few commenters 

recommended a more limited time 

frame to avoid complications and 

readmissions; one mentioned a 3–7 day 

range. A number of commenters 

recommended deferring the 

introduction of this measure until EHRs 

are fully implemented and this measure 

can be captured electronically. One 

commenter recommended clarification 

that the medication reconciliation 

should be documented in a medical 

record rather than be a medication 

claim. 

Response: The commenter that 

pointed out the error in the proposed 

rule is correct. NQF #554 is a 30 day 

post discharge medication 

reconciliation measure rather than a 60 

day measure as we indicated in the 

measure description (76 FR 19572). The 

correct NQF number for the 60 day 

measure that we proposed is NQF #97. 

Accordingly, in this final rule, we are 

adopting NQF #97, the 60 day measure, 

in an effort to align with PQRS. Since 

this measure would be collected 

through the GPRO web interface, which 

will have ability to both accept manual 

data uploads and interface with an EHR 

as described in section II.F.4.b. of this 

final rule, we do not think this measure 

needs to be deferred until there is 

greater EHR implementation in the 

provider community. We recommend 

commenters direct comments regarding 

alternative time frames, care settings 

and other deviations from the endorsed 

specification to the measure steward. 

We will consider the other suggested 

medication-related measures and 

propose them through future rule 

making if appropriate. 

Comment: Proposed measure 11. Care 

Transitions. One commenter generally 

endorsed measures related to transition 

plans of care, while others specifically 

endorsed this measure. One commenter 

recommended that this measure be 

eliminated as it is already captured via 

CAHPS, while another cautioned 

against adoption of any measure that 

requires chart abstraction. Another 

commenter expressed concern that this 

is not an objective measure and lacks 

evidence it improves outcomes. A few 

commenters requested that CMS clarify 

whether this is a survey measure or 

reported through GPRO. One 

commenter suggested CMS consider 

other care coordination measures that 

assess whether: the patient received a 

reconciled medication list upon 

discharge, the patient received a 

transition record with specified 

information, and the transition record 

was transmitted to the receiving 

provider in a timely manner. 

Response: We are not finalizing this 

measure at this time in an effort to be 

responsive to comments about reporting 

burden. We recognize this measure is 

typically collected within 48 hours to 

six weeks after discharge via phone or 

mailed survey. In exploring options for 

operationalizing this measure in an 

ACO context, we recognize that it would 

be difficult to require this measure for 

an ACO that does not have a hospital, 

as it could require substantive 

infrastructure, education, and 

development to have an ACO 

disseminate the survey questions to 

patients timely post-discharge and 

report the results to CMS. Nevertheless, 

we continue to believe that assessing 

care coordination, and in particular care 

transitions, is an important aspect of 

evaluating the overall quality of the care 

furnished by ACOs. One way we will do 

this is by including an access to 

specialists module in the CAHPS survey 

as previously described. We also intend 

to continue exploring ways to best 

capture ACO care coordination metrics 

as suggested, including the proposed 

measure, and will consider adding new 

care coordination measures for future 

years. 

Comment: Proposed measures 12–18. 

Ambulatory Care Sensitive Conditions 

Admissions. Several commenters 

expressed concern about the use of 

various AHRQ Prevention Quality 

Indicators (PQIs) for the Ambulatory 

Care Sensitive Conditions (ACSC) 

Admissions measures as these are 

designed as screening tools rather than 

quality measures and are not adequately 

risk-adjusted. A few of these 

commenters thought the PQIs might be 

useful for monitoring but not for 

inclusion in performance scores, since 

they could inadvertently drive 

underutilization. One commenter 

suggested evaluating the incidence of 

ACSC admissions in each ACO and if 

the size of many ACOs’ enrollment is 

insufficient to assure that these 

measures are statistically stable, such 

instability should be considered before 

tying performance results to shared 

savings. One commenter suggested 

developing a methodology to address 

how measures for ACOs with small 

eligible populations (for example N<30) 

can be reliably and fairly scored. Two 

commenters recommended we consider 

consolidating measures with small 

sample sizes into one measure at least 

for scoring purposes. One commenter 

believed beneficiary compliance to be 

outside the provider’s control and 

recommended that CMS monitor these 

measures rather than include them in 

the performance score. 

One commenter supported the intent 

of ACSC: Congestive Heart Failure 

(proposed measure 15) but stated there 

are technical issues with the measure in 

that it may not accurately capture 

patients with CHF. This commenter 

urged CMS to remove monitor 

implementation of this measure to 

ensure its reliability. We did not receive 

any comments on ACSC: Dehydration 

(proposed measure 16). One commenter 

wrote in support of ACSC: Bacterial 

Pneumonia (proposed measure 17). 

Another commenter stated that ACSC: 

Bacterial Pneumonia assumes that 

administrative claims can identify 

preventable cases of pneumonia, fails to 

recognize that the pneumonia vaccine 

has limited effectiveness, and does not 

adjust for regional differences in patient 

and environmental characteristics 

associated with risk for pneumonia. One 

commenter wrote in support of ACSC: 

Urinary Infections (proposed measure 

18). 


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Response: We note that the AHRQ 

PQIs for Ambulatory Care Sensitive 

Condition admissions are wellestablished as indirect measures of 

access to and performance of timely and 

effective primary care services. That is, 

timely and effective care for managing 

patients’ chronic conditions should 

result in fewer hospital admissions for 

these admissions. These were among the 

measures recommended by major 

provider groups in Listening Sessions 

conducted by CMS to inform the rulemaking proposals. We recognize the 

commenters’ risk adjustment concerns 

and believe that the adjustment for age 

and sex included in these measures 

establishes a fair baseline for comparing 

ACO performance to national 

benchmarks, so that both very high and 

very low rates can be investigated. The 

ACSC admissions represent common 

conditions among Medicare FFS 

beneficiaries, but we recognize the 

concern of small numbers of admission 

events. We have accounted for this 

concern in our selection of final ACO 

quality measures to include those PQIs 

that we believe are most important as 

indicators of ACO care coordination and 

remove those that we believe are still 

important but may have sample size 

issues or are less central to ACO goals. 

We are not finalizing the following 

ACSC measures for quality performance 

purposes but may still consider 

calculating them from claims for 

monitoring and informational purposes: 

diabetes, short-term complications 

(proposed measure 12); uncontrolled 

diabetes (proposed measure 13); 

dehydration (proposed measure 16); 

bacterial pneumonia (proposed measure 

17); and urinary infections (proposed 

measure 18). We are finalizing the ACSC 

measures for COPD (proposed measure 

14) and heart failure (proposed measure 

15). Once we have actual ACO 

performance data on the measures, we 

will review again to determine if sample 

size is truly an issue in the ACO context 

and will address in the future if needed. 

We suggest that commenters contact the 

measures steward directly regarding any 

technical issues identified with these 

measures. Finally, we do not believe it 

would be appropriate to combine 

measures with small sample sizes into 

one measure, as one commenter 

suggested. Such combination would 

require further testing and coordination 

with the measures steward. 

Additionally, we are unclear how an 

ACO could take action based on a 

consolidated ACSC measure score that 

does not distinguish between types of 

ACSC events. 

Comment: Proposed measures 19–23. 

Care Coordination/Information Systems. 

One commenter wrote in support of all 

5 of these measures. Another 

recommended CMS require ACOs to 

implement the use of electronic medical 

records as soon as practicable. Many 

commenters wrote in support of a single 

measure of EHR program participation, 

such as proposed measure 19. Percent of 

all Physicians Meeting Stage 1 

Meaningful Use Requirements or 

proposed measure 20. Percent of PCPs 

Meeting Stage 1 Meaningful Use 

Requirements. A number of commenters 

recommended removing these measures 

for a variety of reasons. A few 

commenters recommended CMS remove 

these measures or collect them only for 

monitoring purposes because they are 

structural measures and not necessarily 

accurate indicators of quality 

performance. Another commenter 

echoed this recommendation and added 

that the incentive should not be based 

upon the tools or processes used by an 

ACO but rather the outcomes achieved 

by the ACO. A few commenters stated 

that adoption of health information 

technology is already the subject of 

penalties and incentives under the EHR 

Incentive Program and including these 

measures for the Shared Savings 

Program is redundant. A few 

commenters believed it unfair to 

penalize ACO providers for not meeting 

meaningful use in advance of the 

penalty phase of the EHR Incentive 

Program. One of these commenters 

noted that these measures are not core 

measures for the EHR Incentive Program 

and meeting the proposed requirements 

would be feasible only for ACOs that 

already have experience with a robust 

EHR. One commenter believed certain 

EHR Incentive Program measures were 

susceptible to inaccurate reporting, such 

as whether medication reconciliation is 

performed. 

A few commenters recommended 

proposed measures 19 (Percent of All 

Physicians Meeting Stage 1 Meaningful 

Use Requirements) and 20 (Percent of 

PCPs Meeting Stage 1 Meaningful Use 

Requirements) be dropped or that CMS 

should exempt specialists. One 

commenter thought Stage 1 Meaningful 

Use measures made it difficult for 

specialists to achieve meaningful use, 

while another objected to requiring 

specialists to report on primary carebased measures. One commenter asked 

CMS to consider how specialists, who 

are permitted to contract with multiple 

ACOS, would be able to communicate 

electronically across various ACOs, who 

may be using different EHRs that are not 

interoperable. One commenter 

requested that the ACOs’ EHR-related 

measures not be limited to the 

categories of providers designated as 

EPs under Stage 1 of Meaningful Use. 

A few commenters requested 

clarification of the definition of clinical 

decision-support in proposed measure 

21 (Percent of PCPs Using Clinical 

Decision Support), and one commenter 

urged CMS to include cardiovascular 

imaging decision support tools in the 

measure. Proposed measure 22 (Percent 

of PCPs who are Successful Electronic 

Prescribers Under the eRx Incentive 

Program) and proposed measure 23 

(Patient Registry Use) each received one 

comment of support. 

Response: We considered these 

comments in finalizing our measures set 

and have decided to finalize only 

proposed measure 20 and expand it to 

include any PCP who successfully 

qualifies for an EHR Incentive Program 

incentive rather than only including 

those deemed meaningful users. One 

reason for retaining this measure is that 

we believe it is important to encourage 

EHR adoption as a means for ACOs to 

better achieve the goals of the three-part 

aim, recognizing that some 

organizations may currently be 

achieving better quality outcomes using 

EHRs, even if they are not yet 

considered ‘‘meaningful users,’’ than 

organizations that have not yet adopted 

such technology. To this end, we 

recognize that first-year Medicaid EHR 

Incentive Program participants can earn 

an EHR incentive for adopting, 

implementing, or upgrading an EHR, 

and do not need to be ‘‘meaningful 

users’’ in order to earn an incentive, and 

would like to include such EHR 

participants in this measure. A second 

reason for retaining this measure but not 

proposed measure 19, percent of all 

physicians meeting Stage 1 HITECH 

Meaningful Use Requirements, is that 

we recognize some ACOs may be 

comprised of PCPs only. An ACO’s 

score on proposed measures 19 and 20 

would be the same if the ACO is only 

comprised of PCPs. As a result, the use 

of both measures could be considered 

redundant. The third reason for 

finalizing proposed measure 20 with 

modification is that it is a structural 

measure of EHR program participation 

that is not measured in any other 

program, and therefore is not 

duplicative of any existing measures. In 

addition, CMS can calculate the 

measure based on data already reported 

to the EHR Incentive Program, such that 

no additional reporting would be 

required by ACOs other than what EPs 

have already reported. Overall, we 

believe relaxing this measure definition 

is more inclusive and promotes 


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participation, while still signaling the 

importance of healthcare information 

technology (HIT) for ACOs. 

Regarding the decision not to finalize 

the other proposed Care Coordination/ 

Information Systems measures (that is 

proposed measures 21–23), we have 

removed these measures based on 

commenters’ recommendations and in 

an effort to pare down the proposed 

measures set to those measures that will 

have the most impact and are most 

aligned with ACO goals. Our intent is to 

align the Shared Savings Program 

measures with the EHR Incentive 

Program measures, however since we 

are not incorporating the EHR Incentive 

Program or eRx Incentive Program 

incentives under the Shared Savings 

Program, as discussed in section II.F.5. 

of this final rule, we have decided not 

to finalize EHR and eRx structural 

measures that may be considered 

redundant. For instance, we recognize 

that some ACOs may be comprised 

predominantly of primary care 

physicians, which would make 

proposed measure 19 largely redundant 

of proposed measure 20. 

In response to the comment on 

proposed measure 21. Percent of PCPs 

Using Clinical Decision Support, to 

clarify, the measure proposed was an 

EHR Incentive Program core measure for 

clinical decision support. We have 

removed this measure from the final set, 

since it is included in the meaningful 

use requirements and could be 

considered redundant. Some of the EPs 

who successfully qualify for an EHR 

incentive payment are meaningful users 

of HITECH, and clinical decision 

support is one of the requirements to be 

considered a meaningful user. Similarly, 

we did not finalize proposed measure 

22 (Percent of PCPs who are Successful 

Electronic Prescribers Under the eRx 

Incentive Program), since EPs cannot 

earn both an eRx Incentive Program 

incentive and a Medicare EHR Incentive 

Program incentive. As a result, any 

measures that reflect successful 

incentive qualification for the eRx and 

Medicare EHR incentives would conflict 

with one another. In addition, we 

believe there is some redundancy 

between proposed measures 21 and 22 

with proposed measure 20. Percent of 

PCPs Meeting Stage 1 Meaningful Use 

Requirements, since clinical decision 

support and electronic prescribing are 

part of the meaningful use criteria 

included in proposed measure 20., 

which we are finalizing with minor 

modifications as previously described. 

We are not finalizing the Patient 

Registry Use measure (proposed 

measure 23), since it is not a required, 

‘‘core’’ measure in the EHR Incentive 

Program’s meaningful use criteria. We 

have concerns that, by requiring this 

measure, we will inadvertently provide 

an incentive for ACOs to make an 

optional, EHR Incentive Program ‘‘menu 

set’’ measure a ‘‘core’’ measure for their 

ACO providers/suppliers who are EPs. 

We also recognize that patient registry 

use is fundamental to measuring, 

improving and reporting quality 

measures so we expect that most, if not 

all, ACOs will have some form of 

patient registry use already in place to 

support quality measurement and 

improvement activities. As a result, we 

believe this measure is unlikely to 

provide an incentive for more 

widespread adoption of EHRs or 

registries or improved ACO 

performance. 

Comment: Proposed measures 24. 

Health Care Acquired Conditions 

Composite and 25. CLABSI Bundle. One 

commenter endorsed measures related 

to hospital-acquired conditions and 

patient safety, but many commenters 

stated that hospital-based measures 

should be removed or were not 

applicable to ACOs that do not include 

hospitals as ACO participants. One 

commenter stated that the information 

exchange required would generally not 

be in place for ACOs without hospitals, 

and another thought these measures 

were duplicative of IPPS reporting. 

Others stated that hospitals were 

already being held accountable through 

the hospital value-based purchasing 

program and that, in many markets, an 

ACO simply wouldn’t have the ability to 

impact the various hospitals where an 

ACO’s members might receive 

treatment. Commenters proposed 

various alternatives: That ACOs without 

hospitals be exempted from reporting on 

these measures; that hospital measures 

be made voluntary; that these be 

dropped completely; or that we use 

process measures that are already 

widely used in the hospital value-based 

purchasing program until true 

population-based outcomes measures 

are available. Several commenters 

expressed concern about including the 

HAC composite but supported inclusion 

of the CLABSI bundle until better ACO 

patient safety measures are developed. 

One commenter thought it duplicative 

to have two different measures of 

central line infections and preferred the 

CLABSI bundle as a more reliable and 

valid measure. Regarding the proposed 

method of data submission, one 

commenter noted the difficulties of 

using claims data to accurately detect 

healthcare acquired conditions and 

supported the CDC National Healthcare 

Safety Network (NHSN) surveillance 

data as a more reliable source. One 

commenter recommended CMS apply 

the recently released regulations 

specifying that state Medicaid programs 

may use more comprehensive 

approaches to payment adjustment to 

ACOs. One commenter stated some 

hospital acquired conditions can be 

reduced but not eliminated and 

programs that expect elimination may 

cause providers to avoid caring for highrisk patients and recommended 

identification of evidence-based 

exceptions, development of alternative 

systems to encourage providers to adopt 

processes to reduce HACs, and systems 

to measure process steps taken. 

Proposed measure 24. Health Care 

Acquired Conditions Composite. A few 

of commenters wrote in support of this 

measure; one recommended CMS only 

score the measure on an ‘‘all or nothing’’ 

basis to eliminate rewards for 

preventable medical errors. One 

commenter argued that measurement 

alone would motivate improvement as 

long as scores are transparent and 

visible. Another commenter 

recommended this composite only be 

used for monitoring and not for 

performance scores. 

Many commenters expressed 

concerns about including the HAC 

composite, most commonly on the 

grounds that it is untested or because it 

is a hospital-based measure. A few 

commenters stated that the proposed 

composite HAC measures lack clarity 

and do not provide useful or timely 

information to improve performance. 

These commenters were concerned 

about the measure being a compilation 

of nine CMS HACs combined with an 

AHRQ Patient Safety Indicator which is 

itself a composite of eight measures, 

some of which are only slightly different 

from other proposed components (for 

example pressure ulcers and decubitus 

ulcers are both included). These 

commenters were concerned about how 

risk adjustment would be handled in 

this composite, since sicker patients are 

at higher risk for HACs. These 

commenters were also concerned that 

the data could be submitted from either 

administrative/claims data or NHSN 

and that the resultant measure including 

both sources has not been validated. 

These commenters recommended that 

CMS use the HAC measures 

individually as separate measures and 

not a composite as currently defined in 

the Hospital Inpatient Quality Reporting 

Program; use CLABSI from NHSN with 

data submitted as a separate patient 

safety measure; and delete AHRQ PSI 

#90 since it overlaps with several HAC 

measures and imposes redundant, 

duplicative effort. Another commenter 


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with similar concerns recommended 

inclusion of the first five HAC measures 

along with additional NQF measures 

such as, patient death or serious injury 

associated with medication errors, or 

failure to follow up on or communicate 

clinical information as soon as 

practicable. 

Commenters were also concerned 

that: the complexity and lack of 

validation for the composite would 

discourage organizations or groups from 

participation; risk adjustment is needed 

since sicker patients have a greater 

chance for these events; and many of the 

HACs are low-incidence complications 

that have not been tested for rate-based 

comparisons. One commenter opposed 

the inclusion of accidental puncture or 

laceration and iatrogenic pneumothorax, 

arguing that including measures for rare 

complications is ineffective and may 

result in unintended consequences. This 

commenter stated that it is difficult to 

identify statistically significant 

differences rather than random variation 

in the data and raised concern that 

measuring such rare events could drive 

increased use of less safe procedures 

such as femoral catheterization. A few 

commenters recommended this measure 

be used for monitoring and not be used 

as part of the performance score. One 

commenter stated that there are 

ambiguous coding guidelines regarding 

inadvertent laceration or puncture not 

considered to be accidental (for example 

serosal tears) and recommended CMS 

field test patient safety measures prior 

to adopting them for the Shared Savings 

Program. Another commenter noted that 

the proposed ACO HAC Composite 

includes CLABSIs rather than vascular 

catheter-associated infections, 

consistent with reporting requirements 

in the Hospital Inpatient Quality 

Reporting program. However, this 

commenter urged CMS to further align 

measurement requirements and use 

CLABSIs across programs in order to 

reduce duplicative reporting burden and 

to support the use of what the 

commenter believed to be superior 

quality data. 

A few commenters noted that 

proposed measure 25. Health Care 

Acquired Conditions: CLABSI Bundle is 

the CDC National Healthcare Safety 

Network (NHSN) process measure of 

central line insertion practices and 

questioned how it would be possible to 

measure this based on claims data. The 

commenters stated that the measure is 

very labor intensive, and is not in 

widespread use even in NHSN, which 

means there are minimal baseline data. 

The commenters recommended that this 

measure not be included given the lack 

of baseline data, the labor intensity of 

the required chart abstraction, and the 

number of proposed ACO quality 

measures. Another commenter preferred 

this measure over the proposed HAC 

Composite. 

Response: Medical errors are a major 

source of morbidity and mortality in the 

United States, and patient safety 

initiatives that reduce the number of 

these events are a critical focus for CMS 

and the Department. However, we 

recognize that not all ACOs will have 

participating hospitals, but, for those 

ACOs that do have hospitals, we do not 

believe this approach is duplicative of 

hospital value-based purchasing 

program efforts, which calculate such 

measures at a hospital patient 

population level and not at an ACO 

assigned beneficiary population level. 

We also recognize that some HACs may 

be reduced but not eliminated, as one 

commenter noted. Reporting remains an 

important issue for effectively tracking 

health care acquired conditions. 

Measuring ACO performance on HACs 

would potentially serve as an incentive 

to improve reporting. We agree many of 

the hospital acquired conditions are rare 

events and proposed the composite in 

an effort to produce a larger, more 

meaningful sample size, since ACOs 

will have smaller populations and even 

fewer events than would a hospital. 

However, we recognize there are 

challenges with combining claims and 

surveillance-based measures that have 

different calculation methodologies into 

one measure. There are also challenges 

with using hospital-reported measures 

based on aggregate, all payer data, as is 

the case with measures reported to the 

NHSN, particularly for ACOs that do not 

include hospitals. Upon further 

consideration of our proposal, we agree 

with the suggestion that, if these 

measures were to be finalized, we 

should break out the components and 

score the measures individually. We 

recognize there are operational 

complexities combining endorsed 

measures that reflect different 

population bases and have different 

timeframes, data sources and risk 

adjustment methodologies. In addition, 

we realize that combining these 

measures may result in a larger number 

of incidents in the measure numerator, 

due to the larger sample size, but may 

not result in more meaningful 

information for an ACO. That is, in 

combining the HACs into one measure, 

the ACO cannot discern which HACs 

are of concern and which are not, 

whereas measuring the HACs 

individually would provide such 

information. 

That said, we have decided not to 

finalize these measures at this time. 

However, we may consider claims-based 

HAC measures that can be calculated at 

an ACO assigned beneficiary population 

level for quality monitoring purposes, 

regardless of whether an ACO includes 

a hospital. That is, we would determine 

from claims whether any ACO-assigned 

beneficiaries who had been hospitalized 

(regardless of whether the hospital is an 

ACO provider/supplier) experienced a 

HAC. We believe the approach of 

considering claims-based HAC measures 

that can be calculated at a patient level 

emphasizes the importance of 

monitoring HACs among an ACO’s 

assigned beneficiary population but 

eliminates reporting burden and 

operational complexity, particularly for 

those ACOs that do not include a 

hospital. We would not calculate the 

CLABSI Bundle, even for monitoring 

purposes, at this time as this measure 

can only be calculated from NHSN 

surveillance data, as one commenter 

clarified. Since NHSN data are hospitalreported, all-payer data, we are unclear 

at this time how to translate such data 

to a Medicare FFS ACO population, 

particularly when ACOs do not include 

a hospital. However, we will continue 

exploring how to leverage NHSN data in 

the Shared Savings Program. 

Comment: Proposed measures 26–34. 

Preventive Health. A few commenters 

wrote in general support of preventive 

care measures while one commenter 

recommended that all preventive health 

measures should be dropped until they 

can be studied further. One commenter 

suggested CMS work with CDC to add 

additional prevention measures as the 

program matures. 

Response: We believe preventive 

health is critical to reducing chronic, 

costly conditions, and that primary care 

is critical to the ACO model of care. As 

a result, we believe it is important to 

retain preventive health quality 

measures in the Shared Savings 

Program. However, we will monitor 

these measures and work with the 

measures community in an effort to 

ensure we are using the most 

appropriate, high impact measures. 

Comment: Proposed measures 26 and 

27. Influenza Immunization and 

Pneumococcal Vaccination. Several 

commenters wrote in support of one or 

both of these measures particularly 

given the burden of death, disease and 

high cost care resulting from 

pneumococcal disease and influenza 

among the elderly. One commenter 

stated that these measures are not 

geared towards population health and 

should be removed. One commenter 

recommended that providers not be 

penalized for vaccine shortages. 

Another commenter recommended 


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2Centers for Disease Control and Prevention. 

Influenza and Pneumococcal Vaccination Levels 

Among Adults Aged greater than or equal to 65 

Years—United States. MMWR 1998 Oct 2; 47(38); 

797–802. 

deferring introduction of these measures 

until EHRs are in widespread use 

because vaccine administration would 

be difficult to document if the vaccine 

was received outside of the ACO. 

Another commenter noted the burden of 

using EHR data to populate GPRO and 

suggested CMS instead consider the 

survey-based measure from NCQA 

HEDIS, which could be added to the 

CG–CAHPS. One commenter suggested 

updating the pneumococcal vaccination 

measure to include the new ACIP 

recommendations for pneumococcal 

vaccine for patients age 5–64 that have 

a high-risk condition. 

Response: We believe vaccinations are 

important to population health, 

particularly in the Medicare population, 

and are finalizing the proposed 

measures with minor modification as 

discussed later in this final rule. The 

Advisory Committee on Immunization 

Practices of the Centers for Disease 

Control and Prevention states 

effectiveness estimates for vaccines 

range from 50 percent to 80 percent for 

prevention of pneumonia among 

immunocompetent older adults and 

adults with various underlying 

illnesses.2 The CDC has also shown that 

elderly citizens vaccinated against 

influenza have reductions in the rates of 

hospitalization and death from 

influenza, as compared with the rates in 

unvaccinated elderly persons. These 

measures were not intended to penalize 

providers in cases of vaccine shortages. 

Commenters should contact the 

measures stewards regarding such 

concerns. 

The CAHPS questions relevant to 

health care services are intended to 

assess the patient’s experience with care 

furnished in the ACO rather than 

whether the ACO providers are actively 

tracking immunization status. Since 

ACOs are charged with better 

coordinating and improving care, we 

believe these immunization measures 

should be ACO-reported not patientreported. Our ACO GRPO reporting 

process uses patients’ claims data to the 

extent that they are available when 

calculating the measure, thus reducing 

the burden on providers for reporting on 

their population while allowing the 

ACO to update the numerator with 

information from its clinical or 

administrative systems, such as patientreported information. 

Additionally, in response to other 

comments requesting that we align 

measures with those used in PQRS and 

the EHR Incentive Program, as 

discussed in section II.F.5. of this final 

rule, we have finalized the 

pneumococcal vaccination measure to 

reflect NQF #43 instead of #44. Both 

measures have the same denominator 

population—patients over the age of 

65—and reflect the same outcome, 

whether pneumococcal vaccination was 

obtained in the previous 10 years; 

however, we believe NQF #43 offers an 

advantage to ACOs over NQF #44 in that 

a provider collects NQF #43 through 

discussion with the patient, whereas 

NQF #44 requires medical chart 

abstraction. Because of the level of effort 

required to obtain a 10 year chart 

abstraction (for purposes of NQF #44), 

the decision was made to use NQF #43, 

which can be collected at the point of 

care during a current patient visit and 

reported electronically through the 

GPRO web interface. We believe the use 

of this measure would help address the 

general comments regarding reporting 

burden and would align with quality 

measures used in other programs, such 

as PQRS. 

Comment: Proposed measure 28. 

Mammography Screening. Several 

commenters noted that this measure 

was not aligned with professional 

guidelines that do not support routine 

mammograms for women 40–49 and 

recommended shared decision making 

between woman and provider. Some of 

these commenters also noted that 

guidelines recommend screening for 

women until age 74, not 69 as proposed. 

One commenter favored inclusion of 

women 40–49 but stated that the upper 

age limit should be at 5 years of life 

expectancy. One commenter stated that 

this measure should be eliminated 

because it has potential for the 

unintended consequence of interfering 

with a woman’s right to refuse 

mammography until age 50, by 

measuring the quality of an ACO’s care 

based on whether she received biennial 

exams starting at 40. One commenter 

thought the measure should begin at age 

40, since this age is included in health 

plan coverage and as a measure of 

provider counseling given to the 

woman. Another commenter 

recommended that this measure be 

excluded because the denominator 

population (women, 40–69 years of age) 

is comprised primarily of patients who 

are not Medicare beneficiaries. 

Response: We are finalizing the 

measure as proposed. The proposed 

measure follows guidelines established 

by NCQA and endorsed by NQF. We 

recognize that the age 40–49 category 

applies to a small percentage of 

Medicare beneficiaries, however early 

detection allows women to obtain 

timely treatment and potentially lead a 

longer, healthier, life. We believe early 

preventive health is important for 

deterring many of the chronic 

conditions and illnesses more prevalent 

later in life that are more specific to the 

Medicare population. Additionally, this 

age range aligns with preventive health 

measures with similar age ranges used 

in other CMS quality programs. We also 

appreciate the recommendation to 

extend the age range to 74, however the 

current measure specification is for 

years 40–69. We expect that the 

specifications for the endorsed measures 

may be updated to reflect the change in 

clinical guidelines, at which time we 

would also adopt such specifications. 

Comment: Proposed measure 29. 

Colorectal Cancer Screening. We did not 

receive any comments on this proposed 

measure. 

Response: We will finalize this 

measure as we believe colorectal cancer 

screening is an important component of 

preventive health in the Medicare FFS 

population. 

Comment: Proposed measure 30. 

Cholesterol management for Patients 

with Cardiovascular Conditions. One 

commenter wrote in support of this 

measure. 

Response: We note that the correct 

title of the measure corresponding with 

the NQF number proposed (NQF #75) is: 

Ischemic Vascular Disease: Complete 

Lipid Profile and LDL Control <100. We 

have finalized this measure to reflect the 

correct title and also added an Ischemic 

Vascular Disease subcategory in the At 

Risk Population domain. This measure 

also aligns with other cardiovascular 

disease prevention initiatives that are 

priorities for CMS, CDC, and HHS, such 

as the Million Hearts initiative. 

Comment: Proposed measure 31. 

Adult Weight Screening and Follow-up. 

One commenter expressed concern that 

this was a process measure that does not 

measure actual weight management. 

Response: We believe the processes of 

weight and BMI screening and followup are important steps for preventing 

and reducing obesity and complications 

related to other chronic conditions in 

which weight plays a factor. BMI 

measurement can also be considered an 

intermediate outcome, since BMI can be 

used to monitor patients’ progress with 

respect to weight reduction as well as 

weight gain that can exacerbate chronic 

conditions. Therefore, we are finalizing 

this measure. 

Comment: Proposed measure 32. 

Blood Pressure Measurement. One 

commenter stated that a measure of the 

percentage of patients with uncontrolled 

blood pressure did not represent a best 

practice of care. A few commenters 


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3 DiMatteo MR, Lepper HS, Croghan TW. 

Depression is a risk factor for noncompliance with 

medical treatment: meta-analysis of the effects of 

anxiety and depression on patient adherence. Arch 

Intern Med. 2000 Jul 24;160(14):2101–7. 

questioned the meaningfulness of this 

measure; one urged CMS to go beyond 

structure and process measures to 

measures that solidly address clinical 

appropriateness and overuse. One 

commenter suggested deleting this 

blood pressure process measure, 

because we also proposed a blood 

measure level measure. 

Response: Blood pressure 

measurement for patients with 

diagnosed hypertension is a best 

practice according to clinical guidelines; 

however the measure community 

recognizes the high rate of compliance 

and the need for even greater quality 

improvement. We agree with the 

suggestion to remove this measure, 

since the AMA–PCPI is retiring this 

measure (NQF #13), and because it is 

similar to proposed measure 58. 

Hypertension: Blood Pressure Control 

(NQF #18). 

However, we believe blood pressure 

measurement is an important preventive 

health measure and therefore have 

included ‘‘Proportion of adults 18 years 

and older who have had their BP 

measured within the preceding 2 years,’’ 

in the final measures set, consistent 

with the measure that has been 

proposed for the PQRS for 2012. The 

measure we are finalizing also aligns 

with the Million Hearts Initiative and 

blood pressure measurement standards 

of care recommended by the USPSTF 

and the Joint National Committee on 

Prevention, Detection, Evaluation, and 

Treatment of High Blood Pressure. We 

believe this measure is more appropriate 

for the Preventive Health domain of the 

Shared Savings Program than the 

measure proposed as it is a quality 

measure intended for patients without 

diagnosed hypertension whereas the 

proposed measure was intended for BP 

management for patients with diagnosed 

hypertension. Similar to the proposed 

measure, the measure we are finalizing 

targets a Medicare FFS population age 

18 and older, requires two face-to-face 

provider encounters for assigned 

patients, and would be reported via the 

GPRO web interface. 

Comment: Proposed measure 33. 

Tobacco Use Assessment and Tobacco 

Cessation Intervention. Several 

commenters wrote in support of the 

tobacco use measure. One commenter 

proposed use of NQF Measure #27 as a 

stronger measure of cessation efforts. 

One commenter questioned the fairness 

of holding ACOs responsible for 

patients who might choose to continue 

using tobacco. One commenter 

expressed concern that this measure 

could be gamed and suggested 

excluding or modifying the measure. 

One commenter recommended 

replacing this measure with PQRS 

measure #226. 

Response: Tobacco use is harmful to 

patient health, but among diabetics, it is 

particularly dangerous as it increases 

the risk of complications, and we are 

therefore including this measure in the 

final set. To substantially lower the risk 

for cardiovascular and stroke events, it 

is critical that the specified tobacco use 

assessment and cessation goals are 

achieved. This quality measure aims to 

encourage even greater engagement by 

physicians and their patients in 

achieving tobacco free status. We 

recognize the potential for gaming and 

will monitor this measure closely, for 

instance, through the GPRO audit and 

validation process described in section 

II.F.4.b. of this final rule. We will 

consider suggestions for other measures 

in the future. We also note that at the 

time of our proposed rule the PQRS 

measure number was ‘‘TBD’’ and has 

since been numbered 226; thus, the 

measure we proposed and are including 

in the final measure set for the Shared 

Savings Program is the same measure 

used by PQRS. 

Comment: Proposed measure 34. 

Depression Screening. A few 

commenters wrote in support of the 

depression screening measure. One 

commenter stated that this measure 

would require significant changes in 

primary care workflow, even though it 

has not been linked with improved 

chronic disease outcomes in clinical 

trials. One commenter recommended 

modifying the measure to incorporate 

elements of NQF #17 that specify 

screening, monitoring, and reassessment 

with the Patient Health Questionnaire. 

One commenter recommended CMS 

replace this measure with other 

measures or expand it to include other 

mental health assessment tools. Another 

commenter stated that while several 

useful tools are available in the public 

domain, many lack standardization of 

scoring and data collection modalities, 

or lack sufficient normative data and 

condition-specific benchmarks useful 

for interpreting health scores and 

reducing interpretation bias. In 

addition, the commenter stated, many 

publically available health measures 

lack culturally validated translations for 

non-English speaking patients. 

Response: We disagree with the 

comment that depression screening has 

not been linked to improved chronic 

disease outcomes in clinical trials. In a 

systematic review of the evidence, the 

USPSTF concluded that depression 

screening significantly improves patient 

outcomes. (http://www.ncbi.nlm.nih.

gov/books/NBK36406/) Another study 

found that the presence of depression is 

associated with reduced compliance 

with treatment.3 Because patients in 

whom depression goes unrecognized 

cannot be appropriately treated, 

systematic screening has been 

advocated as a means of improving 

detection, treatment, and outcomes of 

depression. As a result, we are finalizing 

this measure in order to encourage 

ACOs to adopt system changes that 

ensure timely identification and 

adequate treatment and follow-up if 

needed. Since the NQF #17 measure 

suggested is Hypertension Plan of Care 

we believe the commenter was actually 

referring to NQF #712, Depression 

Utilization of the PHQ–9 Tool. 

Comment: Proposed measure 35. 

Diabetes Composite (all or nothing 

scoring) and 52. Coronary Artery 

Disease (CAD) Composite (all or nothing 

scoring). A few commenters wrote in 

support of these measures. A few 

commenters stated opposition to scoring 

these measures in an ‘‘all-or-nothing’’ 

manner. Other commenters cautioned 

against use of both the composite 

measures and counting the components 

of the composite as individual measures 

because of resultant ‘‘double counting.’’ 

A few commenters recommended using 

only the individual measures to allow 

ACOs to target processes for 

improvement but others recommended 

retaining only the composite. 

A few commenters recommended 

CMS replace the diabetes composite 

measure proposed with NQF measure 

#0729 and use the specifications for 

measure #0729 for proposed measures 

36–39 and 41. One commenter 

recommended CMS include 

microalbumin screening in the diabetes 

composite measure as well as an 

individual measure. One commenter 

questioned the fairness of holding ACOs 

responsible for patients who might 

choose to continue using tobacco, under 

the diabetes composite. One commenter 

recommended replacing either the 

diabetes or CAD composites with the 

Optimal Vascular Care Composite (NQF 

#0076). 

Response: To clarify, the diabetes 

composite measure proposed is the 

Optimal Diabetes Care composite, NQF 

#0729, as one commenter suggested. At 

the time of the proposed rule, this 

measure was pending NQF 

endorsement. As a result, we proposed 

similar NQF numbers for the 

components of this composite to 

provide the public the opportunity to 

review and comment on similar and/or 


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4American Diabetes Association. Standards of 

Medical Care in Diabetes—2011. Available at 

http://care.diabetesjournals.org/content/34/

Supplement_1/S11.full. 

related component measures. Since the 

time of proposed rulemaking, the 

measure has been endorsed and 

numbered #0729. We also note this 

composite is currently NQF-endorsed 

with 5 components, of which 

microalbumin screening is not included, 

so we advise the commenter that 

supported inclusion of this measure to 

contact the measure steward directly 

about the addition of other components. 

Although we appreciate that there are 

concerns about all-or-none scoring, 

there are also advantages. For instance, 

AMA–PCPI states that the ‘‘all-or-none 

method is the most patient-centric 

approach and provides the most 

opportunities for improvement, 

especially if the individual components 

are reported out separately.’’ (http://

www.ama-assn.org/resources/doc/cqi/ 

composite-measures-framework.pdf) 

We also understand concerns about 

the redundancy of scoring both the 

composites and individual measures 

and are finalizing the proposed diabetes 

and CAD composites, with modification 

to the CAD composite as described later 

in this final rule, and are not finalizing 

the individual proposed measures that 

were also within the proposed 

composites, consistent with the AMA– 

PCPI statement cited previously. 

However, we will report back to ACOs 

their results on individual measures 

within the composites in addition to 

their overall composite measure score. 

We believe the diabetes and CAD 

composites raise the bar for diabetes and 

CAD care, consistent with Shared 

Savings Program goal of improving 

quality of care, by providing an 

incentive for ACOs to ensure that a 

number of important care processes are 

performed for diabetic and CAD 

patients, and that appropriate outcomes 

are achieved. In contrast, the individual 

measures would award points if only 

some of the processes are performed and 

some outcomes are achieved. We 

recognize the concern about holding 

ACOs accountable for patient choices 

such as continued tobacco use. 

However, since tobacco use causes 

greater complications among diabetics, 

we believe the tobacco use component 

of this composite measure will 

incentivize greater provider 

involvement in smoking cessation 

counseling. 

Comment: Proposed measures 35 and 

39. Diabetes Mellitus: Aspirin Use. One 

commenter wrote in support of this 

measure. One commenter stated that 

these measures are not evidence based 

as aspirin should be given to patients 

with diabetes only after consideration of 

their 10-year risk of a significant 

coronary event in accordance with 

current USPSTF and American Diabetes 

Association guidelines. One commenter 

considered this measure of limited 

value and noted that it only applies to 

those with diabetes and ischemic 

vascular disease but is not included as 

a measure for those with just coronary 

artery disease. 

Response: To clarify, we proposed the 

Minnesota Community Measurement 

‘‘Optimal Diabetes Care’’ composite for 

its up-to-date research, extensive 

testing, and relevance to the Medicare 

FFS beneficiary population, as 

discussed previously. The composite 

measure received NQF endorsement in 

March 2011, too late for this information 

to be included in the Shared Savings 

Program proposed rule. Regarding the 

aspirin use component of proposed 

composite measure 35, which we also 

proposed as individual measure 39, the 

recommendation for aspirin use for 

diabetics with known cardiovascular 

disease is based on American Diabetes 

Association guidelines for daily aspirin 

use.4 Evidence no longer supports daily 

aspirin for all diabetics age 40 and 

older, and, as a result, the aspirin 

component of the composite measure 

only includes diabetic patients with 

known cardiovascular disease. 

We are finalizing diabetes aspirin use 

as part of the diabetes composite 

(proposed measure 35) but are not 

finalizing it as an individual measure at 

this time. Instead of the individual 

aspirin use measure, we are finalizing 

Ischemic Vascular Disease: Use of 

Aspirin or Another Antithrombotic 

(NQF #68), which we believe is a 

broader measure that is more aligned 

with Departmental efforts to improve 

cardiovascular care and with other 

agency programs, such as PQRS. Both 

proposed measure 39 and NQF #68 

measure aspirin or antithrombotic use 

in beneficiaries diagnosed with 

ischemic vascular disease (IVD), use a 

common set of ICD–9 codes to define 

the condition, and are calculated for 

Medicare FFS beneficiaries age 18 and 

older. However, we believe the IVD 

measure is more appropriate as an 

individual measure, since it is intended 

for the entire IVD population, rather 

than only those with IVD and diabetes, 

which the diabetes composite measure 

already captures. 

The IVD measure also includes use of 

other antiplatelet medications, which 

we believe reduces the need for a 

separate CAD: Oral Antiplatelet Therapy 

Prescribed for Patients with CAD 

measure, as discussed in more detail 

later in this final rule in connection 

with proposed measure 53. Thus, we 

believe the IVD measure reduces the 

burden of quality measure reporting for 

ACOs, since it is one GPRO measure 

that captures the data that would 

otherwise have been required be 

reported via 2 separate measures. It also 

aligns with PQRS efforts for 2012, the 

Million Hearts initiative, and the other 

IVD measures we are finalizing in this 

rule. 

Comment: Proposed measures 36 and 

40. Diabetes Mellitus: Hemoglobin A1c 

Control and Hemoglobin A1c Poor 

Control. A few commenters 

recommended that, in order to pare 

down measures, CMS retain only one of 

these measures as there is some overlap. 

One commenter recommended CMS use 

age limits for these measures. 

Response: We note that these 

measures do address somewhat different 

aspects of diabetes control. HbA1c 

Control targets good control in patients, 

with an aim of monitoring to keep levels 

in range, while HbA1c Poor Control 

targets patients whose diabetes is 

poorly-controlled and may require 

additional intervention. Accordingly, 

we believe it is appropriate to retain 

both measures. Although we are not 

finalizing proposed measure 36 in this 

final rule, HbA1c Control is part of the 

all or nothing diabetes composite 

measure under proposed measure 35. 

We suggest that the commenter 

concerned about age limits contact the 

measure steward directly. 

Comment: Proposed measure 38. 

Diabetes Mellitus: Tobacco Non Use. A 

few commenters believed this measure 

was unnecessary as it was duplicative of 

proposed measure 33. Tobacco Use 

Assessment and Tobacco Cessation 

Intervention or suggested that the 

measure be broadened to all tobacco 

users, regardless of diagnoses. One 

commenter expressed concern that this 

measure could be gamed and suggested 

excluding or modifying the measure. 

Response: Tobacco use is harmful to 

patient health, but among diabetics, it is 

particularly dangerous as it increases 

the risk of complications. To 

substantially lower the risk for 

cardiovascular and stroke events among 

patients with diabetes, it is critical that 

the specified outcome goals are 

achieved. This quality measure aims to 

encourage even greater engagement by 

physicians and their diabetic patients in 

achieving tobacco free status. Although 

we are not finalizing this individual 

measure, it is part of the diabetes 

composite under proposed measure 35 

that we are finalizing in this rule. At the 

time the proposed rule was published, 


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5 Guidelines for Improving the Care of the Older 

Person with Diabetes Mellitus. California 

Healthcare Foundation/American Geriatrics Society 

Panel on Improving Care for Elders with Diabetes. 

American Geriatrics Society. May 2003—Vol. 51, 

No. 5 Supplement, JAGS. 

some aspects of the measure had not yet 

received NQF endorsement. Since the 

measure has now been endorsed as part 

of the Optimal Diabetes Care composite 

(NQF #0729), we can clarify that this 

has now been changed to a different 

NQF measure, ‘‘Tobacco Non-Use.’’ This 

measure is specifically endorsed for use 

in diabetics, whereas the measure 

proposed (NQF #28) is a general 

preventive health measure we would 

have calculated for a diabetic 

population. We recognize concerns for 

gaming and intend to use the GPRO 

audit and validation process described 

in section II.F.4.b. of this final rule, to 

monitor such activities. 

Comment: Proposed measure 40. 

Diabetes Mellitus: Hemoglobin A1c Poor 

Control. One commenter questioned 

inclusion of this measure stating it was 

not evidence-based, citing research 

suggesting that interventions to 

maintain glycemic control in the frail 

elderly may adversely affect outcomes. 

One commenter recommended CMS 

remove this measure as it is not aligned 

with patient goals. 

Response: We are finalizing this 

measure as we believe glycemic control 

is an important quality issue. The 

American Geriatrics Society guidelines 

currently state that avoiding poor 

glycemic control is important even for 

frail older adults; therefore, we believe 

this measure is consistent with the 

standard of care and aligned with 

patient goals.5

Comment: Proposed measure 41. 

Diabetes Mellitus: High Blood Pressure 

Control in Diabetes Mellitus. One 

commenter stated that this measure is 

not geared towards population health 

and should be removed. 

Response: We included this measure 

as a population health measure because 

diabetes is prevalent in the Medicare 

population and has high rates of 

morbidity and mortality. Most people 

with diabetes have other risk factors, 

such as high blood pressure, that 

increase the risk for heart disease and 

stroke. However, we are not finalizing 

this as an individual measure, because 

it is part of the diabetes composite, 

proposed measure 35. that we are 

finalizing. 

Comment: Proposed measures 42.–44. 

At Risk Population—Diabetes. One 

commenter supported including 

proposed measure 42. Diabetes Mellitus: 

Urine Screening for Microalbumin or 

Medical Attention for Nephropathy in 

Diabetic Patients. Another commenter 

believed this measure could be removed 

as it only measured process. One 

commenter stated that, regarding 

proposed measure 43. Diabetes Mellitus: 

Dilated Eye Exam in Diabetic Patients, 

there are alternatives to dilated eye 

exams and recommended providers not 

be penalized for using those 

alternatives. We did not receive any 

comments on proposed measure 44. 

Diabetes Mellitus: Foot Exam. 

Response: We are not finalizing these 

measures at this time. While we agree 

that nephropathy screening, eye exams, 

and foot exams are important for 

diabetics, in order to reduce the burden 

of the quality reporting at the start of the 

Shared Savings Program, we have 

sought to include only the most high 

impact diabetes intermediate outcome 

measures and are not finalizing these 

measures at this time. If the commenter 

that recommended eye exam 

alternatives is referring to fundus 

photographs as the alternative, the 2011 

American Diabetes Association (ADA) 

Standards of Medical Care in Diabetes 

still recommend dilated eye exams and 

state that while retinal photography may 

serve as a screening tool for retinopathy, 

it is not a substitute for a comprehensive 

eye exam. 

Comment: Proposed measures 45–51. 

At Risk Population—Heart Failure. One 

commenter supported proposed 

measures 45. Heart Failure: Left 

Ventricular Function (LVF) Assessment 

and 46. Heart Failure: Left Ventricular 

Function (LVF) Testing. A few of 

commenters stated that LVF assessment 

reflects a minimal standard of care and 

urged CMS to go beyond structure and 

process measures to measures that 

solidly address clinical appropriateness 

and overuse. Another commenter 

questioned how meaningful these 

measures are as they may already have 

high performance levels and, therefore, 

have little room for additional quality 

improvement. Another commenter 

wrote in support of proposed measure 

49. Heart Failure: Beta-Blocker Therapy 

for Left Ventricular Systolic Dysfunction 

(LVSD). 

One commenter was concerned that 

proposed measure 47. Heart Failure: 

Weight Measurement was duplicative to 

proposed measure 31 (Adult Weight 

Screening and Follow-up). One 

commenter stated that the measure 

developer had retired this measure. 

Another commenter stated the measure 

was of limited value because it fails to 

differentiate between providers. 

One commenter stated proposed 

measure 48. Heart Failure: Patient 

Education was of limited value because 

it fails to differentiate between 

providers. Another commenter wrote in 

support of proposed measure 50. Heart 

Failure: Angiotensin-Converting 

Enzyme (ACE) Inhibitor or Angiotensin 

Receptor Blocker (ARB) Therapy for Left 

Ventricular Systolic Dysfunction, while 

another commenter questioned the 

value of this measure as it already has 

high performance levels in some 

regions. 

One commenter wrote in support of 

proposed measure 51. Heart Failure: 

Warfarin Therapy for Patients with 

Atrial Fibrillation. Another commenter 

noted that this measure is outdated and 

should be modified to include thrombin 

inhibitor therapy, and one commenter 

recommended removing this measure 

entirely. 

Response: While we agree that LVF 

testing has improved, 2011 AMA–PCPI 

guidelines cite LVF assessment, Patient 

Education, and ACEI/ARB Therapy for 

LVSD as opportunities for improvement. 

(http://www.ama-assn.org/ama1/pub/

upload/mm/pcpi/hfset-12-5.pdf) 

However, in response to comments 

about reducing the number of quality 

measures and in an effort to finalize 

higher impact measures, we are not 

finalizing LVF assessment (proposed 

measure 45), LVF testing (proposed 

measure 46), Patient Education 

(proposed measure 48), or ACEI/ARB 

Therapy for LVSD (proposed measure 

50). We are also not finalizing the Heart 

Failure: Weight Measurement measure 

(proposed measure 47), as it is retired, 

as one commenter noted. We are also 

not finalizing the Warfarin Therapy 

measure (proposed measure 51) but 

intend to further research the 

implications of such a measure of 

warfarin therapy as opposed to one of 

thrombin inhibitor therapy and revisit 

this in the future. 

Of the measures proposed for heart 

failure, we believe there is greatest 

opportunity for quality improvement in 

the Beta-Blocker Therapy for LVSD 

(proposed measure 49) and ACSC: 

Congestive Heart Failure (proposed 

measure 15), aimed at reducing 

avoidable admissions, and are finalizing 

both measures. 

Comment: Proposed measure 52. 

Coronary Artery Disease (CAD) 

Composite: All or Nothing Scoring. 

Comments discussed previously with 

proposed measure 35. 

Response: We have finalized this 

measure with modification to include 

only the following components: Drug 

Therapy for Lowering LDL-Cholesterol 

and Angiotensin-Converting Enzyme 

(ACE) Inhibitor or Angiotensin Receptor 

Blocker (ARB) Therapy for Patients with 

CAD and Diabetes and/or Left 

Ventricular Systolic Dysfunction 


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(LVSD). Since CAD is a common 

chronic condition and is an underlying 

condition for individuals with other 

chronic conditions, we are narrowing 

our composite measure to focus on CAD 

measures that better align with final 

measures in other chronic disease areas. 

In addition, while we will score this 

measure as a composite measure, we 

will provide feedback on the individual 

components so ACOs can identify areas 

of lower performance and design 

strategies to improve performance. 

Comment: Proposed measure 53. 

Coronary Artery Disease (CAD): Oral 

Antiplatelet Therapy Prescribed for 

Patients with CAD. One commenter 

wrote in support of this measure. 

Response: We are not finalizing this 

measure at this time, as we believe the 

aspirin use component of the diabetes 

composite (proposed measure 35) and 

the IVD: Use of Aspirin or Another 

Antithrombotic measure (discussed 

under proposed measure 39) align and 

complement the CAD measures given 

the overlap in the chronic disease 

population. Therefore, we are finalizing 

the diabetes composite and the IVD: Use 

of Aspirin or Another Antithrombotic 

measures in lieu of proposed measures 

39 and 53. 

Comment: Proposed measure 54. 

Coronary Artery Disease (CAD): Drug 

Therapy for Lowering LDL–Cholesterol. 

One commenter wrote in support of this 

measure. One commenter suggested 

dropping this measure and retaining 

proposed measure 56 (Coronary Artery 

Disease: LDL Level <100 mg/dl) in order 

to pare down measures and retain those 

with the most impact on health 

outcomes. Another commenter 

questioned whether there is 

demonstrated variability on this 

measure and whether it was of value. 

Response: We note that AMA–PCPI 

identified this measure as an 

opportunity for improvement and as a 

result have retained the measure in the 

final measure set under the CAD 

composite (proposed measure 52) but 

not as an individual measure, since we 

believe CAD is an area in which we can 

raise the bar for quality improvement 

through all or nothing scoring. 

Comment: Proposed measure 55. 

Coronary Artery Disease (CAD): BetaBlocker Therapy for CAD Patients with 

Prior Myocardial Infarction (MI). One 

commenter wrote in support of this 

measure. Another commenter cautioned 

CMS to use the most recent version of 

this measure, which was updated to 

include patients with left ventricular 

systolic dysfunction. One commenter 

expressed concern about the sample size 

for most ACOs, whether there is 

demonstrated variability in the measure, 

and exclusions for patients who have 

contraindications to beta blockers. 

Response: We have taken the measure 

update into consideration and decided 

not to finalize the measure at this time 

as we believe the IVD measure we are 

finalizing (discussed under proposed 

measure 39) is a broader measure that 

encompasses this aspect of CAD care 

and allows us to reduce reporting 

burden to ACOs by requiring fewer 

measures to be reported. 

Comment: Proposed measure 57. 

Coronary Artery Disease (CAD): 

Angiotensin-Converting Enzyme (ACE) 

Inhibitor or Angiotensin Receptor 

Blocker (ARB) Therapy for Patients with 

CAD and Diabetes and/or Left 

Ventricular Dysfunction (LVSD). One 

commenter questioned whether there is 

demonstrated variability in this measure 

and whether allowances would be made 

for patients with contraindications to 

ACEs/ARBs. 

Response: We believe this measure 

has room for improvement and have 

decided to finalize this measure under 

proposed measure 52, the CAD 

composite measure, rather than as an 

individual measure, as we believe CAD 

is an area in which we can raise the bar 

for quality improvement through all or 

nothing scoring. We will take 

contraindications into account prior to 

releasing measures specifications. 

Comment: Proposed measure 58. 

Hypertension: Blood Pressure Control. 

One commenter stated that this measure 

is dependent on medical record data 

making it particularly difficult for ACOs 

to collect and report and recommended 

it not be included, at least initially. One 

commenter stated that this measure is 

not geared towards population health 

and should be removed. One commenter 

believed beneficiary compliance to be 

outside the provider’s control and 

recommended that CMS monitor this 

measure rather than include it in the 

performance score. 

Response: Many of these measures are 

based on medical record data and will 

be collected through the GPRO web 

interface, which will allow data 

collection from electronic medical 

records, patient registries and other 

administrative systems, as well as from 

paper records. Hypertension is one of 

the most common chronic illnesses in 

the Medicare population and a major 

cause of morbidity and mortality and a 

contributing risk factor for other highly 

prevalent conditions such as diabetes 

and heart disease. Although some 

factors influencing outcome measures 

are outside the provider’s control, many 

others, such as tailoring blood pressure 

medications and nutrition education, 

can be influenced by services received 

through the ACO. Therefore, we are 

finalizing this measure in the final set. 

Comment: Proposed measure 59. 

Hypertension: Plan of Care. Several 

commenters recommended removing 

this measure. Their reasons included: 

Concerns that the measure is not geared 

towards population health; it is 

inefficient; labor intensive; and not 

scalable. Another commenter believed 

this measure could be removed as long 

as Hypertension: Blood Pressure Control 

was retained. 

Response: We believe this measure is 

important, but may have some overlap 

with the Adult Weight Screening and 

Follow-up measure (proposed measure 

31), which also includes a plan of care 

component. Thus, we are not finalizing 

this measure in an effort to be sensitive 

to general measures comments about the 

number of required measures and 

redundancy. We are, however, retaining 

the Hypertension: Blood Pressure 

Control measure, consistent with one 

commenter’s suggestion. 

Comment: Proposed measure 60. 

Chronic Obstructive Pulmonary Disease 

(COPD): Spirometry Evaluation. One 

commenter wrote in support of retaining 

this measure. One commenter 

recommended CMS use age limits for 

this measure. 

Response: We are not finalizing the 

measure at this time, in an effort to 

respond to general comments about the 

number of required measures and 

reporting burden. If the commenter that 

recommended the use of age limits for 

this measure is suggesting changes to 

the endorsed specification, we 

recommend communicating with the 

measure steward directly. We note, 

however, that we are finalizing the 

ACSC: COPD measure (proposed 

measure 14) as previously discussed. 

Comment: Proposed measure 61. 

Chronic Obstructive Pulmonary Disease 

(COPD): Smoking Cessation Counseling 

Received. One commenter wrote in 

support of retaining this measure. One 

commenter expressed concern that this 

measure could be gamed and suggested 

excluding or modifying the measure. 

Response: Tobacco use is harmful to 

patient health, but among patients with 

COPD, it is particularly harmful as it 

can cause progression of the illness. We 

acknowledge the potential for gaming, 

which is why we proposed a GPRO 

audit and validation process. However, 

we have decided not to finalize this 

measure at this time, as we believe 

smoking cessation counseling is 

important for all patients. Accordingly, 

we are instead finalizing the Tobacco 

Use Assessment and Tobacco Cessation 

Intervention measure (proposed 

measure 33), which includes 


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individuals with COPD. We believe this 

decision is also responsive to general 

comments about the number of required 

measures, redundancy in the measures, 

and reporting burden. 

Comment: Proposed measure 62. 

Chronic Obstructive Pulmonary Disease 

(COPD): Bronchodilator Therapy based 

on FEV1. Two commenters wrote in 

support of this measure. 

Response: We are not finalizing this 

measure at this time, but we are 

finalizing the ACSC: COPD measure 

(proposed measure 14), which aims to 

reduce avoidable admissions and is 

outcome focused. 

Comment: Proposed measure 63. 

Falls: Screening for Fall Risk. Several 

commenters supported this measure. 

One commenter stated that this is a 

survey-based measure and should not be 

submitted via GPRO but could be added 

to CG CAHPS. This commenter also 

noted that the proposed measure does 

not match the current measure 

description in the 2011 NCQA HEDIS 

Specifications Volume II. 

Response: We believe it is important 

for an ACO to conduct a fall risk 

screening or have one noted in a 

patient’s medical record and to report 

this measure. The CG CAHPS is a 

patient-reported survey, which we do 

not think is appropriate for this 

measure, given the required 

involvement of a provider educated 

about requirements for a meaningful 

assessment. We are finalizing this 

measure and have adjusted the measure 

description in Table 1 to reflect the NQF 

description. We agree that the proposed 

measure does not match the 2011 HEDIS 

measure description, but HEDIS 

includes a different measure (NQF #35) 

than the one proposed for ACO (NQF 

#101). We are also moving this measure 

to the Care Coordination/Patient Safety 

domain as we believe it is more 

accurately characterized as a patient 

safety measure. 

Comment: Proposed measure 64. 

Osteoporosis Management in Women 

who had a Fracture. Two commenters 

wrote in support of this measure. One 

commenter commended CMS for 

inclusion of this measure but 

recommended that it be expanded to 

include men who have had a fracture 

based on recent literature. One 

commenter believed that CMS should 

align ACO and PQRS measures by 

replacing this measure with the four 

NQF-endorsed osteoporosis measures in 

PQRS. 

Response: At this time, we have 

decided not to finalize this measure in 

order to allow ACOs to focus their 

efforts to redesign their care processes to 

incorporate fall risk assessments and to 

use those results in meaningful 

conversations with their patients about 

fall risks and ways to reduce them. As 

ACOs gain more experience in 

integrating the fall risk screening 

measure more broadly into their day-today practices, we will revisit the frail 

elderly measures in future rulemaking 

to build upon these achievements and to 

address additional issues for the frail 

elderly. 

Comment: Proposed measure 65. 

Monthly INR for Beneficiaries on 

Warfarin. One commenter wrote in 

support of this measure. One 

commenter suggested CMS use ACOVE 

guidelines for INR. One commenter 

suggested CMS modify its proposal to 

measure the quality of warfarin therapy 

by measuring patients on stabilized 

warfarin therapy within the critical INR 

range. Several commenters 

recommended removing of this measure 

and believed it was out of date. 

Response: We have decided not to 

finalize the measure at this time. We 

intend to investigate the 

appropriateness of warfarin therapy 

further, including developments 

regarding of alternative therapies and 

gaps in monthly INR monitoring, and 

will consider this measure and/or other 

related measures that may be 

appropriate in future rulemaking cycles. 

Comment: While a majority of 

commenters suggested paring down the 

measure set, we received a number of 

suggestions for additional measures and 

measure categories that were not 

included in our proposed measures set, 

such as measures of: emergency room 

visits, comprehensive medication 

management, patient safety, additional 

potentially preventable complications, 

care transitions, more robust mental 

health measures, substance use, 

underuse of health care services, 

perioperative care, cancer survivorship 

care, hematology care, kidney disease, 

COPD, asthma and other allergic 

diseases, patient engagement, recovery 

and wellness. Several commenters 

recommended including risk-adjusted 

mortality measures for the entire ACO 

population, not limited to those who 

have been hospitalized. A few 

commenters advocated for more 

emphasis on continued quality 

improvement rather than quality 

assurance. 

Response: Given that many ACOs will 

be newly forming organizations, we 

concluded that ACO quality measures 

should focus on discrete processes and 

short-term measurable outcomes 

derived from administrative claims and 

limited medical record review 

facilitated by a CMS-provided web 

interface to lessen the burden of 

reporting. For both the proposed rule 

and this final rule, we selected a set of 

quality measures based on the criteria 

discussed in section II.F.2.b. of this final 

rule. Because of the focus on Medicare 

FFS beneficiaries, our measure selection 

emphasized prevention and 

management of chronic diseases that 

have high impact on these beneficiaries 

such as heart disease, diabetes mellitus 

and chronic obstructive pulmonary 

disease. 

Comment: A number of commenters 

were concerned that the program 

measure quality across the spectrum of 

care settings including not just 

outpatient clinics and short-term acute 

hospital care but also federally qualified 

health centers, rural environments, 

convenient care clinics, home health, 

telehealth, remote patient monitoring, 

SNFs or long-term care, behavioral 

health, rehabilitation care, anesthesia 

care, hospice and palliative care, and 

case management. A number of these 

commenters suggested adding specific 

measures. One commenter advocated for 

a separate domain of palliative care. 

Response: We selected final measures 

with a predominantly ambulatory care 

focus, consistent with the primary care 

focus of, and beneficiary assignment 

methodology used for, the Shared 

Savings Program. It is important to note, 

however, that ACOs may use 

information from additional care 

settings types of providers in reporting 

quality information via the GPRO web 

interface and that patients’ total 

Medicare Part A and B claims history 

will be used in determining GPRO 

measure denominators and calculating 

claims-based measures. We encourage 

ACOs to work with providers across the 

care spectrum to better coordinate care 

and improve the quality of care for their 

mutual patient population. 

Comment: A number of commenters 

suggested that new measures are needed 

for ACOs and that CMS should partner 

with others, such as Regional Health 

Improvement Collaboratives and AHRQ, 

to identify gaps and develop new 

measures. One commenter supported 

development of new patient-centered 

functional outcome measures that are 

site-neutral, focused on the coordination 

of services, and based on individual 

needs and preferences for care. Another 

stated that new measures specific to the 

ACO patient experience should be 

developed in the future but not prior to 

the launch of the ACO program. One 

commenter recommended development 

of measures of appropriate use of new 

technologies. One commenter expressed 

concern that current measures reflect 

limitations of the current payment 

system, while ACO metrics should 


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include population-based outcomes 

measures such as emergency room use, 

potentially preventable admission rates, 

in-hospital mortality rates, and possibly 

patient safety measures. One commenter 

supported measures of how ACO 

professionals use their performance on 

quality measures to improve care as 

well as the quality measures themselves. 

One commenter proposed that 

emergency medicine measures should 

be developed, while another urged CMS 

to work with NQF to develop more 

robust measures of medication 

management. 

Response: We appreciate the 

commenters’ interest in measures that 

address additional areas of specialty 

care, inpatient and post acute care while 

working to move our measurement 

strategy to more outcome-oriented 

measures and will consider these in the 

future. 

Comment: A number of commenters 

recommended CMS include measures 

that are more inclusive of specialty care, 

pediatric care, and non-physician 

professionals, such as nurse 

practitioners and registered nurses. 

Many of these commenters noted that 

the proposed measures were heavily 

focused on primary care. One 

commenter believed the emphasis on 

primary care measures would result in 

much less data on which to judge ACO 

quality for specialty care, which could 

either inappropriately reward or punish 

specialist providers. Other commenters 

expressed concern that specialty care 

and care for those with disabilities 

might be negatively affected by the lack 

of specialty measures or incentives to 

skimp on necessary care. One 

commenter added that most proposed 

measures have no direct relationship to 

cost management that could be achieved 

during the ACO agreement period, 

particularly since specialty care is a 

driver of cost differences. Without 

specific quality measures related to 

specialty care, the commenter argues, 

specialists in ACOs will face pressure to 

reduce the costs of specialty care, which 

may translate into inferior care for 

beneficiaries by limiting access to 

specialty care and ignoring quality. 

Several commenters recommended 

measures that reflect the 

interprofessional nature of an ACO and 

the mix of clinicians providing primary 

care. 

Response: We believe that the final set 

of measures is appropriately focused 

and measures care furnished by a 

variety of providers including 

specialists, nurses, and nurse 

practitioners. We also believe the issue 

of including specialty providers who 

furnish primary care services is 

addressed in the two-step beneficiary 

assignment methodology discussed in 

section II.E of this final rule. We also 

agree that monitoring is necessary to 

ensure providers do not skimp on care 

or avoid at-risk beneficiaries. Our final 

policies regarding monitoring of ACOs 

are discussed in section II.H. of this 

final rule. Finally, we do not think 

including pediatric measures is 

appropriate at this time, since the 

Shared Savings Program is designed for 

the Medicare FFS population, which 

includes very few children and would 

not allow for reliable and valid pediatric 

measures. 

We also received suggestions for a 

process to retire and add measures over 

time. 

Comment: A few commenters 

recommended CMS take steps to assure 

that the most recent version of a 

specification, per the measure 

developer, is being used and that 

measures keep pace with current 

evidence. One commenter suggested 

that we conduct an annual review of the 

quality measures as well as new 

scientific evidence published in peerreviewed medical literature and 

comparative effectiveness research of 

the Patient-Centered Outcomes Research 

Institute (PCORI) and remove any 

measures that are no longer supported 

by the evidence. Another commenter 

suggested that CMS should plan to 

update evaluation tools and methods as 

advances allow. One commenter 

requested that CMS assure that quality 

measures keep pace with new 

technologies and advances in medical 

care. Another commenter recommended 

CMS specify its criteria for selecting 

future measures and suggested 

beginning with: correlation with 

outcomes; NQF endorsement; measure 

impact (that is, high-volume, high-cost); 

sufficient sample size; existence of 

complete and clear specifications; 

compound or composite measures; and 

degree of opportunity for improvement, 

as indicated by high variability across 

organizations. One commenter stated 

that measures should be meaningful to 

consumers. 

A few commenters suggested that 

measures not be modified or added 

during the first agreement period or, at 

minimum, that we institute a system 

similar to the final value-based 

purchasing system where measures 

must be reported for a year without 

specification changes before they are 

eligible to be added to the performance 

standard. These commenters stated that 

keeping measures constant would allow 

ACOs to compare results from year to 

year. One of these commenters thought, 

at a minimum, any new measures added 

during an agreement period should be 

reasonable in number and limited to 

those that have been publicly reported 

for one year, in line with the HVBP 

model. One commenter requested CMS 

clarify how ACOs will be notified of 

changes to quality reporting in 

subsequent years and how new quality 

measures would be vetted. Another 

commenter recommended measures be 

added through an approval process 

open to all interdisciplinary health 

providers through their professional 

organizations while another commenter 

recommended that CMS use a formal 

notice and comment process to retire or 

add measures so that all stakeholders 

have the opportunity for input. One 

commenter suggested CMS add new 

measures during the agreement period 

for reporting only and not include those 

in the shared savings calculation. This 

commenter also recommended that 

more than 90 days lead time should be 

given before new measures are added. A 

few commenters recommended 

publishing final measure specifications 

at least 90 days in advance for 2012 and 

at least 180 days notice be given for 

subsequent years, while another 

commenter recommended that CMS 

publish sample approach, sample size 

and data collection rules for any survey 

tools at least 12 months in advance. 

Another commenter recommended 

measures be published at least 18 

months in advance. One commenter 

suggested that measures which are 

substantially modified be reported for a 

year prior to being incorporated into the 

performance standard. One commenter 

suggested measures be added only if 

they meet an ACO’s patient population 

needs and removed if they are found to 

be unreliable, unactionable, or do not 

meet the needs of the population served. 

Response: As discussed previously, 

detailed measure specifications, 

including the measure title, for the 

Shared Savings Program quality 

measures may have been updated or 

modified during the NQF endorsement 

process or for other reasons prior to 

2012. Specifications for all Shared 

Savings Program quality measures must 

be obtained from the specifications 

document for Shared Savings Program 

quality measures. As measures stewards 

frequently make their measures updates 

for a given year during the 4th quarter 

of the preceding year or the 1st quarter 

of the applicable year, we expect to 

release specifications during the 4th 

quarter of 2011 or the 1st quarter of 

2012 for most of the measures. We 

expect to release specifications for the 

CAHPS survey later in 2012. We will 

also add and retire measures as 


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appropriate through the rulemaking 

process. We are working with the 

measures community to ensure that our 

specifications are the most up-to-date 

for the 2012 Shared Savings Program 

performance period. We have to balance 

timing the release of specifications so 

they are as up-to-date as possible, while 

also giving ACOs sufficient time to 

review specifications. 

Comment: One commenter requested 

that CMS clarify exclusion options for 

situations when following an evidencebased guideline would be inappropriate 

for a given ACO patient. A few 

commenters noted many of the 

proposed measures are inappropriate for 

terminally ill patients and 

recommended excluding such patients 

from quality measure calculations 

without consequence to the ACO. 

Response: Measure owners identify 

appropriate exclusion criteria as part of 

their measure specifications. 

Additionally, measures collected via the 

GPRO web interface allow providers to 

exclude patients per the measure 

specifications and for other defined 

reasons related to the reporting 

methodology as appropriate. The ACO 

measures specifications and reporting 

methodology will be provided in 

subregulatory guidance. However, in the 

proposed rule, we included information, 

such as the NQF number, for each 

measure so that the public could view 

measures specifications information on 

the NQF Web site and as currently used 

in other CMS programs, such as PQRS 

and the EHR Incentive Programs. Our 

audit and validation process and 

monitoring activities will also look at 

exclusions to determine if ACOs are 

excluding large numbers of patients 

from quality reporting as a way to avoid 

reporting or to game the methodology. 

Comment: Many commenters 

suggested that CMS outline quality 

reporting requirements over the entire 

ACO agreement period since Medicare 

ACOs are required to commit to 

participating for at least 3 years. One 

commenter was disappointed that we 

only aligned with PQRS measures for 

the first year of the agreement period. 

One commenter recommended a 2 year 

reporting-only period for any future new 

measures that are not currently being 

collected. One commenter suggested 

that if measures for the agreement 

period are not specified up front, an 

ACO should be able to withdraw from 

its agreement if the second and third 

year measure reporting requirements are 

too burdensome and resource intensive. 

One commenter urged CMS to specify 

the reporting period, due date of 

submission, and the population that is 

being measured for each of the quality 

measures in the final rule. One 

commenter recommended that ACOs 

not be required to develop clinical 

guidelines and instead we should 

encourage them to use those developed 

by medical specialty societies. There 

was widespread support among 

commenters for a ramp-up approach to 

measurement and linking the degree of 

measure reporting—or in later years, 

measure performance—to the degree of 

shared savings. Many commenters 

believed phasing in measures or having 

a tiered approach, rather than requiring 

ACOs meet all thresholds would 

encourage wider participation, allow 

ACOs time to develop the necessary 

infrastructure and capacity, and reduce 

startup costs. Several commenters 

proposed a tiered approach to the 

performance standard. A few 

commenters stated that this approach 

would not only encourage participation 

but would help avoid some of the 

learning curve issues that occur in new 

programs. Several commenters pointed 

to the approach taken by the PGP 

Demonstration, in which an initial set of 

measures was phased in over time, and 

suggested the Shared Savings Program 

take a similar approach. 

While a number of commenters 

endorsed the first year quality 

performance standard at the reporting 

level, a number of commenters 

recommended extending it for 2 years, 

and a few endorsed a pay-for-reporting 

standard for the entire first agreement 

period. Another commenter requested 

that, if measures which are not in 

current use are included in the final 

rule, these be kept at the reporting 

standard for the entire agreement 

period. One commenter thought the 

proposed Ambulatory Care Sensitive 

Conditions and Risk Standardized All 

Condition Readmission measures 

proposed should be pay for reporting 

measures only during the entire 

agreement period, due to the associated 

cost and risk, similar to the way in 

which new measures have been treated 

under the PGP demonstration. One 

commenter urged CMS not to use the 

reporting standard and to establish at 

least a minimum performance threshold 

from the outset of the program. 

Response: We have outlined in Tables 

1 and 2 the quality measure 

requirements for the ACO agreement 

period. We do not intend to develop 

specific clinical guidelines for ACOs. 

Rather, we intend to adopt existing 

clinical guidelines as appropriate for 

ACOs in our measure specifications. 

Withdrawal from the Shared Savings 

Program is discussed in section II.H.5. 

of this final rule. A subset of these 

measures will be phased in for 

performance scoring starting in 

performance year 2 of the agreement 

period, as illustrated in Table 1 and 

summarized in Table 2. We believe this 

approach emphasizes all domains and 

measures as important, provides a 

longer phase in of measures to pay for 

performance than in our original 

proposal, and aligns closely with the 

phase in used in the PGP Transition 

Demonstration. 

We expect to require ACOs to report 

all measures listed in Table 11 during 

each ‘‘reporting period,’’ as defined in 

§ 425.20, of its agreement. This means 

that while an ACO’s first ‘‘performance 

year,’’ as defined in § 425.20, for shared 

savings purposes would be 18 or 21 

months, quality data will be collected 

on a calendar year reporting period 

basis, beginning with the reporting 

period starting January 1, 2012 through 

December 31, 2012 for ACOs electing an 

interim payment. Thus, the first 

performance year of the ACO agreement 

period begins April 1, 2012 or July 1, 

2012 and ends December 31, 2013, 

while quality performance for this first 

performance year will be based on 

complete and accurate reporting of 

measures January 1, 2013 through 

December 31, 2013. Quality data 

submitted via the GPRO web interface 

for the 2012 reporting period would also 

be used for purposes of the PQRS 

incentive under the Shared Savings 

Program, as discussed in II.F.5. of this 

final rule and for the interim payment 

calculation, as discussed in II.G.2.k. of 

this final rule. Furthermore, for all 

ACOs starting in 2012, we will conduct 

a CAHPS survey with assigned ACO 

beneficiaries and will measure claimsand administrative-based quality 

measures. Complete and accurate 

reporting on all quality measures in 

Table 1 for both the calendar year 2013 

will be used to determine shared 

savings eligibility for an ACO’s first 

performance year. The pay for 

performance phase-in of measures and 

second performance year for shared 

savings purposes would begin January 

1, 2014. Table 2 summarizes the number 

pay for reporting and pay for 

performance measures for each 

performance year. 


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TABLE 1—MEASURES FOR USE IN ESTABLISHING QUALITY PERFORMANCE STANDARDS THAT ACOS MUST MEET FOR

SHARED SAVINGS

Domain Measure title 

NQF measure 

#/measure 

steward 

Method of 

data 

submission 

Pay for performance phase in 

R = Reporting P = Performance 

Year 1 Year 2 Year 3 

AIM: Better Care for Individuals 

1. Patient/Caregiver Experience.CAHPS: Getting Timely 

Care, Appointments, and 

Information.

NQF #5, 

AHRQ.

Survey .......... R P P 

2. Patient/Caregiver Experience.CAHPS: How Well Your 

Doctors Communicate.

NQF #5 

AHRQ.

Survey .......... R P P 

3. Patient/Caregiver Experience.CAHPS: Patients’ Rating of 

Doctor.

NQF #5 

AHRQ.

Survey .......... R P P 

4. Patient/Caregiver Experience.CAHPS: Access to Specialists.NQF #5 

AHRQ.

Survey .......... R P P 

5. Patient/Caregiver Experience.CAHPS: Health Promotion 

and Education.

NQF #5 

AHRQ.

Survey .......... R P P 

6. Patient/Caregiver Experience.CAHPS: Shared Decision 

Making.

NQF #5 

AHRQ.

Survey .......... R P P 

7. Patient/Caregiver Experience.CAHPS: Health Status/ 

Functional Status.

NQF #6 

AHRQ.

Survey .......... R R R 

8. Care Coordination/Patient 

Safety.

Risk-Standardized, All Condition Readmission*.NQF #TBD 

CMS.

Claims .......... R R P 

9. Care Coordination/Patient 

Safety.

Ambulatory Sensitive Conditions Admissions: Chronic 

Obstructive Pulmonary 

Disease (AHRQ Prevention Quality Indicator 

(PQI) #5).

NQF #275 

AHRQ.

Claims .......... R P P 

10. Care Coordination/Patient 

Safety.

Ambulatory Sensitive Conditions Admissions: Congestive Heart Failure 

(AHRQ Prevention Quality 

Indicator (PQI) #8).

NQF #277 

AHRQ.

Claims .......... R P P 

11. Care Coordination/Patient 

Safety.

Percent of PCPs who Successfully Qualify for an 

EHR Incentive Program 

Payment.

CMS ............. EHR Incentive Program Reporting.R P P 

12. Care Coordination/Patient 

Safety.

Medication Reconciliation: 

Reconciliation After Discharge from an Inpatient 

Facility.

NQF #97 

AMA–PCPI/ 

NCQA.

GPRO Web 

Interface.

R P P 

13. Care Coordination/Patient 

Safety.

Falls: Screening for Fall 

Risk.

NQF #101 

NCQA.

GPRO Web 

Interface.

R P P 

AIM: Better Health for Populations 

14. Preventive Health ................ Influenza Immunization ....... NQF #41 

AMA–PCPI.

GPRO Web 

Interface.

R P P 

15. Preventive Health ................ Pneumococcal Vaccination NQF #43 

NCQA.

GPRO Web 

Interface.

R P P 

16. Preventive Health ................ Adult Weight Screening and 

Follow-up.

NQF #421 

CMS.

GPRO Web 

Interface.

R P P 

17. Preventive Health ................ Tobacco Use Assessment 

and Tobacco Cessation 

Intervention.

NQF #28 

AMA–PCPI.

GPRO Web 

Interface.

R P P 

18. Preventive Health ................ Depression Screening ......... NQF #418 

CMS.

GPRO Web 

Interface.

R P P 

19. Preventive Health ................ Colorectal Cancer Screening.NQF #34 

NCQA.

GPRO Web 

Interface.

R R P 

20. Preventive Health ................ Mammography Screening ... NQF #31 

NCQA.

GPRO Web 

Interface.

R R P 

21. Preventive Health ................ Proportion of Adults 18+ 

who had their Blood Pressure Measured within the 

preceding 2 years.

CMS ............. GPRO Web 

Interface.

R R P 

22. At Risk Population—Diabetes.Diabetes Composite (All or 

Nothing Scoring): Hemoglobin A1c Control (< 8 

percent).

NQF #0729 

MN Community 

Measurement.

GPRO Web 

Interface.

R P P 


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TABLE 1—MEASURES FOR USE IN ESTABLISHING QUALITY PERFORMANCE STANDARDS THAT ACOS MUST MEET FOR

SHARED SAVINGS—Continued 

Domain Measure title 

NQF measure 

#/measure 

steward 

Method of 

data 

submission 

Pay for performance phase in 

R = Reporting P = Performance 

Year 1 Year 2 Year 3 

23. At Risk Population—Diabetes.Diabetes Composite (All or 

Nothing Scoring): Low 

Density Lipoprotein 

(< 100).

NQF #0729 

MN Community 

Measurement.

GPRO Web 

Interface.

R P P 

24. At Risk Population—Diabetes.Diabetes Composite (All or 

Nothing Scoring): Blood 

Pressure < 140/90.

NQF #0729 

MN Community 

Measurement.

GPRO Web 

Interface.

R P P 

25. At Risk Population—Diabetes.Diabetes Composite (All or 

Nothing Scoring): Tobacco Non Use.

NQF #0729 

MN Community 

Measurement.

GPRO Web 

Interface.

R P P 

26. At Risk Population—Diabetes.Diabetes Composite (All or 

Nothing Scoring): Aspirin 

Use.

NQF #0729 

MN Community 

Measurement.

GPRO Web 

Interface.

R P P 

27. At Risk Population—Diabetes.Diabetes Mellitus: Hemoglobin A1c Poor Control 

(> 9 percent).

NQF #59 

NCQA.

GPRO Web 

Interface.

R P P 

28. At Risk Population—Hypertension.Hypertension (HTN): Blood 

Pressure Control.

NQF #18 

NCQA.

GPRO Web 

Interface.

R P P 

29. At Risk Population— 

Ischemic Vascular Disease.

Ischemic Vascular Disease 

(IVD): Complete Lipid 

Profile and LDL Control 

< 100 mg/dl.

NQF #75 

NCQA.

GPRO Web 

Interface.

R P P 

30. At Risk Population— 

Ischemic Vascular Disease.

Ischemic Vascular Disease 

(IVD): Use of Aspirin or 

Another Antithrombotic.

NQF #68 

NCQA.

GPRO Web 

Interface.

R P P 

31. At Risk Population—Heart 

Failure.

Heart Failure: Beta-Blocker 

Therapy for Left Ventricular Systolic Dysfunction 

(LVSD).

NQF #83 

AMA–PCPI.

GPRO Web 

Interface.

R R P 

32. At Risk Population—Coronary Artery Disease.Coronary Artery Disease 

(CAD) Composite: All or 

Nothing Scoring: Drug 

Therapy for Lowering 

LDL-Cholesterol.

NQF #74 

CMS (composite)/ 

AMA–PCPI 

(individual 

component).

GPRO Web 

Interface.

R R P 

33. At Risk Population—Coronary Artery Disease.Coronary Artery Disease 

(CAD) Composite: All or 

Nothing Scoring: 

Angiotensin-Converting 

Enzyme (ACE) Inhibitor or 

Angiotensin Receptor 

Blocker (ARB) Therapy 

for Patients with CAD and 

Diabetes and/or Left Ventricular Systolic Dysfunction (LVSD).

NQF #66 

CMS (composite)/ 

AMA–PCPI 

(individual 

component).

GPRO Web 

Interface.

R R P 

* We note that this measure has been under development and that finalization of this measure is contingent upon the availability of measures 

specifications before the establishment of the Shared Savings Program on January 1, 2012. 

TABLE 2—ACO AGREEMENT PERIOD PAY FOR PERFORMANCE PHASE-IN SUMMARY

Performance 

year 1 

Performance 

year 2 

Performance 

year 3 

Pay for Performance .................................................................................................................... 0 25 32 

Pay for Reporting ......................................................................................................................... 33 8 1 

Total ...................................................................................................................................... 33 33 33 


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Final Decision: In summary, in 

response to comments, we have 

modified this final rule by reducing the 

measure set to 33 measures total, or 23 

scored measures when accounting for 

the patient experience survey modules 

scored as 1 measure and the all or 

nothing diabetes and CAD measures 

scored as 1 measure each. We believe 

judiciously removing certain redundant, 

operationally complex, or burdensome 

measures would still provide a high 

standard of quality for participating 

ACOs while providing greater alignment 

with other CMS and HHS quality 

improvement initiatives. This measure 

set will be the starting point for ACO 

measurement, as we plan to modify 

measures in future reporting cycles to 

reflect changes in practice and quality of 

care improvement and continue aligning 

with other quality programs. 

For the patient/caregiver experience 

measures, we believe requiring a 

standardized, patient experience of care 

survey that is based on CAHPS will 

better allow comparisons of ACOs over 

time and benchmarking for future years 

of the program. Additionally, it will 

help ensure the patient survey is 

measuring patient experience for the 

ACO as a whole rather than for one 

specific practice, since there is currently 

no survey instrument in existence, that 

we are aware of, that measures patient 

experience of care in an ACO 

specifically. We will also fund the 

administration of an annual CAHPS 

patient experience of care survey for 

ACOs participating in the Shared 

Savings Program in 2012 and 2013. 

Starting in 2014, ACOs participating in 

the Shared Savings Program must select 

a survey vendor (from a list of CMScertified vendors) and will pay that 

vendor to administer the survey and 

report results using standardized 

procedures developed by CMS. We will 

develop and refine these standardized 

procedures over the next 18 to 24 

months. 

We will consider the individual 

CAHPS modules together as one 

measure for scoring purposes, consistent 

with Hospital Value-Based Purchasing 

and the PGP Transition Demonstration, 

except for Health Status/Functional 

Status. We have also added an access to 

specialists module to align with our 

final step-wise assignment methodology 

that incorporates specialists. This 

module will also promote care 

coordination and allow monitoring for 

avoidance of at-risk patients and 

underutilization of care by adding a 

patient perspective on access to 

specialty care. We will score the two 

finalized coronary artery disease 

measures as one composite and the 

recently endorsed Optimal Diabetes 

Care Composite, which has 5 

components, will also be scored as one 

composite. 

ACOs will be required to completely 

and accurately report on all 33 measures 

for all reporting periods in each 

performance year of their agreement 

period, and we will phase in pay for 

performance in performance years 2 and 

3, as previously described above. Of the 

33 measures we are finalizing, 7 are 

collected via patient survey, 3 are 

calculated via claims, 1 is calculated 

from EHR Incentive Program data, and 

22 are collected via the GPRO web 

interface. 

While we are removing the hospital 

patient safety measures from the final 

measures set, we plan to use the claimsbased hospital measures as part of our 

ACO monitoring efforts. We also intend 

to consider any other claims-based 

measures proposed but not finalized in 

our program monitoring efforts. Please 

note that detailed measure 

specifications, including the measure 

title, for the 2012 Shared Savings 

Program quality measures may have 

been updated or modified during the 

NQF endorsement process or for other 

reasons prior to 2012. Specifications for 

all 2012 Shared Savings Program quality 

measures must be obtained from the 

specifications document for 2012 

Shared Savings Program quality 

measures, which we expect to make 

available on the CMS Web during the 

4th quarter of 2011 or 1st quarter of 

2012, with the exception of the CAHPS 

measures, for which separate 

documentation will be available during 

2012. We also note that the risk 

standardized, all condition readmission 

measure (final measure #2) has been 

under development and that finalization 

of this measure is contingent upon the 

availability of measures specifications 

before the establishment of the Shared 

Savings Program on January 1, 2012. 

Finally, we have modified this final 

rule to define the quality performance 

standard at the reporting level in the 

first year and based on performance in 

subsequent years. Rather than transition 

all measures from pay for reporting to 

pay for performance in the second 

performance year of the ACO agreement 

period as proposed, we will transition 

only a portion of the measures to pay for 

performance in the second performance 

year, and then all but one of the 

measures to pay for performance in the 

third performance year, as outlined in 

Table 2. 

3. Requirements for Quality Measures 

Data Submission by ACOs 

a. General 

Under section 1899(b)(3)(B) of the 

Act, ACOs are required to submit data 

in a form and manner specified by the 

Secretary on measures the Secretary 

determines necessary for the ACO to 

report in order to evaluate the quality of 

care furnished by the ACO. In the 

proposed rule, we stated that most of 

the proposed measures were consistent 

with those reported for PQRS, others 

would rely on survey instruments, eRx, 

and HITECH program data, and some 

might rely on Hospital Compare or the 

Centers for Disease Control and 

Prevention National Healthcare Safety 

Network data (76 FR 19592). We 

recognized that there are a number of 

limitations associated with claims-based 

reporting, since the claims processing 

system was designed for billing 

purposes and not for the submission of 

quality data. For this reason, we stated 

we would make available a CMSspecified data collection tool for certain 

measures, which is now referred to as a 

‘‘web interface.’’ We proposed that 

during the year following the first 

performance period, each ACO would 

be required to report via the GPRO web 

interface the applicable proposed 

quality measures with respect to 

services furnished during the 

performance period. We proposed that 

we would derive the claims-based 

measures from claims submitted for 

services furnished during the first 

performance period, which therefore 

would not require any additional 

reporting on the part of ACO 

professionals. We also proposed that for 

survey-based measures data would also 

reflect care received during the first 

performance period. We also noted that 

we would use rulemaking to update the 

quality measure requirements and 

mechanisms for future performance 

periods. 

We welcomed comments on the 

proposed data submission requirements. 

We also sought comment on whether 

alternative data submission methods 

should be required or considered, such 

as limiting the measures to claims-based 

and survey-based reporting only. 

We received the following comments 

about data submission requirements in 

general. 

Comment: Several commenters 

requested more complete specifications 

about data submission requirements in 

the final rule. A few commenters stated 

that multiple formats of reporting are 

expensive and confusing and suggested 

a single reporting format. One 

commenter supported the multiple 


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approaches to capture quality data. A 

few commenters recommended that 

CMS require ACOs to measure quality 

for all patients, not just Medicare 

beneficiaries. One commenter 

recommended CMS require ACOs to 

give ACO providers/suppliers access to 

claims data arguing that such 

transparency is needed to ensure that all 

ACO providers/suppliers understand 

how their performance rates are being 

calculated. A few commenters 

expressed concern about whether CMS 

has the resources to handle the 

incoming data. One commenter did not 

believe ACOs should be held 

accountable for CMS problems with 

implementation. 

Response: We were as specific as 

practicable in the proposed rule 

regarding the data submission 

requirements. More detailed 

instructions regarding data submission 

will be provided through subregulatory 

guidance. We agree with the 

commenters’ concern about a standard 

format for reporting purposes to ensure 

consistent reporting over years and by 

multiple ACOs. We believe the GPRO 

web interface provides this mechanism 

for ACOs to report data at the individual 

beneficiary level. It was developed with 

provider input and is currently used in 

multiple physician pay for performance 

demonstrations and in the PQRS group 

practice reporting option. The tool is 

pre-populated with Medicare claims 

data for a sample of assigned 

beneficiaries for each ACO to minimize 

reporting burden and to ensure 

complete and accurate reporting. While 

CMS encourages ACOs to measure 

quality for all their patients, it is beyond 

the scope of this regulation to require 

that they do so for patients other than 

Medicare beneficiaries. We also embrace 

the concept of data transparency and 

availability. While we cannot foresee all 

possible future implementation issues, 

we will strive to mitigate any 

unforeseen issues swiftly and fairly. 

We received the following comments 

about survey-based quality data. 

Comment: A few commenters stated 

that the survey data specifications were 

not sufficiently detailed. One 

commenter requested clarification on 

CAHPS timeframe of the last 12 months 

and asked whether visits outside of the 

reporting period may be included. A 

few commenters requested CMS clarify 

who would administer the survey, 

required timing, and sample size, while 

another questioned whether 

implementation of this measure was 

feasible for the first year given that this 

would be a new activity for most ACOs. 

Response: As discussed in section 

II.F.2. of this final rule, we agree with 

the concerns that have been raised 

regarding the initial burden of survey 

administration and have decided to pay 

for the administration of the CAHPS 

survey for 2012 and 2013. We are 

developing the necessary specifications 

and infrastructure to prepare vendors to 

administer the survey. Starting in 2014, 

ACOs will be required to select and pay 

for a CMS-approved vendor to 

administer the survey. 

Comment: One commenter requested 

that the final rule clearly articulate the 

reporting period, due date of 

submission, and the population that is 

being measured for each of the quality 

measures. One commenter wrote in 

support of the 12-month performance 

period as it allows for more valid and 

reliable measurement than would be 

possible under a shorter time period. A 

few commenters stated that 100 percent 

reporting may not be achievable in year 

one. 

Response: To clarify, all quality 

measures will have a 12-month, 

calendar year reporting period, 

regardless of ACO start date. Quality 

measures specifications and processes 

related to all quality measures will be 

made available in subregulatory 

guidance along with the specific dates 

for reporting and submission. Because 

of the measures and the methodology 

we are finalizing in this rule, our 

experience with GPRO measures and 

reporting methods to date, along with 

our plans to administer the CAHPS 

survey for the first 2 years of the 

program, we believe ACOs can achieve 

complete and accurate reporting in all 

years of the agreement period as we 

phase in pay for performance. CMS 

survey vendors will have responsibility 

for measuring the patient experience 

measures, and CMS will be able to 

calculate the claims-based measures and 

EHR Incentive Program measure 

without requiring any additional ACO 

reporting. ACOs will be directly 

responsible for reporting measures 

collected through the GPRO web 

interface. Starting in 2014, ACOs will 

also be responsible for selecting and 

paying for a CMS-certified vendor to 

administer the CAHPS survey. 

Comment: Numerous commenters 

suggested a core and menu set approach 

to quality measurement, which would 

require all ACOs to report on a core 

measure set but allow flexibility to 

choose among measures in a menu set, 

similar to that used for the EHR 

incentive program. Different suggestions 

as to how to select core measures were 

received. One commenter suggested a 

performance score during the first year 

for a limited set of 11 core measures 

available through claims data in order to 

immediately focus on quality 

performance. Another commenter 

suggested separating the measures as 

core, interim clinical process, and 

advanced sets, with ‘‘core’’ referring to 

administrative claims and patient 

survey measures and ‘‘advanced’’ 

referring to more advanced, outcomes 

measures. Advanced measures would be 

those requiring clinical data such as the 

proposed preventive health screening 

measures. One commenter suggested 

requiring a core set of measures but 

offering higher shared savings for 

successful implementation of additional 

voluntary measures. One commenter 

suggested reducing the number of 

measures in each domain to three; 

another advocated reducing the number 

within patient/caregiver experience, 

care coordination, patient safety and 

preventive health domains to an initial 

core similar to EHR Incentive Program 

and emphasized that measures for 

specific clinical areas should eventually 

include measures in several domains in 

as well as for at-risk populations and the 

frail elderly. This commenter also 

suggested CMS begin to identify 

measures for each clinical area within 

those domains. 

Response: We agree with the basic 

suggestions of a more limited measure 

set with some type of phased in 

approach. Table 2 illustrates the desire 

to have a phased in approach and a 

smaller, core set of measures that aligns 

with quality improvement priorities and 

value-based purchasing, in response to 

comments received. We do not agree 

that arbitrarily requiring all domains to 

have the same number of measures 

would be beneficial. Rather, we have 

reduced the number of initial measures, 

independent of domain, based on 

feasibility, impact, program goals, and 

specific comments. At this time, we 

believe it is important all ACOs report 

on the same measures in order to 

emphasize quality improvement across 

a variety of important areas. We believe 

that a menu approach would provide 

incentives for ACOs to select areas in 

which they are already performing well, 

rather than those areas in which there 

is room for improvement. 

We received the following comments 

about claims-based quality measure 

data. 

Comment: Several commenters stated 

measures should be derived from claims 

data when possible for ease of reporting 

and to give ACOs real-time feedback of 

results. One commenter stated that 

using existing data for most measures 

would also be advantageous in that 

ACOs could be more focused on quality 

improvement from the outset rather 

than having to spend resources simply 


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to track and report quality measures. 

One of these commenters recommended 

that measures with HEDIS claims 

specifications should be collected in 

that manner. Several commenters 

recommended beginning with a measure 

set based on claims data and expanding 

to registry or EHR-based measures over 

time. Another commenter indicated that 

Medicare claims data would yield a 

limited set of measures and that CMS 

should instead focus on requiring ACOs 

to demonstrate core capabilities critical 

to improving quality and reducing costs. 

This commenter suggested different 

levels of scoring similar to NCQA’s 

proposed criteria. One commenter 

suggested CMS consider, in the future, 

ABIM’s Comprehensive Care Practice 

Improvement Module, which is 

designed to assess generalist practice. 

Response: We have included 

measures collected from a variety of 

sources, including claims, in the final 

measures set. We recognize that using 

claims offers a benefit in easing 

reporting burden but claims do not 

necessarily reflect the improvement 

outcomes that ACOs will seek to affect. 

We also recognize that the availability of 

measures from electronic health records 

may change significantly in the future, 

which we will consider accordingly. We 

are unable to add new measures in this 

final rule that were not proposed or that 

are not closely related to proposed 

measures. Accordingly, we are 

finalizing a combination of both claimsbased measures and other measures 

collected from clinical quality data, 

patient experience surveys, and EHR 

Incentive Program data. 

b. GPRO Web Interface 

In 2010, 36 large group practices and 

integrated delivery systems used GPRO 

to report 26 quality measures for an 

assigned patient population under the 

PQRS. As we indicated in the proposed 

rule, the GPRO web interface affords a 

key advantage in that it is a mechanism 

through which beneficiary laboratory 

results and other measures requiring 

clinical information can be reported to 

us. The web interface would allow 

ACOs to submit clinical information 

from EHRs, registries, and 

administrative data sources required for 

measurement reporting. We believe the 

web interface would reduce the 

administrative burden on health care 

providers participating in ACOs by 

allowing them to tap into their existing 

Information Technology (IT) tools that 

support data collection and health care 

provider feedback, including at the 

point of care. Accordingly, we proposed 

that the existing GPRO web interface 

would be built out, refined, and 

upgraded to support clinical data 

collection and measurement reporting 

and feedback to ACOs participating in 

the Shared Savings Program. 

For quality measures collected via the 

GPRO web interface, we proposed to 

determine a sample for each domain or 

measure set within the domain using a 

sampling methodology modeled after 

the methodology currently used in the 

2011 PQRS GPRO I, as described in 

section II.F.3.b of the proposed rule. 

Assigned beneficiaries, for purposes of 

the GPRO web interface, would be 

limited to those Medicare FFS 

beneficiaries assigned to the ACO. 

We indicated in the proposed rule 

that we would provide each ACO with 

access to the GPRO web interface that 

would include a sample of its assigned 

beneficiary population and the GPRO 

quality measures listed in Table 1 of the 

proposed rule (76 FR 19592). We stated 

we would pre-populate the web 

interface with the beneficiaries’ 

demographic and utilization 

information based on their Medicare 

claims data. The ACO would be 

required to populate the remaining data 

fields necessary for capturing quality 

measure information on each of the 

beneficiaries as applicable. 

Using the same sampling method 

used in the 2011 PQRS GPRO I, we 

would require that the random sample 

for measures reported via ACO GPRO 

must consist of at least 411 assigned 

beneficiaries per measure set/domain. If 

the pool of eligible, GPRO assigned 

beneficiaries is less than 411 for any 

measure set/domain, then we proposed 

to require the ACO to report on 100 

percent, or all, of the assigned 

beneficiaries. For each measure set/ 

domain within the GPRO web interface, 

the ACO would report information on 

the assigned beneficiaries in the order in 

which they appear consecutively in the 

ACO’s sample. 

We stated that some GPRO measures 

would not rely on beneficiary data but 

rather on ACO attestation. We proposed 

to validate GPRO attestation for such 

measures through CMS data from the 

EHR Incentive Program and Electronic 

Prescribing (eRx) Incentive Program. For 

the other measures reported via the 

GPRO web interface, we proposed to 

retain the right to validate the data 

entered by ACOs via a data validation 

process based on the one used in phase 

I of the PGP demonstration. In the GPRO 

audit process, we would abstract a 

random sample of 30 beneficiaries 

previously abstracted for each of the 

quality measure domains/measure sets. 

The audit process would include up to 

three phases, depending on the results 

of the first two phases. Although each 

sample would include 30 beneficiaries 

per domain, only the first eight 

beneficiaries’ medical records would be 

audited for mismatches during the first 

phase of the audit. A mismatch 

represents a discrepancy between the 

numerator inclusions or denominator 

exclusions in the data submitted by the 

ACO and our determination of their 

appropriateness based on supporting 

medical records information submitted 

by the ACO. If there are no mismatches, 

the remaining 22 of the 30 beneficiaries’ 

records would not be audited. If there 

are mismatches, the second phase of the 

audit would occur, and the other 22 

beneficiaries’ records would be audited. 

A third phase would only be undertaken 

if mismatches are found in more than 10 

percent of the medical records in phase 

two. If a specific error is identified and 

the audit process goes to Phase 3, which 

involves corrective action, we proposed 

to first provide education to the ACO on 

the correct specification process and 

provide the opportunity to correct and 

resubmit the measure(s) in question. If, 

at the conclusion of the third audit 

process the mismatch rate is more than 

10 percent, we proposed that the ACO 

would not be given credit for meeting 

the quality target for any measures for 

which this mismatch rate still exists. We 

noted that the failure to report quality 

measure data accurately, completely 

and timely (or to timely correct such 

data) might subject the ACO to 

termination or other sanctions. 

We invited comment on the proposed 

GPRO quality data submission 

requirements and on the administrative 

burden associated with reporting. 

Comment: A few commenters 

supported the use of GPRO although 

one of the commenters stated that this 

type of reporting requires considerable 

time, effort and knowledge to do well 

and suggested automating measures as 

much as possible. One commenter 

encouraged CMS to rapidly develop the 

GPRO interface for ACOs and requested 

guidance for data submission in the 

meantime. One commenter suggested 

that CMS work with EHR vendors, 

DIRECT HISPs and HIEs to support 

efficient interfaces between EHRs, HIE, 

and the web interface and that the 

Quality Data Model developed by NQF 

should be supported to standardize data 

collection. This commenter also 

suggested that GPRO should be 

evaluated for expanded use. However, a 

few commenters expressed concern 

about whether GPRO is capable of being 

expanded for ACO use or its 

applicability for ACO populations as it 

has been used primarily for large group 

practices to date. A few commenters 

recommended further testing before 


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using it as proposed. Several 

commenters did not believe enough 

information was available about GPRO 

and baseline metrics from GPRO. One 

commenter stated that GPRO reported 

measure specifications are not available 

for review and interpretation. One 

commenter requested provider 

assistance if GPRO reporting is required. 

Another commenter requested 

clarification about whether the intent 

was for GPRO to cover all measures, and 

whether practices within an ACO would 

continue to report separately under 

GPRO for purposes of a PQRS incentive 

payment. Another commenter 

recommended that GPRO be populated 

soon with the prior two years of likely 

ACO assigned members, including an 

analysis of claims only results. 

Response: We have attempted to 

weigh the burdens of various reporting 

mechanisms against the benefits. The 

original GPRO tool evolved from the 

PAT tool used for the PGP 

Demonstration, which was developed 

with significant physician involvement. 

Over 600 physicians in a range of 

practice sizes used it as part of the 

Medicare Care Management 

Performance Demonstration, the PQRS 

had 35 groups using the GPRO tool in 

2010 and 61 have signed up for 2011. 

Additionally, the tool has migrated to a 

web interface, which will offer the 

additional capability of data upload 

from an EHR. As a result, we believe 

this reporting mechanism is capable and 

well-tested and represents the best 

current option for quality reporting. We 

do not think it would be appropriate or 

effective to populate the web interface 

with the prior 2 years of beneficiaries 

likely to be assigned to an ACO, as one 

commenter suggested, since this is not 

the population for which the ACOs will 

be responsible for being accountable for 

quality or financial performance. Rather, 

the ACO will be required to report on 

the beneficiaries actually assigned to the 

ACO in 2012. As a result, the web 

interface will be populated based on a 

sample of the 2012 assigned 

beneficiaries. Additionally, the calendar 

year reporting period for the ACO GPRO 

quality measures aligns with the PQRS 

GPRO reporting period for purposes of 

qualifying ACO TINs for a 2012 PQRS 

incentive payment, which is discussed 

in section II.F.5. of this final rule. 

We are finalizing our proposal to 

build upon GPRO experience for ACO 

use. We have specified in Table 1 which 

final measures must be reported through 

the GPRO web interface. 

Comment: Several commenters 

discouraged CMS from using the GPRO 

web interface because it does not 

provide a long-term solution to data 

collection and may hinder development 

of robust EHR solutions. One 

commenter encouraged CMS to 

establish its intent to collect electronic 

measures in subsequent years of the 

Shared Savings Program. A number of 

commenters noted GPRO is a labor 

intensive reporting method requiring 

chart abstraction, prone to error, and not 

derived from the normal workflow of 

providing patient care and encouraged 

the use of measures that could be 

captured by EHRs. One commenter 

expressed concern about the limited 

amount of time proposed for data entry 

in GPRO. Several commenters suggested 

alternate approaches to reporting. One 

commenter suggested a parallel 

reporting pathway via EHR for practices 

that have invested in health IT. One 

commenter suggested another 

standardized option to the GPRO web 

interface. One commenter recognized 

that medical record data would result in 

increased accuracy and recommended 

CMS prioritize measures for electronic 

exchange of clinical data between ACOs 

and CMS in the future rather than 

introduce the burden associated with 

the use of the GPRO web interface. 

Another commenter suggested content 

analysis of unstructured data available 

from encounters to more objectively 

measure some dimensions of quality 

without increasing reporting burden. 

This commenter also suggested that 

content analysis methodology be tested 

prior to building out the GPRO web 

interface. 

Response: We agree that it is 

important to foster innovation and 

support the development and uptake of 

electronic medical records. For this 

reason, we are including a measure 

related to EHR Incentive Program 

participation in our final measure set. 

However, we must rely on other means 

of collecting quality data for the Shared 

Savings Program until there is much 

more widespread use of electronic 

medical records and available means for 

group reporting based on ACO 

beneficiary level data. We note that the 

original GPRO tool evolved from the 

PAT tool used for the PGP 

Demonstration, which was developed 

with significant physician involvement, 

and over 600 physicians in a range of 

practice sizes used it as part of the 

Medicare Care Management 

Performance Demonstration. PQRS had 

35 groups using the GPRO tool in 2010 

and currently have 61 signed up for 

2011. As a result, we believe this 

reporting mechanism is sound and welltested, and we intend to build upon this 

experience for ACO use. Additionally, 

the tool has migrated to a web interface, 

which will offer the additional 

capability of data upload from an EHR. 

We do not believe content analysis of 

unstructured data, as one commenter 

suggested, would be an efficient or 

operationally feasible way of collecting 

and analyzing ACO quality data as it 

would be difficult and time-consuming 

to make quality performance standard 

determinations from non-uniform data. 

Additionally, the GPRO web interface 

represents a first step in EHR-based 

reporting, which we believe is more 

efficient and cost-effective, since it will 

allow ACOs to upload data directly from 

their EHR systems. Meanwhile, those 

ACOs that would prefer to manually 

submit data through the GPRO web 

interface could do so, in a uniform way. 

Comment: A few commenters 

expressed concern about the proposed 

GPRO data validation process and 

discussed the difficulty of obtaining 

medical records across an entire ACO 

and reconciling those records with 

quality performance data reported by 

the ACO. One of these commenters 

further stated that the data validation 

process should be tested prior to 

implementation. 

Response: We agree that data 

validation may be a challenge but do not 

believe that use of the GPRO web 

interface significantly adds complexity. 

Rather, we believe the data validation 

process implicitly incentivizes ACOs to 

keep organized and up-to-date medical 

records and is necessary to protect 

against the gaming concerns other 

commenters have noted. 

c. Certified EHR Technology 

In July 2010, HHS published final 

rules for the EHR Incentive Programs. 

The final regulations included certain 

clinical quality measures on which EPs 

and eligible hospitals must report as 

part of demonstrating they are 

meaningful EHR users. In the proposed 

rule, we included information on which 

of the proposed quality measures for the 

Shared Savings Program are currently 

included in the EHR Incentive Programs 

and stated our intent to continue to 

further align the measures between the 

two programs. As we intend to further 

align both the Shared Savings Program 

and EHR incentive program through 

subsequent rulemaking, we stated that 

we anticipated that certified EHR 

technology (including EHR modules 

certified to calculate and submit clinical 

quality measures) would be an 

additional measure reporting 

mechanism used by ACOs under the 

Shared Savings Program in future 

program years. 

Comment: Several commenters 

supported the use of EHR-derived 


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measures whenever possible, 

particularly as the use of EHRs becomes 

more widespread. One commenter was 

concerned that EHRs do not currently 

generate all the data necessary for the 

proposed performance measures. Others 

supported the move toward EHR-based 

measures over time. One commenter 

was concerned that the proposed 

measures require providers to have 

already adopted an EHR. Several 

commenters suggested special 

consideration for EHR adoption be given 

to smaller practices. Several 

commenters supported movement 

toward using Health Information 

Exchange (HIE) as a means of measures 

reporting. Another commenter 

expressed concern that the proposed 

regulations require a level of functional 

health information exchange that is not 

yet available, such as a patient online 

portal to meet the patient-centeredness 

objective and the need to electronically 

exchange information with entities 

outside of the ACO. This commenter 

suggested that allowing ACOs to 

determine their own technology needs 

would result in greater participation and 

more widespread adoption of best 

practices. One commenter stated that 

differences in technology access among 

providers would inhibit information 

sharing and care coordination and 

stated that, if beneficiaries see non-ACO 

providers, care coordination may be 

diminished. This commenter requested 

a separate policy to address care 

coordination and exchange of 

information. 

Many commenters also recommended 

that CMS allow data submission 

through clinical registries and 

encourage their use as a proven tool to 

improve quality and control costs and as 

a way of having real-time actionable 

data. One commenter also 

recommended that CMS allow data to be 

submitted via registry or additional 

means that have been established by 

regional collaborative. 

Response: While we hope to have 

more robust capabilities for EHRderived measures and reporting in the 

future, at this point we are finalizing 

one quality measure that rewards and 

encourages greater EHR use, which is 

the percent of primary care providers 

who successfully qualify for an EHR 

Incentive Program payment. We are also 

double weighting this measure for 

scoring purposes as well as for 

determining poor performing to reflect 

the importance of HIT for ACOs to 

redesign care, provide practitioners 

actionable information at the point of 

care, and to align incentives and 

encourage broader EHR adoption. As 

providers gain more experience with 

EHR technology, we will reconsider 

using certified EHR technology as an 

additional reporting mechanism used by 

ACOs under the Shared Savings 

Program. 

Final Decision: After considering the 

comments and for the reasons discussed 

previously, we are finalizing our 

proposal to use survey based measures, 

claims and administrative data based 

measures, and the GPRO web interface 

as a means of ACO quality data 

reporting for certain measures, as listed 

in Table 1. For the ACO GPRO 

measures, we are finalizing our proposal 

to use the same sampling method used 

in the 2011 PQRS GPRO I, as described 

previously. We are also finalizing our 

proposal to retain the right to validate 

the data ACOs enter into the GPRO web 

interface via a data validation process 

based on the one used in phase I of the 

PGP demonstration, as described 

previously. 

4. Quality Performance Standards 

a. General 

A calculation of the quality 

performance standard will indicate 

whether an ACO has met the quality 

performance goals that would deem it 

eligible for shared savings. As discussed 

previously in section II.F.2. of this final 

rule, we are finalizing the 33 measures 

in Table 1 to establish the quality 

performance standards that ACOs must 

meet in order to be eligible for shared 

savings. 

In the proposed rule, we considered 

two alternative options for establishing 

quality performance standards for the 

measures: Rewards for better 

performance, and a minimum quality 

threshold for shared savings. We 

proposed the performance score 

approach and sought comment on the 

threshold approach. The performance 

score approach would reward ACOs for 

better quality with larger percentages of 

shared savings. The threshold approach 

would ensure that ACOs exceed 

minimum standards for the quality of 

care, but allows full shared savings if 

ACOs meet the minimum level of 

performance. 

b. Performance Scoring 

Under the proposed rule, quality 

performance standards would be used to 

arrive at a total performance score for an 

ACO. We proposed to organize the 

measures by domain, and to score the 

performance on each measure. We 

proposed to roll up the scores for the 

measures in each domain into domain 

scores and to provide ACOs with 

performance feedback at both the 

individual measure and domain level. 

We proposed that the percentage of 

points earned for each domain would be 

aggregated using a weighting method to 

arrive at a single percentage that would 

be applied to determine the final 

sharing rate used to determine any 

shared savings or losses. We proposed 

that the aggregated domain scores 

would determine the ACO’s eligibility 

for sharing up to 50 percent of the total 

savings generated by the ACO under the 

one-sided model or 60 percent of the 

total savings generated by the ACO 

under the two-sided risk model. We also 

discussed our proposal to set the quality 

performance standard in the first year of 

the Shared Savings Program at the 

complete and accurate reporting level 

and set the standard at a performance 

level in subsequent years. 

(1) Measure Domains and Measures 

Included in the Domains 

The proposed quality performance 

standard measures in Table 1 were 

subdivided into 5 domains, including: 

(1) Patient/Caregiver Experience; (2) 

Care Coordination; (3) Patient Safety; 

(4) Preventive Health; and (5) At-Risk 

Population/Frail Elderly. We proposed 

that the At-Risk Population/Frail 

Elderly domain would include a frail 

elderly category as well as the following 

chronic diseases: Diabetes mellitus; 

heart failure; coronary artery disease; 

hypertension and chronic obstructive 

pulmonary disorder. 

(2) Methodology for Calculating a 

Performance Score for Each Measure 

Within a Domain 

We proposed that an ACO would 

receive a performance score on each 

proposed measure. For the first year of 

the Shared Savings Program, these 

scores would be for informational 

purposes, since we proposed to set the 

quality performance standard at the 

reporting level. For subsequent years of 

the program, we proposed setting 

benchmarks for each measure using 

national Medicare FFS claims data, MA 

quality performance rates, or, where 

appropriate, the corresponding national 

percent performance rates that an ACO 

will be required to demonstrate. For 

each measure, we proposed to set a 

performance benchmark and a 

minimum attainment level as defined in 

Table 3 of the proposed rule (76 FR 

19595). We proposed that the 

benchmarks would be established using 

the most currently available data source 

and most recent available year of 

benchmark data prior to the start of the 

Shared Savings Program annual 

agreement periods. We would determine 

Medicare FFS rates by pulling a data 

sample and modeling the measures. For 


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MA rates, we would check the 

distribution from the most recent 

available annual MA quality 

performance data for all MA plans and 

set the benchmark accordingly. 

Furthermore, since MA quality 

performance rates utilize both claims 

and clinical data, we proposed to use 

those rates when they are available. 

We proposed that benchmark levels 

for each of the measures included in the 

quality performance standard would be 

made available to ACOs, prior to the 

start of the Shared Savings Program and 

each annual performance period 

thereafter, so ACOs would be aware of 

the benchmarks they must achieve to 

receive the maximum quality score. In 

the proposed rule, we stated that in 

future program years, we anticipate 

incorporating actual ACO performance 

to update the national benchmarks. 

We also proposed that if an ACO fails 

to meet quality performance standard 

during a performance year (that is, fails 

to meet, the minimum attainment level 

for one or more domain(s)), we would 

give the ACO a warning, provide an 

opportunity to resubmit, and reevaluate 

the ACO’s performance the following 

year. If the ACO continues to 

significantly under-perform, the 

agreement may be terminated. We 

further proposed that ACOs that exhibit 

a pattern of inaccurate or incomplete 

reporting or fail to make timely 

corrections following notice to resubmit 

may be terminated from the program. 

We noted that since meeting the quality 

standard is a condition for sharing in 

savings, the ACO would be disqualified 

from sharing in savings in each year in 

which it underperforms. 

We proposed that performance below 

the minimum attainment level would 

earn zero points for that measure under 

both the one-sided and two-sided risk 

models. We also proposed that 

performance equal to or greater than the 

minimum attainment level but less than 

the performance benchmark would 

receive points on a sliding scale based 

on the level of performance, for those 

measures in which the points scale 

applies. We also proposed setting the 

initial minimum attainment level for 

both the one-sided and two-sided 

shared savings models at a 30 percent or 

the 30th percentile of national Medicare 

FFS or the MA rate, depending on what 

performance data are available. 

We proposed ‘‘all or nothing’’ scoring 

for the diabetes and CAD composite 

measures. We proposed that measures 

designated as all or nothing measures 

would receive the maximum available 

points if all criteria are met and zero 

points if at least one of the criteria are 

not met. We defined ‘‘all or nothing’’ 

scoring to mean all of the care process 

steps and expected outcomes for a 

particular beneficiary with the target 

condition must be achieved to score 

positively. This means all sub measures 

within the diabetes and CAD 

composites would need to be reported 

in order to earn any credit for these 

measures. We stated we recognized that 

all or nothing scoring implies that all 

beneficiaries can and should receive the 

indicated care process, which may not 

necessarily be appropriate for all 

beneficiaries. As a result, we also 

proposed scoring the diabetes and CAD 

sub measures individually. We also 

proposed a HAC composite measure for 

which we did not propose all or nothing 

scoring, since the HACs are rare events. 

We also stated our intent to post 

performance rates for the final measures 

set, including the applicable 

benchmarks, on the CMS Web site prior 

to the start of the first performance 

period. 

(3) Methodology for Calculating a 

Performance Score for Each Domain 

Similar to our proposal for setting a 

quality standard for each individual 

measure at the reporting level in the 

first program year, we also proposed 

setting a quality standard for each 

domain at the reporting level. For 

subsequent program years, we proposed 

to calculate the percentage of points an 

ACO earns for each domain after 

determining the points earned for each 

measure. We planned to divide the 

points earned by the ACO across all 

measures in the domain by the total 

points available in that particular 

domain. Each domain would be worth 

a predefined number of points based on 

the number of individual measures in 

the domain. 

We proposed that under both the onesided and two-sided shared savings 

models, the quality measures domain 

scoring methodology would treat all 

domains equally regardless of the 

number of measures within the domain. 

We stated in the proposed rule that we 

believed the key benefit of weighting the 

domains equally is that it would not 

create a preference for any one domain, 

which we consider important as we 

expect ACOs to vary in composition, 

and, as a result, to place more emphasis 

on different domains. Furthermore, we 

want to encourage a diverse set of ACOs 

and believe that emphasizing certain 

domains over others would encourage a 

certain type of ACO to participate but 

discourage other types from 

participating. 

We proposed to aggregate the quality 

domain scores into a single overall ACO 

score which would be used to calculate 

the ACOs final sharing rate for purposes 

of determining shared savings or shared 

losses. All domain scores for an ACO 

would be averaged together equally to 

calculate the overall quality score that 

would be used to calculate the ACO’s 

final sharing rate used to determine the 

amount of shared savings or losses an 

ACO would receive or owe. We also 

proposed that ACOs must report 

completely and accurately on all quality 

measures within all domains to be 

deemed eligible for shared savings 

consideration. Finally, we stated we 

also considered scoring measures 

individually under a method that 

weights measures equally as well as an 

approach that would weight quality 

measures by their clinical importance. 

(4) The Quality Performance Standard 

Level 

We proposed to set the quality 

performance standard for the first year 

of the Shared Savings Program at the 

reporting level. That is, under the onesided model, we proposed that an ACO 

would receive 50 percent of shared 

savings (provided that the ACO realizes 

sufficient cost savings under) based on 

100 percent complete and accurate 

reporting on all quality measures. 

Similarly, we proposed that under the 

two-sided risk model, ACOs would 

receive 60 percent of shared savings 

(provided that the ACO realizes 

sufficient cost savings) based on 100 

percent complete and accurate reporting 

on all quality measures. We stated that 

setting the quality performance standard 

for the first year of the Shared Savings 

Program at full and accurate reporting 

would allow ACOs to ramp up, invest 

in their infrastructure, engage ACO 

providers/suppliers, and redesign care 

processes to capture and provide data 

back to their ACO providers/suppliers 

to transform care at the point of care. 

We also noted that setting the quality 

performance standard at the reporting 

level would be consistent with other 

value-based purchasing programs that 

started as pay for reporting programs. 

We indicated that we planned to raise 

the quality performance standard 

requirements in future years through 

future rulemaking, when actual 

performance on the reported measures 

would be considered in establishing the 

quality benchmarks (in addition to the 

national flat percent or FFS/MA 

percentile). We stated in the proposed 

rule that we believe this approach 

would be consistent with section 

1899(b)(3)(C) of the Act, which requires 

that the Secretary ‘‘seek to improve the 

quality of care furnished by ACOs over 

time by specifying higher standards, 


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new measures, or both for the purposes 

of assessing such quality of care.’’ 

While we proposed the performance 

scoring methodology, we also 

considered adopting a minimum quality 

threshold to assess the performance of 

participating ACOs, as described in the 

proposed rule (76 FR 19597–98). 

Comment: A few commenters 

suggested weighting each domain 

equally or balancing the number of 

measures in each domain to prevent any 

single measure from having a greater 

impact on the overall score. Another 

commenter stated that proposed 

measures are unfairly weighted and 

measured. One commenter believed 

process measurements should be scored 

higher since they are under provider 

control, whereas another commenter 

suggested that outcome measures be 

weighted heavier than structure and 

process measures. One commenter 

thought the measures should be more 

evenly distributed across the 5 equally 

weighted domains, so that domains with 

fewer measures do not have a greater 

impact on overall score. A few 

commenters did not agree with 

measures having equal weighting. One 

commenter recommended that the 

Patient/Caregiver Experience and Care 

Coordination domains be more heavily 

weighted as they are the foundation for 

improving process and outcomes, while 

another commenter stated the domains 

of care coordination and patient 

caregiver experience are untested. 

One commenter suggested scoring 

clinical process measures individually 

rather than by domain. A number of 

commenters thought the proposed 

approach would exclude a large number 

of ACOs from sharing in savings even 

though they were providing high quality 

care. Many commenters took issue with 

the notion that failing to attain the 

standard for one single measure would 

eliminate the possibility for sharing in 

any savings and recommended that the 

threshold be set at the domain level 

rather than the individual measure 

level. One commenter suggested CMS 

provide each ACO with their historical 

50th percentile for each quality metric 

which the ACO would have to exceed 

in each domain to fully share in savings. 

For each domain that exceeded 

benchmark, this commenter 

recommended the ACO’s share of 

savings would increase by 20 percent 

but the ACO would still be responsible 

for shared losses under the two-sided 

model. 

Response: We believe that all 4 

domains we are adopting in this final 

rule are of considerable importance and, 

therefore, agree with the comments that 

supported weighting each domain 

equally and will finalize our proposal to 

do so. This means the 4 measure 

domains (patient/caregiver experience, 

care coordination/patient safety, 

preventive health, and at-risk 

population) will be weighted at 25 

percent each in calculating an ACO’s 

overall quality performance score for 

purposes of determining its final sharing 

rate. Additionally, we are finalizing the 

following disease categories within the 

At-Risk population domain: Diabetes, 

hypertension, ischemic vascular 

disease, heart failure, and coronary 

artery disease. 

Equally weighting the measure 

domains, and individual measures 

within the domains, is consistent with 

our view that all of these domains are 

important to achieving the Medicare 

Shared Savings Program goals and 

should be a focus of ACOs, with the 

exception of the measure, Percent of 

PCPs who Successfully Qualify for an 

EHR Incentive Payment. We are doubleweighting this measure, as discussed in 

section II.F. of this final rule, in an effort 

to signal the importance of EHR 

adoption to ACOs for achieving success 

in the Shared Savings Program. We note 

that, since the Shared Savings Program 

has not yet begun and ACOs have not 

yet formed, we are unsure how we 

could provide any ACO historical data 

on its quality performance since it 

would require participating 

organizations to submit a historical 

baseline for quality which we believe 

would add unnecessary burden to 

newly forming ACOs. 

Comment: Many commenters 

suggested CMS reward a higher level of 

quality and not just a threshold. Several 

commenters expressed concern that the 

quality points scale failed to reward 

ACOs who are already providing high 

quality, efficient care in the first year 

and fails to reward high performance, as 

opposed to minimum threshold, in 

subsequent years. 

Response: We believe the proposed 

approach offers a greater incentive for 

continuous quality improvements, since 

it has a sliding scale in which higher 

levels of quality performance translate 

to higher sharing rates. High performing 

ACOs should do well under this 

approach since it recognizes and 

provides incentives for ACOs to 

maintain high quality performance in 

order to maximize their sharing of 

savings and minimize their sharing of 

losses. 

Comment: Many commenters took 

issue with the proposed 30 percent/30th 

percentile threshold. Several 

commenters stated that if CMS 

establishes benchmarks solely on the 

participating ACOs, it would be unfair 

to assume the bottom 30 percent should 

receive no credit toward retaining 

savings when they may very well be 

performing well above the rest of the 

nation. Several commenters suggested 

CMS should, instead, establish specific 

thresholds for each measure such as a 

certain percentage with blood pressure 

under control or a certain percentage 

improvement, particularly for measures 

which have not been validated or are 

not in widespread use among Medicare 

beneficiaries. However, another 

commenter suggested a minimum 

attainment level higher than the 30th 

percentile in order to best promote 

quality improvement. One commenter 

suggested maintaining the proposed 

approach to score individual measures 

on a continuum between a threshold 

(lower bound) and benchmark (upper 

bound). One commenter suggested 

rewarding performance in the middle 

range of quality improvement more than 

the upper target and lower threshold by 

taking an average of high and low 

performers’ scores. A couple of 

commenters noted that without known 

targets it will be difficult for ACOs to 

know whether they will be able to 

achieve the quality performance 

standards. These commenters requested 

that we publish specific thresholds in 

the final rule so that ACOs will know 

before applying for the program whether 

they have a reasonable likelihood of 

success. One commenter suggested 

establishing performance thresholds and 

rewarding those ACOs that achieve or 

make improvements toward those 

thresholds while another recommended 

establishing specific numerical targets 

for all laboratory-based measures. One 

commenter advocated for gradual 

increases in the minimum attainment 

level so that health care organizations 

are encouraged to continually improve, 

with clear delineation and rewards for 

the high performers. 

Response: We are finalizing our 

proposal to establish the minimum 

attainment level for a measure at a 

national flat 30 percent or where 

applicable the national 30th percentile 

level of performance of FFS or MA 

quality rates, because we believe this 

level is reasonable and achievable given 

current levels of performance on 

measures in other programs and based 

on measure community research. As 

previously discussed, the first year of 

the agreement period will be pay for 

reporting only, so ACOs would earn 

their maximum sharing rate for 

completely and accurately reporting 100 

percent of the required data. We plan to 

release performance benchmarks in sub 

regulatory guidance at the start of the 


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second year of the performance period 

as we phase in measures to pay for 

performance so that ACOs are aware of 

the actual performance rates they will 

need to achieve to earn the maximum 

quality points under each domain. We 

agree with the comment suggesting we 

gradually raise the minimum attainment 

level in order to continue to incentivize 

quality improvement over time and 

would do so through future rulemaking 

after providing sufficient advance notice 

with a comment period to first gain 

industry input. We note that 

performance will be rewarded on a scale 

such that levels of quality improvement 

between an upper and lower threshold 

are rewarded. This scale also rewards 

higher improvement over time, since 

higher performance translates to higher 

shared savings. For example, an ACO 

that performs at 80 percent/80th 

percentile one year and then at 90 

percent/90th percentile the next year, 

would receive a higher level of shared 

savings in their second year than in 

their first year, based on their improved 

quality performance. 

Comment: One commenter suggested 

using the first 2 years of ACO 

performance data to establish 

performance benchmarks, rather than 

the first year only, since the first year 

will require ACOs to develop 

infrastructure and reporting systems. A 

couple of commenters suggested 

calculating regional benchmarks so 

ACOs have a similar chance of 

achieving success regardless of 

geographic location. One of these 

commenters recommended 

benchmarking at the geographic unit 

level MedPAC has recommended for 

MA payments and thought benchmarks 

should not be based on ACO providers/ 

suppliers alone. One commenter 

recommended that the benchmark 

should be based on comparable, local, 

non-assigned, FFS beneficiaries. 

However, another commenter thought 

benchmarks should be based on a 

comparison of ACOs to other ACOs or 

Medicare FFS but not MA. The 

commenter thought it would be 

inequitable to compare ACOs to the MA 

program, since patients are locked-in to 

providers under MA and cannot change 

providers, unlike an ACO model under 

which patients are free to seek care 

outside of the ACO. One commenter 

suggested an evidence-based approach 

to any benchmark changes. One 

commenter recommended CMS specify 

in the final rule whether FFS or MA 

data would serve as the basis for 

benchmarks. This commenter advocated 

for use of FFS data since these data are 

more directly relevant to the target 

population from which the ACO 

population is derived. One commenter 

stated that relying on existing data 

sources for measures would have the 

advantage of allowing benchmarks to be 

determined from program onset. This 

commenter also believed that having a 

fixed set of performance targets around 

which the ACO can plan its work is 

essential to the program’s success and 

that targets should not vary from year to 

year although the commenter did 

suggest a range (for example, good to 

great) be established and incentives set 

accordingly. One commenter asked for 

clarification about how benchmarks 

would be developed for proposed 

measures that do not have historical 

data. One commenter requested 

alignment of the scoring methodology 

with value-based purchasing. 

Response: We are finalizing our 

proposal to establish national 

benchmarks for quality measures using 

a national sample of Medicare FFS 

claims data, M A quality data, or a flat 

percentage if FFS claims/MA quality 

data are not available. We believe 

national benchmarks are more 

appropriate than regional benchmarks, 

since Medicare FFS is a national 

program and we would like to measure 

quality improvement and make 

comparisons over time between FFS and 

ACO populations on a national basis. 

Regarding the comment asking how we 

would develop benchmarks for 

measures in which claims or MA quality 

data are not available, we would use a 

flat national percent establishing the 

minimum at 30 percent and the 

maximum at 90 percent as indicated in 

Table 3. We plan to release 

benchmarking data in subregulatory 

guidance and expect to align with other 

pay for performance program 

benchmarking methodologies over time. 

At this time, we are not proposing to 

compare an ACO’s quality performance 

to the performance of other ACOs for 

purposes of determining an ACO’s 

overall quality score and final sharing 

rate. We agree that we should seek to 

incorporate actual ACO performance on 

quality scores into the quality 

benchmark, however, we would do so in 

future rulemaking and then only after 

seeking industry input. In addition, we 

do expect to update the benchmarks 

over time, consistent with section 

1899(d)(3)(C) of the Act, which requires 

CMS to seek to improve the quality of 

care over time. 

Comment: Several commenters 

recommended a sliding scale in lieu of 

complete and accurate reporting. One 

commenter recommended the standard 

for complete and accurate reporting 

should be 95 to 100 percent and the 

threshold should be between the 70th 

and 100th percentile. A few commenters 

suggested CMS consider the PQRS 

experience with reporting; one 

mentioned that CMS lowered the PQRS 

reporting threshold from 80 to 50 

percent for its claims based reporting 

option and kept the registry reporting 

threshold at 80 percent. A couple of 

commenters requested clarification on 

what would constitute a ‘‘reasonable 

explanation’’ for an ACO not to report 

quality data. A number of commenters 

thought the proposed approach would 

exclude a large number of ACOs from 

sharing in savings even if they provided 

high quality care. Many commenters 

took issue with the notion that failing to 

attain the standard for one single 

measure should eliminate the 

possibility of sharing in any savings. 

One commenter recommended CMS 

give ACOs credit for measures on which 

the ACO scored well, even if it does not 

meet the threshold for other measures 

within the domain, perhaps by setting 

the threshold at the domain level rather 

than the measure level. This commenter 

stated this was particularly important 

early in the program, when ACOs may 

not have experience with the measures, 

the specifications may have been 

modified, and the thresholds setting 

methodology is new and untested. 

Response: While it is our intent that 

ACOs raise the bar in terms of quality 

of care improvement and performance, 

and although we believe 100 percent 

complete and accurate reporting can be 

achieved for the measures we are 

finalizing, we are sensitive to comments 

suggesting we have modified this final 

rule to allow ACOs more time to ramp 

up. As a result, we have modified this 

final rule to provide a longer phase in 

to pay for performance. All 33 measures 

used for scoring purposes will be pay 

for reporting in year 1 of the agreement. 

In year 2, 8 measures will continue to 

be pay for reporting, while 25 measures 

will be used for pay for performance. In 

year 3 (and 4 if applicable), 32 measures 

will be pay for performance and 1 

measure, the health status/functional 

status module will be pay for reporting. 

Final Decision: We recognize that 

achieving the quality performance 

standard on 33 out of 33 measures may 

be difficult especially in the early years. 

Accordingly, we have modified this 

final rule to require that ACOs achieve 

the quality performance standard on 70 

percent of the measures in each domain. 

If an ACO fails to achieve the quality 

performance standard on at least 70 

percent of the measures in each domain 

we will place the ACO on a corrective 

action plan and re-evaluate the 

following year. If the ACO continues to 


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underperform in the following year, the 

agreement would be terminated. We 

believe requiring ACOs to achieve the 

quality performance standard on 70 

percent of the measures in each of the 

4 domains establishes a feasible 

standard, while signaling to providers 

that they need to devote significant 

focus to performance in each domain. 

This approach also means that an 

ACO could fail one or more individual 

measures in each domain measure and 

still earn shared savings. ACOs must 

achieve the minimum attainment level 

on at least 70 percent of the measures 

in each domain in order to continue in 

the program. As described in section 

II.H. of this final rule, if an ACO fails 

to achieve the minimum attainment 

level on at least 70 percent of the 

measures in each domain, we will give 

the ACO a warning, an opportunity to 

resubmit and re-evaluate the following 

year. If the ACO continues to 

underperform in the following year, the 

agreement would be terminated. 

However, in any year that an ACO 

scores a zero for an entire measure 

domain, it would not be eligible to share 

in any savings generated. It should also 

be noted that if an ACO fails to 

completely and accurately report the 

EHR measure, the ACO would miss the 

70 percent cut-off for the Care 

Coordination domain, since this 

measure is double-weighted for both 

scoring purposes and for purposes of 

determining poor performance. 

We are also finalizing our proposal 

that if an ACO fails to report one or 

more measures, we will send the ACO 

a written request to submit the required 

data by a specified date and to provide 

reasonable explanation for its delay in 

reporting the required information. If 

the ACO fails to report by the requested 

deadline or does not provide a 

reasonable explanation for delayed 

reporting, we would immediately 

terminate the ACO for failing to report 

quality measures. ACOs that exhibit a 

pattern of inaccurate or incomplete 

reporting or fail to make timely 

corrections following notice to resubmit 

may be terminated from the program. 

An ACO that has been terminated from 

the program is disqualified from sharing 

in savings. 

TABLE 3—SLIDING SCALE MEASURE SCORING APPROACH

ACO performance level Quality points (all 

measures except EHR) 

EHR measure 

quality points 

90+ percentile FFS/MA Rate or 90+ percent ....................................................................................... 2 points ....................... 4 points. 

80+ percentile FFS/MA Rate or 80+ percent ....................................................................................... 1.85 points .................. 3.7 points. 

70+ percentile FFS/MA Rate or 70+ percent ....................................................................................... 1.7 points .................... 3.4 points. 

60+ percentile FFS/MA Rate or 60+ percent ....................................................................................... 1.55 points .................. 3.1 points. 

50+ percentile FFS/MA Rate or 50+ percent ....................................................................................... 1.4 points .................... 2.8 points. 

40+ percentile FFS/MA Rate or 40+ percent ....................................................................................... 1.25 points .................. 2.5 points. 

30+ percentile FFS/MA Rate or 30+ percent ....................................................................................... 1.10 point .................... 2.2 points. 

< 30 percentile FFS/MA Rate or < 30 percent ...................................................................................... No points ..................... No points. 

TABLE 4—TOTAL POINTS FOR EACH DOMAIN WITHIN THE QUALITY PERFORMANCE STANDARD

Domain 

Total individual 

measures 

(Table F1) 

Total measures for scoring purposes 

Total potential 

points per 

domain 

Domain weight 

(percent) 

Patient/Caregiver Experience 7 1 measure with 6 survey module measures combined, plus 

1 individual measure.

4 25 

Care Coordination/Patient 

Safety.

6 6 measures, plus the EHR measure double-weighted (4 

points).

14 25 

Preventative Health ................ 8 8 measures ............................................................................. 16 25 

At Risk Population .................. 12 7 measures, including 5 component diabetes composite 

measure and 2 component CAD composite measure.

14 25 

Total ................................ 33 23 ............................................................................................ 48 100 

As illustrated in Table 4, a maximum 

of 2 points per measure could be earned 

under both the one-sided and two-sided 

model based on the ACO’s performance, 

except on the EHR measure, which is 

weighted double any other measure and 

would be worth 4 points. We believe 

EHR adoption is important for ACOs to 

be successful in the Shared Savings 

Program and are double weighting this 

measure as a way to signal this and 

provide incentive for greater levels of 

EHR adoption. 

However, the total potential for 

shared savings will be higher under the 

two-sided model, since the maximum 

potential shareable savings based on 

quality performance is 60 percent of the 

savings generated, compared to 50 

percent under the one-sided model, as 

discussed in section II.G. of this final 

rule. That is, 100 percent reporting of 

the quality measures in the first year of 

the Shared Savings Program will result 

in an ACO earning 50 or 60 percent of 

shareable savings, depending on 

whether the ACO is in the one-sided or 

two-sided model. For future 

performance periods, the percent of 

potential shareable savings will vary 

based on the ACO’s performance on the 

measures as compared with the measure 

benchmarks as we phase in the pay for 

performance measures, as shown in 

Table 2. 

We are establishing the minimum 

attainment level for each measure at a 

national flat 30 percent or the national 

Medicare FFS or MA 30th percentile 

level of performance, as proposed. We 

believe this level is reasonable and 

achievable given current levels of 

performance on measures in other 

programs and based on measure 

community research. ACOs will have to 

score at or above the minimum 

attainment level in order to receive any 

credit for reporting the quality measure. 

We will release corresponding national 

benchmarks, based on Medicare FFS 

claims data, Medicare Advantage 

quality data, or a flat percentage if 

claims/quality data are not available in 


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subregulatory guidance at the start of 

the second performance period and, 

when certain measures move to pay for 

performance. 

We are also finalizing our proposal for 

scoring individual measures in each 

domain in pay for performance years. 

Based on their level of performance on 

each measure an ACO would earn the 

corresponding number of points as 

outlined in Table 3. The total points 

earned for measures in each domain 

would be summed up and divided by 

the total points available for that 

domain to produce an overall domain 

score of the percentage of points earned 

versus points available. 

We are finalizing our proposal to 

weight each of the 4 measure domains 

(patient/caregiver experience, care 

coordination/patient safety, preventive 

health, and at-risk population) equally 

at 25 percent for purposes of 

determining an ACO’s overall quality 

performance score. We believe giving 

equal weight to the domains will signal 

the equal importance of each of these 

areas and to encourage ACOs to focus 

on all domains in order to maximize 

their sharing rate. Accordingly, the 

percentage score for each domain, 

calculated using the methodology 

described previously, will be summed 

and divided by 4 to reflect the equal 

weighting of the domains. The resulting 

percentage will then be applied to the 

maximum sharing rate under either the 

one-sided or two-sided model to 

determine the ACOs final sharing rate 

for purposes of determining its shared 

savings payment or share of losses. 

5. Incorporation of Other Reporting 

Requirements Related to the PQRS and 

Electronic Health Records Technology 

Under Section 1848 of the Act 

The Affordable Care Act gives the 

Secretary authority to incorporate 

reporting requirements and incentive 

payments from these programs into the 

Shared Savings Program, and to use 

alternative criteria to determine if 

payments are warranted. Specifically, 

section 1899(b)(3)(D) of the Act affords 

the Secretary discretion to ‘‘* * * 

incorporate reporting requirements and 

incentive payments related to the 

physician quality reporting initiative 

(PQRI), under section 1848 of the Act, 

including such requirements and such 

payments related to electronic 

prescribing, electronic health records, 

and other similar initiatives under 

section 1848 * * *’’ and permits the 

Secretary to ‘‘use alternative criteria 

than would otherwise apply [under 

section 1848 of the Act] for determining 

whether to make such payments.’’ 

Under this authority, we proposed to 

incorporate certain reporting 

requirements and payments related to 

the PQRS into the Shared Savings 

Program for ‘‘eligible professionals’’ 

within an ACO (76 FR 19598). Under 

section 1848(k)(3)(B) of the Act, the 

term ‘‘eligible professional’’ means any 

of the following: (1) A physician; (2) a 

practitioner described in section 

1842(b)(18)(C) of the Act; (3) a physical 

or occupational therapist or a qualified 

speech pathologist; or (4) a qualified 

audiologist. 

We proposed to incorporate a PQRS 

GPRO under the Shared Savings 

Program and further proposed that EPs 

that are ACO participant providers/ 

suppliers would constitute a group 

practice for purposes of qualifying for a 

PQRS incentive under the Shared 

Savings Program (76 FR 19599). 

Specifically, we proposed that EPs 

would be required to submit data 

through the ACO on the quality 

measures we proposed (76 FR 19571) to 

qualify for the PQRS incentive under 

the Shared Savings Program. We 

proposed that the ACO would report 

and submit data on behalf of the EPs in 

an effort to qualify for the PQRS 

incentive as a group practice; that is, 

EPs within an ACO would qualify for 

the PQRS incentive as a group practice, 

and not as individuals. In addition, we 

proposed a calendar year reporting 

period from January 1 through 

December 31, for purposes of the PQRS 

incentive under the Shared Savings 

Program. With regard to the 

incorporation of criteria for satisfactory 

reporting for purposes of the PQRS 

incentive for the first performance 

period under the Shared Savings 

Program, we proposed that: 

• An ACO, on behalf of its EPs, 

would need to report on all measures 

included in the data collection tool; 

• Beneficiaries would be assigned to 

the ACO using the methodology 

described in the Assignment section of 

the proposed rule. As a result, the GPRO 

tool would be populated based on a 

sample of the ACO-assigned beneficiary 

population. ACOs would need to 

complete the tool for the first 411 

consecutively ranked and assigned 

beneficiaries in the order in which they 

appear in the group’s sample for each 

domain, measures set, or individual 

measure if a separate denominator is 

required such as in the case of 

preventive care measures which may be 

specific to one sex. If the pool of eligible 

assigned beneficiaries is less than 411, 

the ACO would report on 100 percent of 

assigned beneficiaries for the domain, 

measure set, or individual measure. 

• The GPRO tool would need to be 

completed for all domains, measure 

sets, and measures described in Table 1 

of the proposed rule. 

Accordingly, we proposed that EPs 

within an ACO that satisfactorily report 

the proposed measures during the 

reporting period would qualify under 

the Shared Savings Program for a PQRS 

incentive equal to 0.5 percent of the 

Secretary’s estimate of total Medicare 

Part B PFS allowed charges for covered 

professional services furnished by the 

ACO’s EPs during the first performance 

period. ‘‘Covered professional services’’ 

are services for which payment is made 

under, or based on, the physician fee 

schedule and which are furnished by an 

eligible professional under the ACO 

participant’s TINs. 

We proposed to align the incorporated 

PQRS requirements with the general 

Shared Savings Program reporting 

requirements, such that no extra 

reporting would actually be required in 

order for EPs or the ACO to earn the 

PQRS incentive under the Shared 

Savings Program. Thus, for ACOs that 

meet the quality performance standard 

under the Shared Savings Program for 

the first performance period, we 

proposed that the PQRS EPs within 

such ACOs will be considered eligible 

for the PQRS incentive under the 

Shared Savings Program for that year. In 

the proposed rule, we stated that this 

means ACOs would need to report on 

all measures proposed (76 FR 19571) in 

order to receive both the Shared Savings 

Program shared savings and PQRS 

incentive (76 FR 19599). We also stated 

that failure to meet the Shared Savings 

Program quality performance standard 

would result in failure to be considered 

eligible for shared savings, as well as 

failure for the EPs within the ACO to 

receive a PQRS incentive under the 

Shared Savings Program for that year. 

ACO participant provider/suppliers 

who meet the quality performance 

standard but do not generate shareable 

savings would still be eligible for PQRS 

incentive payments. We also indicated 

that we intended to discuss the policy 

for incorporating the PQRS incentive 

under the Shared Savings Program for 

subsequent years in future rulemaking 

(76 FR 19599). 

We noted in the proposed rule that 

ACOs would be eligible for the PQRS 

incentive under the Shared Savings 

Program to the extent that they contain 

EPs as defined under § 414.90(b). As a 

result, not all ACOs would necessarily 

be eligible for the PQRS incentive under 

the Shared Savings Program. A 

complete list of PQRS EPs (EP) is 

available at: http://www.cms.gov/PQRI/ 

Downloads/EligibleProfessionals.pdf. In 

addition, similar to traditional PQRS, 

we indicated that an EP could not 


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qualify for the PQRS incentive as both 

a group that is part of an ACO and as 

an individual. Furthermore, EPs could 

not qualify for a PQRS incentive under 

both the PQRS under the Shared 

Savings Program and the traditional 

PQRS under the same TIN. For purposes 

of PQRS incentive analysis and 

payment, we stated that we intended to 

use TINs and NPI numbers similar to 

what we have done in the traditional 

PQRS (75 FR 40169), and we would 

provide such details in guidance (76 FR 

19599). We invited comment on our 

proposal to incorporate PQRS 

requirements and payments under the 

Shared Savings Program. 

We did not propose to incorporate 

payments for the EHR Incentive 

Program or eRx Incentive Program 

under the Shared Savings Program. 

Professionals in ACOs may still 

separately participate in the EHR 

Incentive Program or Electronic 

Prescribing Incentive Program. 

However, we proposed to require for the 

Shared Savings Program measures also 

included in the EHR Incentive Program 

and metrics related to successful 

participation in the Medicare and 

Medicaid EHR Incentive Programs for 

EPs and hospitals and the eRx Incentive 

Program. 

In addition, as a Shared Savings 

Program requirement separate from the 

quality measures reporting, we 

proposed requiring that at least 50 

percent of an ACO’s primary care 

physicians be determined to be 

‘‘meaningful EHR users’’ as that term is 

defined in 42 CFR 495.4 by the start of 

the second performance year in order to 

continue participation in the Shared 

Savings Program. The EHR Incentive 

regulations, including the definition of 

meaningful EHR user and certified EHR 

technology can be found at 42 CFR part 

495, as published on July 28, 2010 (75 

FR 44314). The preamble to the July 28, 

2010 final rule also describes the stages 

of meaningful use. We also sought 

comment on whether we should also 

specify a percentage-based requirement 

for hospitals. Such a requirement would 

be similar to the previous proposal for 

primary care physicians and would 

require 50 percent of eligible hospitals 

that are ACO providers/suppliers 

achieve meaningful use of certified EHR 

technology by the start of the second 

performance year in order for the ACO 

to continue participation in the Shared 

Savings Program. We also requested 

public comment related to 

circumstances where the ACO may 

include only one eligible hospital or no 

hospital and whether we would need to 

provide an exclusion or exemption in 

such a circumstance. 

Comment: A few commenters 

specifically commended CMS’s 

alignment of the ACO quality reporting 

requirements with PQRS reporting 

requirements. A few commenters 

recommended a single reporting process 

for the measures common to PQRS, 

ACO, and the EHR Incentive programs 

to reduce burden and duplication of 

effort. However, one commenter 

recommended separate reporting for the 

Shared Savings Program quality 

performance standard and the PQRS 

satisfactory reporting requirement 

initially until experience with the 

measures ACOs report for shared 

savings eligibility purposes 

demonstrates reliability for both ACO 

and PQRS needs. One commenter 

suggested individual PQRS reporting for 

providers who may be in more than one 

ACO. One commenter supported 

alignment with traditional PQRS GPRO 

reporting and suggested a financial 

disincentive for non-compliance. One 

commenter believed that individual EPs 

should be allowed to submit quality 

measures data to the traditional PQRS 

without participating in ACOs. Another 

commenter expressed concern that 

professionals could be confused by 

reporting ACO PQRS measures via 

GPRO for their ACO patients if they are 

also reporting PQRS measures via 

claims or a registry for patients not in 

the ACO under the traditional PQRS 

program. 

Response: We agree with the 

recommendations to streamline 

reporting as much as possible and are 

finalizing a set of measures aligned with 

other programs, such as the PQRS, EHR 

Incentive Program, and PGP Transition 

Demonstration. In order to reduce 

reporting burden and decrease 

operational complexity for purposes of 

earning the PQRS incentive under the 

Shared Savings Program, we are 

modifying our proposal. Although we 

are requiring that EPs in ACOs meet the 

criteria for satisfactory reporting by 

reporting data on all of the final ACO 

GPRO measures, we are not finalizing 

our proposal to condition the PQRS 

incentive payment on the reporting of 

all of the other ACO quality measures 

(that is from claims, CAHPS, and CMS 

administrative data) under the Shared 

Savings. That is, if an ACO, on behalf 

of its EPs, satisfactorily reports ACO 

GPRO measures, the EP’s ACO 

participant TIN will receive the PQRS 

incentive even if the ACO does not meet 

the quality performance standards and 

lower growth in costs requirements to 

share in savings under the Shared 

Savings Program. EPs in an ACO that 

starts its agreement in April or July 2012 

will also qualify for the 2012 PQRS 

incentive under the Shared Savings 

Program by satisfactorily reporting the 

ACO GPRO measures for the full 2012 

PQRS calendar year reporting period. 

We believe only requiring EPs in 

ACOs to meet the criteria for satisfactory 

reporting by reporting data on all of the 

final ACO GPRO measures reduces 

reporting burden, since we are 

simplifying the requirements EPs in 

ACOs must meet to earn a PQRS 

incentive under the Shared Savings 

Program. It also increases the 

probability that an EP would receive 

some level of incentive under the 

Shared Savings Program. We believe 

requiring ACOs to report the final GPRO 

measures, as opposed to all of the final 

ACO quality measures, to earn a PQRS 

incentive under the Shared Savings 

Program also reduces operational 

complexity because CMS can calculate 

the incentive payment under the Shared 

Savings Program based on the GPRO 

quality data after the ACO completes the 

GPRO quality data submission. That is, 

the calculation and distribution of the 

PQRS incentive will not be contingent 

on our analysis of other ACO quality 

data from claims, CAHPS and CMS 

administrative data under the Shared 

Savings Program. Requiring ACOs to 

report a full 12 months of GPRO quality 

data also aligns the reporting period for 

earning a PQRS incentive under the 

Shared Savings Program with the 

traditional PQRS. In addition, we 

believe groups that are currently 

participating under the traditional PQRS 

GPRO, but are considering participating 

in the Shared Savings Program, would 

have greater assurance they could earn 

a PQRS incentive under the Shared 

Savings Program, given that we are not 

finalizing our proposal that ACOs 

comprised of such group practices must 

also meet other Shared Savings Program 

requirements for a shared savings 

payment for purposes of earning a PQRS 

incentive. 

We also wish to clarify that ACO 

participant TINs that wish to qualify for 

PQRS would need to participate as 

group practices in the PQRS under the 

Shared Savings Program and may not 

separately participate in or earn a PQRS 

incentive under the traditional PQRS, 

outside of the Shared Savings Program. 

In addition, individual ACO providers/ 

suppliers who are EPs in an ACO 

participant TIN may not seek to qualify 

for an individual PQRS incentive under 

the traditional PQRS. We do not agree 

with the suggestion that ACO providers/ 

suppliers, who are EPs in one or more 

ACOs, be allowed to do individual 

PQRS reporting—in either the 

traditional PQRS or the PQRS under the 


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Shared Savings Program—for two main 

reasons. First, the Shared Savings 

Program is concerned with measuring 

the quality of care furnished by the ACO 

as a whole, and not that of individual 

ACO providers/suppliers. Second, 

allowing provider/suppliers to earn 

more than one PQRS incentive goes 

against the rules of traditional PQRS. 

We do not agree with the comment that 

disincentives for non-participation are 

necessary at this point. Rather, we 

believe positive rewards for successful 

Shared Savings Program and PQRS 

participation will be more instrumental 

in achieving the desired outcomes. 

Comment: A few commenters 

recommended CMS assure that 

attestation through the EHR Incentive 

Programs will serve as reporting for the 

ACO program or that participation in 

ACO electronic quality measurement 

reporting as one avenue of fulfilling 

meaningful use criteria under the EHR 

Incentive Program. One of these 

commenters also suggested that CMS 

should facilitate one-time data 

extraction to fulfill multiple programs’ 

reporting requirements. 

Response: At this time, the EHR 

Incentive Program does not have a 

mechanism for group reporting, so we 

are unable to translate quality data that 

ACOs will report as a group under the 

Shared Savings Program to individual 

EHR incentives for EPs. The PQRS does 

allow for group reporting, which is why 

we are able to incorporate and align 

such reporting and incentive payments 

under the Shared Savings Program. 

Comment: While one commenter 

supported the proposal that 50 percent 

of an ACO’s primary care providers be 

meaningful EHR users by the start of the 

second performance year, many 

commenters stated that the initial 50 

percent bar is too high given the lack of 

experience with the EHR Incentive 

Programs, especially for smaller, less 

integrated practices and those in rural 

areas. One commenter did not believe 

that the Shared Savings Program should 

serve to increase the rigor of other CMS 

programs or that lack of participation in 

the EHR incentive programs should 

preclude participation in the Shared 

Savings Program. Some commenters 

noted that CMS already is providing 

incentives for meaningful use of 

certified EHR technology, making 

inclusion of such a requirement under 

the Shared Savings Program redundant 

and unnecessary. Several commenters 

suggested phasing in this requirement, 

potentially over a 5-year period, or 

through certain annual percentages 

starting in year two. Other commenters 

suggested delaying or lowering the 

threshold, creating exceptions (such as 

hardship exceptions) or opportunities 

for corrective action, excluding from the 

requirement professionals who are 

ineligible for the EHR Incentives, 

expanding the scope more broadly than 

primary care physicians, including 

hospitals in the final rule, or generally 

allowing ACOs to establish their own 

goals for meaningful use. Commenters 

expressed concern about the stages of 

meaningful use and which stage would 

have to be met by the second year of a 

given ACO’s agreement with CMS, 

particularly if the second year began on 

January 1, 2014. 

Response: We have modified our 

proposal such that EHR participation is 

no longer a condition of participation 

but remains one of our quality 

measures. In addition, we have clarified 

that the measure will include any PCP 

who successfully qualifies for an EHR 

Incentive Program incentive. We believe 

this change is consistent with industry 

comments, recognizes ACOs providers’ 

current levels of EHR Incentive Program 

participation, rewards higher adoption 

with higher sharing rates, and signals 

the importance of EHR adoption to 

ACOs. To further signal the importance 

of EHRs we will score the EHR quality 

measure with higher weight than the 

other quality measures. Although we are 

not finalizing the requirement that 50 

percent of PCPs in ACOs be meaningful 

users in order for the ACO to be eligible 

to continue to participate for a second 

year in the Shared Savings Program, we 

recognize that ACOs with more IT 

infrastructure integrated into clinical 

practice will likely find it easier to be 

successful under the Shared Savings 

Program. As providers gain more 

experience with EHR technology, we 

will reconsider using certified EHR 

technology as an additional reporting 

mechanism used by ACOs under the 

Shared Savings Program, which we 

would address in rulemaking for future 

program years. 

In the proposed rule, we also 

indicated that ACOs would need to 

participate separately in the eRx 

Incentive Program (76 FR 19599). We 

strongly recommend that potential 

ACOs review the CY 2012 Physician Fee 

Schedule eRx Incentive Program 

proposed and final rules carefully, for 

details about participation 

requirements, self-nomination 

timeframes, incentive payments and 

penalties. The CY 2012 Physician Fee 

Schedule eRx Incentive Program 

proposed rule is available at: http:// 

www.gpo.gov/fdsys/pkg/FR-2011-07-19/ 

pdf/2011-16972.pdf. 

Final Decision: After considering the 

issues raised in the public comments 

and for the reasons we previously 

discussed, we are finalizing our 

proposal to incorporate PQRS reporting 

requirements and incentive payment 

under the Shared Savings Program. 

Specifically, in this final rule we are 

finalizing the use of the GPRO web 

interface, as proposed, as well as our 

proposal that EPs that are ACO 

providers/suppliers constitute a group 

practice under their ACO participant 

TIN for purposes of qualifying for a 

PQRS incentive under the Shared 

Savings Program. Therefore, an ACO, on 

behalf of its EPs, is required to 

satisfactorily submit quality data on the 

GPRO quality measures we are 

finalizing in Table 1 of this final rule. 

Such EPs within an ACO may qualify 

for a PQRS incentive under the Shared 

Savings Program only as a group 

practice and not individuals. ACO 

participants and ACO providers/ 

suppliers also may not seek to qualify 

for the PQRS incentive under traditional 

PQRS, outside of the Shared Savings 

Program. We are also finalizing the 

calendar year reporting period of 

January 1 through December 31 for 

purposes of the PQRS incentive under 

the Shared Savings Program. 

Furthermore, we intend that reporting 

on the GPRO quality measures under 

the Shared Savings Program will also 

fulfill the reporting requirements for 

purposes of avoiding the payment 

adjustment under section 1848(a) of the 

Act that begins in 2015. We plan to 

address this issue in more detail in 

future rulemaking. 

With regard to the GPRO quality 

measures applicable for the PQRS 

incentive under the Shared Savings 

Program, we are finalizing the PQRS 

GPRO criteria for satisfactory reporting 

as described previously. 

Accordingly, EPs within an ACO 

participant TIN that satisfactorily report 

the ACO GPRO measures during the 

reporting period will qualify under the 

Shared Savings Program for a PQRS 

incentive equal to 0.5 percent of the 

Secretary’s estimate of total Medicare 

Part B PFS allowed charges for covered 

professional services furnished by the 

ACO’s EPs during the first reporting 

period. ‘‘Covered professional services’’ 

are services for which payment is made 

under, or based on, the physician fee 

schedule and which are furnished by 

EPs (under the ACO participant’s TINs). 

By satisfactorily reporting the ACO 

GPRO measures on behalf of the EPs in 

the group practice, we note that the 

ACO participant TIN will meet the 

requirements for the PQRS incentive 

payment and also fulfill a portion of the 

quality performance standard 

requirements for purposes of Shared 

Savings Program shared savings 


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eligibility. However, ACOs must also 

completely and accurately report all of 

the measures in Table 1, as well as meet 

the lower growth in costs criteria, 

described in section II.G. of this final 

rule, to be considered eligible for shared 

savings. 

As we indicated previously, we are 

not finalizing our proposal regarding an 

ACO’s failure to report all required ACO 

quality measures. That is, if an ACO 

fails to meet the Shared Savings 

Program quality performance standard 

and is not eligible for shared savings, 

EPs in a group practice that is an ACO 

participant TIN may nevertheless earn 

the PQRS incentive under the Shared 

Savings Program, as long as the ACO 

satisfactorily reports, on behalf of its 

EPs, the ACO GPRO quality measures 

for the reporting period. Thus, ACO 

participant TINs in ACOs that meet the 

satisfactory reporting requirements will 

still be eligible for a PQRS incentive 

payment under the Shared Savings 

Program, even if the ACO does not 

generate shareable savings for the 

Shared Savings Program. 

As we indicated, ACOs are eligible to 

qualify for the PQRS incentive under 

the Shared Savings Program to the 

extent that they contain EPs as defined 

under § 414.90(b). As a result, not all 

ACO participants will necessarily be 

eligible for the PQRS incentive under 

the Shared Savings Program. A 

complete list of PQRS EPs is available 

at: http://www.cms.gov/PQRI/

Downloads/EligibleProfessionals.pdf. In 

addition, similar to traditional PQRS, an 

EP cannot qualify for the PQRS 

incentive as both a group and as an 

individual under the same TIN. For 

purposes of PQRS incentive analysis 

and payment, we will use TINs and NPI 

numbers similar to what we have done 

in the traditional PQRS (75 FR 40169), 

and we will provide such details in 

guidance (76 FR 19599). 

As we noted previously, we did not 

propose to incorporate the EHR 

Incentive Program or eRx Incentive 

Program reporting requirements or 

incentives under the Shared Savings 

Program. EPs in ACOs may still 

separately participate in the EHR 

Incentive Program or eRx Incentive 

Program, and we encourage potential 

ACOs to follow the applicable 

requirements for those programs. 

We are also modifying our proposal 

regarding the EHR Incentive Program 

participation criteria as a condition of 

continued Shared Savings Program. We 

are not finalizing the proposal to require 

that at least 50 percent of an ACO’s 

primary care physicians be determined 

to be ‘‘meaningful EHR users’’ as that 

term is defined in 42 CFR 495.4 by the 

start of the second performance year in 

order to continue participation in the 

Shared Savings Program. Instead we 

will double weight the quality measure 

‘‘Percent of PCPs who Successfully 

Qualify for an EHR Incentive Program 

Payment,’’ as described previously in 

section II.F, to stress the importance of 

EHR adoption among ACOs. 

6. Aligning ACO Quality Measures With 

Other Laws and Regulations 

As we stated in the proposed rule, 

different quality frameworks and 

rewards may add to confusion and 

administrative burdens for affected 

parties, and mitigate efforts to focus on 

the highest-quality care. Therefore, we 

sought comment from affected parties 

and other stakeholders on the best and 

most appropriate way to align quality 

domains, categories, specific measures, 

and rewards across these and other 

Federal healthcare programs, to ensure 

the highest-possible quality of care. 

Specifically, we sought comment on 

whether quality standards in different 

Affordable Care Act programs should 

use the same definition of domains, 

categories, specific measures, and 

rewards for performance across all 

programs to the greatest extent possible, 

taking into account meaningful 

differences in affected parties. 

Comment: A number of commenters 

supported aligning ACO quality 

measures with other CMS programs 

such as PQRS, eRx, Hospital Compare, 

Medicare Advantage, the upcoming 

physician fee schedule value modifier, 

and the EHR Incentive Programs to 

avoid burden, confusion duplicative 

reporting. One commenter suggested the 

EHR Incentive Program requirements 

are not aligned with ACO requirements, 

missing the opportunity to incentivize 

adoption and interoperability to lower 

costs and improve care. This commenter 

suggested that ACO standards be 

supported in the EHR Incentive 

Program. One commenter noted 

‘alignment’ does not necessarily mean 

using exactly the same set of measures 

across programs, since ACOs may have 

data collection capabilities and needs 

that are broader than those applicable to 

the EHR incentive program, and the 

pools of provider participants in the two 

programs will be different. A few 

commenters recommended CMS make 

public its overall quality measurement 

strategy including the synergy between 

measures for ACOs, hospital IQR, and 

other initiatives. One commenter 

supported alignment with other 

programs but raised concerns about the 

fairness of resultant double jeopardy or 

double incentives. A few commenters 

expressed concern that the lack of 

complete alignment with MA 5 Star 

measures would result in increased 

burden of reporting and decreased 

performance, greater start-up costs, and 

hinder consumers’ ability to make 

informed coverage choices. While one 

commenter believed measures reported 

through other programs should be 

excluded from this program, a number 

of commenters recommended that only 

those measures currently being reported 

in other CMS programs should be used 

initially although there were varying 

recommendations about with which 

program to align. One commenter 

recommended using the Hospital 

Quality Incentive Demonstration model 

as had succeeded in improving quality 

and decreasing cost. One commenter 

specifically recommended the ACO 

program begin exclusively with 

measures used in the PGP 

demonstration. 

A few commenters believed it would 

be desirable to have a single set of 

quality measures across payers, 

including Medicaid, Medicare, and 

commercial payers; one noted this 

would benefit vendors, providers, and 

patients. A few commenters suggested 

alignment with non-federal programs. 

One commenter suggested ACO quality 

reports should explain differences in 

measures reported by CMS and those 

reported by Regional Health 

Improvement Collaboratives (RHICs). 

One commenter recommended CMS 

align measures with the goals and 

domains of the National Quality 

Strategy. 

Response: We agree, in principle, 

with alignment across programs. To that 

end, we have chosen a final measure set 

that is closely aligned with PQRS as 

discussed previously. At this point in 

time and for this particular program, the 

ambulatory PQRS set was the natural 

choice compared with other proposed 

measurement sets focused on the 

inpatient setting or MA plans. However, 

we will revisit this issue and continue 

to work toward alignment with those 

and other programs in future 

rulemaking. We also do intend to 

further align the Shared Savings 

Program with the EHR Incentive 

Programs as we develop experience 

with both programs and EHRs become 

more widespread. We do not share the 

one commenter’s concern about ‘‘double 

jeopardy’’ or ‘‘double incentives’’ by 

including measures under more than 

one program. Rather, we believe 

including a measure in more than one 

program and aligning the measures 

specifications signals CMS’ desire for 

better performance in that area and 

serves to increase the motivation for 

such improved performance. While we 


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agree with the principle of alignment 

across a variety of programs, it is 

beyond the purview of this program to 

align fully with external programs or to 

explain differences between our 

measurement set and the numerous 

other measurement sets in existence. 

However, our final measurement set is 

aligned with the National Quality 

Strategy. In response to the commenters 

that recommended we make public our 

overall quality measurement strategy, 

we agree that it is important that we 

make our quality strategy publicly 

available and have done so through our 

Web site and a large number of public 

events. 

Final Decision: We will finalize our 

proposal to align the Shared Savings 

Program quality measures reporting 

requirements with those in other 

programs, to the extent possible, as 

previously discussed. 

G. Shared Savings and Losses 

1. Authority For and Selection of Shared 

Savings/Losses Model 

Section 1899 of the Act, as added by 

section 3022 of the Affordable Care Act, 

establishes the general requirements for 

payments to participating ACOs. 

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

Act provides that ACO participants will 

continue to receive payment ‘‘under the 

original Medicare fee-for-service 

program under Parts A and B in the 

same manner as they would otherwise 

be made.’’ However, section 

1899(d)(1)(A) of the Act also provides 

for an ACO to receive payment for 

shared Medicare savings provided that 

the ACO meets both the quality 

performance standards established by 

the Secretary, as discussed in section 

II.F. of this final rule, and demonstrates 

that it has achieved savings against a 

benchmark of expected average per 

capita Medicare FFS expenditures. 

Additionally, section 1899(i) of the Act 

authorizes the Secretary to use other 

payment models in place of the onesided model outlined in section 1899(d) 

of the Act. This provision authorizes the 

Secretary to select a partial capitation 

model or any other payment model that 

the Secretary determines will improve 

the quality and efficiency of items and 

services furnished to Medicare 

beneficiaries without additional 

program expenditures. 

In the November 17, 2010 Federal 

Register, we solicited public comment 

on a number of issues regarding ACOs 

and the Shared Savings Program, 

including the types of additional 

payment models we should consider in 

addition to the model laid out in section 

1899(d) of the Act, either under the 

authority provided in section 1899(i) of 

the Act or using the Innovation Center 

authority under section 1115A of the 

Act. We further asked about the relative 

advantages and disadvantages of any 

such alternative payment models. 

In the proposed rule, we described 

and sought comment on several options 

for structuring the Shared Savings 

Program. One option we considered was 

to offer a pure one-sided shared savings 

approach using the calculation and 

payment methodology under section 

1899(d) of the Act. This option 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. Another reason we 

considered this option was that a onesided model with no downside 

performance risk might be more 

accessible and attract smaller group 

participation. However, as some RFI 

commenters suggested, while such a 

model may provide incentive for 

participants to improve quality, it may 

not be enough of an incentive for 

participants to improve the efficiency 

and cost of health care delivery. 

Therefore, we considered a second 

option to use our authority under 

section 1899(i) of the Act to create a 

performance risk-based option in the 

Shared Savings Program. Such a model 

would have the advantage of providing 

an opportunity for more experienced 

ACOs that are ready to share in losses 

to enter a sharing arrangement that 

provides greater reward for greater 

responsibility. 

Another approach we considered 

would be to offer a hybrid approach. A 

hybrid approach would combine many 

of the elements of the one-sided model 

under section 1899(d) of the Act with a 

performance risk-based approach under 

section 1899(i) of the Act. 

Based on the input of commenters on 

the November 17, 2010 RFI, other 

stakeholders and policy experts we 

proposed to implement a hybrid 

approach. Specifically, we proposed 

that ACOs participating in the Shared 

Savings Program would have an option 

between two tracks: 

Track 1: Under Track 1, shared 

savings would be reconciled annually 

for the first 2 years of the 3-year 

agreement using a one-sided shared 

savings approach, with ACOs not being 

responsible for any portion of the losses 

above the expenditure target. However, 

for the third year of the 3-year 

agreement, we proposed to use our 

authority under section 1899(i) of the 

Act to establish an alternative two-sided 

payment model. Under this model, an 

ACO would be required to agree to share 

losses generated as well as savings. 

ACOs that enter the Shared Savings 

Program under Track 1 would be 

automatically transitioned to the twosided model in the third year of their 

agreement period. In that year, the 

ACO’s payments would be reconciled as 

if it was in the first year of the two-sided 

model. However, quality scoring would 

still be based on the methods for the 

third year (that is, it would not revert 

back to the first year standard of full and 

accurate reporting). Thereafter, those 

ACOs that wish to continue 

participating in the Shared Savings 

Program would only have the option of 

participating in Track 2, that is, under 

the two-sided model. As proposed, we 

envisioned that this track would 

provide an entry point for organizations 

with less experience with risk models, 

such as some physician driven 

organizations or smaller ACOs, to gain 

experience with population 

management before transitioning to a 

risk-based model. 

Track 2: More experienced ACOs that 

are ready to share in losses with greater 

opportunity for reward could elect to 

immediately enter the two-sided 

model). An ACO participating in Track 

2 would be under the two-sided model 

for all 3 years of its agreement period. 

Under this model, the ACO would be 

eligible for higher sharing rates than 

would be available under the one-sided 

model. We proposed that this track 

would provide an opportunity for 

organizations more experienced with 

care coordination and risk models that 

are ready to accept performance-based 

risk, to enter a sharing arrangement that 

provides greater reward for greater 

responsibility. 

In general, we proposed the same 

eligibility requirements and 

methodologies for the two tracks. That 

is, we proposed to use the same 

eligibility criteria, beneficiary 

assignment methodology, benchmark 

and update methodology, quality 

performance standards, data reporting 

requirements, data sharing provisions, 

monitoring for avoidance of at-risk 

beneficiaries, and transparency 

requirements for ACOs under the onesided and two-sided models. We also 

explained our belief that the proposed 

monitoring procedures in combination 

with our proposed use of a retrospective 

beneficiary assignment methodology 

and proposed beneficiary notification 

requirements were sufficient to guard 

against the prospects that two-sided 

model ACOs might try to avoid at-risk 

beneficiaries in order to minimize the 

possibilities of realizing losses against 


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their benchmarks. However, we invited 

comments on the sufficiency of the 

proposed monitoring procedures as well 

as additional areas and mechanisms for 

monitoring two-sided model ACOs. 

We proposed adding some 

requirements to the program in order to 

provide further assurance about the 

ability of an ACO operating under the 

two-sided model to repay the Medicare 

program in the event of incurred losses. 

We proposed requiring all ACOs to 

demonstrate, as part of their application 

and in advance of entering the twosided model, the establishment of a 

repayment mechanism to ensure 

repayment of losses to the Medicare 

program. We stated our belief that the 

proposed eligibility requirements for 

ACOs in addition to the requirement 

that ACOs demonstrate an adequate 

repayment mechanism were sufficient 

to ensure the ability of ACOs to repay 

CMS in the event they incur losses. We 

sought comment on whether additional 

eligibility requirements were necessary 

for ensuring that ACOs entering the twosided model would be capable of 

repaying CMS if actual expenditures 

exceeded their benchmark. 

Further, we proposed to provide 

greater financial incentives to ACOs that 

participate under the program’s twosided model to encourage ACOs to enter 

the two-sided model, which we believe 

has a greater potential than the onesided model to induce meaningful and 

systematic change in providers’ and 

suppliers’ behavior. 

In the proposed rule, we described 

our intention to design and test partial 

capitation models in the Innovation 

Center first in order to gain more 

experience with such models, introduce 

them to providers of services and 

suppliers, and refine them, before 

applying them more widely in the 

Shared Savings Program. 

Comment: Many comments indicated 

general support for our proposal to base 

the Shared Savings Program on a 

framework of existing FFS payments. 

However, some commenters urged CMS 

not to confine its payment method to 

the current, traditional Medicare fee-forservice payments to ACO participants 

but instead to employ a variety of 

alternative payment approaches. In 

some cases, commenters recommended 

these alternatives to facilitate 

participation by specific provider types 

or the inclusion of specific types of 

services. One commenter suggested this 

is necessary to ensure the success of the 

program. Another commenter, generally, 

supported testing of various payment 

and care delivery models through the 

Innovation Center. 

Of those who recommended 

alternative payment models, 

commenters most commonly 

recommended inclusion of the 

following payment models in the 

Shared Savings Program: blended feefor-service payments; prospective 

payments; episode/case rate payments; 

bundled payments; patient-centered 

medical homes and surgical homes 

payment models; payments based on 

global budgets; full capitation; partial 

capitation such as condition-specific 

capitation; and enhanced FFS payments 

for care management, such as care 

coordination fees. Several others 

suggested CMS allow ACOs to use 

incentives to ensure beneficiaries 

adhere to treatment regimens or seek 

care within the ACO. 

In the case of enhanced FFS 

payments, commenters offered a variety 

of suggestions on the form for such 

payments. Most commonly, commenters 

suggested CMS pay for physicians’ 

consultative or coordination services 

provided via e-mail or telephone, such 

as self-management support for patients 

with chronic diseases, or through a permember per-month (PMPM) care 

management fee (for example, in the 

range of $10–$50 PMPM). One 

commenter offered a specific proposal 

for incorporating enhanced FFS 

payments. Specifically, CMS should use 

its authority under section 1899(i) of the 

Act to authorize payment for CPT codes 

for telephone calls and other non-faceto-face services used by ACOs that 

accept downside risk to improve care 

management and hold ACOs 

accountable for repaying a portion of 

these payments should they bill for 

these codes but fail to achieve savings. 

CMS should then collect data on the 

impact of paying for these services to 

determine if this payment policy should 

be expanded to FFS Medicare. Another 

suggested example would be for CMS to 

authorize payment for telemedicine 

codes reported by ACOs. Another 

commenter suggested using a budget 

neutral way to provide these payments 

by reallocating dollars from inpatient 

and specialty reimbursement. 

Some commenters recommended 

CMS offer other targeted payment 

models to facilitate participation by 

certain types of ACOs, such as small 

physician-only ACOs, and ACO 

participants, namely small- and 

medium-sized physician practices, 

especially those in rural areas; or to 

support care for particular types of 

patients, such as dual eligible 

beneficiaries. 

Several comments related to the 

overall design of the proposed program. 

One commenter suggested the Shared 

Savings Program is an overly complex 

approach to cost management and urged 

CMS to find a simpler solution. The 

commenter suggested setting 

expenditure benchmarks relative to 

geographic areas, allowing ACOs that 

meet quality thresholds to keep FFS 

payments received, and penalizing 

ACOs that do not reduce expenditures. 

Another commenter suggested allowing 

ACOs to share in first dollar savings for 

all Medicare beneficiaries seen by the 

ACO, not just those assigned to the 

ACO. A third commenter urged CMS to 

ensure a consistent approach and level 

playing field as between the Shared 

Savings Program and Medicare 

Advantage. 

Response: We appreciate commenters’ 

interest in and support for adopting 

other payment models in the Shared 

Savings Program, but disagree with 

suggestions that CMS use its authority 

under section 1899(i) of the Act to 

include additional alternative payment 

models in the program at this time. We 

believe many of the suggested payment 

models remain untested. We are 

concerned that immediately adopting 

models on a national scale with which 

we have no experience could lead to 

unintended consequences. However, as 

discussed in section II.B.6. of this final 

rule, it is the Innovation Center’s task to 

test novel payment models under its 

demonstration authority. We anticipate 

that as we gain experience through the 

Innovation Center with novel payment 

models what we learn could be more 

widely adopted in the Shared Savings 

Program. We would note that a number 

of commenters expressed support for 

testing alternative models through the 

Innovation Center. 

Comment: Several comments reflected 

confusion about the proposed payment 

model under the Shared Savings 

Program. For instance, some 

commenters asserted that the program 

will, in fact, make partial capitation 

payments, or questioned if providers 

electing not to participate in the 

program will continue to receive 

payment as usual. 

Response: We would like to clarify 

that consistent with section 

1899(d)(1)(A) of the Act, fee-for-service 

providers will continue to receive 

payments ‘‘under the original Medicare 

fee-for-service program under Parts A 

and B in the same manner as they 

would otherwise be made’’ regardless of 

whether they participate in the Shared 

Savings Program. Also, as indicated 

previously, we do not plan to adopt 

partial capitation (or other such 

payment methodologies) at this time, 

but may do so in the future through 


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appropriate rule-making, depending on 

lessons learned through demonstrations. 

Comment: A few commenters noted 

concerns that uncertainty about the 

Sustainable Growth Rate (SGR) for FY 

2012 could undermine the program, as 

doctors could be subject to lower 

reimbursement rates and also be 

potentially subject to shared losses 

under the Shared Savings Program. One 

commenter suggested that CMS delay 

publication of the final rule for the 

Shared Savings Program until 

clarification of the FY 2012 SGR. 

Further, one commenter suggested that 

physician reimbursement rates are 

already too low to cover costs, and the 

‘‘flawed’’ SGR formula needs to be 

addressed to allow physicians to adapt 

new care delivery models. Another 

commenter suggested that the SGR and 

the Shared Savings Program are 

redundant mechanisms to control 

utilization and focus on prevention, 

quality and efficiency, and as such CMS 

should develop a process for waiving 

SGR requirements for physicians 

participating in ACOs. 

Response: We decline to use our 

authority under section 1899(f) of the 

Act to waive the requirements of the 

SGR methodology for ACO participants 

as it is not necessary to waive these 

requirements in order to carry out the 

provisions of section 1899 and 

implement the Shared Savings Program. 

Rather, the statute at section 

1899(d)(1)(A) expressly provides that 

we continue to make payments to the 

providers and suppliers participating in 

an ACO ‘‘* * * in the same manner as 

they would otherwise be made * * *.’’ 

Accordingly, addressing concerns about 

the SGR methodology is beyond the 

scope of this rule for the Shared Savings 

Program. We note, however, the 

publication of the proposed rule for the 

2012 Medicare Physician Fee Schedule 

on July 1, 2011, and the publication of 

the final rule, to include the Secretary’s 

initial estimate of the SGR for 2012, 

later this year. 

Comment: The comments reflected a 

variety of opinions on the proposed two 

track approach. Several commenters 

supported retaining the proposed two 

track approach in the final rule. As one 

commenter explained, a shared savings 

only track may be appropriate for newly 

formed organizations to gain experience 

with accountable care models, but a 

model that includes shared 

performance-based risk is necessary to 

drive meaningful change. A few 

commenters strongly favored the 

proposal to transition ACOs under the 

one-sided model to a shared savings and 

risk model in the third year while 

offering more mature ACOs the option 

to enter into a shared savings and risk 

model in the first year; indicating the 

importance of shared performancebased risk in the delivery transformation 

necessary to achieve the three-part aim 

and for ‘‘good stewardship’’ of Medicare 

Trust Fund dollars. 

However, most commenters expressed 

concerns with requiring ACOs to 

quickly accept performance risk for the 

costs of their patients, or even to accept 

risk at all, and suggested this proposal 

could diminish participation. Several 

comments noted that for organizations 

(particularly small- and medium-sized 

practices) that do not have any 

experience with care management or 

managing performance-based risk, a 

shared savings only option would better 

enable them to feel comfortable making 

the significant investments necessary to 

transition to the accountable care 

model. Along these lines, commenters 

suggested that including a shared 

savings only model would encourage 

participation by certain groups, such as: 

small- and medium-sized physician 

practices, loosely formed physician 

networks, safety net providers, small 

ACOs, and rural ACOs. 

Some commenters expressed 

reservations about the proposed 

inclusion of the two-sided model. Some 

commenters were concerned that a 

downside risk payment model could 

jeopardize the financial health of ACOs 

and may ultimately result in market 

dynamics similar to those precipitating 

the managed care backlash in the 1990s; 

although, several commenters noted the 

additional proposed program 

protections would safeguard against 

these problems. One commenter 

cautioned that absent sufficient care 

coordination systems, blame for losses 

might lie with certain groups of 

physicians (such as emergency 

medicine physicians). Another 

commenter explained that risk 

emphasizes financial outcomes over 

patient-centered care. Further, several 

commenters questioned the authority 

for including shared losses in the 

program. For example, commenters 

suggested that Congress intended only a 

shared savings program, or expressed 

concern that a requirement for ACOs to 

repay shared losses would constitute an 

unlicensed quota share reinsurance 

arrangement. 

Commenters offered the following 

specific reasons for why ACOs entering 

Track 1 should not automatically 

transition to the two-sided model in 

their third performance year: 

• Insufficient time exists for ACOs to 

gain necessary experience with 

population management to generate 

savings prior to being required to accept 

risk. 

• The risk for substantial loss already 

exists for new ACOs because of the 

unknowns about the potential for ACOs 

to generate savings given the significant 

upfront investments needed to build 

ACO infrastructure and the anticipated 

high operational costs. 

• Potential ACOs may lack access to 

Medicare claims data that would enable 

them to evaluate the nature or 

magnitude of the downside risks they 

would be accepting. 

• When beneficiaries retain freedom 

to see any provider and when 

assignment is retrospective, Medicare 

ACOs may lack the ability to have 

certainty over identification of their 

assigned population and even when 

identified, there is a possibility for 

significant turnover or lack of 

cooperation with an ACO’s efforts to 

control expenditures. 

• The proposed cap on risk 

adjustment may increase ACO risk for 

losses or reduced savings. 

• The potential for increased costs 

that are beyond the ACO’s control 

exists. 

• Risk may incent ACOs to cherry 

pick patients, for example, by excluding 

from the ACO physicians which treat 

high cost patients. 

Hence, commenters suggested a variety 

of alternatives to our proposal, for 

example, that we— 

• Establish a one-sided, shared 

savings only track—the most commonly 

made recommendation. 

• Remove the two-sided model as an 

option for ACOs. 

• Remove the one-sided model as an 

option for ACOs. 

• Extend the length of time available 

in a one-sided shared savings model by 

extending an agreement period or 

allowing ACOs to participate in a onesided model for additional performance 

years or agreement periods. 

• Exempt some ACOs from downside 

risk, such as small, rural and physicianonly ACOs. For instance, extend an 

exemption from the two-sided model to 

those ACOs exempted from the 2 

percent net sharing requirement, or 

develop additional tracks tailored for 

smaller medical practices or rural 

providers and suppliers. Other 

commenters suggested exempting ACOs 

in low cost States and those in areas 

where high hospital readmission rates 

result from a lack of access to 

community-based services beyond the 

ACO’s control. 

• Make the ACO’s population the 

determinant of the applicable model, for 

instance, beneficiaries with high cost 


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conditions would be under the onesided model and the remainder of the 

beneficiary population would be under 

two-sided model. 

• Develop a 4-tiered approach to hold 

organizations at different stages of 

development to different standards. 

However, some patient advocate 

groups generally cautioned against 

amending policies to make the program 

more attractive to providers at the 

expense of clinical or financial benefits 

which could accrue from ACOs. 

Response: We believe that 

maintaining a two track approach is 

important for attracting broad 

participation, including providers and 

suppliers new to value-based 

purchasing and more experienced ACOs 

that are ready to share in losses. 

Commenters supported our belief that 

models where ACOs bear a degree of 

financial risk hold the potential to 

induce more meaningful systematic 

change, which underscores the 

importance of transitioning ACOs from 

the one-sided model to risk-based 

arrangements. However, the 

commenters also persuaded us 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. Commenters 

persuaded us further that revising Track 

1 to be a shared savings only option, 

while retaining Track 2 as a shared 

savings/losses model, would be the 

most appropriate means to achieve this 

objective. Accordingly, we will finalize 

our proposal to offer the two-sided 

model under Track 2 to ACOs willing 

and able to take on performance-based 

risk in exchange for higher reward, but 

will offer Track 1 as a shared savings 

only track for the duration of the first 

agreement period for ACOs needing 

more experience before taking on risk. 

We believe this modification will 

increase interest in the Shared Savings 

Program by providing a gentler ‘‘on 

ramp’’ while maintaining the flexibility 

for more advanced ACOs to take on 

greater performance-based risk for 

greater reward immediately. However, 

we continue to believe that models that 

hold a degree of financial risk have the 

potential to induce more meaningful 

changes. As such, an ACO will be 

eligible for no more than one agreement 

period under the shared savings only 

model. 

We were also encouraged by 

commenters’ interest in including 

alternative payment models in the 

Shared Savings Program. As indicated 

in the proposed rule, it is our intent to 

gain experience with several alternative 

payment models through the Innovation 

Center before potentially adopting them 

more widely in the Shared Savings 

Program. 

Comment: We received a few 

comments on the alignment of the oneand two-sided models on eligibility 

criteria, beneficiary assignment 

methodology, benchmark and update 

methodology, quality performance 

standards, data reporting requirements, 

data sharing provisions, monitoring for 

avoidance of at-risk beneficiaries, and 

transparency requirements. Several 

commenters suggested that retrospective 

assignment could be particularly 

problematic for ACOs under the twosided model, expressing concern that 

ACOs would be accountable for losses 

from assigned beneficiaries whom they 

could not identify and whose care they 

could not influence. 

Response: Unless stated otherwise 

elsewhere in this final rule, we decline 

to further differentiate the program’s 

two models on the basis of eligibility 

criteria, beneficiary assignment 

methodology, benchmark and update 

methodology, quality performance 

standards, data reporting requirements, 

data sharing provisions, monitoring for 

avoidance of at-risk beneficiaries, and 

transparency requirements for ACOs 

because we believe the policies being 

adopted in this final rule are 

appropriate for all ACOs, regardless of 

whether they are participating in a onesided or two-sided model. In addition, 

we believe that the preliminary 

prospective assignment methodology 

that we are adopting in this final rule 

will sufficiently address commenters’ 

concerns about the ability of an ACO to 

identify its potential assigned 

beneficiaries in order to allow for 

effective care management. 

Accordingly, we are finalizing our 

proposal to offer ACOs a choice of two 

tracks, but modify our proposal for 

Track 1. Track 1 will be a shared savings 

only model (under the one-sided model) 

for the duration of the ACO’s first 

agreement period. We will make final 

our proposal that ACOs electing Track 

2 will be under the two-sided model for 

the duration of their first agreement 

period. 

In the proposed rule we discussed 

several options about how to 

incorporate a two-sided model into the 

Shared Savings Program. The major 

options we considered were— 

• Base the program on a two-sided 

model, thereby requiring all participants 

to accept risk from the first program 

year. 

• Allow applicants to choose between 

program tracks, either a one-sided 

model or two-sided model, for the 

duration of the agreement. 

• 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. 

We explained that requiring all ACOs 

to initially take downside risk would 

likely inhibit the participation of some 

interested entities, particularly 

organizations which lack the experience 

and capital to accept significant 

downside risk. We further explained 

that allowing ACOs to choose from 

either a one-sided model or a two-sided 

model created concerns, in particular 

that ACOs capable of taking risk could 

take advantage of the option that allows 

for gain by realizing savings without any 

risk for incurring added costs. In the 

proposed rule, we stated that we 

believed it is important that all Shared 

Savings Program participants quickly 

move to taking on downside risk 

because payment models where ACOs 

bear a degree of financial risk have the 

potential to induce more meaningful 

systematic change in providers’ and 

suppliers’ behavior. We further 

explained our belief that, by introducing 

a risk model, we could elicit applicants 

to the program who are more serious 

about their commitment to achieving 

the program’s goals around 

accountability for the care of Medicare 

beneficiaries and the three-part aim of 

enhancing the quality of health care, 

improving patient satisfaction with their 

care, and better controlling the growth 

in health care costs. 

We proposed that applicants would 

have the option of choosing between a 

one-sided model and a two-sided model 

initially. Under Track 1, ACOs enter the 

program under the one-sided model and 

must transition to the two-sided model 

for the third year of their initial 

agreement period. Alternatively, under 

Track 2, an ACO may enter the twosided model option immediately for a 

full 3-year agreement period. We further 

proposed that all ACOs, whether 

participating under Track 1 or Track 2, 

must participate in the two-sided model 

in subsequent agreement periods. Thus, 

under our proposal, an ACO could only 

participate for a maximum of 2 years 

under the one-sided model, during its 

first agreement period, before it must 

transition and participate thereafter in 

the Shared Savings Program under the 

two-sided model. We stated our belief 

that this approach would allow ACOs to 

gain experience with the accountable 

care model under the one-sided model, 

while also encouraging organizations to 

take on greater risk with the opportunity 

for greater reward by migrating them to 

the two-sided model. We invited 


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comment on this proposal and other 

options for incorporating a two-sided 

model into the Shared Savings Program, 

including mechanisms for transitioning 

ACOs to two-sided risk arrangements. 

Comment: Some commenters urged 

CMS to allow ACOs to accept risk on a 

voluntary basis, ‘‘at their own pace.’’ 

MedPAC, among others, favored 

extending the time an ACO could 

participate under the one-sided model, 

but to ultimately require ACOs to accept 

downside risk. Those favoring transition 

to the two-sided model suggested it 

provides greater incentives for ACOs to 

eliminate unnecessary expenditures and 

improve integration and care 

coordination. The most common 

suggestion was to allow ACOs to 

participate under the one-sided model 

for an initial 3 year agreement period 

and thereafter require ACOs to accept 

risk. Others suggested extending the 

availability of the one-sided model to 

ACOs beyond the first agreement 

period, with suggestions ranging from 4, 

5, or 6 years. Some commenters 

suggested allowing certain types of 

ACOs additional time under the onesided model, such as small, rural and 

physician-only ACOs; for instance 

expanding the proposed exemption of 

these organizations from a 2 percent net 

sharing rate to the requirement to 

transition to the two-sided model. One 

commenter suggested making the onesided model available only to early 

adopters. A hybrid approach would be 

to allow ACOs two agreement periods 

under the one-sided model with the 

option to voluntarily switch to the twosided model at the beginning of any 

calendar year. 

Other commenters recommended 

alternatives for transitioning Track 1 

ACOs to risk in their third year, but 

exempting them from repaying some or 

all of their losses. For instance, one 

commenter suggested holding Track 1 

ACOs harmless for the first 2 percent of 

losses in year 3 if they generated savings 

in their first two performance years, 

based on the idea that our compensation 

through the proposed 2 percent net 

sharing requirement for the one-sided 

model. Alternatively, this commenter 

suggested, more generally, using savings 

generated in a prior performance year to 

off-set the amount of losses owed. 

Several commenters were concerned 

that an automatic transition to risk 

would result in ACOs under the twosided model that lacked the capacity to 

bear risk. One commenter recommended 

a more measured approach, whereby 

CMS would evaluate an ACO’s 

readiness to assume risk before 

transitioning it to the two-sided model. 

Commenters suggested various options 

for ACOs unable to accept risk at the 

point of required transition to the twosided model: Termination by CMS, 

voluntarily withdrawal, and completion 

of the agreement period under the onesided model with no opportunity to 

continue in the program. 

Response: Earlier in this section, we 

specify that in this final rule we are 

adopting a final policy under which 

ACOs will have a choice of two tracks 

for their first agreement period: a shared 

savings only model (Track 1) or the twosided model (Track 2). However, we are 

finalizing our proposal to require an 

ACO to participate under the two-sided 

model after its initial agreement period. 

We continue to believe that 

accountability for losses is an important 

motivator for providers to change their 

behavior and to maximize reductions in 

unnecessary expenditures, and that the 

prospect of accountability for losses will 

ensure that the program attracts 

participants that take seriously their 

commitment to achieving the program’s 

goals. 

We appreciate commenters’ concerns 

about a mandatory transition to risk and 

their recommendations to allow ACOs 

to voluntarily assume risk. Because 

ACOs will be required to enter the twosided model only in subsequent 

agreement periods, ACOs will have the 

option to decide whether to continue to 

participate. As a result, those ACOs that 

decide to continue participating in the 

program at the end of their first 

agreement period will be voluntarily 

entering the two-sided model. In 

selecting the length of time an ACO 

could remain under the one-sided 

model, we found support in comments 

for limiting the period to the first 

agreement period. Further, as discussed 

later in this final rule, we are revising 

our proposed policy in order to allow 

ACOs that have a net loss during their 

first agreement period to continue to 

participate in the program, provided 

they meet all other participation 

requirements. We believe that this 

policy provides further support for 

limiting participation under the onesided model to an ACO’s initial 

agreement period. Underperforming 

ACOs would be allowed to continue in 

the Shared Savings Program, but all 

ACOs that elect to do so would be 

required to be accountable for their 

losses. Lastly, we disagree with 

commenters’ suggestions that we 

exempt some ACOs entirely from the 

two-sided model, or otherwise allow 

ACOs to participate in the one-sided 

model for an extended or indefinite 

period of time. Absent a limit on 

participation under the one-sided model 

we anticipate that ACOs capable of 

taking on risk would take advantage of 

the option that allows for gain by 

realizing savings without any risk for 

incurring losses by remaining in the 

one-sided model. 

We appreciate commenters’ concerns 

about the transition of ACOs to the twosided model when they lack the 

financial reserves necessary to safely 

assume risk. We believe the repayment 

mechanism in this final rule, is 

sufficient to safeguard against ACOs 

entering the two-sided model when they 

lack the capacity to bear risk. 

Additionally, we proposed that an 

ACO may not reapply 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 under-performing organizations 

would not get a second chance. We 

sought comment on this proposal and 

whether denying participation to ACOs 

that previously underperformed would 

create disincentives for the formation of 

ACOs, particularly among smaller 

entities. 

Comment: Commenters expressed 

concern about the proposal to disallow 

continued participation by financially 

under-performing ACOs. Commenters 

suggested this policy could serve as a 

disincentive to participation, 

particularly by small ACOs. They 

believed organizations may be reluctant 

to make the necessary investments to 

form ACOs given the uncertainty over 

their ability to produce shared savings 

during the initial agreement period and 

their ability to continue in the program 

beyond 3 years. Some commenters 

suggested it may take several years for 

an ACO to demonstrate shared savings, 

indicating that some well-intentioned 

ACOs may not be able to do so by the 

end of their initial agreement period. 

Several commenters suggested 

eliminating the proposed policy. Others 

suggested adopting a more flexible 

approach to avoid penalizing wellmeaning ACOs, such as: 

• Allowing continued participation 

for ACOs that, despite experiencing a 

net loss, demonstrate a consistent 

decrease in the net loss over the initial 

3 years of the agreement. 

• Judging ACOs’ readiness to 

continue in the program based on 

quality, not cost, performance. For 

instance, allow continued participation 

for ACOs which meet the program’s 

quality performance requirements. 

Response: We are modifying our 

proposal to allow continued 

participation by ACOs electing to do so 

who experience a net loss during their 

first agreement period. We recognize 

that it may take longer than the term of 


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an ACO’s initial agreement period for an 

ACO to achieve shared savings, 

particularly ACOs new to the 

accountable care model. Commenters 

have persuaded us 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. Our policies 

on monitoring and termination will help 

to ensure that ACOs that underperform 

on the quality standards do not continue 

in the program. Further, continued 

participation by previously 

underperforming ACOs could benefit 

the Trust Funds– as compared to FFS 

providers not engaged in the Shared 

Savings Program—as these ACOs will 

participate under the two-sided model 

and therefore will have an even greater 

incentive to improve the quality and 

efficiency of the care they provide in 

order to avoid being accountable for 

shared losses. While there appear to be 

a number of benefits to allowing 

financially underperforming ACOs to 

continue to participate in the program, 

we believe this policy could be cause for 

concern, as it may allow ongoing 

participation by organizations that are 

not dedicated to the accomplishment of 

the program’s goals but that reap the 

benefits from participation, such as legal 

protections under the waivers. 

Therefore we are further requiring ACOs 

which experience a net loss in their 

initial agreement period, applying to 

participate in a subsequent agreement 

period, to identify in their application 

the cause(s) for the net loss and to 

specify what safeguards are in place to 

enable the ACO to potentially achieve 

savings in its next agreement period. 

Further, we will monitor closely this 

aspect of the program, and may revise 

our policy in future rulemaking. 

We are modifying our proposal to 

allow an ACO which experiences a net 

loss during its first agreement period to 

reapply to participate in the Shared 

Savings Program. 

Final Decision: As provided in 

§ 425.600, we will establish the Shared 

Savings Program on existing FFS 

payments, using both shared savings 

only (Track 1) and shared savings and 

losses models (Track 2). While making 

final our proposal to offer ACOs a 

choice of two tracks, we are modifying 

our proposal for Track 1 so that it will 

be a shared savings only model for the 

duration of the ACO’s first agreement 

period. We will make final our proposal 

that ACOs electing Track 2 will be 

under the two-sided model for the 

duration of their first agreement period. 

We are also finalizing our proposal to 

require all ACOs to participate in the 

two-sided model in agreement periods 

subsequent to the initial agreement 

period. We are modifying our proposal 

to allow continued participation by 

ACOs electing to do so who experience 

a net loss during their first agreement 

period. Specifically, we are requiring 

ACOs, which experience a net loss in 

their initial agreement period and apply 

to participate in a subsequent agreement 

period, to identify in their application 

the cause(s) for the net loss and to 

specify what safeguards are in place to 

enable the ACO to potentially achieve 

savings in its next agreement period. 

Further, we will monitor closely this 

aspect of the program, and may revise 

our policy future rulemaking. 

2. Shared Savings and Losses 

Determination 

a. Overview of Shared Savings and 

Losses Determination 

We proposed that the shared savings 

model (one-sided model) and a shared 

savings/losses model (two-sided model) 

would share many program elements in 

common, including a similar 

methodology for determining whether 

an ACO has achieved savings against 

the benchmark. Unless specifically 

noted, the elements discussed in the rest 

of this section will apply to both the 

one-sided and two-sided models. 

However, we also explained the 

necessity to develop some policies for 

the two-sided model that would not be 

necessary under a one-sided model, 

including, for example, a methodology 

for determining shared losses. The 

following table provides an overview of 

our final decisions on elements of the 

program’s financial models. 

TABLE 5—SHARED SAVINGS PROGRAM OVERVIEW

One-sided model Two-sided model 

Issue Proposed Final Proposed Final 

Transition to Two-Sided 

Model.

Transition in third year 

of first agreement period.

First agreement period under 

one-sided model. Subsequent agreement periods 

under two-sided model.

Not Applicable .............. Not Applicable. 

Benchmark ................... Option 1 reset at the 

start of each agreement period.

Finalizing proposal .................... Option 1 reset at the 

start of each agreement period.

Finalizing proposal. 

Adjustments for health 

status and demographic changes.

Benchmark expenditures adjusted based 

on CMS–HCC model.

Historical benchmark expenditures adjusted based on 

CMS–HCC model. Performance year: Newly assigned 

beneficiaries adjusted using 

CMS–HCC model; continuously assigned beneficiaries 

(using demographic factors 

alone unless CMS–HCC risk 

scores result in a lower risk 

score). Updated benchmark 

adjusted relative to the risk 

profile of the performance 

year.

Benchmark expenditures adjusted based 

on CMS–HCC model.

Historical benchmark expenditures adjusted based on 

CMS–HCC model. Performance year: Newly assigned 

beneficiaries adjusted using 

CMS–HCC model; continuously assigned beneficiaries 

(using demographic factors 

alone unless CMS–HCC risk 

scores result in a lower risk 

score). Updated benchmark 

adjusted relative to the risk 

profile of the performance 

year. 

Adjustments for IME 

and DSH.

Include IME and DSH 

payments.

IME and DSH excluded from 

benchmark and performance 

expenditures.

Include IME and DSH 

payments.

IME and DSH excluded from 

benchmark and performance 

expenditures. 


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TABLE 5—SHARED SAVINGS PROGRAM OVERVIEW—Continued 

One-sided model Two-sided model 

Issue Proposed Final Proposed Final 

Payments outside Part 

A and B claims excluded from benchmark and performance year expenditures; 

Exclude GME, PQRS, 

eRx, and EHR incentive payments for eligible professionals, 

and EHR incentive 

payments for hospitals.

Finalize proposal ...................... Exclude GME, PQRS, 

eRx, and EHR incentive payments for eligible professionals, 

and EHR incentive 

payments for hospitals.

Finalize proposal. 

Other adjustments ........ Include other adjustment based in Part A 

and B claims such as 

geographic payment 

adjustments and 

HVBP payments.

Finalize proposal ...................... Include other adjustment based in Part A 

and B claims such as 

geographic payment 

adjustments and 

HVBP payments.

Finalize proposal. 

Maximum Sharing Rate Up to 52.5 percent 

based on the maximum quality score 

plus incentives for 

FQHC/RHC participation.

Up to 50 percent based on the 

maximum quality score.

Up to 65 percent based 

on the maximum 

quality score plus incentives for FQHC/ 

RHC participation.

Up to 60 percent based on the 

maximum quality score. 

Quality Sharing Rate .... Up to 50 percent based 

on quality performance.

Finalizing proposal .................... Up to 60 percent based 

on quality performance.

Finalizing proposal. 

Participation Incentives Up to 2.5 percentage 

points for inclusion of 

FQHCs and RHCs.

No additional incentives ........... Up to 5 percentage 

points for inclusion of 

FQHCs and RHCs.

No additional incentives. 

Minimum Savings Rate 2.0 percent to 3.9 percent depending on 

number of assigned 

beneficiaries.

Finalizing proposal based on 

number of assigned beneficiaries.

Flat 2 percent ............... Finalizing proposal: Flat 2 percent. 

Minimum Loss Rate ..... 2.0 percent ................... Shared losses removed from 

Track 1.

2.0 percent ................... Finalizing proposal. 

Performance Payment 

Limit.

7.5 percent ................... 10 percent ................................. 10 percent .................... 15 percent. 

Performance payment 

withhold.

25 percent .................... No withhold ............................... 25 percent .................... No withhold. 

Shared Savings ............ Sharing above 2 percent threshold once 

MSR is exceeded.

First dollar sharing once MSR 

is met or exceeded.

First dollar sharing 

once MSR is exceeded.

First dollar sharing once MSR 

is met or exceeded. 

Shared Loss Rate ........ One minus final sharing 

rate.

Shared losses removed from 

Track 1.

One minus final sharing 

rate.

One minus final sharing rate 

applied to first dollar losses 

once minimum loss rate is 

met or exceeded; shared 

loss rate not to exceed 60 

percent. 

Loss Sharing Limit ........ 5 percent in first risk 

bearing year (year 3).

Shared losses removed from 

Track 1.

Limit on the amount of 

losses to be shared 

phased in over 3 

years starting at 5 

percent in year 1; 7.5 

percent in year 2; 

and 10 percent in 

year 3. Losses in excess of the annual 

limit would not be 

shared.

Finalizing proposal. 

The basic requirements for 

establishing and updating the 

benchmark, as well as determining 

whether an ACO has achieved savings 

against the benchmark, are outlined in 

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

1899(d)(1)(B)(i) of the Act establishes 

that an ACO shall be eligible for 

payment of shared savings ‘‘only if the 

estimated average per capita Medicare 

expenditures under the ACO for 

Medicare fee-for-service beneficiaries 

for parts A and B services, adjusted for 

beneficiary characteristics, is at least the 

percent specified by the Secretary below 

the applicable benchmark * * *.’’ 

Consistent with the statute, we 

proposed to take into account payments 

made from the Medicare Trust Fund for 

Parts A and B services, for assigned 

Medicare FFS beneficiaries, including 

payments made under a demonstration, 

pilot or time limited program when 

computing average per capita Medicare 

expenditures under the ACO. The 

statute further requires the Secretary to 

establish the percentage that 

expenditures must be below the 

applicable benchmark ‘‘to account for 

normal variation in expenditures under 

this title, based upon the number of 

Medicare fee-for-service beneficiaries 

assigned to an ACO.’’ We will refer to 


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this percentage as the ‘‘minimum 

savings rate’’ (MSR). 

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

requires the Secretary to establish and 

update the ‘‘* * * benchmark for each 

agreement period for each ACO using 

the most recent available 3 years of perbeneficiary expenditures for parts A and 

B services for Medicare fee-for-service 

beneficiaries assigned to the ACO.’’ This 

section also requires the benchmark to 

‘‘be adjusted for beneficiary 

characteristics and such other factors as 

the Secretary determines appropriate 

and updated by the projected absolute 

amount of growth in national per capita 

expenditures for Parts A and B services 

under the original Medicare fee-forservice service program, as estimated by 

the Secretary.’’ A new benchmark is to 

be established consistent with these 

requirements at the beginning of each 

new agreement period. 

Section 1899(d)(2) of the Act provides 

that, if the ACO meets the quality 

performance standards established by 

the Secretary, as discussed in section 

II.F. of this final rule ‘‘a percent (as 

determined appropriate by the 

Secretary) of the difference between 

such estimated average per capita 

Medicare expenditures in a year, 

adjusted for beneficiary characteristics, 

under the ACO and such benchmark for 

the ACO may be paid to the ACO as 

shared savings and the remainder of 

such difference shall be retained by the 

program under this title.’’ We will refer 

to this percentage as the ‘‘sharing rate.’’ 

This section also requires the Secretary 

to ‘‘establish limits on the total amount 

of shared savings that may be paid to an 

ACO.’’ We will refer to this limit as the 

‘‘sharing cap’’. 

Thus, in order to implement the 

provisions of section 1899(d) of the Act 

for determining and appropriately 

sharing savings, we must make a 

number of determinations about the 

specific design of the shared savings 

methodology described by the statute. 

First, we must establish an 

expenditure benchmark, which involves 

determining: (1) The patient population 

for whom the benchmark is calculated; 

(2) appropriate adjustments for 

beneficiary characteristics such as 

demographic factors and/or health 

status that should be taken into account 

in the benchmark; (3) whether any other 

adjustments to the 3-year benchmark are 

warranted, so as to provide a level 

playing field for all participants; and (4) 

appropriate methods for trending the 3- 

year benchmark forward to the start of 

the agreement period, and subsequently 

for updating the benchmark for each 

performance year during the term of the 

agreement with the ACO. 

Second, we must compare the 

benchmark to the assigned beneficiary 

per capita Medicare expenditures in 

each performance year during the term 

of the agreement in order to determine 

the amount of any savings. 

Third, we must establish the 

appropriate MSR, as required by the 

statute ‘‘to account for normal variation 

in expenditures... based upon the 

number of Medicare fee-for-service 

beneficiaries assigned to an ACO’’ and 

we must determine the appropriate 

sharing rate for ACOs that have realized 

savings against the benchmark and 

meeting or exceeding the MSR. 

Finally, we must determine the 

required sharing cap on the total 

amount of shared savings that may be 

paid to an ACO. We discuss all these 

issues, and our final policies for 

addressing them, in this section. 

In light of the greater potential for a 

two-sided model to bring about positive 

changes in the operation of the FFS 

system by improving both the quality 

and efficiency of medical practice, we 

believe that it is appropriate to provide 

greater incentives for organizations that 

participate in the two-sided model. For 

example, as we described in the 

proposed rule, we believe that it is 

appropriate to provide a higher sharing 

rate for organizations participating in 

the Shared Savings Program under the 

two-sided model than for those 

organizations participating under the 

one-sided model. 

In addition to a methodology for 

determining shared savings, the twosided model requires a methodology for 

determining shared losses in those cases 

where an ACO realizes a loss as 

opposed to a savings against its 

benchmark in any performance year. We 

proposed to mirror the structure and 

features of the shared savings 

methodology as much as possible in the 

determination of loss sharing. As 

discussed later in this final rule, for 

purposes of the loss-sharing 

methodology, we proposed adopting a 

similar structure of minimum loss rate 

(the equivalent of minimum savings rate 

on the savings side), shared loss limit, 

and loss sharing rate. 

We address the methodological steps 

for determining shared savings and 

losses, related comments, responses, 

and our final policy decisions, in the 

sections discussed later in this final 

rule. 

Comment: We received a wide range 

of comments requesting or suggesting 

adjustments to specific policies so that 

an ACO could share in a higher level of 

savings or lower amount of losses than 

what was proposed. Generally, 

commenters expressed the view that the 

reward to risk ratio for participating in 

the program as proposed is unattractive 

to providers, and commenters favored 

policies that would attract broad 

participation by providers. Commenters 

explained that financial rewards must 

be sufficient to offset provider risks and 

startup-costs. According to one 

commenter ‘‘the program as envisioned 

under the proposed rule places 

inordinate investment pressure on 

medical providers for an insufficient 

return that carries a significant amount 

of risk, regardless of the type of ACO.’’ 

Comments reflected concern that this 

pressure is increased for small ACOs, 

such as those comprised largely of small 

and medium sized physician practices; 

small hospitals and safety net providers, 

particularly those serving rural areas; 

and providers serving high risk patients 

(for example, dual eligibles and 

oncology patients). Commenters 

suggested that participation in the 

proposed program will be effectively 

limited to those few large entities 

already organized under an ACO-like 

structure; entities that already have 

ready access to capital, substantial 

infrastructure development, and 

experience operating under an 

integrated service/payment model (for 

example, MA). Even entities which 

might meet these criteria questioned the 

‘‘business case’’ for adoption of the ACO 

model as outlined in the proposed rule. 

Further, some commenters expressed 

concern that the cost of ACO formation 

may foster the development of large 

health system-based or hospital-based 

ACOs thereby financially undermining 

small, independent physician practices. 

Several commenters questioned the 

adequacy of the program’s incentives for 

primary care physicians, on which the 

program focuses. These commenters 

highlighted primary care physicians’ 

critical role in coordinating care across 

care settings from the home to the 

hospital and ensuring that beneficiaries 

see the appropriate specialists. They 

indicated that primary care physicians 

will have to incur additional costs for 

case management and coordination of 

patient care to achieve the program’s 

goals with what will be a potentially 

insufficient and uncertain incentive— 

the chance that there will be a cost 

savings disbursed to them. Further, 

commenters suggested that to the extent 

these physicians experience financial 

failure as a result of assuming risk, the 

program could exacerbate the primary 

care physician shortage, for example by 

discouraging physicians from 

specializing in primary care practice. 

Typically, recommendations we 

received for improving the value 


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proposition of program participation 

included the following: 

• Revise the methodology for 

establishing the benchmark to 

encourage participation by 

organizations that are already efficient 

or in low cost areas. 

• Risk adjust expenditures with the 

CMS–HCC model during both the 

benchmark and performance periods to 

account for changes in acuity and 

movement in the assigned beneficiary 

population. 

• Standardize the benchmark and 

performance year expenditures by 

excluding payments made in pursuit of 

policy goals, such as IME and DSH 

payments. 

• Make it easier for ACOs that 

perform well on quality to receive 

savings, by increasing the sharing rate 

based on quality performance and 

reducing or eliminating the MSR and 

the 2 percent net sharing requirement. 

• Allow ACOs to receive a larger 

share of savings achieved by lowering or 

eliminating the 25 percent payment 

withhold and performance payment 

limit. 

• Include a non-risk option, so that 

ACOs may participate under a shared 

savings-only model while they gain 

experience with the accountable care 

model. 

Commenters’ specific concerns about 

particular aspects of the shared savings 

and losses methodology are further 

detailed in this section of this final rule. 

Response: Commenters’ arguments 

persuaded us of the need to improve the 

financial attractiveness of the program 

to encourage broad participation by 

providers and suppliers, particularly 

those likely to comprise smaller ACOs, 

such as small and medium sized 

physician practices, rural and safety net 

providers. One particularly compelling 

argument suggested that allowing ACOs 

to receive a greater share of savings 

would support ongoing investment in 

and achievement of the program’s goals. 

Further, we agree with commenters’ 

suggestions on the need to adjust 

policies related to determining shared 

savings/losses to avoid unintended 

consequences for certain groups of 

beneficiaries and providers or suppliers. 

For instance, updating ACOs’ risk scores 

to better reflect changes in their 

assigned populations could remove 

incentives for ACOs to avoid 

beneficiaries with high cost or complex 

conditions. Excluding IME and DSH 

payments may allay concerns that 

inclusion of these payments could 

incent ACOs to avoid certain types of 

providers, such as Academic Medical 

Centers. Accordingly, as described in 

the later sections of this final rule, we 

are revising several of our proposed 

policies to make the program, overall, 

more financially rewarding to ACOs, to 

better adjust for changes in assigned 

beneficiaries’ health status, and to 

ensure ACOs include providers and 

suppliers that can provide the high 

quality care for Medicare beneficiaries. 

Underlying our decisions regarding the 

policies we are adopting in this final 

rule is the need to address the 

(sometimes competing) interests of 

ACOs, beneficiaries, the Medicare Trust 

Funds, and the goal of achieving the 

intended transformative effects. We 

believe the financial models presented 

in the final rule offer an appropriate 

balance of payment incentives, while 

still furthering the purpose and intent of 

the program. 

b. Establishing the Benchmark 

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

specifies several requirements with 

regard to establishing an ACO’s 

benchmark. These requirements are as 

follows: 

• First, the law requires the Secretary 

‘‘to estimate a benchmark for each 

agreement period for each ACO using 

the most recent available 3 years of perbeneficiary expenditures for parts A and 

B services for Medicare fee-for-service 

beneficiaries assigned to the ACO.’’ 

• Second, the law requires that 

‘‘[s]uch benchmark shall be adjusted for 

beneficiary characteristics and such 

other factors as the Secretary determines 

appropriate.’’ 

• Third, the law requires that the 

benchmark be ‘‘updated by the 

projected absolute amount of growth in 

national per capita expenditures for 

parts A and B services under the 

original Medicare fee-for-service 

program, as estimated by the Secretary.’’ 

• Finally, the law requires that 

‘‘[s]uch benchmark shall be reset at the 

start of each agreement period.’’ 

In the proposed rule, we considered 

two legally permissible approaches to 

implementing the statutory language for 

estimating the benchmark, which we 

called Option 1 and Option 2. Both 

approaches involved benchmarks 

derived from prior expenditures of 

assigned beneficiaries and adjusted for 

certain beneficiary characteristics, and 

other factors, the Secretary determines 

appropriate and updated by the 

projected absolute amount of growth in 

national per capita expenditures. Under 

both approaches, we proposed to reset 

the benchmark at the start of each 

agreement period. However, a key 

difference between these two 

approaches was the beneficiary 

population used to determine 

expenditures for purposes of the 

benchmark. Specifically, under Option 

1, we proposed estimating an ACO’s 

benchmark based on the Parts A and B 

FFS expenditures of beneficiaries who 

would have been assigned to the ACO 

in each of the 3 years prior to the start 

of an ACO’s agreement period using the 

ACO participants’ TINs. As such, this 

methodology would generate 

benchmark expenditures based on the 

average population cared for by the 

ACO participants during the preceding 

3 years. In contrast, under Option 2, we 

proposed basing the benchmark on the 

Parts A and B FFS expenditures of 

individual beneficiaries assigned to the 

ACO during each performance year, 

with the benchmark expenditures being 

those incurred in the 3 years 

immediately preceding the ACO’s 

agreement period for each of those 

assigned beneficiaries. Under both 

Option 1 and Option 2, the benchmark 

would be reset (or rebased) the start of 

each agreement period. In the proposed 

rule, we proposed to adopt Option 1 to 

establish each ACO’s benchmark; 

however, we solicited comments on 

both options. For a detailed description 

of Options 1 and 2, please see our April 

7, 2011 proposed rule (76 FR 19604 

through 19606). 

Comment: We received numerous 

comments related to our proposal to 

base the benchmark on an ACO’s own 

past cost experience. One commenter 

commended us for establishing the 

benchmark based on an ACO’s historical 

per capita expenditures. This 

commenter noted that a similar 

approach has proven successful in a 

private sector value based purchasing 

initiative, and that this methodology 

offers important confidence to groups 

that the starting budgets represent a fair 

and appropriate allocation of resources. 

The majority of comments, however, 

expressed concern with our proposal to 

establish the benchmark based on 

ACOs’ historical per capita 

expenditures, regardless of whether 

Option 1 or Option 2 was implemented. 

In most cases, commenters expressed 

concern that the proposed 

benchmarking methodology would 

disadvantage efficient providers or those 

in low-spending areas and reward poor 

performers in high cost areas. Thus, 

commenters suggested that efficient 

organizations may be less willing to 

participate in the program because they 

have already invested in the systems 

and infrastructure to produce highquality, low cost care, and will have 

difficulty achieving additional 

efficiencies, and hence savings, given 

the proposed benchmark methodology. 

In particular, some commenters 

suggested the proposed policy would 


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deter participation by rural providers, 

asserting they already operate at or near 

the lowest cost possible. Another 

commenter suggested that providers 

operating in the Indian Health System 

may have difficulty reaching savings 

requirements and other benchmarks 

because of the current funding and 

delivery system structure. One 

commenter suggested that further cost 

control in already efficient areas may 

lead to undesirable results, including, 

for example, limited ACO interest in 

participation or reduced beneficiary 

access to needed care. However, one 

commenter suggested effort will be 

needed by providers in both higher cost 

and lower cost areas to reduce costs, 

and it may not necessarily be ’easier’ for 

providers in higher cost markets to 

achieve this transformation. 

Relative to their concerns, as an 

alternative, some commenters suggested 

that CMS exercise its authority under 

section 1899(i) of the Act to develop and 

implement an alternative benchmarking 

methodology. Commenters suggested 

alternatives such as using local, regional 

or national experience to establish the 

ACOs’ benchmarks; however, opinions 

varied as to which approach among 

these would be most appropriate. Some 

commenters suggested a blended 

approach based on local and national 

spending, for instance use of a 

combination of local and national 

averages or a phased approach to 

transition from initial use of local 

averages to a national average over time. 

Other suggestions for establishing the 

initial benchmark included applying 

alternatives including the following: 

• A prospective benchmark based on 

burden of illness with bonus payments 

that reflect quality care through better 

clinical and patient-reported outcomes. 

• A peer-to-peer benchmarking 

methodology. For instance, one 

commenter suggested that existing high 

cost ACOs should be required to achieve 

a higher percentage of improvement in 

order to share in savings while ACOs 

with historically lower costs should be 

rewarded for smaller improvements 

over the threshold. 

• A matched cohort of Medicare feefor-service beneficiaries as a basis for 

comparison for those beneficiaries being 

treated under an ACO. 

• A fixed percentage of total 

operating funds for all ACO providers, 

such as 85 percent of geographicadjusted expenditure per capita. The 

difference between this benchmark and 

the medical loss ratio incurred by any 

ACO would be shared savings. 

• Methodologies specifically for 

ACOs in low-cost regions, such that 

these ACOs would have the opportunity 

to earn greater rewards. 

• A menu of benchmarking 

methodologies from which the 

organization can choose, similar to the 

methodology used in the Hospital 

Value-Based Purchasing program. 

• A rolling 3 year look-back. 

• A benchmark established by 

determining which beneficiaries would 

have been assigned to the ACO, 

determining their actual utilization 

during the relevant 3-year period, and 

re-pricing the cost of those services 

using the ACO’s fee schedule for the 

relevant performance year being 

compared. 

Response: We understand concerns 

raised by commenters on basing 

benchmarks on ACO’s historical per 

capita expenditures. Section 

1899(d)(1)(B)(ii) of the Act is clear, 

however, that ‘‘The Secretary shall 

estimate a benchmark for each 

agreement period for each ACO using 

the most recent available 3 years of perbeneficiary expenditures for parts A and 

B services for Medicare fee-for-service 

beneficiaries assigned to the ACO.’’ 

Thus, consistent with statute, we plan to 

make final our proposal to establish 

ACO benchmarks using the most recent 

available 3 years of per-beneficiary 

expenditures for parts A and B services 

for Medicare fee-for-service 

beneficiaries assigned to the ACO. 

Comment: As mentioned previously, 

very few comments addressed the 

specific methodology that we should 

use for establishing ACO benchmarks— 

that is, Option 1 or Option 2—although 

a few commenters, including MedPAC, 

suggested CMS adopt a benchmarking 

methodology similar or identical to that 

proposed for the Innovation Center’s 

Pioneer Model ACOs, which tends to 

align with Option 2. For instance, 

MedPAC, among others, recommended 

calculating ACOs’ benchmarks based on 

expenditures of individual beneficiaries 

assigned to the ACO. A number of 

commenters raised concerns about the 

accuracy of the benchmark and 

performance year expenditures in 

circumstances when we have only 

partial data for an assigned 

beneficiary—issues that would more 

typically occur under Option 2 than 

Option 1. For instance, several 

commenters suggested that using Option 

2 would require an additional 

adjustment to account for beneficiaries 

who cross over to or from another payer, 

such as Medicaid or Medicare 

Advantage, and to account for decedents 

and beneficiaries treated in an 

institutional setting where their costs 

may not be attributable to an ACO under 

the proposed assignment methodology. 

Moreover, when adjusting expenditures 

for decedents, commenters tended to 

oppose the methods we discussed under 

Option 2 for adjusting for decedents, 

specifically the method of excluding the 

expenditures of deceased beneficiaries 

from actual expenditures during the 

agreement period. Several commenters 

suggested that while excluding these 

expenditure data would protect ACOs 

from catastrophic costs incurred in the 

patient’s last year of life, it would have 

unintended consequences such as 

discouraging better end of life care 

management, and one commenter 

suggested CMS consider a method to 

risk adjust for expected costs in a 

beneficiary’s final year of life. Another 

commenter favored the second method 

we discussed under Option 2: 

Comparing average expenditures for 

each deceased beneficiary during the 

agreement year to the average 

expenditures for beneficiaries included 

in the benchmark. Under this option, we 

would make no adjustment if the 

agreement year expenditures were 5 

percent or less above the benchmark, 

but would make adjustments if 

expenditures were greater than 5 

percent above the benchmark. 

Response: On balance, we believe 

Option 1 is the most appropriate 

approach for establishing ACO 

benchmarks for at least initial use in the 

program, and plan to make final this 

proposal. We believe Option 1 

establishes a statistically stable 

benchmarking methodology based on 

the ACO’s average population by which 

we can assess improvements the ACO 

makes in the quality and efficiency of 

care delivery for its average population. 

We also acknowledge there are 

drawbacks to this benchmark 

methodology, including that it provides 

incentives for ACOs to seek and/or 

avoid specific beneficiaries during the 

agreement period so that their average 

expenditures would likely be less than 

for their historical beneficiaries 

included in the benchmark. For this 

reason we favor a benchmarking 

methodology based on an ACO’s actual 

assigned population, such as Option 2, 

MedPAC’s suggested approach, or as 

proposed for Pioneer Model ACOs. 

However, we lack experience with this 

model of benchmarking and the related 

need to adjust for decedents, sudden 

increases in individual costs, and 

incomplete expenditure data on some 

assigned beneficiaries. We support the 

Innovation Center’s testing of this 

benchmarking approach through the 

Pioneer Model ACO initiative, and look 

forward to applying lessons learned 

from the Pioneer experience towards 


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developing a robust benchmarking 

methodology for possible use within the 

Shared Savings Program. We intend to 

revisit use of a benchmarking 

methodology based on the ACO’s 

assigned population in future rule 

making, as soon as practicable, once we 

gain more experience with this 

benchmarking approach through the 

Pioneer Model. 

Comment: Some commenters 

expressed concerns that the proposed 

assignment methodology would exclude 

some of Medicare FFS beneficiaries’ 

costs from the ACOs’ benchmark and 

thereby disadvantage certain providers 

and the populations they serve. One 

commenter expressed concern that 

assignment of beneficiaries based on 

primary care services rendered by 

physicians with primary care 

specializations could exclude 

beneficiaries with disabilities and those 

needing medical rehabilitation services 

which rely on care by specialists. This 

commenter favored a step-wise 

approach to assignment in which 

beneficiaries are assigned first on the 

basis of care by primary care physicians 

followed by a second ‘‘sweep’’ of 

assignment based on specialists would 

help ensure that these beneficiaries’ 

costs would be counted. 

Many commenters expressed concern 

that Medicare FFS beneficiaries treated 

by FQHCs and RHCs would not be 

assigned to an ACO or have their costs 

reflected in an ACO’s benchmark under 

the proposed assignment and 

benchmarking methodologies. A 

commenter stated: ‘‘The statute does not 

appear to require the specific 

methodology that has been proposed by 

CMS to determine the benchmark, and 

certainly does not require a single 

uniform methodology for all primary 

care providers. Under the wording of 

this provision, CMS appears to have the 

flexibility to apply a methodology to 

‘estimate a benchmark’ specifically for 

FQHCs.’’ This commenter and some 

others suggested various ways to 

compute the benchmark for FQHCs 

absent 3 years of benchmark data: (1) 

CMS could use the data and claims it 

will have from FQHCs for 2011 and 

assume similar and comparable data 

and claims for the two years prior with 

some adjustments as appropriate 

relating to inflation, etc.; (2) CMS could 

assign beneficiaries utilizing the 2011 

data and recover billing data from the 

prior 2 years with use of health center 

office visit revenue codes to determine 

the 3 year benchmark; (3) CMS could 

further investigate the methods that are 

being used to create benchmarks for 

demonstrations, such as the methods 

that were considered for the Pioneer 

ACO Model Request for Applications; 

(4) a number of FQHCs have been 

recording HCPCS codes for all of their 

patients and have this information 

stored in their practice management 

systems, dating back prior to the 

requirement to report to CMS starting on 

January 1, 2011. Those centers that are 

able to provide CMS with the data it 

requires to establish the 3-year 

benchmark should be allowed to do so; 

and (5) CMS could allow each health 

center to voluntarily choose whether it 

would provide any specific requested 

information. Further, commenters 

suggested that section 1899(i), if not 

section 1899(d) of the Act, provides 

CMS flexibility to estimate a benchmark 

specifically for FQHCs. 

One commenter advocated allowing 

those RHCs and FQHCs who wish to 

participate in ACOs the opportunity to 

provide the requisite data so that they 

may fully participate in the program. 

However, another commenter 

appreciated the Department’s reluctance 

to impose reporting requirements in this 

rule for both FQHCs and RHCs and 

other entities without either a statutory 

requirement or clear support for such a 

regulatory change from the community 

at large. 

Response: In the section II.E. of this 

final rule, we establish a step-wise 

approach to beneficiary assignment that 

simultaneously maintains the primary 

care-centric approach to assignment and 

recognizes the necessary and 

appropriate role of specialists in 

providing primary care services. 

Through this assignment methodology 

we will be able to attribute to ACOs 

expenditures for beneficiaries who 

predominantly rely on care from 

specialists. 

Based on the assignment process that 

we are adopting in this final rule (see 

section II.E. of this final rule), we are 

able to compute a benchmark for ACOs 

that include FQHCs and RHCs, in the 

same manner as we would for any other 

ACO. For ACOs that consist of FQHCs 

and/or RHCs (either independently or in 

partnership with other eligible entities), 

we will establish such ACO’s initial 

benchmark based on the Parts A and B 

FFS expenditures of beneficiaries who 

would have been assigned to the ACO 

in any of the 3 years prior to the start 

of an ACO’s agreement period. 

Comment: As described in section 

II.G. of this final rule, several 

commenters recommended that we 

trend and update the benchmark and 

risk adjust by categories of beneficiaries, 

including aged, disabled and ESRD 

beneficiaries, among others. 

Response: We agree with commenters’ 

suggestions for taking a categorical 

approach to establishing the benchmark 

and are adopting this approach for 

calculating expenditures for the 

historical benchmark. In this final rule, 

we are adopting a policy whereby the 

historical benchmark expenditures will 

be calculated for cost categories 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. 

We will sort beneficiaries according to 

these categories in the order in which 

they are stated. We will make a 

distinction between the aged/dual 

eligible and aged/non-dual eligible 

populations since modeling has 

suggested the expected expenditures for 

these populations is significantly 

different. The ESRD and disabled 

categories include both dual eligible and 

non-dual eligible beneficiaries, 

however, since modeling has indicated 

expenditures are less divergent for these 

populations. As described in section 

II.G. of this final rule, we are adopting 

this categorical approach to establishing 

the benchmark, updating the benchmark 

and calculating performance year 

expenditures. 

Comment: We received a number of 

comments on our proposal to minimize 

variation from catastrophically large 

claims by truncating an assigned 

beneficiary’s total annual Parts A and B 

FFS per capita expenditures at the 99th 

percentile of national Medicare FFS 

expenditures as determined for each 

benchmark year and performance year. 

Mostly commenters were supportive of 

the proposal to adjust for outliers. Some 

commenters suggested that the proposed 

limitations may provide ACOs 

inadequate protections from high-cost 

beneficiaries, and suggested a variety of 

additional or alternate limitations 

including the following: 

• Remove outliers altogether from the 

assigned populations used to establish 

the benchmark and performance year 

expenditures. For instance, one 

commenter suggested excluding all 

costs incurred by patients with rare and 

extreme diagnoses or for care received 

in the tertiary care setting, while 

another recommended CMS use in the 

Shared Savings Program an approach 

similar to what was proposed for the 

Pioneer Model ACOs, in which ACOs 

have the option to exclude from 

benchmark and performance year 

expenditures claims above the 99th 

percentile for national per capita 

expenditures. 

• Reduce the outlier threshold from 

the 99th percentile to the 75th or 95th 

percentile, for instance, to help ensure 


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that ACOs are not penalized for using 

innovative technologies. 

• Use a flat dollar amount, such as 

$100,000 per year, instead of a 

percentile as a basis for truncating 

claims. 

• Use ‘‘alternate windsoring 

techniques’’ for adjusting a distribution 

for outliers; for example, calculating 

separate savings among different cost 

categories of beneficiaries, such as the 

top 5 percent of beneficiaries by cost 

versus the remaining 95 percent of 

beneficiaries. 

• Exclude claims for high cost 

treatments demanded by the patient that 

have a negative result, in part as a 

means of addressing higher medical 

costs in States with high rates of 

medical malpractice litigation. 

One commenter expressed concern 

that under the proposed policy, ACOs 

would have little incentive to effectively 

coordinate care for high cost 

beneficiaries. This commenter 

explained that the proposed policy may 

negatively impact dialysis patients 

because these patients’ costs may be 

close to the 99th percentile threshold. If 

an ACO knows its risk exposure is 

limited for what may be a small portion 

of its assigned population, such as ESRD 

beneficiaries, the ACO may have little 

incentive to spend time and money 

needed to provide high quality care to 

these beneficiaries. 

Several commenters asked for 

clarification about the proposed 

truncation methodology, including 

whether the same 99th percentile will 

be applied to the benchmark or 

performance year expenditures or if it 

will be determined within each 

performance year. Several commenters 

asked for clarification as to whether the 

expenditure amount includes hospital 

outlier payments, or otherwise how 

outlier payments to inpatient facilities 

will be handled. One commenter asked 

generally how CMS will ensure 

providers with high cost patients are 

able to receive savings. 

Response: We are finalizing our 

proposal to truncate an assigned 

beneficiary’s total annual Parts A and B 

FFS per capita expenditures at the 99th 

percentile of national Medicare fee-forservice expenditures as determined for 

each benchmark year and performance 

year. We disagree with those 

commenters that suggested placing 

greater limitations on ACOs’ 

accountability for the cost of outliers, 

such as by completely removing outliers 

from ACO benchmark and performance 

year expenditures or lowering the 

threshold (such as the 95th percentile). 

Doing so would give ACOs less 

incentive to coordinate care and 

services for high-cost beneficiaries, for 

whom improved care coordination 

could be especially valuable, to improve 

outcomes and control unnecessary 

costs. 

The 99th percentile represents a 

dollar amount (roughly $100,000) that 

matches in dollar terms an attachment 

point that is fairly common in the 

reinsurance market. The important 

reason for its inclusion is that it reduces 

variation in expenditure growth, thereby 

lowering the risk of paying ACOs 

savings or requiring ACOs to pay losses 

that result from random variation. A 

lower percentile might have been 

chosen, but the incremental benefit in 

terms of lowered variation would be 

offset by further reduction in the 

incentive for ACOs to increase 

efficiency for high-cost patients. 

Therefore, we believe that truncating 

claims at the 99th percentile achieves an 

appropriate balance between limiting 

catastrophic costs and continuing to 

hold ACOs accountable for those costs 

that are likely to be within their control. 

We appreciate commenters’ concerns 

that by limiting ACO’s accountability 

for catastrophic costs, ACOs may have 

an incentive to avoid managing the care 

for the select few very high-cost 

beneficiaries. However, we believe that 

truncating claims at the 99th percentile 

in conjunction with the opportunity to 

receive shared savings, as well as 

monitoring protections, help assure 

ACOs will not avoid treating at-risk 

beneficiaries. We also note, in response 

to the commenter who expressed 

concern that an ACO could not achieve 

savings for high cost beneficiaries, that 

one of the purposes of risk adjustment 

is to make it possible for ACOs that 

improve the quality and efficiency of 

the care they provide to achieve savings 

in the cost of care for both high and low 

cost beneficiaries. 

Accordingly, as specified in the 

proposed rule, we will truncate all Parts 

A and B FFS per capita expenditures at 

the 99th percentile for each beneficiary 

in each benchmark year and for each 

assigned beneficiary in each 

performance year. Further, we will 

truncate for outliers in the ACO’s 

assigned population as opposed to 

accounting for outlier payments made to 

hospitals (potential ACO participants) 

which will be included in the 

calculation of actual expenditures 

during the performance year. 

Comment: Several comments 

generally suggested that the proposed 

policy for weighting benchmark 

expenditures at 60 percent for BY3, 30 

percent for BY2 and 10 percent for BY1 

was appropriate. Several others 

recommended alternative approaches to 

weighting benchmark expenditures. For 

instance, one commenter recommended 

that CMS weight the most expensive 

benchmark year the highest, followed by 

the second highest and finally the least 

expensive. Another commenter 

suggested, relative to Option 2 for 

establishing the benchmark, to weight 

BY3 at 60 percent and BY2 at 40 

percent. 

Response: We thank the commenters 

for their support of our proposed policy. 

We continue to believe that our 

proposed approach to weighting base 

year expenditures, compared to the 

alternatives suggested by commenters, 

will result in a more accurate 

benchmark. This approach recognizes 

that the ACO’s financial performance in 

the most recent base year is the most 

current of the three base years and 

therefore reflects more accurately the 

latest expenditures and health status of 

the ACO’s assigned beneficiary 

population. Further, weighting BY1 at 

zero, as suggested by one commenter, 

would not meet the statutory 

requirement under section 

1899(d)(1)(B)(ii) of the Act to establish 

the benchmark using the most recent 

available three years of per-beneficiary 

expenditures for Parts A and B services 

for Medicare fee-for-service 

beneficiaries assigned to the ACO. 

Accordingly, we are finalizing our 

proposal to weight the most recent year 

of the benchmark, BY3, at 60 percent, 

BY2 at 30 percent and BY1 at 10 

percent. 

Comment: Many commenters urged 

CMS not to reset the benchmark for 

ACOs that continue in the program after 

the first agreement period, or to limit 

how far the baseline could be moved 

from one agreement period to the next. 

They indicated that rebasing the 

benchmark each agreement period will 

make savings more difficult to attain 

and eventually make savings 

unattainable. They further suggested 

this could discourage initial 

participation in the program, as 

organizations will have little incentive 

to make the needed investment in ACO 

formation. Commenters recommended a 

number of alternatives to mitigate these 

anticipated effects which included the 

following: 

• Never rebasing. 

• Delayed rebasing, for example 

apply the original baseline for longer 

than 3 years, such as 6 or 9 years 

(covering a second and third agreement 

period). 

• Apply partial, as opposed to full, 

rebasing. 

• Rewarding ACOs for maintaining, 

rather than further decreasing, their 

expenditures. 


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• Using rebasing as a mechanism to 

facilitate ACOs’ transition from FFS to 

capitated payments. 

On the other hand, several commenters 

favored resetting the benchmark more 

frequently than we proposed, stating 

their preference for a rolling 3 year look 

back to reset the ACO’s benchmark 

annually. 

Further, some commenters provided 

technical suggestions on how to reset 

the benchmark. One commenter 

suggested that we take inflation into 

consideration when resetting the 

benchmark as to not penalize ACOs for 

market increases beyond their control. 

Another commenter suggested that reset 

benchmarks must include payments for 

care management and coordination 

services and urged CMS to establish 

rates that ACOs could bill for such 

services. This commenter further 

suggested that such rates should vary 

based on the beneficiary’s number of 

chronic conditions and the acuity of 

these conditions (such as severe mental 

illness and/or chemical dependence), as 

well as socio-economic or 

environmental risk factors that would 

require additional social services. 

Response: We are finalizing our 

proposal to reset the benchmark at the 

start of each agreement period, as 

required under section 1899(d)(1)(B)(ii) 

of the Act. Moreover, we believe that 

resetting the benchmark at the 

beginning of each agreement period will 

most accurately account for changes in 

an ACO’s beneficiary population over 

time. As we indicated in the proposed 

rule, turnover in assigned beneficiaries 

could be approximately 25 percent year 

to year. By the end of the agreement 

period, an ACO’s assigned population 

may be significantly different from the 

historically assigned beneficiary 

population used to calculate the ACO’s 

initial benchmark. Resetting the 

benchmark at the beginning of 

subsequent agreement periods will 

allow the benchmark to more accurately 

reflect the composition of an ACO’s 

population, and therefore will protect 

both the Trust Funds and ACOs. We 

appreciate commenters’ concerns that 

resetting the benchmark after 3 years 

could ultimately make it more 

challenging for ACOs to achieve 

savings, particularly for low-cost ACOs; 

however, we believe that one of the 

fundamental purposes of the Shared 

Savings Program is to provide 

incentives for ACOs to strive 

continually to make further advances in 

the quality and efficiency of the care 

they provide. We also appreciate 

commenters’ technical suggestions on 

resetting the benchmark in relation to 

beneficiary health status, and socioeconomic and environmental factors. 

While at this time we decline to use 

authority under section 1899(i) of the 

Act to adopt an alternate approach to 

resetting the benchmark, we may 

reconsider the issue in future 

rulemaking. 

Final Decision: We are making final 

our proposed methodology under 

§ 425.602 for establishing an ACO’s 

initial benchmark based on the Parts A 

and B FFS expenditures of beneficiaries 

who would have been assigned to the 

ACO in any of the 3 years prior to the 

start of an ACO’s agreement period 

using the ACO participants’ TINs 

identified at the start of the agreement 

period. We will calculate benchmark 

expenditures by categorizing 

beneficiaries in the following cost 

categories, in the order in which they 

appear: ESRD, disabled, aged/dual 

eligible Medicare and Medicaid 

beneficiaries, and aged/non-dual 

eligible Medicare and Medicaid 

beneficiaries. This benchmarking 

methodology will apply to all ACOs, 

including those consisting of FQHCs 

and/or RHCs (either independently or in 

partnership with other eligible entities). 

We are also making final our proposals 

to truncate an assigned beneficiary’s 

total annual Parts A and B FFS per 

capita expenditures at the 99th 

percentile of national Medicare fee-forservice expenditures as determined for 

each benchmark and performance year; 

weight the most recent year of the 

benchmark, BY3, at 60 percent, BY2 at 

30 percent and BY1 at 10 percent; and 

reset the benchmark at the start of each 

agreement period. Further, as specified 

in section II.C. of this final rule, we will 

use a 3-month run-out of claims data 

and a completion factor to calculate 

benchmark expenditures. 

c. Adjusting the Benchmark and Actual 

Expenditures 

(1) Adjusting Benchmark and 

Performance Year Average per Capita 

Expenditures for Beneficiary 

Characteristics 

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

stipulates that an ACO is eligible for 

shared savings ‘‘only if the estimated 

average per capita Medicare 

expenditures under the ACO for 

Medicare fee-for-service beneficiaries 

for Parts A and B services, adjusted for 

beneficiary characteristics’’ is below the 

applicable benchmark. Likewise, section 

1899(d)(1)(B)(ii) of the Act specifies that 

the benchmark ‘‘shall be adjusted for 

beneficiary characteristics and such 

other factors as the Secretary determines 

appropriate * * *’’ This requirement to 

adjust for ‘‘beneficiary characteristics’’ 

implicitly recognizes that, under a 

shared savings model, the realization of 

savings against a benchmark could be a 

function of two factors. One factor is 

reduced expenditure growth as a result 

of greater quality and efficiency in the 

delivery of health care services. The 

other factor could be changes in the 

characteristics of the beneficiaries who 

are under the care of the ACO. Thus, in 

the absence of risk adjustment, some 

organizations may realize savings 

merely because they are treating a 

patient mix with better health status 

than the patient population reflected in 

their benchmark. On the other hand, 

some organizations may share in savings 

on a risk adjusted basis that would not 

have shared in savings if expenditures 

were not risk adjusted. 

When applying a risk adjustment 

model, it is necessary to guard against 

changes that result from more specific 

or comprehensive coding as opposed to 

improvements in the coordination and 

quality of health care. An ACO’s ability 

to share in savings can be affected not 

only by changes in the health status of 

the ACO’s assigned population but also 

by changes in coding intensity and 

changes in the mix of specialists and 

other providers within an ACO, which 

in turn could affect the characteristics of 

its assigned beneficiary population, 

relative to the benchmark period. As we 

stated in the proposed rule, our goal is 

to measure improvements in care 

delivery of an ACO and to make 

appropriate adjustments to reflect the 

health status of assigned patients as well 

as changes in the ACO’s organizational 

structure that could affect the case mix 

of assigned patients rather than 

apparent changes arising from the 

manner in which ACO providers/ 

suppliers code diagnoses. 

To address these concerns, in the 

proposed rule, we considered 3 options 

for risk adjusting the initial benchmark. 

One option was to employ a method 

that considered only patient 

demographic factors, such as age, sex, 

Medicaid status, and the basis for 

Medicare entitlement (that is, age, 

disability or ESRD), without 

incorporating diagnostic information. 

The second option was to employ a 

methodology that incorporates 

diagnostic information, in addition to 

demographic variables, specifically the 

CMS–HCC prospective risk adjustment 

model that has been used under the 

Medicare Advantage (MA) program. The 

third option was to implement the MA 

‘‘new enrollee’’ demographic risk 

adjustment model: a model that 

includes adjustments for age, sex, 

Medicaid enrollment status, and 


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originally disabled status, but would not 

take into account the health status of the 

assigned beneficiaries. 

We proposed to adjust Medicare 

expenditure amounts using the CMS– 

HCC model because it more accurately 

predicts health care expenditures than 

the demographic-only model as it 

accounts for variation in case 

complexity and severity. We also noted 

that incorporating diagnosis data in the 

risk adjustment model would encourage 

ACOs to code more fully or intensely for 

purposes of population management 

and quality reporting, and to optimize 

their risk scores to achieve shared 

savings. We elected not to propose the 

MA new enrollee model because it 

could have an adverse effect on ACOs 

that include providers and suppliers 

that typically treat a comparatively sick 

beneficiary population, including 

academic medical centers and tertiary 

care centers. 

We also considered, and sought 

comment on, several approaches to 

account for the upward trend in risk 

scores which may result from coding 

changes alone, without improved 

methods of beneficiary care, such as the 

following: 

• Use of normalization factors and 

coding intensity adjustments, as is done 

for the MA program. 

• Use of an annual cap in the amount 

of risk score growth we would allow for 

each ACO. For instance, we considered 

setting a fixed growth percentage for all 

ACOs and negating any risk score 

growth over the cap. Alternatively, we 

could establish a risk score for the 

ACO’s assigned population during the 

agreement period based on the 

calculated risk score of beneficiaries 

who were used to calculate the ACO’s 

benchmark. 

• Use of a methodology similar to the 

MA methodology that would reduce the 

amount of growth in the risk scores for 

beneficiaries assigned to ACOs, but 

continue to allow increases. 

We further explained our expectation 

that the ACO’s average population risk 

scores would remain stable over time, 

given that there is expected to be 

stability in ACO participants and 

therefore case mix and we will have 

calculated the benchmark risk 

adjustment score for the ACO’s 

historically assigned beneficiary 

population under conditions when the 

ACO providers/suppliers would not 

have had the same incentive to increase 

coding. We stated that we considered 

the benchmark risk adjustment score for 

the ACO’s historically assigned 

beneficiary population to be a 

reasonable approximation of the actual 

risk score for the beneficiary population 

assigned to the ACO during the 

agreement period, while avoiding any 

distortion due to changes in coding 

practices. Therefore, we proposed a cap 

of zero percent growth on risk 

adjustment by calculating a single 

benchmark risk score for each ACO and 

applying this same risk score 

throughout the agreement period to the 

annual assigned patient population’s 

per capita expenditures for assigned 

beneficiaries. 

We specified our intent to monitor 

and evaluate the issue of more complete 

and accurate coding as we gained 

experience with the Shared Savings 

Program, and that we would consider 

making revisions and adaptations to the 

final risk adjustment model through 

future rulemaking if warranted. Further, 

to assure the appropriateness of ACO 

coding practices and our methodology 

for risk adjusting, we proposed to retain 

the option to audit ACOs, especially 

those ACOs with high levels of risk 

score growth relative to their peers, and 

to adjust the risk scores used for 

purposes of establishing the 3-year 

benchmark accordingly. We sought 

comment on these proposals. 

Comment: Commenters typically 

expressed support for adjusting 

benchmark expenditures based on the 

CMS–HCC model; although, some 

commenters raised technical concerns 

about the accuracy of HCC risk 

adjustment. For example, one 

commenter suggested that CMS needs to 

improve the accuracy of the HCC risk 

adjustment model. Other commenters 

expressed concern that the proposed 

risk adjuster lacks the capacity to 

account for socioeconomic status. 

Another commenter suggested the need 

for physician input into risk adjustment 

factors, for example, to be able to 

identify patients with multiple chronic 

conditions. Commenters also made a 

number of recommendations about the 

proposed risk adjustment methodology, 

including the need to define other 

‘‘beneficiary characteristics’’ that might 

be used to risk adjust, modify the HCC 

model to exclude zero spend 

beneficiaries (while these beneficiaries 

are included in the HCC model as used 

in MA, it could disadvantage ACOs 

whose assigned populations would by 

definition exclude zero spend 

beneficiaries), and risk adjust for 

including safety net providers, such as 

RHCs, FQHCs and Method I CAHs. 

While commenters supported use of 

the CMS–HCC model for adjusting 

benchmark expenditures, they also 

expressed concern that benchmark and 

performance expenditures would not 

also be annually updated for risk using 

this same mechanism. Numerous 

commenters expressed concern that a 

cap on risk adjustment in cases where 

care furnished to a patient is 

documented and appropriate would 

diminish the level of shared savings, 

and serve as a disincentive to manage 

patients with complex health care needs 

who can most benefit from better care 

coordination. MedPAC, among other 

commenters, expressed concern that 

this approach would create incentives 

for ACO providers to encourage existing 

patients who are costly to seek care 

elsewhere and to avoid taking on new 

patients that could be costly. Another 

commenter suggested that accurate risk 

adjustment is especially important for 

providers, such as academic medical 

centers, that disproportionately treat the 

sickest and most complex patients. 

Some commenters were concerned 

that the proposed cap on risk 

adjustment would not adequately 

capture changing severity of disease in 

the ACO’s assigned population. For 

example, one commenter encouraged 

CMS to allow for timely and appropriate 

risk adjustment for cancer patients, 

particularly to address the circumstance 

under which a patient has not been 

diagnosed with cancer when the 

benchmark is set, but is later diagnosed 

with and treated for cancer. Another 

commenter noted that individuals with 

multiple health conditions will still 

need more services than other 

beneficiaries with lower acuity. Another 

commenter expressed concern that the 

proposed risk adjustment methodology 

would not account for changes in 

beneficiaries’ health status which result 

from aging. 

Others were concerned that the 

proposed cap on risk adjustment would 

not address changes in the ACO’s 

population as beneficiaries move to 

different providers during the agreement 

period. For instance, some commenters 

pointed to our experience with the PGP 

demonstration, which showed 

approximately a 25 percent variation in 

assignment from year to year. One 

commenter suggested, based on its own 

experience in the demonstration, that 

the turnover rate may be higher. 

Accordingly, several commenters 

encouraged CMS to adopt policies that 

would encourage ACOs to care for highrisk and high-cost beneficiaries. The 

alternative most often recommended by 

commenters is for CMS to annually 

update performance expenditures for 

risk. In their view, these annual updates 

would help keep pace with a changing 

patient population, for example in terms 

of beneficiary age, acuity or severity of 

health status and movement of 

beneficiaries into and out of the ACO’s 

assigned patient population. As one 


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commenter recommended, the ACO’s 

risk adjustment score should be 

determined by the population the ACO 

is actually treating, and should therefore 

be recalculated for each year of the 

agreement period. This commenter 

further suggested that the potential for, 

and presumably consequences of, 

increased coding intensity are far 

outweighed by concerns about creating 

incentives to avoid complex patients or 

penalizing institutions that treat 

patients in their performance period 

who are more complex compared to 

their benchmark population. One 

commenter noted the importance of 

adjusting the ACO’s benchmark for 

changes in risk scores during the 

agreement period, indicating that doing 

so could limit incentives for ACOs to 

avoid high-cost and high-risk 

beneficiaries. 

Among the alternatives offered by 

comments, some commenters 

recommended a narrower approach, 

suggesting that CMS annually update 

ACOs’ risk scores for select populations 

of beneficiaries, such as the aged, 

disabled and ESRD populations, and 

beneficiaries with chronic disease 

codes, or create exceptions for safety net 

providers. One commenter suggested 

CMS apply a cap of 10 percent on any 

annual increase in risk scores, based on 

coding severity, unless an ACO can 

provide a satisfactory sampling of 

assigned beneficiaries audited to 

support the use of proper coding and 

therefore higher risk adjustments. 

Another commenter recommended that 

risk adjustment be made retrospectively, 

on an annual basis, based on the ACO’s 

assigned patients. 

A number of commenters specifically 

addressed the relationship between 

coding accuracy and coding intensity. 

One commenter viewed the concept of 

coding intensity as synonymous with 

coding accuracy. Several commenters 

suggested that improvements in coding 

will likely occur over time as a result of 

ACO formation, for example, as more 

providers adopt EHR and can code more 

completely. One commenter pointed out 

that this improvement in coding should 

be viewed positively, and suggested that 

the issue of disproportionate relative 

risk growth for a subpopulation due 

only to improved coding accuracy will 

self-correct. One commenter encouraged 

CMS to educate physicians and other 

providers in preparation for the 

implementation of ICD–10 in 2013, 

which could result in a significant 

change in coding. Another commenter 

noted their agreement with the proposal 

to address coding accuracy by the 

proposed audit process. 

Commenters suggested a number of 

alternatives to mitigate the effects of 

increased coding intensity which 

included the following: 

• Adjust for increased coding 

intensity as is done for the MA program. 

• Do not subject new enrollees or 

those transitioning from MA to the risk 

score change limitations. 

• Allow ACOs to request a one-time 

benchmark recalculation during the 

agreement period. 

One commenter suggested CMS 

investigate, on an ongoing basis, risk 

adjustment methods that could capture 

the unexplained variation in spending 

or risk of a population. 

Response: We continue to believe that 

risk adjusting benchmark expenditures 

based on the CMS–HCC model accounts 

for variation in case complexity and 

severity and therefore more accurately 

predicts health care expenditures 

compared to a demographic-only model 

or other alternatives suggested by 

commenters. We did not intend for our 

proposed risk adjustment methodology 

to discourage ACOs from accepting 

responsibility for beneficiaries that 

might present higher than average risk, 

but commenters have persuaded us of 

the need to better account for risk 

associated with changes in the ACO’s 

beneficiary population, for instance in 

terms of acuity and beneficiary 

movement, during the agreement 

period. However, we remain concerned 

that liberally adjusting for changes in 

risk scores for beneficiaries assigned to 

the ACO for the entire agreement period 

could create an incentive for ACOs to 

use coding practices intended to 

optimize their risk scores to achieve 

shared savings. Thus, we are modifying 

our initial proposal so that ACO 

benchmarks will better reflect the risk 

associated with their assigned 

beneficiaries. We will adjust 

expenditures to account for changes in 

severity and case mix for beneficiaries 

newly assigned in the current 

performance year (‘‘newly assigned’’), 

and those who are continuously 

assigned to the ACO year-to-year 

(‘‘continuously assigned’’). A newly 

assigned beneficiary is a beneficiary 

assigned in the current performance 

year who was neither assigned nor 

received a primary care service from any 

of the ACO’s participants during the 

most recent prior calendar year. A 

continuously assigned beneficiary is a 

beneficiary assigned to the ACO in the 

current performance year who was 

either assigned to or received a primary 

care service from any of the ACO’s 

participant during the most recent prior 

calendar year. 

First, for newly assigned beneficiaries 

we will annually update an ACO’s 

CMS–HCC prospective risk scores to 

adjust for changes in severity and case 

mix in this population. Second, each 

year, we will recalculate the ACO’s 

CMS–HCC prospective risk scores for 

continuously assigned beneficiaries. If 

the continuously assigned population 

shows a decline in its CMS–HCC 

prospective risk scores, we will adjust 

for health status changes for this 

population using this lower risk score. 

If the continuously assigned population 

shows no decline, this population will 

be adjusted using demographic factors 

only. We believe that this approach to 

risk adjustment strikes a fair balance 

between accounting for changes in the 

health status of an ACO’s population 

while not incenting changes in coding 

practices for care provided to 

beneficiaries who remain continuously 

assigned to the ACO, nor encouraging 

ACOs to avoid high risk beneficiaries. 

This methodology implicitly adjusts for 

beneficiaries who are assigned in the 

prior year but not the current 

performance year (patients which leave 

the ACO), as these beneficiaries will be 

excluded from the continuously 

assigned population. We will monitor 

HCC scores for beneficiaries which are 

assigned in the prior year who are not 

assigned in the current performance 

year, to determine if there is trend in 

changes in health status for this 

population. Based on our findings, in 

future rule making, we may make a 

more explicit adjustment for 

beneficiaries assigned to the ACO in the 

prior year who are not assigned in the 

current performance year. Further, we 

agree with the commenter’s suggestion 

on the need for benchmark expenditures 

to be adjusted relative to the risk profile 

of the performance year assigned 

beneficiaries. Therefore the ACO’s 

updated benchmark will be restated in 

the appropriate performance year risk to 

ensure fairness recognizing changes in 

the level of risk among the ACO’s 

assigned beneficiaries. 

Additionally, we agree with 

commenters’ suggestions about the need 

to take account of variations in risk 

scores across categories of beneficiaries 

to reflect differences in disease severity 

across subpopulations. Therefore, in 

adjusting for health status and 

demographic changes, we will make 

adjustments for separate categories 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 


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beneficiaries as described in section 

II.G.2.b. of this final rule. 

Also, we agree with the comment 

recommending that we use the audit 

process to address coding inaccuracies. 

Therefore, to assure the appropriateness 

of ACO coding practices and our 

methodology for risk adjusting, we are 

finalizing our proposal to retain the 

option to audit ACOs, especially those 

ACOs with high levels or risk score 

growth relative to their peers, and to 

adjust the risk scores used for purposes 

of establishing the 3-year benchmark 

accordingly. In addition, as we stated in 

the proposed rule, we intend to monitor 

and evaluate the issue of more complete 

and accurate coding and, as we gain 

experience with the program, we may 

consider making further revisions 

through future rulemaking. 

Final Decision: We are making final 

our proposal under § 425.602 to risk 

adjust an ACO’s historical benchmark 

expenditures using the CMS–HCC 

model. We are modifying our proposal 

under § 425.604 and § 425.606 to make 

additional risk adjustments to 

performance year assigned beneficiaries 

instead of capping growth in risk 

adjustments during the term of the 

agreement at zero percent. For newly 

assigned beneficiaries, we will annually 

update an ACO’s CMS–HCC prospective 

risk scores, to take into account changes 

in severity and case mix for this 

population. We will use demographic 

factors to adjust for severity and case 

mix for the continuously assigned 

population relative to the historical 

benchmark. However, if the 

continuously assigned population 

shows a decline in its CMS–HCC 

prospective risk scores, we will lower 

the risk score for this population. An 

ACO’s updated benchmark will be 

restated in the appropriate performance 

year risk relative to the risk profile of 

the performance year assigned 

beneficiaries. Further, we will make 

adjustments for each of the following 

categories of beneficiaries: ESRD, 

disabled, aged/dual eligible Medicare 

and Medicaid beneficiaries, and aged/ 

non-dual eligible Medicare and 

Medicaid beneficiaries. We are also 

making final our proposal to monitor 

and evaluate the issue of more complete 

and accurate coding for future rule 

making and to use an audit process to 

assure the appropriateness of ACO 

coding practices and to adjust ACO risk 

scores. We will also monitor HCC scores 

for beneficiaries assigned in the prior 

year that are not assigned in the current 

performance year, and may make a more 

explicit adjustment for this population 

in future rule making. 

(2) Technical Adjustments to the 

Benchmark and Performance Year 

Expenditures 

Consistent with the statute, we 

proposed to take into account payments 

made from the Medicare Trust Fund for 

Parts A and B services, for assigned 

Medicare FFS beneficiaries, including 

payments made under a demonstration, 

pilot or time limited program when 

computing average per capita Medicare 

expenditures for an ACO during both 

the benchmark period and performance 

years. 

In the proposed rule, we stated our 

belief that all relevant Medicare costs 

should be included in an ACO’s 

benchmark to maintain sufficient 

incentives for ACOs to ensure their 

assigned beneficiaries receive care in 

the most appropriate settings. We noted 

that payment adjustments achieve 

policy goals such as supporting teaching 

hospitals and hospitals that serve a 

disproportionate share of low income 

beneficiaries, adjusting for local wage 

differences, or accounting for providers’ 

performance on quality initiatives. We 

further explained that adjustments to 

payment rates can affect both 

expenditures during the benchmark 

period and also during each subsequent 

performance year. Additionally, changes 

in these payment factors, between the 

benchmark and performance years 

could also influence whether an ACO 

realizes savings or incurs losses under 

the program. 

In the proposed rule, we addressed 

the issue of whether to exclude some 

adjustments to Parts A and B payments 

when determining ACOs’ benchmark 

and performance year expenditures. We 

considered a number of specific claimsbased payment adjustments in the 

proposed rule, including: IME and DSH 

payments, geographic payment 

adjustments, and some bonus payments 

and penalties. We also discussed some 

payment adjustments which are outside 

the payments for Parts A and B services 

and therefore would not be included in 

our calculation of ACOs’ expenditures. 

We explained that section 1899(d) of 

the Act provides a way of adjusting for 

such payments in the benchmark. 

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

states, among other things, that the 

benchmark must be adjusted for ‘‘* * * 

beneficiary characteristics and such 

other factors as the Secretary determines 

appropriate * * *.’’ However, when it 

comes to performance year 

expenditures, section 1899(d)(1)(B)(i) of 

the Act provides authority to adjust 

expenditures in the performance period 

for beneficiary characteristics, but does 

not provide authority to adjust for 

‘‘other factors.’’ Therefore, we noted that 

while we could make some adjustments 

to the benchmark, to exclude certain 

payments, we could not make similar 

adjustments in our calculation of 

performance year expenditures. We did 

not discuss the possible use of our 

authority under section 1899(i) of the 

Act, which authorizes use of other 

payment models, to adjust performance 

year expenditures for ‘‘other factors.’’ 

Comment: We received a number of 

comments on adjusting for payments 

and policies not mentioned in the 

proposed rule. Commenters requested 

clarification, or made recommendations, 

on the treatment of a number of 

payments or costs. Among these, 

commenters recommended that we 

exclude the following: 

• Costs of preventive services from an 

ACO’s benchmark and spending 

calculations to avoid incentives to 

withhold preventive care. 

• Costs of urgent care center visits 

from ACO’s benchmark and 

performance year expenditures to avoid 

creating incentives for ACOs to refer 

their non-emergent patients to their own 

emergency departments instead of to 

urgent care centers in the community. 

• Costs of beneficiaries who seek care 

outside the ACO. 

• New technology payments under 

the Inpatient Prospective Payment 

System and transitional pass through 

payment expenditures under the 

Outpatient Prospective Payment System 

for drugs, biological and devices. 

Commenters believed exclusion of these 

payments would avoid incentives for 

ACOs to underuse new technologies and 

therapies. One commenter, for example, 

suggested that CMS’ exclusions keep 

pace with the latest recommended 

treatments. 

• Rural health payment adjustments 

under which CMS reimburses some 

providers under alternative, specialized 

methodologies due to their designation 

as rural or critical access facilities. 

• Low cost county payments. 

• Primary care incentive payments 

under the primary care incentive 

program established by the Affordable 

Care Act. 

• Federal hospital insurance trust 

fund payments. 

• TEFRA relief payments, the 

inclusion of which could provide 

incentives for ACOs to avoid forming 

joint ventures with and including 

cancer centers. 

Commenters offered differing 

opinions on the treatment of Part D 

costs. One commenter urged us to 

include Part D costs, suggesting this 

could maximize ACO’s opportunity for 

success because of the opportunities for 


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cost savings and improved quality 

associated with drug benefits. Several 

commenters expressed concern that in 

some clinical areas (such as cancer care 

and cardiac ablation for atrial 

fibrillation) ACOs may have an 

incentive to move patients from 

appropriate treatments or procedures 

reimbursed through Parts A or B to Part 

D therapies which are excluded from 

the shared savings calculation. 

Commenters suggested safeguards may 

be needed for certain clinical areas. One 

commenter outlined a process for CMS 

to exclude the costs of certain Part A 

and B drugs/biologics or medical 

procedures from the shared savings 

calculation, but to account for use of 

Part D drugs as an alternative to 

procedures paid under Parts A and B. 

One commenter identified a seemingly 

countervailing effect resulting from the 

proposed additional incentive for ACOs 

to include FQHCs and RHCs, which 

may be entities eligible for the 340B 

Drug Pricing Program. The commenter 

explained that the incentive for 

including FQHCs and RHCs may 

prompt ACOs to shift treatment 

protocols and patients from an inpatient 

setting to an outpatient setting in order 

to have access to 340B pricing 

discounts. 

Several commenters expressed the 

need for CMS to take into consideration 

payment policies and causes for 

payment changes which could affect 

ACO financial performance. One 

commenter noted that some payment 

rules can run counter to the goals of the 

Shared Savings Program, for instance 

post-acute care transfer policies that 

reduce payments if the beneficiary is 

moved to certain other types of 

providers prior to reaching the 

geometric mean average length of stay 

for that diagnosis-related group. ACOs 

will be mindful these types of payment 

adjustments, which could result in 

higher Medicare spending. This 

commenter suggested the need to align 

payment policies to be consistent with 

the goals of the Shared Savings Program, 

and recommended that CMS not apply 

payment policies that penalize 

providers for directing the setting of 

care. Several other commenters 

suggested that we consider adjustments 

to the benchmark and performance year 

expenditures to account for changes in 

the structure of ACO providers and 

suppliers which may have a significant 

impact on annual payment rates, such 

as a hospital receiving the status of 

‘‘sole community provider,’’ or a 

hospital incorporating a provider-based 

billing clinic that was previously 

freestanding. Another commenter 

suggested CMS develop a method to 

account for the defensive practice of 

medicine which results in higher 

medical costs, particularly in States 

with higher rates of medical malpractice 

litigation. 

One commenter recommended that 

CMS offer a process where individual 

ACOs could petition for specific 

benchmark adjustments that might be 

relevant to their providers or 

beneficiaries, but would not be relevant 

to all ACOs. 

As described section II.G. of this final 

rule, several commenters recommended 

that we trend and update the benchmark 

and risk adjust by categories of 

beneficiaries, including aged, disabled, 

and ESRD beneficiaries, among others. 

Response: We disagree with 

commenters’ suggestions that we adjust 

ACO benchmark and performance year 

expenditures to account for various 

differences in cost and payment among 

providers and suppliers. We believe that 

making such extensive adjustments, or 

allowing for benchmark adjustments on 

a case-by-case basis, would create an 

inaccurate and inconsistent picture of 

ACO spending and may limit 

innovations in ACOs’ redesign of care 

processes or cost reduction strategies. 

Similarly, we do not believe it is 

appropriate to consider Part D spending 

in our calculation of benchmark and 

performance year expenditures. The 

statute is clear in requiring that we take 

into account only payments made from 

the Medicare Trust Fund for Parts A and 

B services, for assigned Medicare FFS 

beneficiaries, when computing average 

per capita Medicare expenditures under 

the ACO. Although commenters pointed 

out important concerns about the 

potential for inappropriate cost shifting 

to Part D therapies and unintended 

shifts in the site of care for beneficiaries 

with high cost therapies, we believe that 

the program’s quality measurement and 

program monitoring activities will help 

us to prevent and detect any avoidance 

of appropriately treating at-risk 

beneficiaries. Furthermore to the extent 

that these lower cost therapies are not 

the most appropriate and lead to 

subsequent visits or hospitalizations 

under Parts A and B, then any costs 

associated with not choosing the most 

appropriate treatment for the patient 

would be reflected in the ACO’s per 

capita expenditures. 

As we indicated in the discussion of 

establishing and updating the 

benchmark and risk adjusting ACO 

expenditures, we agree with 

commenters’ suggestions for taking a 

categorical approach to calculating ACO 

expenditures. Consistent with our 

policies stated elsewhere in section II.G. 

of this final rule, we are adopting a 

policy whereby performance year 

expenditures will be calculated for cost 

categories 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, as described in 

section II.G.2.b. of this final rule. 

Final Decision: We are finalizing our 

proposal under § 425.602, § 425.604, 

and § 425.606 to take into account 

payments made from the Medicare Trust 

Fund for Parts A and B services, for 

assigned Medicare FFS beneficiaries, 

including individual beneficiary 

identifiable payments made under a 

demonstration, pilot, or time limited 

program, when computing average per 

capita Medicare expenditures under the 

ACO. Further, we will calculate ACO 

expenditures for each of the following 

categories of beneficiaries: ESRD, 

disabled, aged/dual eligible Medicare 

and Medicaid beneficiaries, and aged/ 

non-dual eligible Medicare and 

Medicaid beneficiaries. Lastly, as 

specified in section II.C. of this final 

rule, we will use a 3-month run-out of 

claims data and a completion factor to 

calculate performance year 

expenditures. 

(a) Impact of IME and DSH 

In the proposed rule, we explained 

that teaching hospitals receive 

additional payment to support medical 

education through an IME adjustment. 

In addition, hospitals that serve a 

disproportionate share of low-income 

beneficiaries also receive additional 

payments, referred to as the Medicare 

DSH adjustment. Many hospitals, 

especially academic medical centers, 

receive both adjustments, which can 

provide substantial increases in their 

Medicare payments compared to 

hospitals that do not qualify for these 

adjustments. We stated our belief that 

the higher payments provided to these 

types of hospitals could provide ACOs 

with a strong incentive to realize 

savings simply by avoiding referrals to 

hospitals that receive IME and DSH 

payments. 

In developing the proposed rule, we 

considered whether it would be 

appropriate to remove IME and DSH 

payments or a portion of these payments 

from the benchmark and the calculation 

of actual expenditures for an ACO. 

However, we explained that because of 

our limited statutory authority under 

section 1899(d) of the Act, we could 

adjust the benchmark under this 

provision by removing IME and DSH 

payments, but we could not also do so 

in our calculation of performance year 


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expenditures. We further noted reasons 

for including these payments in the 

calculation of both the benchmark and 

performance year expenditures. First, if 

we were to remove IME and DSH 

payments from the benchmark, the 

benchmark would be set artificially low 

relative to the performance period, thus 

making it more difficult for an ACO to 

achieve savings under this program. 

Second, excluding these payments 

could result in an artificial and 

incomplete representation of actual 

spending of Medicare Trust Fund 

dollars. Third, section 1899(d)(1)(B)(ii) 

of the Act requires that we update an 

ACO’s benchmark during each year of 

the agreement period based on ‘‘the 

projected absolute amount of growth in 

national per capita expenditures for 

parts A and B under the original 

Medicare fee-for-service 

program* * *.,’’ which would 

necessarily include the effects of these 

payments. Lastly, including all relevant 

Medicare costs in an ACO’s benchmark 

would maintain sufficient incentives for 

ACOs to ensure their assigned 

beneficiaries receive care in the most 

appropriate settings. We indicated, for 

example, that this could advantage 

ACOs which include teaching hospitals 

or DSH hospitals because their 

benchmarks would be set higher, and 

they could potentially earn shared 

savings when they refer patients to a 

more appropriate, less intensive care 

setting. We proposed not to remove IME 

and DSH payments from the per capita 

costs included in an ACO’s benchmark. 

We invited comment on this proposal. 

Comment: While a few comments 

supported our proposal not to remove 

IME and DSH payments from the 

benchmark, most comments urged us to 

use our authority under section 1899(i) 

of the Act to remove IME and DSH from 

both the benchmark and performance 

year expenditures. Others suggested that 

section 1899(d) of the Act provides 

implicit authority to adjust the 

performance year expenditures for 

‘‘other factors,’’ such as IME and DSH 

payments. Many commenters favoring 

exclusion of IME and DSH payments 

also recommended that CMS exclude 

direct graduate medical education 

(DGME) payments. 

Commenters explained that our 

proposed policy would incentivize 

ACOs to avoid referring beneficiaries to 

higher-cost academic medical centers, 

thus limiting beneficiary access to high 

quality, medically necessary care. One 

commenter pointed out that the 

inclusion of IME and DSH payments to 

teaching hospitals in establishing the 

benchmark may be attractive to ACOs 

because it would generate a higher 

benchmark against which an ACO could 

work to achieve savings. However, on 

the performance side, ACOs may see the 

cost structure of teaching hospitals as 

too prohibitive to achieve the desired 

savings during the performance years. 

Or, as another commenter suggested, 

ACOs may be motivated to shift their 

referrals away from academic centers so 

as to achieve apparent savings due to 

avoiding education-related payments, 

and not due to achieving actual 

efficiencies. Commenters expressed 

concern that the proposed policy could 

ultimately decrease support for the 

societal benefits provided by teaching 

hospitals, including the training of 

health professionals, discovery of 

advanced treatments, and ensuring the 

presence of the highest level of clinical 

care in a community. Several 

commenters also suggested that the 

proposed policy disadvantages hospitals 

serving low income populations, 

including those which serve a large 

number of Medicare and Medicaid 

patients. 

Other comments supported inclusion 

of teaching hospitals in ACOs 

participating in the Shared Savings 

Program because of their potential to 

achieve the program’s goals. One 

commenter noted that teaching 

hospitals tend to offer a wider variety of 

technologically sophisticated services, 

such as transplant services, compared to 

what is available at other hospitals, and, 

as a result, attract sicker patients, 

requiring more complex and costly 

treatments. This commenter further 

suggested that teaching hospitals are 

well positioned to generate savings and 

improve quality through better care 

coordination under the Shared Savings 

Program. 

One commenter noted that certain 

State policies may lead to a discrepancy 

between Federal DSH payments to 

hospitals and the amount actually 

received by DSH hospitals. The 

commenter described a policy in the 

Texas under which a portion of a 

hospital’s Federal DSH payment accrues 

to the State general revenue fund 

instead of the institution. 

Several commenters suggested 

alternatives to excluding IME and DSH 

payments. One commenter 

recommended that CMS exclude 

teaching and DSH payments from the 

benchmark and savings calculations 

except for ACOs that include at least 

one major teaching hospital and one 

hospital that receives high DSH 

payments, or a single hospital that 

satisfies both criteria. This commenter 

further recommended that we account 

for other reforms under the Affordable 

Care Act that relate to hospitals that 

receive high DSH payments. Other 

commenters suggested that, in the 

longer term, CMS use risk adjustment 

methodologies or additional metrics to 

assess savings and quality 

improvements specific to hospitals 

receiving IME and DSH payments. In 

the event that CMS decides to favor 

including IME and DSH costs in the 

calculation of the benchmark and 

performance year expenditures, one 

commenter suggested that ACOs that 

include hospitals receiving IME and 

DSH adjustments should have an 

opportunity to receive additional shared 

savings payments, as we proposed for 

ACOs including FQHCs and RHCs as 

participants. 

Response: We are modifying our 

proposal in order to adopt an alternate 

payment methodology that excludes 

IME and DSH payments from ACO 

benchmark and performance year 

expenditures, as authorized by section 

1899(i) of the Act. We believe that care 

should be provided in the most 

appropriate setting whether it be a 

physician office, outpatient clinic, 

community hospital or teaching 

hospital. We further recognize the role 

of teaching hospitals in providing high 

quality, medically necessary care to 

Medicare beneficiaries. Commenters 

have persuaded us that including IME 

and DSH payments in determining ACO 

cost performance could create 

incentives for ACOs to avoid 

appropriate referrals to teaching 

hospitals in an effort to demonstrate 

savings. We remain committed to the 

societal benefits supported through IME 

and DSH payments, such as educating 

the nation’s medical workforce, 

advancing the state of medical science, 

and ensuring access to care by 

vulnerable populations. 

To exercise our authority under 

section 1899(i) of the Act, we must 

demonstrate that this policy (1) ‘‘* * * 

does not result in spending more for 

such ACO for such beneficiaries than 

would otherwise be expended * * * if 

the model were not implemented 

* * *.’’ and (2) ‘‘* * * will improve the 

quality and efficiency of items and 

services furnished under this title.’’ 

First, we believe that the intent of the 

program is to reward the prevention of 

unnecessary services and redundancies 

in care. By removing IME and DSH 

payments from benchmark and 

performance year expenditures we can 

reward more accurately actual decreases 

in unnecessary utilization of health care 

services. Second, excluding IME and 

DSH payments from determinations of 

ACO financial performance could help 

ensure participation of hospitals 

receiving IME and DSH payments in 


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ACOs, and their engagement in the 

accountable care model. We believe that 

removing the disincentive for ACOs to 

refer patients to teaching hospitals will 

help ensure beneficiaries continue to be 

referred to the most appropriate place of 

service for their care. In combination, 

these factors could result in Medicare 

beneficiaries receiving higher quality, 

better coordinated and more costefficient care in these settings. For these 

reasons, we do not expect that 

excluding IME and DSH payments from 

the determinations of ACO financial 

performance will result in greater 

payments to ACOs than would 

otherwise have been made if these 

payments were included. However, we 

intend to monitor this issue and will 

revisit it if we determine that excluding 

these payments has resulted in 

additional program expenditures. 

Compared to other alternatives 

suggested by commenters, we believe 

that excluding IME and DSH payments 

from the determination of an ACO’s 

eligibility for shared savings is presently 

the most effective approach to ensure 

participation by hospitals that receive 

IME and DSH payments. We plan to 

monitor this issue to help us determine 

whether these adjustments should be 

maintained and may revisit it in future 

rulemaking as we gain more experience 

with the Shared Savings Program. 

DGME payments are made outside of 

the payments of Parts A and B claims. 

By virtue of this fact, under the 

methodology in either our proposed or 

final rules, DGME payments would not 

be included in an ACO’s benchmark and 

performance year expenditures. 

Therefore, we do not need to make 

adjustments to individual claims for 

these payments. 

Final Decision: We are modifying our 

proposal under § 425.602, § 425.604, 

and § 425.606 so as to exclude IME and 

DSH payments from ACO benchmark 

and performance year expenditures. 

(b) Geographic and Other Payment 

Adjustments 

In addition to IME and DSH 

payments, in the proposed rule we also 

considered whether to include or 

exclude a number of other payments 

from ACO benchmark and performance 

year expenditures. 

In the proposed rule we explained 

that another factor in the Medicare FFS 

payment systems that could affect an 

ACO’s ability to realize savings is the 

geographic payment adjustment applied 

under Medicare payment systems (for 

example, the IPPS wage index 

adjustments and the physician fee 

schedule geographic practice cost index 

(GPCI) adjustments). These adjustments 

increase and decrease payments under 

these systems to account for the 

different costs of providing care in 

different areas of the country. We 

further noted that there have been a 

number of temporary legislative 

adjustments to the wage indexes for 

various parts of the country during 

recent years. In some cases these have 

been extended on virtually an annual 

basis while others have been updated 

more intermittently. The timing of these 

adjustments could result in changes 

being made during an ACO’s agreement 

period and between the benchmark and 

the performance years, thus influencing 

an ACO’s ability to realize savings 

under the program. 

We explained that, as in the case of 

IME and DSH adjustments, under 

section 1899(d)(1)(B)(i) and (ii) of the 

Act, we could adjust the benchmark by 

removing geographic payment 

adjustments, but we could not make a 

similar adjustment to performance year 

expenditures. Consistent with our 

proposed treatment of IME and DSH 

payments, we proposed not to remove 

geographic payment adjustments from 

the calculation of benchmark 

expenditures. We welcomed comment 

on this issue, and in particular the likely 

impact of this proposal in areas that are 

affected by temporary geographic 

adjustments. 

Further, we addressed bonus 

payments and penalties for eligible 

professionals and hospitals. We 

proposed to exclude from ACO 

benchmark and performance year 

expenditures incentive payments for 

eligible professionals under section 

1848 of the Act for the Physician 

Quality Reporting System, eRx, and 

EHR. We explained that section 

1899(b)(3)(D) of the Act provides 

authority for the Secretary to 

incorporate these incentive payments 

into the Shared Savings Program, as the 

Secretary determines appropriate. The 

statute further provides that these 

incentive payments ‘‘shall not be taken 

into consideration when calculating any 

payments otherwise made under 

subsection (d).’’ We reasoned that 

section 1899(b)(3)(D) of the Act does 

not, however, provide authority for the 

Secretary to exclude Medicare 

expenditures or savings for incentive 

payments and penalties under other 

provisions of the Act from benchmark 

and actual expenditures. Therefore, we 

proposed to include in both the 

computation of actual expenditures and 

benchmark expenditures for Part A and 

B services any incentive payments not 

made under section 1848 of the Act that 

are reflected in Part A and B claims for 

services furnished to assigned FFS 

beneficiaries, such as EHR incentive 

payments to hospitals and payments 

under the Hospital Inpatient ValueBased Purchasing Program, which are 

made under section 1886 of the Act, and 

EHR incentive payments to CAHs, 

which are made under section 1814 of 

the Act. 

We explained that incentive payments 

for programs such as these can affect 

actual expenditures and the benchmark, 

and thus an ACO’s ability to realize 

savings. For example, an ACO’s chances 

to share in savings or the level of 

savings that would be shared with the 

ACO would be reduced when an ACO 

professional or hospital participating in 

the ACO fails to receive an incentive 

payment (or is penalized with a 

payment reduction) under one of these 

programs during a benchmark year and 

subsequently receives an incentive 

payment from that program in an ACO 

performance year. This is because, all 

else being equal—(1) the ACO’s 

expenditures in the performance year 

would be higher than they would have 

been in the absence of the incentive; 

and (2) the ACO’s expenditures during 

the benchmark year would be relatively 

lower than they would have been had 

an incentive been received. Conversely, 

an ACO would be more likely to share 

in savings if it received an incentive 

payment under one of these other 

programs in a benchmark year and 

received no incentive or was penalized 

during a performance year. We stated 

our belief that the effect of including 

these incentive payments in the 

calculation of the benchmark and actual 

expenditures could create perverse 

incentives with the result that 

participation in the Shared Savings 

Program has the potential to adversely 

affect the performance of providers of 

services and suppliers with respect to 

other important Medicare efforts. We 

further stated that excluding these costs 

and savings would reduce the chances 

that incentives that were intended to 

encourage and reward participation in 

one Medicare program would 

discourage full participation in another. 

Comment: MedPAC, among other 

commenters, suggested standardizing 

costs for ACOs, so that ACOs would be 

judged based on their success in 

controlling the growth in service use by 

their patients isolated from payments 

unrelated to resource use or changes in 

prices (such as input prices in their 

markets) that may be outside of ACOs’ 

control. These commenters were among 

those that urged CMS to use its implicit 

authority under section 1899(d) of the 

Act or its authority under section 

1899(i) of the Act to make additional 

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based payments including: IME and 

DSH payments, geographic adjusters 

(such as payments based on the area 

wage index), GPCI, HVBP bonuses, 

hospital EHR incentive payments, 

transitional pass-through payments for 

new technologies, primary care 

incentive payments, and low cost 

county payments. Absent existing 

statutory authority to make these 

adjustments, some commenters 

suggested that CMS request that 

Congress amend the statute to allow for 

this possibility. The focus of other 

comments was on ensuring that any 

adjustments, or the lack thereof, to the 

benchmark be applied consistently to 

the calculation of performance year 

expenditures. One commenter 

cautioned that the data used for some 

cost-based incentive payments may be 

flawed. 

Of the comments received, most 

favored excluding geographic payments 

from benchmark and performance year 

expenditures. In particular, commenters 

specified the exclusion of payments 

based on the following: area wage index, 

low cost county payment adjustments, 

GPCI, and the frontier States policy 

adjustment. Several commenters 

expressed concerns about including 

geographic payment adjustments in the 

benchmark calculations. One 

commenter, capturing the concerns 

indicated by several others, explained 

their view that variations in cost growth 

across geographic areas as well as 

inaccuracies in current CMS methods 

for accounting for differences in local 

input and practice costs (recently 

reviewed by the Institute of Medicine) 

may create incentives that reward ACO 

formation in some markets compared to 

others. For instance, some commenters 

were especially concerned that the 

GPCI, which differentially advantages 

providers based on location, is based on 

outdated payment location definitions. 

Another commenter suggested that 

inclusion of these geographic payment 

adjustments could have unintended 

consequences for referral patterns by 

ACOs, such as driving referrals based on 

geographic wage adjustments rather 

than performance. Others were 

generally concerned about including 

geographic payment adjustments that 

would disadvantage some ACOs more 

than others. Several commenters urged 

CMS to consider the findings from the 

Institute of Medicine’s study on the 

impact of geographic adjustment factors 

on Medicare payment policy before 

addressing geographic payment 

adjustments in the Shared Savings 

Program. 

Commenters agreed with the 

proposed exclusion of bonus payments 

for eligible professionals, in particular 

PQRS, eRx, and EHR incentives from 

benchmark and performance year 

expenditure calculations. Many 

commenters urged exclusion of all 

incentive bonus payments and penalties 

from calculations of the benchmark or 

the performance year expenditures. 

Many commenters expressed concern 

that inclusion of Hospital EHR 

incentives and HVBP payments in ACO 

cost calculations could send mixed 

messages to hospitals, and could result 

in misaligned incentives. For example, 

several commenters suggested that by 

including VBP incentive payments in 

the cost of patient care, the proposed 

methodology for determining average 

per beneficiary costs would penalize 

ACOs with high quality hospitals. 

Similarly, as another commenter noted, 

ACOs could be penalized for including 

hospitals that earn EHR incentives 

during their agreement periods. 

Commenters described the 

consequences of including hospital EHR 

incentives and HVBP payments in 

calculating ACO financial performance, 

namely the proposed policy could force 

hospitals to choose between 

participating in the Shared Savings 

Program and other Medicare initiatives, 

which could result in discouraging 

hospital participation in ACOs. One 

commenter noted the importance of 

ensuring that incentives of the various 

programs are properly aligned so that 

their interactions support rather than 

impede each of the programs’ goals. To 

this end, most commenters favored 

excluding EHR incentive payments to 

hospitals and CAHs as well as payments 

under the HVBP program from ACO 

benchmark and performance year 

expenditures. Further, one commenter 

suggested excluding EHR incentive 

payments for hospitals because the EHR 

bonus payments are not calculated on a 

per beneficiary basis and therefore will 

be difficult to apportion among assigned 

beneficiaries, and also because 

reductions in expenditures when the 

EHR incentives expire in future years 

will not be due to any change in the 

quality of patient care furnished by the 

hospitals. 

Response: Some incentive payments 

and penalties discussed in the proposed 

rule are included in payments for Parts 

A and B services, for example, payments 

to hospitals through the Hospital 

Inpatient Value-Based Purchasing 

Program, which will be made under 

section 1886 of the Act. Other 

incentives we discussed, such as PQRS, 

eRx, and EHR incentives to eligible 

professionals, hospitals and CAHs are 

paid outside of payments for Parts A 

and B services. We wish to clarify that 

some bonus payments and penalties 

paid outside of Part A and B claims 

would be effectively excluded from the 

benchmark and performance year 

expenditures because of our proposal to 

take into account payments made from 

the Medicare Trust Fund for Parts A and 

B services furnished to assigned 

Medicare FFS beneficiaries when 

determining ACO’s historical and actual 

costs. This is because bonus payments 

made outside of Parts A and B claims 

would not be captured in either the 

benchmark and performance year 

expenditures. 

We are encouraged by the comments 

supporting our proposed methodology 

which would exclude payments that fall 

outside of Part A and B claims in 

calculating the benchmark and 

performance year expenditures; for 

example, DGME payments, PQRS, eRx, 

and EHR incentive payments for eligible 

professionals, and EHR incentive 

payments for hospitals. 

We believe it is appropriate to finalize 

our proposal to include all Part A and 

B expenditures with the exception of 

the IME and DSH adjustments, as 

previously discussed, in the calculation 

of the benchmark and shared savings 

payments (that is, we would not 

standardize payments for example, by 

making adjustments for geographic or 

HVBP payments). We have experience 

with the PGP demonstration which 

calculated all Part A and B expenditures 

without such adjustments. Unlike the 

IME/DSH adjustments, we do not 

believe these other payments that are 

included in Part A and B expenditures 

(such as geographic payment 

adjustments, and HVBP payments) 

would result in a significant incentive to 

steer patients away from particular 

hospitals or providers since ACOs will 

be compared to their own historical 

expenditure benchmark as updated. 

Additionally, we are concerned about 

the complexity resulting from 

standardizing payments, given its 

relatively minor impact under our 

benchmarking methodology. However, 

we intend to evaluate this issue and 

may address it in future rule-making. 

Final Decision: We are making final 

our proposal under § 425.602, § 425.604, 

and § 425.606 to include all Parts A and 

B expenditures, with the exception of 

IME and DSH adjustments, in the 

calculation of the benchmark and 

performance year expenditures. 

However, we intend to evaluate this 

issue and may address it in future 

rulemaking. 


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(3) Trending Forward Prior Year’s 

Experience To Obtain an Initial 

Benchmark 

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

requires the use of ‘‘* * * the most 

recent available 3 years of perbeneficiary expenditures for parts A and 

B services * * *.’’ to estimate a 

benchmark for each ACO. As the statute 

requires the use of historical 

expenditures, the per capita costs for 

each year must be trended forward to 

current year dollars and then averaged 

using the weights previously described 

to obtain the benchmark for the first 

agreement period. The statute further 

requires that we update the benchmark 

for each year of the agreement period 

based on the ‘‘* * * projected absolute 

amount of growth in national per capita 

expenditures for parts A and B services 

* * *.’’ under the FFS program, as 

estimated by the Secretary. 

(a) Growth Rate as a Benchmark 

Trending Factor 

The statute does not specify the 

trending factor to be used in estimating 

the initial benchmark. In the proposed 

rule we considered two options for 

trending forward the most recent 3 years 

of per beneficiary expenditures for Parts 

A and B services in order to estimate the 

benchmark for each ACO. We 

considered trending these expenditures 

forward using growth rates in 

expenditures for Parts A and B services 

for FFS beneficiaries. We also 

considered trending these expenditures 

forward using a flat dollar amount 

equivalent to the absolute amount of 

growth in per capita expenditures for 

Medicare Parts A and B under the FFS 

program. 

We explained that a growth rate 

would more accurately reflect each 

ACO’s historical experience. That is, in 

contrast to a flat dollar amount, a 

growth rate would neither raise the bar 

for ACOs in historically higher growth 

rate areas nor lower it for ACOs in lower 

growth areas. We also noted that use of 

a growth rate could perpetuate current 

regional differences in medical 

expenditures. We explained our belief 

that use of a flat dollar amount for a 

trending factor was more consistent 

with the method designated by the 

under section 1899(d)(1)(B)(ii) of the 

Act for updating the benchmark during 

the agreement period. Further, we 

indicated that use of a flat dollar 

trending factor could provide a stronger 

incentive for ACO development in areas 

with historically lower expenditures 

and growth rates. Conversely, potential 

ACOs in areas with historically higher 

growth rates could be reluctant to 

participate in the program because the 

challenge to reduce their growth rate 

would be greater in these areas relative 

to low expenditure, low growth ones. 

We explained that, on balance, we 

believed that for purposes of 

establishing an initial expenditure 

benchmark, expenditures should be 

trended forward in a relatively neutral 

and comparable way across geographic 

areas. Therefore, we proposed to trend 

forward the most recent 3 years of perbeneficiary expenditures using growth 

rates in per beneficiary expenditures for 

Parts A and B services. We provided an 

example of how an ACO’s historical 

experience would be trended forward. 

We would use 2009, 2010, and 2011 

claims year data to set the benchmark 

for an ACO starting its agreement period 

January 1, 2012. The 2009 and 2010 data 

would be trended forward using the 

factor described later in this final rule 

so that all benchmark dollars would be 

in 2011 dollars. We welcomed comment 

on this proposal, and especially on 

whether use of a flat dollar amount to 

trend the benchmark would be more 

consistent with our proposal to update 

the benchmark as specified under 

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

Comment: Commenters generally 

agreed with the proposed use of a 

growth rate, as opposed to a flat dollar 

amount, to trend forward the most 

recent 3 years of per beneficiary 

expenditures for Parts A and B services 

in order to estimate the benchmark for 

each ACO. One commenter expressed 

concerns that a flat dollar trending 

factor would not account for either high 

cost geographic areas or annual growth 

in payments to hospitals (such as IME 

and DSH payments) outside the ACO’s 

control, and that the flat dollar amount 

would be based on growth rates across 

all Medicare beneficiaries (those 

assigned to and not assigned to ACOs). 

Based on CMS’ experience with the PGP 

demonstration and the benchmarking 

methodology for the PGP Transition 

demonstration, one commenter 

generally recommended that we use 

separate benchmarks for specific groups 

of beneficiaries—specifically the aged, 

disabled and ESRD populations—to 

account for significant variations in the 

costs of these beneficiaries. Another 

commenter suggested that we weight the 

concentration of Medicaid spending by 

categorizing patients into tiers based on 

their level of Medicaid spending. 

Response: We are finalizing our 

proposal to use a growth rate as a 

trending factor. Further, we were 

persuaded by comments pointing to the 

need to account for variation in costs 

between different populations of 

Medicare beneficiaries. We believe that 

trending forward the benchmark 

expenditures, and updating the 

benchmark (as explained later in this 

final rule), for several categories of 

beneficiaries would provide a more 

accurate benchmark compared to the 

methodology we proposed. Expanding 

upon the commenter’s suggestions, we 

are finalizing our proposal and 

clarifying that we will add to our 

methodology for trending the 

benchmark the calculation of separate 

cost categories 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, as specified in 

section II.G.2.b. of this final rule. We 

believe that trending historical 

expenditures for these four categories 

provides a more complete and accurate 

benchmark for an ACO since it captures 

more accurately the proportion of ACO 

assigned patients that make up these 

categories, their expenditure growth 

patterns, and changes in the health 

status of these patients over time. It will 

also enable us to provide a more 

accurate risk adjustment as described in 

section II.G.2.c.1. of this final rule for an 

ACO’s patient population, by capturing 

changes in the composition of the 

patient population over time, while 

reducing the impact of changes in the 

health status of an ACO’s population 

due to more complete and accurate 

coding. 

Final Decision: In establishing an 

ACO’s benchmark, we are finalizing our 

proposal under § 425.602 to trend 

forward the most recent 3 years of perbeneficiary expenditures using growth 

rates in per beneficiary expenditures for 

Parts A and B services. That is, we will 

trend BY1 and BY2 forward, based on 

a growth rate, to BY3 dollars. Further, 

to trend forward the benchmark, we will 

make calculations for separate cost 

categories 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. 

(b) National Growth Rate as a 

Benchmark Trending Factor 

In the proposed rule, we considered 

use of national, State or local growth 

factors for trending the benchmark. We 

explained that using the national growth 

rate in Medicare A and B FFS 

expenditures appeared to be more 

consistent with the methodology that 

was specified in statute for updating 

each ACO’s benchmark. Further, a 

national growth rate would allow a 

single growth factor to be applied to all 


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ACOs regardless of their size or 

geographic area. However, a national 

rate could also disproportionately 

encourage the development of ACOs in 

areas with historical growth rates below 

the national average that would benefit 

from having a relatively higher base, 

which increases the chances for shared 

saving, while discouraging the 

development of ACOs in areas with 

historically higher growth rates above 

the national average that would have a 

relatively lower base. 

In contrast, we explained that 

trending expenditures based on State or 

local area growth rates in Medicare A 

and B expenditures may more 

accurately reflect the experience in an 

ACO’s area and mitigate differential 

incentives for participation based on 

location. Therefore, we considered an 

option to trend the benchmark by the 

lower of the national projected growth 

rate or the State or the local growth rate. 

This option balanced providing a more 

accurate reflection of local experience 

with not rewarding historical growth 

higher than the national average. We 

believed this method would instill 

strong saving incentives for ACOs in 

both high-cost growth and low-cost 

growth areas. 

We proposed to employ the national 

growth rate in Medicare Parts A and B 

expenditures for FFS beneficiaries for 

trending forward the most recent 3 years 

of per beneficiary expenditures for Parts 

A and B services in order to estimate the 

benchmark for each ACO. We believed 

this approach would help to ensure that 

ACOs in both high spending, high 

growth and low spending, low growth 

areas would have appropriate incentives 

to participate in the Shared Savings 

Program. We further indicated that this 

approach would allow us to move 

toward establishing a national standard 

to calculate and measure ACO financial 

performance. We sought comment on 

this proposal and on the alternatives to 

using a national growth rate. 

Comment: Some commenters 

supported the proposal to employ a 

national growth rate, however many 

more favored use of either local, 

regional, or State growth rates. 

Commenters expressed concerns that 

the use of a national growth rate would 

discourage participation of ACOs in 

higher cost areas, including areas where 

many academic medical centers are 

located, where there is a high 

prevalence of chronic illness, or in 

States (such as Vermont) that have 

increased health care spending due to 

initiatives to expand health insurance 

coverage. These commenters suggested 

that benchmarking using more localized 

growth rates could reflect the 

experience of ACOs in different 

geographic settings, as well as local 

economies and local populations, and 

thereby encourage ACOs to participate 

nationwide, instead of only in certain 

pockets of the country. Others urged 

CMS to adopt policies which would not 

disadvantage already efficient providers 

or those operating in lower cost areas of 

the country. 

Several commenters recognized the 

importance of using national growth 

rates, for rationalizing overall spending 

across regions nationwide, but thought 

it premature to introduce this approach 

to benchmarking at the outset of the 

program: suggesting instead that we 

begin with a local or regional growth 

rate and migrate to a national growth 

rate over time. One commenter favored 

the alternate option we considered, to 

trend the benchmark by the lower of the 

national projected growth rate or the 

State or the local growth rate, whereas 

several others suggested using the lower 

of either the national or local growth 

rates. In addition, commenters offered a 

number of alternative approaches for 

trending benchmark expenditures, 

including the following: 

• Use a blend of national average 

growth and absolute dollar growth, such 

as that planned for the Pioneer Model 

ACOs. 

• Use the ACO’s own percentage 

growth rate to trend forward the 

historical benchmark data. 

• Account for local variation after 

analyzing national and local growth 

rates. 

• Account for adjustments for new 

technology costs. 

Response: We believe that 

implementing a historical benchmark 

trending factor using the national 

growth rate for Parts A and B FFS 

expenditures appropriately balances 

commenters’ concerns that benchmark 

trending should encourage participation 

among providers that are already 

efficient or operating in low cost regions 

without unduly rewarding ACOs in 

high-cost areas. The net effect of using 

the same trending factor for all ACOs 

will be to provide a relatively higher 

expenditure benchmark for low-growth/ 

low spending ACOs and a relatively 

lower benchmark for high growth/high 

spending ACOs. ACOs in high cost high 

growth areas have an incentive to 

reduce their rate of growth more to bring 

their costs more in line with the 

national average; while ACOs in low 

cost low growth areas have an incentive 

to continue to maintain or improve their 

overall lower spending levels. Therefore 

we are finalizing our proposal to use a 

national growth rate in Medicare Parts 

A and B expenditures for FFS 

beneficiaries for trending forward the 

most recent 3 years of per beneficiary 

expenditures for Parts A and B services 

in order to estimate the benchmark for 

each ACO. 

As we proposed, using CMS Office of 

the Actuary national Medicare 

expenditure data for each of the years 

making up the historical benchmark, we 

will determine the national growth rates 

for the first and second benchmark years 

and trend expenditures for these 

benchmark years forward to the third 

benchmark year (BY3) dollars. Further, 

to trend forward the benchmark, we will 

make calculations for separate cost 

categories for each of the following 

populations of beneficiaries: ESRD, 

disabled, aged/dual eligible and aged/ 

non-dual eligible. 

Final Decision: We are finalizing our 

proposal under § 425.602 to use a 

national growth rate in Medicare Parts 

A and B expenditures for FFS 

beneficiaries for trending forward the 

most recent 3 years of per beneficiary 

expenditures for Parts A and B services 

in order to estimate the benchmark for 

each ACO. In doing so, we will make 

calculations for separate cost categories 

for each of the following populations of 

beneficiaries: ESRD, disabled, aged/dual 

eligible and aged/non-dual eligible. 

d. Updating the Benchmark During the 

Agreement Period 

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

states that the benchmark shall be 

‘‘updated by the projected absolute 

amount of growth in national per capita 

expenditures for parts A and B services 

under the original Medicare fee-forservice program, as estimated by the 

Secretary.’’ We considered two options 

for updating the benchmark during the 

agreement period, but proposed to use 

a flat dollar amount equivalent of the 

absolute amount of growth in the 

national FFS expenditures. We 

explained our view that in enacting 

section 1899(d)(1)(B)(ii) of the Act, 

Congress demonstrated interest in 

mitigating some of the regional 

differences in Medicare spending among 

ACOs and that this approach would 

help to ensure that ACOs in both high 

spending/high growth and low 

spending/low growth areas would have 

appropriate incentives to participate in 

the Shared Savings Program. We 

described the effect this update 

methodology might have in the second 

and third years of an agreement period: 

using a flat dollar increase, which 

would be the same for all ACOs, 

provides a relatively higher expenditure 

benchmark for low growth, low 

spending ACOs and a relatively lower 

benchmark for high growth, high 


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spending ACOs. All else being equal, an 

ACO can more likely share in savings 

when its actual expenditures are judged 

against a higher, rather than a lower 

benchmark. Thus, with a flat dollar 

increase to the benchmark, ACOs in 

high cost/high growth areas must reduce 

their rate of growth more to bring their 

costs more in line with the national 

average. We acknowledged that this 

approach to updating the benchmark 

could contribute to selective program 

participation by participants in low 

growth areas that could result in 

Medicare costs due to an increase in the 

amount of bonus payments for unearned 

savings. 

We also considered and sought 

comment on a second option which 

would be to use our authority under 

section 1899(i) of the Act to update the 

benchmark by the lower of the national 

projected absolute amount of growth in 

national per capita expenditures or the 

local/State projected absolute amount of 

growth in per capita expenditures. This 

option could instill strong saving 

incentives for ACOs in low-cost areas, 

as well as for those in high-cost areas. 

Incorporating more localized growth 

factors reflects the expenditure and 

growth patterns within the geographic 

area served by ACO participants, 

potentially providing a more accurate 

estimate of the updated benchmark 

based on the area from which the ACO 

derives its patient population. Capping 

the update at the projected absolute 

amount of growth in national per capita 

expenditures, however, can advantage 

ACOs in low cost/low growth areas that 

have already achieved greater 

efficiencies, while still offering a strong 

incentive for those in high cost/high 

growth areas to reduce their spending. 

Comment: Commenters were mixed in 

their preference for either the proposed 

policy of updating benchmark by 

absolute growth in national FFS 

expenditures, or use of the lower of the 

national projected absolute amount or 

the local/State projected absolute 

amount. For example, one commenter 

disagreed with the option to use the 

lower of the national projected absolute 

amount or the local/State projected 

absolute amount, suggesting it 

negatively prejudges all high growth 

sectors without regard to the underlying 

clinical or quality issues. However, 

another commenter favored this 

approach because this adjustment 

would afford ACOs the greatest 

potential for achieving shared savings 

and minimize the threat of an ACO 

being disadvantaged by virtue of pricing 

within its geographic location. Along 

these lines, one commenter felt the 

proposed approach offered insufficient 

incentives for efficient providers to form 

an ACO. More generally, many 

commenters urged CMS to adopt 

policies to encourage participation by 

organizations that are already efficient 

or in low cost areas. 

Several commenters urged use of 

regional or market-specific expense data 

for calculating the benchmark update. 

One commenter questioned whether the 

update would occur in the first 

performance year, as we specifically 

mentioned the potential effect resulting 

from the update in the second and third 

performance years. 

Response: We considered 

commenters’ suggested alternatives, but 

on the whole we believe our proposed 

method for updating the benchmark 

could best address the program’s goals 

and commenters’ overall concerns about 

the participation of efficient/low cost 

ACOs. The net effect of using the same 

update for all ACOs is to provide a 

relatively higher expenditure 

benchmark for low growth/low 

spending ACOs and a relatively lower 

benchmark for high growth/high 

spending ACOs. Further, with a flat 

dollar increase to the benchmark 

equivalent of the absolute amount of 

growth in the national FFS 

expenditures, ACOs in high cost, high 

growth areas must reduce their rate of 

growth more (compared to ACOs in low 

cost, low growth areas) to bring their 

costs in line with the national average. 

In light of the alternatives we 

considered, we disagree with the 

commenter who indicated that the 

proposed updating methodology offers 

insufficient incentives for efficient 

providers to form ACOs. Benchmarks 

for efficient/low cost providers updated 

to account for growth in regional or 

local expenditures would be 

comparatively lower, and therefore less 

advantageous, than benchmarks 

updated based on national experience. 

Thus, under the proposed update 

methodology, low cost ACOs could 

achieve a greater amount of savings, 

based on the same performance, than a 

comparable ACO in a higher cost area. 

Moreover, we believe that a benchmark 

methodology which encourages 

providers in higher cost areas to bring 

their spending more in line with the 

national average is a desirable outcome 

in furtherance of the program’s goal of 

lowering Medicare expenditures. Lastly, 

updating the benchmark during the 

agreement period using a national 

growth factor aligns with our approach 

of using a national growth rate to trend 

forward base year expenditures to 

obtain the initial benchmark. This could 

facilitate analysis of trends in ACO 

financial performance relative to 

national trends in Medicare 

expenditures. For these reasons, we are 

finalizing our proposal to use the flat 

dollar amount equivalent of the 

projected absolute amount of growth in 

the national FFS expenditures to update 

the benchmark. Also, to clarify, the 

proposed update to the benchmark will 

occur in each year of the agreement 

period. 

Comment: Based on CMS’ experience 

with the PGP demonstration and the 

benchmarking methodology for the PGP 

Transition demonstration, one 

commenter generally recommended that 

we use separate benchmarks for specific 

groups of beneficiaries—specifically the 

aged, disabled and ESRD populations— 

to account for significant variations in 

the costs of these beneficiaries. Another 

commenter suggested that we weight the 

concentration of Medicaid spending by 

categorizing patients into tiers based on 

their level of Medicaid spending. 

Another commenter asked whether the 

projected absolute amount of growth in 

national per capita expenditures for 

Parts A and B would be scaled to reflect 

risk differences between the ACO and 

the Medicare average. 

Response: To clarify, we will not risk 

adjust (that is, based on the CMS–HCC 

model) the flat dollar amount used to 

update the benchmark. However, as 

discussed in section II.G.2.c.(1). of this 

final rule, the updated benchmark will 

be adjusted relative to the risk profile of 

the performance year assigned 

beneficiaries. We agree with 

commenter’s concerns about the need to 

account for variation in costs between 

different populations of Medicare 

beneficiaries. To align with our 

modified methodology for trending the 

benchmark, we will also make categoryspecific adjustments when updating the 

benchmark. We believe that updating 

the benchmark for several categories of 

beneficiaries would provide a more 

accurate benchmark compared to what 

we proposed, as applying national 

growth dollars to each of the benchmark 

strata separately reflects the different 

expected growth rates for these types of 

beneficiaries. Consistent with our 

policies stated elsewhere in section II.G. 

of this final rule, we are modifying our 

proposal to incorporate into the 

methodology for updating the 

benchmark the calculation of separate 

cost categories for each of the following 

populations of beneficiaries: ESRD, 

disabled, aged/dual eligible and aged/ 

non-dual eligible. 

Final Decision: We are finalizing our 

proposal under § 425.602 to update the 

benchmark by the projected absolute 

amount of growth in national per capita 

expenditures for Parts A and B services 


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under the original Medicare fee-forservice program using data from CMS’ 

Office of the Actuary. Further, in 

updating the benchmark, we will make 

calculations for separate cost categories 

for each of the following populations of 

beneficiaries: ESRD, disabled, aged/dual 

eligible and aged/non-dual eligible. 

e. Determining Shared Savings 

(1) Minimum Savings Rate 

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

states that ‘‘an ACO shall be eligible to 

receive payment for shared savings 

* * * only if the estimated average per 

capita Medicare expenditures under the 

ACO for Medicare fee-for-service 

beneficiaries for parts A and B services, 

adjusted for beneficiary characteristics, 

is at least the percent specified by the 

Secretary below the applicable 

benchmark * * *.’’ We call this percent 

the minimum savings rate (MSR). 

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

further specifies that the ‘‘Secretary 

shall determine the appropriate percent 

* * * to account for normal variation in 

expenditures under this title, based 

upon the number of Medicare fee-forservice beneficiaries assigned to an 

ACO.’’ Section 1899(d)(2) of the Act 

provides that, if an ACO has savings in 

excess of the MSR and meets the quality 

standards established by the Secretary, 

‘‘a percent (as determined appropriate 

by the Secretary) of the difference 

between such estimated average per 

capita Medicare expenditures in a year, 

adjusted for beneficiary characteristics, 

under the ACO and such benchmark for 

the ACO may be paid to the ACO as 

shared savings and the remainder of 

such difference shall be retained by the 

program under this title.’’ We call the 

percent paid to the ACO the shared 

savings rate. 

As we discussed in the proposed rule, 

a goal of the Shared Savings Program is 

to use a portion of the savings (the 

difference between the ACO’s actual 

expenditures and the benchmark) to 

encourage and reward participating 

ACOs for coordinating the care for an 

assigned beneficiary population in a 

way that controls the growth in 

Medicare expenditures for that patient 

population while also meeting the 

established quality performance 

standards. However, observed savings 

can also occur as a result of normal 

year-to-year variations in Medicare 

beneficiaries’ claims expenditures in 

addition to the ACO’s activities. Thus, 

even if an ACO engages in no activities 

to improve the quality and efficiency of 

the services it delivers, in certain cases, 

differences between the benchmark 

expenditures (updated according to 

statute) and assigned patients’ 

expenditures would be observed during 

some performance periods merely 

because of such normal variation. 

Consequently, under the one-sided 

model, the statute requires us to specify 

a MSR to account for the normal 

variations in expenditures, based upon 

the number of Medicare FFS 

beneficiaries assigned to the ACO. The 

MSR should be set in a way that gives 

us some assurance that the ACO’s 

performance is a result of its 

interventions, not normal variation. 

However, we also do not want an 

outcome where savings that have been 

earned are not recognized. 

Establishing an MSR on the basis of 

standard inferential statistics that take 

into account the size of an ACO’s 

beneficiary population provides 

confidence that, once the savings 

achieved by the ACO exceed the MSR, 

the change in expenditures represents 

actual performance improvements by 

the ACO as opposed to normal 

variations. 

Under the PGP demonstration, the 

MSR was initially set at a flat 2 percent 

of the benchmark, regardless of number 

of assigned beneficiaries, and PGP 

practices received back 80 percent of the 

savings achieved in excess of the MSR. 

However, in establishing a MSR, section 

1899(d)(1)(B)(i) of the Act calls on us to 

take into account ‘‘the number of 

Medicare fee-for-service beneficiaries 

assigned to an ACO.’’ As such, we 

would need to apply statistical sampling 

techniques to determine a MSR based 

on the number of assigned beneficiaries 

with some level of statistical 

confidence. 

The MSR in combination with the 

savings rate will determine the amount 

of shared savings that an ACO can 

receive. For example, fewer savings 

would be shared if the MSR were set at 

a higher percentage. Conversely, shared 

savings would be higher if the MSR 

were set at a lower percentage. There are 

several policy implications associated 

with the methodology used to set the 

MSR. A higher MSR would provide 

greater confidence that the shared 

savings amounts reflect real quality and 

efficiency gains, and offer greater 

protection to the Medicare Trust Funds. 

However, due to the larger barrier to 

achieving savings, a higher MSR could 

also discourage potentially successful 

ACOs, especially physician-organized 

ACOs and smaller ACOs in rural areas, 

from participating in the program. In 

contrast, a lower MSR would encourage 

more potential ACOs to participate in 

the program, but would also provide 

less confidence that savings are a result 

of improvements in quality and 

efficiency made by an ACO. In the 

proposed rule, we stated that we 

believed that the most appropriate 

policy concerning determination of the 

‘‘appropriate percent’’ for the MSR 

would achieve a balance between the 

advantages of making incentives and 

rewards available to successful ACOs 

and prudent stewardship of the 

Medicare Trust Funds. 

(a) One-Sided Model 

For the one-sided model we proposed 

a sliding scale confidence interval (CI) 

based on the number of assigned 

beneficiaries. The MSR would be 

established for each ACO based on 

increasing nominal confidence intervals 

for larger ACOs so that an ACO with the 

minimum 5,000 assigned beneficiaries 

would have an MSR based on a 90 

percent CI; an ACO with 20,000 

assigned beneficiaries would have a 

MSR based on a 95 percent CI and an 

ACO with 50,000 assigned beneficiaries 

would have an MSR based on a 99 

percent CI. In addition, the MSR would 

not be allowed to fall below 2 percent 

for larger ACOs. Table 6 displays the 

minimum savings rate an ACO would 

have to achieve before savings could be 

shared based on the number of its 

assigned beneficiaries. We proposed 

that an ACO that exceeds its MSR 

would be eligible to share up to 50 

percent of the savings in the one-sided 

model (based on quality performance), 

as discussed in section II.F. of this final 

rule. 

In order to improve the opportunity 

for groups of solo and small practices to 

participate in the Shared Savings 

Program, we proposed to vary 

confidence intervals by the size of the 

ACO, which is determined based on the 

number of assigned beneficiaries. In 

response to our November 17, 2010 RFI, 

many RFI commenters recognized the 

prevalence of solo and small practices 

and the importance of these providers 

for rural areas and for the treatment of 

specific patient populations, for 

example, individuals with mental 

health and substance abuse disorders or 

beneficiaries residing in skill nursing 

facilities. Many of these RFI 

commenters urged us to consider 

policies and models that encourage the 

participation of solo and small practices 

and to address barriers they face in 

forming ACOs, such as access to upfront capital to invest in the 

infrastructure and resources required to 

redesign care. One option that would 

help accomplish this would be to vary 

the confidence intervals used to 

establish MSRs so that smaller practices 

would have relatively lower MSRs. 

Conversely, in recognition that they are 


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likely to be already established, possess 

prior experience, and thus better able to 

achieve savings, larger ACOs would 

have their MSRs based on a higher 

confidence interval, resulting in a 

relatively higher MSR. 

We proposed that the MSRs would be 

estimated to provide confidence that an 

ACO with a given number of 

beneficiaries and assumed to be of 

average national baseline per-capita 

expenditure and expenditure growth 

rate would be unlikely to achieve a 

shared savings payment by random 

chance alone. A specific MSR is a 

function of both the number of assigned 

beneficiaries and a chosen confidence 

interval. Recognizing the higher 

uncertainty regarding expenditures for 

smaller ACOs and the desire to 

encourage participation by smaller 

ACOs, for the one-sided model, we 

proposed to set the confidence interval 

at 90 percent for ACOs of 5,000 

beneficiaries, resulting in an MSR of 3.9 

percent. For ACOs with 20,000 and 

50,000 beneficiaries, we proposed to set 

the confidence interval at 95 percent 

and 99 percent, respectively, resulting 

in MSRs of 2.5 percent and 2.2 percent. 

As ACO size increases from 5,000 to 

20,000 (or similarly from 20,000 to 

50,000), we proposed blending the 

MSRs between the two neighboring 

confidence intervals, resulting in the 

MSRs as shown later in the document 

in Table 6. We specified an MSR at both 

the high and low end of each range of 

ACO population size. A particular ACO 

would be assigned a linearlyinterpolated MSR given its exact 

number of beneficiaries. For example, 

an ACO with 7,500 beneficiaries would 

be assigned an MSR of 3.3 percent 

because it lies at the midpoint between 

7,000 and 7,999 beneficiaries, sizes at 

which the MSR would be 3.4 percent 

and 3.2 percent, respectively. For ACOs 

serving more than 60,000 assigned 

beneficiaries, we proposed that the MSR 

would not be allowed to fall below 2 

percent. This lower bound was designed 

to protect the shared savings formula 

from expenditure reduction due to 

random chance that can occur in group 

claims due to factors that persist 

regardless of a group’s size. This lower 

bound is also consistent with the flat 2 

percent MSR we proposed to use in the 

two-sided model and is the minimum 

level that was used in the PGP 

Demonstration. 

The proposed confidence intervals 

were determined assuming that the 

variation in the per capita expenditure 

growth for a particular ACO would be 

equal to the variation in per capita 

expenditure growth nationally. We 

acknowledged that this would not be 

the case for the majority of ACOs, 

however, as regional growth rates tend 

to vary from the national average due to 

a number of variables. Therefore, the 

confidence intervals generated using 

only the national expenditure growth 

variation would overstate the relative 

confidence associated with an 

increasing group size. This would be 

compensated for in two ways: (1) the 2 

percent floor; and (2) increasing the 

confidence interval as group size 

increases. 

TABLE 6—PROPOSED MINIMUM SAVINGS RATE BY NUMBER OF ASSIGNED BENEFICIARIES

[One-sided model] 

Number of beneficiaries 

MSR (low end 

of 

assigned 

beneficiaries) 

(percent) 

MSR (high 

end of 

assigned 

beneficiaries) 

(percent) 

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 

In the proposed rule, we stated that 

we would welcome comment on the 

most appropriate means to establish the 

MSR for an ACO, including the 

appropriate confidence intervals. 

Comment: Several comments 

supported the proposed MSRs under the 

one-sided model. In particular, MedPAC 

specified that CMS should keep the 

proposed MSRs if it allows for a shared 

savings only track in the first agreement 

period. Most comments on this topic, 

however, expressed concern that the 

proposed methodology for establishing 

the MSR on a sliding scale based on 

population size would disadvantage 

smaller ACOs and discourage 

participation, particularly by setting a 

bar that is too high to encourage 

participation by smaller ACOs, 

including ACOs likely to form in rural 

areas and those largely comprised of 

small- and medium-sized physician 

practices. Some commenters considered 

the potential long term consequences of 

this dynamic, indicating it could 

ultimately result in diminished provider 

competition in some markets or stifle 

the development of innovative care 

coordination strategies. 

Some commenters suggested it would 

be unfair to hold smaller ACOs to what 

they perceived to be a relatively higher 

MSR than what exists for larger ACOs. 

One commenter indicated that the MSR 

is financially beneficial to CMS at the 

expense of ACOs. Further, as other 

commenters indicated, smaller ACOs 

are likely to be in greatest need of 

additional capital to support start-up 

and operational expenses. One 

commenter suggested our proposal 

could make it harder for ACOs to 

continue to achieve savings in excess of 

the MSR as they become increasingly 

efficient over time. Some commenters 

suggested the MSRs may make it 

impossible for smaller ACOs to ever 

share in savings, particularly given the 

program’s rigorous quality standards. 

Thus, commenters recommended a 

variety of alternatives to the proposed 

MSRs. Most commonly, commenters 

suggested that we either— (1) apply a 

common threshold rather than a sliding 

scale, such as a flat 1 or 2 percent MSR, 

for all ACOs; or (2) reduce the MSR that 


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smaller ACOs must achieve. Several 

comments suggested that CMS generally 

adjust the sliding scale to be based on 

lower thresholds (for example, a range 

of 2 to 3 percent), eliminate the MSR, 

or eliminate it for certain ACOs. In lieu 

of an MSR, commenters offered 

alternate suggestions to protect against 

random variation such as making the 

percent of shared savings for which a 

provider is eligible inversely 

proportional to their percentile in 

expenditures per Medicare beneficiary. 

A number of commenters offered that 

other aspects of the proposed program, 

for example, the rigorous quality 

performance standards or the 

requirement that all ACOs ultimately 

accept downside performance risk, are 

sufficient to ensure savings are a result 

of actions by ACOs and obviate the need 

for an MSR. One commenter suggested 

a blended approach such that if an ACO 

exceeds the 2 percent MSR, it would be 

eligible for a lower sharing rate, but 

would not receive the full sharing rate 

unless it exceeded its statistically 

adjusted MSR. Another commenter 

suggested a rolling confidence interval 

option for small ACOs that would allow 

them to cumulate cost experience (and 

savings) over time. Under this approach, 

CMS would base the ACO’s MSR on the 

sum of its assigned beneficiaries across 

all 3 years of participation (for example, 

a 5,000 member ACO would have the CI 

of a 15,000 member ACO over 3 years). 

Further, the commenter recommended 

allowing ACOs to include their entire 

patient base, including privately insured 

patients for purposes of computing their 

MSR. Another commenter asked 

whether CMS would consider rewarding 

those ACOs who can maintain lower 

costs than their initial MSR for 3 years. 

Finally, one commenter asked that we 

defend our assumption that variation 

within an ACO is comparable to 

national variation. 

Response: We agree with comments 

by MedPAC and others supporting the 

proposed sliding scale, based on the size 

of the ACO’s assigned population, to 

establish the MSR for ACOs under the 

one-sided model. In particular, given 

our decision to allow for a shared 

savings only model, we are following 

MedPAC’s advice to retain the proposed 

MSR methodology. Alternatives 

suggested by commenters that allow for 

lower MSRs for smaller ACOs under the 

one-sided model (such as a flat 1 or 2 

percent MSR for all ACOs) provide 

insufficient protection to the Medicare 

Trust Funds against shared savings 

resulting from random variation, absent 

some additional protection such as 

accountability for shared losses. We 

believe the relatively lower MSR under 

the two-sided model is appropriate 

since there is a balancing of the risk of 

random variation because the ACO is 

accountable for losses. Thus, while 

there is some minimal risk that an ACO 

will achieve savings due to random 

variation, there is also some risk that the 

ACO will incur losses due to random 

variation. Therefore, we find it 

appropriate to finalize the proposal to 

establish MSRs for ACOs under the onesided model to protect the Trust Fund 

from paying out incentives for random 

variations in costs rather than for real 

improvements made by ACOs. With 

respect to the comments that expressed 

concern that our proposed MSR 

methodology did not provide 

appropriate incentives for smaller 

ACOs, we believe the change to our 

proposed methodology to provide for a 

shared savings-only track, in addition to 

other changes to increase the financial 

attractiveness of the program, will be 

sufficient to encourage participation. 

The proposed MSRs were defined to 

recognize variation due to the number of 

beneficiaries assigned to the ACO, as 

required by the statute. Therefore in 

developing the proposed MSRs, we 

examined variation in expenditure 

growth rates for groups sampled on a 

national basis in order to isolate 

variation based on group size rather 

than regional factors that can cause 

added variation relative to the national 

average growth rate. 

Final Decision: We are finalizing our 

proposal under § 425.604 to use a 

sliding scale, based on the size of the 

ACO’s assigned population, to establish 

the MSR for ACOs participating under 

the one-sided model. 

(b) Two-Sided Model 

In the proposed rule, we stated that 

the MSR remains important under the 

two-sided model to guard against 

normal variation in costs, so that ACOs 

share savings or losses with the program 

only under those circumstances in 

which we can be confident that such 

savings or losses are the result of the 

ACO’s behavior rather than normal 

variation. At the same time, we noted 

that we believed it was more 

appropriate to employ a fixed minimum 

savings rate under this model than 

under the one-sided model. First, given 

the potential for shared loss, the greater 

predictability of a fixed MSR is more 

likely to attract organizations to 

participate under this model. Second, 

greater protection to the Medicare Trust 

Fund is afforded by ACOs accepting the 

risk of paying Medicare back for losses. 

Therefore, based on our experience with 

the PGP demonstration and consistent 

with the lowest applicable MSR under 

the one-sided model, we proposed to 

adopt a fixed 2 percent MSR for 

organizations operating under the twosided model, in place of the variable 

minimum savings rate for organizations 

operating under the one-sided model. 

Comment: Commenters’ suggestions 

for revising the proposed policy for the 

MSR for ACOs under the two-sided 

model largely tracked those described 

previously for the one-sided model. For 

instance, several commenters 

recommended removing the MSR from 

the two-sided model given ACOs’ 

accountability for shared savings and 

losses under this model. 

Response: We are finalizing our 

proposal to adopt a fixed 2 percent MSR 

for ACOs under the two-sided model. 

We find support for the application of 

a flat 2 percent MSR to ACOs 

participating in the two-sided model in 

commenters’ suggestions that we apply 

a common threshold of 1 or 2 percent 

to all ACOs. We disagree with 

suggestions that we reduce, or eliminate 

altogether, the MSR in the two-sided 

model. Although greater protection to 

the Medicare Trust Fund is afforded by 

ACOs accepting the risk of paying 

Medicare back for losses, there remains 

a need to protect the Trust Fund from 

paying out incentives for random 

variations in costs rather than for real 

improvements made by ACOs. We 

continue to believe that a flat 2 percent 

MSR is appropriate for the two-sided 

model. As explained previously, unlike 

the one-sided model, under the twosided model there is a balancing of risk 

of random variation because the ACO is 

accountable for losses. Thus, while 

there is some minimal risk that an ACO 

will achieve savings due to random 

variation, there is also some risk that the 

ACO will incur losses due to random 

variation. Further, as indicated in the 

proposed rule, a 2 percent MSR reflects 

the lowest MSR under the one-sided 

model and is also the MSR that was 

used in the PGP demonstration. 

Final Decision: We are finalizing our 

proposal under § 425.606 to apply a flat 

2 percent MSR to all ACOs participating 

under the two-sided model. 

(2) Quality Performance Sharing Rate 

As discussed in section II.F. of the 

proposed rule (76 FR 19620 and 19621), 

we proposed that ACOs choosing to 

participate in the one-sided model 

could share in savings if they exceed a 

MSR. For those ACOs whose savings 

exceed the MSR in the one-sided model, 

we proposed a savings sharing rate of up 

to 50 percent of total savings, above a 

2 percent savings threshold, with a 

payment cap of 7.5 percent of an ACO’s 


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benchmark. We also proposed an 

additional increase of up to 2.5 

percentage points for including FQHCs 

and/or RHCs as ACO participants, as 

discussed in section II.F of the proposed 

rule. Thus, under our proposal, an ACO 

participating in the one-sided model 

could realize a maximum shared savings 

rate of 52.5 percent. Under the twosided model, we proposed that an ACO 

that realized savings against its 

benchmark could qualify for a final 

sharing rate of up to 65 percent if it was 

eligible for the maximum adjustments. 

The 65 percent final sharing rate was 

comprised of a savings rate of up to 60 

percent for quality performance, plus 5 

percentage points for including FQHCs 

and/or RHCs as ACO participants. 

Comment: Commenters favored 

allowing higher sharing rates based on 

ACO quality performance for both the 

one-sided and two-sided models, and 

offered a variety of rationales for 

increasing the sharing rate. Typically, 

commenters suggested that higher 

sharing rates would better incent 

participation, particularly considering 

the costs of ACO formation. Others 

indicated that the proposed shared 

savings percentages were too low when 

compared with other Medicare shared 

savings initiatives, such as the 80 

percent shared savings rate under the 

Physician Group Practice 

Demonstration, and the higher sharing 

rates proposed by the Innovation Center 

for Pioneer Model ACOs. 

Commenters suggested sharing rates 

ranging from 50 to 95 percent (most 

commonly 75 percent) under the onesided model and 66 to 95 percent (most 

commonly 80 percent) under the twosided model. MedPAC recommended 

increasing the sharing rates for both 

models, suggesting, for example, 

offering a savings rate of up to 75 

percent for the one-sided model and 95 

percent for the two-sided model for the 

first agreement period. Several 

commenters suggested we initially 

establish higher sharing rates than what 

was proposed, while incrementally 

decreasing the maximum sharing rate 

over time; for instance, setting the 

sharing rate at 75 percent or 95 percent 

for the initial performance year and then 

gradually tapering it off in subsequent 

years. Several commenters suggested 

approaches whereby ACOs meeting a 

quality standard would obtain a 

guaranteed minimum amount of shared 

savings, and thereafter receive an 

additional percentage of shared savings 

on a sliding scale based on higher 

quality performance. For instance, 

creating a minimum sharing rate of 50 

percent for Track 1 and 60 percent for 

Track 2, and using an ACO’s quality 

score to award additional shared savings 

up to a maximum sharing rate of 80 

percent for Track 1 and 90 percent for 

Track 2. 

One commenter suggested the sharing 

rates should be the same for both 

models. More commonly, however, 

commenters supported a policy of 

establishing different sharing rates for 

the two models, to provide a greater 

reward to ACOs taking risk. Some 

commenters recommended that CMS 

increase the difference in sharing rates 

between the models. Several 

commenters suggested maintaining or 

lowering the proposed sharing rate for 

the one-sided model, while increasing 

the sharing rate for the two-sided model. 

One commenter suggested downwardly 

adjusting the sharing rate for the onesided model over time to encourage 

ACOs to move to the two-sided model. 

Others suggested higher sharing rates for 

certain types of ACOs, such as early 

adopters of the ACO model, or ACOs in 

low cost areas. Overall, commenters’ 

suggestions for the amount of difference 

in the sharing rates between the two 

models ranged from zero to 40 percent, 

however most commenters tended to 

recommend differential of between 5 

and 25 percent. 

Response: We carefully considered 

commenters’ requests for a higher 

sharing rate based on quality 

performance for both the one-sided and 

two-sided model as a means of 

encouraging participation in the 

program. 

In the proposed rule we explained 

that the sharing rate based on quality 

performance was a function of equally 

weighting the five proposed domains for 

quality measurement. As such, under 

the one-sided model, each domain 

would account for 10 percent, for a total 

sharing rate of 50 percent. We further 

specified the need to differentiate 

between the program’s models—to 

incent ACOs to take risk by offering the 

possibility of a greater financial 

reward—and proposed the two-sided 

model would have a maximum sharing 

rate based on quality performance of 60 

percent, equally apportioned among the 

five measurement domains. 

As specified in section II.F. of this 

final rule, in the final rule we have 

reduced the number of quality 

measures, and consequently are 

finalizing a quality performance 

standard which includes 4 domains that 

will be equally weighted for purposes of 

quality scoring. As discussed elsewhere 

in this section of this final rule, we are 

modifying our proposals to provide 

greater opportunity for ACOs to achieve 

shared savings, for instance, by allowing 

first dollar sharing under the one-sided 

model and raising the payment 

performance limits for both models. 

We considered how to address the 

opposing views presented in the 

comments on the sharing rate for the 

one-sided model, including 

recommendations that providing a 

higher sharing rate would encourage 

participation in the program, and 

recommendations that we maintain or 

lower the sharing rate to ensure a 

sufficient incentive for ACOs to 

participate in the two-sided model. 

Given our modifications to the quality 

performance standard and financial 

models which will make it easier for 

ACOs to share in a savings, we believe 

that maintaining the proposed sharing 

rate for the one-sided model offers a fair 

balance between commenters’ 

suggestions that we provide greater 

opportunities for ACOs to share in 

savings while also remaining protective 

of the Trust Funds. 

We appreciate commenters’ support 

of the need to differentiate financially 

between the two models by offering a 

higher sharing rate to ACOs under the 

two-sided model. We continue to 

believe that risk-based arrangements are 

more effective in driving behavior 

changes by providers, and therefore we 

should ensure there are appropriate 

incentives for ACOs to enter the 

program’s two-sided model. We agree 

with commenters’ recommendations 

that support our proposal to offer ACOs 

under the two-sided model a higher 

sharing rate than those under the onesided model, as a means of encouraging 

ACOs to accept downside risk. Further, 

our proposal to differentiate the sharing 

rates for the models by 10 percent aligns 

with commenters’ preference for a 

difference in sharing rates in the range 

of 5 to 25 percent. When compared to 

the 50 percent sharing rate based on 

quality for the one-sided model, we 

believe that a 60 percent sharing rate for 

the two-sided model offers an 

appropriate additional incentive for 

ACOs to accept downside risk. 

Final Decision: We are finalizing our 

proposal under § 425.604 and § 425.606 

that ACOs under the one-sided model 

can earn up to 50 percent of total 

savings based on quality performance 

and ACOs under the two-sided model 

can earn up to 60 percent of total 

savings based on quality performance. 

(3) Additional Shared Savings Payments 

In the proposed rule, we recognized 

the important role that FQHCs and 

RHCs play as safety net providers and 

in improving access to primary care for 

Medicare and Medicaid beneficiaries. 

Under the proposed rule, FQHCs and 

RHCs were unable to participate 


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independently in this program by 

forming their own ACOs. As a result, we 

believed that providing incentives to 

ACOs that include FQHCs and/or RHCs 

as ACO participants was in the interest 

of the Shared Savings Program as 

including these types of entities could 

promote care coordination and the 

delivery of efficient, high-quality health 

care. We proposed that ACOs could be 

eligible to receive higher sharing rates, 

based on a sliding scale, for including 

FQHCs and RHCs as ACO participants. 

Under the one-sided model we 

proposed up to a 2.5 percentage point 

increase in the sharing rate for ACOs 

that include these entities as ACO 

participants. Under the two-sided model 

we proposed up to a 5.0 percentage 

point increase in the sharing rate for 

ACOs that include these entities as ACO 

participants. We proposed establishing a 

sliding scale payment, outlined in the 

Table 7, based on the number of 

Medicare FFS beneficiaries with one or 

more visit at an ACO participant FQHC 

or RHC during the performance year. 

TABLE 7—SLIDING SCALE PAYMENT BASED ON NUMBER OF BENEFICIARY VISITS AT AN ACO PARTICIPANT FQHC OR

RHC 

Percentage of ACO assigned beneficiaries with 1 or more visits to an ACO participant FQHC/RHC during the 

performance year 

Percentage 

point increase 

in shared 

savings rate 

(one-sided 

model) 

Percentage 

point increase 

in shared 

savings rate 

(two-sided 

model) 

1–10 percent .......................................................................................................................................................... 0 .5 1.0 

11–20 percent ........................................................................................................................................................ 1 2.0 

21–30 percent ........................................................................................................................................................ 1 .5 3.0 

31–40 percent ........................................................................................................................................................ 2 4.0 

41–50 percent ........................................................................................................................................................ 2 .5 5.0 

We also proposed that ACOs 

specifically identify their FQHC/RHC 

participant TINs in their initial and 

annual reporting of ACO participant 

TINs, and disclose other provider 

identifiers as requested to assure proper 

identification of these organizations for 

the purpose of awarding the payment 

preference. Further, we proposed to 

define FQHCs and RHCs, for the 

purpose of awarding this payment 

preference, as these terms are defined in 

42 CFR 405.2401(b) of our regulations. 

We sought comment on alternate 

options for establishing a payment 

preference with a sliding scale for ACOs 

that include FQHCs or RHCs as ACO 

participants, including suggestions for 

the appropriate method to measure 

FQHC/RHC involvement and the 

appropriate level of incentives. 

Comment: While many commenters 

supported the concept of the proposed 

incentive, others found the incentive 

inadequate to encourage meaningful 

FQHC and RHC participation in ACOs. 

One commenter envisioned that FQHCs 

and RHCs would be ‘‘latched on’’ to the 

ACO in an attempt to achieve a greater 

share of savings. Commenters were also 

critical of the incentive’s focus on care 

provided to ACO beneficiaries at FQHCs 

and RHCs when we proposed to assign 

beneficiaries to ACOs based on their use 

of other primary care providers. As one 

commenter explained, the incentive 

assumes an unlikely scenario where 

non-FQHC providers will refer a patient 

to an FQHC for care. Others considered 

the incentive, based on a one visit rule, 

ripe for gaming: ACOs might schedule 

their beneficiaries to have one visit at an 

FQHC or RHC to obtain the incentive, 

which could result in ‘‘primary care 

discontinuities.’’ One commenter 

questioned whether the incentive was in 

line with the letter and spirit of the 

Affordable Care Act. 

Commenters provided various 

suggestions for how to revise the 

structure of the incentive, such as the 

following: 

• Increasing the amount of the 

incentive, for instance to a 10 percent 

bonus under both models. 

• Including Method I CAHs in the 

incentive payment structure. 

• Providing additional payments for 

including multiple FQHCs. 

Commenters also offered alternatives. 

For instance, one commenter 

recommended that CMS create 

incentives for FQHCs and RHCs to 

participate in ACOs, rather than to 

reward ACOs for including these 

organizations. 

Response: In this final rule, we are 

eliminating our proposal to provide an 

incentive for ACOs to include FQHCs 

and/or RHCs as participants. We 

proposed this incentive to address our 

inability to determine a statutorily 

satisfactory way of assigning 

beneficiaries to an ACO on the basis of 

services furnished by these entities. 

However, given that we have 

determined an appropriate methodology 

for assigning beneficiaries to ACOs on 

the basis of services furnished by 

FQHCs and RHCs, therefore allowing 

FQHCs and RHCs to more fully 

participate in the program, we believe 

the incentive is unnecessary and has the 

potential to cause unintended 

consequences as articulated by 

commenters. 

Final Decision: The final rule will not 

contain a sliding scale-based increase in 

the shared savings rate, up to 2.5 

additional percentage points under the 

one-sided model and up to 5 additional 

percentage points under the two-sided 

model, for ACOs that include an FQHC 

or RHC as an ACO participant. 

In the proposed rule we also 

discussed our interest in encouraging 

providers who serve a large portion of 

dual eligible beneficiaries to participate 

in the Medicare Shared Savings 

Program. We explained that Medicare 

beneficiaries who are also eligible for 

Medicaid—that is, are ‘‘dually eligible’’ 

for these programs—are among the most 

vulnerable of Medicare beneficiaries. 

Dual eligible beneficiaries tend to have 

higher medical costs than other FFS 

beneficiaries, and, as a result, are 

expected to benefit even more than 

other beneficiaries from improvements 

in the quality and efficiency of their 

care resulting from the greater care 

coordination offered by an ACO. 

We also stated in the proposed rule 

that section 1899(j) of the Act provides 

that ‘‘[t]he Secretary may give 

preference to ACOs who are 

participating in similar arrangements 

with other payers.’’ The statute 

prescribes neither the kind of preference 

that the Secretary should provide to 

such ACOs nor what other types of 

arrangements should be considered 

‘‘similar’’ for purposes of such a 

preference. We stated our belief that the 

more patients an ACO sees for which it 

is eligible to receive performance-based 

incentives, such as shared savings, the 

more likely it is that the ACO will adopt 


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substantial behavior changes conducive 

to improved quality and cost savings. 

We sought comment on methods to 

provide preference to ACOs that serve a 

large dual-eligible population or that 

enter into and maintain similar 

arrangements with other payers. 

Specifically, we sought suggestions to 

encourage accountability for dualeligible beneficiaries and participation 

in similar arrangements with other types 

of payers. 

Comment: Comments described the 

health needs of dual eligible 

beneficiaries and the potential 

challenges of managing this population. 

Some commenters saw the need for 

CMS to ensure participation by 

providers that care for dual eligible 

beneficiaries as part of the larger issue 

of the need for CMS to support safety 

net providers and ACOs more generally. 

Many commenters favored policies that 

financially reward ACOs whose 

assigned populations include a larger 

proportion of dual eligible beneficiaries. 

Commenters offered a variety of 

suggestions on how to structure this 

payment preference, including the 

following: 

• Higher shared savings rates for 

ACOs that serve a high percentage of 

dual eligible beneficiaries, similar to the 

increased sharing rate proposed for 

ACOs which included FQHCs and 

RHCs. Commenters’ suggestions for 

higher sharing rates typically ranged 

from 2.5 percentage points to 20 percent 

under the one-sided model and 5 

percentage points to 25 percent under 

the two-sided model. 

• Additional incentives coupled with 

alternative payment models for an ACO 

whose patient mix is comprised mostly 

of Medicaid patients, and which care for 

large percentages for dual eligible 

beneficiaries. 

• Exempt ACOs that treat a larger 

proportion of dual eligible beneficiaries 

from the 2 percent net sharing rate. 

• Revised benchmarking 

methodology (for example, a ‘‘separate 

savings target’’) for ACOs that serve a 

large population of dual eligible 

beneficiaries. 

Several commenters raised concerns 

about creating incentives for ACOs to 

care for dual eligible beneficiaries. One 

commenter noted that the proposed 

assignment methodology, under which 

FQHCs would not be the basis for 

assignment, would exclude many dual 

eligible beneficiaries from ACOs. By 

virtue of this policy, the commenter 

perceived proposed monitoring for 

avoidance of at-risk beneficiaries and 

the proposed rule’s emphasis on 

providing incentives for ACOs to 

include dual eligible beneficiaries to be 

flawed. Another commenter, pointing to 

the unique health care needs of dual 

eligible beneficiaries, cautioned that 

ACOs should have the capacity and 

ability to serve these individuals; 

suggesting that CMS condition any dual 

eligible incentive payment on an ACO 

not only serving a large proportion of 

dual eligible beneficiaries, but also 

having the appropriate infrastructure to 

coordinate care and benefits for this 

population. One commenter opposed 

the use of financial incentives to 

encourage ACOs to serve dual eligible 

beneficiaries or to encourage providers 

serving duals to become ACOs, based on 

the belief that such financial incentives 

in the early days of the program may 

distort provider behavior in ways that 

are detrimental to beneficiaries and 

costly to the program. To effectively 

serve this population, this commenter 

indicated, for example, that we should 

ensure that ACO providers are Medicaid 

participating providers, and that an 

ACO serving many dual eligible 

beneficiaries has a relationship with the 

State Medicaid agency in the State in 

which it operates. This commenter 

further pointed out an effort by the 

Innovation Center in Connecticut to 

develop an Integrated Care Organization 

to serve dual eligibles in the State. 

We received few comments on our 

statutory authority to give preference to 

ACOs who are participating in similar 

arrangements with other payers. One 

commenter recommended that CMS 

give preference to ACOs that have 

contracts with private payers that 

include financial accountability and 

quality performance incentives, and 

avoid requirements that could have a 

chilling effect on the willingness of 

private payers to invest in and partner 

with ACOs. This commenter further 

recommended that the definition of 

‘‘similar arrangement’’ be consistent 

across the Shared Savings Program and 

the Pioneer ACO Model. On a related 

issue, many commenters expressed their 

support, generally, for the Innovation 

Center’s Pioneer ACO Model. As a 

condition of participation in the Pioneer 

Model, ACOs must commit to entering 

outcomes-based contracts with other 

purchasers (private health plans, State 

Medicaid agencies, and/or self-insured 

employers) such that the majority of the 

ACO’s total revenues (including from 

Medicare) will be derived from such 

arrangements, by the end of the second 

performance period in December 2013. 

One commenter requested clarification 

on the extent to which private payers 

could participate in ACOs. 

In addition to the payment incentives 

and preferences discussed in the 

proposed rule, commenters 

recommended that CMS include a 

variety of other incentives based on an 

ACO’s other quality improvement 

activities, and the composition of the 

ACO’s participants or the particular 

populations they serve. For example, 

commenters suggested we include the 

following: 

• Incentives for early adopters of the 

accountable care model. 

• Incentives for caring for particular 

populations, such as rewarding ACOs 

that serve the uninsured, care for 

beneficiaries in rural areas, or that have 

diverse patient populations. 

• Incentives for including the 

following providers and suppliers: 

++ Patient centered medical homes. 

++ Teaching hospitals. 

++ Ambulatory Surgery Centers. 

++ Community health organizations 

including Community Mental Health 

Centers. 

++ Home health and hospice 

agencies. 

++ Physicians practicing in rural 

areas. 

• Incentives for including health 

programs operated by the Indian Health 

Service, tribes or tribal organizations, 

and urban Indian organizations. 

• Incentives to encourage 

participation by small, rural, and 

physician-led ACOs. 

• Incentives to ensure some primary 

care services are delivered by NPs and 

PAs. 

• Incentives to move patients from 

the acute care setting to appropriate 

post-acute or outpatient providers. 

• Incentives to reward participation 

in other quality improvement 

initiatives, such as physician-led quality 

improvement programs. 

• Incentives to use telehealth and 

remote patient monitoring technologies 

in innovative modalities extending 

beyond what is currently reimbursed 

under FFS Medicare. 

• Incentives for the development of 

primary care training in new models of 

care. 

• Incentives for ACOs participating in 

clinical trials, to encourage innovation 

in health care. 

Response: We are finalizing our 

proposal, which does not give 

preference to ACOs engaged in similar 

arrangements with other payers, or 

provide additional incentives for ACOs 

which care for dual eligible 

beneficiaries. Similarly, we do not 

intend to recognize other factors, such 

as the ACO’s other quality improvement 

activities, the composition of the ACO’s 

participants or the particular 

populations they serve. CMS’ goal is to 

promote complete integration of care 


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and align incentives whether care is 

provided under Medicare, Medicaid, or 

both. ACOs are one valuable new option 

to assure greater coordination of care for 

Medicare Parts A and B services for dual 

eligible beneficiaries. Additionally, 

there are existing demonstrations and 

emerging care models underway in the 

Innovation Center in partnership with 

the Medicare-Medicaid Coordination 

Office which will provide further 

opportunities for the integration of care 

and financing across both Medicare and 

Medicaid, including long term services 

and supports. For dually eligible 

individuals CMS intends to study the 

effect of assignment of these individuals 

to ACOs in the Shared Savings Program 

on Medicaid expenditures, and may use 

this information in the development of 

future models for testing by the 

Innovation Center. We believe that these 

demonstrations and models targeting 

the dual eligible population will further 

address and create incentives for 

providers to focus on serving their 

special needs. 

Through the flexibility allowed in the 

governance requirements, discussed in 

the Section II.B. of this final rule, we 

have left room for ACOs to engage with 

private payers. In addition, we may 

revisit our authority to award a 

preference to ACOs that participate in 

similar arrangements with other payers 

as we gain more experience with such 

arrangements through the Pioneer ACO 

Model. 

We decline to incorporate incentives 

into this national program to account for 

the variety of approaches that ACOs 

may choose for their quality 

improvement activities outside the 

Shared Savings Program, as well as their 

provider and supplier composition and 

patient mix. We believe that the 

flexibility allowed in the distribution of 

shared savings provides the opportunity 

for ACOs to reward ACO participants’ 

for engaging in other quality 

improvement initiatives. 

We may revisit the issue of incentives 

related to ACO activities, composition, 

and patient mix as we gain experience 

with the ACO model through the Shared 

Savings Program and the Pioneer ACO 

Model. 

Final Decision: The final rule will not 

contain additional financial incentives, 

beyond those established for quality 

performance, for the care of dual eligible 

beneficiaries or other factors related to 

the composition of the ACO or its 

activities, nor will the final rule include 

a preference for ACOs participating in 

similar arrangements with other payers. 

(4) Net Sharing Rate 

Section 1899(d)(2) of the Act calls for 

us to share ‘‘a percent (as determined 

appropriate by the Secretary) of the 

difference between such estimated 

average per capita Medicare 

expenditures in a year, adjusted for 

beneficiary characteristics, under the 

ACO and such benchmark for the ACO.’’ 

Section 1899(i) of the Act permits the 

Secretary to consider other payment 

models if she determines that they will 

‘‘improve the quality and efficiency of 

items and services furnished under this 

title’’ and will not result in additional 

expenditures. Thus, in considering the 

amount of savings ACOs under the onesided model and two-sided model 

would be eligible to receive, we 

considered several options in addition 

to the methodology outlined in section 

1899(d)(2)of the Act. 

The first option we considered is the 

one required under section 1899(d)(2) of 

the Act, which would permit the ACO 

to share on first dollar savings once it 

achieves savings in excess of the MSR. 

This option would maximize the reward 

that an ACO could realize. This amount 

could provide critical financial support 

for ACOs that serve a smaller 

population (for example, less than 

10,000 assigned beneficiaries), which 

may be physician only and/or 

predominantly care for underserved 

populations, or ACOs whose 

beneficiaries rely upon safety net 

providers for care or ACOs which serve 

rural areas. However, given the normal 

variation in expenditures, we had 

concerns that sharing on first dollar 

savings with ACOs under the one-sided 

model could result in sharing on 

unearned savings rather than on savings 

achieved by the ACO for redesigned 

care processes. We also explained that 

this concern was mitigated under the 

two-sided model, where ACOs are 

assuming the risk of losses due to 

normal year-to-year- variations in 

Medicare beneficiaries’ claims 

expenditures. 

We considered another alternative 

which would limit the amount of 

savings by requiring ACOs to exceed the 

MSR and then share with the ACO only 

those savings in excess of the MSR. As 

discussed previously, one challenge to 

appropriate sharing of savings under 

this program is that observed savings 

can occur as a result of normal year-toyear variations in Medicare 

beneficiaries’ claims expenditures in 

addition to the ACO’s activities. This 

concern is heightened in the one-sided 

model, because absent initial 

accountability for losses, ACOs have 

less motivation to eliminate 

unnecessary expenses and may be more 

likely to be rewarded as a result of 

methodological requirements. Sharing 

only in savings which exceed the MSR 

is consistent with the design of the 

original PGP demonstration and would 

reduce the probability that shared 

savings are earned as a result of chance 

or lower pre-existing expenditure trends 

due to existing efficiencies, and not 

newly enhanced care coordination and/ 

or redesigned delivery of care. Further, 

such a requirement would encourage 

ACOs to strive to generate greater levels 

of savings. 

A third option we considered would 

be to require all ACOs to exceed the 

MSR to be eligible for savings, but only 

to share savings in excess of a certain 

threshold. ACOs meeting certain criteria 

could be exempted from this provision 

and allowed to share in first dollar 

savings. This option would balance the 

need to have assurance that savings are 

not a result of random variation with the 

need to provide critical financial 

support for under-funded ACOs, 

particularly ACOs that serve a smaller 

population, safety net providers, or 

physician-only ACOs. Additionally, we 

have experience with this model 

through the PGP demonstration. 

For the one-sided model, we proposed 

the third option, that once an ACO has 

surpassed its MSR, the ACO would 

share in savings beyond a certain 

threshold. We further proposed that, 

unless exempted, ACOs that exceed the 

MSR would be eligible to share in net 

savings above a 2 percent threshold, 

calculated as 2 percent of its benchmark 

(updated according to statute). The 

sharing rate would be applied to net 

savings above this 2 percent threshold 

in order to determine the shared savings 

amount. We believed that this threshold 

would protect the program from sharing 

unearned savings by helping to ensure 

that shared savings are due to enhanced 

care coordination and quality of care on 

the part of the ACO. 

As previously discussed, many 

smaller physician-driven ACOs and 

ACOs caring for underserved 

populations have the potential to 

improve the quality and efficiency of 

care, but may be especially challenged 

in accessing capital to meet their needs. 

We hope to encourage successful 

participation by these ACOs in the 

Shared Savings Program. Additionally, 

we acknowledge that providers/ 

suppliers working in these 

environments face additional challenges 

in coordinating care and creating the 

infrastructure necessary to create a 

successful ACO, and therefore may not 

be equipped to assume the risk of the 

two-sided model right away (and be 


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eligible for greater reward). Accordingly, 

we proposed that ACOs that met certain 

criteria outlined in the proposed rule 

(76 FR 19613) would be exempt from 

the 2 percent net savings threshold and 

would instead share on first dollar 

savings under the one-sided model. 

For the two-sided model, we 

proposed that ACOs which generate 

savings that exceed the MSR would be 

eligible to share in savings on a first 

dollar basis. We indicated that a number 

of factors favored allowing two-sided 

model ACOs to share on first dollar 

savings. First, savings generated by 

ACOs assuming risk of losses are less 

likely to result from random variation 

compared to savings generated by ACOs 

under the one-sided model because 

these ACOs have a greater incentive to 

make the types of changes that are 

necessary to achieve shared savings and 

avoid shared losses. Second, sharing 

first dollar savings with two-sided 

model ACOs would provide greater 

reward for ACOs that choose to 

participate in the program’s two-sided 

model as compared to the one-sided 

model. Therefore, under the two-sided 

model, the final sharing rate would be 

applied to an ACO’s total savings 

against its updated benchmark. 

Comment: Overall, comments 

expressed concern over the proposal for 

ACOs under the one-sided model, other 

than those exempted, to share savings 

net a 2 percent threshold once they 

exceed the MSR. Many commenters 

requested removal of the net 2 percent 

sharing rate. Most recommended 

sharing on a first dollar basis for all 

ACOs. Commenters provided a variety 

of rationales to support eliminating this 

requirement, for example, that it unduly 

increases uncertainty that an ACO will 

share in savings or could impede an 

ACO’s ability to make the kinds of up 

front and ongoing investments needed 

to better manage care. Some suggested 

that adequate controls are already 

proposed to ensure that shared savings 

are due to improved care coordination 

and quality of care. Several commenters 

recommended first dollar sharing 

indicating random variation in data can 

work in both directions: Setting higher 

thresholds may protect CMS from 

random variation, but does not protect 

against or recognize random variation 

that might affect providers negatively. 

Others suggested that first dollar 

sharing for all ACOs would encourage 

increased participation in the program, 

for instance helping ensure ACOs 

receive a return on investments. One 

commenter pointed out a 2 percent net 

sharing requirement was not included 

in the PGP demonstration. Another 

commenter questioned whether the 2 

percent savings threshold is authorized 

by the law. 

Commenters suggested several 

alternatives to the proposed 2 percent 

net savings threshold; most commonly, 

to allow first dollar sharing for the 

entire agreement period, or as one 

commenter suggested, for a portion of 

the agreement period. Another 

commenter suggested allowing ACOs, 

not CMS, to share 100 percent of the 

first 2 percent of savings earned, 

thereafter CMS and the ACO should 

receive their percentage shares. 

Response: We are persuaded by 

comments suggesting the elimination of 

the 2 percent net sharing rate. 

Commenters made it clear that the 

option we proposed would unlikely 

achieve the balance we sought between 

a threshold low enough to ensure 

participation while protecting the Trust 

Funds from paying ACOs for results 

based on random variation. Commenters 

persuaded us that the 2 percent net 

sharing threshold could deter 

participation. We believe sharing on a 

first dollar basis with all ACOs will be 

important for encouraging participation 

and ensuring ACOs receive capital to 

invest in achieving the program’s goals 

and achieve a return on investment. 

First dollar sharing, compared to 

alternatives that would share on a lower 

threshold amount, appears the most 

effective way to ensure ACOs receive 

needed capital. At this time, we 

consider other program protections—in 

particular the minimum savings rate— 

should be adequate to ensure shared 

savings result from ACO performance 

rather than random variation. We will 

monitor this issue, however, and could 

consider adjustments through future 

rulemaking should they be found 

necessary. 

We are revising our proposal to allow 

for sharing on first dollar savings for 

ACOs under the one-sided model once 

savings meet or exceed the MSR. We are 

finalizing our proposal to similarly 

allowing sharing on a first dollar savings 

for ACOs under the two-sided model 

once savings meet or exceed the MSR. 

Comment: Commenters were 

generally supportive of the proposed 

exemption from the 2 percent net 

sharing threshold for small ACOs, 

particularly those in underserved and 

rural areas. A number of commenters 

suggested expanding the exemption to 

other types of ACOs. One, for example, 

recommended that the exemption 

include ACOs that treat a large 

proportion of dual eligible beneficiaries. 

However, several commenters 

expressed concerns about the proposed 

exemption. One commenter explained 

that based on the proposed assignment 

methodology, ACOs that include FQHCs 

and RHCs would have difficulty 

meeting the threshold level to qualify 

for the exemption. Another commenter 

suggested the exemption may not be 

sufficient to encourage participation by 

ACOs in rural areas. 

Response: Our elimination of the 2 

percent net sharing rate negates the 

need for an exemption from this 

requirement. Accordingly, we are 

eliminating the proposed exemption 

from the 2 percent net sharing rate as all 

ACOs that achieve savings in excess of 

their MSR will share in savings on a 

first dollar basis. 

Final Decision: We are revising our 

proposal under § 425.604 to allow for 

sharing on first dollar savings for ACOs 

under the one-sided model once savings 

meet or exceed the MSR. We are 

finalizing our proposal under § 425.606 

similarly allowing sharing on a first 

dollar savings for ACOs under the twosided model once savings meet or 

exceed the MSR. 

(5) Performance Payment Limits 

Section 1899(d)(2) of the Act requires 

the Secretary to ‘‘establish limits on the 

total amount of shared savings that may 

be paid to an ACO * * *.’’ Therefore, in 

the proposed rule we addressed the 

issue of the maximum performance 

payment an ACO may receive in any 

given performance year. In determining 

what would constitute an appropriate 

limit, we stated that it should provide 

a significant opportunity for ACOs to 

receive shared savings generated from 

quality improvements and better 

coordination and management of Part A 

and B services, while avoiding creating 

incentives for excessive reductions in 

utilization which could be harmful to 

beneficiaries. Under the PGP 

demonstration, the limit was set at 5 

percent of the organization’s Part A and 

Part B expenditure target. 

For purposes of the Shared Savings 

Program, we considered an option to 

vary the performance payment limit by 

the readiness of the ACO to take on 

greater responsibility and performancebased risk. ACOs seeking to participate 

in the Shared Savings Program will vary 

with respect to their readiness to 

function under a risk model due to their 

organizational and systems capacity and 

structure. Accordingly, some ACOs 

might more quickly be able to 

demonstrate quality improvements and 

savings than will others. Applying 

differential payment limits based on an 

ACO’s readiness to take on 

performance-based risk could be 

another means to encourage and reward 

successful ACO participation. 


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In light of our experience with the 

PGP demonstration, we considered a 

limit of 5 percent of benchmark 

expenditures. We also considered 

whether a higher limit, such as 10 

percent or 15 percent, would be 

appropriate to provide an even stronger 

incentive for ACOs to develop the 

quality and efficiency improvements 

that could result in greater shared 

savings. Depending on an ACO’s 

composition, shared savings payments 

under such higher limits could 

represent an even larger portion of 

Medicare payments to ACO participants 

for care furnished to assigned 

beneficiaries since the limit is a 

percentage of the ACO’s benchmark for 

Medicare Part A and B expenditures for 

assigned beneficiaries, which reflects all 

care furnished to those beneficiaries, 

regardless of whether it was provided in 

the ACO. For example, an ACO that 

does not include a hospital would have 

the opportunity to realize a relatively 

higher proportion of shared savings as a 

percentage of its Medicare revenue by 

reducing Part A expenditures for its 

assigned beneficiaries. However, 

opportunities to earn greater savings 

could also raise questions about 

whether the quality of care is 

improving, which is as important a goal 

as achieving savings in the Shared 

Savings Program. In the proposed rule, 

we recognized that providing an 

incentive for ACOs to invest to improve 

quality and efficiency of care needs to 

be balanced against providing an overly 

large incentive such that an ACO may 

be encouraged to generate savings 

resulting from inappropriate limitations 

on necessary care. A higher limit on 

total shared savings could provide such 

an incentive to limit care. While all 

ACOs may have this incentive to some 

degree, ACOs without Part A providers 

could have greater incentive to do so, 

depending on where the limit is 

established. 

A lower limit, such as the 5 percent 

limit under the PGP demonstration, 

would reward ACOs for improving 

quality and efficiency and potentially 

generate more savings for the Medicare 

program without creating incentives to 

limit care that is appropriate and 

necessary. On the other hand, a lower 

limit might be an insufficient incentive 

for some potential ACOs to participate 

in the program. In contrast, a higher 

percentage limit, such as 10 or 15 

percent of an ACO’s Part A and B 

expenditure benchmark, would provide 

greater incentives for organizations to 

participate in the program and to 

achieve the quality and efficiency gains 

that are the goals of the Shared Savings 

Program. Many health care researchers 

believe that the rate of unnecessary 

health care is more than the 

approximate 10 percent which would be 

implied by establishing a 5 percent limit 

on ACO shared savings. (Since the 

maximum shared savings potentially 

realized by an ACO under the proposed 

one-sided model was 52.5 percent, we 

noted that a 7.5 percent limit on the 

ACO share would imply an expectation 

that overall savings may be as high as 

approximately 14 percent; a 10 percent 

limit would imply a savings expectation 

of approximately 19 percent.) On the 

other hand, a higher limit might provide 

some incentive for ACO providers/ 

suppliers to reduce utilization 

inappropriately, which could 

potentially be harmful to beneficiaries. 

In the proposed rule, we 

acknowledged that the considerations in 

favor of both a lower (for example, 5 

percent) and a higher (for example, 10 

percent) limitation on shared savings 

with an ACO had merit. Accordingly we 

proposed to establish the payment limit 

at 7.5 percent of an ACO’s benchmark 

for the first 2 years of the agreement 

under the one-sided model. Following 

suggestions by MedPAC, and in order to 

encourage ACOs to assume 

performance-based risk and participate 

in the two-sided model, we proposed, 

for the two-sided model, to establish the 

payment limit at 10 percent of an ACO’s 

benchmark for those ACOs that either 

elect the two-sided model initially for 

all 3 years or are transitioned from the 

one-sided model during the third year of 

their agreement period. (Since the 

maximum shared savings potentially 

realized by an ACO under the proposed 

two-sided model was 65 percent, a 10 

percent limit on the ACO share would 

imply an expectation that overall 

savings may be as high as approximately 

15 percent). We solicited comment on 

these proposed payment limits and on 

whether a higher limit—for example, 10 

percent for all ACOs—would be more 

appropriate in light of the 

considerations discussed in the 

proposed rule and other considerations 

that commenters might wish to raise. 

We also sought comments on whether 

differential limits should be established 

based on an ACO’s readiness, as 

discussed previously, including the 

criteria we would apply and the 

methods by which we would assess 

readiness and how differential limits 

should be structured. We stated that we 

would consider this information and the 

implications for a differential limit 

based on ACO readiness in future 

rulemaking cycles. 

We stated that, regardless of what 

limit was adopted in the final rule, we 

planned to monitor beneficiary access to 

and utilization of services, and the 

potential contribution of the 

performance limit to any inappropriate 

reductions in services. Our final policies 

related to monitoring and addressing 

ACO performance are discussed in 

section II.H. of this final rule. 

Furthermore, we indicated that as we 

gain more experience with the Shared 

Savings Program and are able to 

evaluate how well the incentive 

structure under the Shared Savings 

Program is operating to generate greater 

quality and efficiency without 

inappropriately reducing utilization of 

services, we may undertake additional 

rulemaking to revise the performance 

payment limits we establish in this final 

rule. 

Comment: One commenter suggested 

that limiting savings is reasonable if 

losses are also limited, in line with our 

proposal. Many commenters, however, 

opposed the proposed limits on shared 

savings for both the one-sided and twosided models stating that these policies 

could limit the ACO’s return on 

investment and therefore the 

attractiveness of the program, 

particularly given the large startup and 

operating costs ACOs are expected to 

face. One commenter cited a recent New 

England Journal of Medicine editorial 

which suggested the ACO must see a 20 

percent gain in order to see a return on 

investment and noted that the proposal 

limits gains to 7.5 percent. Others 

suggested the limits could serve as a 

disincentive for ACOs to invest in 

transformational improvements, 

questioning the use of limits if the 

opportunity for shared savings is indeed 

a motivator for cost management 

behavior. One commenter explained 

that CMS’ rationale for the limits, to 

prevent providers and suppliers from 

inappropriately reducing utilization, is 

unfounded; suggesting that the 

proposed quality performance standards 

and other proposed protections will 

effectively prevent ACOs from 

attempting to improperly reduce 

utilization of services. Another 

commenter suggested removal of the 

limits would signal CMS’ commitment 

to the success of the program. 

Commenters indicated confusion about 

whether the limit applies only to the 

savings paid to the ACO or to the total 

savings subject to sharing. 

Commenters typically recommended 

eliminating the limits, to allow ACOs to 

share in all savings they could achieve, 

suggesting this change could result in 

increased interest and participation in 

the program, particularly by smaller 

medical practices and oncologists. Other 


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commenters suggested raising the limits, 

for instance— 

• Raise the limit to 10 for the onesided model; 

• Raise the limit by 5 percent for both 

the one-sided and two-sided models; 

• Raise the limit to 15 or 25 percent; 

or 

• For the two-sided model, 

incrementally increase the limit across 

the agreement period from 7.5 percent 

in year 1, to 10 percent in year 2 and 

15 percent in year 3 to incentivize 

formation of ACOs willing to pursue 

this option. 

Response: To clarify, the sharing limit 

applies to the savings paid to the ACO, 

not to the total savings subject to 

sharing. We are, however, persuaded by 

comments suggesting the importance of 

raising the performance payment limits 

to encourage participation and to ensure 

ACOs receive capital to invest in 

achieving the program’s goals and 

achieve a return on their investment. 

We believe retaining the performance 

payment limits is necessary to comply 

with the statute and important for 

ensuring against providing an overly 

large incentive that may encourage an 

ACO to generate savings through 

inappropriate limitations on necessary 

care. We believe that a modest increase 

in the performance payment limits 

balances our concerns while increasing 

the attractiveness of the program. 

Further, we believe it is important to 

maintain a higher limit for ACOs 

accepting risk for losses, to incent 

participation in the program’s two-sided 

model. Accordingly, we are modifying 

our proposal in order to provide a 10 

percent payment limit for ACOs under 

the one-sided model and a 15 percent 

payment limit to ACOs under the twosided model. 

Final Decision: We are revising our 

proposal under § 425.604 and § 425.606 

to raise the payment limit from 7.5 

percent to 10 percent of an ACO’s 

updated benchmark for ACOs under the 

one-sided model and to raise the 

payment limit from 10 percent to 15 

percent of an ACO’s updated benchmark 

for ACOs that elect the two-sided 

model. 

f. Calculating Sharing in Losses 

The proposed rule outlined the 

methodology for determining shared 

losses. We proposed a shared losses 

methodology that mirrored the shared 

savings methodology, comprised of: a 

formula for calculating shared losses 

based on the final sharing rate (1 minus 

the final sharing rate), use of a 

minimum loss rate (MLR) to protect 

against losses resulting from random 

variation and a loss sharing limit to 

provide a ceiling on the amount of 

losses an ACO would be required to 

repay. We noted that under this 

approach, an ACO’s share of losses 

would vary depending on its quality 

score. Therefore, an ACO with a higher 

quality score would owe a lower 

amount of losses compared to an ACO 

with an equivalent amount of losses but 

a lower quality score. We considered 

other approaches to calculating the 

amount of shared losses, tracking the 

options considered for establishing the 

quality standard. For instance, we 

considered using a threshold approach 

to measuring quality performance for 

purposes of determining the amount of 

shared savings and losses. Alternately 

we considered using a blend of these 

two methods, whereby we would allow 

ACOs to increase their share of savings 

with higher quality scores, but use a 

threshold approach when calculating 

losses. We sought comment on these 

options. 

Comment: We received few comments 

on our methodology for calculating 

shared losses. One commenter 

explained that the elements of the 

shared savings and losses models need 

not be symmetrical. 

Response: We are finalizing our 

proposed methodology for determining 

shared losses, mirroring the 

methodology for calculating shared 

savings. Our final policy on each 

specific issue is described in detail later 

in this final rule. 

Final Decision: As proposed, the 

shared losses methodology under 

§ 425.606 will mirror the shared savings 

methodology, comprised of: a formula 

for calculating shared losses based on 

the final sharing rate, use of a MLR to 

protect against losses resulting from 

random variation and a loss sharing 

limit to provide a ceiling on the amount 

of losses an ACO would be required to 

repay. 

(1) Minimum Loss Rate 

We proposed a minimum loss rate 

(MLR) for purposes of computing shared 

losses when an ACO’s actual 

expenditures exceed its benchmark. We 

explained that, as with savings, losses 

must exceed some minimum percentage 

around the benchmark in order to 

provide sufficient confidence that the 

losses experienced during a given 

performance year are not simply the 

result of random variation. We proposed 

the MLR would be the equivalent of the 

MSR under the two-sided model: A flat 

2 percent regardless of the size of the 

ACO’s assigned population. ACOs with 

excess expenditures below the MLR 

would not be responsible for repaying 

Medicare. ACOs with expenditures 

exceeding the MLR would be 

responsible for paying a share of excess 

expenditures calculated by multiplying 

the amount of excess above the updated 

benchmark by one minus the final 

sharing rate. Further we proposed that 

once the MLR was exceeded, ACOs 

would be responsible for paying the 

percentage of excess expenditures, on a 

first dollar basis, up to the proposed 

annual limit on shared losses. 

Comment: Several commenters urged 

CMS to apply an adjustment for normal 

variation for losses, instead of requiring 

first dollar loss sharing. Some 

commenters favored policies that would 

exempt some ACOs from repaying 

losses, such as high quality performers. 

One commenter favored increasing the 

MLR and implementing a sliding scale 

so that the rate would correspond with 

the ACO’s population size. Others 

favored lowering the MLR (for example, 

to 1 percent, as proposed for the Pioneer 

Model ACOs) or eliminating it 

altogether. One commenter explained 

that reducing or eliminating the MSR 

and the MLR recognizes that random 

variation works in both directions and 

over the course of the agreement period 

would likely have a net neutral effect on 

ACO revenues; further, this would be 

consistent with other inducements 

being offered to ACOs willing to bear 

risk immediately. One commenter 

appears to have confused the 2 percent 

MLR under the two-sided model with 

the 2 percent net sharing requirement 

under the one-sided model. 

Response: We are finalizing our 

proposal to use a MLR in computing an 

ACO’s shared losses. We believe that 

comments reflect confusion about the 

function of the MLR, which serves as a 

protection for ACOs. An ACO is not 

accountable for losses if its expenditures 

are lower than the MLR. This protects 

ACOs against being held accountable for 

losses that result from random variation, 

as opposed to their performance. If an 

ACO’s actual expenditures are 2 percent 

or more above its updated benchmark, 

the ACO would be responsible for 

paying excess expenditures calculated 

by multiplying the amount of the excess 

above the updated benchmark by one 

minus the final sharing rate, up to the 

limit on shared losses. Once losses meet 

or exceed the MLR an ACO would be 

required to repay losses on a first dollar 

basis. To clarify, the MLR is distinct 

from, and unrelated to, the 2 percent net 

sharing threshold proposed for the onesided model, which would have 

precluded ACOs from sharing savings 

on a first dollar basis. 

The proposed 2 percent MLR appears 

to be an appropriate compromise 

between commenters’ suggestions. 


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Exempting ACOs from accountability 

for losses under the two-sided model 

would negate the purpose of a riskbased payment arrangement. 

Eliminating or reducing the MLR may 

deter participation by some ACOs in the 

two-sided model, particularly those new 

to risk-bearing, in addition to 

potentially holding ACOs accountable 

to losses resulting from random 

variation. 

Final Decision: We are finalizing our 

proposal under § 425.606 to apply a 

MLR for the two-sided model. To be 

responsible for sharing losses with the 

Medicare program, an ACO’s average 

per capita Medicare expenditures for the 

performance year must exceed its 

updated benchmark costs for the year by 

at least 2 percent. Once losses meet or 

exceed the MLR, an ACO would be 

responsible for paying the percentage of 

excess expenditures, on a first dollar 

basis, up to the proposed annual limit 

on shared losses. 

(2) Shared Loss Rate 

We proposed that ACOs with 

expenditures exceeding the MLR would 

be responsible for paying excess 

expenditures calculated by multiplying 

the amount of excess above the 

benchmark by one minus the final 

sharing rate. In the proposed rule we 

defined the final sharing rate as the 

quality performance sharing rate plus 

any percentage points for including 

FQHCs and/or RHCs as ACO 

participants. 

Comment: We received a few 

comments on the proposed shared loss 

rate. One commenter suggested we 

allow ACOs the choice of a percentage 

shared loss rate (as proposed) or a fixed 

dollar amount of risk. Several 

commenters pointed out that under the 

proposed methodology for calculating 

shared savings and losses, an ACO 

could be accountable for a 100 percent 

share of losses (for example, if the 

ACO’s quality sharing rate is zero) 

which is asymmetrical with the shared 

savings methodology. One commenter 

suggested that CMS ensure that the 

ACO’s financial risk equals its potential 

gains in shared savings. 

Response: We are maintaining our 

proposal to calculate the shared loss rate 

as one minus the final sharing rate. 

Given our elimination of the incentive 

for an ACO to include FQHCs or RHCs 

as ACO participants, the final sharing 

rate is based solely on quality 

performance. Therefore, under the twosided model an ACO could achieve a 

maximum sharing rate of 60 percent 

based on quality performance. We 

believe that commenters identified an 

important concern about the shared loss 

rate, that an ACO could achieve a 100 

percent shared loss rate, while the 

maximum shared savings rate is set at 

60 percent. We are concerned that the 

prospect of a shared loss rate bounded 

at 100 percent could significantly deter 

participation by ACOs in the two-sided 

model, particularly ACOs that are new 

to the accountable care model and to 

risk-bearing. On the other hand, we do 

not want to limit the shared loss rate so 

much as to dampen the benefit of the 

program for Medicare or to remove the 

incentive for ACOs to strive for high 

quality scores. To balance these issues, 

we are modifying our proposal to cap 

the shared loss rate at 60 percent, to 

align with the maximum shared savings 

rate based on quality performance under 

the two-sided model. 

Final Decision: As proposed, under 

§ 425.606, the shared loss rate for an 

ACO that is required to share losses 

with the Medicare program for 

expenditures over the updated 

benchmark will be determined based on 

the inverse of its final sharing rate based 

on quality performance (that is, 1 minus 

the shared savings rate). However, we 

are modifying our original proposal to 

provide that an ACO’s shared loss rate 

will be subject to a cap of 60 percent 

consistent with the maximum rate for 

sharing savings. 

g. Limits on Shared Losses 

We proposed an annual maximum 

shared loss limit measured as a 

percentage of the benchmark to provide 

a greater incentive for organizations to 

participate in the Shared Savings 

Program under the two-sided model. We 

proposed to phase in the limit on shared 

losses over a 3 year period, with limits 

of: 5 percent, 7.5 percent, and 10 

percent, respectively across the first 3 

years for Track 2 ACOs. We further 

proposed that an ACO in Track 1 that 

has entered the third year of its initial 

agreement period would be liable for an 

amount not to exceed the percentage for 

the first year of the two-sided model, 

that is, shared losses would not exceed 

5 percent of its updated benchmark. 

Comment: Several commenters agreed 

with the proposed limits on shared 

losses, which one commenter indicated 

would provide an incentive for ACOs to 

participate in the two-sided model. One 

commenter explained that the limits on 

shared losses need not be symmetrical 

with the shared savings limit. Several 

commenters suggested alternatives, such 

as use of risk corridors and capped 

losses similar to the MA program, or 

limiting shared losses to 5 percent of the 

benchmark in all 3 years. Another 

commenter suggested using a perbeneficiary cap on losses. One 

commenter requested that CMS provide 

actuarial data to justify the proposed 

limits on shared losses. 

Response: We are maintaining our 

proposal to phase in limits on shared 

losses, measured as a percentage of the 

ACO’s updated benchmark, over the 

agreement period as follows: 5 percent, 

7.5 percent, and 10 percent, respectively 

across the first 3 performance years for 

Track 2 ACOs. We believe the proposed 

limits achieve an appropriate balance 

between providing ACOs with security 

about the limit of their accountability 

for losses while encouraging ACOs to 

take increasing responsibility for their 

costs and protecting the Medicare Trust 

Funds. 

Otherwise, we believe commenters’ 

concerns are addressed by policies 

discussed in other parts of this finale 

rule. For instance, because we will 

truncate an assigned beneficiary’s total 

annual Parts A and B FFS per capita 

expenditures at the 99th percentile as 

determined for each benchmark year, 

we are adopting a de facto limit on the 

amount of shared losses an ACO can 

incur for care furnished to a single 

beneficiary. 

Final Decision: We are finalizing our 

proposal under § 425.606 that the 

amount of shared losses for which an 

eligible ACO is liable may not exceed 

the following percentages of its updated 

benchmark: 5 percent in the first 

performance year of participation in a 

two-sided model under the Shared 

Savings Program, 7.5 percent in the 

second performance year, and 10 

percent in the third performance year. 

Further, because we have eliminated the 

requirement for ACOs under the onesided model to accept risk in their third 

performance year, we are not finalizing 

the proposed provision regarding the 

limits on shared losses for ACOs 

transitioning from the one-sided to twosided model. 

h. Ensuring ACO Repayment of Shared 

Losses 

As we discussed in the proposed rule, 

ensuring that ACOs entering the twosided model will be capable of repaying 

us for costs that exceed their benchmark 

is a critical program requirement. We 

described examples of financial 

protection requirements for other 

entities with which CMS does business. 

We proposed a flat 25 percent 

withholding rate that would be applied 

annually to any shared savings payment 

earned by the ACO. We proposed that 

this withholding would serve as a 

component of the repayment 

mechanism that ACOs would need to 

establish to ensure their ability to repay 

Medicare for incurred losses. We 


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proposed that we would apply the 

withheld amount towards repayment of 

an ACO’s losses. However, we 

recognized that the 25 percent 

withholding of shared savings may be 

inadequate to cover the total amount of 

shared losses, particularly if an ACO 

participating in the two-sided model 

experienced losses in its first year. 

In order to more fully ensure that the 

Medicare program would be repaid in 

the event that an ACO incurred losses, 

we proposed that an ACO must 

demonstrate that it has established a 

self-executing method for repaying 

losses to the Medicare program. A 

detailed discussion of these methods is 

found in our April 7, 2011 proposed 

rule (76 FR 19622). 

The intent of the proposal was to 

assure operational simplicity without 

establishing eligibility requirements that 

might discourage ACOs with limited 

risk-bearing experience from entering 

Track 2. Further, this option offered 

greater flexibility to ACOs in 

establishing their repayment mechanism 

compared to another option we 

considered, requiring ACOs to use only 

one of these repayment mechanisms. In 

that regard, we considered requiring 

ACOs to obtain a letter of credit in an 

amount not less than the maximum 

potential downside exposure for the 

ACO in any given performance year (for 

example 5 percent of the benchmark in 

the first performance year for an ACO 

entering Track 2, or for a Track 1 ACO 

entering its third performance year of its 

initial agreement period). 

In the proposed rule, after considering 

several options for determining the 

adequacy of an ACO’s recoupment 

mechanism, we proposed that the 

repayment mechanism must be 

sufficient to ensure repayment of 

potential losses equal to at least 1 

percent of per capita expenditures for 

assigned beneficiaries from the most 

recent year available. We believed that 

requiring ACOs to demonstrate their 

ability to repay losses at a level below 

the annual loss sharing limit was 

potentially equally effective as requiring 

ACOs to demonstrate their ability to 

repay the maximum amount of possible 

losses, but less onerous and also 

accounted for the limited probability 

that an ACO would incur the maximum 

possible losses. 

Given the anticipated variation in 

ACO composition and regional 

variations in cost, we indicated that we 

believed the sufficiency of the ACO’s 

repayment mechanism would need to be 

periodically reassessed to ensure its 

adequacy. 

We further proposed that we would 

determine the adequacy of an ACO’s 

repayment mechanism prior to its 

entrance into a period of participation 

in the Shared Savings Program. We also 

proposed that an ACO must 

demonstrate the adequacy of this 

repayment mechanism annually, prior 

to the start of each performance year in 

which it accepts risk, to ensure that it 

is adequate to cover the anticipated 

number of assigned Medicare 

beneficiaries. Under the proposal, an 

ACO would have been required to 

maintain this repayment mechanism, 

ensuring adequate capitalization of 

funds in the case of some recoupment 

methods (such as adequately funded 

escrow accounts or reinsurance 

coverage), for the duration of the 

performance year and up until the time 

when we would need to be reimbursed 

for any losses by the ACO. We proposed 

that we would ensure that an ACO 

maintains an adequate repayment 

mechanism through monitoring 

activities. 

We further proposed that an ACO 

would be required, as part of its 

application, to submit documentation of 

such a repayment mechanism for 

approval by us. This documentation 

would include details supporting the 

adequacy of the mechanism for repaying 

the ACO’s maximum potential 

downside risk exposure. An ACO 

applying for the two-sided model would 

be required to submit this 

documentation as part of its initial 

application. An ACO applying for the 

one-sided model would also be required 

to submit this documentation as part of 

its initial Shared Savings Program 

application because under the proposal 

these ACOs would have been required 

to transition to the two-sided model in 

their third performance year. 

To the extent that an ACO’s 

repayment mechanism does not enable 

us to fully recoup the losses for a given 

performance year, we proposed to carry 

forward unpaid losses into subsequent 

performance years (to be recouped 

either against additional financial 

reserves, or by offsetting shared savings 

earned by the ACO). 

We invited comment on these 

proposals and on the other options that 

we had considered. 

Comment: A number of commenters 

expressed concern about the proposed 

requirement that ACOs establish a selfexecuting repayment mechanism to 

cover potential losses. While some of 

these commenters acknowledged CMS’ 

desire for assurances regarding an 

ACO’s ability to repay losses, they 

believed that the proposals were too 

burdensome and would place the ACOs 

in a difficult financial position. One 

commenter opposed requiring ACOs to 

establish a self-executing method for 

repaying losses, particularly as it may be 

imposed on individual providers that 

may lack a choice as to whether to join 

an ACO based on their relationship with 

a hospital or health system. This 

commenter did not believe such 

physicians should be required to pay for 

losses. Another commenter suggested 

that ACO providers and suppliers 

should bear financial risk proportional 

to the efficiency of their practice (for 

example, psychiatrists would bear a 

lower level of risk). Another commenter 

mentioned the burden a letter of credit 

would create for providers and 

expressed distaste for the mandatory 

withhold. Several commenters generally 

expressed doubt that the proposed 

requirement would ensure that ACOs 

would be able to repay potential losses. 

Others provided comments about the 

financial burden of the proposed 

repayment mechanisms, particularly for 

smaller ACOs that may be unable to 

meet the solvency requirements. They 

indicated that it would be very difficult, 

if not impossible, for ACOs, which 

would typically include low margin 

businesses, to be at risk for both the 

administrative costs associated with 

forming and operating an ACO and also 

be subject to underwriting losses. These 

commenters viewed the proposed 1 

percent repayment mechanism as an 

additional drain on ACOs participating 

in the Shared Savings Program and 

therefore recommended that the 

requirement be removed. 

A number of commenters expressed 

concern about reinsurance as a 

repayment option. One commenter 

suggested that reinsurance would be 

costly and would reduce or eliminate 

any net payment available to reward the 

ACO providers/suppliers. This 

commenter believed that a significant 

increase in the sharing percentage and 

the limit on shared savings would be 

required to make reinsurance a viable 

repayment approach. Other commenters 

asked that CMS clarify in the final rule 

the mechanisms for ACOs to obtain 

reinsurance. A couple of commenters 

encouraged CMS to specify a clear 

mechanism in the final rule for ACOs to 

obtain reinsurance, such as CMS 

sponsorship of reinsurance pools for 

ACO providers or including additional 

funds in the shared savings payments to 

ACOs. One commenter suggested that 

we require ACOs to obtain insurance 

only from highly rated, State regulated 

insurance carriers. 

Several commenters suggested 

eliminating the proposed requirement 

for a repayment mechanism, given the 

proposed 25 percent withhold, believing 

it was unnecessary to have both 


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requirements. On the other hand, as 

described later in this final rule, a 

number of other commenters requesting 

elimination of the proposed 25 percent 

withhold cited the proposed repayment 

mechanism as providing sufficient 

coverage to protect CMS against losses. 

For example, a commenter indicated 

that CMS should monitor capital 

adequacy on an annual basis and rely on 

the provisions in the proposed rule 

regarding the requirement to adopt a 

self-executing repayment method, rather 

than a withhold, to ensure that ACOs 

will be able to repay losses to the 

program. 

Some commenters suggested 

additional alternative approaches that 

CMS could consider to address concerns 

about an ACO’s ability to pay for losses, 

for example: 

• Allow flexibility for an ACO to 

determine the magnitude of financial 

risk it will experience and to determine 

the most appropriate manner of 

repayment. 

• Allow ACOs to use existing 

financing mechanisms, used to 

participate in two-sided models outside 

of Medicare, to ensure repayment of 

shared losses under the Shared Savings 

Program. 

• Adjust the repayment method based 

on the ACO’s prior year performance in 

the Shared Savings Program, or its 

performance and experience with other 

payers. One commenter suggested that 

CMS consider waiving or reducing the 

repayment mechanism requirements for 

applicants to the two-sided model, 

particularly those who have 

demonstrated experience in managing 

risk through participation in a 

Medicaid, State, or private ACO or other 

payment reforms. In this commenter’s 

view, a track record of managing risk 

under other programs should reduce 

CMS’ uncertainty regarding the 

financial viability of the ACO. 

• Adopt certain other approaches 

used by some managed care companies. 

• An agreement to recoup losses from 

future Medicare revenue payments 

should be required for on-going 

enterprises (those in existence for 5 or 

more years of continuous operations). 

The commenter suggesting this 

alternative further explained that the 

repayment term for any losses should be 

set on a sliding scale of time in 

proportion to the amount of debt as a 

percentage of assigned beneficiary per 

capita expenditures for the most current 

year results available. 

Several comments raised concerns 

about how ACOs would share losses 

with their participants. One commenter 

indicated that liability for losses creates 

significant operational issues for ACOs 

and raised questions about how losses 

would be shared as follows: 

• If losses are incurred, how would 

the liability for sharing those losses be 

shared? 

• Will physicians and other 

professionals have incentives to 

participate if they know they may have 

out-of-pocket liability or would be 

required to accept Medicare payments at 

less than traditional Medicare payment 

rates? 

• May the financial obligation for 

losses be disparately shouldered by 

ACO participants or ACO providers/ 

suppliers and would this implicate the 

fraud and abuse laws? 

One commenter indicated that 

recoupment efforts should be directed 

against the ACO and not its individual 

primary care physicians. 

In addition, a few comments asked us 

to clarify specific points in the proposal. 

For example, one commenter simply 

asked that CMS further clarify the 

minimum capitalization requirement. 

Another asked whether there was a 

minimum reserve requirement, and if so 

what the amount would be. Another 

asked how we will evaluate if the 

proposed methodology and minimum 

amount are sufficient. Another asked 

how an ACO should calculate 

beneficiary assignment when preparing 

its initial application in order to ensure 

that the amount of reserves is accurate. 

In response to the proposal to carry 

forward losses into future years, one 

commenter suggested that this provision 

should depend on the success of the 

overall program. As an example, the 

commenter suggested that if 50 percent 

or more of the ACOs entering the 

program under the one-sided model in 

2012 see savings in years 1 and 2, then 

CMS should carry forward losses 

because there would be a likelihood of 

achieving savings in a future year. In 

contrast, if 75 percent or more of ACOs 

experience losses, then CMS should 

undertake a review of the entire 

program to evaluate if there is a fatal 

design flaw. Further, the commenter 

suggested that if an actuarial review 

finds that there are significant 

deviations from initial assumptions, 

then CMS should consider forgiving 

ACOs for any net losses that occurred 

during the initial 3 year period. Another 

commenter requested that CMS use its 

discretion to waive repayments in full 

or in part and to make other 

arrangements to address unpaid losses 

(aside from carrying them forward to the 

next year). 

A few commenters expressed support 

for the proposed repayment mechanism. 

Several commenters urged more 

stringent protections; for instance, one 

commenter noted that the requirements 

that ensure an ACO could meet its risk 

obligation appeared weak in comparison 

to those for Medicare Advantage plans. 

Another commenter expressed concern 

that the financial failure of ACOs could 

undermine the solvency of physician 

practices, thereby limiting patient 

access to care in the ACO’s locality and 

urged additional protections to ensure 

both ACO solvency and to safeguard 

beneficiaries, as opposed to just 

ensuring adequate funds for CMS to 

recoup losses. 

Several commenters expressed 

support for proposed policies to ensure 

ACOs maintain an adequate repayment 

mechanism over time. For example, one 

commenter recommended that CMS 

maintain the rule’s strong repayment 

proposals and further suggested that 

CMS should periodically reevaluate the 

adequacy of the various repayment 

mechanisms during the agreement 

period, believing that it is imperative for 

CMS to maintain strong solvency 

protections to protect the Medicare 

program and beneficiaries, and to 

counter efforts to shift cost risks to 

private payers. Another commenter 

expressed support for a process whereby 

CMS would, on an annual basis, verify 

that processes specified in the ACO’s 

application had been implemented and 

that other program requirements had 

been satisfied. 

Response: We continue to believe that 

it is a critical program requirement to 

ensure that ACOs entering a two-sided 

model are capable of repaying us for 

costs that exceed their benchmark. We 

agree with the commenters’ concern that 

it is desirable to protect consumers from 

disruption of their care due to a 

financial failure of an ACO. We have 

experience implementing protections to 

guard against the financial failure of 

providers in other parts of the Medicare 

program. Our proposals took into 

account our experiences with these 

other programs and requirements. We 

further recognize that the Shared 

Savings Program is a unique, new 

Medicare program and we want to 

address commenters’ concerns about the 

burdens of participating in this program 

to the extent possible. However, in light 

of a number of other significant changes 

to the original proposals for the program 

that we are making in this final rule in 

order to reduce the burdens for 

participating ACOs, we continue to 

believe our proposals to ensure that 

ACOs are able to pay for any shared 

losses are reasonable. 

In particular, a number of commenters 

objected to the repayment proposals on 

the grounds that they were excessive in 

light of the additional requirement of a 


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25 percent withhold from shared 

savings. As discussed in section II.G.2. 

of this final rule we are not finalizing 

our proposal to require a withhold of 

shared savings as a method for helping 

assure that ACOs could repay any future 

shared losses. 

Another significant change from the 

proposed rule which we have included 

in this final rule (discussed in section 

II.G.1. of this final rule) is that Track 1 

of the program is now a one-sided only 

model (that is, shared savings only) for 

the entire initial agreement period. 

During the term of the initial agreement, 

only those ACOs that voluntarily choose 

to participate in the Shared Savings 

Program in the two-sided model under 

Track 2 will be subject to the repayment 

rules. We would expect that during the 

initial stages of the program, these Track 

2 ACOs would more likely be larger 

and/or more experienced ACOs, and 

thus have the experience, expertise, 

and/or resources to meet the repayment 

requirements. 

After review of the comments, we are 

finalizing our proposal to allow ACOs 

flexibility to specify their preferred 

method for repaying potential losses, 

and how it would apply to the ACO 

participants and ACO providers/ 

suppliers. We continue to believe our 

proposal provides significant flexibility 

for ACOs to identify the repayment 

method that is most appropriate for 

their organizations. As a result, our 

policy as proposed, already affords 

ACOs, particularly smaller ACOs, the 

choice of the alternative that would be 

least burdensome for them. For 

example, larger ACOs that include 

hospital systems may be able to repay 

losses from their reserves, whereas, 

smaller ACOs may prefer to pay for 

shared losses through reductions to 

their future FFS payments. Under the 

approach we are finalizing, during the 

application process and annually, each 

ACO participating in Track 2 will be 

required to demonstrate that it has 

established a repayment mechanism. As 

part of this, individual ACOs must 

specify how the liability for sharing 

losses would be shared among ACO 

participants and/or ACO providers/ 

suppliers. We will determine the 

adequacy of an ACO’s repayment 

mechanism prior to the start of each 

performance year under the two-sided 

model. 

In this final rule, we are also 

finalizing our proposal that the 

minimum amount of the reserves 

required for an ACO is sufficient to 

ensure repayment of potential losses 

equal to at least 1 percent of per capita 

Medicare FFS Parts A and B 

expenditures for its assigned 

beneficiaries. Further, we are clarifying 

that this amount should be based either 

on expenditures for the most recent 

available performance year or 

benchmark year. We continue to believe 

this is a reasonable amount that reflects 

our desire to balance possible financial 

burden on ACOs with our need for a 

reasonable assurance that any shared 

losses could be paid. For example, 

Track 2 ACOs could be responsible for 

losses up to a maximum of 5 percent of 

its benchmark in performance year 1, 

7.5 percent in performance year 2, and 

10 percent in performance year 3. We 

believe requiring a reserve of 1 percent 

is reasonable relative to this level of 

liability. 

We decline to finalize the proposed 

policy to carry forward losses into 

future program years (as suggested by 

one commenter). We believe the final 

rule includes sufficient protection 

against ACOs which fail to repay their 

losses, including the requirement for an 

ACO to establish a repayment 

mechanism, and program protections 

which would allow CMS to terminate an 

ACO for not fully repaying its losses 

with the opportunity for the ACO to 

enter into a corrective action plan to 

address this failure to meet program 

requirements. 

In addition, as requested by a 

commenter, we will continue to monitor 

the program as it is implemented to 

determine whether program adjustments 

are needed. 

Further, because we will allow ACOs 

to participate in a shared savings only 

model for their first agreement period, 

we are revising our proposal to require 

only ACOs entering the program’s twosided model (Track 2) or requesting an 

interim payment under the one-sided 

model (Track 1) to demonstrate an 

adequate repayment mechanism. 

We are not adopting the comments 

that suggested a government sponsored 

reinsurance option, such as CMSsponsored reinsurance pools for ACOs. 

ACOs that might want to pursue 

reinsurance as a repayment mechanism 

should contact insurers in their 

individual States to further explore this 

option. 

We are also not adopting other 

comments that encouraged us to adopt 

approaches employed by other payers, 

or to adjust the repayment method 

based on prior year performance in the 

Shared Savings Program or performance 

and experience with private payers. At 

this time we do not believe such 

approaches would be feasible since, for 

example, we would not have readily 

available information or evaluation 

criteria about such performance. As 

explained previously, we believe the 1 

percent reserve requirement provides a 

reasonable balance between minimizing 

the financial burdens on ACOs, while 

providing an assurance to the Medicare 

program that any shared losses will be 

repaid. 

We will further clarify operational 

questions about the repayment 

requirement through the application 

process and other program instructions. 

Finally, we note that the commenters’ 

concerns that the division of liability for 

losses among ACO participants and 

ACO providers/suppliers may implicate 

certain fraud and abuse laws, except to 

the extent that those laws are waived. 

Final Decision: In this final rule we 

are retaining our proposed policies 

under § 425.204 concerning the 

repayment mechanism to ensure ACO 

repayment of shared losses. We are 

finalizing our proposal to allow ACOs 

flexibility to specify their preferred 

method for repaying potential losses, 

and how that would apply to ACO 

participants and ACO providers/ 

suppliers. During the application 

process and annually, each ACO under 

the two-sided model will be required to 

demonstrate that it has established a 

repayment mechanism. One-sided 

model ACOs requesting interim 

payment must make a similar 

demonstration at the time of 

application. We will determine the 

adequacy of an ACO’s repayment 

mechanism prior to the start of each 

year under the two-sided model. We are 

also finalizing our proposal that the 

repayment mechanism must be 

sufficient to ensure repayment of 

potential losses equal to at least 1 

percent of total per capita Medicare 

Parts A and B fee-for-service 

expenditures for assigned beneficiaries 

based either on expenditures for the 

most recent performance year or 

expenditures used to establish the 

benchmark. To the extent that an ACO’s 

repayment mechanism does not enable 

CMS to fully recoup the losses for a 

given performance year, CMS will not 

carry forward unpaid losses into 

subsequent performance years and 

agreement periods. 

i. Timing of Repayment 

We proposed that an ACO must make 

payment in full to CMS of any shared 

losses within 30 days of receipt of 

notification of the shared losses. 

Comment: Commenters requested that 

we consider extending this deadline, for 

example to 60 or 90 or 120 days, stating 

this would be a more reasonable 

timeframe given capital restraints on 

some ACOs. Several commenters 

suggested offering ACOs the option of 

paying losses in installments. 


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Response: In developing the proposed 

rule, we considered repayment within 

30 days to be a timeframe which would 

benefit ACOs because shared losses 

would be considered overpayments and 

under sections 1815(d) and 1833(j) of 

the Act would begin to accrue interest 

if not paid within 30 days of the ACO’s 

notification of losses. We appreciate 

commenters’ concerns about the burden 

that a 30 day requirement could pose to 

ACOs. We agree that ACOs, composed 

of many independent participants, may 

need additional time to gather the 

amount owed. Accordingly, to address 

these concerns, we will use our 

authority under section 1899(f) to waive 

the requirement under sections 1815(d) 

and 1833(j) that repayment be made 

within 30 days, and to extend the 

deadline for repayment and the date on 

which interest on shared losses owed by 

an ACO will start to accrue until 91 

days after the ACO receives notification 

of shared losses. Thus, in order to avoid 

interest ACOs must make payment in 

full to CMS within 90 days of receipt of 

notification of shared losses. Given that 

commenters’ suggestions for extending 

the repayment deadline ranged from 60 

to 120 days, we consider 90 days an 

appropriate timeframe for ACOs to make 

the arrangements necessary to repay 

shared losses. 

Final Decision: We are revising our 

proposed policies under § 425.606(h) 

concerning timing of repayment of 

losses. If an ACO incurs shared losses, 

the ACO must make payment in full to 

CMS within 90 days of receipt of 

notification. 

j. Withholding Performance Payments 

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. In the 

proposed rule, we considered the issue 

of 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. For 

example, under the PGP demonstration, 

a flat 25 percent withhold applied to 

annual earned performance payments to 

guard against losses in future years as 

well as to provide an incentive for PGPs 

to continue in the demonstration since 

the withhold was only released at the 

end of the demonstration period or 

when the PGPs were rebased. Under the 

two-sided model, we proposed that an 

ACO could use a withhold of its earned 

shared savings payment as one option 

for demonstrating an adequate 

repayment mechanism in the event it 

incurs shareable losses. We explained 

that the requirement that ACOs be 

willing to commit to completing a 

multiyear agreement to participate in 

the Shared Savings Program is necessary 

to ensure that the program achieves its 

long-term goal of redesigning health 

care processes, and our proposal to 

withhold performance payment was 

designed to reinforce that requirement. 

Since we wanted to encourage ACOs to 

participate for the entire term of their 

agreements, protect the Medicare 

program against losses, and ensure 

ACOs have an adequate repayment 

mechanism in the event they incur 

losses, we proposed that a flat 25 

percent withholding rate would be 

applied annually to any earned 

performance payment. Under the twosided model, we proposed that an ACO 

may withhold an additional portion of 

its earned performance payment as a 

way to demonstrate an adequate 

repayment mechanism in the event it 

should incur shareable losses. 

Furthermore, we proposed that at the 

end of each agreement period, positive 

balances would be returned to the ACO. 

However, if the ACO does not complete 

its agreement period, the ACO would 

forfeit any savings withheld. 

Comment: Nearly all commenters 

opposed the proposed 25 percent 

withhold, suggesting that given the 

anticipated slow return on investment 

and potentially high startup and 

operating costs, it would adversely 

affect participation or pose financial 

hardship on ACOs by restricting 

necessary capital. As one commenter 

explained, the withhold may hinder 

ACO investment and reinvestment in 

infrastructure and program activities 

that may lead to further improvements 

in care and care delivery processes. 

Some commenters suggested the 

proposed withhold poses a barrier to 

participation by smaller, rural, safety 

net, and physician-only ACOs. One 

commenter considered the need for 

capital support to be potentially crucial 

to participation by safety net providers 

given the proposed withhold. Other 

commenters suggested that the withhold 

appears to penalize only the bestperforming ACOs while having no 

impact on poor performing ACOs. 

Other commenters questioned the 

ability of the proposed policy to achieve 

its aim of protecting CMS against losses 

and indicated that other proposed 

protections, such as a self executing 

repayment mechanism sufficient to 

cover 1 percent of total per capita 

expenditures, are more than adequate. 

Several commenters suggested the 

withhold is inappropriate for 

organizations accustomed to managing 

risk. Others questioned the need for the 

withhold under the one-sided model, 

and noted in particular, that the 

proposed 2 percent net sharing rate may 

be sufficient to cover CMS’ risk of not 

recovering losses when ACOs transition 

to the two-sided model. One commenter 

suggested CMS consider requiring ACOs 

to have reserves similar to under an 

insurance model to participate, rather 

than holding back earned savings. 

Several commenters addressed the 

use of the withhold as a means to 

encourage full-term participation. One 

commenter noted this proposal creates a 

sense that CMS does not trust its 

provider partners. One commenter 

stated forfeiture of the withhold for 

failure to complete the 3 year agreement 

unfairly punishes ACOs that must 

withdraw from the program, for 

example ACOs whose population falls 

below the required 5,000 beneficiaries. 

Commenters typically suggested 

eliminating the withhold entirely, 

suggesting it is redundant or 

unnecessary in light of other proposed 

requirements (such that ACOs 

demonstrate an adequate repayment 

mechanism at the time of application). 

Several commenters suggested that, at a 

minimum, the amount of the withhold 

be reduced, recommending that it not 

exceed 10 percent of shared savings. In 

some cases, commenters recommended 

a temporary reduction in the amount 

withheld. Several recommended 

allowing ACOs a choice between a 

withhold and demonstrating adequate 

financial reserves to repay losses. 

Several commenters suggested CMS pay 

interest on the withheld amount, or 

clarify in the final rule its intent to pay 

interest on this amount. Another 

commenter urged CMS to ensure 

alignment between the withhold of 

payment under the Shared Savings 

Program and the mechanism for 

repayment under the Innovation 

Center’s potential Advance Payment 

initiative. 

Several commenters suggested 

alternative policies for linking the 

withhold to ACO performance. For 

example, one commenter favored an 

alternative to the proposed method for 

calculating shared savings whereby 

CMS would also use a multi-year metric 

of savings. This commenter suggested 

CMS would withhold a portion of 

annual savings (similar to the proposed 

25 percent withhold) and award a net 

performance payment at the end of the 

agreement period based on the multiyear metric. This approach could 

address concerns expressed by several 

commenters that ACOs may have a 

financial disincentive to perform high 

cost procedures or order laboratory tests 

involving substantial upfront costs, 

which over time result in improved 


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health outcomes or savings (such as 

bariatric surgery or lab tests that lead to 

better treatment decisions). 

Response: We are persuaded by 

comments recommending elimination of 

the 25 percent withhold. While we 

continue to believe that strong 

mechanisms for repayment of potential 

losses are necessary, we have concluded 

that the withhold may be an ineffective 

mechanism for ensuring repayment of 

potential losses. As commenters point 

out, an entity that generates savings in 

the first or second year is also likely to 

generate savings in the third year. 

Therefore, the withhold could serve as 

a penalty for successful ACOs while 

doing little to protect the Trust Fund 

against underperforming ACOs. Further, 

we agree with the commenters that 

suggested that other aspects of the 

program may be sufficient to ensure 

ACOs repay losses. In particular, we are 

finalizing the requirement for ACOs to 

establish a self-executing repayment 

mechanism, under which ACOs could 

elect an annual withhold on savings as 

part of their repayment mechanism. 

Commenters also noted the potential 

unintended consequences of using the 

withhold to encourage ACOs to 

complete their agreement periods. We 

are especially concerned that the 

forfeiture requirement could punish 

ACOs terminated from the program for 

circumstances beyond their control. 

Lastly, we are concerned that the 

withhold could pose a financial 

hardship for ACOs by forestalling 

payment of funds that could support 

operational costs, and thus, the policy 

could be a potential barrier to the 

formation of ACOs. 

A smaller withhold, as suggested by 

some commenters, would not effectively 

address the aforementioned concerns. 

Even a smaller withhold could penalize 

high-performing ACOs or those 

terminated from the program for 

legitimate reasons beyond their control 

and pose a barrier to participation. 

Further, while we appreciate 

commenters’ concerns about the need 

for a multi-year measure of savings, to 

be implemented through a withhold of 

savings, we decline to implement this 

approach. We believe that other 

program requirements offer ACOs 

sufficient incentive to provide high 

quality, cost-effective and patientcentered care, while the program’s 

monitoring provisions will enable us to 

detect ACOs’ avoidance of necessary 

services. 

Final Decision: We are revising our 

proposal to eliminate the 25 percent 

withhold and the related proposed 

provision concerning forfeiture of the 25 

percent withhold in the event of early 

termination from the program. 

k. Determining First Year Performance 

for ACOs Beginning April 1 or July 1, 

2012 

As discussed in Section II.C. of this 

final rule, we will offer start dates on 

April 1, 2012 (agreement period of 3 

years and 9 months), and July 1, 2012 

(agreement period of 3 years and 6 

months) for those ACOs that apply and 

are approved to participate in the 

Shared Savings Program during 2012. 

This section describes the methodology 

for determining shared savings and 

losses for the first performance year for 

April 1 and July 1 starters defined as 21 

and 18 months respectively. This 

methodology will consist 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. Such first year 

reconciliation, taking into account the 

12 months covered by the interim 

payment period as well as the remaining 

6 or 9 months of 2013, will allow us to 

determine the overall savings or losses 

for the ACO’s first performance year. 

As we have previously discussed, 

commenters expressed support for 

policies allowing for a shorter 

turnaround period for feedback on 

quality metrics and shared savings 

reconciliation. In particular, 

commenters stressed the importance of 

shared savings for establishing return on 

investment, and supporting ongoing 

operations and likewise achievement of 

program goals. We agree with 

commenters about the importance of 

timely availability of funds. 

In this final rule, we are adopting a 

policy that will enable ACOs with start 

dates of April 1 and July 1, 2012 to opt 

for an interim payment calculation as 

part of their application to participate in 

the Shared Savings Program. However, 

ACOs opting for interim payment under 

either the Track 1 one-sided or Track 2 

two-sided model will need to assure 

CMS of their ability to repay monies 

determined to be owed upon final first 

year reconciliation. For ACOs under the 

two-sided model, their demonstration of 

an adequate repayment mechanism as 

part of their entrance into a shared loss 

arrangement will be sufficient also to 

assure return of an overpayment of 

shared savings under the interim 

payment calculation. ACOs under the 

one-sided model would, likewise, need 

to demonstrate an adequate repayment 

mechanism. We will, therefore, require 

ACOs entering Track 1 with start dates 

of April 1 or July 1, 2012, that opt to 

receive interim payment calculation to 

demonstrate an adequate repayment 

mechanism as under Track 2 to repay 

any overpayment of shared savings. 

This requirement will not apply to 

Track 1 ACOs with start dates of April 

1 or July 1, 2012, that do not elect 

interim payment calculation. 

(1) Interim Payment Calculation 

In the interim payment calculation, 

we will determine shared savings and 

losses based on the ACO’s first 12 

months of program participation. 

Quality performance will be assessed as 

described in section II.F of this final 

rule. Quality performance for the 

interim payment calculation will be 

based on GPRO quality data reported for 

calendar year 2012. (Claims-based and 

CAHPS measures will be calculated for 

informational purposes for 2012.) We 

believe that quality data based on CY 

2012 is an appropriate measure of 

ACO’s quality performance for 

determining interim payment because 

ACOs beginning April 1 and July 1 will 

have submitted GPRO data for CY 2012 

as part of demonstrating their eligibility 

for the 2012 PQRS incentive. 

The same methodology for 

determining shared savings and losses, 

as specified in section II.G. of the final 

rule will apply to this interim payment 

period. More specifically, we will apply 

the methodology as stated elsewhere in 

section II.E. of this final rule for 

assigning beneficiaries and in section 

II.G. of this final rule for determining 

shared savings and losses (including 

calculating and risk adjusting 

expenditures, establishing the MSR and 

MLR, and determining shared savings or 

losses) based on the ACO’s first 12 

months of performance with the 

exception of calculating the update to 

the benchmark. For purposes of interim 

payment calculation, the historical 

benchmark will be updated (and 

adjusted for changes in beneficiary risk 

as described below) for the period 

which includes the ACO’s first 12 

months of participation. 

Depending on the results of the 

interim payment calculation, the ACO 

may receive a shared savings payment 

or, in the case of ACOs under the twosided model, be liable for shared losses. 

ACOs will be notified of shared savings 

or losses. Unless stated otherwise, 

program requirements which apply in 

the course of a performance year apply 

to the interim payment period. 

(2) First Year Reconciliation 

For ACOs beginning April 1 or July 1, 

2012, the reconciliation for the first 

performance year will occur after the 

completion of the ACO’s first 

performance year, defined as 21 months 


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for April 1 starters and 18 months for 

July 1 starters; that is at the conclusion 

of CY 2013. First year reconciliation 

will account for the entire 18 or 21 

month period. Our assignment 

methodology and calculations of the 

updated benchmark and performance 

year expenditures will take into account 

the overlap between the ACO’s first 12 

months of performance and CY 2013. To 

simplify the summation of performance 

year expenditures and the updated 

benchmark for the two overlapping 

timeframes, we will state figures for first 

year reconciliation in the aggregate, 

rather than on a per capita basis. Quality 

performance for first year reconciliation 

will be based on complete and accurate 

reporting, for all required quality 

measures, for CY 2013. 

The following steps outline the 

methodology for adjusting the ACO’s 

interim payment determination to 

account only for the 6 or 9 months 

included in CY 2012 and summing it 

with the ACO’s CY 2013 performance: 

• Assignment: First performance year 

expenditures will be summed over 

beneficiaries assigned in two 

overlapping 12 month assignment 

windows. The first window will be the 

beneficiaries assigned for the first 12 

months used for interim payment 

calculation. The second window will be 

beneficiaries assigned for CY 2013. 

• Aggregate expenditures for the first 

performance year: We will sum 

aggregate interim payment expenditure 

dollars to account for the ACO’s first 6 

or 9 months during CY 2012 for 

beneficiaries assigned for the interim 

payment calculation with aggregate 

dollars calculated for CY 2013 for 

beneficiaries assigned for CY 2013. 

• Risk adjustment: Risk adjustment 

for beneficiaries assigned in CY2013 

will be performed as it would be for a 

normal calendar performance year, 

based on a comparison of risk scores for 

continuously assigned and newly 

assigned beneficiaries to BY3 risk 

scores. We will identify beneficiaries 

from the CY 2013 assignment window 

as either continuously assigned or 

newly assigned relative to the previous 

calendar year. We will base risk 

adjustment for the 6 or 9 months of 

performance year one (PY1) that lie 

within CY 2012 on the same adjustment 

factor identified for purposes of the 

interim payment calculation. Respective 

risk adjustment factors will be used to 

adjust updated benchmark dollars to the 

performance year risk level. 

• Updating the benchmark: We will 

establish an updated benchmark for the 

first performance year stated in 

aggregate dollars. Based on the assigned 

beneficiary population for the ACO’s 

first 12 months of performance we will 

calculate the ACO’s interim updated 

benchmark for the average fraction of 

expenditures incurred in the latter 6 or 

9 months of CY 2012, and restate it in 

terms of aggregate expenditures. We will 

add to that an updated aggregate 

benchmark representing CY 2013. 

• Determining shared savings/losses: 

We will determine the savings 

percentage for the entire 18 or 21 month 

performance year by comparing 

summed expenditures to summed 

updated benchmark dollars. We will 

compare this percentage to the ACO’s 

MSR or MLR as stated in terms of a 

percentage. For ACOs under the onesided model, we will compare the PY1 

savings percentage to an MSR obtained 

from Table 6 by counting all 

beneficiaries who have been assigned in 

at least one of the two assignment 

windows for PY1. For ACOs under the 

two-sided model, we will compare the 

PY1 savings percentage to a flat 2 

percent MSR or MLR. 

The reconciled amount of the shared 

savings or losses owed to or by the ACO 

for the performance year will be net of 

any interim payments of shared savings 

or losses. CMS may determine that it 

owes the ACO additional shared savings 

payments or received an overpayment of 

shared losses from the ACO. Conversely, 

following the first year reconciliation, 

CMS may determine the ACO has been 

overpaid for shared savings or owes 

additional shared losses. In either of 

these cases, the ACO would owe CMS 

the difference. ACOs will be notified of 

shared savings or losses, or other 

monies determined to be owed upon 

first year reconciliation. Unless stated 

otherwise, program requirements which 

apply in the course of a performance 

year apply to the ACO’s first year 

reconciliation. 

(3) Repayment Mechanism for ACOs 

Electing Interim Payment Calculation 

An interim payment system therefore 

raises a concern about the ability of an 

ACO to repay CMS in the event that first 

year reconciliation results in a payment 

due to CMS. As described previously, 

ACOs under the program’s two-sided 

model must demonstrate that they have 

a self-executing mechanism for repaying 

losses equal to at least 1 percent of the 

ACO’s Medicare fee-for-service Parts A 

and B total per capita expenditures for 

its assigned beneficiaries based either 

on expenditures for the most recent 

performance year or expenditures used 

to establish the benchmark. However, as 

discussed in this section, the repayment 

mechanism would generally apply only 

to ACOs under the two-sided model. 

We believe this same repayment 

mechanism is also sufficient to ensure 

that ACOs in the one- and two-sided 

models that opt for interim payments 

can repay CMS in the event that the 

ACO owes CMS money after first year 

reconciliation. ACOs must indicate in 

their application whether they are 

requesting an interim payment 

calculation. Therefore, similar to the 

requirements for two-sided model ACOs 

in this final rule, we will require those 

ACOs that choose to request an interim 

payment during their first performance 

year, regardless of Track, to demonstrate 

as part of their application that they 

have an adequate repayment mechanism 

in place. 

Another issue raised by interim 

payments is the deadline for paying 

shared losses, as well as the deadline for 

refunding other monies determined to 

be owed by the ACO after first year 

reconciliation. As described previously 

in this final rule, ACOs under the 

program’s two-sided model will be 

required to repay losses within 90 days 

of receipt of notification of losses. 

Therefore, to align the interim payment 

policy with our policy regarding 

payment of shared losses, we will 

require that any monies determined to 

be owed by the ACO after first year 

reconciliation must be repaid by the 

ACO, in full, within 90 days of receipt 

of notification. 

Final Decision: We are adopting a 

policy under § 425.608 that will enable 

ACOs with start dates of April 1 and 

July 1, 2012 to opt for an interim 

payment calculation, to determine 

shared savings and losses, at the end of 

their first 12 months of program 

participation. Unless stated otherwise, 

the same methodology for determining 

shared savings and losses that applies 

under §§ 425.604 and 425.606 will 

apply to this interim payment 

calculation. For ACOs with start dates of 

April 1 or July 1, 2012, reconciliation 

for the first performance year will occur 

after the completion of the ACO’s first 

performance year, defined as 21 months 

for April 1 starters and 18 months for 

July 1 starters. ACOs must indicate in 

their application whether they are 

requesting an interim payment 

calculation. ACOs that opt for interim 

payment during their first performance 

year must demonstrate as part of their 

application that they have an adequate 

repayment mechanism in place, 

consistent with the requirements for 

two-sided model ACOs in this final rule. 

ACOs that generate shared losses under 

the interim payment calculation must 

repay such losses within 90 days of 

notification of losses. Further, any 

monies determined to be owed by an 


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ACO after first year reconciliation, 

whether as a result of additional shared 

losses or an overpayment of shared 

savings, must be repaid to CMS, in full, 

within 90 days of receipt of notification. 

3. Impact on States 

In the proposed rule, we emphasized 

that, under our proposal for a two-sided 

model under the Shared Savings 

Program, the Medicare program would 

retain the insurance risk and 

responsibility for paying claims for the 

services furnished to Medicare 

beneficiaries, and that the agreement to 

share risk against the benchmark would 

be solely between the Medicare program 

and the ACO. We did not intend that 

any of our proposals concerning the 

Shared Savings Program would render 

States responsible for bearing any costs 

resulting from the operation of this 

program. However, we noted that each 

State has its own insurance and risk 

oversight programs and that some States 

may regulate risk bearing entities, such 

as the ACOs participating in the twosided model under the Shared Savings 

Program. Accordingly, we sought 

comment on whether any of our 

proposals for the two-sided model in 

particular, or the Shared Savings 

Program in general, would trigger the 

application of any State insurance laws, 

the adequacy of those provisions that 

we have set forth, and the ways that we 

can work with ACOs and States to 

minimize the burden of any additional 

regulation. 

Comment: A few commenters 

expressed concern that the two-sided 

model could trigger some State 

insurance laws, or that States could 

decide to subject ACOs under the 

program’s two-sided model to State 

licensure requirements (for example, 

requiring the ACO to obtain an HMO 

license). In particular, a few 

commenters expressed concern about 

potential overlap between State 

insurance requirements and the 

proposed requirements to demonstrate 

an adequate repayment mechanism 

(including establishing lines of credit, 

recoupment of losses from future FFS 

payments, and obtaining reinsurance 

sufficient to account for 1 percent of per 

capita expenditures for the assigned 

beneficiaries). 

A few other commenters were 

concerned that State laws may serve as 

a barrier to ACO formation due to the 

added expense of compliance with State 

regulation of ACOs. Several commenters 

requested clarification on or 

recommended Federal protection from 

these State laws, for instance by Federal 

preemption of State insurance laws, a 

safe harbor or otherwise discouraging 

assertion of authority by State insurance 

agencies over ACOs that participate in 

the Shared Savings Program. One 

commenter suggested CMS promote a 

uniform national privacy requirement to 

preempt potentially conflicting State 

laws, particularly surrounding quality, 

data use, information sharing, and 

privacy protections. 

One commenter wanted CMS to 

ensure that States will ‘‘not require 

ACOs to obtain an HMO license * * * 

to meet financial and repayment 

requirements’’. On the other hand, 

several commenters explained that State 

licensed organizations that accept 

insurance risk must comply with strict 

financial solvency criteria, and were 

supportive of State regulation of ACOs. 

Another commenter suggested that 

ACOs that assume risk for losses and/or 

perform other health plan functions that 

are regulated at the State level (for 

example, subject to State financial and 

consumer protection standards) should 

have to meet the same standards 

required of health plans. These 

standards include financial 

requirements (for example, capital, 

reserve and solvency requirements); 

network requirements (for example, 

ensuring access to adequate numbers 

and types of providers); filing, reporting 

and disclosure requirements; and 

quality improvement requirements, 

including accreditation standards and 

other consumer protection standards. 

The commenter expressed a concern 

that if ACOs are not subject to the same 

standards as heath plans, then 

consumers receiving care from an ACO 

may have less access to care, receive 

care of lesser quality, be faced with 

increased costs, and/or be more 

vulnerable to discontinuation of 

coverage if unforeseen events occur, 

such as a flu pandemic or similar 

disaster impacting the health care 

system. One commenter suggested that 

the proposed 25 percent withhold and 

repayment mechanism may not be 

necessary for ACOs complying with 

State financial solvency requirements, 

but should be required for ACOs that are 

not licensed to assume both professional 

and institutional risk by the State in 

which they operate. 

Several commenters asked that CMS 

address whether Federal laws would 

preempt State laws that might conflict 

with the intent of the regulation. One 

commenter stated that without such 

preemption there could be barriers to 

clinical integration. One commenter 

suggested that CMS provide a list of 

States that either currently recognize or 

authorize ACOs under their State laws, 

or have pending legislation to recognize 

ACOs. 

One commenter expressed concern 

that this regulation would override State 

and local protocols concerning 

ambulance transportation. The 

commenter was concerned that 

ambulances would be required to 

deliver patients to ACO participants 

instead of the closest or most 

appropriate facility. 

Another commenter recommended 

that ACOs be exempt from State 

malpractice laws so that the burden of 

malpractice insurance and litigation 

costs are not added to the already 

significant cost of forming and 

maintaining an ACO. This commenter 

did not believe such protections for 

ACOs would preclude patients from 

pursuing claims for malpractice against 

ACO participants or from seeking 

discovery directly from such 

participants under existing State laws. 

Another commenter urged medical 

liability protections for physicians 

complying with ACO guidelines, such 

as criteria for utilizing diagnostic 

imaging. The commenter recommended 

the following approaches: 

• Deem an ACO and/or ACOparticipating physician to be an 

employee of the Public Health Service 

for purposes of any civil action that may 

arise from ACO-related services. The 

commenter stated that this approach 

would require patients alleging 

malpractice to pursue their claim under 

the Federal Tort Claims Act. 

• Allow physicians to introduce the 

relevant ACO guidelines into evidence 

as an affirmative defense to any medical 

liability claim. 

• Establish a standard of proof of 

clear and convincing evidence for any 

medical liability lawsuit in which a 

physician utilized ACO guidelines. 

Another commenter suggested that 

CMS structure the program to be flexible 

enough to facilitate State and local 

initiatives. 

Finally, a commenter, reported that its 

State department of insurance indicated 

that the proposed rule does not 

implicate any State insurance laws. 

Response: In the proposed rule we did 

not make a proposal regarding these 

State-level issues but instead, we sought 

comment on whether any of our 

proposals for the two-sided model in 

particular, or the Shared Savings 

Program in general, would trigger the 

application of any State insurance laws, 

the adequacy of those provisions that 

we have set forth, and the ways that we 

can work with ACOs and States to 

minimize the burden of any additional 

regulation. 

We do not believe it would be 

appropriate to subject ACOs to the same 

standards as health plans as a way to 


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ensure that beneficiaries receiving care 

from an ACO do not have less access to 

care or receive care of lesser quality. 

ACOs that will be participating in the 

Shared Savings Program are very 

different from health plans. Further, 

these regulations, which are based on 

Federal law, would not preempt State 

insurance laws that govern providers 

within individual States, nor would 

they override State and local protocols 

concerning ambulance transportation. In 

addition, we are not adopting the 

comments related to the application of 

the malpractice laws, including the 

recommendation that ACOs be exempt 

from State malpractice laws. 

At this time, we are not able to 

provide a list of States that currently 

recognize or authorize ACOs under their 

State laws, or have pending legislation 

to recognize ACOs. We believe it would 

be best for those interested in the 

Shared Savings Program to obtain such 

information directly from their 

individual State insurance agency. 

Final Decision: We would emphasize 

that under the Shared Savings Program, 

the Medicare program retains the 

insurance risk and responsibility for 

paying claims for the services furnished 

to Medicare beneficiaries, and that the 

agreement to share potential losses 

against the benchmark would be solely 

between the Medicare program and the 

ACO. We will further consider these 

issues in future rulemaking should we 

become aware of any unexpected 

program issues that render States 

responsible for bearing any costs 

resulting from the operation of this 

program. 

H. Additional Program Requirements 

and Beneficiary Protections 

1. Background 

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

the Act requires ACOs to demonstrate 

that they meet patient-centeredness 

criteria specified by the Secretary. We 

believe that one important aspect of 

patient centeredness is patient 

engagement and transparency. 

Therefore, we discuss in this section 

certain requirements for ACOs that we 

believe will protect beneficiaries by 

ensuring patient engagement and 

transparency, including requirements 

related to beneficiary notification and 

outreach, marketing, and public 

reporting. 

Section 1899 of the Act sets forth a 

number of requirements for ACOs. In 

addition, section 1899(a)(1)(A) of the 

Act authorizes the Secretary to specify 

additional criteria that ACOs must 

satisfy in order to be eligible to 

participate in the Shared Savings 

Program. In this section, we discuss 

how ACOs will be monitored with 

respect to program requirements and 

what actions will be taken against ACOs 

that are not in compliance with the 

requirements of the Shared Savings 

Program. 

Programs that include incentives to 

reduce costs for care may result in 

unintended consequences such as 

avoidance of at-risk patients, ‘‘stinting’’ 

on care, fraud and abuse, 

overutilization, deliberate delay in 

claims submission, and other such 

activities. We must ensure that 

beneficiaries continue to receive high 

quality and appropriate care, and that 

providers do not put beneficiaries or the 

Trust Fund at risk. In this section we 

also discuss our program integrity 

requirements, which we believe will 

help to deter inappropriate conduct by 

ACOs, while protecting the Trust Fund 

and the integrity of the Shared Savings 

Program and the Medicare program as a 

whole. 

2. Beneficiary Protections 

a. Beneficiary Notification 

As we discussed in the proposed rule, 

the statute does not mandate that ACOs 

should provide information to 

beneficiaries about the Shared Savings 

Program. Such information could 

include whether the beneficiaries are 

receiving services from an ACO 

participant or ACO provider/supplier, 

or whether the beneficiaries’ 

expenditure and quality data may be 

used to determine the ACO’s eligibility 

to receive a shared savings payment. 

However, we believe the Shared Savings 

Program lays the foundation for a 

beneficiary-centered delivery system 

that should create a strong relationship 

between beneficiaries and care 

providers based, in large part, on patient 

engagement in the new care system. 

Such engagement would be more 

difficult if beneficiaries are not aware of 

the new delivery system available 

through ACOs, or the possibility of their 

being data used to assess the ACO’s 

performance. In short, we believe 

transparency must be a central feature of 

the Shared Savings Program. 

In the proposed rule, we stated that 

we intended to develop educational 

materials and other forms of outreach, to 

provide beneficiaries with timely, 

accurate, clear, and understandable 

information about the Shared Savings 

Program. Additionally, we indicated 

that we would update the annual 

Medicare & You Handbook to contain 

information about the Shared Savings 

Program and ACOs. 

In the proposed rule, we proposed 

specifically to require ACO participants 

to post signs in their facilities indicating 

their ACO provider’s/supplier’s 

participation in the Shared Savings 

Program and to make available 

standardized written information 

developed by CMS to the Medicare FFS 

beneficiaries whom they serve. ACO 

participants would be required to 

provide standardized written notices of 

both their ACO provider’s/supplier’s 

participation in the Shared Savings 

Program and the potential for CMS to 

share beneficiary identifiable data with 

the ACO. 

Likewise, we discussed whether 

beneficiaries should be made aware 

when an ACO participant does not 

renew its agreement at the end of the 

agreement period, or an ACO’s 

participation agreement has been 

terminated. Thus, we proposed that 

ACOs be required to provide 

beneficiaries notice in a timely manner 

if the ACO participant or ACO provider/ 

supplier will no longer be participating 

in the Shared Savings Program. We 

proposed the notice should include the 

effective date of the termination of the 

ACO agreement. 

For a complete discussion of these 

notification proposals and rationale, 

please refer to the proposed rule 

published April 7, 2011 (76 FR 19567). 

Comment: Many commenters 

supported our proposal to require ACO 

participants to notify FFS patients at the 

point of care that their ACO provider/ 

supplier is participating in this Shared 

Savings Program. Some suggested CMS 

collaborate with stakeholders to educate 

beneficiaries about ACOs and the 

program and to seek stakeholder input 

on the materials CMS intends to 

provide, given the complexities of the 

program. Some suggested ensuring that 

language is culturally and linguistically 

appropriate and addresses low health 

literacy levels. Others suggested notices 

should include a detailed explanation of 

the expectations for patient engagement 

under the Medicare Shared Savings 

Program, and the ability of patients to 

receive care outside the ACO if they 

wish. Others suggested that ACOs be 

required to obtain the signature of the 

beneficiary in order to provide a 

mechanism for monitoring compliance 

with this requirement. 

Commenters varied in their opinion of 

whether notification of the program 

should come from the ACO or CMS. 

One commenter suggested first contact 

should be from practitioners as trusted 

partners in the beneficiary’s care, rather 

than from CMS. Other commenters 

suggested that CMS should ‘‘bear the 

financial responsibility for such a 


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program’’ and that ‘‘since the Medicare 

program has created a strong 

relationship with its beneficiaries, it is 

more appropriate that the Medicare 

program take all responsibility for 

notifying beneficiaries of the benefits 

and opportunities of receiving care 

through an ACO.’’ Some suggested that 

CMS send a letter to a participating 

PCP’s active Medicare patients on an 

annual basis notifying them of the 

potential use of their data to assess ACO 

performance, and that all 

communications to beneficiaries should 

be written in ‘‘plain English’’. 

Conversely, some commenters 

strongly objected to the proposed 

notification requirements for ACOs, 

suggesting that signs, even if developed 

by CMS, would not be able to convey 

the complexities of the program and 

would be ‘‘confusing and annoying’’ to 

beneficiaries as well as ‘‘onerous and 

burdensome’’ to ACOs. A health care 

public policy center criticized the sign 

proposal as ‘‘costly, of unproven value, 

and duplicative given the requirement 

to provide written information, and 

therefore contributing to the problem of 

unnecessary administrative and 

financial burdens on ACOs.’’ 

Response: We agree with those 

commenters who advocated that we 

retain a notification policy in this final 

rule. We believe that our proposal to 

inform beneficiaries at the point of care 

was tested and successfully employed 

in the PGP demonstration, and did not 

prove to be ‘‘annoying’’ or ‘‘confusing’’ 

to beneficiaries. Although we appreciate 

one commenter’s concerns that the sign 

proposal might be costly, of unproven 

value, and duplicative, we believe that 

posting signs will serve the purpose of 

calling the attention of beneficiaries to 

the existence of the ACO and the choice 

of the ACO participant and its ACO 

providers/suppliers to participate in it, 

ultimately resulting in increased 

transparency and the opportunity for 

improving beneficiary engagement in 

this care delivery model. We believe 

that it is useful and important for every 

fee-for-service beneficiary to know they 

are receiving services from participants 

in such a program, even those 

beneficiaries whose data will not 

ultimately be used to assess the ACO’s 

performance. This is because ACOs are 

intended to develop special methods for 

coordinating care and improving quality 

that should affect the care of every 

beneficiary and improve the engagement 

of the beneficiary as a consumer of 

health care, whether that beneficiary is 

ultimately ‘‘assigned’’ to the ACO or 

not. The presence of signs and written 

materials will provide a useful initial 

notification for every beneficiary and 

that could encourage beneficiaries to 

raise questions and engage in 

discussions with the physicians and 

other providers about the ACO and its 

potential effects on their care and to 

become a more active consumer and 

partner in the care delivered. Nor 

should posting signs be inappropriately 

burdensome, since CMS will develop 

appropriate language and there will be 

a limited number of locations in each 

ACO in which the signs will need to be 

posted. Finally, we believe that the 

notice should appropriately come from 

the ACO participant and its associated 

ACO providers/suppliers because this is 

the first and most immediate point of 

contact with the beneficiary. Therefore, 

we believe that it is appropriate to 

finalize the requirement that the ACO 

agree to post signs in the facilities of 

ACO participants indicating the ACO 

provider’s/supplier’s participation in 

the Shared Savings Program and make 

available standardized written notices to 

Medicare FFS beneficiaries whom they 

serve. 

We agree with the recommendation 

from commenters suggesting we ensure 

the use of ‘‘plain writing’’, and we 

would note that President Obama signed 

the Plain Writing Act of 2010 on October 

13, 2010, which is intended to promote 

clear Government communication that 

the public can understand and use.’’ We 

will incorporate the requirements of the 

Plain Writing Act in all CMS 

communications and standardized 

language regarding the Shared Savings 

Program. We will also clarify that 

beneficiary communications, such as 

notifications of provider participation in 

an ACO in the Shared Savings Program, 

must meet the applicable marketing 

guidelines described later in this 

section. 

Final Decision: We are finalizing our 

proposal to require ACO participants to 

post signs in their facilities indicating 

their associated ACO provider’s/ 

supplier’s participation in the Shared 

Savings Program and to make available 

standardized written notices developed 

by CMS to Medicare FFS beneficiaries 

whom they serve. All standardized 

written information provided by CMS 

will be in compliance with the Plain 

Writing Act of 2010. We are clarifying 

that the standardized written notices 

must be furnished in settings in which 

fee-for-service beneficiaries are 

receiving primary care services. 

Additionally, as we noted in the 

proposed rule, under a retrospective 

assignment methodology it would not 

have been possible for ACOs to notify 

beneficiaries of the ACO’s participation 

in advance of the period in which the 

beneficiary may seek services from an 

ACO participant or ACO provider/ 

supplier. We believe the revised policy 

of preliminary prospective assignment 

with retrospective reconciliation that we 

are establishing in section II.E. of this 

final rule gives ACOs the information 

necessary to provide advance notice, if 

the ACO so chooses, to some 

beneficiaries who have previously 

received services from ACO providers/ 

suppliers and who are likely to continue 

to do so. Specifically, we are revising 

our policy such that ACOs may choose 

to provide notification of their 

participation to the beneficiaries who 

appear on the preliminary prospective 

assignment list and quarterly 

assignment lists (described in section 

II.D. of this final rule). 

Finally, to minimize beneficiary 

confusion and reduce burden on ACOs 

and its ACO providers/suppliers, we are 

modifying our rule such that in 

instances where either an ACO does not 

renew its agreement at the end of the 

agreement period, or an ACO’s 

participation agreement is terminated, 

ACOs will not be required to provide 

beneficiaries notice that the ACO, its 

ACO participants and its ACO 

providers/suppliers will no longer be 

participating in the Shared Savings 

Program. Similarly, ACO participants 

and ACO providers/suppliers that 

terminate their participation in an ACO 

will not be required to provide such 

notice to beneficiaries. All beneficiary 

notification and signage are included in 

the definition of ‘‘marketing materials 

and activities’’ and must comply with 

applicable marketing requirements 

described later in this section. 

b. ACO Marketing Guidelines 

We realize that care coordination is an 

important component of the Shared 

Savings Program; however, the potential 

for shared savings may be an incentive 

for ACOs, ACO participants, its ACO 

providers/suppliers, or other 

individuals or entities performing 

functions or services related to ACO’s 

activities to engage in marketing 

behavior that may confuse or mislead 

beneficiaries about the Shared Savings 

Program or their Medicare rights. 

As an aspect of patient centeredness, 

we stated in the proposed rule we 

believe it is appropriate and consistent 

with the purpose and intent of the 

statute to limit and monitor the use of 

beneficiary communications specifically 

related to the ACO operations or 

functions as well as ACO marketing 

activities and materials to ensure that 

such communications and marketing by 

ACOs are used only for appropriate 

purposes, such as notification that a 

beneficiary’s health care provider is 


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participating in the ACO, issuance of 

any CMS required notices, or 

notification of provider or ACO 

terminations. We therefore proposed a 

definition of ACO marketing materials 

and activities and proposed that CMS 

approve materials or activities, or any 

revisions to previously approved 

materials in advance of their use. We 

proposed that failure to comply with 

marketing requirements could result in 

a CAP or termination, at our discretion. 

For a complete discussion of these 

notification proposals and rationale, 

please refer to (76 FR 19642). 

Comment: Several beneficiary 

advocacy organizations submitted 

comments strongly supporting our 

proposed marketing guidelines. They 

shared our concern that beneficiaries 

could be misled into thinking that an 

ACO is similar to a managed care 

organization and that they must receive 

services some or all services from the 

ACO participants and associated ACO 

providers/suppliers. These commenters 

also raised concerns that beneficiaries 

could be targeted by aggressive 

marketers seeking to take unfair 

advantage of them. Additionally, some 

commenters offered specific suggestions 

for strengthening our guidelines such 

as— 

• Making approval of an ACO’s 

application to the program dependent 

on approval of their marketing 

materials; 

• Expanding the definition of 

marketing materials and activities to 

include marketing via social media. 

• Providing beneficiary notification 

in ‘‘plain’’ English. 

In contrast, providers and provider 

advocates questioned the necessity and 

feasibility of our proposed marketing 

guidelines. These commenters disagreed 

that there is any significant potential for 

beneficiaries to be misled and noted that 

to require approval of marketing 

materials in advance imposes a financial 

and operational burden on the ACO. 

Some commenters posited that ACOs 

should be allowed to communicate with 

beneficiaries as necessary without any 

prior approval because physicians have 

long-standing relationships with their 

patients, families and the communities 

they serve, and their honesty with their 

patients is critical to maintaining open, 

positive relationships. These 

commenters recommended reducing the 

burden imposed by our proposal by, for 

example: 

• Placing a limitation on review and 

approval of materials to those used 

specifically to notify beneficiaries of a 

provider’s participation in an ACO and 

to describe the Shared Savings Program 

in addition to the notification informing 

beneficiaries of their opportunity to 

decline data sharing. 

• Providing templates or model 

language for ACOs to use. 

• Implementing a ‘‘file and use’’ 

method similar to the one used in the 

MA program and requiring the ACO to 

certify compliance with marketing 

requirements; 

• Permitting ACOs to use outreach 

materials if they have been approved by 

a Regional Health Improvement 

Collaborative (RHIC) or if they have 

been developed and issued jointly with 

an RHIC. 

Response: The wide range of 

comments demonstrates the importance 

of this topic to stakeholders, and the 

importance of balancing beneficiary 

protection with the burden marketing 

requirements imposed on potential 

ACOs. We agree with commenters that 

our definition of marketing materials 

should be refined in order to offer 

additional beneficiary protections. We 

agree with commenters that social 

media can be used as a marketing tool 

and therefore will modify our definition 

of ‘‘marketing materials and activities’’ 

to include social media, such as Twitter 

or Facebook. 

We are also sensitive to the 

operational burden imposed by our 

proposal that the ACO seek prior 

approval before the use of any 

marketing materials. We decline the 

commenter’s suggestion to make an 

ACO’s application approval dependent 

on approval of marketing materials 

because it would not address the use of 

new or revised marketing materials and 

activities after the approval of an ACO’s 

application to participate in the Shared 

Savings Program. In light of the 

comments, this final rule provides that 

marketing materials and activities may 

be used or conducted 5 business days 

following their submission to CMS, 

provided that the ACO certifies 

compliance with applicable marketing 

requirements and CMS does not 

disapprove the marketing materials and 

activities. This final rule further 

provides that marketing materials and 

activities are deemed approved after 

expiration of the initial five day review 

period, but permits CMS to disapprove 

marketing materials and activities at any 

time, including after the expiration of 

the initial 5 day review period. The 

ACO, ACO participant, or ACO 

provider/supplier, as applicable, must 

discontinue use of any marketing 

materials or activities disapproved by 

CMS and may be sanctioned for using 

disapproved marketing materials and 

activities. 

We disagree with the commenter who 

suggested that there is little potential for 

marketing materials and activities to 

mislead beneficiaries. To ensure the 

accuracy of marketing materials, this 

final rule imposes a requirement that 

marketing materials and activities must 

not be inaccurate or misleading. In 

addition, we will make template 

language available for certain marketing 

materials and require that such template 

language be used when available. We 

agree with commenters that it is 

desirable for marketing and notification 

materials to be provided in ‘‘plain 

writing’’ according to the definition of 

the term ’’plain writing’’ which means 

writing that is clear, concise, wellorganized, and follows other best 

practices appropriate to the subject or 

field and intended audience. We note 

that the Plain Writing Act of 2010, 

signed by President Obama on October 

13, 2010, applies only to Government 

communications. To the extent that 

CMS supplies templates or model 

language for ACOs to use in marketing 

materials, we will ensure it complies 

with the Plain Writing Act of 2010. 

In response to commenters 

recommending limiting review of only 

certain marketing materials and 

activities, we clarify that our proposed 

definition of marketing materials and 

activities includes materials ‘‘used to 

educate, solicit, notify, or contact 

Medicare beneficiaries or providers and 

suppliers regarding the Shared Savings 

Program.’’ Additionally, our definition 

of marketing materials and activities 

excludes materials that do not include 

information about the ACO, its ACO 

participants or its ACO providers/ 

suppliers. 

Comment: Commenters recommended 

that CMS prohibit certain behaviors 

such as discriminatory marketing 

directed at certain types of beneficiaries 

or beneficiaries with certain health 

profiles, marketing that misleads or 

confuses beneficiaries about benefits 

and services, making claims that the 

ACO is recommended or endorsed by 

Medicare. Commenters recommended 

modifying the definition of ‘‘marketing 

materials and activities’’ to remove the 

exception for ‘‘informational materials 

customized or limited to a subset of 

beneficiaries,’’ stating it creates a 

significant loophole for ACOs to engage 

in discriminatory behaviors. 

Response: We understand the 

commenters’ concerns and agree that 

targeting certain types of beneficiaries 

including beneficiaries with certain 

health profiles or beneficiaries with 

certain racial or ethnic profiles or with 

language barriers could be used in some 

circumstances to mislead beneficiaries 

and should be prohibited as 

discriminatory marketing. However, we 


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also believe that some targeted materials 

are necessary for care coordination. For 

example, an ACO may send materials 

targeted to heart patients because they 

have a specialized heart facility that can 

coordinate the care of such individuals. 

Requiring such materials to be sent to 

all beneficiaries would be less effective 

and imposes an additional financial 

burden on the ACO. Thus, where 

targeted materials promote beneficiary 

access and care coordination, they likely 

do not constitute discriminatory 

marketing. Because we do not believe 

that all targeted materials are 

necessarily discriminatory, we are not 

revising the definition of ‘‘marketing 

materials and activities’’ as suggested by 

the commenters. We are instead 

modifying the marketing requirements 

to provide that marketing materials and 

activities must not be used in a 

discriminatory manner or for 

discriminatory purposes. 

Final Decision: We are finalizing the 

definition of marketing materials and 

activities without substantive change at 

§ 425.20 of this final rule. We note that 

the definition is revised to include 

language proposed in the preamble that 

was inadvertently omitted from the 

proposed regulation text. Accordingly, 

§ 425.20 excludes from the definition of 

marketing materials or activities those 

materials and activities that do not 

constitute ‘‘marketing’’ under 45 CFR 

164.501 and 164.508(a)(3)(i). 

Further, this final rule allows ACOs to 

use marketing materials 5 days after 

filing them with CMS if the organization 

certifies that the marketing materials 

comply with all applicable marketing 

requirements. We have revised the 

regulation to specify that all marketing 

materials and activities must use 

template language when available, must 

comply with the prohibition set forth at 

§ 425.304(a) regarding certain 

beneficiary inducements, must not be 

used in a discriminatory manner or for 

discriminatory purposes, and must not 

be inaccurate or misleading. Materials 

will be provided in ‘‘plain’’ language 

that is easily comprehensible, clear, 

concise, well organized, and complies 

with requirements of the Plain Writing 

Act of 2010. 

Finally, if ACOs are found not in 

compliance with marketing guidelines, 

they will be subject to penalties as 

discussed later in this section of the 

final rule. 

c. Public Reporting and Transparency 

Increasingly, transparency of 

information in the health care sector is 

seen as a means to facilitate more 

informed patient choice, offer 

incentives, and feedback that help 

improve the quality and lower the cost 

of care, and improve oversight with 

respect to program integrity. While the 

Act did not include a specific 

requirement for public reporting and 

transparency related to the Shared 

Savings Program, improved 

transparency would support a number 

of program requirements. In particular, 

increased transparency would be 

consistent with and support the 

requirement under section 1899(b)(2)(A) 

of the Act for an ACO to be willing to 

‘‘become accountable for the quality, 

cost, and overall care’’ of the Medicare 

beneficiaries assigned to it. 

Therefore, as stated in the proposed 

rule, we believe it is desirable and 

consistent with section 1899(b)(2)(A) of 

the Act for several aspects of an ACO’s 

operation and performance to be 

transparent to the public. We proposed 

that certain information regarding the 

operations of the ACO would be subject 

to public reporting to the extent 

administratively feasible and permitted 

by law. We proposed that each ACO 

must be responsible for making this 

information available to the public in a 

standardized format that we will make 

available through guidance. This 

requirement would be included in each 

ACO’s agreement. For a more complete 

discussion of these proposals and 

rationale, please refer to (76 FR 19653). 

Comments: Numerous commenters 

wrote in support of public reporting and 

transparency but varied in their 

recommendations about how the 

reporting should occur. A few 

commenters suggested expanding public 

reporting beyond what was proposed. 

Some commenters supported ACOs 

reporting the data rather than CMS. 

However, other commenters believed 

that the cost and administrative burden 

of asking ACOs to report measures 

seemed unnecessary and possibly less 

effective than making CMS responsible 

for public reporting. One commenter 

suggested CMS work with states to 

develop public reporting sites. One 

commenter stated that both CMS and 

the ACO should report the data. A few 

recommended that ACOs be allowed 

some flexibility in how the reporting 

occurs in order to best meet the needs 

of their patients. A few commenters 

suggested public reporting not occur 

until the second or third year to allow 

ACOs to develop the necessary 

infrastructure and expertise. We 

received few comments regarding 

whether additional information should 

be required to be publicly reported by 

ACOs with a two-sided model. A few 

commenters suggested that ACOs be 

allowed to review and verify CMS data 

before the information is released. 

Response: We believe it is consistent 

with section 1899(b)(2)(A) of the Act for 

several aspects of an ACO’s operation 

and performance to be transparent to the 

public. Public reporting also supports 

the mandate for ACOs to be willing to 

‘‘become accountable for the quality, 

cost, and overall care’’ of the Medicare 

beneficiaries assigned to it. Reports on 

ACO quality and cost performance will 

hold ACOs accountable and contribute 

to the dialogue on how to drive 

improvement and innovation in health 

care. Public reporting of ACO cost and 

quality measure data would improve a 

beneficiary’s ability to make informed 

health care choices, and facilitate an 

ACO’s ability to improve the quality and 

efficiency of its care. We believe 

publicly reporting certain ACO quality 

data on the Physician Compare Web site 

is a good first step toward Shared 

Savings Program transparency, 

consistent with comments and other 

quality program efforts. The mechanism 

for public reporting of other quality 

measures, such as measures of patient 

experience and claims- and 

administrative-based measures, will be 

addressed in guidance. 

Final Decision: We are finalizing our 

proposal for public reporting as outlined 

in § 425.308. Consistent with the 

proposed regulation text, the final 

public reporting provision requires 

ACOs to publicly report the identity of 

each member of the governing body, not 

just the ACO participants. 

We expect that the reporting of 

quality performance standards will align 

with the proposed new public reporting 

requirements under the Physician 

Quality Reporting System (76 FR 

42841). Specifically, because an ACO 

will be considered to be a group practice 

under the Physician Quality Reporting 

System GPRO under the Shared Savings 

Program, we intend to report ACO 

quality performance GPRO measures on 

Physician Compare along with the 

performance of all other PQRS group 

practices. However, we note that this 

modification is contingent upon the 

final policies regarding public reporting 

under the PQRS, which will be 

announced in the CY 2012 Physician 

Fee Schedule final rule that will be 

issued later this year. We will issue 

guidance to provide ACOs with 

guidelines regarding public reporting of 

the quality performance scores. 

3. Program Monitoring 

a. General Methods Used To Monitor 

ACOs 

In implementing other Medicare 

programs, including MA and the 

Medicare Prescription Drug programs, 


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we have gained extensive experience in 

monitoring organizational, provider, 

and supplier behavior with respect to 

compliance with the Medicare program 

and program integrity requirements, 

quality measurement, avoidance of 

particular types of beneficiaries, 

overutilization, and claims submissions. 

General monitoring methods can be 

used, for example, to assess whether the 

ACO provider/suppliers have been 

stinting on care provided to 

beneficiaries assigned to the ACO in an 

effort to artificially create savings to 

obtain a shared savings payment, or 

over utilizing items and services 

furnished to beneficiaries who are not 

assigned to the ACO in order to make 

up revenues it may no longer be 

receiving due to other efficiencies or to 

assess if an ACO is steering beneficiaries 

through selective billing for the purpose 

of affecting shared savings and losses. A 

number of factors may trigger our 

heightened oversight of ACOs by us, 

including conduct that may form the 

basis for terminating the ACO agreement 

described in this section II.H.5 of this 

final rule. Given the goals of the Shared 

Savings Program, we anticipate 

particularly close examination of ACOs 

that incur large losses. 

In the proposed rule, we proposed to 

employ many of the methods we have 

developed for purposes of the MA and 

Medicare prescription drug programs to 

monitor and assess ACOs, ACO 

participants, and ACO providers/ 

suppliers for noncompliance with 

statutory and regulatory eligibility and 

other program requirements. We 

proposed that the methods we could use 

to monitor ACO performance may 

include, but are not limited to the 

following: 

• Analysis of specific financial and 

quality data as well as aggregated 

annual and quarterly reports. 

• Site visits. 

• Collection, assessment and follow 

up investigation of beneficiary and 

provider complaints. 

• Audits (including, for example, 

analysis of claims, chart review, 

beneficiary surveys, coding audits). 

If based upon the results of our 

monitoring activities we conclude that 

the ACO may be subject to termination, 

we proposed to use our discretion to 

take any or all of the following actions 

prior to termination of the ACO from the 

Shared Savings Program: 

• Provide a warning notice to the 

ACO describing the issue of concern. 

• Request a CAP from the ACO. 

• Place the ACO on a special 

monitoring plan. 

We sought comment on additional 

actions or sanctions that may be 

appropriate prior to termination. 

Comment: Some commenters agreed 

that a number of beneficiary protection 

policies within the ACO program, 

including rules around contacting the 

beneficiaries directly, monitoring 

avoidance of at-risk beneficiaries, 

monitoring beneficiary and provider 

complaints, record retention, 

termination, payment structure within 

the ACO, and monitoring quality 

metrics were needed to help avert any 

unintended consequences to 

beneficiaries. 

Some commenters suggested 

additional protections were necessary, 

stating that our proposed monitoring 

methods lacked appropriate safeguards 

and operational details necessary to 

create a comprehensive program that is 

quality driven. Specifically, commenters 

suggested that the ACO should have a 

provider network that is inclusive of all 

medically necessary services, that ACOs 

should be held to the same standards 

required for MA plans, or that ACOs be 

required to implement a comprehensive 

independent monitoring program for 

monitoring ACO performance that 

includes collecting data on race and 

ethnicity, validating beneficiary 

satisfaction surveys, and providing 

oversight for financial solvency in order 

to ensure consumer protections and 

market stability. 

Other commenters suggested that 

CMS implement an evaluation or 

monitoring program to allow lessons 

learned from this program to be 

integrated in the larger Medicare 

program and to determine the following: 

Whether an ACO is achieving desired 

goals, such as less fragmented care and 

improvement of quality of care beyond 

the set of identified performance 

measures; whether or not elements of 

the ACO structure are contributing to 

any identified improvements or whether 

they are having a negative effect; 

whether there are positive 

characteristics of certain ACOs that can 

be transferred to other ACOs; and 

whether ACOs work better in certain 

environments (rural vs. urban) or with 

certain populations. Finally, some 

commenters suggested that CMS should 

have just cause to audit an ACO or its 

participants because audits are costly 

and burdensome to Medicare providers. 

They suggested that CMS narrow the 

types of organizations to which it 

applies this open-ended audit policy or 

reduce monitoring requirements after an 

ACO has successfully delivered a 

minimum of 5 percent savings for 3 

years in a row. 

Response: We believe that the 

beneficiary and program monitoring and 

protections we are finalizing contain 

appropriate safeguards and are 

necessary to ensure that unintended 

consequences are minimized. We 

reiterate that the Shared Savings 

Program is built on the FFS system, and 

beneficiaries retain all rights and 

benefits under traditional FFS Medicare. 

Therefore, we do not believe it is 

necessary to impose the same 

protections or network adequacy 

requirements as are present in the MA 

program because the Shared Savings 

Program does not lock-in beneficiaries 

or restrict beneficiary access to services 

or their choice of providers. However, 

we have and will use our experience 

with monitoring MA plans to inform our 

monitoring of ACOs. 

In our monitoring, we intend to rely 

primarily on claims-based measures and 

other information provided by 

beneficiaries and providers. We will 

conduct a sufficient number of audits 

necessary to assess ACOs performance. 

We disagree with the comments 

suggesting that we should narrow the 

number or type of organizations that are 

subject to audits or that audits should be 

conducted only if there is a suspicion of 

wrong doing of some other ‘‘good 

cause’’ to audit. To protect the program, 

we need the flexibility to audit and 

monitor compliance under a variety of 

circumstances. This is particularly 

critical for the Shared Savings Program, 

not only because it is a new program, 

but also because it includes the waiver 

of certain fraud and abuse authorities. 

However, as a practical matter, we may 

choose to target our resources to audit 

or monitor certain organizations or 

compliance with certain program 

requirements. 

We agree with commenters that 

evaluation of the Shared Savings 

Program and ACOs can help us 

determine the impact and effectiveness 

of the program. We intend to improve 

the Shared Savings Program over time 

by integrating lessons learned by 

modifying program requirements as 

necessary to reflect lessons that 

demonstrated positive and effective 

characteristics of ACOs, or to mitigate 

any negative results. We may also use 

lessons learned to improve upon 

existing Medicare programs. 

Final Decision: We appreciate both 

the support for our monitoring 

proposals by providers and the 

beneficiary advocate community, as 

well as the concerns expressed 

regarding the need for increased 

monitoring and concerns regarding 

burden on providers and ACOs. We 

believe our proposals balance these 


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concerns. Therefore, we will finalize 

without substantive change the proposal 

to use the many methods at our disposal 

to monitor ACO performance and 

ensure program integrity, including but 

not limited to, undertaking an audit if 

we determine it is necessary. 

b. Monitoring Avoidance of At-Risk 

Beneficiaries 

(1) Definition of At-Risk Beneficiaries 

Section 1899(d)(3) of the Act 

authorizes the Secretary to ‘‘impose an 

appropriate sanction’’ on an ACO, 

including ‘‘termination from the 

program,’’ if the Secretary determines an 

ACO ‘‘has taken steps to avoid patients 

at-risk in order to reduce the likelihood 

of increasing costs to the ACO.’’ While 

the statute does not define what 

constitutes ‘‘patients at-risk,’’ we 

proposed a definition which is detailed 

in the proposed rule at (76 FR 19625). 

We sought comment on this definition 

of ‘‘at-risk beneficiary’’ and whether 

other beneficiary characteristics should 

be considered in determining whether a 

beneficiary is ‘‘at-risk.’’ 

Comment: Several commenters 

expressed concern that our definition of 

at-risk beneficiaries did not include 

certain high-risk diseases and 

conditions for which patients may need 

specialized care or follow-up during 

recovery. They made many suggestions 

for additional conditions or diagnoses 

that would cause a beneficiary to be 

considered at-risk such as— 

• Persons with disabilities; 

• Beneficiaries with limited 

proficiency in English or low economic 

status; 

• Non-compliant patients; 

• Patients who choose to have 

elective surgeries; 

• Patients with recent diagnoses or 

conditions that are expected to result in 

increased cost, such as amputation, 

major multiple trauma, fracture of 

femur, various neurological disorders 

(such as stroke, spinal cord injury, brain 

injury, multiple sclerosis, motor neuron 

diseases, polyneuropathy, muscular 

dystrophy, and Parkinson’s disease), 

burns, bilateral knee and hip joint 

replacements, specific types of 

rheumatoid and osteoarthritis, 

transplant patients and beneficiaries 

with end-stage renal disease, persons 

diagnosed with diabetes or pre-diabetes, 

cancer patients and survivors; 

• Patients with mental health or 

substance use disorders (MH/SUD); or 

• Patients seen in an emergency room 

3 times within 12 months. 

Response: We believe that our 

proposed definition is general enough to 

include most of the specific suggestions 

made by commenters. For example, the 

suggestion was made to include 

beneficiaries who have brain injuries or 

other chronic conditions. We believe 

beneficiaries who have brain injury or 

other chronic conditions suggested by 

commenters are included in our 

proposed definition which we proposed 

in preamble would include beneficiaries 

who have one or more chronic 

conditions. We also believe that many 

beneficiaries with low socioeconomic 

status are included in our definition 

which includes dually eligible 

beneficiaries. We disagree that 

beneficiaries with limited proficiency in 

English should be included in the 

definition of at-risk beneficiaries. We do 

not believe that limited English 

proficiency puts patients at risk for 

significant increases in health care 

costs. However, we note, that this final 

rule prohibits ACOs, ACO participants, 

ACO providers/suppliers, and other 

individuals or entities performing 

functions or services related to ACO 

activities from engaging in 

discriminatory marketing directed at 

certain types of beneficiaries, includes 

those with language barriers. We believe 

that patients seen in an emergency room 

to three times in a 12 month period are 

included in the proposed definition of 

at-risk which specifically mentions 

emergency room use. However, we agree 

with commenters that our proposed 

definition should be expanded to 

include patients who are entitled to 

Medicare because of disability and those 

who are diagnosed with mental health 

or substance use disorders. Such 

conditions could also be very high-cost 

conditions and thus make these 

beneficiaries targets for avoidance. We 

also agree that as we learn more about 

the ACOs and the Shared Savings 

Program, other types of beneficiaries 

may be considered at-risk for avoidance 

Final Decision: Given our reasoning 

described previously, we are finalizing 

the definition of at-risk beneficiary as 

proposed in § 425.20, with the addition 

of patients who are entitled to Medicaid 

because of disability and who are 

diagnosed with a mental health or 

substance abuse disorder. 

(2) Penalty for Avoidance of At-Risk 

Beneficiaries 

To identify ACOs that could be 

avoiding at-risk beneficiaries, we 

proposed to use a variety of methods 

that would begin with an analysis of 

claims and examination of other 

beneficiary-level documentation to 

identify trends and patterns suggestive 

of avoidance of at-risk beneficiaries. The 

results of these analyses could lead to 

further investigation and follow-up with 

beneficiaries or the ACO (including 

ACO participants, ACO providers/ 

suppliers, and other individuals or 

entities performing functions or services 

related to ACO’s activities) in order to 

determine whether avoidance of at-risk 

beneficiaries has occurred. For example, 

as a part of our monitoring for 

avoidance of at risk beneficiaries, we 

would be interested in assessing the 

changes in risk adjustment of the 

assigned population over time. Changes 

in risk adjustment of the beneficiaries 

assigned in the prior year who are not 

assigned in the current performance 

year could help determine whether 

there is a pattern of avoidance. In cases 

where it appears the ACO has 

developed a pattern of avoidance, we 

stated we may determine an audit is 

necessary. If as a result of our analysis 

we conclude that an ACO has been 

avoiding at-risk beneficiaries during a 

performance year, we proposed to notify 

the ACO of our determination and to 

require the ACO to submit a CAP for our 

approval as discussed in later in this 

section II.H.5 of this final rule. We 

proposed that the CAP must address 

actions the ACO would take to ensure 

that the ACO, ACO participants, ACO 

providers/suppliers, and other 

individuals or entities performing 

functions or services related to ACO 

activities cease avoidance of at-risk 

beneficiaries and that the CAP must be 

implemented as approved. In addition, 

we proposed that the ACO would be reevaluated both during and at the end of 

the CAP. If we determine that the ACO 

has continued to avoid at-risk 

beneficiaries, the ACO would be 

terminated from the Shared Savings 

Program. We also proposed that an ACO 

operating under a CAP because it has 

avoided at-risk beneficiaries would not 

receive shared savings payments while 

under a CAP regardless of the 

performance period in question, and 

would not be eligible to earn any shared 

savings for the period during which it 

is under this CAP. 

We solicited comments on whether 

lesser sanctions would be appropriate 

when an ACO avoids at-risk 

beneficiaries. 

Comment: Commenters shared CMS’ 

concern that ACOs may seek to avoid atrisk beneficiaries. While the 

commenters did not directly address our 

proposed methods for monitoring, they 

did suggest that CMS implement a 

robust monitoring strategy to ensure 

beneficiary protections such as: 

Requiring ACOs to have an effective 

grievance process in place to ensure 

beneficiaries have recourse against 

unfair practices; requiring ACOs to 

provide access to specialists trained in 


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the care of complex, high-need patient 

populations (for example oncology 

patients or patients needing palliative or 

hospice care) across diagnostic 

categories and that the penetration of 

palliative care and hospice care among 

high-need high-cost beneficiaries be 

assessed; requiring ACOs to monitor 

primary care physician’s referral 

patterns to ensure that medically 

necessary services are not denied to 

Medicare patients with cancer; use of 

individualized care plans for patients atrisk and other potentially critical 

conditions, and strict enforcement of 

penalties for avoiding beneficiaries. 

A few commenters expressed 

concerns that CMS’ proposal was not 

robust enough. These commenters 

stated they believe that CMS would only 

enforce penalties for avoiding patients 

at-risk in extreme circumstances and 

urged CMS to strictly enforce penalties. 

A few commenters suggested lesser 

sanctions, including the cessation of or 

reduction in the assignment of new 

beneficiaries, a reduction in the amount 

of shared savings payments, or a fine for 

each instance of avoiding an at-risk 

beneficiary. 

Response: We believe that the 

proposed policy is necessary for 

beneficiary and program protections and 

is in accordance with section 1899(d)(3) 

of the Act. We do not agree that we 

should use the lesser sanctions 

suggested by the commenters for 

avoidance of at-risk beneficiaries 

because of the serious implications that 

avoidance of high risk patients has on 

Medicare beneficiaries. Also, this is a 

new program and we do not have any 

experience to determine the true 

severity of this issue. However, we may 

consider lesser sanctions as we gain 

experience. It is our intention to create 

policies that ensure beneficiary and 

program protections while minimizing 

the burden on ACOs. Since Medicare 

FFS beneficiaries have many 

mechanisms at their disposal to lodge 

their grievances against practitioners 

involved in their care (including 1–800 

Medicare, the Medicare ombudsman’s 

office, quality improvement 

organizations and others), we do not 

believe an additional grievance 

mechanism needs to be developed that 

is specific to ACOs. Instead, we will 

monitor complaints by beneficiaries 

assigned to ACOs that come in through 

these established mechanisms. We 

believe the CAP process described 

previously provides ACOs the 

opportunity to explain and correct any 

deficiencies to potentially avoid 

termination or other penalties. 

Therefore, we are finalizing our 

proposal to place ACOs under a CAP to 

correct the deficiency before 

termination of its participation 

agreement and to require the ACO to 

forfeit any shared savings it was eligible 

for while under the CAP. However, in 

response to comments, we will modify 

our proposal to retain the discretion to 

impose immediate termination in 

appropriate cases. 

Final Decision: We are finalizing our 

proposal to use various methods at our 

disposal, as discussed previously in this 

section to monitor ACOs for avoidance 

of at-risk beneficiaries, and the actions 

we will take if we conclude an ACO has 

been avoiding at-risk beneficiaries 

(under § 425.316). In response to 

commenter concerns, we are retaining 

in this final rule the right to terminate 

immediately in appropriate cases. 

c. Compliance With Quality 

Performance Standards 

Section 1899(d)(4) of the Act 

authorizes the Secretary to terminate an 

agreement with an ACO that does not 

meet the established quality 

performance standards. In the proposed 

rule, we made proposals related to 

termination of an ACO for failure to 

meet the established quality 

performance standards. For a complete 

discussion and description of our 

proposals, please refer to (76 FR 19625). 

Comments: A few commenters 

believed that our proposal for 

monitoring compliance with quality 

performance standards were limited and 

insufficient. Commenters suggested that 

the language be revised to remove the 

warning for the first incident and to add 

language that the ACO will be evaluated 

during the subsequent 3 to 6 months 

depending on the number of affected 

beneficiaries and the seriousness of the 

problem, and if the ACO is still out of 

compliance, CMS may terminate the 

ACO or take other actions such as a 

reduction in shared savings payments. 

Additionally, commenters stated that 

CMS should differentiate between the 

failure to meet quality performance 

standards because of lack of data 

infrastructure rather than the failure to 

satisfy quality performance standards 

due to provisions of poor quality care. 

It was suggested that ACOs that furnish 

poor quality care should be subject to 

closer monitoring than ACOs that fail 

because of faulty data processes. 

Response: We have considered the 

comments and agree that we should 

have flexible methods for enforcing 

compliance with the quality 

performance standards. We proposed in 

§ 425.216 that the issuance of a warning 

letter followed by re-evaluation in 1 

year applied in addition to the actions 

prior to termination set forth at 

proposed § 425.218. Thus, depending on 

the nature and severity of the 

noncompliance, we may forgo the 

issuance of a warning letter and instead 

place the ACO on a special monitoring 

plan or immediately impose a CAP and 

additional monitoring. At this time, we 

do not believe it necessary to create 

penalties or procedures in addition to 

those we proposed, although we have 

modified the regulation to permit 

immediate termination when warranted. 

We will consider appropriate additional 

penalties in the future as necessary. 

Comment: A commenter suggested 

that when an ACO makes a written 

request for payment of shared savings 

(or acknowledges shared losses), it 

should describe how it was able to 

ensure that quality was not negatively 

impacted as a result of the changes it 

made to generate savings. 

Response: Because an ACO cannot 

share in savings without satisfying the 

quality standards, we do not believe it 

is necessary to require an ACO to 

describe how it ensured that quality did 

not suffer as a result of its activities. 

With respect to ACOs that incur losses, 

we will be monitoring their quality 

performance and will take appropriate 

action in response to such monitoring. 

In light of the eligibility and program 

requirements, monitoring procedures, 

and sanctions provisions, we do not 

believe it is necessary to require ACOs, 

including those that incur losses, to 

submit a written description of how 

they ensured that quality was not 

negatively affected by the ACO’s 

activities. The policy regarding a written 

request for shared savings has been 

modified as described later in this 

section. 

Final Decision: We are finalizing our 

rule as proposed regarding termination 

for poor quality performance under 

§ 425.316(c), except that this final rule 

permits for immediate termination or a 

CAP in addition to a warning letter for 

ACOs who are underperforming on 

quality performance standards. 

4. Program Integrity Requirements 

Section 1899(a)(1)(A) of the Act 

authorizes the Secretary to specify 

criteria that groups of providers of 

services and suppliers must meet in 

order to work together to manage and 

coordinate care for Medicare FFS 

beneficiaries through an ACO. Using 

this authority, we proposed several 

program integrity criteria to protect the 

Shared Savings Program from fraud and 

abuse and to ensure that the Shared 

Savings Program does not become a 

vehicle for, or increase the potential for, 

fraud and abuse in other parts of the 


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Medicare program or in other Federal 

health care programs. 

Comment: Commenters generally 

agreed with the need for the proposed 

program integrity requirements. A few 

commenters expressed concern that 

although the ACO participants and ACO 

providers/suppliers undergo stringent 

screening to participate in Medicare, the 

ACO entity itself is not required to 

enroll in Medicare, which may make 

this program vulnerable to fraud, waste, 

and abuse. Several commenters 

suggested that our proposed program 

integrity requirements impose 

operational and administrative burdens 

on ACOs which would increase costs 

and distract organizations from focusing 

on improving care coordination and 

quality of care. Other commenters 

suggested strengthening our proposed 

requirements. 

Response: The goal of our program 

integrity proposals are to protect the 

rights of beneficiaries and minimize the 

risk of fraud and abuse in the Shared 

Savings Program. We are seeking to 

strike the right balance between helping 

providers provide high quality 

coordinated and efficient care to 

Medicare beneficiaries, while also 

protecting the Medicare Trust Funds. 

Striking this balance requires us to 

ensure that the ACO implements certain 

compliance requirements. As described 

later in this final rule, we are adopting 

our program integrity proposals with 

clarification in this final rule. 

Comment: A commenter expressed 

concern that because of financial 

pressures to reduce utilization and 

costs, practitioners will be exposed to 

an increased likelihood of malpractice 

suits. The commenter suggested that 

CMS create a specialty health court to 

handle suits against ACOs and their 

providers by ACO patients. 

Response: We do not have the 

statutory authority to create such a 

system. We expect ACO providers/ 

suppliers to provide high quality, 

coordinated care, and are adopting a 

number of monitoring strategies to 

ensure that they are meeting these 

requirements. As a result, it is not clear 

that malpractice litigation will increase, 

and indeed may decrease if beneficiary 

outcomes improve as a result of the 

activities of the ACO. 

a. Compliance Plans 

We proposed that an ACO have a 

compliance plan. We recognize that the 

specific design and structure of an 

effective compliance plan may vary 

depending on the size and business 

structure of the ACO. However, we 

proposed requiring that the ACO 

demonstrate that it has a compliance 

plan that includes at least the following 

elements: A designated compliance 

official or individual who is not legal 

counsel to the ACO and who reports 

directly to the ACO’s governing body; 

mechanisms for identifying and 

addressing compliance problems related 

to the ACO’s operations and 

performance; a method for employees or 

contractors of the ACO, the ACO 

participants, or the ACO providers/ 

suppliers to report suspected problems 

related to the ACO; compliance training 

for the ACO, the ACO participants, the 

ACO providers/suppliers; and a 

requirement for the ACO, its ACO 

participants, and other individuals or 

entities performing functions or services 

related to ACO activities to report 

suspected violations of law to an 

appropriate law enforcement agency. 

We also noted that an ACO may want 

to coordinate its compliance efforts with 

the compliance functions of its ACO 

providers/suppliers. 

Comment: Commenters generally 

agreed with the proposed compliance 

plan requirement. However, a few 

commenters pointed out that they 

believe a compliance plan does not stop 

fraud, waste, and abuse. These 

commenters believe that the program 

requirements should be strengthened. 

Some commenters recommended that 

CMS establish compliance plan 

requirements and intermediate 

sanctions for the Shared Saving 

Program, similar to those used for 

Medicare Advantage programs or that 

CMS explain why it does not believe 

that an ACO should adhere to the same 

or similar requirements that MA 

organization must meet. 

Response: We agree that compliance 

plans on their own do not stop fraud 

and abuse; however, compliance 

programs increase the likelihood of 

identifying and preventing unlawful 

and unethical conduct; provide a 

centralized source for distributing 

information on health care statutes, 

regulations, and other program 

directives related to fraud and abuse; 

and create an environment that 

encourages employees and others to 

anonymously report potential problems, 

among other benefits. We believe the 

compliance plan helps guide the 

organization in the right direction and is 

necessary to ensure the ACO is taking 

action regarding suspected fraud and 

abuse. Therefore, we are finalizing our 

proposal on compliance plans to require 

a method for employees or contractors 

of the ACO, the ACO participants, or the 

ACO providers/suppliers to 

anonymously report suspected problems 

related to the ACO and to require that 

ACOs report suspected fraud and abuse 

to an appropriate law enforcement 

agency. In addition to finalizing the 

compliance plan requirements, this final 

rule strengthens other program 

requirements and remedies (for 

example, we may impose immediate 

termination in appropriate 

circumstances) to minimize the 

potential for fraud and abuse. 

Comment: One commenter suggested 

that CMS consider limiting the 

compliance training to the compliance 

officer to reduce some of the burden on 

ACOs. 

Response: We believe that requiring 

compliance training for the ACO and all 

of its ACO participants and ACO 

providers/suppliers help to ensure that 

every ACO participant, ACO providers/ 

suppliers, and contractor understands 

their legal obligations with respect to 

the ACO’s operations and performance, 

as well as the requirements of the 

compliance program and the manner in 

which their ACO is implementing such 

requirements. Without compliance 

training, ACO participants, ACO 

providers/suppliers, and contractors 

may not be aware of potential 

compliance risks and how to report 

compliance concerns. We do not believe 

that only training the compliance officer 

is sufficient to ensure that the entire 

ACO is aware of compliance risks. 

Comment: A few commenters 

disagreed with our proposal that the 

compliance officer is not permitted to 

also be legal counsel to the organization. 

These commenters suggested if CMS 

will not allow an attorney to be both 

legal counsel and compliance officer, it 

would be important to have a clear 

statement from CMS that an attorney 

may not serve as the compliance officer. 

Response: We believe it is important 

that the authorized, designated 

compliance officer not also be the legal 

counsel to the organization. However, 

many compliance officers are trained as 

attorneys, and we did not mean to 

suggest that an attorney would not be 

able to serve as a compliance officer. We 

clarify that the legal counsel to the ACO 

and the compliance officer must be 

different individuals, in order to ensure 

independent and objective legal reviews 

and financial analyses of the 

organization’s compliance efforts and 

activities by the compliance officer. We 

are also clarifying that for existing 

organizations, ACOs can use their 

current compliance officer, who must 

report directly to the ACO’s governing 

body, provided that the compliance 

officer is not legal counsel to the 

existing organization. We believe this 

decision allows the ACO to take full 

advantage of the compliance 


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requirements already in existence and 

reduces the burden on ACOs. 

Comment: One commenter believed 

that attempting to meet legal 

requirements of two or more different 

entities in cases such as when providers 

may be participating in an ACO for 

some patients, but continue to function 

as an independent provider for others 

can create considerable complexity and 

confusion. 

Response: In order to provide ACOs 

with the flexibility they need to define 

a compliance plan that meets the needs 

of the ACO, its ACO participants, its 

ACO providers/suppliers, and 

contractors, we decline to specify how 

various organizations should work 

together to develop their plan. We look 

forward to innovation from the industry 

in this area. We will monitor reports of 

any difficulty in this area and may 

address this issue further in future 

rulemaking. 

Comment: A few commenters 

recommended that the requirement to 

report suspected violations of law to an 

appropriate law enforcement agency be 

removed because it deviates from 

accepted compliance practices. The 

commenters pointed out that the 

phrases ‘‘suspected violations’’ and 

‘‘suspected fraud, waste, and abuse’’ are 

unclear and too general. Additionally, 

commenters are concerned that this 

reporting requirement suggests that 

there is no chance for the ACO to 

resolve the problem first, before 

reporting it. 

Response: Health care providers have 

had compliance obligations for many 

years and have developed successful 

approaches to combating fraud and 

abuse in their organizations. The Office 

of the Inspector General has outlined 

industry best practices for compliance 

programs as well as a description of the 

risks of fraud and abuse that various 

providers may face. We suggest that 

providers without experience 

developing compliance programs review 

the various resources that are available 

from the OIG’S web site to help 

determine the risk of fraud and abuse in 

the ACO and when an activity may rise 

to the level of a violation that may need 

to be reported. The Office of the 

Inspector General has consolidated its 

compliance guidance at: http:// 

oig.hhs.gov/compliance/complianceguidance/index.asp. Resources are also 

available for ACOs and ACO 

participants to self disclose potential 

violations. For example, the Medicare 

self-referral disclosure protocol for 

potential violations of the physician 

self-referral statute is available at: 

https://www.cms.gov/ 

physicianselfreferral/ 

65_self_referral_disclosure_protocol.asp 

and the OIG’s provider self-disclosure 

protocol is available at: http:// 

oig.hhs.gov/authorities/docs/ 

selfdisclosure.pdf. 

We believe ACOs should have a 

compliance program that allows for the 

prompt and thorough investigation of 

possible misconduct by ACO 

participants, ACO providers/suppliers, 

other individuals or entities performing 

functions or services related to ACO 

activities, corporate officers, managers, 

employees, and independent 

contractors, as well as, early detection 

and reporting of violations, thus 

minimizing the loss to the Federal 

government from false or improper 

claims and thereby reducing the ACO 

and ACO participants’ and its ACO 

providers/suppliers’ to applicable civil 

damages and penalties, criminal 

sanctions, or administrative remedies, 

such as program exclusion, as 

applicable. As such, ACOs should 

consider implementing a system for 

identifying and addressing possible 

violations when designing their 

compliance plan. We are modifying the 

final rule to provide that ‘‘probable’’ 

violations should be reported to law 

enforcement. 

Final Decision: We are finalizing our 

proposed compliance plan requirements 

with minor modifications, as outlined in 

§ 425.300. Like the proposal, the final 

rule allows an ACO to coordinate and 

streamline compliance efforts with 

those of its ACO participants and ACO 

providers/suppliers. We have added a 

provision requiring compliance plans to 

be updated periodically to reflect 

changes in law, including new 

regulations regarding mandatory 

compliance plan requirements of the 

Affordable Care Act. In addition, we 

provide that ‘‘probable’’ violations of 

law should be reported to law 

enforcement. Finally, we clarify that 

although both legal counsel to the ACO 

and the compliance officer may have a 

legal education, legal counsel to the 

ACO and the compliance officer must be 

different individuals. ACOs may use 

their current compliance officer, who 

must report directly to the ACO’s 

governing body, provided that the 

compliance officer is not legal counsel 

to the existing organization and meets 

the requirements of § 425.300. 

b. Compliance With Program 

Requirements 

We proposed that, notwithstanding 

any relationships that the ACO may 

have with other entities regarding ACO 

related activities, the ACO maintains 

ultimate responsibility for compliance 

with all terms and conditions of its 

participation agreement with CMS. We 

proposed to require that all contracts or 

arrangements between or among the 

ACO, its ACO participants and ACO 

providers/suppliers, and other entities 

furnishing services related to ACO 

activities must require compliance with 

the ACO’s obligations under its 

agreement with CMS, including the 

document retention and access 

requirements discussed in this section 

II.H.4.f of this final rule. Further, we 

proposed that an individual with the 

authority to legally bind the ACO (for 

example, the ACO’s chief executive 

officer (CEO), chief financial officer 

(CFO)) must certify the accuracy, 

completeness, and truthfulness of 

information contained in its Shared 

Savings Program application, agreement 

with CMS, and submissions of quality 

data and other information. The 

certification must be made at the time 

the application, agreement, and 

information is submitted. 

We proposed that, as a condition of 

receiving a shared savings payment, an 

individual with the authority to legally 

bind the ACO (for example the ACO’s 

chief executive officer (CEO) or chief 

financial officer (CFO)), must make a 

written request to CMS for payment of 

the shared savings in a document that 

recertifies the ACO’s compliance with 

program requirements as well as the 

accuracy, completeness, and 

truthfulness of any information 

submitted to CMS by the ACO, its ACO 

participants, or its ACO providers/ 

suppliers, or other individuals or 

entities performing functions or services 

related to ACO activities to CMS, 

including any quality data or other 

information or data relied upon by CMS 

in determining the ACO’s eligibility for, 

and the amount of, a shared savings 

payment. To ensure the accuracy of 

information relied upon in calculating 

shared losses, we proposed to require 

submission of a similar recertification 

by an ACO that incurs losses under the 

two-sided model. We further proposed 

that, if any data or information on 

which we rely to determine shared 

savings or losses are generated by ACO 

participants or another entity, or a 

contractor, or subcontractor of the ACO, 

the ACO participants or the ACO 

provider/suppliers, must similarly 

certify the accuracy, completeness, and 

truthfulness of the data and provide the 

government with access to such data for 

audit, evaluation, and inspection. 

Comment: A few commenters were 

concerned about the requirement that a 

single, authorized representative of the 

ACO must ‘‘certify the accuracy, 

completeness and truthfulness of 

information contained in the Shared 


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Savings Program application.’’ as well 

as quality data and other data, because 

the penalty for an individual’s false 

certification, is not clear. The 

commenters were concerned that, given 

the amount of data being provided and 

the variety of individuals and entities 

other than the ACO that may generate 

the data (for example, ACO participants, 

ACO providers/suppliers, and 

contractors to such entities), it is 

possible that the ACO may 

unintentionally submit some incorrect 

information. The commenters 

recommended a ‘‘to the best of my 

knowledge’’ attestation or some other 

resolution that would apportion the 

responsibility to submit accurate 

information among the ACO, ACO 

participants, ACO providers/suppliers 

and their contractors. 

Response: An individual or entity 

may be prosecuted under Federal law 

for the submission of false information, 

including a false certification, only if he 

or she knowingly submits false 

information (that is, with actual 

knowledge of its falsity or in reckless 

disregard or deliberate ignorance of the 

truth or falsity of the information). If the 

individual or entity later realizes that 

incorrect information has been 

submitted unintentionally, the 

individual or entity must timely submit 

corrected information. We expect that 

the submission and certification of 

forms, data, and other information will 

be completed by an appropriately 

authorized individual who knows or 

should know that the information 

submitted is true, accurate, and 

complete. Although we did expressly 

state in the preamble that the 

certification must be provided to the 

best of the certifying official’s 

knowledge, information, and belief (76 

FR 19544), we acknowledge that this 

language was not included in the text of 

the proposed regulation. As such, we 

wish to clarify that the certification 

language may include ‘‘to the best of my 

knowledge or belief’’ or similar language 

appearing in other Medicare 

certifications. We will provide the forms 

that require certification in guidance. 

We note that if it is discovered that the 

authorized designee knew or should 

have known that the information 

submitted was inaccurate, then he and/ 

or the ACO, and/or the participants/ 

providers/suppliers could be subject to 

liability for making false statements, 

termination, or other sanctions. 

Comment: Some commenters thought 

that we proposed a cumbersome or 

burdensome process for requesting 

payment of shared savings and 

recertifying the accuracy of the 

information relied upon for calculating 

shared savings and losses. 

Response: We agree a simpler process 

is warranted, although it is critical that 

ACOs certify the accuracy of 

information we rely upon in calculating 

shared savings and losses. We will 

require ACOs to certify after each 

performance period the accuracy of all 

information and data that we rely upon 

in determining eligibility for shared 

savings, the amount of any shared 

savings payments, and the amount of 

shared losses, if applicable. If the ACO 

or one of its ACO participants or ACO 

providers/suppliers has become aware 

that incorrect information was 

submitted during the performance year, 

corrected information must be 

submitted before the recertification. 

Final Decision: We are finalizing, at 

§ 425.302, our proposals with the 

clarification described previously and 

the modification that ACOs will be 

required to submit annual certifications 

by the timeframe CMS will establish 

through guidance. 

c. Conflicts of Interest 

We proposed that the ACO governing 

body have a conflicts of interest policy 

that applies to members of the 

governing body. For a full discussion of 

this proposal and the rationale for it, 

please refer to the proposed rule (76 FR 

19643). 

Comment: A commenter asked CMS 

to provide examples of conflicts of 

interest members of the governing body 

should disclose. 

Response: The existence of a conflict 

of interest may vary depending on the 

composition and activities of an ACO, 

as well as other factors. In general, we 

believe that an ACO should adopt an 

appropriate conflict of interest policy 

consistent with relevant best practices 

in the industry and general principles of 

good corporate governance. An ACO 

should consider the variety of potential 

conflicts of interest that may exist 

among of members of the governing 

body, the term of applicable State and 

Federal laws, and other relevant 

concerns when adopting a policy that 

fits the scope of the ACO’s operations. 

As a starting point for organizations 

unfamiliar with conflict of interest 

policies, a sample conflict of interest 

policy for organizations exempt from 

Federal income tax is available from the 

Internal Revenue Service in the 

Instructions for Form 1023 Appendix A 

at http://www.irs.gov/instructions/ 

i1023/ar03.html. ACOs should consider 

sample conflict of interest policies as a 

starting point only and should 

customize the policy for their 

operations. 

Final Decision: We finalizing without 

change our proposal to require the ACO 

governing body have a conflict of 

interest proposal that applies to 

members of the governing body under 

§ 425.106(d). 

d. Screening of ACO Applicants 

Although the Medicare program 

includes substantial screening 

procedures for enrolling providers and 

suppliers, ACOs may not be subject to 

those procedures if they are not 

providers that are eligible to enroll in 

Medicare. We proposed to screen ACOs 

during the Shared Savings Program 

application process with regard to their 

program integrity history, including any 

history of program exclusions or other 

sanctions and affiliations with 

individuals or entities that have a 

history of program integrity issues. We 

proposed that ACOs whose screening 

reveals a history of program integrity 

issues and/or affiliations with 

individuals or entities that have a 

history of program integrity issues may 

be subject to rejection of their Shared 

Savings Program applications or the 

imposition of additional safeguards or 

assurances against program integrity 

risks. We sought comment on the nature 

and extent of such screening and the 

screening results that would justify 

rejection of an application or increased 

scrutiny. 

Comment: Several commenters 

supported the proposed screening 

process. 

Response: We appreciate the 

commenters’ support of the proposal. 

We believe it is important to set a level 

of screening that is appropriate to 

address the risk of fraud and abuse in 

the Shared Savings Program. 

Comment: One commenter found our 

proposal confusing because it appeared 

to contain conflicting language about 

whether ACOs would be subject to 

screening. Other commenters were 

concerned that because an ACO does 

not go through the Medicare enrollment 

process, the potential for fraud and 

abuse would be increased. Commenters 

recommended that ACOs enroll in the 

Medicare program using the Provider 

Enrollment, Chain and Ownership 

System (PECOS). One commenter asked 

CMS to discuss the screening 

procedures for the Shared Saving 

Program and explain how the screening 

procedures will be any different for 

physician offices and hospitals than 

what were in place before the 

publication of the final rule with 

comment period entitled ‘‘Medicare, 

Medicaid, and CHIP; Additional 

Screening Requirements, Applications 

Fees, Temporary Enrollment Moratoria, 


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Payment Suspensions, and Compliance 

Plans for Providers and Suppliers’’ that 

appeared in the Federal Register on 

February 2, 2011 (76 FR 5862) (the 

‘‘provider screening rule’’). 

Response: Providers of services and 

suppliers that desire to participate in 

the Medicare program are subject to the 

screening procedures set forth in a 

provider screening rule. For example, an 

ACO that is a provider of services, such 

as a hospital employing ACO 

professionals, would be eligible to 

enroll in Medicare and would undergo 

the usual screens at enrollment. 

However, if the ACO entity is not a 

provider of services or a supplier that is 

eligible to enroll in Medicare, the ACO 

would not undergo the same screening 

procedures applicable to providers of 

services or suppliers, or be required to 

submit enrollment information through 

PECOS. For example, if some providers 

or suppliers that are not already 

integrated join together to form an ACO, 

they must create a new legal entity as 

described in section II.B.3 of this final 

rule. Such an ACO is not eligible to 

enroll in Medicare and would not 

undergo the usual screens. 

Therefore, in addition to considering 

the program integrity history of ACOs 

and ACO participants that can enroll in 

Medicare, we proposed a separate 

screening process for ACOs that are not 

eligible to enroll in Medicare in order to 

ensure that the ACO undergoes 

appropriate screening prior to 

participating in the Shared Savings 

Program. Due to statutory limitations, 

we are unable to apply the provisions of 

the provider screening rule to ACOs that 

are not eligible to enroll in Medicare. 

Comment: Commenters believed that 

the proposed screening requirements are 

too broad and should be narrowed based 

on the nature of the relationship 

between an ACO applicant and an entity 

with a history of program integrity 

issues. It was suggested that CMS 

consider parameters so that potential 

rejection or exclusion by CMS is not so 

broad as to prevent reasonable and 

appropriate participation by 

organizations that have only passing 

contact with potentially problematic 

providers. 

Some commenters believed that a 

provider operating under a corporate 

integrity agreement is committed to 

correcting any error it may have made 

in the past and putting in place new 

procedures to prevent any future 

concerns and that these providers 

should not be excluded from 

participation in the Medicare Shared 

Savings Program. 

A few commenters were concerned 

that increased attention to program 

integrity may also lead to increased 

reports of unfounded and inaccurate 

allegations being made by CMS and its 

contractors against Medicare providers; 

therefore, program integrity allegations 

should not be held against aspiring or 

approved ACOs until the claims have 

been fully adjudicated. 

Response: We believe that the results 

of the screening will need to be 

considered in light of the relevant facts 

and circumstances. Therefore, we 

decline to draw a bright line regarding 

when an entity’s history of program 

integrity issues justify denial of a 

Shared Savings Program participation 

agreement. We would likely consider 

the nature of the applicant’s program 

integrity issues (including the program 

integrity history of affiliated individual 

and entities), the available evidence, the 

entity’s diligence in identifying and 

correcting the problem, and other 

factors. We intend to ensure that ACOs, 

ACO participants, and ACO providers/ 

suppliers would not pose a risk of fraud 

or abuse within the Shared Savings 

Program while recognizing that some 

program integrity allegations may not 

have been fully adjudicated. 

Comment: Some commenters had 

concerns that the proposed rule is a 

violation of the Administrative 

Procedures Act and the commitment to 

government transparency by the current 

Administration. These commenters 

recommended that CMS solicit public 

comments through the proposed 

rulemaking process prior to establishing 

a screening process for ACOs. 

Response: We included a proposal to 

screen ACOs that are not eligible to 

enroll in Medicare and solicited 

comments on our proposal in the 

proposed rule. We have considered 

public comments on the proposal to 

make our final decision, in accordance 

with the notice and comment 

rulemaking provisions of the 

Administrative Procedures Act. 

Final Decision: We finalize our 

proposed screening requirements 

without change. ACOs and ACO 

participants that are providers of 

services or suppliers who are eligible to 

enroll in Medicare will be subject to 

screening in accordance with applicable 

regulations, and their program integrity 

experience will be considered when 

reviewing the ACO’s application to 

participate in the Shared Savings 

Program. For ACOs that are not eligible 

to enroll in Medicare, we will consider 

the ACO’s program integrity history, 

including any history of program 

exclusions or other sanctions and 

affiliations with individuals or entities 

that have a history of program integrity 

issues, as a part of our application 

process. We clarify that our screening 

process will be based upon the 

information submitted with the ACO’s 

application as further described in 

section II.B. of this final rule. An ACO 

whose screening reveals a history of 

program integrity issues and/or 

affiliations with individuals or entities 

(including ACO participants and ACO 

providers/suppliers) that have a history 

of program integrity issues may be 

subject to rejection of their Shared 

Savings Program applications or the 

imposition of additional safeguards or 

assurances against program integrity 

risks. 

e. Prohibition on Certain Required 

Referrals and Cost Shifting 

In the proposed rule, we stated that 

we are concerned that ACOs, their ACO 

participants, or their ACO providers/ 

suppliers may offer or be offered 

inducements to over utilize services or 

to otherwise increase costs for Medicare 

or other Federal health care programs 

with respect to the care of individuals 

who are not assigned to the ACO. We 

noted that this risk might be heightened 

if the final rule provides for prospective 

assignment of beneficiaries. In other 

words, we are concerned that ACOs, 

ACO participants, or ACO providers/ 

suppliers might shift Medicare or 

Federal health care program costs for 

other beneficiaries not assigned to the 

ACO. 

To address the risk of this 

inappropriate cost shifting, we stated 

that we were considering prohibiting 

ACOs, and ACO participants from 

conditioning participation in the ACO 

on referrals of Federal health care 

program business that the ACO, its ACO 

participants, and its ACO providers/ 

suppliers know or should know is being 

provided to beneficiaries who are not 

assigned to the ACO. 

Comment: One commenter stated that 

there is no perceived risk of abuse or 

inappropriate cost shifting with 

prospective assignment and that the 

Medicare program already causes cost 

shifting so the concern about new cost 

shifting is misplaced. A commenter 

expressed concerns that the rule did not 

address potential drug cost shifting from 

Part B to Part D and suggested that CMS 

develop mechanisms in the event that 

an ACO shifts drug utilization by not 

allowing patients to receive their 

appropriate medication and puts 

patients at-risk. Another commenter was 

concerned that ACOs, ACO participants, 

and ACO providers/suppliers who also 

participate in the 340B program (a 

program that allows physicians to 

purchase outpatient drugs at a discount 

rate and administer those drugs to their 


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patients) may purchase and administer 

drugs for patients of other ACO 

participants and providers/suppliers. 

This commenter suggested that CMS 

work with HRSA to gain a better 

understanding of the 340B program and 

establish protections against fraud, 

waste, and abuse. 

Response: This final rule adopts a 

preliminary prospective assignment 

methodology with final retrospective 

reconciliation, as fully described in 

section II.E. of this final rule. We 

disagree with the commenter that there 

is no potential for inappropriate cost 

shifting in a prospective assignment 

model. We remain concerned that some 

ACOs, ACO participants, and ACO 

providers/suppliers, while working 

together to decrease costs for 

beneficiaries preliminarily assigned to 

the ACO, might inappropriately offer or 

be offered inducements to over utilize 

services or otherwise increase Federal 

health care program expenditures for 

beneficiaries not assigned to the ACO. 

To this end, our final regulations 

prohibit an ACO from conditioning 

participation in the ACO on referrals of 

non-ACO business. 

We recognize the importance of 

appropriate beneficiary drug utilization 

and the concerns of the commenter 

regarding potential cost shifting of drug 

costs from Part B to Part D. As part of 

our ACO monitoring activities, 

described previously in this section, we 

intend to monitor the available claims 

data to detect patterns of cost shifting in 

the Federal health care programs by 

ACOs, including patterns of shifting 

drug costs. The ACO is not itself a 340B 

eligible entity. Health care providers in 

an ACO that participates in the 340B 

program must continue to meet all the 

requirements of the 340B statute, 

including ensuring they are not 

diverting drugs to non-patients or 

receiving duplicate discounts. A 340B 

provider is prohibited from purchasing 

or transferring drugs to non-340B 

entities and patients of non-340B 

providers, including those which are a 

part of an ACO. We will consult with 

HRSA regarding the risk of fraud and 

abuse in the 340B program to determine 

if there are additional monitoring needs 

for ACOs participating in the 340B 

program. 

We intend to review specific 

circumstances of inappropriate cost 

shifting to determine if corrective action 

or other sanctions, is necessary 

Comment: A commenter expressed 

the need for clarification as to how our 

proposal will successfully mitigate cost 

shifting in the Medicare program to 

patients outside of ACOs. Commenters 

also expressed concerns that ACOs will 

shift costs to other health plan types in 

the private sector by stinting on care. 

One commenter noted that the private 

market could also face cost shifting as 

an attempt to recover losses incurred by 

ACO participants and ACO providers/ 

suppliers under the proposed two-sided 

model. 

Another commenter recommended 

that CMS: (1) Require all participating 

ACOs to have a mechanism for assessing 

performance on private sector per capita 

costs by the second year of the program; 

gather data regarding current market 

shares, market entries and exits, and 

pricing trends for the ACOs; (2) set 

expectations for resource stewardship 

and waste reduction, including public 

reporting of quality and cost metrics (for 

example, cost to charge ratios, 

professional fee billing rates, prices for 

episodes for public and private payers, 

total costs for beneficiaries assigned to 

the ACO for public and private payers, 

etc.); (3) specify a standardized set of 

measures for costs, with input from 

consumers, purchasers, and other 

stakeholders; (4) hold ACOs in the 

Shared Savings Program to a maximum 

threshold of price increase with their 

commercial market clients; and (5) 

require ACOs take part in all-payer 

claims databases. Finally, one 

commenter suggested that we 

coordinate with the FTC and DOJ to 

thwart anti-competitive behavior. 

Response: We expect ACOs to manage 

resources of all payers carefully and 

respectfully and ensure continual waste 

reduction so that every step in care adds 

value to the beneficiary. However, we 

share the commenters’ concern that 

there is potential for ACOs to shift costs 

to other health plan types in the private 

sector and to engage in anti-competitive 

behavior. 

In section II.C. of this final rule we 

discuss our concerns about issues 

related to market power and the 

interaction of the Shared Savings 

Program with the antitrust laws. As part 

of our ACO monitoring activities, 

described previously in this section, we 

intend to monitor the available data to 

detect patterns of cost shifting by ACOs. 

However, we recognize that we do not 

hold the private sector claims data that 

would be necessary for a complete 

analysis. We will work in consultation 

with the Federal Trade Commission 

(FTC), the Department of Justice (DOJ) 

Antitrust Division, and the HHS OIG, as 

appropriate, if patterns of inappropriate 

cost shifting in the Shared Savings 

Program are reported to identify any 

needed responses on our part or the part 

of other Federal agencies. 

We are unable to implement the five 

suggestions raised in the last paragraph 

of the comment summary because they 

are outside the scope of the statutory 

authority of the Shared Savings 

Program, were not included in the 

proposed rule for public comment, or 

require analysis of data that is not 

currently available to CMS. 

However, please see section II.F. of 

this final rule for a full discussion of our 

quality measurement requirements, 

which have undergone notice and 

comment rulemaking to obtain public 

input and which may be refined in the 

future to include additional measures 

regarding cost and efficiency. This 

section also describes the information 

we plan to report publicly regarding 

shared savings or losses data for each 

ACO. 

Comment: Commenters stated that 

CMS should establish a strict 

prohibition against any behavior that 

seeks to limit the ability of an ACO 

provider/supplier to referral 

beneficiaries to professionals who are 

not participating in the ACO. One 

commenter expressed concern with his 

experience that network providers use 

coercive methods to keep patients 

‘‘within network,’’ or to ensure that the 

patients receive care from a particular 

provider or supplier, which may be 

owned by the physician or his or her 

employer. The commenter asserted that 

such methods may include a physician’s 

refusal to order services or to continue 

to serve as the patient’s treating 

physician. The commenter asked CMS 

to make sure such methods will not be 

permitted and to describe how patient 

freedom of choice will be enforced. 

Another commenter asked whether an 

ACO would be deemed to be 

diminishing or restricting the rights of 

beneficiaries assigned to it if it—(1) 

required its ACO providers, consistent 

with its care coordination and 

management efforts under the Shared 

Savings Program, to refer the ACO’s 

assigned beneficiaries to ACO 

participants and ACO providers/ 

suppliers to the extent services are 

available from those parties, unless the 

beneficiary specifically requests referral 

to another provider or supplier; and (2) 

provided written notice of the foregoing 

to its assigned beneficiaries, to include 

notice that the beneficiary retains 

freedom of choice to select a provider of 

services or supplier, and that such 

freedom of choice, as communicated to 

the ACO provider making any such 

referral, will be respected. 

Response: The Shared Savings 

Program maintains the beneficiary’s 

freedom under Medicare FFS program 

to choose any participating Medicare 

provider for care. We anticipate that 

beneficiaries will prefer receiving care 


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from the ACO, the ACO participants, 

and the ACO providers/suppliers 

because the care will be patientcentered and coordinated among 

providers. We expect that the ACO, its 

ACO participants, and its ACO 

providers/suppliers will discuss the 

need for services with the beneficiary 

using shared decision-making. However, 

such discussions should not serve as 

roadblocks to beneficiaries who seek to 

obtain high quality care from the 

providers or suppliers of their choice. 

We understand commenters’ concerns 

regarding behavior that seeks to limit or 

restrict referrals to professionals who 

are participating in the same ACO, but 

we also are concerned that a strict 

prohibition as advocated by some 

commenters would disrupt 

arrangements that are permitted under 

the physician self-referral law (see 

§ 411.354(d)(4)), thereby requiring the 

restructuring of many legitimate 

arrangements. Therefore, we are 

modifying our final rule to prohibit 

limiting or restricting referrals of 

beneficiaries to ACO participants or 

ACO providers/suppliers within the 

same 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 

patient expresses a preference for a 

different provider, practitioner, or 

supplier; the patient’s insurer 

determines the provider, practitioner, or 

supplier; or the referral is not in the 

patient’s best medical interests in the 

judgment of the referring party. For 

example, an employer or contracting 

entity, such as a hospital, may require 

its employees and contractors to refer to 

the employer or contracting entity (for 

example, to the hospital’s laboratory or 

imaging center), provided that the 

referring party is free to honor patient 

choice, insurer requirements, and 

medical best interests of the patients. As 

part of our ACO monitoring activities, 

described in this section, we intend to 

monitor the actions of ACOs, including 

the results of beneficiary experience of 

care surveys, to determine whether an 

ACO, its ACO participants, or its ACO 

providers/suppliers are interfering with 

the beneficiary’s freedom of choice by 

improperly limiting or restricting 

referrals and care to ACO participants or 

ACO providers/suppliers in the same 

ACO. 

Comment: One commenter advocated 

that we interpret the fraud and abuse 

laws liberally for purposes of the Shared 

Savings Program because Congress has 

recognized that such laws were written 

and interpreted for a health care 

delivery system designed for different 

payment incentives and not with ACOs 

in mind. However, other commenters 

stated that that the remedies do not 

provide enough protection from the 

compliance risks associated with the 

physician self-referral law, antikickback statute, antitrust laws, and 

other regulations. One commenter was 

troubled by the proposal to waive the 

physician self-referral law, antikickback statute, and civil monetary 

penalties law because ACOs create 

incentives similar to those that have 

historically concerned CMS and these 

laws are paramount to protecting 

Medicare beneficiaries. The commenter 

further expressed concern that Shared 

Savings Program necessarily involved 

incentives to stint on care. Therefore, 

the commenter asserted, it is critical 

that CMS incorporate into the final rule 

robust and explicit protections similar 

to those that Medicare has traditionally 

found necessary to ensure that no 

Medicare beneficiaries are harmed by 

the program. 

Response: We disagree with the 

commenter’s assertion that the Shared 

Savings Program ‘‘necessarily involves 

incentives to stint on care.’’ This final 

rule incorporates a variety of program 

protections, and we intend to monitor 

the program closely for fraud and abuse. 

Elsewhere in this issue of the Federal 

Register, HHS OIG and CMS have 

jointly issued an interim final rule with 

comment period regarding issues related 

to the physician self-referral law, antikickback statute, and certain civil 

monetary penalty law provisions. See 

that interim final rule with comment 

period for a consideration of comments 

related to the physician self-referral law, 

anti-kickback statute, and certain civil 

monetary penalty law provisions. We 

believe the waivers will balance 

effectively the need for innovation and 

flexibility in the Shared Savings 

Program with protections for 

beneficiaries and the Medicare program. 

Final Decision: We are finalizing the 

requirement to prohibit ACOs, their 

ACO participants, their ACO providers/ 

suppliers, from conditioning 

participation in the ACO on referrals of 

Federal health care program business to 

the ACO, its ACO participants, or its 

ACO providers/suppliers for services 

they know or should know are being 

provided to beneficiaries who are not 

assigned to the ACO. For the reasons 

discussed above, we are modifying our 

final rule to prohibit limiting or 

restricting referrals of patients to ACO 

participants or ACO providers/suppliers 

within the same ACO, 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 

patient expresses a preference for a 

different provider, practitioner, or 

supplier; the patient’s insurer 

determines the provider, practitioner, or 

supplier; or the referral is not in the 

patient’s best medical interests in the 

judgment of the referring party. 

f. Record Retention 

In order to ensure that we have the 

information necessary to conduct 

appropriate monitoring and oversight of 

ACOs, we proposed that ACOs, ACO 

participants, and ACO providers/ 

suppliers, and other individuals or 

entities performing functions or services 

related to ACO activities must retain 

records of their activities under the 

Shared Savings Program for a sufficient 

period of time to allow the government 

to conduct the appropriate audits, 

evaluations, investigations and 

inspections of their activities. For a 

complete discussion of these proposals, 

please refer to the proposed rule 

published April 7, 2011 (76 FR 19651). 

Comment: Commenters agreed with 

the record retention and audit proposals 

but recommended that the six year 

record retention requirement be limited 

to disputes involving only the ACO, not 

its ACO participants, its ACO providers/ 

suppliers, or other contracted entities. 

In addition, commenters expressed 

concern that the record retention 

requirements would continue to apply 

even after the ACO has dissolved. The 

commenter asked CMS to address the 

question of which party is liable for any 

issues that surface after the ACO no 

longer exists. Commenters suggested 

that the responsibility should be 

divided among the ACO, its ACO 

participants, its ACO providers/ 

suppliers and other individuals or 

entities performing functions or services 

related to ACO activities. 

Response: We see no reason to limit 

the 6-year record retention provision as 

suggested by the commenter. We note 

that the proposed record retention and 

audit requirements are consistent with 

other Medicare programs, such as MA. 

In order to provide ACOs with 

flexibility, we decline to specify how 

ACOs, ACO participants, ACO 

providers/suppliers, or other 


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individuals or entities performing 

functions or services related to ACO 

activities will develop a records 

retention plan or apportion 

responsibility for record retention in the 

event the ACO dissolves prior to 

conclusion of the audit and record 

retention period. We anticipate that the 

ACO and the entities participating in 

the ACO will develop policies related to 

audit and record retention that address 

the needs of the ACO’s operations while 

retaining records and permitting access 

to records for audit for the required time 

period. 

Final Decision: We finalize our 

proposed audit and record retention 

requirements (§ 425.314) with the 

clarification that, as a result of any 

inspection, evaluation, or audit, it is 

determined that the amount of shared 

savings due to the ACO or the amount 

of shared losses owed by the ACO has 

been calculated in error, CMS reserves 

the right to reopen the initial 

determination and issue a revised initial 

determination. We further clarify that, 

consistent with our authority, the record 

retention requirements in this rule do 

not limit or restrict OIG’s authority to 

audit, evaluate, investigate, or inspect 

the records of the ACO, its ACO 

participants, its ACO providers/ 

suppliers and other individuals or 

entities performing functions or services 

related to ACO activities. 

g. Beneficiary Inducements 

As noted in section II.B of this final 

rule, section 1899(b)(2)(G) of the Act 

requires an ACO to ‘‘define processes to 

promote * * * patient engagement.’’ 

We described in the proposed rule that 

the term ‘‘patient engagement’’ is the 

active participation of patients and their 

families in the process of making 

medical decisions. Patient engagement 

is an important part of motivating and 

encouraging more active participation 

by beneficiaries in their care delivery. 

Comment: Some commenters noted 

that beneficiary engagement and 

coordination of care could be enhanced 

by providing additional incentives to 

beneficiaries to motivate and encourage 

them to be actively involved in their 

care. Some commenters suggested that 

one way to promote patient engagement 

would be to offer beneficiaries 

incentives to encourage health 

awareness. One commenter gave the 

example of supplying scales to 

beneficiaries with CHF to help them 

better manage this chronic disease. 

On the other hand, one commenter 

recommended that CMS and the OIG 

closely monitor ACOs to ensure that 

exceptions to the physician self-referral 

laws are not abused; and prohibit ACOs 

from waiving co-pays, giving deep 

discounts, or offering other incentives to 

ACO patients in order to induce them to 

receive services within the ACO. One 

commenter expressed concern with his 

experience that network providers use 

coercive methods to keep patients 

‘‘within network,’’ or to ensure that the 

patients receive care from a particular 

provider or supplier, which may be 

owned by the physician or his or her 

employer. The commenter asserted that 

such methods may include a physician 

refusal to order services, or to continue 

to serve as the patient’s treating 

physician. The commenter asked CMS 

to make sure such methods will not be 

permitted and to describe how patient 

freedom of choice will be enforced. 

Others recommended that CMS 

prohibit the ACO from providing gifts, 

cash, or other remuneration as 

inducements for receiving services or 

remaining assigned to an ACO or with 

a particular ACO participant or ACO 

provider/supplier. Commenters stated 

that CMS should prohibit ACOs from 

waiving co-pays, giving deep discounts, 

or offering other incentives to ACO 

beneficiaries in order to incentivize 

them to receive services within the 

ACO. 

Response: We agree with commenters 

that providing gifts, cash, or other 

remuneration to beneficiaries as 

inducements for receiving services or 

remaining in an ACO or with a 

particular provider within the ACO 

should be prohibited. 

This final rule therefore provides at 

§ 425.304 that an ACO, its ACO 

participants, its ACO providers/ 

suppliers, and other individuals and 

entities performing functions or services 

related to ACO activities are prohibited 

from providing gifts, cash, or other 

remuneration as inducements for 

receiving services or remaining in an 

ACO or with a particular provider 

within the ACO. 

However, we also believe that there 

are certain instances when an ACO, its 

ACO participants, and its ACO 

providers/suppliers may offer items or 

services to beneficiaries for free or 

below market value to encourage care 

coordination and encourage beneficiary 

health awareness. For this reason, and 

consistent with the joint CMS and OIG 

interim final rule with comment period 

published elsewhere in this issue of the 

Federal Register describing waivers of 

certain fraud and abuse authorities in 

connection with the Shared Savings 

Program, we are adding a provision at 

§ 425.304 to provide that an ACO, its 

ACO participants, or its ACO providers/ 

suppliers may provide to beneficiaries 

items or services for free or below fairmarket-value if all the following 

conditions are met: 

• The ACO remains in good standing 

under its participation agreement. 

• There is a reasonable connection 

between the items or services and the 

medical care of the beneficiary. 

• The items or services are in-kind 

and either are preventive care items or 

services or advance one or more of the 

following clinical goals: 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 blood pressure monitors to patients 

with hypertension in order to encourage 

regular blood pressure monitoring and 

thus educate and engage beneficiaries to 

be more proactive in their disease 

management. In this instance, such a 

gift would not be considered an 

improper inducement to encourage the 

beneficiary to remain with an ACO, 

ACO participant, or ACO provider/ 

supplier. However, this final rule would 

prohibit an ACO, ACO participant, or 

ACO provider/supplier, or another 

individual or entity performing 

functions or services related to ACO 

activities from offering monetary or 

other gifts (for example: Baseball tickets, 

jewelry, household items, gift 

certificates for non-health care related 

retail items) that can be used for 

purposes other than direct health and 

care related purposes. We intend to 

interpret § 425.304 consistent with the 

joint OIG/CMS interim final rule 

referenced above, which contains 

additional discussion and information 

on the subject. 

5. Terminating an ACO Agreement 

a. Reasons for Termination of an ACO’s 

Agreement 

There are a number of important 

statutory requirements that ACOs must 

satisfy in order to be eligible to 

participate in the Shared Savings 

Program. In addition, using our 

authority under section 1899(a)(1)(A) of 

the Act, we proposed additional 

regulatory criteria that ACOs must 

satisfy to enter and remain in the Shared 

Savings Program. Although sections 

1899(d)(3) and (d)(4) of the Act 

authorize termination for avoidance of 

at-risk beneficiaries and for failure to 

meet the quality standards, we do not 

believe that Congress intended the 

remainder of the regulatory scheme to 

be unenforceable. We believe that the 

Shared Savings Program participation 

agreement with an ACO should be 

contingent upon that ACO continuing to 

meet the requirements for eligibility and 


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other program requirements. 

Accordingly, we proposed that the 

participation agreement would require 

the ACO to comply with the 

requirements of the Shared Savings 

Program in order to participate in the 

program. In addition, we proposed that 

we would monitor compliance with 

eligibility requirements and that we 

could discretion terminate an agreement 

with an ACO before the end of the term 

of its agreement for a number of reasons 

which can be reviewed in detail at (76 

FR 19649). 

Furthermore, we proposed that an 

ACO may voluntarily terminate its 

agreement. We believe it is appropriate 

that an ACO should provide notice if it 

elects to terminate its participation in 

the Shared Savings Program. 

Accordingly, we proposed to require an 

ACO to provide us with a 60-day notice 

if it chooses to terminate its agreement. 

We also proposed that the ACO would 

be required to notify us of its decision 

to terminate its participation in the 

Shared Savings Program and would also 

be required to notify all of its ACO 

participants and ACO providers/ 

suppliers, who would in turn be 

required to notify beneficiaries in a 

timely manner of the ACO’s decision to 

withdraw from the Shared Savings 

Program. We also proposed that, as 

described in section II.F.13. of the 

proposed rule (76 FR 19615), the ACO 

would forfeit its mandatory proposed 25 

percent withhold of shared savings. 

Comment: Commenters stated that 60- 

day notices for an ACO to exercise its 

right to terminate its agreement is not 

appropriate in the commercial market 

and allowing an ACO to terminate the 

agreement with such limited notice, 

especially in the first and second year 

of a one-sided only risk agreement, will 

add costs to the system rather than 

reduce them. These commenters are 

concerned that allowing such short 

notice may permit increased potential 

for ‘‘gaming’’ in that ACOs easily 

terminate when they are experiencing 

losses. 

Response: We appreciate all the 

commenters concerns, however, we 

believe there is a distinction between 

the MA and the Shared Savings 

Programs which does not require the 

same restrictions. Unlike managed care 

plans, ACOs do not need to transition 

beneficiaries to another plan. Moreover, 

as discussed previously in this section, 

and in response to comments, we are 

eliminating the requirement for the ACO 

to notify beneficiaries that the ACO, 

ACO participants or ACO providers/ 

suppliers are no longer participating in 

the program. Thus, ACOs are only 

required to notify CMS and their ACO 

participants and ACO providers/ 

suppliers that they are terminating their 

agreement. 

Comment: Some commenters stated 

that the myriad reasons proposed for 

termination pose too much risk for 

providers to participate. Specifically, 

commenters disagreed with termination 

of an ACO’s agreement for use of 

improper or unapproved marketing 

materials, underperforming on quality 

performance standard or failure to 

submit quality data, failure to submit 

payment of losses in a timely manner 

and changes in the ACO’s leadership 

and management structure. A few 

commenters suggested that CMS does 

not have the authority to terminate an 

agreement for reasons other than 

avoidance of at-risk beneficiaries and 

failure to meet quality standards. 

In contrast, several commenters 

believe CMS should expand the reasons 

for termination so that they are 

consistent with the MA program. 

Commenters suggested ACO should be 

terminated if the number of assigned 

beneficiaries to the ACO fall below 

5,000 in any given month; felony, 

conviction or indictment of any owner 

of the parent of the ACO; OIG exclusion, 

or lack of meaningful beneficiary 

participation in the ACO. 

Response: We believe it is necessary 

to be able to terminate ACOs for failure 

to comply with the regulations because 

that is an important protection for 

beneficiaries and against abuse. As 

discussed in this section, we intend to 

use a variety of sanctions such as 

warning letters and CAPs to address 

noncompliance, at CMS’ sole discretion, 

in addition to termination. Termination 

is only one option and CAPs may be 

sufficient to certain correct types of 

noncompliance; situations where 

noncompliance is more serious may 

require immediate termination. 

It is our intent to ensure beneficiary 

and program protections (especially in 

light of the fraud waivers) while 

minimizing burden for ACOs interested 

in participating in the program. 

Concurrently with our proposed rule, 

CMS and the Office of Inspector General 

published a Joint Notice on Waiver 

Designs in Connection with the 

Medicare Shared Savings Program that 

proposed certain waivers of the 

physician self-referral law, antikickback statute, and civil monetary 

penalties law. Elsewhere in this issue of 

the Federal Register, CMS and OIG have 

published final interim waivers of those 

laws. We are modifying this proposal to 

address how any continuing violations 

of those laws will affect the termination 

provisions. Specifically, we have 

clarified that ACOs may be terminated 

for violations of these three laws only to 

the extent that the laws are not waived. 

We have also clarified that ACOs may 

be terminated if their participants 

submit false certifications to CMS; we 

remind them that such false 

certifications may also trigger liability 

under the False Claims Act. 

We decline to adopt commenters’ 

suggestion that we expand the reasons 

for termination so they are consistent 

with the MA program. We believe there 

are important distinctions between the 

MA and the Shared Savings Program, as 

discussed throughout this final rule. It 

is our goal to create policies that ensure 

beneficiary and program protections 

while balancing burden imposed on 

ACOs. 

We believe that meeting the 5,000 

beneficiary threshold is an important 

eligibility requirement as discussed in 

section II.B. of this final rule and that 

ACO would no longer meet those 

requirements if it fall below 5,000 

beneficiaries. An ACO assignment that 

falls below 5,000 would fail to meet the 

eligibility as outlined in this final rule, 

and therefore would be terminated 

under our proposal to terminate ACOs 

that fail to meet eligibility requirements. 

We would use various monitoring 

methods discussed in this section such 

as quarterly aggregated reports to 

determine if ACOs no longer meet the 

5,000 beneficiary threshold. This 

comment and others raise a good point 

that despite the list proposed in the 

proposed rule, there are a number of 

reasons why it may be desirable to 

terminate an ACO for non-compliance 

with program requirements and for 

failure to meet eligibility. Therefore, we 

will generalize the reasons why an ACO 

may be terminated to include noncompliance with program requirements 

and for failure to meet requirements 

necessary for eligibility. 

Comment: Some commenters 

suggested we give ACOs an opportunity 

to explain why they are not in 

compliance with program rules before 

terminating an ACO agreement. 

Response: Where appropriate, we will 

work with the ACO to understand why 

the noncompliance occurred so that we 

can develop an effective CAP and 

monitoring technique. However, in 

instances where we believe the 

circumstances are more serious or pose 

risk of harm to beneficiaries or access to 

care, we reserve the right to terminate a 

participation agreement immediately 

without providing an ACO the 

opportunity for a CAP or warning 

notice. 

Final Decision: We are therefore 

finalizing our proposal under § 425.218 

for terminating an ACO and for taking 


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certain actions before termination under 

§ 425.216. Specifically, CMS may 

terminate an ACO’s agreement for noncompliance with the requirements of the 

Shared Savings Program, which 

includes maintaining eligibility. 

Examples include termination for 

avoidance of at-risk beneficiaries, failure 

to meet quality performance standards 

as previously described previously. We 

have modified this final rule to retain 

the right to terminate an ACO’s 

agreement immediately for violations 

we determine are more serious. 

Additionally, as discussed in this 

section, we are finalizing our proposal 

to use a variety of sanctions such as 

warning letters and CAPs to address 

non-compliance, as CMS’ sole 

discretion, in addition to termination. 

We are clarifying that we will work with 

ACOs where appropriate to understand 

why the noncompliance occurred and 

work to develop an effective CAP. Also, 

we wish to clarify that certain personnel 

changes in leadership and management 

would not necessarily result in 

termination, for example, one qualified 

medical director replacing the initial 

qualified medical director, provided the 

ACO continued to meet the eligibility 

criteria and remained able to perform all 

of the required functions of an ACO 

participating in the Shared Savings 

Program. However, as proposed, 

changes in leadership and management 

structures such that the ACO no longer 

meets eligibility to participate in the 

program, for example, no longer having 

a formal legal structure, would be 

grounds for termination. Finally, we 

have modified our proposal to clarify 

that CMS will provide the ACO with 

notice of termination. 

Further, we would like to clarify that 

consistent with our proposal to 

terminate an ACO in the event sanctions 

or other actions are taken against an 

ACO, its ACO participants, its ACO 

providers/suppliers, or other 

individuals or entities performing 

functions or services related to ACO 

activities, by an accrediting 

organization, or by a State, Federal, or 

local government agency, an ACO 

agreement may be terminated if its 

providers are excluded by the OIG or 

have their privileges to participate in 

Medicare revoked. We are also 

clarifying that demonstrating 

meaningful beneficiary participation is a 

requirement for eligibility and as such, 

failure to adequately notify beneficiaries 

of participation in the program would 

constitute grounds for terminating the 

ACO. 

We are also clarifying that if an ACO 

has violated the antitrust laws or the 

fraud and abuse authorities (except to 

the extent these laws are waived by the 

Secretary under section 1899(f) of the 

Act), the ACO’s eligibility to participate 

in the Shared Savings Program will have 

to be reassessed by CMS. For example, 

if an antitrust agency disbands the ACO 

for violation of antitrust laws, the ACO 

no longer exists as the applicant that 

was approved for a participation 

agreement and may therefore be 

terminated. 

After taking all comments into 

consideration, we are finalizing our rule 

that ACOs may voluntarily terminate 

and will be required to provide CMS 

and all of its ACO participants, ACO 

providers/suppliers, and other 

individuals or entities performing 

functions or services related to ACO 

activities with a 60-day notice of its 

decision to terminate its participation in 

the Shared Savings Program. We are 

clarifying that ACOs that terminate their 

participation agreement early will not 

share in any savings for the performance 

year during which it notifies CMS of its 

decision to terminate the participation 

agreement because it failed to complete 

the entire performance year by which 

we calculate shared savings payments 

(§ 425.316(c)(5)). After taking into 

consideration commenters’ concerns 

and to reduce burden on ACOs, this 

final rule provides that an ACO would 

not be required to notify beneficiaries of 

the ACO’s decision to withdraw from 

the Shared Savings Program. We have 

also not finalized our proposal to 

require the ACO to forfeit its mandatory 

proposed 25 percent withholding of 

shared savings if its agreement is 

terminated before the term is completed. 

b. Corrective Action Plans 

In the proposed rule, we proposed 

that, at our sole discretion, CMS could 

require the ACO to produce a corrective 

action plan (CAP) prior to termination 

for minor violations that we do not 

believe pose no immediate risk of harm 

to beneficiaries or impact care. 

Additionally, we proposed that an ACO 

must submit a CAP for our approval by 

the deadline indicated on the notice of 

violation. Under our proposal, the CAP 

would address what actions the ACO 

will take to ensure that the ACO, ACO 

participants, and other individuals or 

entities performing functions or services 

related to ACO activities would correct 

any deficiencies to remain in 

compliance with Shared Savings 

Program requirements. We proposed 

that the CAP would be implemented as 

approved, and that the ACO’s 

performance would be monitored 

during the CAP process. We further 

proposed that failure of the ACO to 

submit a CAP by the requested deadline, 

obtain approval for, or implement a CAP 

may result in termination of the 

agreement. Similarly, failure of the ACO 

to demonstrate improved performance 

upon completion of the CAP may result 

in termination. We also proposed that 

the ACO would not receive shared 

savings payments while it is under a 

CAP regardless of the performance 

period in question and that the ACO 

would not be eligible to earn any shared 

savings for the period during which it 

is under a CAP. 

Comment: We received very few 

comments regarding the CAP process. 

There were no comments received that 

opposed the CAP process. 

Final Decision: We are finalizing our 

proposal under which we may require 

an ACO to produce a corrective action 

plan (CAP) for violations that we 

consider minor in nature and pose no 

immediate risk of harm to beneficiaries 

or impact on care. 

c. Future Participation of Previously 

Terminated Program Participants 

In our proposed rule, we discussed 

how ACOs would be handled that 

terminate their agreement to participate 

in the Shared Savings Program, are 

terminated from the Program, or 

underperform and do not achieve 

savings during the first agreement 

period (section II.H.3. of the proposed 

(76 FR 19653)) but wish to participate 

in the Program for an additional 

performance period. 

We proposed that potential ACOs 

disclose to CMS as part of its 

application whether the ACO, its ACO 

participants, or its ACO providers/ 

suppliers, or other individuals or 

entities performing functions or services 

related to ACO activities have 

participated in the program under the 

same or a different name, and specify 

whether the entity or person was 

terminated or withdrew voluntarily 

from the program. If the entity or person 

was previously terminated from the 

program, the applicant must identify the 

cause of termination and what 

safeguards are now in place to enable 

the prospective ACO to participate in 

the program and complete the term of 

the new agreement. We proposed that 

terminated ACOs may not begin another 

agreement period until the original 

agreement period had lapsed. (See (76 

FR 19653), for discussion of our 

proposal to prohibit ACO’s which 

demonstrate a net loss in their first 

agreement period from reapplying to 

participate in the Shared Savings 

Program.) In addition, consistent with 

our proposal that ACOs may only have 

one agreement under the one-sided 

model, we proposed that previously 


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terminated ACOs that wish to reenter 

the program must do so under the twosided model. 

Comment: Some commenters 

indicated ACOs may have difficulty 

achieving net gains during their first 

agreement period. Others projected that 

it will take several years for an ACO to 

become fully operational. Commenters 

suggested that the prospect of being 

disqualified from the program before 

recovering the start-up costs required to 

form an ACO will deter providers from 

participating. Several commenters were 

supportive of allowing well-intentioned 

ACOs, terminated from the program, to 

reapply. In particular, one commenter 

recommended a more flexible approach 

in the final rule that does not penalize 

well-meaning, otherwise acceptable 

ACO who might have had 

understandable difficulties. 

Response: We must ensure our policy 

on subsequent participation in the 

Shared Savings Program does not 

provide a second chance for underperforming organizations or for 

providers or suppliers who have been 

terminated for failing to meet program 

integrity or other requirements. We 

believe that this is an important 

protection for beneficiaries and the 

program. We do believe the 

commenter’s standard of allowing ‘‘well 

intentioned’’ ACOs to reapply is easily 

enforced. 

We have considered public comments 

received on this policy, however, we 

believe that in order to ensure 

protection for beneficiaries and the 

program, ACOs should not be allowed 

to re-enter the Shared Savings Program 

before the conclusion of their initial 

agreement period. We are therefore 

finalizing our rule such that ACOs who 

were previously terminated through 

enforcement action or voluntarily that 

wish to re-enter the Shared Savings 

Program may do so at the end of their 

initial agreement period. We note that 

excluded individuals or entities would 

not be permitted to participate in the 

Shared Savings Program unless and 

until their reinstatement. An ACO that 

was previously terminated may reenter 

the program only under the two-sided 

model unless it was terminated less 

than half way through its agreement 

under the one-sided model in which 

case it will be allowed to re-enter the 

one-sided model. An ACO that was 

terminated more than half way through 

its agreement will only have the option 

of entering in Track 2. Such an ACO 

must describe the reason for termination 

of its initial agreement and what 

safeguards are now in place to enable 

the prospective ACO to participate in 

the program for the full term of their 

participation agreement. We believe it is 

important beneficiary and program 

protections to limit participation in the 

program to providers and suppliers who 

are dedicated to the goals of the 

program. 

Final Decision: We will finalize our 

proposal that the ACO disclose to us 

whether the ACO, its ACO participants, 

or its ACO providers/suppliers, or other 

individuals or entities performing 

functions or services related to ACO 

activities, have participated in the 

program under the same or a different 

name, and specify whether it was 

terminated or withdrew voluntarily 

from the program. If the ACO, its ACO 

participants or ACO providers/ 

suppliers, or other individuals or 

entities performing functions or services 

related to ACO activities were 

previously terminated from the 

program, the applicant must identify the 

cause of termination and what 

safeguards are now in place to enable 

the prospective ACO to participate in 

the program for the full period of the 

initial term of agreement. We will 

consider this information in 

determining whether an ACO should be 

approved to participate in the program. 

ACOs that are terminated from the 

program will be afforded the 

opportunity to re-apply to participate in 

the shared savings again only after the 

date on which the term of the original 

participation agreement would have 

expired if the ACO had not been 

terminated. An ACO that was 

terminated less than half way through 

its agreement under the one-sided 

model will be allowed to re-enter the 

one-sided model at the conclusion of 

the term of their original agreement. 

ACOs that were terminated more than 

half way through its agreement will only 

have the option of entering under Track 

2 at the conclusion of the term of their 

original agreement. 

6. Reconsideration Review Process 

In the proposed rule, we outlined 

certain actions specified in section 

1899(g) of the Act for which there shall 

be no administrative or judicial review. 

However, we stated that it is important 

to establish a fair administrative process 

by which ACOs may request review of 

other decisions, such as the denial of an 

application to participate in the program 

or the termination of an existing 

participation agreement for reasons 

other than those exempted by statute. 

For a full discussion of our proposals 

and rationale, see the proposed rule 

published April 7, 2011 (76 FR 19627). 

Comment: Commenters expressed 

concern that the statutory exceptions to 

administrative review should be 

construed narrowly so that additional 

reasons for administrative review are 

allowed and that the proposed 

timeframe to request a review (15 days) 

is too short. Commenters also expressed 

concern with the fairness of the 

reconsideration review process since 

CMS is not an independent party. 

Commenters specifically recommended 

that CMS— 

• Establish an appeals and grievance 

system for patients and providers when 

care is compromised; 

• Review all cases in which an ACO 

requests reconsideration; and 

• Establish a review process through 

an independent party. 

Response: The decisions excluded 

from the reconsideration review process 

are consistent with section 1899(g) of 

the Act. Our reconsideration review 

process was built on our experience 

with established, effective, and well 

accepted procedures used in other 

Medicare programs. The reconsideration 

review allows for significant procedural 

due process for all parties, a clear and 

easily understood linear process, and 

reviews by independent CMS officials. 

The timeframe allowed to request 

review under the reconsideration review 

process is consistent with the MA 

(§ 422.622) and Part D (§ 423.651) 

programs which both provide 15 

calendar days after receipt of the notice 

of determination to request review. We 

agree that the reconsideration review 

should be conducted by an independent 

reviewer. The process as proposed 

allows the ACO the opportunity to have 

a reconsideration review conducted by 

an independent reviewer who was not 

involved with any previous 

determination including both the initial 

and review stage of the reconsideration. 

We also believe that we have proposed 

several monitoring tools that will ensure 

beneficiary protections and as a result, 

we do not believe it is necessary to 

establish a separate grievance process 

for ACOs. 

Final Decision: After consideration of 

the comments received and for the 

reasons discussed previously, we are 

finalizing the reconsideration review 

process as proposed, with the exception 

of our decision to eliminate the specific 

provision related to review of 

determinations made by a reviewing 

antitrust agency as no longer applicable 

in light of the revisions to our 

procedures for Antitrust review, which 

are discussed in section II.C. of this final 

rule. We are clarifying that when we 

stated ‘‘if any of the parties disagree 

with the recommendation of the 

reconsideration, they may request an on 

the record review,’’ we were referring to 

both CMS and the ACO. 


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III. Collection of Information 

Requirements 

As stated in section 3022 of the ACA, 

Chapter 35 of title 44, United States 

Code, shall not apply to the MSSP. 

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. Introduction 

We have examined the impacts of this 

final rule as required by Executive 

Order 12866 on Regulatory Planning 

and Review (September 30, 1993), 

Executive Order 13563 on Improving 

Regulation and Regulatory Review 

(January 18, 2011), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354), section 1102(b) of 

the Act, section 202 of the Unfunded 

Mandates Reform Act of 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). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This final 

rule has been designated an 

‘‘economically’’ significant rule, under 

section 3(f)(1) of Executive Order 12866 

and a major rule under the 

Congressional Review Act. Accordingly, 

the rule has been reviewed by the Office 

of Management and Budget. 

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 2011, that 

threshold is approximately $136 

million. This final 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 $136 

million in any one year. We 

acknowledge that there will be costs 

borne by the private sector, as discussed 

in this regulatory impact section, in 

order to participate in this program; 

however, participation is voluntary and 

is not mandated. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a final 

rule that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

We do not believe that there is anything 

in this final rule that either explicitly or 

implicitly pre-empts any State law, and 

furthermore we do not believe that this 

final rule will have a substantial direct 

effect on State or local governments, 

preempt State law, or otherwise have 

Federalism implications. 

B. Statement of Need 

This final rule is necessary to 

implement section 3022 of the 

Affordable Care Act which amended 

Title XVIII of the Act (42 U.S.C. 1395 et 

seq.) by adding a new section 1899 to 

establish a Shared Savings Program that 

promotes accountability for a patient 

population, coordinates items and 

services under parts A and B, and 

encourages investment in infrastructure 

and redesigned care processes for high 

quality and efficient service delivery. 

Section 1889(a)(1) of the Act requires 

the Secretary to establish this program 

not later than January 1, 2012. Also, 

section 1889(a)(1)(A) of the Act states 

that under this program, ‘‘groups of 

providers of services and suppliers 

meeting criteria specified by the 

Secretary may work together to manage 

and coordinate care for Medicare feefor-service beneficiaries through an 

accountable care organization (referred 

to * * * as an ‘ACO’)’’; and section 

1889(a)(1)(B) of the Act provides that 

‘‘ACOs that meet quality performance 

standards established by the Secretary 

are eligible to receive payments for 

shared savings * * *.’’ 

The Shared Savings Program is a new 

approach to the delivery of health care 

aimed at reducing fragmentation, 

improving population health, and 

lowering growth in overall health care 

costs. 

The Shared Savings Program should 

provide an entry point for all willing 

organizations who wish to move in a 

direction of providing value-driven 

healthcare. Consequently, in accordance 

with the authority granted to the 

Secretary under sections 1899(d) and 

1899(i) of the Act, we looked at creating 

both a shared savings model (one-sided) 

and a shared savings/losses model (twosided). The sharing parameters under 

the two options are balanced so as to 

provide greater reward for organizations 

that accept risk while maintaining 

sufficient incentive to encourage 

providers to participate in the one-sided 

model, which provides an entry point to 

risk-oriented models. 

C. Overall Impact 

As detailed in Table 8, we estimate a 

total aggregate median impact of $470 

million in net Federal savings for 

calendar years (CY) 2012 through 2015 

from the implementation of the Shared 

Savings Program. The 10th and 90th 

percentiles of the estimate distribution, 

for the same time period, yields a net 

savings of $940 million and $0 million, 

respectively. These estimated impacts 

represent the effect on Federal transfers. 

Median estimated Federal savings are 

somewhat less than the estimate 

published for the proposed rule 

(estimated $510 million net savings 

through 2014) due in part to increased 

program generosity, led by first-dollar 

(below benchmark) sharing. This, 

combined with the easing of a number 

of program requirements and burdens, 

expands our expected range of 

participation, resulting in a somewhat 

greater median net savings amidst a 

wider stochastic projection range. 

Furthermore, we estimate a total 

aggregate median impact of $1.31 billion 

in bonus payments to participating 

ACOs in the Shared Savings Program for 

CYs 2012 through 2015. The 10th and 

90th percentiles of the estimate 

distribution, for the same time period, 

yield a bonus payment to ACOs of $890 

million and $1.9 billion, respectively. 

We estimate the aggregate cost 

associated with the start-up investment 

of ACOs participating in the Shared 

Savings Program will range from $29 

million to $157 million. The program’s 

first agreement period has been 

expanded by up to 6 to 9 months, 

rewarding ACOs who enter the program 

early in 2012 with a longer agreement 

period under their initial benchmark, 

while also accommodating ACOs that 

might require an additional year (or 

partial year) of preparation. 

Furthermore, aggregate ongoing annual 

operating costs for the participating 

ACOs are estimated to range from $63 

million to $342 million. Both start-up 

investment and ongoing annual 

operating cost ranges utilize an 

anticipated participation rate of 50 to 

270 ACOs in the Shared Savings 

Program. Lastly, when utilizing the 

anticipated mean participation rate of 

ACOs in the Shared Savings Program, 

this yields an estimated aggregate 

average start-up investment and ongoing 

annual operating costs of $451 million 

for CYs 2012 through 2015. Therefore, 

as illustrated in Table 8, for CYs 2012 

through 2015 the total median ACO 

bonus payments of $1.31 billion 


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coupled with the aggregate average startup investment and ongoing annual 

operating cost of $451 million, incurred 

at the mean participation rate of ACOs 

in the Shared Savings Program, result in 

an estimated benefit-cost ratio of 2.9. 

In addition to rewarding ACOs who 

enter the program early in 2012 with a 

longer effective agreement, while also 

accommodating ACOs that might 

require an additional year (or partial 

year) of preparation, the Shared Savings 

Program will also benefit beneficiaries 

since the program requires ACOs to be 

accountable for Medicare beneficiaries, 

improve the coordination of FFS items 

and services, and invest in 

infrastructure and redesigned care 

processes for high quality and efficient 

service delivery that demonstrate a 

dedication and focus toward patientcentered care. Accordingly, we have 

prepared a regulatory impact analysis 

(RIA) that to the best of our ability 

presents the costs and benefits of this 

final rule. 

TABLE 8—ESTIMATED NET FEDERAL SAVINGS, COSTS AND BENEFITS, CYS 2012 THROUGH 2015 

CY 2012 CY 2013 CY 2014 CY 2015 CYs (2012–2015) 

Net Federal Savings: 

10th Percentile .... ¥$30 Million ............. ¥$20 Million ............. $10 Million ................. $0 Million ................... $0 Million. 

Median ................ $20 Million ................. $90 Million ................. $160 Million ............... $190 Million ............... $470 Million. 

90th Percentile .... $70 Million ................. $210 Million ............... $320 Million ............... $370 Million ............... $940 Million. 

ACO Bonus Payments: 

10th Percentile .... $60 Million ................. $180 Million ............... $280 Million ............... $360 Million ............... $890 Million. 

Median ................ $100 Million ............... $280 Million ............... $410 Million ............... $520 Million ............... $1,310 Million. 

90th Percentile .... $170 Million ............... $420 Million ............... $600 Million ............... $740 Million ............... $1,900 Million. 

Costs .......................... The estimated start-up investment costs for participating ACOs range from $29 million to $157 million, with annual ongoing costs ranging from $63 million to $342 million, for the anticipated range of 50 to 270 participating ACOs. With 

the mean participation of ACOs, the estimated aggregate average start-up investment and four year operating 

costs is $451 million. 

Benefits ...................... Improved healthcare delivery and quality of care and better communication to beneficiaries through patient centeredcare. 

* Note that the percentiles for each individual year do not necessarily sum to equal the percentiles estimated for the total four year impact, in 

the column labeled CYs 2012–2015, due to the annual and overall distributions being constructed independently. 

Participating ACOs will have the 

opportunity to earn shared savings 

payments by reducing Medicare 

expenditure growth for their assigned 

beneficiaries below specified target 

thresholds or benchmarks while 

simultaneously meeting quality 

performance measures. An ACO could 

initially opt for one of two program 

tracks. The first option (one-sided 

model) offers eligibility for shared 

savings payments in all years without 

the risk of being responsible for 

repaying any losses if actual 

expenditures exceed the benchmark. 

Combined with rolling enrollments into 

the program in 2012, ACOs will have 

options to ease their transition toward 

responsibility for quality of care 

improvement and the total cost of care 

for the beneficiaries they serve. The 

second option (two-sided model) 

provides an opportunity for receiving a 

higher percentage of shared savings for 

all years of the agreement period, but 

with potential liability in each of the 

agreement years for annual expenditures 

that exceed the benchmark, thereby 

increasing associated risk. 

There is substantial uncertainty as to 

the number of ACOs that will 

participate in the program, their 

characteristics, provider and supplier 

response to the financial incentives 

offered by the program, and the ultimate 

effectiveness of the changes in care 

delivery that may result as ACOs work 

to improve the quality and efficiency of 

patient care. These uncertainties 

complicate efforts to assess the financial 

impacts of the Shared Savings Program 

and result in a wide range of potential 

outcomes regarding the net impact on 

Medicare expenditures. 

To best reflect these uncertainties, we 

designed a stochastic model that 

incorporates assumed probability 

distributions for each of the key 

variables that will affect the overall 

financial impact of the Shared Savings 

Program. Using a Monte Carlo 

simulation approach, the model 

randomly draws a set of specific values 

for each variable, reflecting the expected 

covariance among variables, and 

calculates the program’s financial 

impact based on the specific set of 

assumptions. We repeated the process 

for a total of 5,000 random trials, 

tabulating the resulting individual cost 

or savings estimates to produce a 

distribution of potential outcomes that 

reflects the assumed probability 

distributions of the incorporated 

variables, as shown in Table 8. In this 

way, we can evaluate the full range of 

potential outcomes based on all 

combinations of the many factors that 

will affect the financial impact, and 

with an indication of the likelihood of 

these outcomes. It is important to note 

that these indications do not represent 

formal statistical probabilities in the 

usual sense, since the underlying 

assumptions for each of the factors in 

the model are based on reasonable 

judgments, using independent expert 

opinion when available. 

The median result from the 

distribution of simulated outcomes 

represents the ‘‘best estimate’’ of the 

financial effect of the Shared Savings 

Program, recognizing the uncertainty 

inherent in a new program with 

uncertain responses. The full 

distribution illustrates the uncertainty 

surrounding the mean or median 

financial impact from the simulation. 

As detailed in Table 9, the median 

estimate involves a combination of: (1) 

Reduced actual Medicare expenditures 

due to more efficient care; (2) shared 

savings payments to ACOs; and (3) 

payments to CMS for shared losses 

when actual expenditures exceed the 

benchmark, resulting in a projected total 

of $470 million in net savings over CYs 

2012 through 2015. Greater 

participation is estimated due to the 

option for a longer 42 or 45 month 

agreement period, gentler transition 

period, and greater generosity provided. 

The extra year also amplifies our 

estimated savings and cost totals. 

A net savings (costs) occurs when the 

payment of earned and unearned 


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shared-savings bonuses (less penalties 

collected) resulting from: (1) Reductions 

in spending; (2) program design; and (3) 

random group claim fluctuation, in total 

are less than (greater than) assumed 

savings from reductions in 

expenditures. 

As the actual number of participating 

ACOs and their characteristics become 

known, the range of financial outcomes 

will narrow. Similarly, as data become 

available on the initial differences 

between actual expenditures and the 

target expenditures reflected in ACO 

benchmarks, it will be possible to 

evaluate the financial effects with 

greater certainty. The estimate 

distribution shown in Table 9 provides 

an objective and reasonable indication 

of the likely range of financial 

outcomes, given the chosen variables 

and their assumed distributions at this 

time in the program’s implementation. 

D. Anticipated Effects 

1. Effects on the Medicare Program 

As a voluntary program involving an 

innovative and complex mix of financial 

incentives for quality of care and 

efficiency gains within FFS Medicare, 

the Shared Savings Program could result 

in a wide range of possible outcomes. 

While examples exist across the 

healthcare marketplace for risk-sharing 

arrangements leading to efficiency 

gains, a one-sided model would 

presumably provide a weaker incentive 

to ACOs than other approaches. Track 2 

introduces downside risk while offering 

a lower minimum savings rate and a 

greater sharing percentage, all of which 

enhance the incentive for efficiency 

while protecting the Trust Funds against 

losses for fluctuation or other exogenous 

factors. It is possible that participation 

in Track 1 might enable such ACOs to 

gain the experience necessary to take on 

risk in a subsequent two-sided 

arrangement, possibly enhancing the 

opportunity for greater program savings 

in years beyond the first agreement 

period. Conversely, if in that first 

agreement period ACOs come to reliably 

predict a bias that ensures an outcome— 

whether favorable or unfavorable—the 

program would be at risk for 

increasingly selective participation from 

favored ACOs and any real program 

savings could be overwhelmed by 

outsized shared-savings payments. 

Even ACOs that opt for Track 2 could 

eventually terminate their agreement if 

they anticipate that efforts to improve 

efficiency are overshadowed by their 

particular market circumstances. (Under 

section 1899(d) of the Act, we update 

ACO benchmarks by the estimated 

annual increase in the absolute amount 

of national average Medicare Part A and 

Part B expenditures, expressed as a flat 

dollar amount for each year. As a result, 

the updates to ACO benchmarks in 

percentage terms will be higher in lowcost areas of the country and lower in 

high-cost areas.) This scenario could 

contribute to selective program 

participation by ACOs favored by the 

national flat-dollar growth target, or 

favored by other unforeseen biases 

affecting performance. 

While shared FFS savings, even with 

optional liability for a portion of excess 

expenditures, offers less incentive to 

reduce costs than, say, full capitation, it 

still represents a new incentive for 

efficiency. Shared-savings (and 

potential liabilities) will have varying 

degrees of influence on hospitals, 

primary physicians, specialty 

physicians, and other providers. The 

expectation is for different ACOs to 

comprise a varying mix of these 

providers and suppliers. And while 

certain care improvements might be 

achieved relatively quickly (for 

example, prevention of hospital 

readmissions and emergency-room 

visits for certain populations with 

chronic conditions), many potential 

ACOs might need more than 3 years to 

achieve comprehensive efficiency gains. 

Challenges include identification of 

assigned beneficiaries, coordinating care 

furnished by providers and suppliers 

outside the ACO, lack of similar 

contracts with other payers, achieving 

buy-in from ACO providers/suppliers, 

and the extent to which possible future 

shared savings or losses will affect the 

perceived value of immediate FFS 

revenue for providers and suppliers 

participating in an ACO. 

While there remains great uncertainty 

for the aggregate financial impact of the 

program, the impact on quality, as will 

be measured and reported, is likely to 

show gains for most participating ACOs 

over the course of their agreement. 

Comment: One commenter 

recommended that we include further 

detail regarding the beneficiary 

population expected to be assigned to 

ACOs participating in the Shared 

Savings Program, including 

characteristics of ethnicity and gender, 

and further requested that we provide 

baseline per capita FFS expenditures. 

Another commenter requested that we 

analyze the average expenditures for 

beneficiaries in States with low, 

median, and high average expenditures, 

were they assigned to an ACO 

participating in the Shared Savings 

Program achieving maximum sharedsavings, were they enrolled in a 

Medicare Advantage organization of 

various quality star ratings, or were they 

simply in traditional Medicare. 

Response: Due to the great uncertainty 

regarding the quantity and composition 

of ACOs that will participate in the 

Shared Savings Program, such estimates 

of the demographic characteristics or 

per capita expenditures of affected 

beneficiaries are not currently feasible. 

Even were we confident of specific 

markets that were likely to generate 

ACOs, we would require the mix of 

TINs that would be aggregated to form 

the basis of assignment to such potential 

ACOs in order to estimate any potential 

differences in the demographic 

characteristics for all ACO-assigned 

patients relative to the greater FFS 

Medicare population, or to analyze 

differences in average expenditures 

relative to MA or traditional Medicare. 

Such expenditures could vary 

significantly based not only on 

geography but also an ACO’s provider 

composition, which can mean ACOs in 

the same market may have widely 

varying baseline per capita expenditures 

for their assigned beneficiaries. Indeed, 

a stochastic model was chosen to 

illustrate such great uncertainty 

presented by voluntary participation in 

a new and complex program. However, 

we agree that such analysis would be 

beneficial within future evaluations 

based on actual program experience. 

a. Assumptions and Uncertainties 

We sought input from a wide range of 

external experts, including credentialed 

actuaries, consultants, and academic 

researchers, to identify the pertinent 

variables that could determine the 

efficacy of the program, and to identify 

the reasonable ranges for each variable. 

Also, subsequent to publication of the 

proposed rule, we studied rule 

comments, expert reactions, and letters 

of intent for the Innovation Center 

Pioneer ACO Model. The assumptions 

ultimately identified and stochastically 

modeled include the following: 

• Number of participating ACO 

provider groups, including the 

sensitivity to burdens of participation 

and the generosity of the sharing 

arrangement. 

• Size mix of participating ACOs. 

• Type of ACO that would consider 

accepting risk under Track 2. 

• Participating ACOs’ current level of 

integration and preparedness for 

improving the quality and efficiency of 

care delivery. 

• Baseline per-capita costs for 

prospective ACOs, relative to the 

national average. 

• Number and profile of providers 

and suppliers available to participate in 

the Shared Savings Program as a result 


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of Innovation Center ACO model 

initiatives. 

• Range of gross savings achieved by 

ACOs, and the time required for full 

phase-in. 

• Local variation in expected claims 

cost growth relative to the national 

average. 

• Quality reporting scores and 

resulting attained sharing (or loss) 

percentages. 

Overall we assumed 1 to 5 million 

Medicare beneficiaries would align with 

between 50 and 270 ACOs during the 

first four years of the program. We 

assumed ACOs to be equally likely to 

participate from markets exhibiting 

baseline per-capita FFS expenditures 

above, at, or below the national average, 

as opposed to our assumption for the 

proposed rule that ACOs would be more 

likely to form in high-cost markets. In 

addition, we assumed the level of 

savings generated by an ACO to 

positively correlate to the achieved 

quality performance score and resulting 

sharing percentage. 

We anticipate a minority of ACOs—a 

more capable subset of the total program 

participation—will opt for Track 2 in 

the first agreement period, enabled by 

experience accepting risk for other 

populations and motivated by a lower 

minimum savings rate and greater 

sharing percentage. However, most 

participating ACOs are expected to 

choose Track 1 in order to 

simultaneously—(1) avoid the potential 

for financial loss if expenditures 

experience a significant upward 

fluctuation or efficiency improvements 

are less effective than planned; and (2) 

build organizational experience to 

achieve a per-capita cost target as 

presented by the program’s unique 

benchmark methodology. 

A particularly important cause for 

uncertainty in our estimate is the high 

degree of variability observed for local 

per-capita cost growth rates relative to 

the national average ‘‘flat dollar’’ growth 

(used to update ACO benchmarks). The 

benchmark or expenditure target 

effectively serves as the only measure of 

efficiency for participating ACOs. 

Factors such as lower-than-average 

baseline per-capita expenditure and 

variation in local growth rates relative to 

the national average can trigger shared 

savings payments even in the absence of 

any efficiency gains. Similarly, some 

ACOs could find that factors, such as 

prevailing per-capita expenditure 

growth in their service area that is 

higher than the national average, limit 

efficiency gains and reduce or prevent 

shared savings. 

b. Detailed Stochastic Modeling Results 

Table 9 shows the distribution of the 

estimated net financial impact for the 

5,000 stochastically generated trials. 

(The amounts shown are in millions, 

with negative net impacts representing 

Medicare savings). The net impact is 

defined as the total cost of shared 

savings less—(1) any amount of savings 

generated by reductions in actual 

expenditures; and (2) any losses 

collected for ACOs that accepted risk 

and have actual expenditures exceeding 

their benchmark. 

The median estimate of the Shared 

Savings Program financial impact for 

calendar years 2012 through 2015 is a 

net Federal savings of $470 million. 

This amount represents the ‘‘best 

estimate’’ of the financial impact of the 

Shared Savings Program initiative 

during the agreement period. It is 

important to note, however, the 

relatively wide range of possible 

outcomes. Overall, 90 percent of the 

stochastic trials resulted in net program 

savings, and the remaining 10 percent 

represented cost increases. The 10th and 

90th percentiles of the estimated 

distribution show net savings of $940 

million and a net cost of $ zero million, 

respectively, suggesting a 10 percent 

likelihood that the actual impact would 

fall outside respective percentile 

amounts. In the extreme scenarios, the 

results were as large as $2.0 billion in 

savings or $1.1 billion in costs. Relative 

to the proposed rule, the final rule 

projections reflect greater generosity 

(and cost to Medicare) offset by greater 

participation over an extended 

agreement period, leading to a higher 

median net savings but also a wider 

stochastic range than we would now 

estimate for the proposed rule over the 

same period. (Market response to the 

proposed rule causes us to decrease the 

participation levels we would assume 

for the originally proposed program 

design.) 

The stochastic model and resulting 

financial estimates were prepared by the 

CMS Office of the Actuary (OACT). The 

median result of $470 million in savings 

is a reasonable ‘‘point estimate’’ of the 

impact of the Shared Savings Program 

provision in current law, as it would be 

implemented through this final rule. 

However, we emphasize the possibility 

of outcomes differing substantially from 

the median estimate, as illustrated by 

the estimate distribution. With 

additional data on the actual number 

and characteristics of participating 

ACOs, we can estimate the financial 

impact with greater precision. 

The projections assume the 

assignment of roughly 1 to 5 million 

beneficiaries to participating ACOs 

during the first program agreement 

period. To the extent that 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, Shared 

Savings Program savings or costs would 

result in corresponding adjustments to 

MA payment rates. Neither of these 

secondary impacts has been included in 

the analysis shown. 


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Table 10 shows the median estimated 

financial effects for the Shared Savings 

Program initiative, and the associated 

10th and 90th percentile ranges, broken 

out during the first agreement period. 

Net savings (characterized by a negative 

net impact on Federal outlays) are 

expected to be marginal in 2012 ($20 

million) due to gradual enrollment 

assumed over that first year as well as 

the assumption that cost-saving 

initiatives will require time for 

maturation. In calendar years 2013 

through 2015 net savings are expected 

to grow as maturing cost-saving 

effectiveness is partially offset by 

increasing cost from growing variation 

in the accuracy of updated national 

targets compared to actual local growth. 

As a result, the projections for CYs 2013 

through 2015 cover a wider range of 

possible outcomes, reflecting a growing 

dependence on uncertain assumptions 

for savings and expenditure growth 

variation relative to the national 

average. We note that the percentiles are 

tabulated for each year separately, and 

therefore the overall net impact 

distribution (Table 9) will not 

necessarily exactly match the sum of 

distributions for each distinct year. 


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c. Further Consideration 

The impact analysis shown is only for 

the first agreement period. Beyond this 

initial period, there is additional 

uncertainty, in significant part because 

the rules governing subsequent Shared 

Savings Program agreement periods 

have not yet been developed. In 

addition, uncertainties exist in the short 

and long term regarding providers’ 

responses to the program. For example, 

a voluntary program may eventually 

draw selective participation by ACOs 

that develop an ability to predict a 

favorable bias in the savings formula. 

However, ACOs that participate in the 

program during the first agreement 

period may foster significant 

improvements in the quality and costefficiency of health care delivery, 

leading to broader use of these 

techniques nationwide and accelerated 

adoption of risk-sharing arrangements 

(such as partial capitation, bundled 

payments, etc.). These changes could 

result in significant efficiency gains in 

FFS Medicare. The stochastic model for 

the first agreement period of the 

program does not incorporate either of 

these longer-run scenarios, but both 

remain possibilities. At this time, an 

impact estimate expanded to include 

performance beyond the initial 

agreement period would likely entail a 

significantly wider range of possible 

outcomes. The results of the first 

performance cycle, however, will help 

inform estimates of the ongoing 

financial effects of the Shared Savings 

Program. 

2. Impact on Beneficiaries 

We anticipate the Shared Savings 

Program will benefit beneficiaries 

because the intent of the program is to 

require ACOs to be accountable for 

Medicare beneficiaries, improve the 

coordination of FFS items and services, 

encourage investment in infrastructure 

and redesigned care processes for high 

quality and efficient service delivery 

that demonstrates a dedication and 

focus toward patient-centered care. This 

program does not affect the beneficiary’s 

freedom of choice regarding providers 

or care since beneficiaries assigned to an 

ACO continue to be in the traditional 

Medicare program. Also, a requirement 

of ACO participation in the Shared 

Savings Program is reporting of, and 

successful performance related to, 

quality measures and patient-experience 

surveys. These aspects of the Shared 

Savings Program will encourage the 

provider and supplier community to 

focus on and deliver improved quality 

care. In addition to existing Medicare 

monitoring programs that are in place to 

protect beneficiaries, the Shared Savings 

Program will include monitoring and 

auditing processes to protect beneficiary 

choice as well as ensure that 

beneficiaries are receiving the 

appropriate care. As is discussed in 

more detail in the preamble, these 

processes include monitoring ACO 

avoidance of at-risk beneficiaries, 

assessing and providing follow up on 

beneficiary complaints, audits 

(including, for example, analysis of 

claims, chart review, beneficiary 

surveys, coding audits) and analysis of 

quality performance. 

More specifically, we believe that 

advantages for beneficiaries would be 

maximized as the ACO meets the 

mission of the Shared Savings Program, 

as established by the Affordable Care 

Act and embraces the goals of better 

health and experience of care for 

individuals, better health for 

populations and lower expenditure 

growth. The ACO’s impact will be 

demonstrated by how effectively it 

delivers care as measured under the 

financial methodology outlined in 

section II.G. of this final rule, how well 

it improves and delivers high quality 

care outlined in the quality 

measurement and reporting 

methodology in section II.F. of this final 

rule, and in meeting program 

requirements for patient-centered care 


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outlined in the discussion of eligibility 

in section II.B. of this final rule. 

Because ACOs are accountable for 

both the quality and overall cost of care 

provided to their assigned beneficiary 

population and must meet the quality 

performance standards prior to sharing 

any savings, they have new incentives 

to improve the health and well being of 

the beneficiaries they treat. ACOs will 

report on conditions and areas that are 

high prevalence and high cost in the 

Medicare population, such as chronic 

disease, ambulatory care sensitive 

conditions, care transitions and 

readmissions, and patient experience. 

We have observed that measuring 

quality and providing incentives can 

result in redesigned care processes that 

provide clinicians with actionable 

information on their patients at the 

point of care which can lead to 

improved patient care processes and 

outcomes. For example, the Medicare 

Physician Group Practice Demonstration 

Fact Sheet (CMS, July 2011) showed 

that over the first 4 years of the PGP 

Demonstration, physician groups 

increased their quality scores an average 

of 10 percentage points on the ten 

diabetes measures, 13 percentage points 

on the ten congestive heart failure 

measures, 6 percentage points on the 

seven coronary artery disease measures, 

9 percentage points on the two cancer 

screening measures, and 3 percentage 

points on the three hypertension 

measures. Further analysis is provided 

in the Physician Group Practice 

Demonstration Evaluation Report 

(Report to Congress, 2009; http:// 

www.cms.gov/DemoProjectsEvalRpts/ 

downloads/PGP_RTC_Sept.pdf). 

In addition to the overall increases in 

quality scores, we can examine the 

impact of the PGP Demonstration on 

quality by comparing the values of the 

seven claims-based quality measures for 

each PGP site and its comparison group. 

Our analysis found that, on the claimsbased measures, PGP performance 

exceeded that of the comparison groups 

(CGs) on all measures between the base 

year (BY) and performance year 2 (PY2). 

It also found that the PGP sites 

exhibited more improvement than their 

CGs on all but one measure between the 

BY and PY2. Even after adjusting for 

pre-demonstration trends in the claimsbased quality indicators, the PGP sites 

improved their claims-based quality 

process indicators more than their 

comparison groups. 

3. Impact on Providers and Suppliers 

In order to participate in the program, 

we realize that there will be costs borne 

in building the organizational, financial 

and legal infrastructure that is required 

of an ACO as well as performing the 

tasks required (as discussed throughout 

the Preamble) of an eligible ACO, such 

as: Quality reporting, conducting patient 

surveys, and investment in 

infrastructure for effective care 

coordination. While provider and 

supplier participation in the Shared 

Savings Program will be voluntary, we 

have examined the potential costs of 

program participation. 

In this final rule, we have revised 

many of the policies in the proposed 

rule, so as to allow for greater flexibility 

regarding the specific structure and 

requirements of an ACO, and we believe 

these changes will substantially reduce 

the burden associated with the 

infrastructure start-up and ongoing 

annual operating costs for participating 

ACOs in the Shared Savings Program. 

Significant modifications to reduce 

burden and cost for participating ACOs 

include offering flexibility in the: (1) 

Eligibility to participate in the Shared 

Savings Program; (2) program start date; 

(3) establishment of the agreement 

period; (4) governance and legal 

structure of an ACO; (5) quality 

performance standards and reporting on 

quality and cost measures; (6) 

adjustment to the benchmark and 

performance year expenditures; (7) 

shared savings determination and 

availability of first dollar savings; (8) 

transition to risk; (9) withholding 25 

percent of shared savings; (10) timing 

for the evaluation of sharing savings 

(claims run-out); (11) antitrust review; 

and (12) timing for repayment of losses. 

Specific analyses regarding these 

significant final policy modifications are 

discussed in detail in section II. of this 

final rule. 

Furthermore, beyond the statutory 

requirement that ACOs have at least 

5,000 assigned Medicare beneficiaries, 

the size of ACOs will also vary in 

relation to beneficiary participation and 

associated costs. Due to the limited 

precedence for this program and 

uncertainty regarding the structure and 

strategies that the provider community 

will pursue in order to participate as an 

ACO, precise estimates of expected 

provider costs are difficult to create. An 

analysis produced by the Government 

Accountability Office (GAO) of first year 

total operating expenditures for 

participants of the Medicare PGP 

Demonstration varied greatly from 

$436,386 to $2,922,820, with the 

average for a physician group at 

$1,265,897 (Medicare Physician 

Payment: Care Coordination Programs 

Used in Demonstration Show Promise, 

but Wider Use of Payment Approach 

May Be Limited. GAO, February 2008). 

These costs (for groups which all had 

200 or more physicians) include 

investments in infrastructure and 

information technology enhancements, 

management, quality reporting, and 

focused care coordination programs. 

The GAO also discovered that start-up 

investment expenditures in the PGP 

Demonstration varied between $82,573 

and $917,398, with the average for a 

physician group at $489,354. 

It is worth noting that the 10 

participating physician groups in the 

demonstration were large compared 

with other physician practices in terms 

of annual medical revenues and nonphysician staff. GAO claims that their 

larger relative size gave the 10 

participating physician groups in the 

PGP Demonstration three size-related 

advantages over smaller physician 

practices. First, participants typically 

had institutional affiliations with an 

integrated delivery system, a general 

hospital, or a health insurance entity. 

Specifically 9 of the 10 participating 

physician groups were part of an 

integrated delivery system, 8 affiliated 

with a general hospital, and 5 affiliated 

with an entity that marketed a health 

insurance product. As a result of these 

affiliations, GAO claims that 

participating physician groups generally 

had greater access to relatively large 

amounts of financial capital needed to 

initiate or expand programs. The second 

advantage, GAO claims, the 10 large 

participating physician groups had over 

smaller physician practices is the 

increased probability of having or 

acquiring EHR systems, which was 

essential in participants’ ability to 

gather data and track progress in 

meeting quality-of-care targets. For 

example, 8 of the 10 participating 

physician groups had an EHR in place 

before the demonstration began, and the 

2 other participants, out of necessity, 

developed alternative methods for 

gathering patient data electronically. 

Lastly, GAO claims that the third sizerelated advantage that most of the 10 

participating physician groups had over 

smaller physician practices was the 

larger groups’ experience with other 

pay-for-performance systems prior to 

participating in the PGP Demonstration. 

That is, 8 of the 10 participants had 

previous experience with pay-forperformance programs initiated by 

private or public sector organizations. 

This experience, GAO concludes, may 

have eased their adjustment to the PGP 

Demonstration and allowed them 

greater initial and overall success. 

Therefore, we recognize that start-up 

and ongoing annual operating costs will 

vary greatly between ACOs for various 

reasons, including those related to the 


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experience, size and funding available 

to the participating ACO. 

We use this analysis not to predict 

cost investment and operating 

expenditures, but to demonstrate that 

we expect the range of investment to 

vary greatly across ACOs and to provide 

potential scope for aspiring participants. 

We expect that due to the difference in 

program requirements between the 

Shared Savings Program and the PGP 

Demonstration Project, and the potential 

variation in ACO size and structure, the 

PGP related costs may be a subset of the 

investment required by entities seeking 

participation in this program. However, 

we also recognize that potential 

advantageous key drivers for 

participating physician groups would 

include institutional affiliations that 

allow greater access to financial capital, 

access to and experience using EHR and 

other IT systems and experience with 

pay-for-performance programs. As a 

result, we continue to believe that the 

structure, maturity, and thus associated 

costs represented by those participants 

in the Medicare PGP Demonstration are 

most likely to represent the majority of 

anticipated ACOs participating in the 

Shared Savings Program. Lastly, we 

recognize that participating ACOs may 

involve Medicare and the commercial 

side within their business scope, 

thereby stratifying start-up investment 

and ongoing annual operating costs 

across various business segments, and 

not solely attributable to the Medicare 

Shared Savings Program. 

We contacted several experienced 

provider organizations, private health 

plan network executives and investors 

involved with integrated delivery 

systems to assess the infrastructure costs 

associated in establishing a new ACO. 

As a result, we have revised our cost 

estimates relative to the proposed rule 

to reflect new information we learned 

regarding the start-up investment cost 

for an ACO. The ongoing annual 

operating costs presented in the 

proposed rule were validated and thus 

remain within the same range in the 

final rule. Therefore, our cost estimates 

for purposes of this final rule reflect an 

average estimate of $0.58 million for the 

start-up investment costs and $1.27 

million in ongoing annual operating 

costs for an ACO participant in the 

Shared Savings Program. Lastly, 

assuming an expected range of ACOs 

participating in the Shared Savings 

Program of 50 to 270 ACOs yields an 

estimated start-up investment cost 

ranging from $29 million to $157 

million, with ongoing annual operating 

costs ranging from $63 million to $342 

million for CYs 2012 through 2015. 

When utilizing the anticipated mean 

participation rate of ACOs in the Shared 

Savings Program coupled with the 

average start-up investment and ongoing 

annual operating costs, this yields an 

estimated aggregate average start-up 

investment and ongoing annual 

operating costs of $451 million for the 

CYs 2012 through 2015. 

While there will be a financial cost 

placed on ACOs in order to participate, 

there will be benefits to the respective 

organizations in the form of increased 

operational and healthcare delivery 

efficiency. Furthermore, as discussed 

previously, and explained in more 

detail in the preamble of this final rule, 

there will be an opportunity for 

financial reward for success in the 

program in the form of shared savings. 

As shown in Table 11, the estimated 

bonuses paid are a median of $1.31 

billion during CYs 2012 through 2015, 

with $890 million and $1.90 billion 

reflecting the 10th and 90th percentiles. 

(Similar to the previously presented 

stochastic distributions, the distribution 

represents uncertainty given the range 

of expert opinion, rather than a true 

statistical probability distribution.) 

Therefore, the total median ACO bonus 

payments of $1.31 billion during CYs 

2012 through 2015 coupled with the 

aggregate average start-up investment 

and ongoing annual operating cost of 

$451 million, incurred by the mean 

participation rate of ACOs in the Shared 

Savings Program during the same time 

period, yields a benefit-cost ratio of 2.9. 

We expected an increased amount of 

total bonuses relative to the proposed 

rule due to a more favorable sharing CYs 

2012 through 2015 arrangement and 

simplified requirements of 

participation, highlighted by first-dollar 

sharing and removal of year-3 risk in 

Track 1. The increase in bonuses is also 

in part due to the added participation 

expected as a result of these changes. 

Participating Track 2 ACOs will be 

assuming a risk of a financial penalty for 

failing to achieve savings (that is, if 

actual expenditures exceed the 

benchmark). At the median, we do not 

anticipate the collection of penalties 

during the first agreement period, with 

our 90th percentile projecting only $20 

million in collected penalties. Penalties 

decrease relative to the proposed rule 

despite the increased participation 

assumptions. This is primarily due to 

the enhanced attractiveness of Track 1 

relative to Track 2, as well as the 

removal of required risk from year three 

of Track 1. Due to the voluntary nature 

of this program, we expect the formation 

of ACOs by entities that aspire to 

receive benefits that outweigh their 

costs. ACOs that opt for Track 2 are 

expected to achieve significant savings 

in a shorter time period. We anticipate 

that not all ACOs will achieve shared 

savings and some may incur a financial 

loss, due to the requirement to repay a 

share of actual expenditures in excess of 

their benchmark. 


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We invited comment on the provider 

and supplier cost impact assessment, 

including the start-up investment and 

ongoing annual operating costs 

considered. 

Comment: Commenters expressed 

concern that the ACO infrastructure 

costs, including start-up and first year 

operating costs, presented in the 

proposed rule were low. Furthermore, 

the commenters referenced a study by 

the American Hospital Association 

(AHA) estimating start-up investment 

and ongoing annual operating costs as 

more accurately reflecting the associated 

costs of participating in the Medicare 

Shared Savings Program. 

Response: The AHA study presented 

estimates much higher than those 

utilized in this RIA and the independent 

GAO study. Their estimates focused on 

two prototypes. The first prototype 

included a 200 bed, 1 hospital system, 

with 80 primary care providers and 150 

specialists. The second prototype 

included a 1,200 bed, 5 hospital system, 

with 250 primary care providers and 

500 specialists. 

The overall estimates in the AHA 

study reflect an all inclusive cost 

structure well beyond the minimum 

requirements of the Medicare Shared 

Savings Program and the anticipated 

average participating ACO. As a result, 

the AHA study identifies three notes of 

caution relative to its findings. First, 

depending on the organization and 

circumstances of the ACO, some of the 

costs identified in the study may have 

already been incurred or attributable to 

purposes other than ACO-related 

development. Second, AHA 

acknowledges that the four case studies 

presented are not a large sample size 

from which to estimate costs. Third, 

their research work was conducted 

before the Medicare Shared Savings 

Program proposed rule was published 

and does not reflect the policies for the 

program put forth in either the proposed 

rule or this final rule. Furthermore, the 

study acknowledges that at the time of 

their research, the nature of ACOs and 

the process of developing them had not 

been standardized. In addition, the 

reporting requirements for ACOs had 

not yet been disclosed. Lastly, the study 

concludes that these estimates should 

be used as ‘‘early indicators,’’ and 

‘‘certainly not as definitive measures for 

ACOs in the Medicare Shared Savings 

Program.’’ We agree with the limitations 

of the study and as a result, we continue 

to believe that the independent GAO 

analysis provided on the Medicare PGP 

Demonstration and the analysis to 

support the advanced payment model 

offer a more closely aligned benchmark 

for assessing the start-up investment 

and ongoing annual operating costs 

associated with participation in the 

Medicare Shared Savings Program 

under the policies established in this 

final rule. 

4. Impact 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 

nonprofit status or by qualifying as 

small businesses under the Small 

Business Administration’s size 

standards (revenues of less than $7.0 to 

$34.5 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 Web site at 

http://www.sba.gov/sites/default/files/ 

Size_Standards_Table.pdf. 

For purposes of the RFA, 

approximately 95 percent of physicians 


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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 (PFS). 

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 drafted 

the rules and regulations accordingly in 

order to minimize costs and burden on 

such entities as well as maximize their 

opportunity to participate. The Shared 

Savings Program is designed to 

encourage individual physicians and 

small physician practices to integrate 

with other such practices as well as 

larger entities to create ACOs. Small 

entities will both be allowed and 

encouraged to participate in the Shared 

Savings Program, provided they have a 

minimum of 5,000 assigned 

beneficiaries, thereby realizing 

economic benefits through the 

utilization of enhanced and efficient 

systems of care and care coordination. 

Examples of increased economic 

benefits as a result of participating in 

this program include shared savings 

from this program, as well as qualifying 

for financial incentives from other CMS 

programs, such as PQRS, EHR, and e-Rx 

incentive payments. Therefore, a solo, 

small physician practice or other small 

entity may realize these 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. 

Again, we note that the Shared 

Savings Program is a voluntary program 

and payments for individual items and 

services would continue to be made on 

a FFS basis. This final rule will have a 

significant impact on a substantial 

number of small entities and we present 

more detailed analysis on these impacts, 

including costs and benefits to small 

entities and alternative policy 

considerations throughout this RIA. 

However, as detailed in this RIA, the 

total median bonus payments will 

exceed the average costs borne by 

participating in the Shared Savings 

Program. As a result, this regulatory 

impact section, together with the 

remainder of the preamble, constitutes 

the Final Regulatory Flexibility 

Analysis. 

In addition, section 1102(b) of the 

Social Security 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 604 of the RFA. For purposes of 

section 1102(b) of the Act, we define a 

small rural hospital as a hospital that is 

located outside of a metropolitan 

statistical area and has fewer than 100 

beds. Although the Shared Savings 

Program is a voluntary program, this 

final rule will have a significant impact 

on the operations of a substantial 

number of small rural hospitals. We 

have created the regulations such that 

rural hospitals will have the 

opportunity to participate and, where 

possible, be provided incentives to 

encourage participation, such as shared 

savings and the opportunity to qualify 

for financial incentives from other CMS 

programs, such as the EHR Incentive 

Program. As detailed in this RIA, the 

estimated aggregate median impact of 

bonus payments to participating ACOs 

more than exceeds the estimated 

average costs borne by voluntarily 

participating in the Shared Savings 

Program. 

E. Alternatives Considered 

This final rule contains a range of 

policies. Many tenets of the program are 

statutorily mandated and thus allow for 

little, if any, flexibility in the 

rulemaking process. Where there was 

flexibility, we made our policy 

decisions regarding alternatives based 

on a balance between creating the least 

possible negative impact on the 

stakeholders affected by the program 

and satisfactorily fitting the vision of the 

program within given operational 

constraints. 

For example, while the Affordable 

Care Act mandates that an ACO be large 

enough to care for a minimum of 5,000 

assigned beneficiaries, as is described in 

the preamble, we are adopting a sliding 

minimum percentage and confidence 

interval for the savings threshold based 

on the size of an ACO. This policy is a 

balance of protecting the program from 

paying out savings based on random 

variation, while allowing attainable 

thresholds for smaller ACOs and thus 

encouraging participation from various 

sized entities. 

The preceding preamble provides 

descriptions of the various statutory 

provisions that are addressed in this 

final rule, identifies those policies when 

discretion has been allowed and 

exercised, presents the rationales for our 

final policies and, where relevant, 

alternatives that were considered. An 

important alternative involves making 

adjustments to an ACO’s benchmark for 

changes in FFS price adjustments (such 

as the geographic practice cost index 

(GPCI) under the PFS and hospital wage 

index). Such price changes regularly 

occur and often impact counties or other 

localities in magnitudes that can 

significantly differ from the national 

average. If, for example, operating cost 

payments are reduced for section 508 of 

the MMA hospitals (as will occur under 

current law at the end of FY 2011) then 

ACO-attributed claims incurred in a 

section 508 of the MMA hospital would 

exhibit significant price decreases 

which could lead to shared savings 

payments unrelated to real 

improvements in ACO efficiency. 

Absent such adjustments, these 

statutory changes will impact the 

comparison of actual expenditures and 

the benchmark. As we have previously 

noted, the statute provides authority for 

adjustment to the benchmark for ‘‘such 

other factors as the Secretary determines 

appropriate,’’ and while there is no 

similar authority under section 1899(d) 

of the Act to adjust actual expenditures 

during a performance year for ‘‘such 

other factors’’ we considered using our 

authority under section 1899(i) of the 

Act to make such adjustments to the 

determination of actual expenditures. 

Although this potentially beneficial but 

operationally complex policy is not 

included in this final rule, we note that 

such adjustment may be explored by 

pilots designed within the Innovation 

Center and could potentially inform 

future rulemaking for this program. 

However, we do note, that we are using 

our authority under sections 1899(d) 

and (i) of the Act to make adjustments 

to remove IME and DSH payments from 

both benchmark and performance 

expenditures, constituting a partial step 

toward a bonus formula that responds to 

improvements in utilization rather than 

differences in price between 

performance and benchmark 

expenditures. 

The proposed rule received numerous 

comments calling for a method for risk 

adjustment to take into account changes 

in the health status of the population 

between the benchmark period and 

performance year. Options were 

considered for the final rule that could 

reflect such changes in beneficiary 

characteristics without rewarding ACOs 

for more complete and accurate HCC 

coding of their assigned patient 

population than would occur for a 

comparable group of beneficiaries 

receiving care outside an ACO. 

Therefore a method was chosen for 

stratifying the benchmark by four 

distinct beneficiary eligibility categories 

that each share a unique expenditure 

profile: ESRD, disabled, aged dualeligible beneficiaries and aged non-dualeligible beneficiaries. The benchmark 

will be normalized to the mix of 


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beneficiaries aligned across the four 

strata in a given performance year, 

improving the fidelity of the updated 

benchmark to the beneficiary 

characteristics in such performance 

year. In addition, adjustments will be 

made to account for changes in severity 

and case mix for newly assigned 

beneficiaries utilizing CMS–HCC 

prospective scores. Demographic factors 

alone would be used to adjust for 

changes for continuously assigned 

beneficiaries in order to avoid 

rewarding ACOs for more complete and 

accurate diagnosis coding, unless this 

populations HCC risk score declines in 

which case it will be reset at the lower 

rate. Such combined method for 

accounting for shifts in the 

characteristics of the assigned 

population is expected to reduce 

variation in expenditure growth relative 

to the benchmark and also to mitigate 

the incentive for ACOs to reduce 

services to high-risk patients in order to 

compare favorably against a static 

benchmark. 

Comments also frequently discussed 

the limited reward presented by the 

proposed rule relative to the costs that 

providers estimated they would incur 

for infrastructure and operation as an 

ACO under the program. Many elements 

of the final rule respond directly to this 

concern, including the removal of 

required risk in the third year under 

Track 1, the addition of first-dollar 

sharing in Track 1, the increased sharing 

caps for both tracks, the removal of the 

25 percent withhold on shared-savings 

dollars, and the reduction in operational 

burdens such as the number of quality 

measures to be reported. All described 

changes likely improve the businesscase for ACOs to join the program, 

whether in terms of reduced burden or 

enhanced benefit of participation. 

However, our modeling of these 

changes’ impact on the Medicare 

program indicated that the removal of 

the 2 percent threshold is the most 

significant change that directly affects 

the more favorable program sharing 

arrangement. Raising the sharing caps is 

not likely to affect shared savings 

payments for even the highestperforming ACOs. The withholds were 

also expected to have minimal direct 

financial impact since an ACO incurring 

a withhold—and therefore generating 

measured savings in year 1 or 2—would 

be unlikely to incur a penalty in a 

following year of the agreement period 

(and would be even less likely to fail to 

repay the penalty in such rare case). 

Requiring risk in the third year was not 

anticipated to generate significant 

additional penalty dollars, since it 

would most likely cause ACOs 

experiencing difficulty meeting their 

benchmarks to terminate their 

agreements prior to that third year 

rather than face likely penalties. As a 

result, removing this requirement is 

expected to enhance program 

participation without negatively 

impacting the estimated net Federal 

savings. 

Finally, a key design element with 

potential to significantly affect the 

impact of the program involves the 

method for establishing quality 

standards. We propose aggregating the 

quality domain scores into a single 

overall ACO score used to calculate the 

ACO’s final sharing rate for purposes of 

determining shared savings or shared 

losses as described in section II.F. of 

this final rule. We would average all 

domain scores for an ACO together 

equally to calculate the overall quality 

score used to calculate the ACO’s final 

sharing rate as previously described. We 

also considered a variety of scoring 

methodologies that would have differing 

incentives for improving clinical 

outcomes such as: Scoring measures 

individually under a method that would 

weigh all measures equally as well as 

weighing quality measures by their 

clinical importance. In addition to the 

performance score approach that 

rewards ACOs for better quality with 

larger percentages of shared savings as 

modeled in this analysis, we could use 

a threshold approach that allows any 

ACO that meets minimum standards for 

the quality measures to realize the full 

shared savings. However, our final 

policy encourages continuous quality 

improvement since ACOs that score 

higher on quality get to keep a higher 

percentage of the savings they generate 

compared to ACOs that perform lower 

on quality. 

F. Accounting Statement and Table 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/sites/default/files/ 

omb/assets/regulatory_matters_pdf/a4.pdf), in Table 12, we have prepared an 

accounting statement showing the 

classification of transfers, benefits and 

costs associated with the provisions of 

this final rule. 

TABLE 12—ACCOUNTING STATEMENT: ESTIMATED TRANSFERS, BENEFITS AND COSTS

[CYs 2012–2015] 

Category Transfers 

Annualized 

monetized transfers 

Year dollar Units discount rate 

Notes 

2011 7% 3% 

Primary Estimate ........... ¥$110.08 million .......... ¥$112.85 million .......... These estimates represent the range 

of annualized impacts on the 

Medicare Program (net bonus 

payments) for CYs 2012–2015. 

90th Percentile Estimate $11.02 million ................ $10.45 million.

10th Percentile Estimate ¥$233.92 million .......... ¥$238.76 million.

From/To ......................... Federal Government to ACO Providers 

Category ........................ COSTS 

Year Dollar: 

2011: 

Primary Estimate ........... Primary Estimate ........... $112.2 million ................ $112.5 million ................ Estimated aggregate average startup investment and ongoing annual 

operating costs based on the 

mean ACO participation rate for 

CYs 2012 through 2015. 


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TABLE 12—ACCOUNTING STATEMENT: ESTIMATED TRANSFERS, BENEFITS AND COSTS—Continued 

[CYs 2012–2015] 

Category Transfers 

Annualized 

monetized transfers 

Year dollar Units discount rate 

Notes 

2011 7% 3% 

Category ........................ BENEFITS 

Qualitative Benefits ........ Improved healthcare delivery and communication to beneficiaries through patient centered-care. 

G. Conclusion 

As a result of this final rule, the 

median estimate of the financial impact 

from implementation of the Shared 

Savings Program, for CYs 2012 through 

2015, is a net savings (after bonus 

payments) of $470 million. Although 

this is the ‘‘best estimate’’ for the 

financial impact of the Shared Savings 

Program during CYs 2012 through 2015, 

a relatively wide range of possible 

outcomes exists. Overall, 90 percent of 

the stochastic trials resulted in net 

program savings, and the remaining 10 

percent represented cost increases. The 

90th and 10th percentiles of the 

estimate distribution show net savings 

of $940 million and $0 million, 

respectively, suggesting a 10 percent 

likelihood that the actual impact would 

exceed $940 million and a 10 percent 

likelihood that the actual impact would 

result in a negative net Federal savings 

(that is, a net Federal cost). In the 

extreme scenarios, the results were as 

large as $2.0 billion in savings or $1.1 

billion in costs. In addition, at the 

anticipated mean participation rate of 

ACOs in the Shared Savings Program, 

participating ACOs may experience an 

estimated aggregate average start-up 

investment and ongoing annual 

operating cost of $451 million for CYs 

2012 through 2015. Lastly, we estimate 

an aggregate median impact of $1.31 

billion in bonus payments to 

participating ACOs in the Shared 

Savings Program for CYs 2012 through 

2015. The 10th and 90th percentiles of 

the estimate distribution, for the same 

time period, yield bonus payments to 

ACOs of $890 million and $1.9 billion, 

respectively. Therefore, the total median 

ACO bonus payments of $1.31 billion 

during CYs 2012 through 2015 coupled 

with the aggregate average start-up 

investment and ongoing annual 

operating cost of $451 million, incurred 

by the mean participation rate of ACOs 

in the Shared Savings Program during 

the same time period, yields a benefitcost ratio of 2.9. 

Overall, we assumed greater 

participation by ACOs under the 

policies contained in this final rule due 

to the greater generosity and the longer 

agreement period, as well as the full 

agreement period with a one-sided 

option. The longer agreement period 

also amplified our saving and cost 

estimates from what they would have 

been in a 3-year program. This resulted 

in total bonuses increasing dramatically, 

while penalties decreased due to these 

changes. 

List of Subjects in 42 CFR Part 425 

Administrative practice and 

procedure, Health facilities, Health 

professions, Medicare, Reporting and 

recordkeeping requirements. 

For the reasons set forth in the 

preamble, the Centers for Medicare & 

Medicaid Services amends 42 CFR 

Chapter IV by adding part 425 to read 

as follows: 

PART 425—MEDICARE SHARED 

SAVINGS PROGRAM 

Sec. 

Subpart A—General Provisions 

425.10 Basis and scope. 

425.20 Definitions. 

Subpart B—Shared Savings Program 

Eligibility Requirements 

425.100 General. 

425.102 Eligible providers and suppliers. 

425.104 Legal entity. 

425.106 Shared governance. 

425.108 Leadership and management. 

425.110 Number of ACO professionals and 

beneficiaries. 

425.112 Required processes and patientcenteredness criteria. 

425.114 Participation in other shared 

savings initiatives. 

Subpart C—Application Procedures and 

Participation Agreement 

425.200 Agreement with CMS. 

425.202 Application procedures. 

425.204 Content of the application. 

425.206 Evaluation procedures for 

applications. 

425.208 Provisions of participation 

agreement. 

425.210 Application of agreement to ACO 

participants, ACO providers/suppliers, 

and others. 

425.212 Changes to program requirements 

during the agreement term. 

425.214 Managing changes to the ACO 

during the agreement. 

425.216 Actions prior to termination. 

425.218 Termination of the agreement by 

CMS. 

425.220 Termination of an agreement by the 

ACO. 

425.222 Reapplication after termination. 

Subpart D—Program Requirements and 

Beneficiary Protections 

425.300 Compliance plan. 

425.302 Program requirements for data 

submission and certifications. 

425.304 Other program requirements. 

425.306 Participation agreement and 

exclusivity of ACO participant TINs. 

425.308 Public reporting and transparency. 

425.310 Marketing requirements. 

425.312 Notification to beneficiaries of 

participation in shared savings program. 

425.314 Audits and record retention. 

425.316 Monitoring of ACOs. 

Subpart E—Assignment of Beneficiaries 

425.400 General. 

425.402 Basic assignment methodology. 

425.404 Special assignment conditions for 

ACOs including for FQHCs and RHCs. 

Subpart F—Quality Performance Standards 

and Reporting 

425.500 Measures to assess the quality of 

care furnished by an ACO. 

425.502 Calculating ACO quality 

performance score. 

425.504 Incorporating reporting 

requirements related to the Physician 

Quality Reporting System. 

425.506 Electronic health records 

technology. 

Subpart G—Shared Savings and Losses 

425.600 Selection of risk model. 

425.602 Establishing the benchmark. 

425.604 Calculation of savings under the 

one-sided model. 

425.606 Calculation of shared savings and 

losses under the two-sided model. 

425.608 Determining first year performance 

for ACOs beginning April 1 or July 1, 

2012. 

Subpart H—Data Sharing With ACOs 

425.700 General rules. 

425.702 Aggregate reports. 

425.704 Beneficiary-identifiable data. 

425.706 Minimum necessary data. 

425.708 Beneficiary may decline data 

sharing. 

425.710 Data use agreement. 


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Subpart I—Reconsideration Review 

Process 

425.800 Preclusion of administrative and 

judicial review. 

425.802 Request for review. 

425.804 Reconsideration review process. 

425.806 On-the-record review of 

reconsideration official’s 

recommendation by independent CMS 

Official. 

425.808 Effect of independent CMS 

official’s decision. 

425.810 Effective date of decision. 

Authority: Secs. 1102, 1106, 1871, and 

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

1302 and 1395hh). 

Subpart A—General Provisions 

§ 425.10 Basis and scope. 

(a) Basis. This part implements 

section 1899 of the Act by establishing 

a shared savings program that promotes 

accountability for a patient population, 

coordinates items and services under 

Medicare parts A and B, and encourages 

investment in infrastructure and 

redesigned care processes for high 

quality and efficient services. The 

regulations under this part must not be 

construed to affect the payment, 

coverage, program integrity, and other 

requirements that apply to providers 

and suppliers under FFS Medicare. 

(b) Scope. This part sets forth the 

following: 

(1) The eligibility requirements for an 

ACO to participate in the Medicare 

Shared Savings Program (Shared 

Savings Program). 

(2) Application procedures and 

provisions of the participation 

agreement. 

(3) Program requirements and 

beneficiary protections. 

(4) The method for assigning 

Medicare fee-for-service beneficiaries to 

ACOs. 

(5) Quality performance standards, 

reporting requirements, and data 

sharing. 

(6) Payment criteria and 

methodologies (one-sided model and 

two-sided model). 

(7) Compliance monitoring and 

sanctions for noncompliance. 

(8) Reconsideration review process. 

§ 425.20 Definitions. 

As used in this part, unless otherwise 

indicated— 

Accountable care organization (ACO) 

means a legal entity that is recognized 

and authorized under applicable State, 

Federal, or Tribal law, is identified by 

a Taxpayer Identification Number (TIN), 

and is formed by one or more ACO 

participants(s) that is(are) defined at 

§ 425.102(a) and may also include any 

other ACO participants described at 

§ 425.102(b). 

ACO participant means an individual 

or group of ACO provider(s)/supplier(s), 

that is identified by a Medicare-enrolled 

TIN, that alone or together with one or 

more other ACO participants 

comprise(s) an ACO, and that is 

included on the list of ACO participants 

that is required under § 425.204(c)(5). 

ACO professional means an ACO 

provider/supplier who is either of the 

following: 

(1) A physician legally authorized to 

practice medicine and surgery by the 

State in which he performs such 

function or action. 

(2) A practitioner who is one of the 

following: 

(i) A physician assistant (as defined at 

§ 410.74(a)(2) of this chapter). 

(ii) A nurse practitioner (as defined at 

§ 410.75(b) of this chapter). 

(iii) A clinical nurse specialist (as 

defined at § 410.76(b) of this chapter). 

ACO provider/supplier means an 

individual or entity that— 

(1) Is a provider (as defined at 

§ 400.202 of this chapter) or a supplier 

(as defined at § 400.202 of this chapter); 

(2) Is enrolled in Medicare; 

(3) Bills for items and services it 

furnishes to Medicare fee-for-service 

beneficiaries under a Medicare billing 

number assigned to the TIN of an ACO 

participant in accordance with 

applicable Medicare regulations; and 

(4) Is included on the list of ACO 

providers/suppliers that is required 

under § 425.204(c)(5). 

Agreement period means the term of 

the participation agreement which 

begins at the start of the first 

performance year and concludes at the 

end of the final performance year. 

Antitrust Agency means the 

Department of Justice or Federal Trade 

Commission. 

Assignment means the operational 

process by which CMS determines 

whether a beneficiary has chosen to 

receive a sufficient level of the requisite 

primary care services from a physician 

who is an ACO provider/supplier so 

that the ACO may be appropriately 

designated as exercising basic 

responsibility for that beneficiary’s care. 

At-risk beneficiary means, but is not 

limited to, a beneficiary who— 

(1) Has a high risk score on the CMS– 

HCC risk adjustment model; 

(2) Is considered high cost due to 

having two or more hospitalizations or 

emergency room visits each year; 

(3) Is dually eligible for Medicare and 

Medicaid; 

(4) Has a high utilization pattern; 

(5) Has one or more chronic 

conditions. 

(6) Has had a recent diagnosis that is 

expected to result in increased cost. 

(7) Is entitled to Medicaid because of 

disability; or 

(8) Is diagnosed with a mental health 

or substance abuse disorder. 

Continuously assigned beneficiary 

means a beneficiary assigned to the 

ACO in the current performance year 

who was either assigned to or received 

a primary care service from any of the 

ACO’s participant during the most 

recent prior calendar year. 

Covered professional services has the 

same meaning given these terms under 

section 1848(k)(3)(A) of the Act. 

Critical access hospital (CAH) has the 

same meaning given this term under 

§ 400.202 of this chapter. 

Eligible professional has the meanings 

given this term under section 

1848(k)(3)(B) of the Act. 

Federally qualified health center 

(FQHC) has the same meaning given to 

this term under § 405.2401(b) of this 

chapter. 

Hospital means a hospital subject to 

the prospective payment system 

specified in § 412.1(a)(1) of this chapter. 

Marketing materials and activities 

include, but are not limited to, general 

audience materials such as brochures, 

advertisements, outreach events, letters 

to beneficiaries, Web pages, data sharing 

opt out letters, mailings, social media, 

or other activities conducted by or on 

behalf of the ACO, or by ACO 

participants, or ACO providers/ 

suppliers participating in the ACO, 

when used to educate, solicit, notify, or 

contact Medicare beneficiaries or 

providers and suppliers regarding the 

Shared Savings Program. The following 

beneficiary communications are not 

marketing materials and activities: 

Certain informational materials 

customized or limited to a subset of 

beneficiaries; materials that do not 

include information about the ACO, its 

ACO participants, or its ACO providers/ 

suppliers; materials that cover 

beneficiary-specific billing and claims 

issues or other specific individual 

health related issues; educational 

information on specific medical 

conditions (for example, flu shot 

reminders), written referrals for health 

care items and services, and materials or 

activities that do not constitute 

‘‘marketing’’ under 45 CFR 164.501 and 

164.508(a)(3)(i). 

Medicare fee-for-service beneficiary 

means an individual who is— 

(1) Enrolled in the original Medicare 

fee-for-service program under both parts 

A and B; and 

(2) Not enrolled in any of the 

following: 

(i) A MA plan under part C. 

(ii) An eligible organization under 

section 1876 of the Act. 


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(iii) A PACE program under section 

1894 of the Act. 

Medicare Shared Savings Program 

(Shared Savings Program) means the 

program, established under section 1899 

of the Act and implemented in this part. 

Newly assigned beneficiary means a 

beneficiary that is assigned in the 

current performance year who was 

neither assigned to nor receives a 

primary care service from any of the 

ACO’s participants during the most 

recent prior calendar year. 

One-sided model means a model 

under which the ACO may share 

savings with the Medicare program, if it 

meets the requirements for doing so, but 

is not liable for sharing any losses 

incurred under subpart G of this part. 

Performance year means the 12- 

month period beginning on January 1 of 

each year during the agreement period, 

unless otherwise noted in the ACO’s 

agreement. 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 and 18 months, 

respectively. 

Physician means a doctor of medicine 

or osteopathy (as defined in section 

1861(r)(1) of the Act). 

Physician Quality Reporting System 

(PQRS) means the quality reporting 

system established under section 

1848(k) of the Act. 

Primary care physician means a 

physician who has a primary specialty 

designation of internal medicine, 

general practice, family practice, or 

geriatric medicine, or, for services 

furnished in an FQHC or RHC, a 

physician included in an attestation by 

the ACO as provided under § 425.404. 

Primary care services mean the set of 

services identified by the following 

HCPCS codes: 

(1) 99201 through 99215. 

(2) 99304 through 99340, and 99341 

through 99350, G0402 (the code for the 

Welcome to Medicare visit), G0438 and 

G0439 (codes for the annual wellness 

visits); 

(3) Revenue center codes 0521, 0522, 

0524, 0525 submitted by FQHCs (for 

services furnished prior to January 1, 

2011), or by RHCs. 

Quality measures means the measures 

defined by the Secretary, under section 

1899 of the Act, to assess the quality of 

care furnished by an ACO, such as 

measures of clinical processes and 

outcomes, patient and, where 

practicable, caregiver experience of care 

and utilization. 

Reporting period, for purposes of 

subpart F of this part, means the 

calendar year from January 1 to 

December 31. 

Rural health center (RHC) has the 

same meaning given to this term under 

§ 405.2401(b). 

Shared losses means a portion of the 

ACO’s performance year Medicare feefor-service Parts A and B expenditures, 

above the applicable benchmark, it must 

repay to CMS. An ACO’s eligibility for 

shared losses will be determined for 

each performance year. For an ACO 

requesting interim payment, shared 

losses may result from the interim 

payment calculation. 

Shared savings means a portion of the 

ACO’s performance year Medicare feefor-service Parts A and B expenditures, 

below the applicable benchmark, it is 

eligible to receive payment for from 

CMS. An ACO’s eligibility for shared 

savings will be determined for each 

performance year. For an ACO 

requesting interim payment, shared 

savings may result from the interim 

payment system calculation. 

Taxpayer Identification Number (TIN) 

means a Federal taxpayer identification 

number or employer identification 

number as defined by the IRS in 26 CFR 

301.6109–1. 

Two-sided model means 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 under subpart G of this part. 

Subpart B—Shared Savings Program 

Eligibility Requirements 

§ 425.100 General. 

(a) Under the Shared Savings 

Program, ACO participants may work 

together to manage and coordinate care 

for Medicare fee-for-service 

beneficiaries through an ACO that meets 

the criteria specified in this part. The 

ACO must become accountable for the 

quality, cost, and overall care of the 

Medicare fee-for-service beneficiaries 

assigned to the ACO. 

(b) ACOs that meet or exceed a 

minimum savings rate established under 

§ 425.604 or § 425.606, meet the 

minimum quality performance 

standards established under § 425.500, 

and otherwise maintain their eligibility 

to participate in the Shared Savings 

Program under this part are eligible to 

receive payments for shared savings 

under subpart G. 

(c) ACOs that operate under the twosided model and meet or exceed a 

minimum loss rate established under 

§ 425.606 must share losses with the 

Medicare program under subpart G of 

the part. 

§ 425.102 Eligible providers and suppliers. 

(a) The following ACO participants or 

combinations of ACO participants are 

eligible to form an ACO that may apply 

to participate in the Shared Savings 

Program: 

(1) ACO professionals in group 

practice arrangements. 

(2) Networks of individual practices 

of ACO professionals. 

(3) Partnerships or joint venture 

arrangements between hospitals and 

ACO professionals. 

(4) Hospitals employing ACO 

professionals. 

(5) CAHs that bill under Method II (as 

described in § 413.70(b)(3) of this 

chapter). 

(6) RHCs. 

(7) FQHCs. 

(b) Other ACO participants that are 

not identified in paragraph (a) of this 

section are eligible participate through 

an ACO formed by one or more of the 

ACO participants identified in 

paragraph (a) of this section. 

§ 425.104 Legal entity. 

(a) An ACO must be a legal entity, 

formed under applicable State, Federal, 

or Tribal law, and authorized to conduct 

business in each State in which it 

operates for purposes of the following: 

(1) Receiving and distributing shared 

savings. 

(2) Repaying shared losses or other 

monies determined to be owed to CMS. 

(3) Establishing, reporting, and 

ensuring provider compliance with 

health care quality criteria, including 

quality performance standards. 

(4) Fulfilling other ACO functions 

identified in this part. 

(b) An ACO formed by two or more 

otherwise independent ACO 

participants must be a legal entity 

separate from any of its ACO 

participants. 

§ 425.106 Shared governance. 

(a) General rule. An ACO must 

maintain an identifiable governing body 

with authority to execute the functions 

of an ACO as defined under this part, 

including but not limited to, the 

processes defined under § 425.112 to 

promote evidence-based medicine and 

patient engagement, report on quality 

and cost measures, and coordinate care. 

(b) Responsibilities of the governing 

body and its members. (1) The 

governing body must have 

responsibility for oversight and strategic 

direction of the ACO, holding ACO 

management accountable for the ACO’s 

activities as described in this part. 

(2) The governing body must have a 

transparent governing process. 

(3) The governing body members must 

have a fiduciary duty to the ACO and 

must act consistent with that fiduciary 

duty. 


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(4) The governing body of the ACO 

must be separate and unique to the ACO 

in cases where the ACO comprises 

multiple, otherwise independent ACO 

participants. 

(5) If the ACO is an existing entity, the 

ACO governing body may be the same 

as the governing body of that existing 

entity, provided it satisfies the other 

requirements of this section. 

(c) Composition and control of the 

governing body. (1) The ACO must 

provide for meaningful participation in 

the composition and control of the 

ACO’s governing body for ACO 

participants or their designated 

representatives. 

(2) The ACO governing body must 

include a Medicare beneficiary 

representative(s) served by the ACO 

who does not have a conflict of interest 

with the ACO, and who has no 

immediate family member with conflict 

of interest with the ACO. 

(3) At least 75 percent control of the 

ACO’s governing body must be held by 

ACO participants. 

(4) The governing body members may 

serve in a similar or complementary 

manner for an ACO participant. 

(5) In cases in which the composition 

of the ACO’s governing body does not 

meet the requirements of paragraphs 

(c)(2) and (c)(3) of this section, the ACO 

must describe why it seeks to differ 

from these requirements and how the 

ACO will involve ACO participants in 

innovative ways in ACO governance or 

provide meaningful representation in 

ACO governance by Medicare 

beneficiaries. 

(d) Conflict of interest. The ACO 

governing body must have a conflict of 

interest policy that applies to members 

of the governing body. The conflict of 

interest policy must— 

(1) Require each member of the 

governing body to disclose relevant 

financial interests; and 

(2) Provide a procedure to determine 

whether a conflict of interest exists and 

set forth a process to address any 

conflicts that arise. 

(3) The conflict of interest policy must 

address remedial action for members of 

the governing body that fail to comply 

with the policy. 

§ 425.108 Leadership and management. 

(a) An ACO must have a leadership 

and management structure that includes 

clinical and administrative systems that 

align with and support the goals of the 

Shared Savings Program and the aims of 

better care for individuals, better health 

for populations, and lower growth in 

expenditures. 

(b) The ACO’s operations must be 

managed by an executive, officer, 

manager, general partner, or similar 

party whose appointment and removal 

are under the control of the ACO’s 

governing body and whose leadership 

team has demonstrated the ability to 

influence or direct clinical practice to 

improve efficiency processes and 

outcomes. 

(c) Clinical management and oversight 

must be managed by a senior-level 

medical director who is a physician and 

one of its ACO providers/suppliers, who 

is physically present on a regular basis 

at any clinic, office, or other location 

participating in the ACO, and who is a 

board-certified physician and licensed 

in a State in which the ACO operates. 

(d) Each ACO participant and each 

ACO provider/supplier must 

demonstrate a meaningful commitment 

to the mission of the ACO to ensure the 

ACO’s likely success. 

(1) Meaningful commitment may 

include, for example, a sufficient 

financial or human investment (for 

example, time and effort) in the ongoing 

operations of the ACO such that the 

potential loss or recoupment of the 

investment is likely to motivate the 

ACO participant and ACO provider/ 

supplier to achieve the ACO’s mission 

under the Shared Savings Program. 

(2) A meaningful commitment can be 

shown when an ACO participant or 

ACO provider/supplier agrees to comply 

with and implement the ACO’s 

processes required by § 425.112 and is 

held accountable for meeting the ACO’s 

performance standards for each required 

process. 

(e) CMS retains the right to give 

consideration to an innovative ACO 

with a management structure not 

meeting paragraphs (b) through (c) of 

this section. 

§ 425.110 Number of ACO professionals 

and beneficiaries. 

(a)(1) The ACO must include primary 

care ACO professionals that are 

sufficient for the number of Medicare 

fee-for-service beneficiaries assigned to 

the ACO under subpart E of this part. 

The ACO must have at least 5,000 

assigned beneficiaries. 

(2) CMS deems an ACO to have 

initially satisfied the requirement to 

have at least 5,000 assigned 

beneficiaries specified in paragraph 

(a)(1) of this section if the number of 

beneficiaries historically assigned to the 

ACO participants in each of the three 

years before the start of the agreement 

period, using the assignment 

methodology in subpart E of this part, 

is 5,000 or more. 

(b) If at any time during the 

performance year, an ACO’s assigned 

population falls below 5,000, the ACO 

will be issued a warning and placed on 

a CAP. 

(1) While under the CAP, the ACO 

remains eligible for shared savings and 

losses during that performance year and 

its MSR will be set at a level consistent 

with the number of assigned 

beneficiaries. 

(2) If the ACO’s assigned population 

is not returned to at least 5,000 or more 

by the end of next performance year, the 

ACO’s agreement will be terminated and 

the ACO will not be eligible to share in 

savings for that performance year. 

§ 425.112 Required processes and patientcenteredness criteria. 

(a) General. (1) An ACO must— 

(i) Promote evidence-based medicine 

and beneficiary engagement, internally 

report on quality and cost metrics, and 

coordinate care; 

(ii) Adopt a focus on patient 

centeredness that is promoted by the 

governing body and integrated into 

practice by leadership and management 

working with the organization’s health 

care teams; and 

(iii) Have defined processes to fulfill 

these requirements. 

(2) An ACO must have a qualified 

healthcare professional responsible for 

the ACO’s quality assurance and 

improvement program, which must 

include the defined processes included 

in paragraphs (b)(1) through (4) of this 

section. 

(3) For each process specified in 

paragraphs (b)(1) through (4) of this 

section, the ACO must— 

(i) Explain how it will require ACO 

participants and ACO providers/ 

suppliers to comply with and 

implement each process (and 

subelement thereof), including the 

remedial processes and penalties 

(including the potential for expulsion) 

applicable to ACO participants and 

ACO providers/suppliers for failure to 

comply with and implement the 

required process; and 

(ii) Explain how it will employ its 

internal assessments of cost and quality 

of care to improve continuously the 

ACO’s care practices. 

(b) Required processes. The ACO 

must define, establish, implement, 

evaluate, and periodically update 

processes to accomplish the following: 

(1) Promote evidence-based medicine. 

These processes must cover diagnoses 

with significant potential for the ACO to 

achieve quality improvements taking 

into account the circumstances of 

individual beneficiaries. 

(2) Promote patient engagement. 

These processes must address the 

following areas: 


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(i) Compliance with patient 

experience of care survey requirements 

in § 425.500. 

(ii) Compliance with beneficiary 

representative requirements in 

§ 425.106. 

(iii) A process for evaluating the 

health needs of the ACO’s population, 

including consideration of diversity in 

its patient populations, and a plan to 

address the needs of its population. 

(A) In its plan to address the needs of 

its population, the ACO must describe 

how it intends to partner with 

community stakeholders to improve the 

health of its population. 

(B) An ACO that has a stakeholder 

organization serving on its governing 

body will be deemed to have satisfied 

the requirement to partner with 

community stakeholders. 

(iv) Communication of clinical 

knowledge/evidence-based medicine to 

beneficiaries in a way that is 

understandable to them. 

(v) Beneficiary engagement and 

shared decision-making that takes into 

account the beneficiaries’ unique needs, 

preferences, values, and priorities; 

(vi) Written standards in place for 

beneficiary access and communication, 

and a process in place for beneficiaries 

to access their medical record. 

(3) Develop an infrastructure for its 

ACO participants and ACO providers/ 

suppliers to internally report on quality 

and cost metrics that enables the ACO 

to monitor, provide feedback, and 

evaluate its ACO participants and ACO 

provider(s)/supplier(s) performance and 

to use these results to improve care over 

time. 

(4) Coordinate care across and among 

primary care physicians, specialists, and 

acute and post-acute providers and 

suppliers. The ACO must— 

(i) Define its methods and processes 

established to coordinate care 

throughout an episode of care and 

during its transitions, such as discharge 

from a hospital or transfer of care from 

a primary care physician to a specialist 

(both inside and outside the ACO); and 

(ii) As part of its application, the ACO 

must: 

(A) Submit a description of its 

individualized care program, along with 

a sample individual care plan, and 

explain how this program is used to 

promote improved outcomes for, at a 

minimum, its high-risk and multiple 

chronic condition patients. 

(B) Describe additional target 

populations that would benefit from 

individualized care plans. Individual 

care plans must take into account the 

community resources available to the 

individual. 

§ 425.114 Participation in other shared 

savings initiatives. 

(a) ACOs may not participate in the 

Shared Savings Program if they include 

an ACO participant that participates in 

the independence at home medical 

practice pilot program under section 

1866E of the Act, a model tested or 

expanded under section 1115A of the 

Act that involves shared savings, or any 

other Medicare initiative that involves 

shared savings. 

(b) CMS will review and deny an 

ACO’s application if any ACO 

participants are participating in another 

Medicare initiative that involves shared 

savings payments. 

(c) CMS will determine an 

appropriate method to ensure no 

duplication in payments for 

beneficiaries assigned to other shared 

savings programs or initiatives, 

including initiatives involving dually 

eligible beneficiaries, when such other 

shared savings programs have an 

assignment methodology that is 

different from the Shared Savings 

Program. 

Subpart C—Application Procedures 

and Participation Agreement 

§ 425.200 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 three years. 

(b) Term of agreement. (1) For 2012. 

For applications that are approved to 

participate in the Shared Savings 

Program for 2012, the start date for the 

agreement will be one of the following: 

(i) April 1, 2012 (term of the 

agreement is 3 years and 9 months). 

(ii) July 1, 2012 (term of the agreement 

is 3 years and 6 months). 

(2) For 2013 and all subsequent 

years— 

(i) The start date is January 1 of that 

year; and 

(ii) The term of the agreement is 3 

years. 

(c) Performance year. (1) Except as 

specified in paragraphs (b)(1)(i) and (ii) 

of this section, the ACO’s performance 

year under the agreement is the 12 

month period beginning on January 1 of 

each year during the term of the 

agreement unless otherwise noted in its 

agreement. 

(2) 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. 

(d) During each calendar year of the 

agreement period, including the partial 

year associated with start dates 

specified in paragraph (b)(1)(i) and (ii) 

of this section, ACOs must submit 

measures in the form and manner 

required by CMS. 

§ 425.202 Application procedures. 

(a) General rules. (1) In order to obtain 

a determination regarding whether it 

meets the requirements to participate in 

the Shared Savings Program, a 

prospective ACO must submit a 

complete application in the form and 

manner required by CMS by the 

deadline established 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 participate 

in 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 their application with 

the Antitrust Agencies. 

(b) Condensed application form. PGP 

demonstration sites applying to 

participate in the Shared Savings 

Program will have an opportunity to 

complete a condensed application form. 

(c) Application review. (1) CMS 

determines whether an applicant 

satisfies the requirements of this part 

and is qualified to participate in the 

Shared Savings Program. 

(2) CMS approves or denies 

applications accordingly. 

§ 425.204 Content of the application. 

(a) Accountability for beneficiaries. As 

part of its application and participation 

agreement, the ACO must certify that 

the ACO, its ACO participants, and its 

ACO providers/suppliers have agreed to 

become accountable for the quality, 

cost, and overall care of the Medicare 

fee-for-service beneficiaries assigned to 

the ACO. 

(b) Disclosure of prior participation. 

(1) The ACO must disclose to CMS 

whether the ACO, its ACO participants, 

or its ACO providers/suppliers have 

participated in the Medicare Shared 

Savings Program under the same or a 

different name, or is related to or has an 

affiliation with another Shared Savings 

Program ACO. 

(2) The ACO must specify whether the 

related ACO agreement is currently 

active or has been terminated. If it has 

been terminated, the ACO must specify 

whether the termination was voluntary 

or involuntary. 

(3) If the ACO, ACO participant, or 

ACO provider/supplier was previously 

terminated from the Shared Savings 

Program, the ACO must identify the 


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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 

agreement. 

(c) Eligibility. (1) As part of its 

application, an ACO must submit to 

CMS the following supporting materials 

to demonstrate that the ACO satisfies 

the eligibility requirements set forth in 

subpart B of this part: 

(i) Documents (for example, 

participation agreements, employment 

contracts, and operating policies) 

sufficient to describe the ACO 

participants’ and ACO providers’/ 

suppliers’ rights and obligations in and 

representation by the ACO, including 

how the opportunity to receive shared 

savings or other financial arrangements 

will encourage ACO participants and 

ACO providers/suppliers to adhere to 

the quality assurance and improvement 

program and evidenced-based clinical 

guidelines. 

(ii) A description, or documents 

sufficient to describe, how the ACO will 

implement the required processes and 

patient-centeredness criteria under 

§ 425.112, including descriptions of the 

remedial processes and penalties 

(including the potential for expulsion) 

that will apply if an ACO participant or 

an ACO provider/supplier fails to 

comply with and implement these 

processes. 

(iii) Materials documenting the ACO’s 

organization and management structure, 

including an organizational chart, a list 

of committees (including names of 

committee members) and their 

structures, and job descriptions for 

senior administrative and clinical 

leaders including administrative and 

clinical leaders specifically noted in 

§ 425.108. 

(iv) Evidence that the governing body 

is an identifiable body, that the 

governing body is comprised of 

representatives of the ACO’s 

participants, and that the ACO 

participants have at least 75 percent 

control of the ACO’s governing body. 

(v) Evidence that the governing body 

includes a Medicare beneficiary 

representative(s) served by the ACO 

who does not have a conflict of interest 

with the ACO, and who has no 

immediate family member with conflict 

of interest with the ACO. 

(vi) A copy of the ACO’s compliance 

plan or documentation describing the 

plan that will be put in place at the time 

the ACO’s agreement with CMS 

becomes effective. 

(2) Upon request, the ACO must 

provide copies of all documents 

effectuating the ACO’s formation and 

operation, including, without limitation 

the following: 

(i) Charters. 

(ii) By-laws. 

(iii) Articles of incorporation. 

(iv) Partnership agreement. 

(v) Joint venture agreement. 

(vi) Management or asset purchase 

agreements. 

(vii) Financial statements and records. 

(viii) Resumes and other 

documentation required for leaders of 

the ACO. 

(3) If an ACO requests an exception to 

the— 

(i) Governing body requirements in 

§ 425.106, the ACO must describe why 

it seeks to differ from these 

requirements and how the ACO will 

involve ACO participants in innovative 

ways in ACO governance or provide 

meaningful representation in ACO 

governance by Medicare beneficiaries or 

both; or 

(ii) Leadership and management 

requirements in § 425.108, the ACO 

must describe how its alternative 

leadership and management structure 

will be capable of accomplishing the 

ACO’s mission. 

(4)(i) An ACO must certify that it is 

recognized as a legal entity in the State, 

Federal or Tribal area in which it was 

established and that it is authorized to 

conduct business in each State or Tribal 

area in which it operates. 

(ii) An ACO formed among multiple, 

independent ACO participants must 

provide evidence in its application that 

it is a legal entity separate from any of 

the ACO participants. 

(5) The ACO must provide CMS with 

such information regarding its ACO 

participants and its ACO providers/ 

suppliers participating in the program 

as is necessary to implement the 

program. 

(i) The ACO must submit a list of all 

ACO participants and their Medicareenrolled TINs. 

(A) For each ACO participant, the 

ACO must submit a list of the ACO 

providers/suppliers and their provider 

identifier (for example, NPI) and 

indicate whether the ACO provider/ 

supplier is a primary care physician as 

defined in § 425.20. 

(B) The list specified in paragraph 

(c)(5)(i)(A) of this section must be 

updated in accordance with 

§ 425.302(d). 

(ii) ACOs must also submit any other 

specific identifying information as 

required by CMS in the application 

process. 

(iii) If the ACO includes an FQHC or 

RHC as an ACO participant, it must also 

do the following: 

(A) Indicate the TINs, organizational 

NPIs, and other identifying information 

for its participant FQHCs or RHCs or 

both, as well as NPIs and other 

identifying information for the 

physicians that directly provide primary 

care services in the participant FQHCs 

or RHCs or both. 

(B) Submit any other specific 

identifying information for its 

participant FQHCs or RHCs or both as 

required by CMS in the application 

process. 

(iv) The ACO must certify the 

accuracy of this information. 

(d) Distribution of savings. As part of 

its application to participate in the 

Shared Savings Program, an ACO must 

describe the following: 

(1) How it plans to use shared savings 

payments, including the criteria it plans 

to employ for distributing shared 

savings among its ACO participants and 

ACO providers/suppliers. 

(2) How the proposed plan will 

achieve the specific goals of the Shared 

Savings Program. 

(3) How the proposed plan will 

achieve the general aims of better care 

for individuals, better health for 

populations, and lower growth in 

expenditures. 

(e) Selection of track and option for 

interim payment calculation. 

(1) As part of its application, an ACO 

must specify whether it is applying to 

participate in Track 1 or Track 2 (as 

described in § 425.600). 

(2)(i) An ACO applying to participate 

in the program with a start date of April 

1, 2012 or July 1, 2012, has the option 

of requesting an interim payment 

calculation based on the financial 

performance for its first 12 months of 

program participation and quality 

performance for CY 2012. 

(ii) An ACO must request interim 

payment calculation as part of its 

application to participate in the Shared 

Savings Program. 

(f) Assurance of ability to repay. (1) 

An ACO must have the ability to repay 

losses for which it may be liable, and 

any other monies determined to be 

owed upon first performance year 

reconciliation. 

(i) As part of its application, an ACO 

that is applying to participate under the 

two-sided model of the Shared Savings 

Program or requesting an interim 

payment calculation under the onesided model must submit for CMS 

approval documentation that it is 

capable of repaying losses or other 

monies determined to be owed upon 

first year reconciliation. 

(ii) The documentation specified in 

paragraph (f)(1)(i) of this section must 

include details supporting the adequacy 

of the mechanism for repaying losses, or 

other monies determined to be owed 


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upon first year reconciliation, equal to 

at least 1 percent of the ACO’s total per 

capita Medicare Parts A and B fee-forservice expenditures for its assigned 

beneficiaries based either on 

expenditures for the most recent 

performance year or expenditures used 

to establish the benchmark. 

(2) An ACO may demonstrate its 

ability to repay losses, or other monies 

determined to be owed upon first year 

reconciliation, by obtaining reinsurance, 

placing funds in escrow, obtaining 

surety bonds, establishing a line of 

credit (as evidenced by a letter of credit 

that the Medicare program can draw 

upon), or establishing another 

appropriate repayment mechanism that 

will ensure its ability to repay the 

Medicare program. 

(3) An ACO participating under the 

two-sided model must demonstrate the 

adequacy of this repayment mechanism 

annually, prior to the start of each 

performance year in which it takes risk. 

§ 425.206 Evaluation procedures for 

applications. 

(a) Basis for evaluation and 

determination. (1) CMS evaluates an 

ACO’s application on the basis of the 

information contained in and submitted 

with the application. 

(2) CMS notifies applicant ACOs 

when the application is incomplete and 

provide an opportunity to submit 

information to complete the application. 

Applications remaining incomplete by 

the application due date will be denied. 

(b) Notice of determination. (1) CMS 

notifies in writing each applicant ACO 

of its determination to approve or deny 

the ACO’s application to participate in 

the Shared Savings Program. 

(2) If CMS denies the application, the 

notice will indicate that the ACO is not 

qualified to participate in the Shared 

Savings Program, specify the reasons 

why the ACO is not so qualified, and 

inform the ACO of its right to request 

reconsideration review in accordance 

with the procedures specified in subpart 

I of this part. 

§ 425.208 Provisions of participation 

agreement. 

(a) General rules. (1) Upon being 

notified by CMS of its approval to 

participate in the Shared Savings 

Program, an executive of that ACO who 

has the ability to legally bind the ACO 

must sign and submit to CMS a 

participation agreement. 

(2) Under the participation agreement 

the ACO must agree to comply with the 

provisions of this part in order to 

participate in the Shared Savings 

Program. 

(b) Compliance with laws. The ACO 

must agree, and must require its ACO 

participants, ACO providers/suppliers, 

and other individuals or entities 

performing functions or services related 

to the ACO’s activities to agree, or to 

comply with all applicable laws 

including, but not limited to, the 

following: 

(1) Federal criminal law. 

(2) The False Claims Act (31 U.S.C. 

3729 et seq.). 

(3) The anti-kickback statute 

(42 U.S.C. 1320a–7b(b)). 

(4) The civil monetary penalties law 

(42 U.S.C. 1320a–7a). 

(5) The physician self-referral law 

(42 U.S.C. 1395nn). 

(c) Certifications. (1) The ACO must 

agree, as a condition of participating in 

the program and receiving any shared 

savings payment, that an individual 

with the authority to legally bind the 

ACO will certify the accuracy, 

completeness, and truthfulness of any 

data or information requested by or 

submitted to CMS, including, but not 

limited to, the application form, 

participation agreement, and any quality 

data or other information on which CMS 

bases its calculation of shared savings 

payments and shared losses. 

(2) Certifications must meet the 

requirements at § 425.302. 

§ 425.210 Application of agreement to 

ACO participants, ACO providers/suppliers, 

and others. 

(a) 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. 

(b) 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 this part, including, but 

not limited to, those specified in the 

participation agreement with CMS. 

§ 425.212 Changes to program 

requirements during the agreement term. 

(a)(1) ACOs are subject to all statutory 

changes that become effective during 

the term of their participation 

agreement. 

(2) ACOs are subject to all regulatory 

changes with the exception of the 

following program areas: 

(i) Eligibility requirements concerning 

the structure and governance of ACOs. 

(ii) Calculation of sharing rate. 

(iii) Beneficiary assignment. 

(b) In those instances where there are 

changes in law or regulations, the ACO 

will be required to submit to CMS for 

review and approval, as a supplement to 

its original application, an explanation 

detailing how it will modify its 

processes to address these changes in 

law or regulations. 

(c) If an ACO does not modify its 

processes to address a change in law or 

regulations, it will be placed on a CAP. 

If the ACO fails to effectuate the 

necessary modifications while under the 

CAP, the ACO will be terminated from 

the Shared Savings Program using the 

procedures in § 425.218. 

(d) An ACO will be permitted to 

terminate its agreement, in those 

instances where Shared Savings 

Program statutory and regulatory 

standards are established during the 

agreement period which the ACO 

believes will impact its ability to 

continue to participate in the Shared 

Savings Program. 

§ 425.214 Managing changes to the ACO 

during the agreement. 

(a)(1) During the term of the 

participation agreement, an ACO may 

add or remove ACO participants or ACO 

providers/suppliers (identified by TINs 

and NPIs). 

(2) An ACO must notify CMS within 

30 days of such an addition or removal. 

(3) The ACO’s benchmark, risk scores, 

and preliminary prospective assignment 

may be adjusted for this change at CMS’ 

discretion. 

(b) ACOs must notify CMS within 

30 days of any significant change. A 

‘‘significant change’’ occurs when an 

ACO is no longer able to meet the 

eligibility or program requirements of 

this Part. 

(c) Upon receiving an ACO’s notice of 

a significant change described in 

paragraph (b) of this section, CMS 

reevaluates the ACO’s eligibility to 

continue to participate in the Shared 

Savings Program and may request 

additional documentation. CMS may 

make a determination that includes one 

of the following: 

(1) The ACO may continue to operate 

under the new structure. 

(2) The ACO structure is so different 

from the initially approved ACO that it 

must terminate its agreement and 

submit a new application for 

participation. 

(3) The ACO no longer meets the 

eligibility criteria for the program and 

its participation agreement must be 

terminated. 

(4) CMS and the ACO may mutually 

decide to terminate the agreement. 

§ 425.216 Actions prior to termination. 

(a) Pre-termination actions. (1) If CMS 

concludes that termination of an ACO 

from the Shared Savings Program is 

warranted, CMS may take one or more 


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of the following actions prior to 

termination of the ACO from the Shared 

Savings Program. 

(i) Provide a warning notice to the 

ACO regarding noncompliance with one 

or more program requirements. 

(ii) Request a CAP from the ACO. 

(iii) Place the ACO on a special 

monitoring plan. 

(2) Nothing in this part, including the 

actions set forth in paragraph (a)(1) of 

this section, negates, diminishes, or 

otherwise alters the applicability of 

other laws, rules, or regulations, 

including, but not limited to, the 

Sherman Act (15 U.S.C. 1 et seq.), the 

Clayton Act (15 U.S.C. 12), and the 

Federal Trade Commission Act 

(15 U.S.C. 45 et seq.). 

(b) Corrective action plans. (1) The 

ACO must submit a CAP for CMS 

approval by the deadline indicated on 

the notice of violation. 

(i) The CAP must address what 

actions the ACO will take to ensure that 

the ACO, ACO participants, ACO 

providers/suppliers or other individuals 

or entities performing functions or 

services related to the ACO’s activities 

or both correct any deficiencies and 

comply with all applicable Shared 

Savings Program requirements. 

(ii) The ACO’s performance will be 

monitored and evaluated during and 

after the CAP process. 

(2) CMS may terminate the ACO’s 

agreement if the ACO fails to submit, 

obtain approval for, or implement a 

CAP, or fails to demonstrate improved 

performance upon completion of the 

CAP. 

§ 425.218 Termination of the agreement by 

CMS. 

(a) General. CMS may terminate the 

participation agreement with an ACO 

when an ACO, the ACO participants, 

ACO providers/suppliers or other 

individuals or entities performing 

functions or services related to ACO 

activities fail to comply with any of the 

requirements of the Shared Savings 

Program under this part. 

(b) Grounds for termination by CMS. 

CMS may terminate the participation 

agreement for reasons including, but not 

limited to the following: 

(1) Non-compliance with eligibility 

and other requirements described in this 

part. 

(2) The imposition of sanctions or 

other actions taken against the ACO by 

an accrediting organization, State, 

Federal or local government agency 

leading to inability of the ACO to 

comply with the requirements under 

this part. 

(3) Violations of the physician selfreferral prohibition, civil monetary 

penalties (CMP) law, Federal antikickback statute, antitrust laws, or any 

other applicable Medicare laws, rules, 

or regulations that are relevant to ACO 

operations. 

(c) CMS may immediately terminate a 

participation agreement without taking 

any of the pre-termination actions set 

forth in § 425.216. 

(d) Notice of termination by CMS. 

CMS notifies an ACO in writing of its 

decision to terminate the participation 

agreement. 

§ 425.220 Termination of an agreement by 

the ACO. 

(a) Notice of termination. An 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. 

(b) Payment consequences of early 

termination. The ACO will not share in 

any savings for the performance year 

during which it notifies CMS of its 

decision to terminate the participation 

agreement. 

§ 425.222 Re-application after termination. 

(a) An ACO that has been terminated 

from the Shared Savings Program under 

§ 425.218 or§ 425.220 may participate in 

the Shared Savings Program again only 

after the date on which the term of the 

original participation agreement would 

have expired if the ACO had not been 

terminated. 

(b) To be eligible to participate in the 

Shared Savings Program after a previous 

termination, the ACO 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 will remain in compliance 

with the terms of the new participation 

agreement. 

(c) An ACO under the one-sided 

model whose agreement was previously 

terminated may reenter the program 

only under the two-sided model unless 

it was terminated less than half way 

through its agreement under the onesided model in which case it will be 

allowed to re-enter the one-sided model. 

An ACO under the two-sided model 

whose agreement was terminated may 

only re-apply for participation in the 

two-sided model. 

Subpart D—Program Requirements 

and Beneficiary Protections 

§ 425.300 Compliance plan. 

(a) The ACO must have a compliance 

plan that includes at least the following 

elements: 

(1) A designated compliance official 

or individual who is not legal counsel 

to the ACO and reports directly to the 

ACO’s governing body. 

(2) Mechanisms for identifying and 

addressing compliance problems related 

to the ACO’s operations and 

performance. 

(3) A method for employees or 

contractors of the ACO, ACO 

participants, ACO providers/suppliers, 

and other individuals or entities 

performing functions or services related 

to ACO activities to anonymously report 

suspected problems related to the ACO 

to the compliance officer. 

(4) Compliance training for the ACO, 

the ACO participants, and the ACO 

providers/suppliers. 

(5) A requirement for the ACO to 

report probable violations of law to an 

appropriate law enforcement agency. 

(b)(1) ACOs that are existing entities 

may use the current compliance officer 

if the compliance officer meets the 

requirements set forth in paragraph 

(a)(1) of this section. 

(2) An ACO’s compliance plan must 

be in compliance with and be updated 

periodically to reflect changes in law 

and regulations. 

§ 425.302 Program requirements for data 

submission and certifications. 

(a) Requirements for data submission 

and certification. 

(1) The ACO, its ACO participants, its 

ACO providers/suppliers or individuals 

or other entities performing functions or 

services related to ACO activities must 

submit all data and information, 

including data on measures designated 

by CMS under § 425.500, in a form and 

manner specified by CMS. 

(2) Certification of data upon 

submission. With respect to data and 

information that are generated or 

submitted by the ACO, ACO 

participants, ACO providers/suppliers, 

or other individuals or entities 

performing functions or services related 

to ACO activities, an individual with 

the authority to legally bind the 

individual or entity submitting such 

data or information must certify the 

accuracy, completeness, and 

truthfulness of the data and information 

to the best of his or her knowledge 

information and belief. 

(3) Annual certification. At the end of 

each performance year, an individual 

with the legal authority to bind the ACO 

must certify to the best of his or her 

knowledge, information, and belief— 

(i) That the ACO, its ACO 

participants, its ACO providers/ 

suppliers, and other individuals or 

entities performing functions or services 

related to ACO activities are in 

compliance with program requirements; 

and 


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(ii) The accuracy, completeness, and 

truthfulness of all data and information 

that are generated or submitted by the 

ACO, ACO participants, ACO providers/ 

suppliers, or other individuals or 

entities performing functions or services 

related to ACO activities, including any 

quality data or other information or data 

relied upon by CMS in determining the 

ACO’s eligibility for, and the amount of 

a shared savings payment or the amount 

of shared losses or other monies owed 

to CMS. 

(b) [Reserved] 

§ 425.304 Other program requirements. 

(a) Beneficiary inducements. 

(1) 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) Consistent with the provisions of 

paragraph (a)(1) of this section and 

subject to compliance with all other 

applicable laws and regulations, 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 and services and the 

medical care of the beneficiary and 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. 

(b) Screening of ACO applicants. 

(1) ACOs, ACO participants, and ACO 

providers/suppliers will be 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. 

(c) Prohibition on certain required 

referrals and cost shifting. ACOs, ACO 

participants, and ACO providers/ 

suppliers are prohibited from: 

(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. 

(d) Required reporting of NPIs and 

TINs. (1) The ACO must maintain, 

update, and annually furnish to CMS at 

the beginning of each performance year 

and at other such times as specified by 

CMS the list of each ACO participant’s 

TIN and ACO providers/supplier’s NPI 

that is required to be submitted under 

§ 425.204(c)(5)(i). 

(2) The ACO must notify CMS within 

30 days of any changes to the list of 

NPIs and TINs. 

§ 425.306 Participation agreement and 

exclusivity of ACO participant TINs. 

(a) For purposes of the Shared Savings 

Program, each ACO participant TIN is 

required to commit to a participation 

agreement with CMS. 

(b) Each ACO participant TIN upon 

which beneficiary assignment is 

dependent must be exclusive to one 

Medicare Shared Savings Program ACO 

for purposes of Medicare beneficiary 

assignment. ACO participant TINs upon 

which beneficiary assignment is not 

dependent are not required to be 

exclusive to one Medicare Shared 

Savings Program ACO. 

§ 425.308 Public reporting and 

transparency. 

For purposes of the Shared Savings 

Program, each ACO must publicly 

report the following information 

regarding the ACO in a standardized 

format as specified by CMS: 

(a) Name and location. 

(b) Primary contact. 

(c) Organizational information 

including all of the following: 

(1) Identification of ACO participants. 

(2) Identification of participants in 

joint ventures between ACO 

professionals and hospitals. 

(3) Identification of the members of its 

governing body. 

(4) Identification of associated 

committees and committee leadership. 

(d) Shared savings and losses 

information, including: 

(1) Amount of any shared savings 

performance payment received by the 

ACO or shared losses owed to CMS. 

(2) Total proportion of shared savings 

invested in infrastructure, redesigned 

care processes and other resources 

required to support the three-part aim 

goals of better health for populations, 

better care for individuals and lower 

growth in expenditures, including the 

proportion distributed among ACO 

participants. 

(e) Results of patient experience of 

care survey and claims based measures. 

Quality measures reported using the 

GPRO web interface will be reported on 

Physician Compare in the same way as 

for the group practices that report under 

the Physician Quality Reporting System. 

§ 425.310 Marketing requirements. 

(a) File and use. Marketing materials 

and activities, as defined in § 425.20, 

may be used or conducted five business 

days following their submission to CMS 

if— 

(1) The ACO certifies compliance 

with all the marketing requirements 

under this section; and 

(2) CMS does not disapprove the 

marketing materials or activities. 

(b) Deemed approval. (1) Marketing 

materials and activities are deemed 

approved after expiration of the initial 

5 day review period specified in 

paragraph (a) of this section. 

(2)(i) CMS may issue written notice of 

disapproval of marketing materials and 

activities at any time, including after the 

expiration of the initial 5 day review 

period. 

(ii) The ACO, ACO participant, ACO 

provider/supplier, or another individual 

or entity performing functions or 

services related to ACO activities as 

applicable, must discontinue use of any 

marketing materials or activities 

disapproved by CMS. 


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(c) Marketing requirements. Marketing 

materials and activities must meet all of 

the following: 

(1) Use template language developed 

by CMS, if available. 

(2) Not be used in a discriminatory 

manner or for discriminatory purposes. 

(3) Comply with § 425.304(a) 

regarding beneficiary inducements. 

(4) Not be materially inaccurate or 

misleading. 

(d) Sanctions. Failure to comply with 

this section will subject the ACO to the 

penalties set forth in § 425.216, 

termination under § 425.218, or both. 

§ 425.312 Notification to beneficiaries of 

participation in shared savings program. 

(a) ACO participants must do all of 

the following: 

(1) Notify beneficiaries at the point of 

care that their ACO providers/suppliers 

are participating in the Shared Savings 

Program. 

(2) Post signs in their facilities to 

notify beneficiaries that their ACO 

providers/suppliers are participating in 

the Shared Savings Program. 

(3) Make available standardized 

written notices regarding participation 

in an ACO and, if applicable, data optout. Such written notices must be 

provided by the ACO participants in 

settings in which beneficiaries receive 

primary care services. 

(b)(1) ACOs have the option of 

notifying beneficiaries on the 

preliminary prospective assignment list 

and quarterly assignment list provided 

to the ACO under § 425.704(d). 

(2) ACOs choosing this option must 

use the standardized written notice 

developed by CMS. 

(c) The beneficiary notifications under 

this section meet the definition of 

marketing materials and activities under 

§ 425.20 and therefore must meet all 

applicable marketing requirements 

described in § 425.310. 

§ 425.314 Audits and record retention. 

(a) Right to audit. The ACO must 

agree, and must require its ACO 

participants, ACO providers/suppliers, 

and other individuals or entities 

performing functions or services related 

to ACO activities to agree, that the CMS, 

DHHS, the Comptroller General, the 

Federal Government or their designees 

have the right to audit, inspect, 

investigate, and evaluate any books, 

contracts, records, documents and other 

evidence of the ACO, ACO participants, 

and ACO providers/suppliers, and other 

individuals or entities performing 

functions or services related to ACO 

activities that pertain to all of the 

following: 

(1) The ACO’s compliance with 

Shared Savings Program. 

(2) The quality of services performed 

and determination of amount due to or 

from CMS under the participation 

agreement. 

(3) The ability of the ACO to bear the 

risk of potential losses and to repay any 

losses to CMS. 

(4) If as a result of any inspection, 

evaluation, or audit, it is determined 

that the amount of shared savings due 

to the ACO or the amount of shared 

losses owed by the ACO has been 

calculated in error, CMS reserves the 

right to reopen the initial determination 

and issue a revised initial 

determination. 

(b) Maintenance of records. An ACO 

must agree, and must require its ACO 

participants, ACO providers/suppliers, 

and other individuals or entities 

performing functions or services related 

to ACO activities to agree to the 

following: 

(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, 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. 

(2) To maintain such books, contracts, 

records, documents, and other evidence 

for a period of 10 years from the final 

date of the agreement period or from the 

date of completion of any audit, 

evaluation, or inspection, whichever is 

later, unless— 

(i) CMS determines there is a special 

need to retain a particular record or 

group of records for a longer period and 

notifies the ACO at least 30 days before 

the normal disposition date; or 

(ii) There has been a termination, 

dispute, or allegation of fraud or similar 

fault against the ACO, its ACO 

participants, its ACO providers/ 

suppliers, or other individuals or 

entities performing functions or services 

related to ACO activities, in which case 

ACOs must retain records for an 

additional 6 years from the date of any 

resulting final resolution of the 

termination, dispute, or allegation of 

fraud or similar fault. 

(c) Responsibility of the ACO. 

Notwithstanding any arrangements 

between or among an ACO, ACO 

participants, ACO providers/suppliers, 

and other individuals or entities 

performing functions or services related 

to ACO activities, the ACO must have 

ultimate responsibility for adhering to 

and otherwise fully complying with all 

terms and conditions of its agreement 

with CMS, including the requirements 

set forth in this section. 

(d) OIG authority. None of the 

provisions of this part limit or restrict 

OIG’s authority to audit, evaluate, 

investigate, or inspect the ACO, its ACO 

participants, its ACO providers/ 

suppliers and other individuals or 

entities performing functions or services 

related to ACO activities. 

§ 425.316 Monitoring of ACOs. 

(a) General rule. (1) In order to ensure 

that the ACO continues to satisfy the 

eligibility and program requirements 

under this part, CMS monitors and 

assesses the performance of ACOs, their 

ACO participants, and ACO providers/ 

suppliers. 

(2) CMS employs a range of methods 

to monitor and assess the performance 

of ACOs, ACO participants, and ACO 

providers/suppliers, including but not 

limited to any of the following, as 

appropriate: 

(i) Analysis of specific financial and 

quality measurement data reported by 

the ACO as well as aggregate annual and 

quarterly reports. 

(ii) Analysis of beneficiary and 

provider complaints. 

(iii) Audits (including, for example, 

analysis of claims, chart review 

(medical record), beneficiary survey 

reviews, coding audits, on-site 

compliance reviews). 

(b) Monitoring ACO avoidance of atrisk beneficiaries. (1) CMS may use one 

or more of the methods described in 

paragraph (a)(2) of this section (as 

appropriate) to identify trends and 

patterns suggesting that an ACO has 

avoided at-risk beneficiaries. The results 

of these analyses may subsequently 

require further investigation and followup with beneficiaries or the ACO and its 

ACO participants, ACO providers/ 

suppliers, or other individuals or 

entities performing functions or services 

related to the ACO’s activities, in order 

to substantiate cases of beneficiary 

avoidance. 

(2)(i) CMS, at its sole discretion, may 

take any of the pre-termination actions 

set forth in § 425.216(a)(1) or 

immediately terminate, if it determines 

that an ACO, its ACO participants, any 

ACO providers/suppliers, or other 

individuals or entities performing 

functions or services related to the 

ACO’s activities avoids at-risk 

beneficiaries. 


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(ii) If CMS requires the ACO to submit 

a CAP, the ACO will— 

(A) Submit a CAP that addresses 

actions the ACO will take to ensure that 

the ACO, ACO participants, ACO 

providers/suppliers, or other 

individuals or entities performing 

functions or services related to the 

ACO’s activities cease avoidance of atrisk beneficiaries. 

(B) Not receive any shared savings 

payments during the time it is under the 

CAP. 

(C) Not be eligible to receive shared 

savings for the performance year 

attributable to the time that necessitated 

the CAP (the time period during which 

the ACO avoided at risk beneficiaries). 

(iii) CMS will re-evaluate the ACO 

during and after the CAP 

implementation period to determine if 

the ACO has continued to avoid at-risk 

beneficiaries. The ACO will be 

terminated if CMS determines that the 

ACO has continued to avoid at-risk 

beneficiaries during or after the CAP 

implementation period. 

(c) Monitoring ACO compliance with 

quality performance standards. To 

identify ACOs that are not meeting the 

quality performance standards, CMS 

will review an ACO’s submission of 

quality measurement data under 

§ 425.500. CMS may request additional 

documentation from an ACO, ACO 

participants, or ACO providers/ 

suppliers, as appropriate. If an ACO 

does not meet quality performance 

standards or fails to report on one or 

more quality measures, in addition to 

actions set forth at § 425.216 and 

§ 425.218, CMS will take the following 

actions: 

(1) The ACO may be given a warning 

for the first time it fails to meet the 

minimum attainment level in one or 

more domains as determined under 

§ 425.502 and may be subject to a CAP. 

CMS, may forgo the issuance of the 

warning letter depending on the nature 

and severity of the noncompliance and 

instead subject the ACO to actions set 

forth at § 425.216 or immediately 

terminate the ACO’s participation 

agreement under § 425.218. 

(2) The ACO’s compliance with the 

quality performance standards will be 

re-evaluated the following year. If the 

ACO continues to fail to meet quality 

performance standards in the following 

year, the agreement will be terminated. 

(3)(i) If an ACO fails to report one or 

more quality measures or fails to report 

completely and accurately on all 

measures in a domain, CMS will request 

that the ACO submit— 

(A) The required measure data; 

(B) Correct the data; 

(C) Provide a written explanation for 

why it did not report the data 

completely and accurately; or 

(D) A combination of the submission 

requirements in paragraphs (c)(3)(i)(A) 

through (c)(3)(i)(C) of this section. 

(ii) If ACO still fails to report, fails to 

report by the requested deadline, or 

does not provide a reasonable 

explanation for not reporting, the ACO 

will be terminated immediately. 

(4) An ACO that exhibits a pattern of 

inaccurate or incomplete reporting of 

the quality performance measures, or 

fails to make timely corrections 

following notice to resubmit, may be 

terminated. 

(5) An ACO will not qualify to share 

in savings in any year it fails to report 

fully and completely on the quality 

performance measures. 

Subpart E—Assignment of 

Beneficiaries 

§ 425.400 General. 

(a)(1)(i) A Medicare fee-for-service 

beneficiary is assigned to an ACO when 

the beneficiary’s utilization of primary 

care services meets the criteria 

established under the assignment 

methodology described in § 425.402. 

(ii) CMS applies a step-wise process 

based on the beneficiary’s utilization of 

primary care services provided under 

Title XVIII by a physician who is an 

ACO provider/supplier during the 

performance year for which shared 

savings are to be determined. 

(2)(i) Medicare assigns beneficiaries in 

a preliminary manner at the beginning 

of a performance year based on most 

recent data available. 

(ii) Assignment will be updated 

quarterly based on the most recent 12 

months of data. 

(iii) Final assignment is determined 

after the end of each performance year, 

based on data from the performance 

year. 

(b) Beneficiary assignment to an ACO 

is for purposes of determining the 

population of Medicare fee-for-service 

beneficiaries for whose care the ACO is 

accountable under subpart F of this part, 

and for determining whether an ACO 

has achieved savings under subpart G of 

this part, and in no way diminishes or 

restricts the rights of beneficiaries 

assigned to an ACO to exercise free 

choice in determining where to receive 

health care services. 

(c) Primary care services for purposes 

of assigning beneficiaries are identified 

by selected HCPCS codes, G codes, or 

revenue center codes as indicated in the 

definition of primary care services 

under § 425.20. 

§ 425.402 Basic assignment methodology. 

(a) CMS employs the following stepwise methodology to assign Medicare 

beneficiaries to an ACO after identifying 

all patients that had at least one primary 

care service with a physician who is an 

ACO provider/supplier of that ACO: 

(1)(i) Identify all primary care services 

rendered by primary care physicians 

during one of the following: 

(A) The most recent 12 months (for 

purposes of preliminary prospective 

assignment and quarterly updates to the 

preliminary prospective assignment). 

(B) The performance year (for 

purposes of final assignment). 

(ii) The beneficiary is assigned to an 

ACO if the allowed charges for primary 

care services furnished to the 

beneficiary by all the primary care 

physicians who are ACO providers/ 

suppliers in the ACO are greater than 

the allowed charges for primary care 

services furnished by primary care 

physicians who are— 

(A) ACO providers/suppliers in any 

other ACO; and 

(B) Not affiliated with any ACO and 

identified by a Medicare-enrolled TIN. 

(2) The second step considers the 

remainder of the beneficiaries who have 

received at least one primary care 

service from an ACO physician, but who 

have not had a primary care service 

rendered by any primary care physician, 

either inside or outside the ACO. The 

beneficiary will be assigned to an ACO 

if the allowed charges for primary care 

services furnished to the beneficiary by 

all ACO professionals who are ACO 

providers/suppliers in the ACO are 

greater than the allowed charges for 

primary care services furnished by— 

(i) All ACO professionals who are 

ACO providers/suppliers in any other 

ACO; and 

(ii) Other physicians, nurse 

practitioners, physician assistants, 

clinical nurse specialists who are 

unaffiliated with an ACO and are 

identified by a Medicare-enrolled TIN. 

(b) [Reserved] 

§ 425.404 Special assignment conditions 

for ACOs including FQHCs and RHCs. 

CMS assigns beneficiaries to ACOs 

based on services furnished in FQHCs 

or RHCs or both consistent with the 

general assignment methodology in 

§ 425.402, with two special conditions: 

(a) Such ACOs are required to 

identify, through an attestation, 

physicians who directly provide 

primary care services in each FQHC or 

RHC that is an ACO participant and/or 

ACO provider/supplier in the ACO. 

(b) Under the assignment 

methodology in § 425.402, CMS treats a 

service reported on an FQHC/RHC claim 

as a primary care service if the— 


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(1) NPI of a physician included in the 

attestation is reported on the claim as 

the attending provider; and 

(2) Claim includes a HCPCS or 

revenue center code that meets the 

definition of primary care services 

under § 425.20. 

Subpart F—Quality Performance 

Standards and Reporting 

§ 425.500 Measures to assess the quality 

of care furnished by an ACO. 

(a) General. CMS establishes quality 

performance measures to assess the 

quality of care furnished by the ACO. If 

the ACO demonstrates to CMS that it 

has satisfied the quality performance 

requirements in this subpart, and the 

ACO meets all other applicable 

requirements, the ACO is eligible for 

shared savings. 

(b) Selecting measures. (1) CMS 

selects the measures designated to 

determine an ACO’s success in 

promoting the aims of better care for 

individuals, better health for 

populations, and lower growth in 

expenditures. 

(2) CMS designates the measures for 

use in the calculation of the quality 

performance standard. 

(3) CMS seeks to improve the quality 

of care furnished by ACOs over time by 

specifying higher standards, new 

measures, or both. 

(c) ACOs must submit data on the 

measures determined under paragraph 

(b) of this section according to the 

method of submission established by 

CMS. 

(d) Patient experience of care survey. 

For performance years beginning in 

2014 and for subsequent performance 

years, ACOs must select a CMS-certified 

vendor to administer the survey and 

report the results accordingly. 

(e) Audit and validation of data. CMS 

retains the right to audit and validate 

quality data reported by an ACO. 

(1) In an audit, the ACO will provide 

beneficiary medical records data if 

requested by CMS. 

(2) The audit will consist of three 

phases of medical record review. 

(3) If, at the conclusion of the third 

audit process there is a discrepancy 

greater than 10 percent between the 

quality data reported and the medical 

records provided, the ACO will not be 

given credit for meeting the quality 

target for any measures for which this 

mismatch rate exists. 

(f) Failure to report quality measure 

data accurately, completely, and timely 

(or to timely correct such data) may 

subject the ACO to termination or other 

sanctions, as described in § 425.216 and 

§ 425.218. 

§ 425.502 Calculating the ACO quality 

performance score. 

(a) Establishing a quality performance 

standard. CMS designates the quality 

performance standard in each 

performance year. 

(1) For the first performance year of 

an ACO’s agreement, CMS defines the 

quality performance standard at the 

level of complete and accurate reporting 

for all quality measures. 

(2) During subsequent performance 

years, the quality performance standard 

will be phased in such that the ACO 

must continue to report all measures but 

the ACO will be assessed on 

performance based on the minimum 

attainment level of certain measures. 

(b) Establishing a performance 

benchmark and minimum attainment 

level for measures. (1) CMS designates 

a performance benchmark and 

minimum attainment level for each 

measure, and establishes a point scale 

for the measures. 

(2) Contingent upon data availability, 

performance benchmarks are defined by 

CMS based on national Medicare feefor-service rates, national MA quality 

measure rates, or a national flat 

percentage. 

(3) The minimum attainment level is 

set at 30 percent or the 30th percentile 

of the performance benchmark. 

(c) Methodology for calculating a 

performance score for each measure. 

(1) Performance below the minimum 

attainment level for a measure will 

receive zero points for that measure. 

(2) Performance equal to or greater 

than the minimum attainment level for 

a measure will receive points on a 

sliding scale based on the level of 

performance. 

(3) Those measures designated as all 

or nothing measures will receive the 

maximum available points if all criteria 

are met and zero points if one or more 

of the criteria are not met. 

(4) Performance at or above 90 percent 

or the 90th percentile of the 

performance benchmark earns the 

maximum points available for the 

measure. 

(d) Establishing quality performance 

requirements for domains. (1) CMS 

groups individual quality performance 

standard measures into four domains: 

(i) Patient/care giver experience. 

(ii) Care coordination/Patient safety. 

(iii) Preventative health. 

(iv) At-risk population. 

(2) To satisfy quality performance 

requirements for a domain: 

(i) The ACO must report all measures 

within a domain. 

(ii) ACOs must score above the 

minimum attainment level determined 

by CMS on 70 percent of the measures 

in each domain. If an ACO fails to 

achieve the minimum attainment level 

on at least 70 percent of the measures 

in a domain, CMS will take the actions 

describe in § 425.216(c). 

(iii)(A) If the ACO achieves the 

minimum attainment level for at least 

one measure in each of the four 

domains, and also satisfies the 

requirements for realizing shared 

savings under subpart G of this part, the 

ACO may receive the proportion of 

those shared savings for which it 

qualifies. 

(B) If an ACO fails to achieve the 

minimum attainment level on all 

measures in a domain, it will not be 

eligible to share in any savings 

generated. 

(e) Methodology for calculating the 

ACO’s overall performance score. (1) 

CMS scores individual measures and 

determines the corresponding number 

of points that may be earned based on 

the ACO’s performance. 

(2) CMS adds the points earned for 

the individual measures within the 

domain and divides by the total points 

available for the domain to determine 

the domain score. 

(3) Domains are weighted equally and 

scores averaged to determine the ACO’s 

overall performance score and sharing 

rate. 

§ 425.504 Incorporating reporting 

requirements related to the Physician 

Quality Reporting System. 

(a) Physician quality reporting system. 

(1) ACOs, on behalf of their ACO 

provider/suppliers who are eligible 

professionals, must submit the measures 

determined under § 425.500 using the 

GPRO web interface established by 

CMS, to qualify on behalf of their 

eligible professionals for the Physician 

Quality Reporting System incentive 

under the Shared Savings Program. 

(2)(i) ACO providers/suppliers that 

are eligible professionals within an ACO 

may only participate under their ACO 

participant TIN as a group practice 

under the Physician Quality Reporting 

System Group Practice Reporting 

Option of the Shared Savings Program 

for purposes of receiving an incentive 

payment under the Physician Quality 

Reporting System. 

(ii) Under the Shared Savings 

Program, an ACO, on behalf of its ACO 

providers/suppliers who are eligible 

professionals, must satisfactorily report 

the measures determined under Subpart 

F of this part during the reporting 

period according to the method of 

submission established by CMS under 

the Shared Savings Program in order to 

receive a Physician Quality Reporting 


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System incentive under the Shared 

Savings Program. 

(3) If ACO providers/suppliers who 

are eligible professionals within an ACO 

qualify for a Physician Quality 

Reporting System incentive payment, 

each ACO participant TIN, on behalf of 

its ACO supplier/provider participants 

who are eligible professionals, will 

receive an incentive, for those years an 

incentive is available, based on the 

allowed charges under the Physician 

Fee Schedule for that TIN. 

(4) ACO participant TINs and 

individual ACO providers/suppliers 

who are eligible professionals cannot 

earn a Physician Quality Reporting 

System incentive outside of the 

Medicare Shared Savings Program. 

(5) The Physician Quality Reporting 

System incentive under the Medicare 

Shared Savings Program is equal to 0.5 

percent of the Secretary’s estimate of the 

ACO’s eligible professionals’ total 

Medicare Part B Physician Fee Schedule 

allowed charges for covered 

professional services furnished during 

the calendar year reporting period from 

January 1 through December 31, for 

years 2012 through 2014. 

(b) [Reserved] 

§ 425.506 Electronic health records 

technology. 

(a) ACOs, ACO participants, and ACO 

providers/suppliers are encouraged to 

develop a robust EHR infrastructure. 

(b) As part of the quality performance 

score, the quality measure regarding 

EHR adoption will be measured based 

on a sliding scale. 

(c) Performance on this measure will 

be weighted twice that of any other 

measure for scoring purposes and for 

determining compliance with quality 

performance requirements for domains. 

Subpart G—Shared Savings and 

Losses 

§ 425.600 Selection of risk model. 

(a) For its initial agreement period, an 

ACO may elect to operate under one of 

the following tracks: 

(1) Track 1. Under Track 1, the ACO 

operates under the one-sided model (as 

described under § 425.604 of this part) 

for the agreement period. 

(2) Track 2. Under Track 2, the ACO 

operates under the two-sided model (as 

described under § 425.606), sharing both 

savings and losses with the Medicare 

program for the agreement period. 

(b) For subsequent agreement periods, 

an ACO may not operate under the onesided model. 

(c) An ACO experiencing a net loss 

during the initial 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. 

§ 425.602 Establishing the benchmark. 

(a) Computing per capita Medicare 

Part A and Part B benchmark 

expenditures. 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: 

(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 considers 

individually beneficiary identifiable 

payments made under a demonstration, 

pilot or time limited program. 

(2) Makes separate expenditure 

calculations for each of the following 

populations of beneficiaries: ESRD, 

disabled, aged/dual eligible Medicare 

and Medicaid beneficiaries and aged/ 

non-dual eligible Medicare and 

Medicaid beneficiaries. 

(3) Adjusts expenditures for changes 

in severity and case mix using 

prospective HCC risk scores. 

(4) Truncates an assigned 

beneficiary’s total annual Parts A and B 

fee-for-service per capita expenditures 

at the 99th percentile of national 

Medicare fee-for-service expenditures as 

determined for each benchmark year in 

order to minimize variation from 

catastrophically large claims. 

(5)(i) Using CMS Office of the Actuary 

national Medicare expenditure data for 

each of the years making up the 

historical benchmark, determines 

national growth rates and trends 

expenditures for each benchmark year 

(BY1 and BY2) to the third benchmark 

year (BY3) dollars. 

(ii) To trend forward the benchmark, 

CMS makes separate calculations for 

expenditure categories 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. 

(6) Restates BY1 and BY2 trended and 

risk adjusted expenditures in 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 using the following 

percentages: 

(i) BY3 at 60 percent. 

(ii) BY2 at 30 percent. 

(iii) BY1 at 10 percent. 

(8) The ACO’s benchmark may be 

adjusted for the addition and removal of 

ACO participants or ACO providers/ 

suppliers during the term of the 

agreement period. 

(b) Updating the benchmark. CMS 

updates the historical benchmark 

annually for each year of the agreement 

period based on the flat dollar 

equivalent of the projected absolute 

amount of growth in national per capita 

expenditures for Parts A and B services 

under the original Medicare fee-forservice program. 

(1) CMS updates this fixed benchmark 

by the projected absolute amount of 

growth in national per capita 

expenditures for Parts A and B services 

under the original Medicare fee-forservice program using data from CMS’ 

Office of the Actuary. 

(2) To update the benchmark, CMS 

makes expenditure calculations for 

separate 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. 

(c) Resetting the benchmark. An 

ACO’s benchmark will be reset at the 

start of each agreement period. 

§ 425.604 Calculation of savings under the 

one-sided model. 

(a) Savings determination. For each 

performance year, CMS determines 

whether the estimated average per 

capita Medicare expenditures under the 

ACO for Medicare fee-for-service 

beneficiaries for Parts A and B services 

are below the applicable updated 

benchmark determined under § 425.602. 

(1) Newly assigned beneficiaries. CMS 

uses an ACO’s HCC prospective risk 

score to adjust for changes in severity 

and case mix in this population. 

(2) Continuously assigned 

beneficiaries. (i) CMS uses demographic 

factors to adjust for changes in the 

continuously assigned population. 

(ii) If the prospective HCC risk score 

is lower in the performance year for this 

population, CMS will adjust for changes 

in severity and case mix in this 


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population using this lower prospective 

HCC risk score. 

(3) Assigned beneficiary changes in 

demographics and health status are used 

to adjust benchmark expenditures as 

described in § 425.602(a). In adjusting 

for health status and demographic 

changes CMS makes adjustments for 

separate 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. 

(4) To minimize variation from 

catastrophically large claims, CMS 

truncates an assigned beneficiary’s total 

annual Parts A and B fee-for-service per 

capita expenditures at the 99th 

percentile of national Medicare fee-forservice expenditures as determined for 

each performance year. 

(5) CMS uses a 3 month claims run 

out with a completion factor to calculate 

an ACO’s per capita expenditures for 

each performance year. 

(6) Calculations of the ACO’s 

expenditures will include the payment 

amounts included in Part A and B feefor-service claims. 

(i) These calculations will exclude 

indirect medical education (IME) and 

disproportionate share hospital (DSH) 

payments. 

(ii) These calculations will take into 

consideration individually beneficiary 

identifiable payments made under a 

demonstration, pilot or time limited 

program. 

(7) In order to qualify for a shared 

savings payment, the ACO’s average per 

capita Medicare 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 rate (MSR). 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 an ACO 

participating under the one-sided 

model. The MSR under the one-sided 

model for an ACO based on the number 

of assigned beneficiaries is as follows: 

Number of beneficiaries 

MSR (low end 

of assigned 

beneficiaries) 

(percent) 

MSR 

(high end 

of assigned 

beneficiaries) 

(percent) 

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 

(c) Qualification for shared savings 

payment. In order to qualify for shared 

savings, an ACO must meet or exceed its 

minimum savings rate determined 

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) Final sharing rate. An ACO that 

meets all the requirements for receiving 

shared savings payments under the onesided model will receive a shared 

savings payment of up to 50 percent of 

all savings under the updated 

benchmark, as determined on the basis 

of its quality performance under 

§ 425.502 of this part (up to the 

performance payment limit described in 

paragraph (e)(2) of this section). 

(e) Performance payment. (1) If an 

ACO qualifies for savings by meeting or 

exceeding the MSR, the final sharing 

rate will apply to an ACO’s savings on 

a first dollar basis. 

(2) The amount of shared savings an 

eligible ACO receives under the onesided model may not exceed 10 percent 

of its updated benchmark. 

(f) Notification of savings. 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. 

§ 425.606 Calculation of shared savings 

and losses under the two-sided model. 

(a) General rule. For each performance 

year, CMS determines whether the 

estimated average per capita Medicare 

expenditures under the ACO for 

Medicare fee-for-service beneficiaries 

for Parts A and B services are above or 

below the updated benchmark 

determined under § 425.602. In order to 

qualify for a shared savings payment 

under the two-sided model, or to be 

responsible for sharing losses with CMS, 

an ACO’s average per capita Medicare 

expenditures under the ACO for 

Medicare fee-for-service beneficiaries 

for Parts A and B services 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) Newly assigned beneficiaries. CMS 

uses an ACO’s HCC prospective risk 

score to adjust for changes in severity 

and case mix in this population. 

(2) Continuously assigned 

beneficiaries. (i) CMS uses demographic 

factors to adjust for changes in the 

continuously assigned beneficiary 

population. 

(ii) If the prospective HCC risk score 

is lower in the performance year for this 

population, CMS will adjust for changes 

in severity and case mix for this 

population using this lower prospective 

HCC risk score. 

(3) Assigned beneficiary changes in 

demographics and health status are used 

to adjust benchmark expenditures as 

described in § 425.602(a). In adjusting 

for health status and demographic 

changes 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. 

(4) To minimize variation from 

catastrophically large claims, CMS 

truncates an assigned beneficiary’s total 

annual Parts A and B fee-for-service per 


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capita expenditures at the 99th 

percentile of national Medicare fee-forservice expenditures as determined for 

each performance year. 

(5) CMS uses a 3 month claims run 

out with a completion factor to calculate 

an ACO’s per capita expenditures for 

each performance year. 

(6) Calculations of the ACO’s 

expenditures will include the payment 

amounts included in Part A and B feefor-service claims. 

(i) These calculations will exclude 

indirect medical education (IME) and 

disproportionate share hospital (DSH) 

payments. 

(ii) These calculations will take into 

consideration individually beneficiary 

identifiable payments made under a 

demonstration, pilot or time limited 

program. 

(7) In order to qualify for a shared 

savings payment, the ACO’s average per 

capita Medicare 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) 

To qualify for shared savings under the 

two-sided model, an ACO’s average per 

capita Medicare expenditures for the 

performance year must be below its 

updated benchmark costs for the year by 

at least 2 percent. 

(2) To be responsible for sharing 

losses with the Medicare program, an 

ACO’s average per capita Medicare 

expenditures for the performance year 

must be at least 2 percent above its 

updated benchmark costs for the year. 

(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 of 

this part, and otherwise maintain its 

eligibility to participate in the Shared 

Savings Program under this part. 

(d) Final sharing rate. An ACO that 

meets all the requirements for receiving 

shared savings payments under the twosided model will receive a shared 

savings payment of up to 60 percent of 

all the savings under the updated 

benchmark, as determined on the basis 

of its quality performance under 

§ 425.502 of this part (up to the 

performance payment limit described in 

paragraph (e)(2) of this section). 

(e) Performance payment. (1) If an 

ACO qualifies for savings by meeting or 

exceeding the MSR, the final sharing 

rate will apply to an ACO’s savings on 

a first dollar basis. 

(2) The amount of shared savings an 

eligible ACO receives under the twosided model may not exceed 15 percent 

of its updated benchmark. 

(f) Shared loss rate. The shared loss 

rate— 

(1) 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 the inverse of its 

final sharing rate described in 

§ 425.606(d) (that is, 1 minus the final 

shared savings rate determined under 

§ 425.606(d) of this part); and 

(2) May not exceed 60 percent. 

(g) Loss recoupment limit. The 

amount of shared losses for which an 

eligible ACO is liable may not exceed 

the following percentages of its updated 

benchmark as determined under 

§ 425.602: 

(1) 5 percent in the first performance 

year of participation in a two-sided 

model under the Shared Savings 

Program. 

(2) 7.5 percent in the second 

performance year. 

(3) 10 percent in the third and any 

subsequent performance year. 

(h) 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. 

§ 425.608 Determining first year 

performance for ACOs beginning April 1 or 

July 1, 2012. 

(a) For April 1 and July 1, 2012 

starters, first year (defined as 21 and 18 

months respectively) performance will 

be based on an optional interim 

payment calculation (based on the 

ACO’s first 12 months of participation) 

and a final reconciliation at the end of 

the ACO’s first performance year. 

Unless stated otherwise, for purposes of 

the interim payment calculation and 

first year reconciliation, the 

methodology under subpart E of this 

part for assigning beneficiaries and the 

methodology described in § 425.602 

through § 425.606 for calculating shared 

savings and losses will apply, and 

quality performance will be assessed as 

described in subpart F of this part. 

(b) In the interim payment 

calculation, based on the ACO’s first 12 

months of performance— 

(1) CMS compares the first 12 months 

of per capita beneficiary expenditures to 

a historical benchmark updated for the 

period which includes the ACO’s first 

12 months of participation, taking into 

account changes in health status and 

demographics; and 

(2) Quality performance is based on 

GPRO quality data reported for CY 2012. 

(c)(1) The interim payment 

calculation is reconciled with the ACO’s 

performance for its complete first 

performance year, defined as 21 months 

for April 1, 2012 starters and 18 months 

for July 1, 2012 starters. 

(2) The first year reconciliation takes 

into account expenditures spanning the 

entire 21 or 18 months of the first 

performance year. 

(3) First performance year 

expenditures are summed over 

beneficiaries assigned in two 

overlapping 12 month assignment 

windows. 

(i) The first window will be the first 

12 months used for interim payment 

calculation. 

(ii) The second window will be 

CY2013. 

(4) Expenditures for the first 

performance year are the sum of 

aggregate expenditure dollars 

accounting for the ACO’s first 6 or 9 

months of performance within CY 2012 

for beneficiaries assigned for the interim 

payment calculation and aggregate 

dollars calculated for CY2013 for 

beneficiaries assigned for CY 2013. 

(5) Adjustments for health status and 

demographic changes are performed as 

described in § 425.604 through 

§ 425.606 with the following exceptions: 

(i) Beneficiaries from the CY2013 

assignment window are identified as 

continuously assigned or newly 

assigned relative to the previous 

calendar year. 

(ii) The adjustment factor identified 

for purposes of the interim payment 

calculation is applied to the 6 months 

or 9 months of the ACO’s first 

performance year that lie within 

CY2012. 

(6) The updated benchmark, stated in 

aggregate dollars, is the sum of the 

interim updated benchmark for the 

average fraction of expenditures 

incurred in the latter 6 or 9 months of 

CY 2012 and an updated aggregate 

benchmark representing CY 2013. 

(7) A savings percentage (based on a 

comparison of summed expenditures to 

summed updated benchmark dollars) 

for the ACO’s 18 or 21 month 

performance year is compared to the 

ACO’s MSR or MLR. The reconciled 

amount of the shared savings or losses 

owed to or by the ACO for the 

performance year is net of any interim 

payments of shared savings or losses. 


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(8) Quality performance for the first 

year reconciliation is based on complete 

and accurate reporting, of all required 

quality measures, for CYs 2012 and 

2013. 

(d) An ACO with a start date of April 

1, 2012 or July 1, 2012 has the option 

to request an interim payment 

calculation based on quality and 

financial performance for its first 12 

months of program participation. As 

required under § 425.204(f), the ACO 

requesting an interim payment 

calculation must have a mechanism in 

place to pay back the interim payment 

if final reconciliation determines an 

overpayment. 

(e) Unless otherwise stated, program 

requirements which apply in the course 

of a performance year apply to the 

interim payment calculation and first 

year reconciliation. 

Subpart H—Data Sharing With ACOs 

§ 425.700 General rules. 

(a) CMS shares aggregate reports with 

the ACO. 

(b) CMS shares beneficiary 

identifiable data with ACOs on the 

condition that the ACO, its ACO 

participants, ACO providers/suppliers, 

and other individuals or entities 

performing functions or services related 

to the ACO’s activities observe all 

relevant statutory and regulatory 

provisions regarding the appropriate use 

of data and the confidentiality and 

privacy of individually identifiable 

health information and comply with the 

terms of the data use agreement 

described in this subpart. 

(c) The ACO must not limit or restrict 

appropriate sharing of medical record 

data with providers and suppliers both 

within and outside the ACO in 

accordance with applicable law. 

§ 425.702 Aggregate reports. 

CMS shares aggregate reports with 

ACOs as follows: 

(a) Aggregate reports are shared at the 

start of the agreement period based on 

beneficiary claims data used to calculate 

the benchmark, and each quarter 

thereafter during the agreement period. 

(b) These aggregate reports include, 

when available, the following 

information, deidentified in accordance 

with 45 CFR 164.514(b): 

(1) Aggregated metrics on the assigned 

beneficiary population. 

(2) Utilization and expenditure data at 

the start of the agreement period based 

on historical beneficiaries used to 

calculate the benchmark. 

(c)(1) At the beginning of the 

agreement period, during each quarter 

(and in conjunction with the annual 

reconciliation), and at the beginning of 

each performance year, CMS, upon the 

ACO’s request for the data for purposes 

of population-based activities relating to 

improving health or reducing growth in 

health care costs, process development, 

case management, and care 

coordination, will provide the ACO 

with information regarding 

preliminarily prospectively assigned 

beneficiaries whose data was used to 

generate the aggregate data reports 

under paragraphs (a) and (b) of this 

section. The information includes the 

following: 

(i) Beneficiary name. 

(ii) Date of birth. 

(iii) HICN. 

(iv) Sex. 

(2) In its request for these data, the 

ACO must certify that it is seeking the 

following information: 

(i) As a HIPAA-covered entity, and 

the request reflects the minimum data 

necessary for the ACO to conduct its 

own health care operations work that 

falls within the first or second 

paragraph of the definition of health 

care operations at 45 CFR 164.501. 

(ii) As the business associate of its 

ACO participants and ACO providers/ 

suppliers, who are HIPAA-covered 

entities, and the request reflects the 

minimum data necessary for the ACO to 

conduct health care operations work 

that falls within the first or second 

paragraph of the definition of health 

care operations at 45 CFR 164.501 on 

behalf of those participants. 

§ 425.704 Beneficiary-identifiable data. 

Subject to providing the beneficiary 

with the opportunity to decline data 

sharing as described in this § 425.708, 

and subject to having a valid DUA in 

place, CMS, upon the ACO’s request for 

the data for purposes of evaluating the 

performance of its ACO participants or 

its ACO providers/suppliers, conducting 

quality assessment and improvement 

activities, and conducting populationbased activities relating to improved 

health, will provide the ACO with 

beneficiary identifiable claims data for 

preliminary prospective assigned 

beneficiaries and other beneficiaries 

who receive primary care services from 

an ACO participant upon whom 

assignment is based during the 

agreement period. 

(a) If an ACO wishes to receive 

beneficiary identifiable claims data, it 

must sign a DUA and it must submit a 

formal request for data. ACOs may 

request data as often as once per month. 

(b) The ACO must certify that it is 

requesting claims data about either of 

the following: 

(1) Its own patients, as a HIPAAcovered entity, and the request reflects 

the minimum data necessary for the 

ACO to conduct its own health care 

operations work that falls within the 

first or second paragraph of the 

definition of health care operations at 45 

CFR 164.501. 

(2) The patients of its HIPAA-covered 

entity ACO participants or its ACO 

providers/suppliers as the business 

associate of these HIPAA covered 

entities, and the request reflects the 

minimum data necessary for the ACO to 

conduct health care operations work 

that falls within the first or second 

paragraph of the definition of health 

care operations at 45 CFR 164.501 on 

behalf of those participants. 

(c) The use of identifiers and claims 

data will be limited to developing 

processes and engaging in appropriate 

activities related to coordinating care 

and improving the quality and 

efficiency of care that are applied 

uniformly to all Medicare beneficiaries 

with primary care services at the ACO, 

and that these data will not be used to 

reduce, limit or restrict care for specific 

beneficiaries. 

(d) To ensure that beneficiaries have 

a meaningful opportunity to decline 

having their claims data shared with the 

ACO, the ACO may only request claims 

data about a beneficiary if— 

(1) The beneficiary name appears on 

the preliminary prospective assignment 

list found on the initial or quarterly 

aggregate report, or has received 

primary care services from an ACO 

participant upon whom assignment is 

based (under Subpart E of this part), 

during the agreement period. 

(2) The beneficiary has been notified 

in writing how the ACO intends to use 

beneficiary identifiable claims data in 

order to improve the quality of care that 

is furnished to the beneficiary and, 

where applicable, coordinate care 

offered to the beneficiary; and 

(3) The beneficiary did not exercise 

the opportunity to decline having his/ 

her claims data shared with the ACO as 

provided in § 425.708. 

(e) At the ACO’s request, CMS 

continues to provide ACOs with 

updates to the requested beneficiary 

identifiable claims data, subject to 

beneficiary’s opportunity to decline data 

sharing under § 425.708. 

(f) If an ACO requests beneficiary 

identifiable information, compliance 

with the terms of the data use agreement 

described in § 425.710 is a condition of 

an ACO’s participation in the Shared 

Savings Program. 


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§ 425.706 Minimum necessary data. 

(a) ACOs must limit their identifiable 

data requests to the minimum necessary 

to accomplish a permitted use of the 

data. The minimum necessary Parts A 

and B data elements may include but 

are not limited to the following data 

elements: 

(1) Beneficiary ID. 

(2) Procedure code. 

(3) Gender. 

(4) Diagnosis code. 

(5) Claim ID. 

(6) The from and through dates of 

service. 

(7) The provider or supplier ID. 

(8) The claim payment type. 

(9) Date of birth and death, if 

applicable. 

(10) TIN. 

(11) NPI. 

(b) The minimum necessary Part D 

data elements may include but are not 

limited to the following data elements: 

(1) Beneficiary ID. 

(2) Prescriber ID. 

(3) Drug service date. 

(4) Drug product service ID. 

(5) Quantity dispensed. 

(6) Days supplied. 

(7) Brand name. 

(8) Generic name. 

(9) Drug strength. 

(10) TIN. 

(11) NPI. 

(12) Indication if on formulary. 

(13) Gross drug cost. 

§ 425.708 Beneficiaries may decline data 

sharing. 

(a) Before requesting claims data 

about a particular beneficiary, the ACO 

must inform the beneficiary that it may 

request personal health information 

about the beneficiary for purposes of its 

care coordination and quality 

improvement work, and give the 

beneficiary meaningful opportunity to 

decline having his/her claims 

information shared with the ACO. 

(b) ACOs may contact preliminarily 

prospective assigned beneficiaries. in 

writing to request data sharing. 

(1) If these beneficiaries do not 

decline within 30 days after the letter is 

sent, the ACO may request identifiable 

claims data from CMS. 

(2) These beneficiaries must also be 

provided a form explaining the 

beneficiary’s opportunity to decline data 

sharing as part of their first primary care 

service visit with an ACO participant 

upon whom assignment is based (under 

Subpart E of this part) during the 

agreement period. 

(c) For beneficiaries that have a 

primary care service office visit with an 

ACO participant who provides primary 

care services, the ACO must supply the 

beneficiaries with a written notification 

explaining their opportunity to decline 

data sharing. The form must be 

provided to each beneficiary as part of 

their first primary care service visit with 

an ACO participant upon whom 

assignment is based (under Subpart E of 

this part) during the agreement period. 

(d) The requirements specified in 

paragraphs (a) through (c) of this section 

do not apply to the initial identifiable 

data points that CMS provides to ACOs 

under § 425.702(d). 

(e) CMS does not share beneficiary 

identifiable claims data relating to 

treatment for alcohol and substance 

abuse in accordance with 42 CFR 

290dd–2 and the implementing 

regulations at 42 CFR part 2. 

(f) The provisions of this section 

relate only to the sharing of Medicare 

claims data between the Medicare 

program and the ACO under the Shared 

Savings Program and are in no way 

intended to impede existing or future 

data sharing under other authorities. 

§ 425.710 Data use agreement. 

(a)(1) Before receiving any beneficiary 

identifiable data, ACOs must enter into 

a DUA with CMS. Under the DUA, the 

ACO must comply with the limitations 

on use and disclosure that are imposed 

by HIPAA, the applicable DUA, and the 

statutory and regulatory requirements of 

the Shared Savings Program. 

(2) If the ACO misuses or discloses 

data in a manner that violates any 

applicable statutory or regulatory 

requirements or that is otherwise noncompliant with the provisions of the 

DUA, it will no longer be eligible to 

receive data under subpart H of this 

part, may be terminated from the Shared 

Savings Program under § 425.218, and 

may be subject to additional sanctions 

and penalties available under the law. 

(b) [Reserved] 

Subpart I—Reconsideration Review 

Process 

§ 425.800 Preclusion of administrative and 

judicial review. 

(a) There is no reconsideration, 

appeal, or other administrative or 

judicial review of the following 

determinations under this part: 

(1) The specification of quality and 

performance standards under § 425.500 

and § 425.502. 

(2) The assessment of the quality of 

care furnished by an ACO under the 

performance standards established in 

§ 425.502. 

(3) The assignment of Medicare feefor-service beneficiaries under Subpart 

E of this part. 

(4) The determination of whether an 

ACO is eligible for shared savings, and 

the amount of such shared savings, 

including the determination of the 

estimated average per capita Medicare 

expenditures under the ACO for 

Medicare fee-for-service beneficiaries 

assigned to the ACO and the average 

benchmark for the ACO under 

§ 425.602, § 425.604, and § 425.606. 

(5) The percent of shared savings 

specified by the Secretary and the limit 

on the total amount of shared savings 

established under § 425.604 and 

425.606. 

(6) The termination of an ACO for 

failure to meet the quality performance 

standards established under § 425.502. 

(b) [Reserved] 

§ 425.802 Request for review. 

(a) An ACO may appeal an initial 

determination that is not prohibited 

from administrative or judicial review 

under § 425.800 by requesting a 

reconsideration review by a CMS 

reconsideration official. 

(1) An ACO that wants to request 

reconsideration review by a CMS 

reconsideration official must submit a 

written request by an authorized official 

for receipt by CMS within 15 days of the 

notice of the initial determination. 

(i) If the 15th day is a weekend or a 

Federal holiday, then the timeframe is 

extended until the end of the next 

business day. 

(ii) Failure to submit a request for 

reconsideration within 15 days will 

result in denial of the request for 

reconsideration. 

(2) The reconsideration review may be 

held orally (that is, in person, by 

telephone or other electronic means) or 

on the record (review of submitted 

documentation) at the discretion of the 

reconsideration official. 

(b) An ACO that requests a 

reconsideration review for termination 

will remain operational throughout the 

review process. 

§ 425.804 Reconsideration review process. 

(a) Acknowledgement of 

reconsideration review request. The 

reconsideration official sends an 

acknowledgement of the reconsideration 

review request to the ACO and CMS that 

includes the following: 

(1) Review procedures. 

(2) Procedures for submission of 

evidence including format and 

timelines. 

(3) Date, time, and location of the 

review. 

(b) Burden of proof, standard of proof, 

and standards of review. The burden of 

proof is on the ACO to demonstrate to 

the reconsideration official with 

convincing evidence that the initial 

determination is not consistent with the 


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requirements of this part or applicable 

statutory authority. 

(c) Reconsideration official. The 

reconsideration official is an 

independent CMS official who did not 

participate in the initial determination 

that is being reviewed. 

(d) Time and place of hearing. The 

reconsideration official may, on his or 

her own motion, or at the request of 

CMS or the ACO, change the time and 

place for the reconsideration review, but 

must give CMS and the ACO notice of 

the change. 

(e) Evidence. (1) The reconsideration 

official’s review will be based only on 

evidence submitted by the 

reconsideration official’s requested 

deadline, unless otherwise requested by 

the reconsideration official. 

(2) Documentation submitted for the 

record as evidence cannot be 

documentation that was not previously 

submitted to CMS by the applicable 

deadline and in the requested format. 

(3) All evidence submitted by the 

ACO and CMS, in preparation for the 

reconsideration review will be shared 

with the other party to the hearing. 

(f) The reconsideration official will 

notify CMS and the ACO of his or her 

recommendation. 

§ 425.806 On-the-record review of 

reconsideration official’s recommendation 

by independent CMS official. 

(a)(1) If CMS or the ACO disagrees 

with the recommendation of the 

reconsideration official, it may request 

an on the record review of the initial 

determination and recommendation by 

an independent CMS official who was 

not involved in the initial determination 

or the reconsideration review process. 

(2) In order to request an on-therecord review, CMS or the ACO must 

submit an explanation of why it 

disagrees with the recommendation by 

the timeframe and in the format 

indicated in the reconsideration 

official’s recommendation letter. 

(b) The on-the-record review process 

is based only on evidence presented 

during the reconsideration review. 

(c) The independent CMS official 

considers the recommendation of the 

reconsideration official and makes a 

final agency determination. 

§ 425.808 Effect of independent CMS 

official’s decision. 

(a) The decision of the independent 

CMS official is final and binding. 

(b) The reconsideration review 

process under this subpart must not be 

construed to negate, diminish, or 

otherwise alter the applicability of 

existing laws, rules, and regulations or 

determinations made by other 

government agencies. 

§ 425.810 Effective date of decision. 

(a) If the initial determination denying 

an ACO’s application to participate in 

the Shared Savings Program is upheld, 

the application will remain denied 

based on the effective date of the 

original notice of denial. 

(b) If the initial determination to 

terminate an agreement with an ACO is 

upheld, the decision to terminate the 

agreement is effective as of the date 

indicated in the initial notice of 

termination. 

(c) If the initial determination to 

terminate an ACO is reversed, the ACO 

is reinstated into the Shared Savings 

Program, retroactively back to the 

original date of termination. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: October 6, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: October 19, 2011. 

Kathleen Sebelius, 

Secretary. 

[FR Doc. 2011–27461 Filed 10–20–11; 11:15 am] 

BILLING CODE 4120–01–P 


sroberts on DSK5SPTVN1PROD with RULES