Value Based Payment

CMS Overhauls the Medicare Shared Savings Program

May 19, 2019 11:27 pm

On Dec. 31, 2018, the Centers for Medicare & Medicaid Services (CMS) published a 267-page final rule in the Federal Register that redesigned the Medicare Shared Savings Program (MSSP), currently the largest accountable care organization (ACO) program administered by CMS, with 561 organizations responsible for 10.4 million beneficiaries, or 27 percent of the 38 million in fee-for-service (FFS) Medicare.

The Pathways to Success final rule revises the MSSP to improve cost savings and quality for the federal government by more quickly driving MSSP ACOs into risk-sharing arrangements. The changes are projected to save Medicare $2.9 billion during the next decade.

Why was there an absence of partisanship? First, Republicans are aware the ACO concept was birthed in Washington during the George W. Bush administration and pioneered in the Medicare Physician Group Practice (PGP) Demonstration Project, which started its five-year test in 2005. Second, Democrats support any action that preserves elements of the Affordable Care Act. And third, despite the Trump administration’s general antiregulation bent, it recognizes the trajectory of the nation’s healthcare costs is untenable—and ACOs are among the most aggressive means for addressing this problem.

Salient Changes

According to CMS Administrator Seema Verma, with five overarching goals—accountability, competition, engagement, integrity, and quality—the final rule “strikes a balance between encouraging participation in the ACO program and advancing the transition to value, ultimately protecting taxpayers and patients. Medicare can no longer afford to support programs with weak incentives that do not deliver value.”a

The most material changes are as follows:

  • Replacing the current Track 1, Track 1+, and Track 2 models with the BASIC track, which has five levels (Levels A and B, both involving upside risk only, and Levels C, D, and E, all of which are two-sided, with upside and downside risk).
  • Reducing the time an ACO can remain in the program without taking on downside risk from six years to two years for new ACOs and to three years for new “low revenue” (physician-led) ACOs.
  • Renaming the current Track 3 the ENHANCED track.
  • Providing higher shared savings rates—up to 40 percent for the upside-only Levels A and B in the BASIC track (up from 25 percent in the proposed rule published in August 2018); up to 50 percent for Levels C, D, and E in the BASIC track; and up to 75 percent for the ENHANCED track.
  • Allowing delivery of telehealth services at a beneficiary’s place of residence.
  • Allowing ACOs to offer new monetary incentive payments to Medicare FFS beneficiaries to encourage them to receive primary care services.
  • Factoring in regional Medicare spending, not just national data, to establish an ACO’s benchmark (i.e., spending target).

Dispute over the Application Deadline

On Jan. 11, CMS announced Feb. 19 as the deadline for application to the program, which will start on July 1, 2019. After the CMS anouncement, the National Association of ACOs (NAACOS) pressed for an extension of the deadline to March 29. At least 11 organizations supported NAACOS’s request, including the American Hospital Association (AHA) and the American Medical Association (AMA).

A Game of Policy “Chicken”

To date, a very small percentage of the MSSP ACOs have been willing to take on downside risk. Pathways to Success forces the issue, and in so doing, it places the largest government value-based payment program at a crossroads.

Provider organizations have expressed concern that CMS is overemphasizing risk within this voluntary program. NAACOS has warned that there could be “significant shrinkage in the ACO movement,” and the AHA has predicted a “significant decrease in program participation.”b A reduced number of Medicare ACOs may not be all bad, as it could constitute a “culling of the herd,” with the top performers of the remaining participants setting an example of successful accountable care for the rest.

But what if most MSSP ACOs leave the program? Conceivably, CMS could reverse course and relax its requirements, or it could launch a less-stringent alternative program. Yet neither of those options would be likely, given the rationale provided for Pathways to Success and the sobering fiscal realities surrounding federal healthcare spending, not to mention the irreparable damage it would do to CMS’s credibility. At some point, CMS could implement mandatory downside-risk models, although that “hard ball” approach would alienate provider organizations if there are few ACOs validating “the pathway to success” between now and then.

Pathways to Success is an unquestionably more challenging proposition for ACOs. Provider organizations must decide whether the downside risks inherent in Medicare’s redesigned ACO program are outweighed by the upside potential and the learning effects that may help them win at CMS’s endgame of fully accountable care.

a. CMS, “CMS Finalizes ‘Pathways to Success,’ an Overhaul of Medicare’s National ACO Program,” press release, Dec. 21, 2018.

b. Leventhal, R., “EXCLUSIVE: NAACOS President Foresees ‘Shrinkage in Accountable Care Movement’ Pending MSSP Final Rule,” Healthcare Innovation, Dec. 5, 2018; and Hagland, M., “Has CMS Just Tipped the Scales Towards Provider Alienation, in Its ACO Final Rule?” Healthcare Innovation, Dec. 22, 2018.


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