CMS finalizes redesign of Medicare Shared Savings Program

Eases some timeframes for ACOs taking on risk

On December 21, 2018, the Centers for Medicare and Medicaid Services (CMS) published a final rule for the Medicare Shared Savings Program (MSSP) that restructures the program to accelerate participating health care providers’ movement into accountable care organization (ACO) payment arrangements that bear downside financial risk, rebranding the model as "Pathways to Success."

March 26, 2019 | Health care

Broadly, the MSSP final rule moves ahead with many policies included in the proposed rule, while making certain modifications to meet CMS’ two stated goals of, “Promoting accountability by accelerating the move to two-sided risk while promoting competition by encouraging participation by low revenue ACOs.”

To move forward with the changes, CMS finalized a one-time new agreement period start date of July 1, 2019. CMS will resume the annual application cycle for the performance year beginning January 1, 2020, and subsequent years. To ensure continuity, current MSSP participants whose agreements would have expired at the end of 2018 had the option to extend their agreement until the July 1 start date. The application deadline for all July 1 starts was February 19, 2019. After July 1, all ACOs entering new participation agreements will operate under the restructured MSSP program (more detail provided below).

Importantly, the final rule distinguishes between low- and high-revenue ACOs in terms of eligibility to participate in the two payment tracks, moving high-revenue ACOs to a faster pace to risk. The proposed rule indicates that low-revenue ACOs generally will be more common in rural areas and among smaller, physician-only ACOs, while higher-revenue ACOs in many cases will include a hospital. In addition to revenue differences, the final rule makes a new distinction between ACOs that are experienced or inexperienced with performance-based risk Medicare ACO initiatives.

Projected Impact on MSSP participation, Medicare expenditures

At the end of 2018, 460 of the 561 MSSP ACOs (82 percent) participated in Track 1, featuring only shared savings. Of the 460 Track 1 participant, 82 ACOs’ second participation agreements under Track 1 were due to end on December 31, 2018, requiring them to move into an MSSP track with downside financial risk or leave the program. CMS reports that 90 percent of ACOs with agreements that expired at the end of the year has signed six-month extensions that would allow them to renew their agreement on July 1 under the new rules.

CMS estimates that there will be three fewer ACOs participating in MSSP in 2019. By 2028, CMS estimates that 36 fewer ACOs will participate in the program. These estimates represent a smaller decline in participation from the proposed rule, reflecting changes that allow greater flexibility in participation under the new structure.

Overall, CMS projects that the final changes will result in a net reduction in Medicare spending of $2.9 billion for the period of 2019 through 2028; an increase from the proposed rule due to higher levels of participation, lower overall shared savings payments to ACOs, and an increase in incentive payments under the Medicare Access and CHIP Reauthorization Act (MACRA) Quality Payment Program (QPP) for qualifying participants in Advanced Alternative Payment Models.

Additional details on the “BASIC” and “ENHANCED” tracks are presented below. Other key provisions of the proposed rule also are summarized.

Overview of pathways to success: BASIC and ENHANCED Tracks

The final rule discontinues Track 1 and Track 2 under MSSP and similarly discontinues the option for ACOs to renew participation in either track.

Instead, the Pathways for Success initiative restructures MSSP into two tracks:

  • BASIC track, which allows eligible ACOs to begin under a one-sided risk model and gradually increase to higher levels of financial risk
  • The ENHANCED track, modeled after the existing Track 3 and offering additional tools and flexibility for ACOs that take on the highest level of risk and potential shared savings

Both the BASIC and ENHANCED tracks feature five-year participation agreements, with variations in when and to what degree a participating ACO must assume the risk. In addition, the Center for Medicare and Medicaid Innovation will discontinue future applications cycles for the Track 1+ demonstration project under the rule’s Pathways for Success initiative.

BASIC track

The BASIC track, which contains elements of the prior Tracks 1 and 2, begins as a one-sided model for eligible ACOs and gradually transitions to a level of risk-bearing that qualifies as an Advanced APM under MACRA’s QPP by the final year of the five-year participation agreement.

A one-sided (non-risk-bearing) model is available for one year to ACOs identified as having previously participated in the program under Track 1. A one-sided model is available for two years for most new entrants, while new low-revenue ACOs would have up to three years in a one-sided model.

The BASIC track is further delineated into five levels, with levels A and B representing one-sided arrangements, and levels C, D, and E requiring increasing levels of downside-risk. In general, BASIC track ACOs will advance at the start of each performance year along the progression of risk-reward levels. However, the final rule provides for BASIC track ACOs to move more quickly to higher levels of risk and potential shared savings in the initial years of the participation agreement.

The final rule increased total savings received by ACOs under a one-sided risk arrangement from 25 percent to 40 percent of savings below established benchmarks, increasing to 50 percent when the ACO takes on risk.

ACOs that have participated in MSSP Track 2, Track 3, or the Track 1+ Model and have been identified as low-revenue ACOs, will be required to participate in either the BASIC track’s highest level of risk (Level E). ACOs that have participated in MSSP Track 2, Track 3, or the Track 1+ Model that have been identified as high-revenue ACOs would be required to participate in the ENHANCED track (explanation of low- and high-revenue ACOs follows).


The ENHANCED track is modeled after the existing MSSP Track 3, including the same shared savings and shared loss rates (see below).

Overview of prior and new MSSP Payment Tracks

mssp-table.jpg (816×1056)

Low- and high-revenue ACOs

Under the final rule, an ACO would be considered to be low revenue if its ACO participants’ total Medicare Parts A and B fee for service (FFS) revenue for assigned beneficiaries was less than 35 percent of the ACO’s assigned beneficiary population’s total Medicare Parts A and B FFS expenditures. The 35 percent standard is a marked increase from the proposed rule’s 25 percent threshold. Low-revenue ACOs are generally more common in rural areas and among smaller, physician-only ACOs. CMS projects that the threshold increase will “allow more ACOs with small hospitals as ACO participants, including small rural hospitals, to be considered low revenue ACOs, while continuing to ensure that ACOs with large institutional providers are considered high revenue ACOs.” CMS models predict that 31 additional ACOs will participate as a result of this policy change, representing a 13 percent increase from prior estimates.

Low-revenue ACOs will be allowed to renew participation in the BASIC track at the highest risk level for a second five-year participation agreement. This provision is intended to make it possible for low-revenue ACOs to bear less performance-based risk than high-revenue ACOs while still providing a viable path to participating in Advanced APMs under MACRA’s QPP.

After the initial five-year participation agreement in the BASIC track, higher-revenue ACOs will be required to move to the ENHANCED track, corresponding to the prior Track 3 ACO model.

Application timelines

The new program will begin with a mid-year application cycle with a start date of July 1, 2019, for both the BASIC and ENHANCED tracks. Starting in 2020, the application cycle will start at the beginning of the calendar year.

As a result, new ACOs entering the BASIC track’s “glide path” for an agreement period beginning on July 1, 2019, would have up to up to 3.5 years under a one-sided model in the case of low-income ACOs that are new to MSSP. Most other new applicants will have 2.5 years under a one-sided model while existing ACOs that have participated in Track 1 will have 1.5 year before automatically advancing into two-sided risk-bearing agreements.

ACO type and experience level

Time in a one-sided model for July 1, 2019, starts

Time in a one-sided model for 2020 and beyond

New entrant, low-revenue

Up to 3.5 years; must progress immediately to Level E thereafter

Up to three years; must progress immediately to Level E thereafter

New entrant

2.5 years

Two years

Previous Track 1 participants

1 ½ year

One year

Previous Tracks 1+, 2, and 3 participants



Other programmatic changes

Benchmarking changes

In an effort to improve the accuracy of the benchmarks against which ACO performance is measured, the final rule revises the benchmark methodology to incorporate factors based on regional fee-for-service (FFS) expenditures in the first ACO performance year, rather than the second or subsequent performance period.

The final rule’s benchmarking provisions are largely unchanged from what was initially proposed. The changes are designed to mitigate the positive or negative impact of the regional adjustments used to establish and reset the ACO benchmark by:

  • Reducing the maximum weight used in calculating the regional adjustment from 70 percent to 50 percent; and
  • Capping the regional adjustment amount using a flat dollar amount equal to 5 percent of national Medicare FFS per capita expenditures.

The final rule discontinues prior methodology for annually risk adjusting the benchmark for newly assigned and continuously assigned beneficiaries but makes some adjustments from what was initially proposed.

In response to stakeholder comments indicating that the regional adjustment changes for ACOs with higher historical expenditures relative to their regional benchmarks might deter their participation in the program, the final rule adjusts the weighting for those ACOs to more gradually phase in their regional adjustment weighting. CMS calculates the regional adjustment using a percentage of the difference between the average per capita expenditures in the ACO’s regional service area and the ACO’s own initial benchmark.

As noted in the table below, future agreement periods would increase the regional adjustment weighting for such organizations.

Agreement period

Regional adjustment weighting for higher-spending ACOs (percent)

Regional adjustment weighting for lower-spending ACOs (percent)













The final methodology also allows for upward risk score adjustments to reflect changes in health status of up to 3 percent over the length of the agreement period, but CMS declined to finalize a proposed -3 percent limit on risk score decreases.

CMS finalized a plan to use a blend of regional and national growth rates based on Medicare FFS expenditures to calculate the regional trend and update factors. This approach will have CMS increase the weight of the national component of the blend as the ACO’s regional area increases. CMS expects this approach to yield:

  • More favorable trend factors for ACOs with high penetration in their regional service area with lower spending growth compared to the nation;
  • Less favorable trend factors for ACOs with higher penetration in their regional services area with higher spending growth compared to the nation; and
  • Little impact on ACOs with low to medium penetration in their regional services area.

CMS further notes that moving from a three- to a five-year agreement period allows for longer-range planning for ACOs to meet and exceed established benchmarks with less concern for a total rebasing on a more frequent timeframe.

Beneficiary assignment

To implement a provision of the Bipartisan Budget Act of 2018 (BBA), the rule finalizes flexibility for ACOs to choose prospective beneficiary assignment or preliminary prospective assignment with retrospective reconciliation. ACOs will make the choice prior to the start of each agreement period and will be permitted to change that selection for each subsequent performance year.


The BBA included provisions aimed at expanding telemedicine reimbursement for ACOs participating in two-sided risk arrangements.

To implement the BBA provisions, the final rule provides for payment to ACOs in two-sided risk arrangements for telehealth services furnished to prospectively assigned beneficiaries even if the otherwise applicable geographic limitations are not met, including when the beneficiary’s home is the originating site. The policy will apply to ACOs entering the BASIC track under a two-sided model and the Enhanced track when the ACO elects prospective assignment.

The proposed rule sought comment on an approach that could allow for the policy to be extended to ACOs in two-sided risk arrangements that opt for preliminary prospective assignment with retrospective reconciliation as their methodology for beneficiary assignment, leaving room for this change in future rounds of rulemaking.

SNF three-day waiver rule

The final rule allows eligible ACOs in two-sided risk arrangements within the BASIC track’s glide path and the ENHANCED track to use the existing waiver of the requirement of a three-day inpatient hospital stay prior to admission to a skilled nursing facility (SNF). The waiver will be available to eligible ACOs whether they choose prospective beneficiary assignment or preliminary prospective assignment with retrospective reconciliation.

The final rule also moved forward with amending the existing SNF three-day waiver to allow critical access hospitals and other small, rural hospitals operating under a swing bed agreement to partner with eligible ACOs as SNF affiliates for purposes of the SNF three-day waiver.

Beneficiary incentive payments

To implement another provision of the BBA, the final rule allows ACOs operating under certain two-sided arrangements to offer beneficiaries incentive payments of up to $20 for each qualifying primary care service that the beneficiary receives, including visits to Federally Qualified Health Centers or Rural Health Clinics.

Vouchers or other in-kind incentives are also permitted, as long as they have a “reasonable connection to the beneficiary’s medical care and be preventive care items or services or advance a clinical goal for the beneficiary, including adherence to a treatment or drug regime, adherence to a follow-up care plan, or management of a chronic disease or condition.”

Beneficiary notification

The final rule requires ACOs to notify beneficiaries of their participation in the ACO, as well as provide information about their options to change their primary care provider or otherwise opt out of ACO participation. Beneficiaries will be permitted to more closely align with an ACO by designating a particular practitioner as their “primary clinician,” with the responsibility to coordinate their care. For several years, CMS has sought public feedback on whether to allow ACOs to employ a beneficiary “opt-in” approach in lieu of or in addition to the standard claims-based assignment approach, but no such approach has been adopted to date.

Voluntary alignment

Consistent with requirements of the BBA, the final rule modifies existing policies on the voluntary alignment of beneficiaries to ACOs by permitting beneficiaries to designate a physician (regardless of specialty) or a nurse practitioner, physician assistant, or clinical nurses specialist as their “primary clinician” responsible for coordinating their overall care.

Under the final rule, CMS will continue to use the beneficiary’s designation to align the beneficiary to the ACO in which their primary clinician participates even if the beneficiary does not continue to receive primary care services from an ACO professional in the ACO.

Program integrity

In an effort to strengthen program integrity in MSSP, the final rule codifies a combination of policies, including:

  • Using past participation in performance-based risk Medicare ACO initiatives by the ACO legal entity and by its ACO participants to determine available participation options
  • Monitoring for financial performance and permitting termination of ACOs with multiple years of poor financial performance
  • Modifying application review criteria to permit CMS to consider the ACOs per capita expenditures and failure to meet quality performance standards in multiple years of the previous agreement period
  • Holding terminated ACOs in two-sided models accountable for pro-rated shared losses

ACOs that voluntarily terminate their participation after June 30 of a 12-month performance year will be accountable for pro-rated shared losses.

Promoting interoperability

The final rule adopts new requirements for the use and adoption of certified electronic health record technology (CEHRT), including adding interoperability as a prerequisite for both new and renewing ACOs. ACOs would be required to attest that a minimum of 50 percent of participating clinicians use CEHRT.

ACOS that participate in a track or payment model within a track that is an Advanced APM under MACRA’s QPP will be required to attest to the higher of the 50 percent threshold or the CEHRT threshold required for Advanced APMs.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor.

Deloitte shall not be responsible for any loss sustained by any person who relies on this publication.

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